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Sampath Bank PLC110, Sir James Peiris MawathaColombo 02Sri Lanka

Sam

path B

ank PLC

|

Annual R

epo

rt 2009

Corporate InformationName of CompanySampath Bank PLC

Legal FormA Public Limited Liability Company incorporated in Sri Lanka on 10th March 1986 under the Companies Act No. 17 of 1982 and listed in the Colombo Stock Exchange. A licensed Commercial Bank under the Banking Act No. 30 of 1988. Re-registered on 28th April 2008 under the Companies Act No. 7 of 2007.

Registration NumberPQ 144

Head Office & Registered Office110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka.

Telephone(011) 2300260. (011) 2358358, (011) 4730630, (011) 5331441, (011) 5600600

Fax(011) 2303085

SWIFT CodeBSAMLKLX

[email protected]

Web Pagewww.sampath.lk

AuditorsErnst & YoungChartered Accountants

LawyersNithya PartnersAttorneys-at-Law

Company SecretaryS SudarshanACIS(UK), MBA (Lincoln-UK)

Stock Exchange Listings68,887,628 Ordinary Shares 15,000,000 Unsecured Subordinated Debenturesof Rs 100/- each - 2007/2012

VAT Registration Number134001194 – 7000

Credit RatingFitch Rating (Lanka) Ltd has affirmed AA-(lka) National Ratingfor Sampath Bank PLC

Board of DirectorsMr Indulakshin W Senanayake - ChairmanMr Sunil G Wijesinha - Deputy Chairman Mr Mohan A Abeynaike - Non - Executive DirectorMr Denzil J Gunaratne- Non - Executive DirectorDr Saman Kelegama- Non - Executive DirectorMr Jayampathi D Bandaranayake- Non - Executive DirectorMr Ernest A Gunasekera- Non - Executive DirectorMr Lakshman J K Hettiaratchi- Non - Executive DirectorMr W M Prasantha Lal De Alwis- Non - Executive DirectorMr K D Dhammika Perera- Non - Executive DirectorMr G L Harris Premaratne - Executive Director/Chief Executive OfficerMr M Y Aravinda Perera - Executive Director/Chief Operating OfficerMr R Samaranayake - Executive Director/Group Chief Financial Officer

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CLARIFICATIONS ON THE REPORT

PLEASE CONTACT

Company SecretarySampath Bank PLCNo. 110, Sir James Peiris MawathaColombo 02, Sri LankaE-mail : [email protected]: (011) 4730418/9

Subsidiary CompaniesName of the Company Holding % Nature of Business

Sampath Centre Ltd 97.14 Renting of Commercial PropertySC Securities (Pvt) Ltd 51.00 Stock BrokingSampath Leasing and Factoring Ltd 100.00 Leasing & FactoringSampath Trade Services (Hong Kong) Ltd 100.00 Documentary Collection and Documentary CreditSampath Information Technology 100.00 Developing Software Solutions and Solutions Ltd Maintenance of Hardware

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The aftermath of the war has ushered in a renewed sense of hope and a vision – to re-build our motherland, Together.

Equipped with 23 years of extensive experience in taking technologically driven, total banking and financial solutions to all areas of the country, we at Sampath Bank believe in motivating people. As we are on the road to nation-wide reconstruction, the fundamentals that have made us who we are, take on a new light. We continue to encourage, equip and nurture communities across the nation. Because it is after all, what we do best.

At Sampath Bank, we inspire people.

Our NationInspiring

Sampath Bank PLC | Annual Report 20092

Contents

Contents

Our Vision & Values 3Sri Lanka, through the eyes of Sampath Bank 4Your bank, in 2009 6Message from the Chairman 14Message from the CEO 18Board of Directors 24Board of Directors - Profiles 26Corporate Management 28Senior Management 30COO’s Operational Review 34Management Discussion & Analysis 39

Financial Review 45Sustainability Report 2009 50Corporate Governance 84Risk Management 100

Financial Reports Annual Report of the Board of Directors on the Affairs of the Company 116Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 133Directors’ Responsibility for Financial Reporting 134Risk Management Committee Report 135Audit Committee Report 136Human Resources & Remuneration Committee Report 138Auditors’ Report 139Income Statement 140Balance Sheet 141Cash Flow & Reconciliation Statement 142Statement of Changes In Equity 144Significant Accounting Policies 145Notes to the Financial Statements 157Income Statement in US$ 202Balance Sheet in US$ 203Capital Adequacy 204

Share Information 208Sampath Bank Debentures 212Ten Years at a Glance 214Branch Network 216Correspondent Banks 220Milestones 222Glossary of Financial and Banking Terms 223Notice of Meeting 224Form of Proxy 225Investor Feedback Form 227

Corporate Information Inner Back Cover

Sampath Bank PLC | Annual Report 2009 3

• Create a learning culture that promotes individual and organisational development as well as promoting innovation and value for customers• Treat all internal and external customers the way we would like to be treated• Encourage and promote teamwork in all aspects of behaviour• Open to feedback and demonstrate an eagerness for personal development• Monitor and demonstrate an impressive commitment to results• Uncompromising ethical and professional standards of behaviour

The Growing Force in Sri Lankan Financial Services

Our Vision

Our guiding values & ethics

Our Vision & Values


‘Sri Lanka, through the eyes of Sampath Bank’An inspiring message from

20 Million people as one nation, live in hope.

Hope for peace that lasts. Hope that peace-dividends will compensate the hardships we’ve all endured – all of us, whether rich or poor. Hope for greater equality and easier access to justice. Hope for bold and transparent governance to open windows of economic opportunities in 2010, and for years to come.

Our nation’s progress is our collective responsibility. Business leaders, the banking sector and citizens across the nation need to collectively energise and support policymakers to surmount economic and social challenges.

Sampath Bank is poised well to support policymakers with innovative solutions to help Sri Lanka prosper.

Last year in our Annual Report we talked about our internal introspection. It helped us define what premium value we could offer to customers and map out how best to manage our fundamentals to become a truly national bank in every sense of the word.

It was a fulfilling experience.

Learning from our internal introspection, we have put in place strategies to cautiously manage liquidity and asset growth which has given us the most sought after attribute in a volatile industry - stability. Our stability has shielded us from turbulence in the financial industry – both from ad-hoc market shocks experienced locally and the sustained impacts of the global financial crisis. We continued in 2009 with our strategy to add value to our well established products and promote uniquely innovative solutions to all customers – from minors, to professionals, expatriates to large businesses. Because we understood it’s all about delivering value to the entire nation.

Sri Lanka, through the eyes of Sampath Bank

The Ceylon Chamber of Commerce

The Best Corporate Citizen of the Year 2009&

“The Banker” - Financial Times, London

The Bank of the Year 2009

Adjudged by Adjudged by


Our Asset base grew by Rs.17 Bn in 2009, and reached Rs.156 Bn.

Loans & advances increased by 3% in 2009, despite low credit demand in the country.

Service sectors and the banking sector in particular, can contribute much to the prosperity of a nation. Steps taken by the government in 2009 to reduce lending rates are commendable. It will create credit demand among the private sector, which is a catalyst to economic growth.

In a country with limited capital markets, the financial sector depends largely on internal profits for capital. Given this environment, regulators and policymakers on their part need to remove impediments to capital creation, such as the high rates of taxation levied on the financial industry.

Public-Private Partnerships will surely help Sri Lanka achieve its MDGs by 2015.

Despite obstacles, Sri Lanka has made laudable progress in its Millennium Development Goals (MDGs). Yet, to fast-track a better life for millions living on less than US$ 1 per day, we would need improved fiscal management - especially prudent use of taxes for development rather than unplanned consumption.

The Private Sector and Sampath Bank in particular, have already made bold strides in setting-the-bar for better and transparent management through Corporate Governance mechanisms. The country will indeed gain if these are mirrored across all public and private initiatives to govern and develop the nation.

Sampath Bank has witnessed a renewed sense of urgency and a resurgence of interest by Fund Managers and FDIs, to invest in Sri Lanka.

Industrialists from across the country should plan ahead to reap maximum benefits from post-conflict Foreign Direct Investments and grasp the opportunities presented by Trade Treaties such as GSP+, SAARC Preferential Trading Agreement (SAPTA), Agreement on South Asian Free Trade Area (SAFTA), Indo Sri Lanka Free Trade Agreement (ISFTA), Pakistan Sri Lanka Free Trade Agreement (PSFTA) and Asia Pacific Trade Agreement (APTA).

The Government on its part should be commended for its resolve to invest and initiate large scale infrastructure projects –such as highways, ports, airports in the last two years, to spur development. Infrastructure in the East especially, has seen a remarkable improvement.

Yet challenges to increased economic growth still exist across the island, and need to be addressed by our policy makers. Fast tracking infrastructure development – especially in the North and East, and simplifying the process to start up businesses across the country would be priorities. Investments are needed; to provide rural producers with greater access to markets and for technology transfers. If addressed expeditiously, the emerging economic opportunities in a post conflict era could be maximised.

On our part, we at Sampath Bank are committed to fully exploit the economic potential across our entire landmass and maritime boundaries. With solid plans afoot to be the private sector bank with the largest presence in the North & East by 2010 and to be the ‘e-gateway’ for banking across the entire nation, Sampath Bank will be ‘the bank for every Sri Lankan’.

We hope you are inspired to join us and make our nation progress - because, we all have our part to play.

Sampath Bank

Sri Lanka, through the eyes of Sampath Bank

0

Rs. Mn.

05 06 07 08 09

Loans & Advances

20,000

40,000

60,000

80,000

100,000

120,000

60,0

95

75,9

70

93,4

30

95,6

55

98,6

85

0

Rs. Mn.

05 06 07 08 09

Total Assets

30,000

60,000

90,000

150,000

120,000

84, 8

11

109,

550

133,

196

138,

539

156,

162

180,000


Your bank has delivered a strong performance in 2009.

Financial Highlights

BANK GROUP 2009 2008 Change 2009 2008 Change (Rs Mn) (Rs Mn) % (Rs Mn) (Rs Mn) %

ProfitabilityIncome 25,213 22,243 13.4 25,560 23,069 10.8Operating income 12,048 9,441 27.6 12,088 9,567 26.3Operating expenses 8,072 6,877 17.4 8,243 6,961 18.4Profit before tax 3,976 2,564 55.1 4,005 2,787 43.7Provision for taxation 1,878 1,150 63.3 1,921 1,262 52.2Profit for the year 2,098 1,414 48.4 2,084 1,525 36.6Gross dividends 474 276 71.7 474 276 71.7

Assets & LiabilitiesDeposits from customers 125,690 106,931 17.5 125,573 106,892 17.5Loans & advances to customers - Gross 98,685 95,655 3.2 99,682 97,824 1.9 - Net of IIS & Provisions 93,177 89,713 3.9 94,004 91,815 2.4Non-performing advances - Gross 8,243 8,184 0.7 8,486 8,472 0.2 - Net of IIS 7,474 7,057 5.9 7,717 7,344 5.1Total assets 156,162 138,539 12.7 158,002 142,279 11.1Shareholders’ funds 11,846 9,776 21.2 12,707 10,939 16.2

Investor informationNet asset value per share (Rs) 171.96 141.92 21.2 183.08 157.06 16.6Market price at year end (Rs) 204.25 68.00 200.4 204.25 68.00 200.4Earnings per share (Rs) - - - 30.08 21.70 38.6Dividend yield ( % ) 3.1 5.9 (48.0) 3.1 5.9 (48.0)Dividend per share (Rs) 6.25 4.00 56.3 6.25 4.00 56.3Dividend cover (Times) 7.6 6.8 12.0 7.6 7.4 2.5

Key IndicatorsReturn on shareholders’funds (%) - after tax 19.4 15.4 25.9 17.7 14.7 20.5Return on average assets (%) - before tax 2.7 1.9 43.0 2.7 2.0 34.1 - after tax 1.4 1.0 36.8 1.4 1.1 29.4Cost to income ratio (%) 57.0 59.6 (4.3) 57.4 59.6 (3.7)Liquid assets (% ) 30.5 22.7 34.4 - - -Capital adequacy ratio (%) -Tier I 10.4 8.1 28.4 10.6 8.5 24.9 -Tier I & II 13.5 11.9 12.6 13.9 12.4 11.9

Fitch Rating AA-(lka) AA-(lka)

Your Bank, in 2009

Your Bank, in 2009


Our Key Performance Indicators

We are on track with our financial goals.

Financial Goals & Achievements

Year ended 31st December Goal 2009 2008 2007 2006 2005 Annual post-tax profit growth >20% 48.40 34.43 2.30 25.19 32.15Return on equity >18% 19.41 15.41 13.84 16.78 17.20Return on assets >1.25% 1.42 1.04 0.90 1.06 1.08Total capital adequacy ratio >12.5% 13.45 11.95 11.58 10.82 13.53

Your Bank, in 2009

Our year-on-year performance has been impressive

090

3.0

6.0

9.0

12.0

15.0

18.0

%

05 06 07 08

Capital Adequacy

Tier - 1

Tier - 11Tier - 1 (Required)

Tier - 11 (Required)

0

375

750

1,125

1,500

1,875

2,250

Rs. Mn.

05 06 07 08 09

Net Profit After Tax

821

1,02

8

1,05

2

1,41

4

2,09

8

0

70

35

105

140

210

175

Rs.

05 06 07 08 09

Share Price

90 110

120

68 205

0

2,000

4,000

6,000

8,000

10,000

12,000

Rs. Mn.

0

3.5

7.0

10.5

14.0

17.5

21.0

%

05 06 07 08 09

Shareholders’ Funds and ROE

ROE (After Tax) (%)Shareholders’ Funds (Rs. Mn)

5,63

2

6,62

6

8,56

9

9,77

6

11,8

46

%

05 06 07 08 09

Return on Assets (ROA)

TargetROA

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0.00

%

05 06 07 08 09

Return on Equity(ROE)

4.00

8.00

12.00

16.00

20.00

TargetROE

24.00

%

05 06 07 08 09

Profit Growth

TargetProfit Growth

0

24.0

16.0

8.0

32.0

40.0

48.0

ROA (Before Tax) (%)Total Assets (Rs. Mn)

0

50,000

100,000

150,000

200,000

%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Rs. Mn.

05 06 07 08 09

Total Assets and ROA

84,8

11

109,

550

133,

196

138,

539

156,

162


Our key operational segments and products – at a glance

We are on track to meet our Vision to become ‘The Growing Force in Sri Lankan Financial Services’

Our exclusive service in personal banking and corporate banking is unmatched.

We are widely acknowledged as a ‘de-facto National-Switch’ by the ICT & IT industry in Sri Lanka.

We are the ATM gateway for the country and soon to be the payment-gateway across the nation.

We are proud of our reputation as an ethical corporate entity.

Responsible brand positioning and communication ethos is entrenched at Sampath Bank

Personal Banking

We offer a gamut of financial products catering to the most discerning customer – from children, to teenagers, to professionals, to senior citizens.

Your Bank, in 2009

Your Bank, in 2009

Product Type Product Features

Current AccountsPersonal Speedy clearing system & SMS Alertz

Business Special facilities for ‘Sampath Supreme’ accounts

Savings Accounts

PersonalSavings

Sampath Double S Upto 50% bonus interest monthly

Sampath Max Save More than 100% bonus intrest payable quarterly

Sampath HIT Saver High interest closer to Fixed Deposit with flexible terms

Minor Savings Accounts

Sampath Sapiri High interest

Pubudu Triple S Bonus Interest & Gifts

Teen Savings Accounts

X SET A comprehensive savings package for teenagers

Professionals Accounts

Sampath Professional A special accounts for professionals

Senior Citizens’ Accounts

Sampath Sanhinda - Fixed Deposits

Higher interest rate than normal Fixed Deposits

Sampath Sanhinda Saver Interest paid twice a month with medical and other facilities

Term Deposits

Sampath Thirasara Fixed Deposits for over 10 years with attractive interest rates

Unfixed Deposits Floating Rate Fixed Deposits

Certificate of Deposits Competetive Intrest rates

Call Deposits Competetive Intrest rates

Sampath Kalin Cash Upfront interest on Fixed Deposits

Easy FD Flexibilty to withdraw without a reduction on agreed intrest

Sampath Bank PLC | Annual Report 2009 9Your Bank, in 2009


Foreign Currency Accounts

Non Resident Foreign Currency Accounts (NRFC)

Speedier on-line services

Resident Foreign Currency Accounts (RFCA)

Speedier on-line services

Resident Non-National Foreign Currency Accounts (RNNFC)

Tax on Interest, exempted accounts for non-nationals

Rupee Accounts for Non-resident Sri Lankan Investments (RANSI)

Investment accounts with higher returns

Special Foreign Investment Deposit Accounts (SFIDA)

Foreign currency accounts exempted from taxes

Export Foreign Currency Accounts (EFCA)

Foreign currency accounts for exporters

Loans, Overdrafts and Credit Cards

Loan Facilities

Sampath Sevana - Housing Loans

Next Generation Housing Loans - Children take over repayment,when parents retire

Leasing Facilities

Speedy loan processing through regional officesShort, Medium and Long Term Loan Facilities

Permanent & Casual Overdrafts

Pawning FacilitiesSampath Randiriya - Pawning Facility

Highest advance quantum per sovereign for lowest interest charge in the market

Credit Cards

Master and Visa Cards * Special discount promotions with merchants * Chip based credit cards for maximum security * Facility to withdraw cash at Cargills Foodcity outlets without an ATM

Visa Electron

Affinity Cards

Visa Platinum

Loyalty Cards Plus Point Card Loyalty points scheme on the use of credit cards

Money Transfer Facilities

e-Remittance Service 35 linked exchange companies to send & receive money

Value Added Services

Night Safe FacilityCost effective special safekeeping facilities

Safe Custody Services

On-line payment of utility bills and payments to service organisations

Pay bills, on-line to 26 different service providers

Door step banking Money delivered to customers’ door step

Relationship Banking

Platinum Plus Special services for premium customers

Special countersExclusive banking services to Muslim ladies at Akkaraipattu and Kalmunai branches



ATM / Debit Cards

SET Card* 99% ATM up time*186 Sampath ATM’s around the island * Access to over 730 shared ATM’s with BOC, Union Bank, NSB and DFCC* Access to approx. 610,000 cirrus ATM’s and 27 Mn Point Of Sale (POS) terminals around the world

SET Family Card

VISA Debit Card

e-Remittance Card

Commercial & Corporate Credit

Term Loans Flexible, tailor-made facilities with repayment plans to suit individual situations and cash flowsOverdrafts

Leasing Facilities To purchase vehicles, machinery, equipment etc.

Foreign Currency Loans Foreign currency facilities to BOI and other Exporters

Syndicate Loans To fulfill large financing requirements at competetive rates

Securitisation Financing for receivables at competetive rates

Money Market Loans With the rate of interest linked to the Money Market Rates

Dealer Financing Financing for trade dealers together with large corporates

Guarantee Facilities Issuance of Bid,Performance,Retention and Credit Guarantees

Commercial Paper Debt instruments for large corporates

Margin Trading To exploit opportunities in share trading

Trade Services

Import Related Facilities

Documentary Credit Opening of Documentary credit online through our web

Acceptances To obtain credit from suppliers

Import Short Term LoansFinancing for payment of customs duty and other related expenses in imports

Trust Receipt Loans To clear goods imported under LC’s/Collections

Pledge Facilities Financing under goods pledged

Shipping Guarantees Guarantees to clear consignments on copy documents

Handling of Collection Bills Act as an agent for collection transactions

Packing Credit Pre-shipment financing for exporters at competetive rates

Export Related Facilities

Advising / Confirmation of LC’s Post-shipment financing for exporters at competetive rates

Purchasing/Negotiation of LC’s and bills

Post-shipment financing for exporters at competetive rates

Corporate Banking

Your Bank, in 2009

Your Bank, in 2009



Development Banking

Project Financing Financing for SME/Large scale projects

Micro Financing To help grass root level entrepreneurs through ‘ Sampath Saviya ‘

Re-financing facilities under Credit Lines

Re-financing facilities through our large branch network for different segments

Treasury Operations

Treasury Bills

Customer friendly speedier service, competive rates and investment advisory services

Treasury Bonds

Investment in Sri Lanka Development Bonds

REPO’s & Reverse REPO’s

Forward & Spot Dealings

SWAPS

Call Money Market Lending & Borrowing

Your Bank, in 2009

131Branches19 new Branches opened during 2009 186 ATMs

24 new ATMs added in 2009

32e-Remittance CompaniesLinked with exchange companies to send and receive remittances 99.6% ATM up time

99% ATM up time in 2008 increase to 99.6% in 2009

77% Debit Card Usage1 Mn ATM Cards used by 1.3 Mn Customers 0.6 Mn Cirrus ATMs

World wide access points through Cirrus ATMs

“ We are all different. Yet, we are all connected. We all look

towards the future with the same hope and anticipation of what

it may bring. At Sampath Bank we encourage you to visualise

dreams that will change our nation’s future. And then make

those dreams come true. We inspire people.”

Our NationInspiring


Message from the Chairman

I W Senanayake Chairman


The Bank achieved a record-breaking 48.4% increase in post tax profits for 2009, despite a modest asset growth


19New Brancheswere opened during the year with 10 in the North & East.


Dear Stakeholders,

Today, the major economies of the world are making progress towards recovery, albeit slowly. Here in Sri Lanka, a post-conflict landscape has opened new vistas of opportunities to develop the nation as an emerging Asian economy. At this, our 24th Annual General Meeting, it is with much optimism that I boldly envision tremendous economic opportunities for Sri Lanka in the years ahead. I am justifiably proud that, despite it being one of the most challenging macro environments in my 22 years of being associated with Sampath Bank, our profit growth this year far surpassed the performance of most other local banks.

That we achieved this amidst eroding public confidence in local financial institutions and insufficient credit lines due to the global financial meltdown, clearly reflects the strength of our banking fundamentals.

The performance of your bank in 2009 is synopsised at the start of this report and analysed in the context of the macroeconomic environment in the Management Discussion by our Chief Operating Officer. The strategies we adopted to counter business challenges and strengthen our fundamentals are analysed by our CEO in his message on the ‘Strategic Intent’ for the bank.

It is my duty as Chairman to see that our vision to be a truly national bank in every sense of the word is fulfilled despite many hurdles. And it is this path - to become a bank for every Sri Lankan - which I would like to share with you, in my message.

Chairman’s Vision :

Delivering value – to every Sri Lankan, withoutdiscriminationAt Sampath, we are committed to deliver premium value to customers. In 2009, following the internal introspection the previous year, we adopted a comprehensive product policy that truly catered to the financial needs of every Sri Lankan. In an environment where depositors were hard pressed to save, we reinvented our range of deposits. Specific benefits were offered to give the best return to depositors from all walks of life and across all age groups.

We stimulated the economy through an innovative approach to lending. Our money-market linked loan scheme helped corporate customers stay competitive during the high interest regime at the start of the year. Long before interest rate cuts were announced by the government, we led the way by offering unprecedented low rates for pawning advances – the only credit available to the lower-income segment of society. We catered to needs across society, without discrimination.

Sampath Bank – the Bank for every Sri Lankan


Mainstreaming national developmentTo stay ahead in a fast developing, competitive environment, and be a successful catalyst for development a vibrant business entity needs to be aggressive.

Our vigorous expansion drive this year, (19 branches island-wide with 10 in the North & East), will help mainstream all provinces into the national development spectrum. We also plan to become more accessible to the nation with 40 more branches to be established across the island, next year.

Our expansion programme, though aggressive, will be rolled-out within a mechanism which is mindful of the trade-off between risks and rewards. Prudent banking and commitment to good governance will continue to be the cardinal principles that will guide us in shaping the destiny of our Bank to take on a pivotal role in national development.

Our plans for growth will, at all times, balance the needs of all our stakeholders.

Staying true to one of our core values, we will demonstrate steadfast commitment to results which will maximize our shareholders’ returns. But the compelling corporate-need to ensure a socially responsible work ethos that revolves around sustaining the economy at large will always guide our decisions. We are mindful, that we cannot contribute to the success of our nation unless we play our part to sustain the environment and engage the support of all our stakeholders including, customers, suppliers, employees, the state mechanism and the society at large. I am proud that this broader vision espoused by our Bank has been recognised by the Ceylon Chamber of Commerce by conferring on us the ‘Best Corporate Citizen’s Award’ for 2009.

The driving force of a vibrant Sri LankaIn 2009, we continued our commitment to drive the economy in many ways, by adding value to our stakeholder’s wealth.

To our depositors, we provided stability and healthy returns. As a responsible lender, we read the pulse of different economic sectors through tailor-made affordable products and financial solutions.

As a just and fair employer, we recruited 115 young men and women. And to all our staff, we laid out clear paths towards successful career development. As a leading corporate body, we rewarded our shareholders for putting their trust in us - our strategies and our performance helped drive our shares upwards on the bourse and allowed us to pay higher dividends. As a direct contribution to the

national coffers, we paid Rs. 3 Bn in lieu of corporate and other taxes which was a significant 61% of our profits before all taxes.

Our unwavering concern for the environment is a hallmark in the industry. Our achievement as the Best Corporate Citizen of 2009 was a clear acknowledgement of our efforts to do our utmost for society.

Our vision over the next year is to reposition the bank to become ‘the premier bank for deposits in Sri Lanka’.

We will stay on course over the next few years to become a solid financial service provider and a driving force in a vibrant Sri Lanka.

As a pioneer in innovative banking, we will continue to add value to our products. Ground breaking technology by our highly acclaimed IT team will soon project the Bank to become the nation’s payment gateway for an e-government initiative by the national ICT Agency.

We will continue to invest in our people, our workforce, to motivate them – to build a winning culture. We relish the challenge of building an extensive, skilled workforce within a short time-frame. Our ambitious expansion drive will create attractive career advancement opportunities. Our investment in knowledge enhancement will equip our staff with better skills to meet the challenges ahead. Our reward-system will compensate them adequately for their individual or collective contributions to our performance. In short, we have created a path for our employees to become partners in our drive to become the best in banking, in the country.

We hope that our bold and inspiring message to the nation titled ‘Sri Lanka – through the eyes of Sampath Bank’ will energise both the public and private sector to advocate policies to make ours a more visible economy in the region. It requires the will to bring stability, transparency and more fiscal discipline across all governing structures.




AcknowledgementsPublic confidence in our fundamentals has never been higher and we as a Bank truly appreciate this trust. Our customers embraced each and every innovation we delivered through the year. The loyalty and support of our depositors and other customers during the difficult times of 2009 helped us record the incredible volume and results that we did. I assure you, that this loyalty will be rewarded with premium value – in the form of tailor-made products and solutions, greater accessibility through an ever-widening network of branches and service with a personalised touch, in the years ahead.

I also take this opportunity to thank the Central Bank of Sri Lanka and other regulators for their guidance and support. We acknowledge gratefully, the support extended to us by the security forces personnel to set up branches in the Northern and Eastern provinces.

My fellow members on the Board of Directors have been magnanimous in their support, during the year. As reflected in our performance in 2009, our strategy to strengthen the Bank’s management and the Board with professional and seasoned bankers has paid great dividends.

But we could not have delivered if not for the ‘can-do’ spirit of our highly talented staff – our ‘Team Sampath’. I sincerely thank you all for the effort you put in, to win us the prestigious ‘Bank of the Year 2009’ title, awarded by the London based The Banker magazine of the Financial Times Group.

Whilst achieving international acclaim, I firmly pledge that we will - as a truly national bank, continue to aggressively invest and innovate in the years ahead, to put Sri Lanka on the map.

I W SenanayakeChairman17th February 2010Colombo, Sri Lanka


Sampath Bank PLC | Annual Report 200918Message from the CEO

Message from the CEO

Our ability to adapt is one reason why we are viewed as such a stable bank that can withstand any financial upheaval

G L H PremaratneChief Executive Officer

Sampath Bank PLC | Annual Report 2009 19Message from the CEO

19.41%Return on EquityROE increased from 15.41% in 2008 to 19.41% in 2009, a 25.9% increase.

In effect, we have proven our ability to adapt - to switch gear at short notice and take timely decisions to arrest adverse impacts.

An evolving macro economic environment presents many opportunities for us.

2009, has been such a year - a year which dawned with limited international credit lines at steep borrowing costs - and ended with excess liquidity. The Bank’s ability to implement timely corporate strategies to counter ground realities in our operating environment withstood the litmus test.

Strategic planning at Sampath BankTo us, planning for each of our strategic business units is not just an annual event in our corporate calendar. We focus on it with vigor and we review it through the year. Flexibility in our planning model has helped us weather many a storm in the financial markets. A ‘Revolving Strategic Planning Model’ has been adopted, where business goals and strategies for the next three years are reviewed and updated annually in line with the current realities of the market. Budgets are then set to achieve the updated strategic goals.

That is why, Sampath Bank is, and has always been, ready to change and steer through challenges posed by an evolving landscape, at any time of the year.

Our ability to adapt is one reason why we are viewed as such a stable Bank that can withstand any financial upheaval.

The strategic direction of the Bank is a collective endorsement by the Board, the Management and the Strategic Planning Committee, where dissimilar views are deliberated at length by professionals drawn from diverse disciplines. As we shape the course to be steered by the Bank, we always stay true to one of our core values, ‘to maintain uncompromising ethics and professional standards’.

Our strategies helped us deliver on our promisesLast year, in our Annual Report we promised to deliver certain strategic goals while ‘looking to 2009’.

We delivered higher growth rates in deposits and total assets and improved our net interest margins, as promised. Although our growth in advances was a modest 3.2%, we performed well in managing our liquidity. We also pursued cost efficiencies with a passion and managed our NPLs and tax planning more efficiently.

As you will see below, focused strategies helped us deliver on our promises. Wherever we fell short – we still managed to create opportunities to deliver premium value to our customers and in turn, improve our shareholders’ return.

Managing liquidityChallenged with shrinking international credit which caused borrowing rates to skyrocket in the 1st quarter of the year, and eroding public confidence in the entire non-government backed financial sector due to issues in certain local financial institutions - the Bank shifted into overdrive.

CEO’s Strategic Intent :

• A strategy for strong fundamentals• A strategy for innovation• A strategy for a truly national Bank


A repositioning strategy to aggressively mobilise deposits was designed. Our novel value-added deposit products such as ‘Kalin-Cash’, helped accelerate deposit growth from the 2nd quarter onwards, to record 17.5% by the end of 2009, far exceeding the target of 12%.

Concurrently, strategies adopted by the Bank’s ALCO to manage funds helped us maintain statutory and working, liquidity levels. Externally, poor credit demand in the economy and steps taken by the Central Bank to lower the statutory reserve ratio from 7.75% to 7%, facilitated improved liquidity in the entire banking sector.

Adapting to declining credit demandPoor credit demand caused by a sluggish economy threatened to pull back bottom-line profit growth. The Bank countered the impact by structuring attractive financial solutions across the board to corporate customers as well as personal and retail customers. People from the lower income strata benefited immensely by our pioneering strategy to reduce interest rates on pawning advances from 24% to 16%. Our bold action helped us increase our pawning advances from Rs.13.2 Bn as at end 2008 to Rs.18.1 Bn by 2009, which was a substantial growth of 37.8%. The banking industry followed our initiative on rates. Despite a negative growth across the industry, the Bank achieved a credit growth of 1.4% by the 3rd quarter which, by the end of the year had further improved to 3.2%.

Recognising that credit growth alone would not boost profits, we also steered a course to balance our costs while maximising deposit growth. To maximise Net Interest Margins, a deliberate effort was made to channel and re-channel surplus funds to alternate financial instruments and more remunerative areas. The Bank’s ALCO implemented timely pricing and re-pricing decisions. As a result, Net Interest Margins improved from 4.89% in 2008 to

5.30% in 2009, helping to record a Net Interest Income growth of 17.4% for 2009, which far exceeded the asset growth of 12.7%, achieved during this period.

Managing portfolio qualityThe high interest regime and shrinking export markets affected many businesses and their repayment capacity on borrowings. The Net NPL ratio of Sampath Bank gradually rose from 7.47% in December 2008 to 9.84% by June 2009. To arrest the trend, we adopted a two-pronged strategy.

To improve credit processing, we centralised credit evaluation into regional centres, staffing them with specialized personnel, with more local consumer knowledge. Specific sector-exposure limits, helped control lending to high risk sectors.

We also strengthened our monitoring and recovery efforts, providing better resources, bringing in operational efficiencies to the recovery process, which helped us offer flexible negotiated settlements to borrowers. An expedited legal process supplemented recovery efforts.

Our strategies succeeded in arresting the trend and reducing the Net NPL ratio from 9.84% as at 30 June, to 7.60% as at 31 December 2009.



0

%Rs. Mn.

05 06 07 08 09

NPA Cover

4,000

2,000

6,000

8,000

10,000

NPA Cover (%)NPA (Net) (Rs. Mn)

3,49

6

4,04

2

6,20

2

7,05

7

7,47

3

12,000

0.0

26.0

13.0

39.0

52.0

65.0

78.0

0.0

%Rs. Mn.

05 06 07 08 09

Total Deposits & Its Growth

Growth (%)Deposits (Rs. Mn)

0

42,000

21,000

63,000

84,000

105,000

126,000

8.0

4.0

12.0

16.0

20.0

24.0

65,4

19

80,7

92

98,8

84

106,

931

125,

689

0 0

1.0

2.0

3.0

4.0

5.0

6.0

%Rs. Mn.

05 06 07 08 09

Net Interest Margin

8,000

4,000

12,000

16,000

20,000

Net Interest Margin (%)Interest Income (Rs. Mn)

24,000

7,22

7

9,99

7

14,9

50

20,9

69

19,4

51


Managing fee based incomeShrinking markets for our export commodities and the knock-on effect on the demand for industrial imports severely affected Trade Financing across the industry.

As a result, the Bank’s strategy last year to enhance the features of products, mainly in the trade financing portfolio, and create value based on future expectations of our customers – i.e. to shift its product portfolio into the ‘contingent’ category, fell short of expectations.

Despite the drop in fee-based income from trade finance and lending related activities due to unfavourable macro economic conditions, the bank looked at new opportunities to create growth in this product portfolio. A pioneering venture by our IT team, saw the Bank taking the trade finance function to the customers door-step, with another innovative value added service – ‘DC-Direct’. The Bank is keen to maximise the potential this opportunity has presented to take personalised banking services to a higher plateau.

A remarkable profit growthOther far-reaching strategic measures helped improve overall profitability.

Better tax planning resulted in reducing the Effective Tax Rate (excluding deffered tax) from 51.9% in 2008 to 41.5% this year. Re-engineered processes across the Bank - such as rationalised staff numbers in several departments across the head office, a centralised credit processing system which further rationalised staff numbers at branches and a re-vamped procurement procedure, have all resulted in productivity gains and cost efficiencies.

A 48.4% profit growth in 2009, which has surpassed our target of 20% has contributed to some of our KPIs outperforming last year’s levels.

2009 Growth Rate

2008 Growth Rate

Profit After Tax (Rs. Mn) 2,098.3 48.4% 1,413.9 34.4%

ROA (%) 1.42 36.8% 1.04 19.5%

ROE (%) 19.41 25.9% 15.41 11.3%

Total CAR (%) 13.45 13.0% 11.95 3.2%

Last year, we also promised to ‘enhance the premium value of every aspect of our products and services’ while hoping to compensate the shareholders with a healthy return.

We increased the ROE from 15.41% in 2008 to 19.41% in 2009 and we have proposed to increase the dividends per share from Rs.4.00 in 2008 to Rs. 6.25 in 2009. These improvements, coupled with improved profitability and enhanced image of the Bank, helped improve our performance on the Bourse. The shares of Sampath Bank, which were traded at Rs.68.00 per share at the end of 2008 climbed to Rs.204.25 per share by the end of 2009 - an increase of 200% which was far in excess of the share price appreciation of all other leading Banks in the local market.

I am proud to say, we delivered.

Strategies to deliver premium value to the entire nation

Branch ExpansionWith 19 branches opened islandwide - the largest branch expansion drive by any Bank across the country, we want to ensure our presence across every township, in every District. Investments in a re-modernisation drive will ensure that an attractive, customer-oriented ambience is reflected across our entire branch network.

Mainstreaming the Northern & Eastern ProvincesOur strategy is to be the private sector Bank with the largest presence in the North and East by 2010.

Affirming our commitment, we channeled more than 50% of our planned investments on expansion in these two provinces.

All 10 Branches opened in these provinces in 2009 are networked across our delivery channels and offer the same uncompromising ethical and professional standards, as espoused in our core values. With peace heralding greater access to these provinces, we are actively working alongside government initiatives to re-energise the economic activities of the two provinces.



Maintaining our IT supremacyJust over two decades ago, we made history by introducing the banking industry to the revolutionary concept of uni-banking – an interconnected branch network where customers could transact from anywhere. We were also the first to introduce Networked ATMs and Credit Cards.

We haven’t lost our resolve to innovate banking technology.

In 2009, we invested generously to upgrade our core banking systems to improve efficiencies, especially in Treasury Management. These internal efficiencies will help us increase value to our customers. And we will continue to promote more electronic delivery channels to improve our reach and bring down banking costs. Our strategic tie-up with Cargills Food City outlets will help our customers transact with us from anywhere in the country – even towns not serviced by a Sampath Bank branch, yet.

Strategic focus on sustainabilityWhat emerged from the global economic meltdown were lessons to stick to prudent banking fundamentals and to focus on sustainability.

To us, sustainability encompasses a wide arena of action which include, among others, risk management, transparency and good governance.

We are working tirelessly to develop better risk-managed portfolios and to contribute to efforts at improving corporate governance in the financial sector.

Sampath Bank has played a pivotal role in efforts by the banking sector to improve disclosures and fall in line with international accounting standards - as part of a joint project launched by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Central Bank of Sri Lanka (CBSL). And we are setting the stage to migrate into the Advanced Approach to BASEL II.

Strategic venturesDuring the year, we took strategic decisions to strengthen, expand or divest our holdings in our group companies, with the intent of creating greater wealth to our shareholders.

• LankaBangla Finance Ltd, the Bank’s only offshore presence, is a leading Finance Company operating in Bangladesh.

The Company’s outstanding profit growth of 58.7% in 2009, and investor confidence in its fundaments, have boosted its shares from an initial trading price of BDT 10.00 to its current levels of BDT 260.00.

In 2009, Sampath Bank divested part of its shareholding in the Company, realissing a capital gain of Rs. 1,559 Mn, while sales proceeds of USD 14.140 Mn were repatriated to Sri Lanka. Despite the divestiture, Sampath Bank is still the single largest shareholder with a 13.5% holding, and is represented on the Board by two Directors.

• Lankabangla Securities Ltd, a fully owned subsidiary of Lankabangla Finance Ltd is the largest stock brokering firm in Bangladesh in terms of daily turnover and the most profitable stock brokering company.

• Sampath Leasing and Factoring Ltd, was recapitalised with an infusion of Rs. 300 Mn, improving its Debt /Equity Ratio.

• Sampath Surakum Ltd, was amalgamated with Sampath Bank subsequent to the Bank obtaining the license as a primary dealer.

• Sampath Trade Services (Hongkong Ltd), is in the process of being liquidated.

The Bank also continued with its strategy to improve the operations of its subsidiaries that performed well in 2009, in order to maximise their contribution to group profits.

• SC Securities (Pvt) Ltd, has recorded a marked turnaround in its performance buoyed-up by the sharp increase in activities on the Colombo bourse with the advent of peace.

• Sampath Information Technology Solutions Ltd, has continued to successfully trade several projects.

• Sampath Centre Ltd, the property development arm which owns the Sampath Bank headquarters performed well in 2009.

Our overall group strategy is to make each of these entities vibrant players in their respective fields and in turn, contribute to the Bank’s efforts to achieve and sustain itself as the best in the banking industry.




Strategic Intent for 2010• To reposition the Bank’s image as ‘The Bank for Deposits in the Country’; our corporate priorities would be to provide the most competitively priced products in the market with appeal to all customer segments.

• We will work towards backing our outstanding financial stability with a wide-spread, convenient network of delivery channels and customer service levels unparalleled in the banking industry.

• Expansion into the North & East provinces will be prioritised. Our focus will be to maximise the business potential in these provinces for deposit mobilisation, small to medium credit, remittances and pawning.

• We will drive our product promotion and branch expansion with vigor, to maintain our growth momentum through organic and non-organic means, in 2010.

• The Bank will positively explore non-organic growth opportunities - such as friendly mergers and strategic investments in the financial and insurance sector, to strengthen the Group.

• As the pioneer in the Credit Card Business, the entire card segment will be energised to become the leading player in the card industry, in the country.

• In an environment of rapidly decreasing interest rates, we will focus more on Assets and Liability management and product re-pricing mechanisms, which are vital to minimise any adverse impacts on our Net Interest Margins.

• Enhanced service links with our customers would be a key driver in our strategy to generate more fee-based and exchange income to supplement profit growth.

• A priority would be to maximise recoveries and further improve the NPL ratio.

• We will inculcate a target driven culture within the Bank and invest in developing and motivating our staff to achieve targets.


I am confident that these key strategies will guide the Bank towards a sound growth in post tax profits of at least over 20% in 2010, and further improve key financial ratios of Return On Assets (ROA), Return On Equity (ROE) and Capital Adequacy Ratio (CAR).

Our strategies in the past have served us well.

We are now in a position to circumnavigate adverse economic impacts and position ourselves for long term growth and increasing returns.

As our nation stands at the cusp of an era with incredible economic opportunities, this superior financial strength, will undoubtedly give us an edge over others in the industry.

G L H PremaratneChief Executive Officer17th February 2010Colombo, Sri Lanka


Mr. I W SENANAYAKEChairmanNon Executive DirectorAn Entrepreneur.Date Joined – 16.03.1987Chairman of Strategic Planning and Nominations Committees.Member of Audit Committee.

Mr. MOHAN A ABEYNAIKENon Executive DirectorA Chartered Accountant.

Date Joined – 27.07.1995Chairman of Audit Commttee.

Member of Credit, Strategic Planning, Nominations and ESOP Administration

Committees.

Mr. DENZIL J GUNARATNENon Executive DirectorA President’s Counsel.Date Joined – 29.01.1998Chairman of Shareholder Relations Committee.Member of Credit, Nominations and Risk Management Committees.

Mr. LAKSHMAN J K HETTIARATCHINon Executive DirectorAn IT, Finance & Legal Professional.Date Joined – 10.12.1998Member of Audit ,Credit, Strategic Planning, HR & Remuneration, Risk Management and ESOP Administration Committees.

Dr. SAMAN KELEGAMANon Executive Director

An Economist.Date Joined – 01.04.1998

Mr. SUNIL G WIJESINHADeputy ChairmanNon Executive DirectorA Management Specialist.Date Joined – 14.10.1996Chairman of ESOP Administration Committee.Member of Audit, Strategic Planning, Nominations and HR & Remuneration Committees.

Board of Directors

Board of Directors


Mr. ERNEST A GUNASEKERANon Executive DirectorA Senior Banker.Date Joined – 17.07.2001Chairman of Credit Committee.Member of Shareholder Relations Committee.

Mr. PRASANTHA LAL DE ALWISNon Executive Director

An Attorney – at – Law.Date Joined – 15.01.2002

Chairman of Risk Management Committee.Member of HR & Remuneration and Shareholder Relations Committees.

Mr. JAYAMPATHI D BANDARANAYAKENon Executive DirectorA General Management Professional.Date Joined – 17.07.2001Chairman of HR & Remuneration Committee.Member of Strategic Planning Committee.

Mr. ARAVINDA PERERAExecutive Director / Chief Operating

OfficerA Senior Banker.

Date Joined – 25.11.2008Member of Credit, HR & Remuneration and

Risk Management Committees.

Mr. HARRIS PREMARATNEExecutive Director / Chief Executive OfficerA Senior Banker.Date Joined – 25.11.2008Member of Credit, Strategic Planning, HR & Remuneration, Risk Management and ESOP Administration Committees.

Mr. RANJITH SAMARANAYAKEExecutive Director / Group Chief Financial OfficerA Senior Banker.Date Joined – 01.01.2009Member of Credit, Strategic Planning, Risk Management and ESOP Administration Committees.

Mr. K D DHAMMIKA PERERANon Executive DirectorAn Entrepreneur.Date Joined – 01.08.2007Member of Strategic Planning and Risk Management Committees.

Board of Directors


Board of Directors - Profiles

Board of Directors - Profiles

I W SENANAYAKEChairman (Non-Executive)

Founder Director since March 1987.

Chairman since October 2008.

Honorary Trade Representative for Singapore Trade Development Board in Sri Lanka.

Chairman of American President Lines Lanka (Pvt) Ltd.

Chairman and Chief Executive Officer of IWS Holdings (Pvt) Ltd, a conglomerate with diversified business interests in Telecommunications, Broadcasting, Information Technology, Aviation, Shipping, Automobiles, Warehousing & Logistics Support Services and Consultancy & Project Management Services for the Telecommunications, Packing & Food Processing Industries.

SUNIL G WIJESINHADeputy Chairman (Non-Executive)MBA, FCMA, FMS

Mr Sunil G Wijesinha is a Director of Sampath Bank since October 1996 and appointed as Deputy Chairman in October 2008.

Nominee Director of the Employees’ Trust Fund Board from September 1990 to September 1994.

He holds a MBA from the Postgraduate Institute of Management - University of Sri Jayewardenapura, is a Fellow Member of the Chartered Institute of Management Accountants - UK, a Fellow Member of the Institute of Management Services - UK and an Associate Member of the Institution of Engineers - Sri Lanka.

He counts extensive experience in the fields of industry, finance and management consultancy, spanning both the public and private sectors in Sri Lanka. A former Chairman/CEO of the Employees’ Trust Fund Board and former Managing Director of Merchant Bank of Sri Lanka Limited. He now serves as the Chairman/Managing Director of Dankotuwa Porcelain PLC.

Mr Wijesinha is the Vice President of the National Chamber of Commerce of Sri Lanka and the Chairman of its Employment, Education and Training Committee. He is also on the Committee of the Ceylon Chamber of Commerce and on the Council of the Employers’ Federation of Ceylon. He is also a member of the National Labour Advisory Council and the Labour Law Reforms Committee.

Mr Wijesinha has been actively involved in the National Productivity Programme, since the launch of the National Productivity Year in 1996. The Asian Productivity Organisation has honoured him twice by conferring the APO National Award – 2000 in recognition of his efforts in promoting productivity in Sri Lanka, and the APO Regional Award – 2005 in recognition of his efforts in promoting productivity in the Asia Pacific Region.

MOHAN A ABEYNAIKEDirector (Non-Executive)FCA

Director of Sampath Bank since July 1995.

Past President of the Institute of Chartered Accountants of Sri Lanka. Has been a member of the Securities & Exchange Commission of Sri Lanka and Chairman/Director of several organisations in the Public and Private sectors.

DENZIL J GUNARATNEDirector (Non-Executive)Attorney-at-Law

Director of Sampath Bank since January 1998.

An Attorney-at-Law since 1973 and served in the Attorney General’s Department as a State Counsel. Joined the Judiciary and was a Magistrate from 1979, having served in such capacity at Kebithigollewa, Matara and Kegalle. Joined the unofficial Bar in 1984.

Was appointed the Chairman of the Employees’ Trust Fund Board in 1994 and also Dankotuwa Porcelain PLC.

He is the Chairman of Uni-East Agencies (Pvt) Ltd., and Bibile Trading & Forwarding Agency.

Appointed as a Director of Ascot Holdings Ltd and Sampath Information Technology Solutions Ltd (SITS – wholly owned subsidiary of the Bank).

DR. SAMAN KELEGAMADirector (Non-Executive)D. PHIL [OXON]

Director of Sampath Bank since 1998.

Director of Singer (Sri Lanka) PLC since 2006.

Executive Director of the Institute of Policy Studies of Sri Lanka. Fellow, National Academy of Sciences of Sri Lanka.

Former President of the Sri Lanka Economic Association.

Has written extensively on the Sri Lankan economy.

LAKSHMAN J K HETTIARATCHIDirector (Non-Executive)LL.B, FCMA, MBCS, CITP, Attorney-at-Law

Director of Sampath Bank since December 1998.

Management Consultant, Director of several companies and a Member of the Council of University of Moratuwa. Member of the National Education Commission. Former President of the Organisation of Professional Associations of Sri Lanka, former President of The Chartered Institute of Management Accountants, Sri Lanka Branch and former Country Manager of IBM World Trade Corporation, Sri Lanka.

He is the Chairman of Sampath Information Technology Solutions Ltd (SITS – wholly owned subsidiary of the Bank).

JAYAMPATHI D BANDARANAYAKEDirector (Non-Executive)LL.B., FICCS, FCPM and FIPM.


He is the immediate past Chairman of the Ceylon Chamber of Commerce and past Chairman of the Employers’ Federation of Ceylon.

He is the Chairman of Ceylon Tobacco Company PLC and serves on the Boards of Coca Cola Beverages (Lanka) Ltd, Finlays Colombo PLC and Hayleys PLC.

He currently serves as a Member of the Board of Investment of Sri Lanka and a Member of the Presidential Taskforce on Productivity. He is a nominee of the Central Bank to serve as a member of the Board of Westcoast Power (Pvt) Ltd.

Sampath Bank PLC | Annual Report 2009 27Board of Directors - Profiles

ERNEST A GUNASEKERADirector (Non-Executive)ACIB (LOND)


Banker with 46 years experience in Commercial Banking. Former Director and Head, Bankers Trust Company of New York, Colombo with responsibility for Sri Lanka, Bangladesh, Nepal and Maldives.

PRASANTHA LAL DE ALWISDirector (Non-Executive)LL.B, LLM (Colombo), Attorney-at-Law, Dip. M.ACIM (UK)


An Attorney-at-Law since 1983, was a former State Counsel at the Attorney General’s Department.

A Certified National Trainer in Human Resource Management of the Junior Chamber International.

Visiting lecturer, Faculty of Law, University of Colombo.

Advisor to the Minister of Export Development and International Trade.

K D DHAMMIKA PERERADirector (Non-Executive)

Director of Sampath Bank since 01st August 2007

Chairman/Director-General of the Board of Investment of Sri Lanka (BOI). Member of the Board of Directors of Strategic Enterprise Management Agency (SEMA) and Sri Lanka Export Development Board (EDB). He is a well known prominent entrepreneur and investor whose business interests include hydropower generation, manufacturing, hospitality, entertainment, banking and finance.

He serves as the Chairman of The Fortress Resorts PLC, Vallibel Power Erathna PLC, Vallibel Finance Ltd, Vallibel Holdings (Pvt) Ltd, and holds Directorships in his other private sector companies.

Deputy Chairman of Royal Ceramics Lanka PLC, LB Finance PLC, Amaya Leisure PLC.

Director of Hayleys PLC, Haycarb PLC, Hayleys-MGT Knitting Mills PLC, Asian Alliance Insurance PLC and Hotel Reefcomber PLC.

HARRIS PREMARATNEDirector (Executive) ACIB (LOND)

Director of Sampath Bank since 25th November 2008.

Joined Sampath Bank as Chief Executive Officer (Designate) in October 2008. Appointed as Chief Executive Officer from 1st January 2009. He is an Associate Member of the Chartered Institute of Bankers,London.

Prior to joining Sampath Bank he was a Senior Deputy General Manager at Commercial Bank of Ceylon PLC, from which position he retired. He has 39 years of overall banking experience with expertise in the areas of Trade Services, Trade Finance, Corporate Credit, Corporate Finance, Recoveries and Correspondent Relations.

He was a Director of Sri Lanka Credit Information Bureau and was the Chairman of the Technical Advisory Committee of the Sri Lanka Banks’ Association. He is a Director of the Asiri Hospital Group of Companies. He also held the position of Director of Softlogic Group of Companies.

ARAVINDA PERERADirector (Executive) B.Sc (Engineering), C.Eng, MIE(SL), MBA, FIB, FCMA

Director of Sampath Bank since 25th November 2008.

He is the Chief Operating Officer of Sampath Bank. He received his Degree in Engineering from University of Moratuwa in 1981 and his MBA from the University of Sri Jayawardenepura in 1989. He is also a Fellow member of the Institute of Bankers of Sri Lanka.

Previously he functioned as the Deputy General Manager (Corporate Banking), Assistant General Manager (Corporate Banking), Assistant General Manager (Credit) and Senior Manager (Corporate Credit) of Sampath Bank.

Prior to joining Sampath Bank, he served at DFCC as a Senior Project Officer and at Ceylon Tobacco Company, as Departmental Manager &

Service Engineer and as an Engineer at National Milk Board.

He is a Chartered Engineer and a Member of the Institute of Engineers, Sri Lanka and a Fellow of the Chartered Institute of Management Accountants, U.K.

He is also a Director of Credit Information Bureau, Sri Lanka (CRIB).

RANJITH SAMARANAYAKE Director (Executive) B.Com (Accontancy Special)


Holder of a Bachelor of Commerce (Accountancy Special) Degree from the University of Peradeniya, where he became the President of the Students Council in 1970. He commenced his banking career in 1975 and headed the Finance & Planning function at three Banks, namely NSB, Commercial Bank and at present Sampath Bank, for a period of over 34 years. He joined NSB as an Executive in 1975 and joined Commercial Bank as an Executive in 1979. Rising up to the position of Senior Deputy General Manager (Finance & Planning) at Commercial Bank PLC he retired in February 2008, after serving for 28 years. In addition, he served as a Director of many subsidiary companies of Commercial Bank and a member of several Management Committees.

He joined Sampath Bank in February 2008, as Consultant (Finance & Planning) and was subsequently appointed as the Group Chief Financial Officer. He was appointed as an Executive Director of Sampath Bank with effect from 1st January 2009. In addition, he is working as a member of several Board Sub Committees and Management Committees.

He has also functioned as the Chairman of the SLBA Sub-Committee on Basel II implementation in Sri Lanka and the Chief Examiner of “Regulation and Compliance” of the Diploma Examination , conducted by the Institute of Bankers-Sri Lanka.

Sampath Bank PLC | Annual Report 200928Corporate Management

Corporate Management

Mr Harris PremaratneExecutive Director / Chief Executive Officer

Mr Aravinda PereraExecutive Director / Chief Operating Officer

Mr Ranjith Samaranayake Executive Director / Group Chief Financial Officer

Mr Nimal Tillekeratne Deputy General ManagerOperations & Commercial Credit

Mr Vimal IndrasomaDeputy General Manager Information Technology

Mr Nanda FernandoDeputy General Manager Personal Banking

Mr Saman HerathDeputy General Manager Corporate Banking

Mr Lalith JayakodyDeputy General Manager Finance & Planning

Mrs Anoja Karunaratne Chief Risk & Compliance Officer

Sampath Bank PLC | Annual Report 2009 29Corporate Management

Mr Sarath JayasingheDeputy General Manager Human Resource Development

Mr Wije DambawinneAssistant General Manager Treasury

Mrs Hiranthi De SilvaAssistant General Manager Corporate Credit

Mr K L G PradeepAssistant General Manager Branch Credit

Mr Tharaka RanwalaAssistant General Manager Marketing & Deposits


Senior Management

Senior Management

Mr Kamal Abeysinghe Head of Compliance

Mr Rohana Dissanayake Head of Retail Deposits

Mr Dinusha IhalalandaHead of Recoveries I

Mr Deepal SamarasekeraSenior Manager Commercial Credit

Mr S SudarshanCompany Secretary

Mr Nanda BandaraHead of Internal Audit

Mrs Nirosha De SilvaSenior Manager Card Centre

Mr Upali DharmasiriHead of Recoveries II

Mr Sanath AbhayaratneSenior Manager International Operations

Mr Aruna JayasuriyaHead of Trade Services

Mr Amanda AbeyweeraSenior Regional Manager

Mr Rajendra Ranasinghe Senior ManagerSystems & Procedures

Sampath Bank PLC | Annual Report 2009 31Senior Management

Mr H P AmaratungaSenior Regional Manager

Mr Pununuwan Wickremasekera Senior Manager Legal

Mr Mangala P WickremasingheHead of Enterprise IT Solutions

Mr Ramalingam JeyarajeswarenSenior Regional Manager

Mrs Nimali Abeyratne Senior Regional Manager

Mrs Anuja GoonetillekeChief Legal Officer

Mrs Shashi Kandambi JassimSenior Manager Corporate Finance & FCBU

Mr Manoj AkmeemanaSenior Manager Research & Development

Our NationInspiring

“ We all have ideas. And we all visualise putting these into practice. Creating a solid platform to nurture and encourage aspirations that bring our country to the fore is what we do at Sampath Bank. We inspire people.”


With the bank’s image for stability and ethics, and backed by healthy capital adequacy ratios and strong financials, we stood above the rest, in 2009

COO’s Operational Review

Aravinda PereraChief Operating Officer



Several extraneous factors impacted the economy in 2009. But through it all, we managed to achieve our key operational deliverables.

Snapshot of the Sri Lankan economy

InflationInflation continued to decline substantially through the year, reaching the lowest level recorded in five years by September to 0.7%, while the annual inflation stood at around 4.2%.

Although inflation is expected to increase in 2010 from its current low levels, it is expected to remain within single digit.

GDP

• Since 2005, the Sri Lankan economy has been growing at an average of 6% continuously, for four consecutive years.

• The slowdown in economic growth in 2009 was primarily due to the global recession.

• Worker remittances largely, from the Middle East, amounting to US$ 3 Billion – the country’s top foreign exchange earner, is expected to cover 70% of the budget deficit, which is 7% of GDP.

• Although export revenues from garments tops US$ 3 Mn annually, nearly half the earnings are ploughed back to import fabrics and accessories. With prices yet to record a healthy turnaround for Sri Lankan commodities such as rubber and tea, worker remittances remain the mainstay of the economy.

Agricultural sector

2009: Poor growth is mainly due to the contraction in the production of tea and minor export crops.

2010: The agriculture sector is expected to improve with the re-integration of the Northern and Eastern Provinces.

Industrial sector


0

2

3

1

4

6

5

7

%GDP Growth

2008

- A

ctua

l

1st

Hal

f of 2

009

Pro

ject

ed fu

ll ye

ar 2

009

2010

Pro

ject

ed

0

2

4

6

8

%Performance of the Agriculture Sector

2008

- A

ctua

l

1st

Hal

f of 2

009

Pro

ject

ed fu

ll ye

ar 2

009

0

2

4

6

8

%Performance of the

Industrial Sector

2008

- A

ctua

l

1st

Hal

f of 2

009

Pro

ject

ed fu

ll ye

ar 2

009

6.00

7.50

4.40

3.30

2.10

3.50

6.00

5.90

3.00

3.60


2009: The reduction in growth is mainly due to the weak performance of export oriented industries as a result of the global economic slowdown.

2010: With the recovery of the global economy, industrial performance is expected to improve at a relatively higher rate and will be further strengthened by the expansion of markets into newly liberated areas.

Service sector

2009: Slow growth is largely due to the contraction in wholesale and retail trade and the hotels and restaurants sub-sectors, amidst the overall slowdown in economic activity.

2010: With the recovery of domestic economic activities, tourism, import and export trade, banking and finance sectors, the service sector is expected to revive.

Economic context under which we delivered our strong performanceThe year started off with visible challenges to the financial markets from the global financial crisis causing a shortage of international liquidity and high borrowing costs. However, the liquidity crunch eased-up as the year wore on.

Although 2009 experienced a flat growth in the 1st quarter, for Sri Lanka, most economies are slowly on the path to recovery – with China and India recording positive growths in the 3rd quarter. However, according to global experts, Sri Lanka is expected to have an economic growth above 6% for 2009.

In Sri Lanka, the impact of the global meltdown was more profound on our external trade. With shrinking demand in most global economies – especially in the US and EU, export earnings declined by 17.2% in the first eight months in 2009 due to the contraction in Industrial and Agricultural Sectors. To counter low export revenues – especially from apparels, tea and rubber, the government initiated restrictions on imports to safeguard reserves which impacted our trade financing volumes. However, IMF standby loan facility eased Sri Lanka’s foreign reserve situation, which improved to USD 4 Bn by September 2009. The only glimmer of hope continued to be our key foreign exchange earner - remittances from Sri Lankan workers abroad, which grew at 9.9% to USD 2.2 Bn in the first eight months of 2009 and reached USD 3.3 Bn by the end of the year.

The tea industry made a remarkable comeback in 2009. However, progress is still slow in import financing and in the garments industry, whose future remains cloudy with hovering issues concerning GSP+ concessions. Tourist arrivals declined by 2.6% in the first 9 months of the year, but low exposure of 4% of the total loan portfolio, the impact to Sampath Bank was minimal. However, with the end of the civil conflict, tourism is fast accelerating, creating a new demand for project financing in tourism related infrastructure and construction activities.

During first quarter of the year the domestic economy was marked by high inflation, high interest rates, tight monitory controls and rapidly increasing expenditure to end a prolonged conflict. Local industrialists reacted sharply by re-engineering their operations, to become more cost competitive. Deposit mobilisation proved to be a challenge in the first half of the year due to high inflation, while the banking industry as a whole began experiencing low credit demand by the private sector and a sharp rise in NPLs due to high interest rates.

The government’s effort to spur investments by slashing interest rates towards the 3rd quarter has still not reversed industry trends sufficiently and the negative growth in customer advances, continue. It is expected that the construction industry will witness resurgence due to the low interest rates and with the improvement in tourism.

The rupee fluctuated heavily during the year, due to volatile market conditions, moving from Rs. 112 to 1 US$ in January 2009, to its lowest level of Rs.120.25



0

2

4

6

8

%Performance of the

Service Sector

2008

- A

ctua

l

1st

Hal

f of 2

009

Pro

ject

ed fu

ll ye

ar 2

009

5.60

1.10 3.

50


in April, and then steadied at around Rs.114.80 since May 2009. A steady decline was also witnessed in the yields of Treasury Bills and Bonds, during the year.

Impact of regulatory & policy changes on ourperformance• Import restrictions enforced by the Government

to counter slack exports in late 2008, included regulations on margin requirements, on prepayment of import bills, forward contracts, imports on documents against acceptance, margins on letters of credit and curtailment on issuing import permits. National expenditure on imports decreased substantially by 35%, affecting the Bank’s Trade Finance operations. These regulations caused a drag on the import of vehicles, commodities and construction related items. Despite most regulations being removed in 2009, uncertainty in government policy continued to worry the market, which has not picked up adequately.

• The banking sector benefited by the policy shift which allowed the Sri Lankan Diaspora and migrant workers to invest in Treasury Bills and Bonds, enabled the payment of bonus interest to NRFC and RFC accounts, allowed Commercial Banks to transfer funds between SIERRA Accounts and FCBU Accounts for non residents and to issue foreign exchange for any travel purpose.

• Fiscal policies to maintain high Treasury-Bill rates at the start of the year, benefited the Bank’s operations.

• The increase in general provisioning did not impact the Bank, as the loan book did not increase significantly and pawning is not subject to the provisioning regulations.

• The Government’s stipulations on the mandatory lending percentages to the agriculture sector did not impact the Bank as our exposure was above the minimum stipulated.

• New risk management policies, arising due to certain issues in the industry, including minimum levels of knowledge in Treasury are currently being complied with.

Key Performance Indicators (KPI) achieved

Profit After Tax (PAT)

Target KPI Actual 2009

Actual 2008

Annual Post Tax Profit Growth

> 20% 48.4% 34.4%

Despite a low asset growth of 12.7%, the significant achievement in our PAT is attributable to several factors - primary among which was the improved net interest margins on our fund based operations.

Net interest margins which stood at 4.89% for 2008, rose to 5.30% (by 0.41%) in 2009, mainly due to prudent management of the Bank’s fund base as well as interest rate risks, in a volatile market. Prudent and timely decision making by the Bank’s Assets and Liability Committee (ALCO) enabled us to manage volatilities in both exchange rates and interest rates positively.

As a result, the net interest income of the Bank, grew by 17.6% in 2009 which is a very high growth rate as compared to the advances growth of 3.2% over the total asset growth of 12.7%.

Furthermore, the Bank sold 4.1 Mn shares in LankaBangla Finance Ltd to realise significant market gains. The resulting profit of Rs. 1,559 Mn was sufficient to offset the impairment provision of Rs. 1,069 Mn made on an investment in a foreign currency bond in 2004.

Return on Equity (ROE)


Actual 2008

Return on Equity >18% 19.41% 15.41%

This year’s ROE of 19.41% comfortably exceeded the 2008 ROE of 15.41% and exceeded the target of 18% mainly due to superior profit growth resulting from the measures mentioned in this report.

Return on Assets (ROA)


Actual 2008

Return on Assets >1.25% 1.42% 1.04%

The ROA comfortably exceeded the previous year’s achievement and this years’ target. The ROA of 1.42% was mainly due to the profit growth of 48.4% surpassing the asset growth of 12.7%.



Capital Adequacy Ratio (CAR)


Actual 2008

Total Capital Adequacy Ratio >12.5% 13.45% 11.95%

This year’s total CAR of 13.45% exceeded the actual achieved last year, and the target of 12.5%. This is attributable to the redemption of debentures worth Rs. 1.5 Bn which are yet to be reissued and investments made in Sampath Leasing and Factoring Ltd, amounting to Rs 300 Mn. being deducted from the Capital.

Outlook for 2010The Central Bank is expected to continue with retaining inflation at present levels, resulting in low interest rates which prevailed towards the end of 2009, moving into 2010 as well – although a slight upward movement may be experienced. A positive impact of the low interest rates will be seen in our loan books in 2010, which augurs well for the Bank. However, we would need to adopt innovative strategies to manage our Net Interest Margins. As proven in 2009, one of our core strengths, is our Assets and Liabilities management.

A stable political environment and consistent fiscal and monetary policies that ensures a five-month reserve, will be conducive for investment and lending, and help improve imports and energize the leasing and housing markets. It is hoped that our exports will revive if both the EU and the US accelerate their economic recovery.

It’s a trying time for the Banking industry as a whole, but the strategies we will adopt at Sampath Bank in strengthening our capital base and to provide premium value to customers across the board, will stand us in good stead. We will pursue our expansion plans to integrate all provinces across the nation into the development spectrum. Our branch expansions – especially in the North will be accelerated.

Targeted KPIs for 2010

Annual Post tax profit growth >20%

Return on assets >1.25%

Total Capital Adequacy Ratio >12.5%

Return on Equity >18%



We are already a resilient Bank – our performance speaks for itself.

It is with quite a sense of confidence that I look forward to 2010, to explore exciting new avenues the economy may bring our way.

Aravinda PereraExecutive Director / Chief Operating Officer17th February 2010Colombo, Sri Lanka


Management Discussion & Analysis

Personal Banking In an environment marked by slow commercial activity, we reoriented ourselves.

We realised that, to sustain ourselves and the sluggish economy, we need to provide an even superior service, enhance our customer convenience channels and give greater value to our personal banking customers.

Apart from our range of deposits and lending products which offer the best value in today’s banking industry, a customer’s entire personal banking needs are cared for, by us – overdrafts, personal loans, import/export financing, lending to selected industries, pawning, leasing and housing loans.

Highlights of 2009• A penetrative delivery channel of 131 branches

offer easy access to our broad range of personal banking products.

• Our tie-up with Eagle Insurance provided our customers with yet another reason to appreciate our personalised service under one roof. Bankassurance services contributed almost Rs.11 Mn to the Bank’s fee-based income this year.

• Despite stagnant lending growth in the industry, we achieved our profit targets.

• Keeping to our sustainability agenda, our branches initiated at least 2 or more CSR projects, one of which focused on entrepreneurial development.

Understanding our customer betterWe know that it’s all about giving our customers a better service and greater value. In turn, we are able to reward our shareholders with higher returns.

A specialist trainer has been contracted full-time to develop a keen customer-centric culture across all branches.

This year, we expedited credit processing and improved credit quality by moving from a Colombo Branch-centric focus to a more regionalised system. Staff with specialised credit processing knowledge at our five new Regional Centres, armed with more in-depth local knowledge, helped us know our customers better and reach them faster. This measure helped Branch Managers to concentrate purely on superior customer servicing, while bringing in cost efficiencies to the Bank.

Faced with economic inactivity, we still managed to improve our market share through promotions island-wide, but avoided mass-scale lending. Our regional staff, helped Branch Managers source dependable customers, who had the ability to survive the tough times.

Improving our portfolio qualityWe helped our customers in the tea-sector survive the rough seas, by offering longer grace periods and more flexible restructured repayment options. We also became a party Government sponsored credit lines to strengthen the working capital of the tea plantations/private factories.

Experienced staff in our restructured recoveries division worked closely with customers in difficulty, to restructure long outstanding loans, while legal options were accelerated. It helped us maintain credit quality and avoid new additions to the NPL segment. In a sluggish economy, this is a remarkable achievement.

2009 2008 Change %

NPL Ratio (As a % of total advances (%)

8.4 8.7 -3.45

Cash recoveries during the year (Rs.Mn.)

540.3 457.6 18.07

Re-orienting our lending focusTraditional lending was tough this year, so we re-oriented our lending focus.

We were the first bank to offer the highest advance quantum per sovereign – in the last 5 years, and we offered the lowest pawning-advance rates in the market. We were rewarded with a 38% growth in pawning advances.

We maintained portfolio quality by curtailing lending to the high risk construction sector and restricted leasing. Realising an urgent need for export facilities, we spurred growth in the southern agriculture sector by offering competitive rates and a personalised service to tea and cinnamon exporters in the south.

Our Delivery Channels – comprehensive, widespread, dependableWe are within easy reach, across the island. The biggest expansion drive in the local banking industry enabled us to open 19 branches this year, including 4 in the North and 6 in the East.

With a disaster recovery time of just 10 minutes, 24x7 monitoring of downtime and instant updates on low cash-levels - our widespread network of ATMs recorded a 99.6% reliability for uninterrupted services and far exceeded our customer expectations.




We are accessible to our customers through a choice of delivery channels, each with its own unique benefits.

• A99.6%reliablenetworkofATMso Sampath Bank ATMs - 186o ATMs networked with BOC, Union Bank, NSB,

DFCC - 730o ATMs with online-real time deposit facilities - 6

• e-Bankingo Sampath Vishwa – virtual branch banking

experience 24x7 o SampathNet –Internet Bankingo PayEasy – secure payments to the widest base

of service providers, through the internet or EasyBanking Centres

o Sampath Internet Payment Gateway – fully secure payment system and cyber shopping at its best

o Telebanking – telephone banking with multi language options, from anywhere in the world

o SMSAlertz – transaction alerts via SMS on all accounts

o e-remittance – receive money within seconds from anywhere in the world

• Brancheso Islandwide, interconnected branch network - 131o Regional Offices - 11o EasyBanking Centres - 18

• Cardso Gold and Classic Credit Cardso Visa Platinum – offering exclusive features and

privileges around the worldo Affinity Cardso Chip Card – the first to issue chip based VISA

cards & Master Cards, and enable acceptance of chip card transactions on POS network.

o Web Card – a pre-paid VISA card, which can be topped-up as desired, aimed at secure cyber shopping

o Visa Debit Card

InnovationAt times such as these, we valued the cliché; innovation is the key to growth.

Our delivery channels increased with our ‘Visa Shop N Cash’ tie-up with Cargills. With increased accessibility, our customers can now withdraw cash from a cashiers point while shopping at any Cargills Food City outlet.

“Connecting with the economy, our shareholders, our customers, the community, the environment and our valued employees - is what we do best. We are proud of our phenomenal sustainability initiatives, which are ingrained into the very core of all our banking operations........” Sampath Bank – Winner of the Best Corporate Citizens Award 2009


Analysis of Advances Portfolio - 2008

Manufacturing - 16%

Infrastructure - 1%

Agriculture & Fishing - 7%

Financial & Business Services - 4%

Tourism - 4%

Other Services - 5%

Transport - 1%

Credit Cards - 2%

Construction - 15%

Pawning - 14%

Traders - 19%

Other Customers - 11%

New Economy - 1%

Analysis of Advances Portfolio - 2009

Manufacturing - 19%

Infrastructure - 2%

Agriculture & Fishing - 10%

Financial & Business Services - 3%

Tourism - 4%

Other Services - 5%

Transport - 2%

Credit Cards - 2%

Construction - 12%

Pawning - 18%

Traders - 16%

Other Customers - 5%

New Economy - 2%


Understanding the potential for inward remittances from across the world, we drove awareness campaigns about our remittance facilities and increased association with leading financial institutions across the Middle East, Italy, UK, Canada, New Zealand and South Korea. Banking hours were extended in Sri Lanka – especially during periods of festivities and helped increase our fee based income from remittances.

Our innovative business drive at the Colombo International Book Fair in September 2009 was a tremendous success. We are now in the process of rolling out the CDMA technology based POS terminals in partnership with Suntel, Lanka Bell and EPIC Lanka, to grow the merchant base.

Giving our traditional deposit and lending products an innovative twist and by launching new products with even more exciting features, helped us penetrate our customer segments even better.

Personal Banking Strategies for 2010 We will pursue our plans for 2010 with resolve, to lay a platform for aggressive growth.• Expand our regional focus - especially in the

North and East, to expedite credit processing and improve credit quality

• Continue our aggressive branch expansion and pursue with our policy to recruit local staff with personalised local knowledge

Branches planned for 2010

Province

Eastern 2

Western 13

Southern 4

Northern 6

Central 4

North Western 8

North Central 3

Total 40

• Exploit opportunities presented by low monitory policy rates and low inflation, especially in the housing sector.

• Aggressively promote ‘Sevana Step-up’ & ‘Next Generation Housing Loans’.

• Penetrate untapped business opportunities that may arise with the new harbour and airport in the Southern Province – especially for tourism related activities in the Tissamaharama and Hambantota districts.

• Strengthen the merchant base developed with the successful piloting of the CDMA technology.

• Connect the cash registers of the growing network of over 100 Cargills Food City outlets to our banking system. This will almost double our delivery channels, allow extende banking hours to withdraw cash and enable customers to be rewarded with value added benefits.

Corporate BankingCorporate Credit, Foreign Currency Banking, Corporate Finance, Development Banking, Trade Finance and Treasury related services combine to provide corporate banking solutions and services, which far exceed the expectations of our corporate customers.

Corporate Credit We focused our efforts to understand our customers’ business needs and match their expectations with exceptional, personalised service.

Highlights of 2009• In the midst of a stagnant economy, we are proud of maintaining the

quality of our portfolio and recording a moderate growth of 7.5% in corporate lending.

• Effective pricing and timely financial solutions helped us retain our customer base, in a tough banking environment.

Maintaining our portfolio qualityStrict scrutiny by the Risk and Compliance Unit of all credit proposals and of sectors considered risk sensitive to local and global externalities helped us maintain a quality portfolio.

Prudent risk mitigating strategies were introduced where necessary - lending caps were placed on certain sectors and customers were advised to limit exposure to high risk buyers.

Supporting private sector growthOur far-sighted risk management measures were supported by effective pricing strategies arising from sensible assets and liabilities management. Perceptive strategies such as these gave us the confidence to continue lending to the tea and rubber sectors despite the ripple effects of the global recession. Selected lending also continued during the year to industries; including cement, food producers in the agriculture industry and fertilizer importers in the indirect agriculture-based industry.

We have laid the foundations to exploit new credit demand – which is yet to accelerate, but is expected to grow.


Sampath Bank PLC | Annual Report 200942Management Discussion & Analysis


We have witnessed heightened investment interest by both local and overseas entrepreneurs and fund managers. We are also encouraged by signs that the Central Bank may relax certain restrictions on capital-flow which will allow overseas investments, to counter slack local demand. Removal of travel advisories by key tourism markets in the US, EU and Japan should create investment opportunities in tourism, especially in newly liberated areas around the eastern coast.

Corporate Credit Strategies for 2010• Grasp opportunities presented by post-conflict development,

especially in infrastructure and construction related industries in the North and East.

• Support capacity expansions in the leisure industry which expects to almost triple its current capacity by 2011.

• Meet or exceed regulatory needs by encouraging lending to mass-scale agriculture and agriculture based industries.

Corporate Finance Whilst continuing to operate in the traditional sectors, we expanded our work in restructuring businesses and facilities, to help overcome the effects of the economic downturn and facilitate a turnaround in the industry as well as in servicing of debt.

Highlights of 2009• Corporate Finance continued to record a growth, despite the effects

of the global economic slowdown which effected most industries/sectors.

• Personalised relationships and expertise in meeting business needs continued to give us a competitive edge.

Broadening our scope With margins thinning out and the general culture of economic inactivity pervading all sectors, Corporate Finance diversified from its traditional lending scope. We focused on financing a commercial property development project by one of the leading Leasing Companies in Sri Lanka, and continued to expand into the fast developing health sector.

We also proactively reached inwards to help maintain credit quality. Improving risk evaluation was a step in the right direction. And by lending our expertise to restructure businesses and credit facilities, we helped our customers survive the low-demand environment and improve their debt repayment capacities.

Corporate Finance Strategies for 2010• Expand our customer care network by building on the operational

efficiencies brought about by internal restructuring in 2009, together with technology innovation in Trade Services.

• Exploit opportunities to build personalised relationships with corporate customers involved in post-conflict investments.

Development Banking We continued to provide financial assistance and advice to entrepreneurs, and to finance projects geared at national development.

Highlights of 2009• Development banking lending volumes increased

by promoting new credit schemes such as;

o Agro Livestock Development Project o Small & Medium Entrepreneur Regional

Development Project o Relief Package for Tea Factory Ownerso DFCC - V for North & Eastern Regionso Awakening Northo Credit Line for Resumption of Economic

Activities in the Eastern Provinceo Poverty Alleviation Micro Finance Project

Financing to mainstream developmentA regional customer-centric credit evaluation process, brought about by restructuring efforts in personal banking, helped promote project lending to the manufacturing, health and infrastructure development sectors. Refinanced loans at low interest continued to attract SME customers outside the Western Province and for hydro power projects.

“Through every product we deliver, in every service we offer - we aim to be a Bank for every Sri Lankan. This award is one giant stride in our journey to be recognized as a truly national Bank.....”Bank of the Year 2009 – The Banker Awards, Financial Times, London.

Sampath Bank PLC | Annual Report 2009 43Management Discussion & Analysis

We also reached out to the most micro-level SMEs and the self-employed – who would otherwise struggle to raise traditional collateral-backed credit from most banks, to start up businesses.

Development Banking Strategies for 2010• Continue promoting attractive lending options

under five new refinanced loan schemes and increase participation more in new credit lines.

• Mobilise our extensive branch network in the Southern, Eastern and North Western coastal belt, to help the leisure sector expand its capacity almost three-fold under their accelerated plans.

• With our branch network expanding mainly into agriculture based communities, and due to our ability to offer competitive rates through agriculture based refinance schemes, we will maximise lending opportunities to this sector.

• Increase lending for development projects – especially through refinanced loan schemes, in the newly accessible Northern and Eastern provinces.

Trade ServicesCompetitive trade financing rates helped our customers withstand the impact of sluggish demand in trade activities.

Highlights of 2009 • We succeeded in recording an import turnover

of US$ 475Mn, despite declining import volumes in consumer goods, motor vehicles, electrical appliances and textiles.

• Export financing volumes topped the US$ 180Mn, mark, in-spite of poor global demand for rubber, textiles and garment exports on the back of the global economic downturn.

• We stayed a step ahead of our competition by investing in staff training to improve their technical knowledge on trade financing.

A singular focus on customer serviceOur unique and highly competitive trade services unit offers a range of trade financing with a friendly personal touch.

Restructured into four clusters this year, we now have an even better understanding of each customer segment to meet their unique import and export financing needs.

‘DC-Direct’ is yet another innovative banking technology, pioneered by us. Our ability to innovate allowed us to give our customers the privilege of opening Letters of Credit from the convenience of their office. DC-Direct was further enhanced with facilities for our import customers to view their outstanding trade dues, and other daily updates, thus developing it into an internet banking solution, with a user friendly touch.

Trade Services Strategies for 2010• Extend our personalized Trade Finance services by offering

customers a facility to purchase their Export Bills at their own office. On request, our professional Trade Team will visit the customer within minutes to finalise trade documents in compliance with Letters of Credit and to purchase/ negotiate LCs and Collection Bills.

• Develop a software solution for our export customers to view their outstanding bills, generate reports and obtain daily updates.

TreasuryOur experience in wealth management and advisory services, a keen sense of market volatilities, and superior technology, gives us a clear advantage in the banking industry.

Highlights of 2009• Successfully managed the liquidity requirements across the Bank,

despite volatility in currency and capital markets.• Strategic investments in financial instruments and foreign currency

placements helped boost net interest income and realised capital gains to the Bank.

• Succeeded in maintaining our position as a leading player in Bank Note repatriation, by quoting competitive rates to market participants.

Exploiting market trendsIt’s a skill to survive in such volatile and competitive markets as we witnessed this year. Many astute decisions marked the success of our liquidity management in 2009.

A volatile rupee fluctuated and steadied towards the end of the year. Government Treasury Bills and Sri Lanka Development Bonds declined by almost 1000 basis points over 12 months. Judicious borrowing and lending strategies in local and foreign currencies, active trading on the T-Bill Markets and foreign currency placements helped us increase our net interest income and realise significant capital gains to the Bank.

Through the year we substantially increased our business volumes by successfully handling forward bookings, spot requirements and cross currency requirements for our customers. By avoiding risky financial instruments and maximising market conditions through other instruments such as SWAPS, our customers benefited with the most competitive rates in the market.




The foresight and guidance of the Assets and Liabilities Committee, together with our Treasury Division’s years of experience and keen sense of markets, helped us maximise market gains and cut our losses. In making sense of the numbers – the Bank further strengthened its stability, our customers enjoyed competitive pricing and value-added benefits, while shareholders increased their returns.

Treasury Strategies for 2010• Continue dealing arrangements with new Banks and strengthen

relationships built over the years. • Strive to obtain better returns in US Dollar/Rupee trading with

competitor banks.• Engage in more aggressive secondary market trading in Treasury

Bills to obtain profits through higher volumes.• Introduce new products and increase business volumes through

Bank Note Repatriation.

Information Technology (IT)Two decades ago, we revolutionised the use of information technology in banking. Today, our IT platform is still ahead of its time.

Highlights of 2009• This year, our superior technology has positioned us to become

a growing force in Sri Lankan financial services, by expanding our delivery channels and our market reach, through pioneering links.

• The seamless integration of services has delivered value and convenience to customers.

• We have significantly improved the speed, efficiency and reliability of our network, by developing 49 new systems and rolling-out 249 system enhancements

Empowering the nationWe are a part of the network linking every village across the island to the ICTA initiative ‘Lanka-gate’. On-line payments to all government institutions through the internet will be handled and cleared by Sampath Bank. As a centre of IT excellence in Sri Lanka, we consider it our privilege to have been awarded the honour of becoming the payment hub for the nation.

Pioneering LinksA direct and secure link has provided our representatives across the world improved access to customer databases maintained by the Bank, online, increasing the speed of processing and approving remittances. Our award-winning e-Remittance Service can also be availed by anyone to obtain money within seconds, from anywhere in the world, even if no accounts are maintained at Sampath Bank.

Enhancing systems - improving customer convenienceWe continued to invest in upgrading and strengthening our security, communications and disaster recovery systems. It added to the reliability and availability of our delivery channels.

Customer service enhancements that impacted especially Trade Services and remittances, and a gamut of internal process improvements have all resulted in efficiencies which have percolated into improved customer convenience and added value.

The seamless integration of our back office operations, the branch network, the e-banking network, the 730 additional ATMs made available by our links with BOC, Union Bank, NSB and DFCC, and other delivery channels - backed by the 99.6% reliability of our network of 186 ATMs, is a record we are justifiably proud of.

IT Strategies for 2010• Continue to raise the bar in local banking

technology through internal process improvements and customer convenience enhancements.

• Maximise business opportunities presented by the link with Cargills.

• Evolve the DC-Direct mobile platform into a self-service Trade Finance facility and explore its potential for other financial solutions.

• Upgrade our Internet banking system to provide comprehensive and total solutions by the 1st quarter of 2010.

• Introduce automatic cheque imaging deposit ATMs which will link directly to the clearing system for immediate processing

Sampath Bank PLC | Annual Report 2009 45Financial Review

The Bank’s ProfitabilityThe Bank continued its growth momentum in the year 2009 as well, recording impressive results for the twelve month period ended 31st December 2009. The Pre-Tax Profit of the Bank for the period, crossed the Rs.3.9 Bn mark and stood at Rs.3,976 Mn, as against Rs.2,564 Mn for the previous year (2008), recording a Pre-Tax Profit growth of Rs. 1,412 Mn or 55.1%. The Post Tax Profit of the Bank grew by 48.4% to Rs.2,098.3 Mn, an increase of Rs 684.4 Mn over the last year’s profit of Rs 1,413.9 Mn,

Prudent management of the Bank’s Assets and Liabilities helped enhance the net interest income from Rs. 6,649.6 Mn in 2008, to Rs. 7,805.2 Mn in 2009, which reflected an impressive growth of Rs. 1,155.5 Mn or 17.4%, significantly above the asset-growth of 12.7%, recorded for the year. This was facilitated mainly by an improved Net Interest Margin, which rose from 4.89% in 2008 to 5.30% in 2009.

A combination of several internal and external factors facilitated this improvement in Net Interest Margin. The foremost internal factor was the Bank’s success in managing its fund base and the interest rates structure in a prudent and professional manner through the ALCO. In addition, the steps were taken to manage the NPA Ratio, by recovering some of the loans and advances already classified as non performing and by closely monitoring borderline cases which helped to enhance the net interest margin. The reduction in the Statutory Reserve requirement on rupee deposits from

Financial Review

7.75% to 7.00% resulted in an estimated Rs. 308 Mn benefit and was one of the significant external factors which helped improve Net Interest Income.

The Return on Assets (After Tax) of the Bank for this year, improved by 0.38% to 1.42%, from 1.04% in the year 2008. The Return on Equity as at end December 2009 rose by 4% to 19.41%, as against 15.41% recorded as at end December 2008.

Business VolumesTotal deposit base of the Bank grew from Rs.106.9 Bn as at 31st December 2008 to Rs.125.7 Bn as at 31st December 2009 i.e by Rs. 18.8 Bn or 17.5 %, which was a reasonably good growth, considering the market conditions that prevailed. However, despite this deposit growth, the total asset growth of the Bank during the period was only Rs. 17.6 Bn or 12.7%, mainly due to redemption and settlement of Debentures totaling to Rs.1.5 Bn, and certain term borrowings totaling to Rs.2 Bn, during the period. However, based on the results published up to 30th September 2009, the asset growth of the Bank is above the industry growth and reached the 3rd highest place in the private-sector commercial banking category. Stiff competition, and an extremly high interest rate-scenario that prevailed during the early part of the year and the “wait and see policy” of investors resulted in a slower growth of 3.9% in gross advances - from Rs. 95.7 Bn in 2008 to Rs. 98.7 Bn in 2009.

Non Fund Based Income Total other income of the Bank rose from Rs. 2,791.5 Mn in 2008 to Rs. 4,243 Mn in 2009, reflecting a growth of Rs. 1,451.5 Mn or 52%. Foreign Exchange Income, one of the main sources of other income, showed a moderate growth from Rs. 647.2 Mn in 2008 to Rs. 774.5 Mn in 2009. However, the commission and fee based income of the Bank,

Profitability

05 06 07 08 09Profit Before TaxProfit After Tax

0

1,500

2,000

500

1,000

2,500

3,500

3,000

4,000Rs. Mn.

1,29

7

2,26

8

2,21

8

2,56

4

3,97

6

821

1,02

8

1,05

2

1,41

4

2,09

8

0.0 0

1.0

1.5

0.5

2.0

2.5

8.0

4.0

16.0

20.0

12.0

3.0 24.0

%%

05 06 07 08 09

Return On Assets and Return On Equity

ROE (After Tax)

ROA (After Tax)

1.08

1.06

0.87

1.04

1.42


the bulk of which relates to lending activities, recorded a decrease from Rs.1,355 Mn in 2008, to Rs.1,205 Mn in 2009, largely due to the slowdown in the lending activities of the economy.

The notable development in other income was that the Bank sold 4.1 Mn shares, (inclusive of the bonus shares so far received) of its Overseas Associate LankaBangla Finance Ltd., in order to take advantage of the high share prices that prevailed on the Dhaka Stock Exchange. This sale resulted in a profit of Rs 1,559 Mn, which is reflected under Other Income.

Operating ExpensesDue to rapid expansion of the branch network - with 19 new branches added this year, 2 off site ATMs being added on to the network, the salary revision to the staff effective from 1st April 2009, a higher provision for the retirement benefit plan, as well as due to an impairment provision of Rs. 1,069 Mn made as a prudent measure against a foreign currency bond investment made in 2004; the operating expenses of the Bank rose to Rs.8,072 Mn in 2009, from Rs. 6,877 Mn in 2008. This was an increase of Rs.1,195 Mn or 17.4%, as against a 31.4% increase recorded in 2008. However, this increase of 17.4% was well within the growth of 27.6% in the total net income of the Bank. On this basis, the Cost / Income Ratio improved to 57.0% in 2009 , as against 59.6% for 2008.

Provisions and NPLDespite the global and local economic down turn, the Bank was able to manage the Non performing advances ratio (net of interest suspended on overdrafts) experiencing only a slightly marginal increase from 7.5% at the end of December 2008 to 7.6% at the end of December 2009. Nevertheless, the provision for specific loan losses for 2009 (Refer Note 7 to the financial statements) amounted to Rs. 456.188 Mn, as against Rs. 746.410 Mn for 2008. The drop in this provision in 2009 was mainly due to a provision made for a specific debt in 2008. In addition, the general provision for loans and advances recorded a drop of Rs. 253.388 Mn. This was mainly due to replenishment of the general provision in 2008 of up to 1.0%, on account of advances granted prior to 2008 and the reversal of the excess general provision amounting to Rs 39.718 Mn in 2009, in view of the reduction in performing and overdue

Financial Review

The Cost / Income Ratio improved to 57.0% in 2009, as against 59.6% for 2008.

Financial Review

40

45

50

55

60

70

65

%

05 06 07 08 09

Cost to Income Ratio

Cost to Income Ratio

Deposits and Advances

05 06 07 08 09Deposits Loans & Advances

0

52,000

78,000

26,000

104,000

130,000Rs. Mn.

65,4

19

80,7

92

98,8

84

106,

931

125,

690

60,0

95

75,9

70

93,4

30

95,6

55

98,6

85 ATM’s

Branches

0

100

50

150

200

No.

05 06 07 08 09

Branch & ATM Spread

83 96 105

112

131

Sampath Bank PLC | Annual Report 2009 47Financial Review

loans and advances considered for General provision requirement. The negative provisions against pawning, both in 2009 and 2008 were as a result of reversal of provisions held against these advances.

Capital and liquidityThe Total Capital Adequacy Ratio improved to 13.45% as at end December 2009, (after recognition of profits) compared to the total Capital Adequacy Ratio of 11.95%, as at end December 2008, well above the minimum statutory requirement of 10%.

Even after redemption and settlement of Debentures and a large parcel of borrowings, the Bank’s overall Liquidity Ratio stood at 30.5% at end December 2009, well above the minimum statutory requirement of 20%.

Market Capitalization and DividendsWith the cessation civil war which prevailed during the last three decades in the country and the political stability achieved due to the outcome of the recently concluded presidential election, investor confidence has improved. This was impacted on market activities of the Colombo Stock Exchange, with both the Milanka and All Share Price Indices moving upwards. As a result new economic environment and the improved financial and non financial performance of the Bank, the Bank’s share price has been pushed to an all-time high, recording a Market Capitalization of Rs. 14.07 Bn, as at 31st December 2009.

Considering these extraneous factors and the “deemed dividend tax requirement”, the Directors have recommended a final dividend of Rs.6.25 per share, to be paid in April 2010.

Moving forwardSampath Bank operates with a network of 131 branches and 186 Automated Teller Machines as at 31st December 2009. The Bank had opened 19 new branches in 2009, the biggest branch expansion in the country within a year. Arrangements have already been made to continue with the branch expansion program in 2010, by opening at least 40 more branches during 2010 across all parts of the country, with priority being given to the newly liberated Eastern and Northern Provinces.

Looking forward, Sampath Bank has drawn up a new Strategic Plan for 3 years, covering the period of 2010 to 2012, with emphasis on excellent customer service, accelerating our growth momentum, a stringent focus on credit quality and improving overall profitability. Skills development among our staff and inculcating a target driven work culture will also be focal points of the new plan.

Group PerformanceSampath Group, which consists of the Bank and its 5 Subsidiary Companies, posted a Pre-Tax Profit of Rs. 4,004.9 Mn in 2009, as against Rs. 2,787.4 Mn in 2008, recording a Pre-Tax Profit growth of Rs. 1,217.5 Mn or 43.7%. The Post tax profit of the Group for the twelve month period ending 31st December 2009 amounted to Rs 2,083.7 Mn, a 36.6% growth from Rs 1,525 Mn in the previous year. Three major business transactions ocurred within the Group’s business activities in 2009. The Bank’s share holding in the Sampath Centre Ltd, a subsidiary company, was increased to 97% from 94% as a result of purchasing 1 Mn shares owned by National Development Bank. The subsidiary company engaged in primary dealer activities of the Bank “Samapth Surakum Ltd” was amalgamated with the Bank effective 03rd November 2009.

Consequent to the sale of shares of the associated company, LankaBangla Finance Ltd in Bangladesh, the Bank’s holding in this company dropped from 22.8% to13.5% as at 31st December 2009. However, the Bank held over a 20% stake in the Company up to 3rd August 2009, upto which date the share of profits were recognized in the Group figures. This investment is now reflected under “Investment Securities” in the Balance Sheet.

0

70

35

140

175

105

210

Rs.

Maximum Market Price (Rs)

Market Capitalisation (Rs. Mn)

0

9,000

3,000

6,000

12,000

15,000

Rs. Mn.

05 06 07 08 09

Sampath Share Price & Market Capitalisation

6,20

0

7,45

7

8,26

7

4,68

4

14,0

70

0

1,000

1,500

500

2,500

2,000

3,500

3,000

4,000

4,500

Rs. Mn.

05 06 07 08 09

Other Income

1,47

6

2,34

3

2,44

9

2,79

1

4,24

3

“ We all want achievement. Motivation, strategic direction and solid relationships are some of the

key elements in being a success. We at Sampath Bank believe in investing

in relationships that last a lifetime that take our country to the next

level. We inspire people.”

Our NationInspiring

Sampath Bank PLC | Annual Report 200950Sustainability Report

‘Staying connected with our future’

SustainabilityReport 2009

Sampath Bank PLC | Annual Report 2009 51Sustainability Report

CEO’s Sustainability StatementThe way we work affects everything around us. People. The economy. The environment.

As you will see from our performance, we have fared exceedingly well compared to our peers in the industry. And for that, we owe a tremendous debt of gratitude to all those who made us strong enough to survive the risks and challenges of 2009 and in the years past.

We have a wide spectrum of stakeholders. In fact, as the most acclaimed Bank of the year, we impact the whole nation.

As we pursue our profit growth and provide finance for developing our nation through technology transfers, infrastructure, industry and trade, we are acutely aware of how, the choices we make today, will impact on our future generations and their ability to survive.

As the Best Corporate Citizen of 2009 - an accolade befitting what we like to call our ‘transformational’ CSR efforts, we chose to communicate even more transparently this year, about sustainability at Sampath. Complying with certain internationally accepted Global Reporting Initiative (GRI) Framework has allowed us a critical look at our efforts at sustaining the future of all our stakeholders.

The nature of our operations compels us to always make new choices about how we interact with all our stakeholders. The way we can help our customers and shareholders gain better value. The way we drive the economy - not only through our banking operations but also, as a responsible corporate citizen that cares for its community. The way we treat our employees. And the gentleness of our footprint on the fragile environment. Because, the future of all our stakeholders, is also our future.

We hope we have given you a glimpse of the choices we have made, to stay connected with our future.

G L H PremaratneExecutive Director/Chief Executive Officer

CSR Governance at Sampath Bank

Sampath CSR Policy

Sampath Bank considers CSR as a part and parcel of the organisation process, and therefore, strives to develop a sustainable existence for all stakeholder categories of the society through CSR

initiatives.

The CSR initiatives of the Bank go beyond the natural obligations which govern our activities in the ordinary course of business and

aspire to attain the ultimate objective of CSR by being sensitive to societal needs.

With proven expertise and professionalism in banking and finance, the Bank mainly focuses its CSR efforts towards economic

development and growth of the individual and society, at large.

The Bank’s CSR initiative is tripartite in nature and is facilitated through the contribution by the Bank, Team Sampath and the Community.

CSR initiatives of the Bank will not in any way be used for image building activities or to secure business for the Bank and therefore,

any form of advertising will not be encouraged

Two decades ago, we, at Sampath Bank started connecting with all our stakeholders to ensure a better future for them, and for us.

Today, our CSR philosophy has witnessed a progressive shift to align and integrate CSR across our operations to generate sources of opportunities, innovations and a competitive advantage that will benefit all our stakeholders.

Strategic Shift

Deep Partnerships

Changing Industry Norms

Transactional CSR

Philanthropic CSR

Transformational CSR

Donations

Grants

Event Sponsorships

Volunteer Projects


We still continue to be sensitive to people’s need for our donations and grants and consider it important to be involved with our community through events and voluntary projects.

By aligning our CSR philosophy with our overarching strategic goal to become a truly national Bank, we have transformed it to address industry variables. This strategic shift will help us to countribute more effectively to the most pressing macro-economic and social issues in the country. An effort which we like to term as our ‘Transformational’ CSR initiatives.

CSR Strategies

Sampath CSR Strategies

Align all CSR initiatives with core business objectives and core competencies in order to gain mutual benefits.

Shift from “Voluntary CSR” to “Obligatory CSR” and introduce mechanisms to enhance employee engagement.

Spread out Bank level CSR projects in rural and semi urban sectors and focus on small and medium scale projects in order to share the

benefit with a greater number of beneficiaries.

Develop partnerships, strategic agreements, industry collaborations with respective bodies in order to facilitate industry level changes/

improvements.

Our four-pronged CSR Strategy has helped us internalise CSR into our core business strategies of ‘People Development’ and ‘Business Expansion.’

CSR Model

Although our CSR model - Entrepreneur Development, Environment Protection & Conservation, Education for Development, Empowerment of Community (4E platform) will continue to be our core CSR model, greater priority will be given to entrepreneur development and to environmental issues, as we gradually move away from charity-driven CSR to strategy-driven CSR. ‘It’s better to teach a man to fish than to give him fish’, completely sums up our approach.

CSR Stewardship

Our CSR philosophy is driven by a high powered committee, which is responsible for formulating CSR strategies in line with business requirements, implement CSR initiatives as per the annual CSR plan and organise CSR projects at the corporate level.

Corporate Management level CSR Steering Committee:

COO (Chairman CSR Committee)AGM (Marketing)DGM (HR)Sub Committees at Unit LevelVoluntary Committee

The sub-committees at each unit level recognise CSR projects at the unit-level, which are compiled by the voluntary committees in line with the CSR guidelines. The sub-committees are then empowered to implement the projects with the active involvement of three parties – Team Sampath, Community and the Management of the Bank.

Corporate GovernanceAs with all our activities, the Bank’s CSR initiatives too are governed by our corporate ethics and values. Our governance framework is set out in detail in the ‘Corporate Governance’ segment of this Annual Report.

Maximising our shareholders’ wealth in a sustainable manner and safeguarding the rights of all our stakeholders, is of paramount importance to us. We support initiatives across the corporate world to improve governance and disclosures.

Sustainability Report

EntrepreneurDevelopment

EnvironmentProtection &

Conservation

Education forDevelopment

Empowerment of Community

Sustainability Socioeconomic

D

evel

opm

ent



Sampath Bank PLC is an active member of following Associations/Regulators

The Financial Ombudsman Sri Lanka (Guarantee) LtdAmerican Chamber of Commerce in Sri LankaCentral Depository Systems (Pvt) LtdColombo Stock ExchangeCentral Bank of Sri LankaInstitute of Bankers of Sri LankaCeylon Chamber of CommerceBankers’ ClubSri Lanka Bank’s Association (Guarantee) LtdEuropean Chamber of Commerce of Sri LankaEmployers’ Federation of CeylonThe National Chamber of Commerce in Sri LankaLanka SWIFT user groupNational Intellectual PropertyFitch Ratings Lanka Ltd

Report Parameters

Scope & Boundary of the ReportThis Sustainability Review has been prepared in conformity with the GRI guidelines, for the first time and covers the period from 1st January 2009 to 31st December 2009.

As a service organisation some GRI indicators are not fully applicable to us, while some of the information disclosed is relevant only to the operations of Sampath Bank PLC and does not cover our subsidiaries.

Sampath Bank PLC is registered at No.110,Sir James Peiris Mawatha, Colombo 02 and has 131 Branches as at 31st December 2009 across all provinces in the country.

All contact information is available in Corporate Information in the inner back cover.

Information pertaining to Social and Environmental issues have been gathered based only on data available in the Bank, while the subsidiary performance has been excluded.

A comprehensive Sustainability Report for the year 2008 has been compiled by us and presented to the Ceylon Chamber of Commerce.

Process for defining report contentThe report covers the performance of Sampath Bank PLC. All our branches actively engage within all stakeholder groups.

Data Measurement TechniquesData on the Economic Performance has been gathered from the information available in the Audited Financial Statements which are audited by our external auditors M/s. Ernst & Young. All other information relating to our Social and Environmental performance has been gathered based on data provided by various business units.

Material sustainability issues - Key Impacts, Risks and Opportunities

Economic ImpactWhile the economy recorded a positive growth despite a global recession, the post-conflict era has provided ample opportunities to banks and other businesses to exploit business potential in the Northern and Eastern provinces and to create economic growth in these areas.

The high interest rates at the start of the year resulted in a low growth in bank advances, while shrinking interest rates and stable exchange rates by end of 2009 brought about new investments and new lending opportunities.

In depth analysis of the economic impact is available in the ensuing section titled Economic Contribution, while all risks and opportunities faced by the Bank are analysed in detail within the Management Discussion and Analysis.

Social ImpactThe country as a whole has been re-energised with end of the prolonged conflict and several new opportunities have emerged to develop the nation as a whole, and its citizens.

Our expansion into the newly liberated areas and across the country, has created 115 new employment opportunities for which 70 were recruited from the Northern and Eastern Provinces accounting for 60% of our total new recruits.

We have also noted a lack of social connections and mutual confidence between the people of the North and the South, which we are attempting to bridge by commencing operations in these areas. We opened mobile banking units in Internally Displaced People’s (IDP) camps and became the first private bank to open such branches to serve the people.

The social impact of our work is available within the sustainability review in the sections titled, ‘Connecting with the Community’, ‘Working at Sampath Bank’ and ‘Connecting with our Customer & Suppliers’.

Environment ImpactEach year, our concern for the fragile environment in which we live, has made us leave a lighter footprint.

Special training programmes across the Bank – on waste management, recycling and energy conservation have begun to show tremendously encouraging results.



Yet - each year, we make an even firmer resolve than in the past, to improve on our lean resource consumption. We will stay committed to our resolve.

Initiatives across the Bank that show our concern for the environment are set out in the section titled ‘Connecting with the Environment’.

Economic Contribution

Management Approach

Our policies and strategies are formulated to deliver premium value and sustain growth.

From a pay-for-performance culture, to prudent banking strategies to increase shareholder wealth, re-inventing our products and services, an aggressive expansion plan; are all geared to ensure sustainable

growth while creating greater wealth to all our stakeholders.

Many of these strategies and plans have been discussed indepth by our CEO in his message titled Strategic Intent. The risks faced and opportunities explored in our progress towards sustainable development and steps taken to rationalise internal processes to counter economic

• Value retained for future expansion 29.5%• Value paid to providers of capital 8.2%• Total distributed to employees 29.1%• Total accrued to the government 33.2%

• Total Revenue from our Foreign Currency Banking Unit operations Rs. 2,630 Mn.

• Investments made in the Northern & Eastern Provinces by way of Fixed Assets Rs. 89 Mn.

• Investments made elsewhere in Sri Lanka by way of Fixed Assets (excluding Colombo) Rs. 32 Mn.

• Total No. of employees in the North and East 124

• Total No. of employees elsewhere in Sri Lanka (excluding Colombo) 620

We are a responsible employer, committed to upholding all statutory laws and regulations.

Details of the Defined Benefit Plan, Defined Contribution Plan and other retirement benefit obligations are set out in the significant accounting policies.

The section titled ‘Working at Sampath Bank’ within this sustainability review, explains how we go beyond these statutory regulations and contribute to sustaining the future of our employees.

In the ensuing sections we have shared with you a synopsis of how we connected with our Shareholders, our Customers & Suppliers and with our Community.



Receiving the Business Excellence Award

challenges, are discussed in detail in the Management Discussion and Analysis.

The total economic value generated by the Bank has increased by Rs. 310.2 Mn in 2009.

As a truly national bank, we are committed to sustaining the nation in many ways. This year, we have reached out across the nation to drive growth in a post-conflict era.

Contribution to the Government as Taxes

05 06 07 08 09Profit Before TaxCorpotate Tax, Finance VAT & Deffered Tax

0

1,900

2,850

950

3,800

5,700

4,750

Rs. Mn.

1,60

4

2,87

6

2,83

5

3,52

7

5,36

1

782

1,84

7

1,78

3

2,11

3

3,26

3


Economic Value Addition

Rs.Mn.Year 2009 2008 2007 2006 2005 Shareholders’ funds 10,811.3 9,172.7 7,597.2 6,128.4 4,774.6Accumulated provision for credit losses 4,740.0 4,815.0 4,007.9 3,089.9 2,880.9 15,551.2 13,987.7 11,605.1 9,218.3 7,655.5

Profit attributable to share holders 2,098.3 1,413.9 1,051.7 1,028.1 821.2Provision for credit losses 284.6 809.0 936.9 487.6 622.2Actual credit losses written off (359.7) (33.2) (40.1) (287.6) (175.7) 2,023.2 2,189.7 1,948.5 1,228.1 1,267.7

Economic cost %( 12 monthsaverage Treasury Bill rateplus 2% risk premium) 15.3 20.4 18.8 12.6 12.5Economic cost 2,382.5 2,859.1 2,180.6 1,164.3 956.2Economic value addition (359.2) (669.4) (232.1) 63.8 311.5

The economic value created by the Bank to its shareholders’ credit during the period is reflected in the above analysis.

Financial Value Addition

2009 % 2008 % (Rs.’000) (Rs.’000)

Value AddedIncome earned by providingbanking services 23,528,939 22,099,127Cost of services 14,879,931 14,198,547Value added by banking services 8,649,007 7,900,580Non-banking income 1,683,958 143,416Provision for bad debts and diminutionvalue of dealing securities (1,202,122) (1,252,017) 9,130,843 6,791,978

Value allocatedTo employees Salaries, wages and other benefits 2,662,058 29.2 2,138,453 31.5

To providers of capital Dividends to shareholders 275,550 3.0 206,663 3.0 Interest to Debentureholders 471,534 5.2 705,756 10.4 747,084 8.2 912,419 13.4To government Income tax 1,647,356 18.0 1,364,561 20.1 Value Added Tax & Debit Tax 1,385,300 15.2 962,800 14.2 3,032,657 33.2 2,327,361 34.3For expansion and growth Retained Income 2,069,847 22.7 1,207,249 17.8 Depreciation 392,939 4.3 387,019 5.7 Deferred taxation 226,258 2.5 (180,523) (2.7) 2,689,044 29.5 1,413,744 20.8

9,130,843 100.0 6,791,978 100.0



Sources & Distribution of Income

Rs.Mn.For the year ended 31st December 2009 2008 2007 2006 2005 Sources of Income Interest Income 20,970 19,451 14,950 9,997 7,227Foreign Exchange Profit 774 647 505 646 192Fee & Commission Income 1,206 1,355 1,211 1,107 829Investment Income 116 136 85 29 45Others 2,147 654 648 561 410 25,213 22,243 17,400 12,340 8,704 Distribution of Income To Depositors/ Borrowers/Debenture Holders Interest Paid 13,165 12,801 9,947 5,890 3,914 To Employees Salaries & Other Payments 2,662 2,138 1,575 1,383 1,136 To Suppliers/Depreciation/ Provision for credit losses 4,025 3,776 3,041 2,192 2,051Depreciation 393 387 287 235 207Credit Losses 285 809 937 488 622Other Expenses 3,347 2,580 1,817 1,470 1,222 To Government 3,263 2,114 1,784 1,847 783VAT 1,385 964 617 608 307Income Tax 1,878 1,150 1,167 1,240 476 To Shareholders 2,098 1,414 1,052 1,028 821Dividends 276 207 172 34 138Retained Profit 1,823 1,207 880 994 683 25,213 22,243 17,400 12,340 8,704



0

9,000

4,500

18,000

13,500

22,500

27,000

Rs. Mn.

05 06 07 08 09

Sources of Income

Interest Income

Fee & Commission Income

Others

Foreign Exchange Profit

Investment Income

0

9,000

4,500

18,000

13,500

22,500

27,000

Rs. Mn.

05 06 07 08 09

Distribution of Income

To Depositors/ Borrowers/Debenture Holders

To Suppliers/Depreciation/Provision for credit losses

To Shareholders

To Employees

To Government


Sources of Financing

Deposits Rs.Mn.For the year ended 31st December 2009 2008 2007 2006 2005 Local Currency Deposits Demand 7,966 6,525 6,367 5,714 5,165Savings 37,491 28,414 28,108 28,980 25,886Call Deposits 1,591 354 904 536 678Fixed Deposits 57,873 51,675 42,536 29,991 20,983Certificate of Deposits 5,247 5,151 3,811 2,486 1,905Total 110,168 92,119 81,726 67,707 54,617 Foreign Currency Deposits Demand 1,661 1,866 1,382 1,115 825Savings 4,336 4,304 4,709 4,469 4,149Call Deposits 59 129 131 77 485Fixed Deposits 9,466 8,513 10,936 7,424 5,343Total 15,522 14,812 17,158 13,085 10,802 Total Deposits 125,690 106,931 98,884 80,792 65,419 Borrowings/Debt Financing Securities sold under repurchase agreements 2,887 2,423 1,730 5,343 3,448Refinance Borrowings 4,819 4,592 4,157 2,774 1,900Other liabilities evidenced by paper 3,102 4,514 4,433 2,734 2,491Foreign currency borrowings 29 1,526 7,251 3,001 783Other borrowings 843 2,302 1,936 2,667 1,151Total Borrowings 11,680 15,357 19,507 16,519 9,773 Equity Financing Share/Stated Capital 1,582 1,582 1,582 1,582 689Reserves 10,264 8,194 6,987 5,043 4,943 11,846 9,776 8,569 6,625 5,632 Total Deposits,Borrowings & Equity 149,216 132,064 126,960 103,936 80,824


090

52,000

26,000

104,000

78,000

130,000

156,000

Rs. Mn.

05 06 07 08

Financing Mix

Total Deposits

Equity

Total Borrowings

0

40,000

20,000

80,000

60,000

100,000

120,000

Rs. Mn.

05 06 07 08 09

Local Currency Deposits

Demand

Call Deposits

Certificate of Deposits

Savings

Fixed Deposits

0

6,000

3,000

12,000

9,000

15,000

18,000

Rs. Mn.

05 06 07 08 09

Foreign Currency Deposits

Demand

Call Deposits

Savings

Fixed Deposits


Utilisation of Funds

Advances 2009 2008 2007 2006 2005

Local Currency Advances Overdrafts 14,346 17,249 19,292 15,608 13,389Trust receipts 290 386 447 509 411Term loans 41,072 41,162 38,891 31,109 23,533Other loans 20,260 14,804 11,200 9,687 8,826Total 75,968 73,601 69,830 56,913 46,159 Foreign Currency Advances Overdrafts 2,390 2,008 2,108 1,240 1,129Trust receipts 96 131 141 73 102Packing credit 115 165 115 100 90Term loans 13,620 11,475 11,501 8,735 6,563Total 16,221 13,779 13,865 10,148 7,884 Lease Rentals Receivable 3,511 5,448 6,788 6,307 3,304 Bills of Exchange Cheques purchased Local 58 83 66 96 129Foreign 85 71 118 93 59Bills purchased Export 2,290 1,995 2,262 1,807 2,190Import 552 678 501 576 370 2,985 2,827 2,947 2,572 2,748 Total Advances 98,685 95,655 93,430 75,940 60,095 Investments Treasury bills & bonds 31,768 20,282 12,218 9,802 8,551Dealing securities 276 1,224 4,275 4,165 3,814Placements & loans with banks 2,473 4,093 6,643 6,490 3,489Investments in subsidiaries 992 824 824 695 461Investments in associates - 146 146 401 401Investment securities 7,264 5,397 4,392 2,888 413Commercial papers 459 - 100 - -Reverse repo 2,677 - - - -Total Investments 45,909 31,966 28,598 24,441 17,129



0

26,000

13,000

52,000

39,000

65,000

78,000

Rs. Mn.

05 06 07 08 09

Local Currency Advances

Overdrafts

Term Loans

Trust Receipts

Other Loans

0

6,000

3,000

12,000

9,000

15,000

18,000

Rs. Mn.

05 06 07 08 09

Foreign Currency Advances

Overdrafts

Packing credit

Trust receipts

Term loans

0

40

20

80

60

100

%

05 06 07 08 09

Composition of Advances

Bills of Exchange

Foreign Currency Advances

Lease Rentals Receivable

Local Currency Advances

0

40

20

80

60

100

%

05 06 07 08 09

Composition in Utilisation of Funds

InvestmentsTotal Advances

Rs.Mn.


Social Contribution - Connecting with our shareholders

Stakeholder engagementOur shareholders own our organisation. We are committed to adopting the most transparent and accountable banking strategies, which will not only pave the way for future growth but position the Bank as a valued corporate among current and potential investors. Because we know, that ensuring our sustainability means enhancing our shareholders’ wealth.

Our concerns Our interaction & engagement

• Value creation• Profit growth

• We ensure that we connect with every single one of our shareholders – bar none. We are one of the few public quoted Companies who publish the Annual Report in English as well as in Sinhala, simultaneously, while the key statements by the Chairman and CEO are published in Tamil.

• Quarterly financial statements are published in all 3 languages in local newspapers and updated on our website

• An open dialogue is encouraged at the AGM to enable our shareholders to clarify issues from our Board of Directors

• A ‘Shareholder Relations Committee’ addresses any suggestions and recommendations given by a Shareholder

• Press releases are issued frequently, to update all stakeholders on the latest developments within the Bank, new products, awards and financial achievements

• Email addresses, names and telephone numbers of Branch managers are updated regularly on our web to give direct accessibility to all our stakeholders

• Any of our stakeholder can meet the management by appointment• An Investor Feedback Form is made available for all shareholders to provide their comments/ query to

the Bank.

Social Contribution - Connecting with our Customers

Stakeholder engagement

We are conscious that our customers expect lofty standards from us - which is precisely why we continuously strive to provide them premium value through our customer service and by our financial products.


• Quality of services offered• Availability of access points• Customer satisfaction & trust• Range of products to all segments• Empowering the Customer by

investing in them

• Regular customer visits help to build a personalised rapport• Dedicated Relationship Managers cater to the needs of specific customer categories• Annual customer gatherings make us more approachable to our customers• Suggestion Boxes placed at all branches allow customer comments and

suggestions• Open access to Branch Managers and Heads of Departments



Towards zero-customer complaints by 2011Phenomenal strides have been made to incorporate an even more customer centric focus in the way we work.

A survey on Corporate Perception and on Customer Savings Habits, helped us tailor-make our products and give a more personalized service. Training our staff on service-excellence is on-going and extremely successful.

Proactive customer engagement has improved the speed at which customer feedback is analysed and acted upon.

Management ApproachTraditional Sri Lankan warmth, cutting edge technology and professionalism are the hallmarks of our customer service

paradigm.

We believe in listening and interacting with our customers. Because, we know, that we cannot become a truly national Bank,

without offering them premium value through customer care.

We have setup a dedicated unit to ensure zero routine customer complaints by 2011 and uniformity in customer service practices. A customer care pyramid guides this initiative by providing a framework within which creative customer service solutions are designed based on customer feedback and industry best practices.

Delivering premium value through customer careRecognizing the need to stay ahead of customer expectations, we redesigned some of our traditional deposit and lending products – giving them each a unique value, to innovate them in the eyes of our consumers.

Hit SaverThe savings account with the highest return in the market

Kalin CashA fixed deposit which pays interest up-front

Sapiri and PubuduInvestment & savings account with multiple benefits to kids

Sevana Step-UpA housing loan with flexible repayment plans for young professionals

Sevana NGLSNext Generation Housing Loans, where children take over repayment when parents retire

We also launched several new banking products, with exciting features.

Easy-FDWithdraw cash anytime from your FD without compromising interest earnedSupreme Current AccountPremium service to customers with a healthy 3-year track recordSanhinda SaverA savings account which combines high interest with special offers, discounts and gifts

Taking personalised service across cultures, we commenced ‘ladies-only banking’ in Akkaraipattu and Kalmunai, where sections of the branch are staffed entirely by female bank staff.

Increasing accessibilityIn addition to our multitude of delivery channels and an aggressively expanding branch network, this year, we also increased our off-site ATMs and Deposit ATMs – where cash gets credited instantly to the account.

2005 2006 2007 2008 2009

Branches &

Extension Offices83 96 105 114 133

No of Sampath

ATMs109 131 150 162 186



0

120

40

80

160

200

No.

05 06 07 08 09

Branch & ATM Spread

ATMs

Branches & Extension Offices

83 96 105

114

133


System Enhancements and New Systems Developed during 2009

Technology driven enhancements have improved customer convenience and added value to our products and services through improved or re-engineered internal processes, this year.

Process/System DevelopedDegree of Impact to the service quality

(High/Medium/Low)Impact to the customers Remarks

Mandate Scanning (Phase II) High Customer data retrieval time minimised, thereby reducing queuing time

Customer service enhancement

e-Remittance financial portal High Accessibility of the core banking system with limitations, for overseas business

Improved convenience for both the business promotion officers, as well as overseas customers

Online credit approval system Medium Speedier credit approvals Enhancement to existing system

Advancements to e-remittance system

High Increased accessibility to different remittance companies

Wider access to remittance companies in different countries

ATM monitoring system High Improved ATM availability time ATM cash availability informed to branch officers by automatic SMS messaging system

Online Documentary Credit High Improved convenience for customers – as they can now apply for D/C’s and view existing D/C’s without coming to the bank

Developed a system for customers to send LC applications to the bank via Internet and also provide facilities to view all import /export related transactions online

Opening of Nawinna off-site ATM - to increase customer access points

Customer gatherings make us more approachable to our customers



Social Contribution - Connecting with our SuppliersOur business partners range from a network of global banks, to service providers and micro-entrepreneurs.

Suppliers and service providers are selected through an established tender procedure and procurement mechanism. However, we make every attempt wherever possible to source locally based suppliers and service providers from the vicinity of our branches – especially for maintenance and repairs.

Stationery is the main type of material we allocate our resources to – for which we have spent Rs. 107 Mn, this year. We are proud of our commitment to obtain our supplies only through local suppliers of stationery.

We are committed to ensuring that our relationship with our suppliers are sustained by attempting to use only those service providers who are registered with us and providing financing to strengthen their operations.

Social Contribution - Working at Sampath Bank

Stakeholder engagementWorking at Sampath Bank is not merely a job. While we grow, diversify and expand, we encourage our employees to map out their careers and grow with us.

We aim to connect with our employees by creating space for them to; shoulder greater responsibility and meet their career aspirations, enjoy a safe working environment, a good work-life balance and a culture that encourages professional and ethical behaviour.


• Remuneration & rewards

• Health & safety• Work satisfaction• Career

development• Balance between

personal & professional life

• A transparent performance appraisal method, where the appraisal is finalised after an open dialogue between Employee, Appraiser and Reviewer

• All employees are provided with intranet facilities to allow open communication and for ease of knowledge sharing and knowledge management

• All HR policies are documented and available online and awareness is created at recruitment and at promotions

• ‘Sampath Sandeshaya’ our quarterly newsletter is an effective conduit to share news of events and achievements of the Bank and Team Members

• Sampath Bank Employees’ Association which represents 98% of the staff, is given unrestricted access to the management

• Monthly meetings of different Internal Business Units helps the communication flow• Team spirit and fellowship is fostered through the efforts of the Sampath Bank Sports Club and other

Associations, at events such as,Sampath NiteYear-end trade fair for employees and their familiesBhakti GeethaPirith CeremonyQuiz Competition among Branches & DepartmentsSports and recreation facilities‘Sampath Tharu’ - Talent shows of team membersArt, Poetry and Essay competitions for children of Team MembersLeadership Development programmes for children of Team Members

Sampath Pola - An event for staff members and their families




Events for Sampath Team to show their talents - ‘Sampath Bethi Gee Saraniya’

Equality and Diversity

Employee Population by Grade As at 31st December 2009

Male Female

Corporate Management 12 2

Senior Managers & Managers 43 8

Executive Management 301 116

Junior Management 264 131

Junior Executives 783 674

Allied 40 14

Total 1,443 945

Team-Sampath stands at 2,388 employees as at 31st December 2009.

We take pride in our workforce, which comprises diverse ethnicities, castes and religions, and is balanced in gender – it is as diverse as the customers we serve.

Staff Genderwise Analysis as at 31.12.2009

Male - 60%

Female - 40%

Staff Age Analysis as at 31.12.2009

21 to 30 Yrs - 57%

31 to 40 Yrs - 28%

41 to 50 Yrs - 13%

Above 50 Yrs - 2%

Staff Service Analysis as at 31.12.2009

5 to 10 Yrs - 27%

Up to 5 Yrs - 38%

10 to 15 Yrs - 15%

15 to 20 Yrs - 11%

Over 20 Yrs - 9%

We have a perfect blend of youth and experience with almost 35% of the team members having over 10 years banking experience at Sampath Bank.

We have made pioneering efforts in the Banking industry to create a workplace-environment which is conducive to the differently-abled. Our Central Cash Department operation is manned by 7 differently abled team members.

Staff Promotions in 2009Grade Male Female

DGM 4 -AGM 1 -Executives 40 17Junior Executives 36 15Total 81 32

Staff Age Analysis as at 31.12.2009Age No of Employees %

Below 20 Yrs 1 0.0421 to 30 Yrs 1,353 56.6631 to 40 Yrs 670 28.0641 to 50 Yrs 308 12.90Above 50 Yrs 56 2.34Total employees 2,388 100.00



Human Resource PolicyOur HR Policies centre on the premise of creating a professional and caring culture in line with internationally accepted best practices, local labour laws and are influenced by guidelines established by the International Labour Organization (ILO).

Recruitment PolicyAs an equal opportunity employer, we are dedicated to creating a workplace that respect and value people - both, for who they are and what they achieve.

Our Policy is to first look internally to fill vacancies and if needed source externally. Internal career progression motivates our employees to develop competencies demanded for future growth.

On principle Sampath Bank does not employ any persons under the age of eighteen years.

In keeping with our Recruitment Policy we filled vacancies in all new branches opened in the North and East, for all grades, with recruits from the branch locality.

District-wise Staff Recruitments in 2009

Ampara 3Batticaloa 17Badulla 1Colombo 22Galle 5Gampaha 8Jaffna 38Kurunegala 2Kalutara 1Kandy 3Matale 1Matara 1Mannar 2Nuwaraeliya 1Trincomalee 6Vavuniya 4Total 115

Recruitments to Nothern and Eastern Branches are mainly from their locality.Branches opened in 2009 Total No.of staff Recruited from localityChenkalady 6 5Chunnakam 7 6Jaffna 8 6Kalavanchikudy 6 4Kattankudy 7 6Mannar 8 7Nelliady 5 2Oddamavady 6 3Pottuvil 3 1Sahinthamaruthu 6 4Total 62 44

71%

Management Approach

We believe that the key to our success and competitive advantage is our unique team commitment to continuous improvement and results.

We design our HR policies based on strategic business needs and develop our human resources to go that extra mile to achieve organisational goals. Robust training and career development has enabled us to retain the best of talent.

Our expansion plans for the years ahead will create many horizontal and vertical opportunities, for which we have adopted HR management strategies that will;

i. Recognise the most competent people and build a HR pipeline that can cater to our business expansion plans

ii. Develop partnerships with employee representatives to make them accountable for the business

iii. Make managers accountable and responsible for their work

iv. Create a performance driven work culturev. Improve the efficiency of the entire HR

process

Though it has been a challenge, our excellence in human resource management has enabled us the distinction of enjoying good industrial relations without a single day of work stoppage, strike or labour dispute, since the inception of the Bank.

We believe that every employee has a right to join any labour union, of their choice. We treat the Sampath Bank Employee Association (SBEA) as a consultative committee and work with them collectively or with representatives of their choice, in good faith and through open-dialogue.




Labour RelationsOur open-door communication policy, and the active involvement of the SBEA at formal and informal discussions with the executive management of the Bank, including the CEO has created a sense of ownership and inclusiveness among the Association members.

An upward revision of remuneration across the board, was made possible this year, through cordial negotiations with the SBEA.

An Employee Relations Policy that encompasses;improved communication, a grievance handling procedure, career counselling, and a gamut of thoughtfully designed welfare benefit plans, have all created an environment conducive to healthy employee relations.

Management Approach

Our approach to industrial relations goes beyond the Collective Bargaining Mechanism. We treat the Sampath Bank Employees’ Association (SBEA) - comprising almost 98% of our employees across all grades, as a consultative committee, and adopt a constructive approach to resolve matters of mutual interest.

We strive to work with the SBEA as joint partners who – as individuals, and as a collective body, are equally responsible for the results of the organisation and our image among stakeholders.

Remuneration and benefitsCompared to industry indicators, we are above industry-average on certain remunerative based indicators.

High performers are recognised and compensated on par with the industry.

We have pioneered an innovative set of benefits for our employees.

• Team efforts are recognised through a ‘Team Reward Scheme’

• Gratuity and pensions provisions exceed statutory requirements

• A non-contributory pension plan, in addition to the Provident Fund, Gratuity and ETF.

Management Approach

We aim to be an employer of choice, an employer that cares about the progress of the careers and lives of its Team Members.

Our performance based remuneration and reward scheme is on par with the industry. We are an equal opportunity employer when employing staff, creating career opportunities and in setting the path for career progression.

A multitude of bonus schemes encourages and motivates, while creating a sense of ‘belonging’ to the Bank.• Annual & customary bonuses• Productivity and Profit related bonuses, when the Bank exceeds its

targeted KPIs• Profit sharing• ESOP – Employee Share Ownership Plan

Bonuses are computed based on the growth of Return on Assets.


0 0

22.0

11.0

33.0

2.0

4.0

6.0

8.044.0

10.0

66.0

55.0

12.0

Rs. Mn. Rs. Mn.

05 06 07 08 09

Assets & Turnover per Employee

Turnover per Employee (Rs.Mn)Assets per Employee (Rs.Mn)

45.2

53.7

60.2

58.5

65.4

0 0

0.6

0.9

0.3

1.2

1.5

10

5

20

25

15

1.8 30

No.Rs. Mn.

05 06 07 08 09

Profit & Employees per Branch

Employees per Branch

PBT per Employee

0.7

1.1

1.0

1.1

1.7


Going beyond, the basic salary and emoluments, we offer our employees;

• Loans for housing, vehicle , furniture, computer and to travel abroad on special interest rates

• An emergency loan scheme• Children’s educational loans at low interest rates• Transport and lodging when serving in remote locations• Comprehensive medical cover and a 24-hour insurance cover• Bank owned holiday bungalows to spend vacations• Sports and recreation facilities

Contribution towards our Employees

Rs.Mn

Staff Benefits 2005 2006 2007 2008 2009

Staff Salaries 936 1,142 1,323 1,738 1,886

Other Benefits 80 98 82 215 308

Retirement Benefits 120 143 170 186 468

Total Staff Cost 1,136 1,383 1,575 2,139 2,662

Total No.of staff 1,875 2,039 2,213 2,364 2,388

Average cost per-employee 0.61 0.68 0.71 0.90 1.11

Knowledge & Development

We consider training as one of the most valuable investments for the future.

In 2009

Total investment in training Rs. 12.6 Mn

Total investment on professional education of our employees Rs. 11.7 Mn

Short term competency training is geared to develop skills that enable employees to give of their best in their current positions. Long-term competency training is designed in line with the Bank’s strategic long term goals and to meet evolving industry and global trends.

A gamut of other training and development initiatives complement our competency based training, such as Advanced e-learning Modules, On-Line Job Rotation Schemes and Special Individual Development Plans.

Average Training hours per Employee

Training hours

Type of training

CorporateManagement

Senior Managers

and Managers

Executive Management

Junior Management

Junior Executives

Internal - 0.16 1.69 9.19 4.45

External 4.39 1.94 1.32 2.99 1.68

Foreign 10.29 11.65 1.14 0.21 0.01

Total 14.68 13.75 4.15 12.39 6.13

Management Approach

Knowledge and development, recognition and rewards are an integral part of being employed with us.

We allow our employees to realise their professional and personal goals through a systematic and comprehensive plan.

Competency Mapping is a pioneering initiative adopted by us to map out the competency profiles for each job. It provides the basis on which competency gaps are identified and training initiatives designed to suit individual and team needs.

We also believe in creating opportunities for career progression by encouraging our staff to work in cross-functional teams and to take-up challenging assignments.

Our commitment to retaining the best is probably one reason for our staff turnover ratio of a mere 2.94 %, which is lower than the industry average.

Sustainability Report .


0 0

900

450

1,350

0.2

0.4

0.6

0.81,800

0.1

2,700

2,250

1.2

Rs. Mn. %

05 06 07 08 09

Staff Cost

Avg.cost per employee (Rs.Mn.)Total Staff Cost (Rs.Mn.)

1,13

6

1,38

3

1,57

5

2,13

9

2,66

2


Anti-corruption in business operationsWe have many corporate fraud risk management strategies which are detailed in the sections on Risk Management and Corporate Governance.

Key among these is the Bank’s ‘Whistle-blowing Policy’ which recognises the duty of each employee to speak about their genuine concerns in relation to any activities which may be harmful to the best interests of the Bank.

All actions and relationships of employees are also governed by a written ‘Code of Conduct’.

Occupational Safety and Health (OSH)Creating a safe and secure work-environment is a priority addressed everyday, despite the lack of a formal written OSH Policy.

Our keen focus on a range of safety and health measures including; maintaining a hazard-free environment, a Business Continuity Plan that addresses emergency situations, employing a dedicated Security Consultant, ensuring healthy house-keeping practices, counselling and awareness programmes on OSH etc. have all contributed to a zero-accident environment for the last 22 years.

CommunicationSeveral channels of communication complement our open-door approach to disseminate information and foster dialogue.• Intramail among the entire workforce enables swift communication• A five-tiered communication level ranging from one-to-one

discussions to Board Meetings, enables work-related opinions to permeate across the Board

• Employee Suggestion Schemes, Intranet, Team Briefings and the e-magazine ‘Sampath Sandeshaya’ provide forums for management and employees to exchange views

Employee Recognition PolicyThe policy emphasises recognition of outstanding achievement or behaviour as a means of creating a sense of fulfilment among individuals and teams and to promote a result-driven work culture.

The ‘Sampath Special Thanks And Recognition Scheme - Sampath STARS’ is driven by the Bank’s Recognition Committee to allow employees to utilise their untapped potential and go beyond their assigned responsibilities as individuals or teams. This year, we have recognised 117 Sampath STARS for their extraordinary efforts in customer services, product innovations and for professionalism.

We are proud of the sporting prowess of our teams and individual performers.


Team Achievements in Sports during 2008/2009

Nature of Sport Event Achievement

Cricket Mercantile ‘A’ Division Knockout Tournament - 2009 Champions

Mercantile ‘A’ Division League Tournament - 2009 Runner-Up

Basketball Mercantile ‘A’ Division Super League Tournament 2008 Champions

Mercantile ‘A’ Division Knockout Tournament 2008 Champions

Mercantile ‘A’ Division Semi League Tournament 2008 Champions

Mercantile ‘A’ Division Semi League Tournament 2009 Champions

04th Maldivian Basketball Association Invitational Championships 2009

Champions

Hockey Mercantile ‘A’ Division League Tournament 2009 Runner-Up

Badminton Mercantile ‘A’ Division Team Championship 2008 2nd Runner-Up

Mercantile Open Championship (Individual) 2008 2nd Runner-Up

Chess Mercantile Chess Championship 2008 - ‘A’ Division Champions

Mercantile Chess Championship 2008 - ‘B’ Division Champions


Social Contribution - Connecting with the Community

Stakeholder engagement


Empowering the community, through;

• Entrepreneur Development

• Education & Career Development

• Capacity building

• Connecting with the community through the phenomenal CSR efforts of our branches.

• Regular updates of our CSR efforts of different business units on Sampath Sandeshaya, our web based e magazine

• Sponsorship of National events, such as the Colombo International Book Fair


Our Basketball Team brought glory to the Bank Mercantile ‘A’ division Cricket Champions

Management Approach

We believe that community development is a process of empowering individuals and groups within communities, in a manner that will enable them to challenge real and perceived limitations to improve their livelihoods.

Through our network of branches, we focus on developing intelligent individuals, who would encourage real development within their community, rather than mere dependence on charity.

We believe this approach has helped our branches connect at a personal level with the communities they operate in and be recognised as socially sensitive business partners. Our efforts and approach have positioned Sampath Bank as a responsive and responsible corporate citizen.

Corporate support for staff volunteerismWe realise that CSR is done best, when it is taken personally. We encourage all employees to actively participate in their unit level CSR activities. Because, to us, CSR is not just another project - it is a catalyst to moulding our staff to develop competencies in line with the Bank’s business strategies.

Last year, in our Annual Report, we set out funding mechanisms that sustain our community based initiatives, viz,; ‘The Sampath Bank CSR Fund’, and ‘The Sampath Sahana Fund’.

This year, we recognized the immense efforts taken by our staff in volunteering their time to CSR, through the first ever ‘Sampath Social Responsibility Awards’ - a glittering awards ceremony held in the presence of a distinguished gathering of community representatives and Board Members. Outstanding CSR teams were appreciated for exceptional initiatives that qualified within the Bank’s strategic CSR framework and for the sustainability of their impact on the communities they helped.


Highlights of 2009

As a Bank that aims to inspire the nation we implemented 32 community development initiatives this year.

We focused on 3 areas of community development in 2009, which were guided by one of our key business objectives of enhancing entrepreneurial skills and our core competency of micro financing,

i. Developing entrepreneursEntrepreneurs can do much to develop a nation and are a vital cog in developing nations such as ours, to achieve our poverty related Millenium Development Goals (MDGs). This year, we aimed at sharpening entrepreneurial skills and providing access to markets, raw materials and financing for entrepreneurs with potential to successfully develop small scale business through self employment.

At a glance….

Our Entrepreneur Development Quick Fact Box

7 Projects to assist dairy farmers26 Projects to agriculture sector development41 Projects for small scale shoe/garment/ handicraft manufacturers7 Projects to assist self-employed food manufacturers

Bank’s best CSR Team felicitated

Donation of artificial limbs to disabled soldiers at ‘Ranaviru Sevana’

Donation to N U Jayawardena Trust Fund

A Blood Donation Campaign organised at branch level


ii. EducationEducation will always be a passport-to-the-world, to many underprivileged children across the nation. Yet, to many of those that have received an education, gainful employment remains a hurdle.

This year, our efforts were aimed at improving English and IT literacy among rural students, providing career guidance and industrial placements to university undergraduates and developing infrastructure in rural based schools.

At a glance….

Our strategic agreement with the University of Ruhuna benefited 250 selected undergraduates, who underwent a programme to build competencies required in the business world.

Our programme on industrial placement benefited 25 undergraduates from the IT, HR, Management and Science fields, who were placed with us for 6 months to orient them to the corporate world. Successful participants were also provided with employment opportunities.

iii. Empowering communitiesA community empowered is a community developed.

With just five more years to achieve the MDGs, Sampath Bank strives to lift communities across the nation a step away from poverty, one community at a time.

‘Sampath Saviya’, the Bank’s micro finance product mobilises self-help groups in selected rural districts, helping them to identify feasible micro industries and empowering them with technical and entrepreneurial skills, access to markets and financial services. A mechanism to market the produce of 477 micro finance loan recipients has benefited 1,056 families within these self-help groups.

Total loan disbursements - Rs.14.9 MnTotal loan outstanding - Rs.8.6 MnRecovery ratio - 95%

Helping hand to a Handicraft Manufacturer



Computer centre for a Sunday School

Donation of library books


Reaching out to the community – in many waysThis year, your Bank explored many new ways of engaging with the community through our ‘transformational’ initiatives.

All our owned new branches will, in future, include disability friendly features.

Efforts taken to reduce lending rates – especially in pawning, helped lower-income segments of our society to ride the rough tides of an economic recession. We are proud that we pioneered a rate-cut averaging almost 8% in the entire pawning industry.

With 70 staff, including 15 undergraduates from the University of Jaffna, recruited from the North and East, we were one of the first private sector organisations to commence integrating the conflict ridden North and East into the development spectrum, in the post-conflict era.

We continued to be sensitive to those in need. Our philanthropic activities continued unabated this year, with a special focus on caring for elders and children.

Financial and product marketing assistance to a mushroom grower

Bank assisted an entrepreneur who developed a special vaccination machine to treat Thalesemia patients


Examination held to recruit employees from the Northern & Eastern Provinces

Career guidance programmes for school children


Environmental concerns

Highlights

• We are the single largest contributor to the Wildlife and Nature Protection Society. Since our collaboration commenced in 1994, we have contributed Rs.5/- on each SET card issued. This year we contributed Rs.414,405/- to the organization’s efforts.

• Our publications, Sampath Sandeshaya and Ayubowan engage our staff on broader environmental concerns.

• We have disbursed Rs. 563 Mn to launch mini-hydro power projects that generate 10.4 Mw of power.

Our management approach to minimising our environmental footprint is encompassed in the following;

Sampath Bank Environment Policy

We are dedicated to preserving the natural composition of air, water and soil, in order to make the earth a better place to live.

The Bank encourages earth-friendly projects that use modern technology, operating on the principles of lean-resource consumption.

The Bank’s eco-projects are mainly focussed on environmental conservation and protection.

The Bank funds only those projects or businesses that comply with environmental protection regulations.



Providing proper garbage disposal equipment in public places

Reducing non-degradable waste - 500 eco-friendly bags were designed and distributed to the public by our branch in Piliyandala

Preserving indigenous herbal plants for future generations- a project to plant herbal plant in collaboration with students at Bulugahapitiya Pirivena, Eheliyagoda

Environment protection efforts - A tree planting campaign


Six Eco-GuidelinesAlthough we are not bound by any specific environmental regulations relevant to the Banking industry, these six guidelines shape the way we work.

i. Adopt lean-resource consumption practices across our operations, to reduce the use of paper, energy and non-biodegradable material

ii. Ensure proper disposal of waste, to minimise harmful environmental impacts

iii. Create awareness on protecting and conserving the environment – among employees, customers and other stakeholders

iv. Address critical environment related issues through a tripartite involvement, between the Bank, Employees and the Community.

v. Ensure compliance with environmental regulations in all our business transactions

vi. Facilitate green-enterprises, through special incentives, grants, loans and guidance

A greener Bank

Energy consumptionWe succeeded in maintaining electricity usage per square feet at the head office premises at levels equivalent to last year, despite the increase in the usage of office equipment.

2008 (Kwh) 2009 (Kwh)

Total use of electricity 1,858,450.4 1,888,104.4

Average consumption per month (Kwh/square feet)

1.4 1.4

Specific energy saving measures included;• Introducing automatic sensors to detect heat

variations in the AC system at Head office• Replacing high-energy consuming PC monitors

with energy saving flat screen monitors• Continuously educating staff on lean energy

consumption practices• Introducing low-energy consuming bulbs across

the Bank• Use of energy saving illumination bulbs for

signboards of the Bank, thus minimising the use of neon signs


We have used an average of 157,342 Kwh per month of electricity from the national grid at the head office building during 2009 (as compared to 154,871 Kwh per month in 2008). Thus, our energy saving measures have saved electricity consumption, despite utilising an additional 5,882 sq.ft. of floor space compared to last year.

Emissions, Effluents, and WasteIn 2008, we introduced a systematic waste disposal system at the head office building which classified waste into two categories;

• Recyclable Waste (ie. Non-degradable and paper waste)• Other types of waste.

In addition to waste categorization, we implemented a proper waste delivery mechanism, waste recycling and proper disposal procedures.

Recycling paperAn average of 3600 Kgs of waste paper per month is recycled to produce paper and paper-related products in collaboration with an external recycler.




Preserving corals at the Polhena Reef in Matara in the international year of coral reefs - an awareness programme in collaboration with the Department of Oceanography and Marine Biology at the University of Ruhuna

We use;• Rough paper (printed on one side) for internal memos• Used envelopes for internal mail• Use of emails as the first option for all communication

Reducing waste• Improvements to the ATM interface have reduced the need for

paper-based receipts• Easy access to customer information cross the Bank, by scanning

& storing data has reduced use of paper for photocopies/faxes• E-Remittance portal, through which overseas customers and

agents can access relevant information online, has made paper-usage obsolete for this function

• Use of a ‘common’ voucher, which replaces eight other types of vouchers, has reduced unnecessary stocks of voucher and printing costs.

Sampath Bank PLC | Annual Report 2009 75Sustainability Report

Independent Limited Assurance Report in relation to the Sustainability Report-2009

IntroductionWe have performed a limited assurance engagement in order to provide a conclusion as to whether the Sampath Bank PLC’s (Bank) Sustainability Report 2009 (here in after referred to as “The Report”) has been presented in accordance with the “Report Parameters” as detailed in the page 53 of The Report.

Responsibility of the Management for The ReportThe management of the Bank is responsible for the preparation and presentation of The Report in accordance the Report Parameters as detailed in the page 53 of The Report.

This responsibility includes establishing and maintaining internal controls relevant to the preparation and presentation of The Report that is free from material misstatement, whether due to fraud or error; selecting and applying specific principles, methodologies, policies and data sources used to prepare and present the data attributable to the reporting entity; and making estimates that are reasonable, when appropriate.

Assurance practitioner’s responsibilityOur responsibility is to express a conclusion on The Report based on our limited assurance engagement. We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (ISAE 3000): Assurance Engagements Other than Audits or Reviews of Historical Financial Information. This Standard requires amongst others that we comply with relevant ethical requirements and when providing a limited assurance, which is lower than reasonable assurance, a negative conclusion is used. Accordingly, we plan and perform the assurance engagement to obtain a limited assurance whether the information in The Report is fairly stated.

‘Fairly stated’ means that the reported information properly reflects the information contained in the underlying sources such that is consistent with the source information.

Context and criteriaThere are no generally accepted standards for reporting sustainability performance. The Bank applies its own internal sustainability reporting criteria, some of them are derived from Sustainability Reporting Guidelines of the Global Reporting Initiatives as detailed on pages 76 to 81 of The Report.

In The Report, the Bank describes its efforts and progress in relation to Sustainability. Our engagement was designed to provide a limited assurance on whether the information in The Report is fairly stated.

Work scopeOur procedures were designed to obtain a limited level of assurance on which to base our conclusion. These procedures are more limited than for a reasonable assurance engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. The procedures performed depend on the assurance practitioner’s judgment including the risk of material misstatement of the specific activity information, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Our assurance procedures included: interviewing relevant Bank’s personnel to understand the process for capturing,

aggregating and reporting these information; Reviewing of information reported by the relevant business units to corporate

level and the information validation processes at corporate and business level; checking the calculations performed by the Bank on a sample basis through

recalculation; identifying and testing assumptions supporting the calculations for

reasonableness; Reconciling and agreeing the data on financial performance are properly

derived from the Bank’s financial statements for the year ended December 31, 2009 for which the independent auditors issued an unqualified audit opinion dated 19th February 2010 on page 139 of the Annual Report.

understanding data quality controls applied by the Bank, through interviews and document review

Our procedures did not include testing electronic systems used to collect and aggregate the information.

Scope limitations and considerationsWe could not visit the selected project sites and branches to physically sight the projects and to meet the relevant beneficiaries due to time constraints.

Environmental and social performance data are subject to inherent limitations given their nature and the methods used for determining, calculating and estimating such data.

To obtain a thorough understanding of the financial results and financial position of the Bank, the reader should refer Bank’s audited financial statements for the year ended December 31, 2009, included in the Annual Report from page 140 to 201.

ConclusionBased on our limited assurance procedures as described in this report, nothing has come to our attention that causes us to believe that The Report was not presented fairly, and in accordance with the Criteria detailed above.

Ernst & YoungChartered Accountants26th February, 2010Colombo, Sri Lanka



1 Strategy and analysis Page No

1.1Statement from the most senior decision-maker of the organisation about the relevance of sustainability to the organisation and its strategy

Sustainability Report - CEO’s Sustainability Statement

51

1.2 Description of key impacts, risks and opportunities

Message from the Chairman 14-17

Message from the CEO 18-23

COO's Operational Review 34-38

Sustainability Report - Material Sustainability Issues

53

2 Organisational Profile

2.1 Name of the organisation Corporate Information Inner Back Cover

2.2 Primary brands, products and servicesYour Bank, in 2009 - Our Key Operational Segments and Products

8-10

2.3 Operational structure of the organizationCorporate Governance - Corporate Governance Framework

85

2.4 Location of organization’s headquarters Corporate Information Inner Back Cover

2.5 Number of countries with operationsSignificant Accouting Policies - 1.3 Principal Activities and Nature of Operations

145

2.6 Nature of ownership and legal form Corporate Information Inner Back Cover

2.7 Markets served

Your Bank, in 2009 - Our Key Operational Segments and Products

8-10

Management Discussion & Analysis 39-44

The Global Reporting Initiative (GRI) G3

Two decades ago, we, at Sampath Bank started reporting on sustainability. This year, we further refined our reporting in line with the Global Reporting Initiatives (GRI) G3 Framework, which enabled us to understand, discuss, monitor and communicate our Economic, Social and Environmental impacts in a better way. We have self assessed our Report at ‘B’.

GRI Application Level Grid C C+ B B+ A A+

Man

dato

ry

Self Declared

Opt

iona

l Third Party Checked

GRI Checked

GRI Index refers Sustainability Report, Financial Reports and other various reports in the Annual Report 2009.

GRI Content Index



Page No

2.8Scale of reporting organisation - Number of Employees, Revenue, Total Assets, Benificial Ownership, Stated Capital

Financial Review 45-47

Ten year summary 214-215

Share Information 208-211

2.9Significant changes during the reporting period regarding size, structure or ownership

Message from the CEO - Strategic Ventures 22

2.10 Award receivedSustainability Report - Awards and Accrediation

82-83

3 Report Parameters

Report Profile

3.1 Reporting periodSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.2 Date of most recent previous reportSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.3 Reporting cycleSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.4 Contact point for questions regarding the report Corporate Information Inner Back Cover

Report Scope and Boundary

3.5 Process for defining report contentSustainability Report - Report Parameters - Pocess for defining the report content

53

3.6 Boundary of the reportSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.7 Limitations on the scope or boundary of the reportSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.8 Basis for reporting on subsidiariesSustainability Report - Report Parameters - Scope and Boundary of the Report

53

3.9Data measurement techniques and the bases of calculations

Sustainability Report - Data measurement techniques

53

3.10Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such restatement

There are no restatements of information

3.11Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report

Not applicable

GRI Content Index

3.12 Location of the standard disclosuresSustainability Report - GRI Context Index Table

76-81

Assurance

3.13 External AssuranceSustainability Report - Independent Assurance Report

75




4 Governance, Commitments and Engagement Page No

Governance

4.1 Governance structure of the organisationCorporate Governance - Corporate Governance Framework

85

4.2Chair of the highest governance body is also an executive officer

Corporate Governance - Chairman & CEO 2.1 Division of responsibilities of chairman and CEO

87

4.3Highest governance body - Independant and / or non-executive members of the highest governance body

Corporate Governance - Board Balance - 5.2 Composition of the Board

88

4.4Mechanism for shareholders and employees to provide recommendations to the highest governance body

Corporate Governance - 13 Relations with Shareholders

92

Investor Feedback Form 227

Sustainability Report - Working at Sampath Bank - Labour relations / Anticorruption in business operations

65-67

4.5Compensation for members of the Highest Governance body, Senior Managers & Executives and performance of the organisation

Annual report of the Board of Directors on the affairs of the company- Directors' Remuneration

118

Corporate Governance - 12 Directors' Remuneration

91

4.6 Avoidance of conflicts of interestDirectors' Report - Directors' interests in contracts with the company / Directors’ interest register

125-131

4.7 Expertise of governance bodyCorporate Governance - 1.1 Effective and suitable board

86

4.8 Mission and value statements Our Vision and Values 3

4.9Procedures of the highest governance body for overseeing the organisation's identification and management

Corporate Governance - 6 Supply and use of information and advice / 15 Internal Controls

89-94

4.10Processes for evaluating the highest governance body’s own performance

Corporate Governance Report - 10 Appraisal of Boad's performance / 11 Appraisal of the CEO

91

Commitments - External Initiatives

4.11Explanation of whether and how the precautionary approach or principle is addressed by the organisation

Risk Management 100-113

4.12Externally developed initiatives to which the organisation subscribes or endorses

Sustainability Report - Environmental Concerns

72

4.13Memberships in associations and advocacy organisations

Sustainability Report - Memberships in associations

53



Engagements - External Initiatives Page No

4.14 List of stakeholder groups engaged Sustainability Report - Social Contribution 59-71

4.15Basis for identification and selection of stakeholders with whom to engage

We do not report a process for identification of stakeholder groups

4.16Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group

Sustainability Report - Social Contribution 59-71

4.17Key topics and concerns that have been raised through stakeholder engagement

Sustainability Report - Social Contribution 59-71

5 Economic Performance Indicators

Economic Performance

EC 1 Direct economic value generated and distributedSustainability Report - Value Addition Statements

55

EC 2Financial implications for the organisation's activities due to climate change

COO’s Operational Review 37

EC 3 Organisation's defined benefit plan obligations

Sustainability Report - Working at Sampath Bank - Remuneration and benefits

65

Accounting Policies - 4.5 Retirement benefit obligations

152

EC 4 Financial assistance received from government None

Market Presence

EC 5Range of ratios of standard entry level salary compared to local minimum salary at significant locations of operation

Sustainability Report - Working at Sampath Bank - Remuneration and benefits

65

EC 6Policy of spending on locally-based suppliers at significant locations of operation

Sustainability Report - Connecting with our suppliers

62

EC 7Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation

Sustainability Report - Working at sampath Bank - Recruitment Policy

64

6 Environmental Performance Indicators

Materials

EN 1 Materials used by weight or volumeSustainability Report - Connecting with our suppliers

62

Energy

EN 3 Direct energy consumption by primary energy sourceSustainability Report - Environmental Concerns - Energy Consumption

73

EN 5Energy saved due to conservation and efficiency improvements

Sustainability Report - Environmental Concerns - Energy Consumption

73

EN 6Initiatives to provide energy-efficient or renewable energy-based products and services, and reductions in energy requirements as a result of these initiatives

Sustainability Report - Environmental Concerns - Energy Consumption

73



Biodiversity Page No

EN 14Strategies, current actions and future plans for managing impacts on biodiversity

Sustainability Report - Environmental Concerns highlights

72

Emissions, Effluents, and Waste

EN 22 Total weight of waste by type and disposal methodSustainability Report - Environmental Concerns - Recycling Papers

74

Compliance

EN 28Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

No single fines imposed against the Bank in relation to violation of environmental laws

7 Social Performance Indicators

Labor Practices & Decent Work

LA 1 Breakdown of total workforceSustainability Report - Working at sampath Bank - Employee population by grade

63

LA 2 Total number and rate of employee turnover Sustainability Report - Working at sampath Bank - Knowledge and development Management approach

66

LA 3 Benefits provided to full-time employeesSustainability Report - Working at sampath Bank - Remuneration and benefits

65

LA 5Minimum notice period(s) regarding significant operational changes

Sustainability Report - Working at sampath Bank - Communication

67

LA 6 Management-worker health and safety committeesSustainability Report - Working at sampath Bank - Occupational Safety and health

67

LA 7Rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities

Sustainability Report - Working at sampath Bank - Recruitment Policy / Occupational Safety and health

64-67

LA 8Education, training, counselling, prevention, and risk-control programs in place to assist workforce members

Sustainability Report - Working at sampath Bank - Knowledge and development

66

LA 9 Health and safety topics covered in formal agreementsSustainability Report - Working at sampath Bank - Occupational Safety and health

67

Training and Education

LA 10 Average hours of training per yearSustainability Report - Working at sampath Bank - Knowledge and development

66

LA 12Percentage of employees receiving regular performance and career development reviews

Sustainability Report - Employee Relations

Diversity and Equal Opportunity

LA 13Breakdown of employees per category according to gender, age group, minority group membership

Sustainability Report - Working at sampath Bank - Equality and diversity

63

LA 14Ratio of basic salary of men to women by employee category

No salary differential




Human Rights Page No

Non-discrimination

HR 4Total number of incidents of discrimination and actions taken

None.

Freedom of Association and Collective Bargaining

HR 5Right to exercise freedom of association and collective bargaining

Sustainability Report - Working at sampath Bank - Labour relations

65

Child Labor

HR 6Incidents of child labor, and measures taken to contribute to the elimination of child labour

Sustainability Report - Working at sampath Bank - Recruitment Policy

64

Forced and Compulsory Labor

HR 7 Forced or compulsory laborSustainability Report - Working at sampath Bank - Human Resource Policy

64

8 Society

Community

SO 1Practice that assess and manage the impacts of operations on communities

Sustainability Report - Social Contribution - Connecting with the community

68

Corruption

SO 3Employees trained in organization’s anti-corruption policies and procedures

Sustainability Report - Working at sampath Bank - Anticorruptions in business in business operations

67

SO 4 Incidents of corruption None

Public Policy

SO 5Public policy positions and participation in public policy development and lobbying

Sampath Bank does not engage in political lobbying

SO 6Contributions to political parties, politicians and related institutions by country

Sampath Bank does not contribute to any political parties or for politicians

Anti-Competitive Behavior

SO 7Anti-competitive behavior, anti-trust, and monopoly practices and their outcomes

None reported

Compliance

SO 8Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

None reported




Business ExcellenceHonoured with 4 accolades at the National Business Excellence Awards ceremony 2009, organized by the National Chamber of Commerce of Sri Lanka.

“Bank of the Year - 2009” by the highly acclaimed international magazine “The Banker” of Financial Times - London.

Silver Award for the Overall Competition for National Business Excellence

First Runner-Up Award in the Extra Large Category

Winner of the Banking Sector of Sri Lanka

Winner in Excellence in Business & Financial Performance


Awards & Accreditation


Winner in the Community Relations Category

Best Corporate Citizen 2009

Top Ten Corporate Citizens of the Country for 2009

Best Corporate CitizenHonoured with 3 accolades at the Best Corporate Citizen Awards organised by the Ceylon Chamber of Commerce

Reporting & publications

The Annual Report of 2008

Adjudged Joint Runner-up in the Banking Institutions category for Best Presented Accounts awarded by South Asian Federation of Accountants (SAFA)

Joint Runner-up in ‘Awards for Excellence in Annual Reports’ - organised by the Institute of Chartered Accountants of Sri Lanka.


The prestigious Magazine ‘Business Today’ selected Sampath Bank within top 10 Companies in Sri Lanka for the financial year 2008 - 2009.

Sampath Bank PLC | Annual Report 200984Corporate Governance

Corporate Governance

DefinitionCorporate Governance is a set of policies, processes and procedures affecting the way a company is controlled and administered. It covers many stakeholders, the relationship between them, the company and the strategic vision of the company. The stakeholders comprise shareholders, management, board of directors, team members (employees), depositors, customers, creditors, suppliers, regulators and society at large. All parties mentioned have either a direct or indirect interest in corporate governance as it helps in the effective performance of the organisation.

Corporate governance is a multifaceted subject, where an important theme is the aspect of accountability of individuals in an organisation through various mechanisms. Economic efficiency in order to bring in strong shareholder welfare is another focus towards this effect. Your Board which comprises of eminent individuals in various fields give their best efforts to the success of the Bank.

Corporate Governance at Sampath BankAt Sampath Bank we recognise the value of good Corporate Governance and believe that it will be a major factor in the bank achieving the status of a truly “National Bank”.

At Sampath, we constantly review our Governance Policy while adhering to the Code of Best Practices in Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka, the mandatory Code of Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka, and the Rules on Corporate Governance for listed companies issued by the Colombo Stock Exchange.

The Board is responsible to shareholders for creating and delivering sustainable shareholder value through the management of the Bank’s businesses. The Board is the decision making body for all matters of such importance as to be of significance to the Bank as a whole because of their strategic, financial or reputational implications or consequences.

In conformance with highly recommended Corporate Governance principles and the Corporate Governance Code for Licensed Commercial Banks by the Central Bank of Sri Lanka, the positions of Chairman and Chief Executive Officer have been separated.

The overall governance of the Board is by the Chairman, while the routine management of the Bank is by the CEO, in line with the Board approved objectives, directions and corporate values.

The Board approves the organisation’s strategic aims and ensures, that the necessary financial, technical and human resources are in place for the Bank to achieve its objectives. It reviews Management performance against set “Goals” on a continuous basis.

The Board is committed to be of high ethical standards. This enables the Board to set values and standards for the Bank and its staff on par with best practices, while creating trust and transparency, ensuring that its obligations to its shareholders and others are understood and met.

Statement of ComplianceThe level of Compliance of Sampath Bank with Direction on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka under Banking Act Direction No. 11 of 2007 and subsequent amendments are given in the ‘Statements of Compliance.’

The disclosures also indicate the level of conformance to the Code of Best Practice on Corporate Governance for public companies jointly issued by the Securities and Exchange Commission of Sri Lanka (SEC) and the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2009, Colombo Stock Exchange regulations and the Bank’s Articles of Association.

Sampath Bank PLC | Annual Report 2009 85Corporate Governance

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Statement of Compliance

CORPORATE GOVERNANCE PRINCIPLES

SOURCE OF REFERENCEADOPTION & COMPLIANCE

IMPLEMENTATION

1. Board of Directors

1.1 Effective & Suitable Board

SEC & ICASL – A 1 Companies Act No: 7 of 2007 – Sec 184 [a]&[b]CBSL Rule 3[2]CBSL Rule 3 [8]

AdoptedComplied

CompliedComplied

The Board consists of eminent bankers, businessmen and professionally qualified individuals as Directors. They are qualified in Banking, Accountancy, Law, Management, Economics, Engineering, IT and possess skills, knowledge and experience in the relevant fields to direct, lead and control the business and affairs of our Bank.

The relevant details and profiles of the Board of Directors are given on pages 26 to 27 of this Annual Report.

1.2 Regular Meetings SEC & ICASL – A 1.1 Articles of Association of the Bank Article No. 94.CBSL Rule 3 [1] (iii)

AdoptedComplied

Do -

Regular Board Meetings are held monthly during the latter part of each month while special Board Meetings are held as and when the need arises.

The details of Board Meetings and Board Sub Committee Meetings and Attendance are given on pages 97 to 99 of this Annual Report.

1.3 Board’s Responsibilities

SEC & ICASL A 1.2CBSL Rule 2[1], 3 [1] & 3 [4] Companies Act No. 7 of 2007 – Sec: 184, 187, 188 & 189

Bank’s Articles of Association – Article No. 105, 109 & 110.

Adopted

Complied

Do -

Do -

The Board is overall responsible and accountable for the management of the affairs and business of the Bank. For this purpose the Board;

1] Acts in good faith for the best interests of the Bank.

2] Acts in the manner that will not contravene any provisions of the Companies Act or any other relevant statutes and the Articles of Association of the Bank and relevant rules, regulations and directions.

3] Reviews and monitors the implementation of a sound business strategy.

4] Ensures that the CEO and Management team are competent, and of an effective Succession Plan is adopted for the CEO and Senior Management.

5] Secures effective information flow, internal controls and audit systems.

6] Ensures compliance with legal/ethical standards.

7] Ensures prevention and management of risks.

8] Does not act in a manner which is reckless or grossly negligent.

9] Exercises the degree of skill and care that may reasonably be expected of persons of their knowledge and experience.

1.4 Obtain Independent Professional Advice

SEC & ICASL A 1.3CBSL Rule 3 [1] Companies Act NO: 7 of 2007 Sec: 190

Adopted.

Complied

The Board Sub Committees and various professionals in Corporate Management & Senior Management advise the Board on various matters relevant to them. In addition, the Board obtains independent professional advice as and when necessary. These functions are coordinated through the Company Secretary.





IMPLEMENTATION

1.5 Company Secretary SEC & ICASL A 1.4CBSL Rule – 3 [1]Company’s Act No. 07 of 2007 Sec. 221, 222 & 147.Bank’s Articles of Association Article No. 119 & 120

Companies Act No. 07 of 2007 – Section 147Banking Act No. 30 of 1988 Section 44 &Banking Amendment Act No.33 of 1995 – Section 24

Adopted

Complied

Do -

Complied

All members of the Board have opportunities to obtain advice and services of the Company Secretary who is a Chartered Corporate Secretary and who is responsible to the Board in ensuring the follow up of Board procedures, Compliance with Rules and Regulations, Directions and Statutes and keeping and maintaining Minutes and relevant records of the Bank.

The Secretary, possess all qualifications as specified in the Company’s Act, and required of a licenced Commercial Bank.

1.6 Independent Judgment of Directors

SEC & ICASL A 1.5CBSL – Rule 3 [1]Companies Act No. 07 of 2007 – Sec 192Bank’s Articles of Association Article No. 96 & 97

Adopted

Complied

Do -

The Directors of the Bank have no vested interests and take decisions on matters before them using independent judgment. If a matter concerning a company, in which a Director has an interest is tabled for discussion and decision making, the Director declares his interests and withdraws from the meeting.

1.7 Dedication of time for making Board Decisions

SEC & ICASL A 1.6CBSL – Rule 3 [6]Bank’s Articles of AssociationArticle No. 94

Adopted

CompliedDo -

The Board dedicates adequate time for Board Meetings and generally the dates of regular Board Meetings are scheduled well in advance. In addition to these meetings, Board Sub-Committee meetings are held regularly, in compliance with the regulatory requirements and the needs of the Bank.

1.8 Appropriate Training for Directors

SEC & ICASL A 1.7

CBSL Rule 3 [ 1]

Adopted

Complied

When changes take place in Statutes, Rules and Regulations and regulatory directions relevant to the Banking Industry, arrangements are made to make presentations to the Board by relevant professionals.

Board Members also participate in Seminars/ Workshops in relevant fields.

2 Chairman & CEO

2.1 Division of responsibilities of Chairman and CEO

SEC & ICASL A 2CBSL – Rule 3 [5]

Bank’s Articles of Association Article No. 82, 83 & 101

AdoptedComplied

Do -

The positions of the Chairman and the CEO have been separated keeping in line with the best practices of Corporate Governance in order to maintain balance of power and authority. The Chairman is a Non-Executive Director, while the CEO is an Executive Director.

2.2 Chairman’s Role SEC & ICASL - A 3CBSL – Rule 3 [5]

Companies Act No. 7 of 2007 – Section 147 [2]

AdoptedComplied

Do -

The Chairman of our Bank is a Non-Executive Director appointed by the Board and entrusted with the following duties:

1] To ensure effective participation of both Executive and Non Executive Directors in decision making on behalf of the Bank.

2] To encourage Directors to make an effective contribution for the benefit of the Bank and for that purpose to ensure the Directors receive relevant information on time.

3] To maintain a balance of power between Executive and Non-Executive Directors.






IMPLEMENTATION

4] To approve the Agenda and Minutes of the Board Meetings prepared by the Company Secretary and conduct Board Meetings, in an orderly manner.

5] To ensure effective communication with shareholders and their views are communicated to the Board. In this regard, a Shareholder Relations Committee has been established.

6] To provide leadership to the Board and ensure that the Board works effectively to discharge its responsibilities.

2.3 Role of CEO SEC & ICASL A 2CBSL – Rule 2 [5] & 3 [5]

Bank’s Articles of Association Article No. 83

AdoptedComplied

Do -

1] Responsible for the effective running of the Bank and implementation of Board policies.

2] Identify and evaluate the risks that the Bank undertakes and set clear goals for growth.

3] Give leadership to the Corporate Management and through them, to the entire organization.

4] Act as a leader of the entire organization in achieving goals and objectives.

5] Provide true and relevant information on operational matters to the Board and the Chairman, where relevant. 6] Facilitate investigations through relevant Board Sub Committees and Authorities about matters reported through the Whistle Blowing Policy and provide the results of such investigations to the Board for appropriate decision making.

3. Material Relationship CBSL – Rule 3 [5] Complied The Chairman, CEO and other members of the Board, have no material relationships which will weaken or damage their respective roles.

4. Financial Acumen & knowledge of the Board

SEC & ICASL A 4 Adopted Majority of the Directors are Fellow and Associate Members of The Chartered Institute of Management Accountants of UK and one Director is a Fellow Member of The Institute of Chartered Accountants of Sri Lanka. They have the ability to offer guidance to the Board on matters of Finance.

5 Board Balance

5.1 Number of Directors CBSL – Rule 3 [2]Companies Act No. 07 of 2007 – Section 201Bank’s Articles of AssociationArticle No. 75 [i]

CompliedDo –

Do –

A total of 13 Directors serve on the Board of the Bank.

5.2 Composition of the Board

SEC & ICASL – A 5CBSL – Rule 3 [2]CSE Listing Rules 7 [10]Bank’s Articles of AssociationArticle No. 82

Adopted

CompliedDo –

Do -

The Board of Directors of the Bank comprises 10 Non Executive Directors and 03 Executive Directors. The Chairman of the Bank is a Non-Executive Director while the CEO, COO and GCFO are Executive Directors who serve on the Board with other Non Executive Directors.

At least 1/3rd of the total number of Directors are Independent Directors.





IMPLEMENTATION

5.3 Independent Directors SEC & ICASL – A 5CBSL – Rule 3 [2]CSE – Rule – 7 [10]

Adopted

Complied

Do -

Independent Directors are : Mr J D Bandaranayake and Mr W M P L De Alwis.

As per terms of CSE Rule 7, 10.3 the Board presents their opinion that the following persons too are Independent Directors irrespective of the fact that they are not in compliance with the relevant criteria required by the Rules of CSE, SEC & ICASL [ A 5].

Mr M A Abeynaike - has served the Board continuously as a Director for over a period of 09 years.

Mr D J Gunaratne - has served the Board continuously as a Director for over a period of 09 years. Dr S Kelegama - has served the Board continuously as a Director for over a period of 09 years.

Mr E A Gunasekera - Being a Director of a Subsidiary Company.

6 Supply & use of Information & Advice

SEC & ICASL – A 6CBSL Rule – 3 [5]Companies Act No. 07 of 2007 Sec : 190, 147 [4]Company’s Articles of Association Article No. 94

Adopted

CompliedDo –

Do –

Through an Executive Summary which includes a detailed analysis of Financial and Non Financial Data/Information, the Board of Directors receive comprehensive information for the monthly Board Meetings. The executive summery is circulated within the stipulated time prior to the scheduled Board Meetings.

Any requests for further information is co-ordinated through the Company Secretary with respective members of Corporate Management & Senior Management.

The Board is also provided with information regarding decisions made at the Board Sub Committee meetings.

The Whistle Blowing Procedure implemented within the Bank ensures that the Board is kept informed of issues, to enable appropriate decision making. The Chairman ensures that all the members of the Board receive the relevant reliable information on a timely basis in order that all members can actively participate/contribute in decision making.

7 Appointments to the Board

SEC & ICASL A 7CBSL – Rule 3 [2] & 3 [6]Companies Act No. 7of 2007 Section 202 – 205Bank’s Articles ofAssociationArticle 88, 92 & 93Banking Amendment Act No. 02 of 2005Section 16

AdoptedComplied

Do –

Do –

Appointment of Directors are carried out by the Board after having considered the recommendations of the Nominations Committee and as per the terms of relevant statutes, Articles of the Bank and other relevant Rules, Regulations and Regulatory directions.






IMPLEMENTATION

7.1 Nomination Committee SEC & ICASL – A 7 (i) CBSL – Rule 2 [6] & 3 [6]Bank’s Articles of AssociationArticle No. 103 & 104Companies Act No. 7 of 2007 – Section 186

AdoptedComplied

Do -

Do -

In accordance with the Cadbury recommendations the Board has established a Nomination Committee since January 2002.

The Chairman of the Bank acts as Chairman of the Nomination Committee. The Committee comprises the Deputy Chairman, Chairman of the Audit Committee and another Non-Executive Board Member.

Whenever necessary the committee recommends suitable personnel to fill vacancies on the Board.

The Articles of Association do not make provisions to appoint shareholding based Nominee Directors to the Board.

7.2 Disclosure of Appointments of the Board Members

SEC & ICASL – A 7CBSL Rule 3 [2]CSE Appendix 8 ACompanies Act No. 7 of 2007 Section 223 [2]

AdoptedComplied

Do -Do -

Whenever new Directors are appointed to the Board the necessary disclosures, announcements and notifications are made in accordance with the requirements of statutes, rules & regulations and regulatory Directions. Additionally, the shareholders are informed through the information in the Annual Report and in the Notice of the Annual General Meeting to be presented for their re-election as per Article 93 of the Articles of Association of the Bank.

8 Re-election of Directors SEC & ICASL – A 8Bank’s Articles of AssociationArticle No. 86, 87 & 93

AdoptedComplied

As per terms in Articles of Association of the Bank, any Director appointed by the Board during the year should hold office until the next Annual General Meeting and is subject to re-appointment by the shareholders.

The Articles also provide terms that 1/3 of the Directors should retire at each Annual General Meeting and be subject to re-election. Such Directors who retire are those who held office for the longest time period since the election/re-appointment.

The details of the re-election of Directors have been disclosed in the Annual Report of the Directors on Page 119.

9 Fitness & Propriety of Directors

CBSL Rule 3 [3]Company’s Act No. 7 of 2007Section 210, 211 & 212

Banking [ Amendment ]Act No. 02 of 2005Section 16

CompliedSubject to statutory provisionsComplied

Complied

The Companies Act provides that a Director over 70 years could be re-elected by the shareholders for a period of one year, by giving special notice.

Consequently, no Non Executive Director can serve for more than 09 years continuously, other than those who received a general extension in 2008 who could serve up to 31.12.2011.

Hence, the shareholders Resolution to be moved at the AGM with regard to re-appointment of the Director Mr E A Gunasekera who is over the age of 70 years, will be considered at the AGM and therefore, the resolution is included in the Agenda of the Notice of Annual General Meeting.

Accordingly information on the re-election of the Directors are given in the Annual Report of the Board of Directors of the Bank on page 119.

As per the terms of Section 42 of the Banking [ Amendment] Act the relevant documents have been submitted to the Director – Bank Supervision Department of CBSL in order to comply with fitness and propriety of Directors.





IMPLEMENTATION

10 Appraisal of Board Performance

SEC & ICASL - A 9CBSL – Rule 3 [1]

AdoptedComplied

The Board annually appraises their own performance to ensure that they are discharging their responsibilities satisfactorily. The Board documents this process. Among the areas they concentrate on are reviewing and monitoring the implementation of sound business strategy.

The Board appraises its performance by each Director filling a “Board Performance Evaluation” form in line with the Corporate Governance Code of SEC and ICASL. This information is tabulated and discussed at the Board.

The Board ensures that the CEO and Management Team are competent and an effective Succession Plan is in place for the CEO and Senior Management.

10.1 Appraisal of Board Sub-Committees

SEC & ICASL – A 9 Adopted The Committee appraises itself and the reports are retained by the Committee Chairman.

11. Appraisal of the CEO Sec & ICASL – A 11 Adopted Assessment of performance of the CEO is carried out by the Board at the end of each year to ensure that targets set have been achieved.

At the beginning of the Financial Year, the Board discusses with the CEO and sets long term, medium term and short term Financial & Non Financial goals of the Bank that are to be achieved by the CEO within the course of the year.

12. Directors’ Remuneration

12.1 Human Resources Remuneration Committee

SEC & ICASL B [1]CBSL Rule 3 [6]CSE – Rule 7 [10]Company’s Act No. 7 of 2007, section 186Bank’s Articles of Association Article No. 103 & 104

Adopted

CompliedComplied

Complied

As per the CSE Listing Rules with regard to Corporate Governance, the Mandatory Code of Corporate Governance issue by CBSL and the Code by SEC & ICASL and as per terms of the Articles of Association of the Bank, the criteria to establish this committee has been met and is chaired by an Independent Director.

This Committee is responsible for setting goals and targets for the CEO and key management personnel and evaluation of their performance.

12.2 Levels & make up of Remuneration

SEC & ICASL – B 2Companies Act No. 07 of 2007 Section 216

Bank’s Articles of Association Article No. 77, 78, 79, 84 & 99

Adopted

Complied

Complied

The Remuneration Committee maintains a market oriented remuneration policy for the Bank’s Directors, Management and Executive staff. No Director is involved in deciding his own remuneration.

In reviewing remuneration, data containing levels of pay among comparator banks as well as in competing organisations in the market place and completed by independent specialists, are considered. Similarly in adopting appropriate HR practices the committee will draw on a wide range of experiences and best practices adopted externally.

12.3 Disclosure of Remuneration

SEC & ICASL – B [3]CBSL Rule 3 [ 8]

AdoptedComplied

Details of the Directors’ Fees, reimbursement of expenses and total remuneration are disclosed on Page 191 of this Annual Report.

A full Report of the Remuneration Committee is given on Page 138 of this Annual Report.






IMPLEMENTATION

13. Relations with Shareholders

13.1 Constructive use of the Annual General Meeting & other General Meetings

SEC & ICASL – C 1CBSL Rule 3 [1]Companies Act No: 7 of 2007 – Section 133 & 134Bank’s Articles of Association Article No. 46 & 47

AdoptedCompliedDo -

Do -

The Annual General Meeting is one of the main forums of contact between small shareholders and the Board. It is a common practice for the CEO to have regular contact with the major shareholders. The Chairman often also participates in these meetings. The Chairman as a part of his role, ensures effective communication with shareholders and keeps the Board informed of major concerns raised by the shareholders.

13.2 Circulation of Notices of Annual General Meetings to Shareholders

SEC & ICASL– C 1.4, 1.5Companies Act No. 7of 2007 Section 135, 136 & 146Bank’s Articles of AssociationArticle No. 48 – 73

AdoptedComplied

Do -

All Board Members, including the Chairmen of the Board Sub-Committees attend the AGM in order to answer questions raised [on request by the Chairman]

The Bank dispatches the Notice of the Annual General Meeting and relevant documentation to shareholders in compliance with regulatory requirements well before the date of the meeting to shareholders, as per the terms of Companies Act and the Articles of Association. A summary of the procedure governing voting at the General Meeting is given in the Proxy Form.

13.3 Building up Relations with Shareholders

SEC & ICASL CCBSL – Rule 3 [1]Articles of Association Article No. 103 & 104 CSE Listing Rules 7.4, 7.5 & 7.6Companies Act No. 7 of 2007 – Section 166 – 168

AdoptedComplied

Complied

The Bank, recognising the importance of effective communication with shareholders, provides a full detailed Annual Report. The Bank also maintains a close dialogue with its shareholders through the Secretariat of the Bank. The Bank maintains a regular dialogue with institutional shareholders and the financial community.

In an effort to give more priority to shareholders and to enhance shareholders’ value the Board has formed a Shareholder Relations Committee of the Board. The Shareholder Relations Committee extends assistance by providing appropriate solutions to shareholders’ grievances.

13.4 Major Transactions SEC & ICASL – C 2Companies Act No: 7of 2007 – Section 185Bank’s Articles of AssociationArticle No. 110CSE Listing RulesAppendix 8 – [18]

AdoptedComplied

Complied

Do -

During the Financial Year ending 31st December 2009, there were no major transactions which materially affected the Net Assets base of the bank.

However the Bank was amalgamated with its fully owned subsidiary company i.e. Sampath Surakum Ltd on 03rd November 2009, but this has no material effect on the Net Assets base of the Bank.

The relevant notices of Amalgamation and Completion of Amalgamation have been Gazetted and published in News papers in all three languages, as per statutory requirements. Transactions, if any, which materially affect the Net Assets of the Bank will be disclosed in the Quarterly/Annual Financial Statements.

14 Accountability and Audit

The Board has taken great efforts to ensure complete disclosure of Financial and Non-Financial information within boundaries of commercial reality.





IMPLEMENTATION

14.1 Financial Reporting SEC & ICASL D 1CBSL – Rule 3 [8]Companies Act No. 7 of 2007 Section 150 – 153Bank’s Articles of Association Article No. 141 – 144CSE – Listing Rule 7.4 – 7.6Banking Act No. 30 of 1988 Section 35, 36 & 37Banking Amendment Act No. 02 of 2005 Section 15.

AdoptedCompliedDo -

Do -

Do-

Do-

The main method of communicating the financial position and the operating results to the shareholders is through the Interim and Annual Financial statements which are published on a timely basis in all three languages in keeping with requirements of statutory & regulatory rules, regulations and directions.

The Financial Statements have been prepared in accordance with the requirements of the Sri Lanka Accounting Standards and the relevant provisions of the Banking Act No. 30 of 1988 and Amendments thereto.

The Bank has always complied with the reporting and disclosure requirements directed/imposed by regulatory authorities such as the Central Bank of Sri Lanka, Securities & Exchange Commission of Sri Lanka and Colombo Stock Exchange.

14.2 Statement of Solvency Test & Auditors Report on Solvency Test

SEC & ICASL – D 1.1Companies Act No. 7 of 2007 Section 57, Section 242 [6]CSE Listing Rules 7.1 [f]

AdoptedComplied

Do -

The Board made statements of Solvency to the Auditor and obtained Certificates of Solvency from the Auditor in respect of dividend payments conforming to the statutory provision.

Additionally the Solvency Test has been carried out at the amalgamation of the Bank with its fully owned subsidiary company; Sampath Surakum Ltd. The Board of Directors were satisfied that the Bank has met the Solvency Test in terms of the provisions of the Companies Act No. 07of 2007 upon the amalgamation.

14.3 Annual Report of the Board of Directors re. Affairs of the Company

SEC & ICASL – D 1.2Companies Act No. 7 of 2007 – Section 166 – 168CSE Listing Rule 7.6

AdoptedComplied

Do -

The Directors’ Report has been prepared by the Company Secretary in accordance with the Statutory and regulatory requirements and the Report is on pages 116 to 132 in this Annual Report.

14.4 Directors’ Responsibility of Financial Reporting

SEC & ICASL – D 1.3Companies Act No. 7 of 2007 Section 150 & 170Bank’s Articles of Association – Article No. 141 – 144

AdoptedComplied

Do - Adopted

A statement of Directors’ Responsibilities for Financial Reporting is given on page 134 of this Annual Report.

14.5 Management Discussion & Analysis Report

SEC & ICASL – D 1.4 Adopted The report given from Page 39 to 44 presents a detailed management review with regard to industry development, prevailing opportunities, threats, relevant business risks, adequacy of internal control systems, financial performance and future prospects.

14.6 Declaration of the Directors that the business is a going concern

SEC & ICASL – D 1.2& D 1.5

AdoptedComplied

Do -

The declaration included is part of the Annual Report of the Directors on the affairs of the Company with necessary disclosures given on page 124 of this Annual Report.

14.7 Convening an EGM to notifiy about the serious loss of capital

SEC & ICASL – D 1.6Companies Act No. 7 of 2007 Section 220CSE Listing RuleAppendix 8[ 20]

AdoptedComplied

The Bank has not been confronted with such a situation in the past. However, if the situation arises the Bank will comply with the statutory and regulatory requirements.






IMPLEMENTATION

15 Internal Controls

15.1 Maintaining a sound system of Internal Control and Risk Management

SEC & ICASL – D 2CBSL – Rule 38

AdoptedComplied

The Board is responsible for formulating & implementating of appropriate and adequate internal control systems.

In order to conduct the banking operations in an orderly manner within the statutory and regulatory requirements, effective internal control systems have been implemented by the Bank.

Review of the adequacy and effectiveness of these internal control systems are carried out by the Internal Audit Department and the Board Audit Committee.

The Board Audit Committee conveys their decisions and makes recommendations to the Board, in order that the Board of Directors take appropriate decisions to implement these internal control systems.

These Internal control systems help manage the risks of the Bank’s business and ensure that the financial information on which the business decisions are made and which is published are reliable. The controls also ensure that the Bank’s assets are safeguarded.

The Risk Management Report is given in detail on page 100 to page 113 in this Annual Report.

15.2 Timely review of the effectiveness of internal controls

SEC & ICASL – D 2.1CBSL Rule 3 [8](except B & C)

AdoptedComplied

Prevailing internal control systems of the bank are reviewed by the internal audit department and also by the external auditors, and periodic reports are submitted to the Audit Committee. The Minutes of the decisions made by the Audit Committee are provided to the Board to ensure that they are fully informed of all audit and compliance related issues.

The Audit Committee keeps under review the Group’s Internal Control and Systems to assess and mitigate Financial and Non-Financial risks.

16. Audit Committee and Auditors.

SEC & ICASL – D 3.1CBSL – Rule 3 [6] CSE Listing Rules 7.10.6Company’s Articles of Association Article No. 103 & 104

AdoptedComplied

Do -

The Audit Committee has been established in keeping with the requirements of good governance, since 1992.

16.1 Composition & Terms of the Audit Committee

Company’s Act No. 07 of 2007 Sec: 186Banking Act No. 30 of 1988 Sec,. 39.

AdoptedCompliedDo -

The Audit Committee consists of Non Executive Directors. The Directors of the Committee, CEO, COO, CFO, DGM – Finance, Manager – Systems Audit and a representative of the External Auditors normally attend the meetings. The Company Secretary of the Bank acts as the Secretary to the Audit Committee. Meetings of the Committee are held regularly throughout the year.

16.2 Review of External Audit Function and relationship with External Auditors

SEC & ICASL – D 3.22CBSL Rule – 3 [6]CSE Listing Rules 7.10.6

Companies Act NO. 7 of 2007 Section 154 - 165Bank’s Articles of Association – Article No. 145 – 148

AdoptedCompliedDo -

Do -

Do -

The Committee has responsibility for recommending to the Board, the appointment/re-appointment of the External Auditors and reviewing the nature, scope and results of the annual external audit.

It also approves the audit fee and on an annual basis, assesses the effectiveness and the independence of the External Auditors.





IMPLEMENTATION

The Bank maintains suitable relationship with the External Auditors. The Non-Audit Services provided to the Bank are restricted to tax consultancy work.

Details of the Audit Committee and the Report of the Audit Committee are given on page 136 and 137 respectively in this Annual Report.

16.3 Conflict of Interest & Related Party Transactions

SEC & ICASL – D 4CBSL Rule 3 [1], 3 [7]CSE Listing Rule 7.8Companies Act No. 7 of 2007Section 191 – 200, 217Bank’s Articles of AssociationArticle – 96, 97 & 98Banking Act No. 30 of 1988Section 47 Banking [Amendment ]Act No. 02 of 2005Section – 20

AdoptedComplied

Complied

Do -

Do -

Do -

The Directors are conscious of their obligation to ensure that no conflict of interest arises in the decision making process. Directors having direct or indirect interests in any transaction with the Company refrain from participating in discussions, decisions making or voting on matters whenever such conflict of interest arises.

Directors’ interest in contracts details are specified from page 130 to 132 in the Directors’ Report and have been disclosed and declared at the Meetings of Board of Directors and entered in the Directors Interest Register which is maintained by the Company Secretary and kept under his custody.

The Related Party Transactions are disclosed on page 191 in this Annual Report.

Further, the Directors’ shareholdings are disclosed in the Annual Report of the Directors on page 120 in this Annual Report.

16.4 Code of Business Conduct

SEC & ICASL – D 4 Adopted It is the policy of Sampath Bank that its affairs are conducted to the highest standard of ethics. The Bank competes for business only on the basis of quality, price and service to customers.

16.5 Confidential Information & Insider Trading

SEC & ICASL – D 4.1SEC Act No. 36 of 1987Part IV Section 32 - 34CSE Listing Rules 8.3

Banking Act No. 30 of 1988 Section 77

Banking Amendment Act No. 02 of 2005 Section 34

AdoptedComplied

Complied

Do -

Do -

The Board of Directors ensures that the Bank has adequate and effective control systems to protect depositors’ interest and prevent any possible mismanagement of their Funds. The Board ensures that banking secrecy is always complied with.

The Bank has a policy which prevents the disclosure of price sensitive information outside the Bank or the use of such information for unauthorised personal financial gains.

17 Shareholders

17.1 Institutional & Individual shareholders voting rights

SEC & ICASL – E 1 & F 2CSE Listing Rule 7.2Bank’s Articles of AssociationArticle No. 57, 67Companies Act No. 07 of 2007Section 140 & 141

Adopted

Complied

Do -

Do -

The Institutional shareholders and individual major shareholders are encouraged to make use of their voting rights and to participate in decision making at the shareholders’ General Meetings, by exercising their voting rights.

Small shareholders are educated in this aspect through the Shareholder Relations Committee and the Small Shareholders’ Association. In year 2000, when the Bank was confronted with a issue of hostile take over, almost all shareholders actively participated in decision making at the Annual General Meeting by exercising their voting rights through proxies.






IMPLEMENTATION

Voting at General Meetings is generally by a show of hands. However, as stated in the Articles of Association the Chairman of the meeting or 3 shareholders can demand a poll. In this event Ballot Cards are issued. Scrutinisers specialised in conducting Polls are appointed/invited to participate at such General Meetings of the shareholders.

In case of a poll, one share would have one vote.

18 Employees & Other Stakeholders

Company’s Articles of AssociationArticle No. 14Company’s Act NO. 7 of 2007 – Section 71 [2] [g]

Adopted All confirmed permanent Bank staff; Sampath team members are the beneficial owners of shares of the Bank through employees share ownership plans.

In addition, considerable numbers of team members are shareholders of the Bank and actively participate at shareholders’ General Meetings by exercising their voting rights in person or by proxy in decision making at such meetings. They also contribute by passing special and ordinary resolutions.

Staff who are members of the Sampath Bank Employees Association [SBEA] (98% of all staff) and their representatives are given unrestricted access to the management to voice their concerns. Communication between the Association and Board of Directors is carried out through the Company Secretary of the Bank.

The Bank respects the rights of all stakeholders, whether established by relevant statues or by agreement / memorandum of mutual understanding. All stakeholders have access to relevant reliable information on a regular, and timely basis thus safeguarding the stakeholders’ interests.

18.1 Corporate Social Responsibilities

We at Sampath recognise that we exist not only to look after the long term shareholder interest but also to look after the interests of all our stakeholders i.e. team members, clients, suppliers, depositors, borrowers, various organisations and the Government. We believe that in the long term, we can sustain our profitability and growth only by taking into consideration as to how our business decisions affect the society we exist in.

Sampath Bank has been adjudged the Best Corporate Citizen for 2009.

19 Other Investors SEC & ICASL–F Adopted Investor related accounting ratios such as Earnings Per Share, Earnings Yield, Dividend Per Share and Dividend Yield, Growth Rates of Earnings and Dividends etc. and Market Capitalisation results are given in the Audited Financial Statements not only for the current financial year but for the last five years in order to allow investors maximum information to assist their investment decision making.

Further, information is given on Major Shareholders, Share Distribution Analysis, Market Capitalisation in comparison to indices of CSE and summary of announcements made by the Bank at the CSE during the financial year. Reports are given on pages 208 to 211 of this Annual Report to draw the attention of Investors and Prospective Investors.





IMPLEMENTATION

19.1 Investing/Divesting Decisions

SEC & ICASL F-1.2 Adopted Shareholders Analysts, Stockholders Associations, the Media and interested members of the public are rapidly informed with regard to all announcements of the Bank, by informing such decisions promptly to the Colombo Stock Exchange, publication in the press and updating the Sampath web-site.

20 Corporate Governance Disclosures

SEC & ICASL – D 5 & E2CBSL – Rule 2 [1], 3 [1] & 3 [8]

CSE Listing Rules7 – 10 & 8

Adopted

Complied

The Board takes responsibility for compliance with accepted rules and regulatory directions of Corporate Governance. The Board also ensures compliance with all regulatory and supervisory requirements. Further the Board ensures that an effective combination of professionals with practical experience in relevant subjects such as Banking, Finance, Economics, Business Management, Human Resource Management, Law, Marketing, Information Technology or any other discipline relevant or complementary to banking operations are available to the Bank to undertake its operations and discharge its responsibilities.

Accordingly, the Board is of the opinion and is satisfied that the relevant and adequate disclosures have been made under these rules and regulations which governs the Corporate Governance best practices. In addition, the Board wishes to state that voluntary disclosures made are appropriately included in this Annual Report.

AttendanceDuring the year under review the Board met on 19 occasions for Board Meetings. The attendance at Board Meetings were :-

Name Meetings Attendance Excused

Mr I W Senanayake 19 17 02

[Chairman]

Mr S G Wijesinha 19 15 04

[Deputy Chairman]

Mr M A Abeynaike 19 15 04

Mr D J Gunaratne 19 17 02

Dr S Kelegama 19 13 06

Mr L J K Hettiaratchi 19 14 05

Mr J D Bandaranayake 19 16 03

Mr E A Gunasekera 19 19 NIL

Mr W M P L De Alwis 19 14 05

Mr K D D Perera 19 10 09

Mr G L H Premaratne 19 17 02

Mr M Y A Perera 19 17 02

Mr R Samaranayake 19 19 NIL

Collectively, the Directors bring a range of domestic and international exposure in various spheres ranging from corporate management, financial management, quality management, economic foresight, banking and related financial services, legal, business and various other professional disciplines. A snap shot of the Directors are given on pages 24 to 25 of the Report.




The Bank has formed many Board Sub-Committees in keeping with the Corporate Governance Codes and Guidelines. The details of Committees are as follows :

Board of DirectorsAudit

CommitteeNominationCommittee

Credit Committee

Human Resources &

RemunerationCommittee

StrategicPlanning

Committee

Board RiskManagement Committee

ShareholderRelations

Committee

Mr I W Senanayake (Chairman) √ √ • √ •

Mr S G Wijesinha (Deputy Chairman) √ √ √ √

Mr M A Abeynaike √ • √ √ √

Mr D J Gunaratne √ √ √ √ •

Dr S Kelegama

Mr L J K Hettiaratchi √ √ √ √ √

Mr J D Bandaranayake √ • √

Mr E A Gunasekera √ • √

Mr W M P L De Alwis √ √ • √

Mr K D D Perera √ √

Mr G L H Premaratne √ √ √ √

Mr M Y A Perera √ √ √

Mr R Samaranayake √ √ √

• Chairman of the Committee

Committee/CompositionNo. of Meetings

Held AttendedScope

1. Audit Committee

M A AbeynaikeI W SenanayakeS G WijesinhaL J K Hettiaratchi

06 06 06 06 06 05 06 03

The Audit Committee consists of Non-Executive Directors and is chaired by Mr Mohan Abeynaike who has relevant financial experience and qualifications. The Committee met six times during the year. The Directors of the committee, CEO, COO, GCFO, DGM – Finance, Head of Internal Audit, Manager – Systems Audit and a representative of the external auditors normally attend the meetings. The Committee has responsibility for recommending to the Board the published accounts and for reviewing the Group’s financial reporting and accounting policies. It is also responsible for the relationship with the external auditors and for the internal audit function.

The Committee has responsibility for recommending to the Board the appointment of the external auditors and for reviewing the nature, scope and results of the annual external audit. It also recommends the audit fee on an annual basis and assesses the effectiveness and independence of the external auditors. It keeps under review the Group’s internal controls and systems for assessing and mitigating financial and non-financial risks.

2.Nominations Committee

I W SenanayakeS G WijesinhaM A AbeynaikeD J Gunaratne

01 01 01 01 01 01 01 01

The Nominations Committee was chaired by Mr I W Senanayake since 01st October 2008. The Committee makes recommendations to the Board on the appointment of Directors. In carrying out these tasks, the Committee gives careful consideration to the balance and skills required on the Board, including the need to reflect diversity, experience and strong managerial and business skills.



Committee/CompositionNo. of Meetings

Held AttendedScope

3.Credit Committee

I W Senanayake(Resigned 28.05.09)S G Wijesinha(Resigned 26.11.09)E A GunasekeraM A AbeynaikeG L H PremaratneM Y A PereraR S Samaranayake [GCFO]L J K Hettiaratchi(Appointed on 26.11.09)D J Gunaratne(Appointed on 28.05.09)

04 03

11 08

12 12 12 11 12 10 12 10 12 11 01 --

09 06

The Committee has been appointed by the Board, by the amalgamation of the Credit Policy & Credit Approvals Committees. The Committee can call for a meeting when deemed necessary. The facilities approved by the Committee are tabled at a full Board Meeting later.

The Committee is responsible for formulating and guiding the Bank’s Credit Policy and the Management of Credit Risk.

4. Board Risk Management Committee

W M P L De AlwisD J GunaratneK D D PereraL J K HettiaratchiG L H Premaratne *M Y A Perera *R Samaranayaka **Members KMPs

07 07 07 05 07 02 07 06 07 07 07 06 07 07

The Committee is responsible for assessing all risks; including operational and strategic risk of the Bank. This Committee reviews the adequacy and effectiveness of all management level committees.

The Committee submits a report to the Board on risk assessment/ management.

5. Human Resources andRemuneration Committee

J D Bandaranayake L J K Hettiaratchi W M P L De Alwis S G Wijesinha G L H Premaratne M Y A Perera

08 08 08 06 08 05 08 07 08 07 08 07

The Committee is responsible for setting goals and targets for the CEO and key management personnel and evaluate their performance.

This Committee maintains a market oriented remuneration policy for the Bank’s Directors, Management and its Executive Staff.

6. Strategic PlanningCommittee

I W Senanayake M A Abeynaike S G Wijesinha L J K Hettiaratchi J D Bandaranayake K D D Perera G L H Premaratne R Samaranayake

01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01

The Committee is responsible for Strategic Planning and direction of the Bank and recommending appropriate strategies to the Board.

7. Shareholder Relations Committee

D J GunaratneE A GunasekeraW M P L De Alwis

03 02 03 03 03 02

The Committee was formed in late 2008 and had it first meeting in January 2009. The Committee looks at to how the Bank can give certain benefits to shareholders, and create a close relationship with individual shareholders.

KMP = Key Management PersonnelThe reports of the various Board Sub Committees are given on pages 135 to 138 in this Report.



Risk Management

Risk Management

In the wake of the recent high profile collapses in the financial sector, there is an obligation on the part of the Bank to protect shareholder value and aim at an appropriate trade-off between risk and return


OverviewOne of the key challenges faced by the financial sector today is to strike a balance between risk and return.

The impact of the global financial crisis on Sri Lanka’s financial institutions was limited; as domestic banks did not have direct exposure to US mortgage linked securities or to the failed financial institutions. Nevertheless, the consequent world recession most certainly did have noticeable ill effects on the entire economy.

The Central Bank introduced several prudent measures in the last few years to strengthen the risk management and resilience of banks, including;

• Enhancement of minimum capital levels• General provisioning requirements• Mandatory corporate governance requirements• Revised loan classifications • Specific provisioning requirements• Revised single borrower limits • Guidelines for integrated risk management

In addition, Banks were required to migrate to Basel II adequacy frame work applying the standardised approach for credit and market risk, and the basic indicator approach for operational risk from, January 2008.

Our risk management strategy is based on the need to assess the bank’s susceptibility to risk, while minimising adverse impacts of operational risk, market risk and credit risk on resources, earnings and cash flows through a robust framework of integrated risk management.

Notable benefits of Risk Management include; higher predictability of achieving business objectives, controlled spending on Governance, Risk and Compliance thereby increasing shareholder value.

Managing Risk at Sampath BankRisk Management efforts at Sampath Bank continue to focus on establishing a well structured, strategic and integrated approach - to identifying, assessing and mitigating risks, which eventually lead to proactively selecting the best strategies to optimize our performance.

Risk Management efforts at Sampath Bank are guided by the following;

i. Regulations and guidelines issued by the Central Bank of Sri Lankaii. Basel II recommendationsiii. Recommendations of KPMG Consultancy Project resulting from the Gap Analysis of the Integrated Risk Management Framework, undertaken in 2008iv. Accounting Standards and Industry best practices/ frameworksv. Policies approved periodically by the Board of Directors, for each type of risk

Integrated Risk Management Framework of the BankSampath Bank has re-aligned its risk management structure with the objective of ensuring a single view of risk across the Bank, and putting in place capabilities for an integrated risk management framework.

The Bank’s core risk management function is segregated from the business operating units and is centralised at Head Office. It reports to an Independent Board Risk Management Committee appointed by the Board of Directors.

The Bank has implemented several risk mitigation steps during the year under review, originating from recommendations of KPMG, and reviews by the Central Bank of Sri Lanka during their periodic inspections.

The organisational structure of the risk management function and its roles and responsibilities within the Bank, are defined below:

o The Board of Directors provide overall leadership, and assume responsibility in managing the risks faced by the Bank, while directing the overall tone of the Bank’s risk appetite.o Board Risk Management Committee (BRMC), which is a sub committee of the Board, meets monthly, and discharges its responsibilities as set-out in the regulatory instructions, and powers vested on it by the Board of Directors. Functions of BRMC include;

– Recommending policies and strategies for integrated risk management containing various risk exposures of the Bank–– Issuing specific overall directions to be carried out by the Corporate Management, and Chief Risk and Compliance Officer (CRCO).

o For operational efficiency, the bank has established an independent Risk Management Unit (RMU), which is independent of profit and volume targets. The RMU is headed by the CRCO, who was appointed in 2009 and is in charge of overall risk management efforts and Compliance Risk within the Bank’s administrative hierarchy. The CRCO reports to the BRMC.

Risk Management


o Corporate Management and Steering Committees in charge of Credit Risk and Operational Risk and the ALCO Committee, provide corporate level sponsorship and support for the risk management function. The RMU is responsible for developing, recommending, implementing and maintaining Operational, Credit and Market risk management efforts of the Bank. o Anti Money Laundering (AML) and Regulatory Compliance activities are administered by the AML and Compliance Unit operating under the Head of Compliance, who reports to the CRCO.

Three Lines of Defense ApproachThe Bank’s overall risk/governance model is premised on the concept of the Three (3) Lines of Defense, namely:

1st Line of Defense: Risk Taking Units (Business/Support Units Management);2nd Line of Defense: Risk Control Units (Operational Risk Management Unit); and3rd Line of Defense: Internal Audit Unit (Internal Audit).

Board of Directors (BOD)

Board Risk Management

Committee (BRMC)

Chief Executive Officer /Executive Director

Chief Risk & Compliance Officer

AML & Compliance Unit

Risk Management Unit

Head of Compliance

Operational Risk Management

Credit Risk Management

Market Risk Management / Middle Office

Risk Management

Risk Management


1st Line of DefenseBusiness units are considered as primary risk owners and risk takers taking the foremost responsibility for managing risk exposures on a day-to-day basis. Primary responsibilities of the Business/Support Units are:

i. Assume the primary responsibility for identifying, managing and reporting their risksii. The business units are required to manage certain defined risk through the use of facilities and services provided by specialist risk departments (e.g. Credit Risk Unit)iii. Business units will report their own risks.

2nd Line Of DefenseAcross the Bank, the task of setting the integrated risk management framework encompasses measurement, monitoring and controlling tools, methodologies, setting of the risk appetite, as well as facilitating identification of risks undertaken by the Risk Management Function.

The RMU is responsible for:

i. Providing support to the business units, review and report key risks to BRMC.ii. Assisting, providing information and ensuring that the BRMC and the Board are satisfied that risks are managed cost- effectively and at an acceptable level.iii. Ensuring that the specialist departments offer sufficient support to others.

3rd Line of DefenseThe key roles performed by the Internal Audit Department are to:

i. Provide an independent assurance of the robustness of the different risk management processes and methodologies.ii. Communicate with the external audit and BRMC/Board.iii. Ensure that the Bank is compliant with necessary regulatory requirements and sufficiently sound and robust in its risk management framework.

BOARD

RISK MANAGEMENT COMMITTEES

EXECUTIVE TEAM

Risk Management Function

• Operational Risk• Market Risk• Credit Risk• Other relevant risks

Internal Audit

• Risk approach• Risk system assessment

Specialist Departments

• Identifying• Reporting their risk

Specialist Department

• Legal• HR

AuditCommittee

ExternalAudit

REGULATORS

Primary Responsibility/ Decentralised

Oversight / Centralised

Independent Assurance of All Other Components

1st Line of Defense 2nd Line of Defense 3rd Line of Defense

BusinessUnit 2

BusinessUnit 1

Risk Management

The duties and responsibilities of the 3 lines of defense are segregated as follows:


Credit Risk Management

Credit Risk is the risk of loss, arising from a borrower’s or counterparty’s inability to meet its obligations in accordance with the agreed terms.

Credit Risk, in some guise exists throughout the Bank’s activities, both on and off-balance sheet and arises from the Banks dealings with corporate entities, individuals, other banks, financial institutions or countries.

In view of the above, our Credit Risk management efforts are directed at maximising the Bank’s risk-adjusted rate of return, by monitoring credit risk exposure within acceptable limits. All credit risk aspects are governed by the credit risk policy which has been approved by the Board of Directors.

Risk Management TechniquesSampath Bank has adopted a host of Credit Risk management techniques which have helped to mitigate likely adverse impacts of Credit Risk. A few techniques include;

• Reviewing the Credit Risk Management Policy• Establishing a structured and standardised credit approval

process which includes a well established procedure of comprehensive credit appraisal and credit rating

• Reviewing the lines of delegated authority • Credit administration and monitoring process • Independent credit risk assessment and credit portfolio

management

During the year under review, the Bank further strengthened these techniques as follows:

•CreditRatingAs the initial step of the Internal Rating Based system recommended by BASEL II accord, the Credit Risk Management function successfully implemented a Two-Tier Credit Risk Rating System for Corporate customers. In addition Credit Risk Rating Models, for Small & Medium Entrepreneurs (SME), Retail/Consumption, Housing, Projects/Start-up Business, have been developed and are in the process of being finalised and implemented.

The ratings serve as a key input in the approval process as well as the post-approval credit process and each borrower’s rating is reviewed at least annually. Independent Credit Risk assessments are conducted for high value credit proposals submitted by business units.

• Post Mortem AnalysisPost Mortem analysis is conducted for; facilities that are being transferred to Past Dues, and for borrowers indicating early warning signals.

Post Mortem analysis would assist the bank to identify and highlight key issues and warning signs that lead to default, and to proactively adopt suitable action for mitigation. The frequency of asset review is now being extended to include borrowers with a higher outstanding amount and/or a lower credit rating.

• Data CleansingData Cleansing of the Bank’s portfolio of Advances within the core banking system, was carried out very successfully during the year.

The Bank’s IT team provided an efficient systems workflow that enabled the entire bank to complete this task in less than five months. Data cleansing will ensure more accurate analysis of the advances portfolio, which will ultimately lead to more accurate and high quality decisions.

• Credit Portfolio ManagementWe measure, monitor and manage credit risks for each borrower, as well as at the portfolio level. Our aim is to ensure a well balanced portfolio, with a view to limiting concentrations in terms of risk quality, geography, industry, maturity and large exposure.

Multiple analyses such as Sector Exposure and High end-exposures are monitored, and outcomes used to manage the credit portfolio of the Bank.

The Bank will be further strengthening the existing prudent limits such as Counterparty Level Limits, Portfolio Level Limits and Asset Class Limits to exercise a much better control over the Advances portfolio, and to optimise returns.

Risk Management

Risk Management


Operational Risk Management

Operational Risk is the possibility of loss resulting from inadequate or failed internal processes, people and systems or from external events. This includes legal risk but excludes strategic and reputation risks.

Operational risks in the Bank are managed by maintaining a comprehensive system of internal controls and policies, thereby reducing the probability and potential impact of losses from Operational Risks.

Despite the wide scope covered by Operational Risk, the Bank has been successful in addressing a number of important aspects in managing operational risk.

Policies, Procedures & Internal Control Framework The Bank identified the current gaps in its policy and procedure framework, and has initiated action to bridge them suitably.

Some of the gaps in internal controls - such as in the areas of Outsourcing, Product Development, Insurance, and Intellectual Property Rights etc. have been strengthened this year, while other gaps identified, would be addressed in 2010.

Risk Review of ProceduresEvery new or amended procedural instruction is reviewed for risk against the Risk Register of the Bank, and risks are categorised by their potential impact. Risk mitigating measures recommended during the process, are being suitably incorporated into the procedures prior to being implemented.

Internal Loss Event Data CollectionThe Bank continued to capture Loss Event Data during the year with a view to elevating to Basel II advanced approach. These events are identified and mapped to the relevant business line as per Basel II, categorised into loss events (actual loss), and causes and then reported to BRMC monthly, for review and action.

Weak processes or systems identified during loss data collection, are addressed by implementing sufficient mitigating steps within the business processes, in order to minimise or prevent recurrence.

Managing Risk within the IT SystemsAll new IT systems as well as upgrades to existing systems are reviewed for Risk and Compliance issues prior to implementation, while Systems Audit conducts the review of Systems Audit aspects.

New Product DevelopmentA Product Policy implemented in 2009, addresses, among other areas, the risk management process and regulatory requirements of all new and existing products. A risk and compliance sign-off is required for all product additions/ changes.

OutsourcingA Policy on outsourcing of banking and ancillary functions - as recommended by the Central Bank of Sri Lanka was approved by the Board of Directors and implemented in 2009. This spells out the Bank’s policies in selecting areas for outsourcing, selection of service providers, periodic reviews and execution of Service Level Agreements. An Outsourcing Committee, represented by key functional areas of the Bank has been appointed by the Board of Directors to ensure that all outsourcing activities of the Bank are in line with the criteria spelt out in the policies.

Internal Loss Event Data Reporting Summary - 2009

Retail Banking - 922

Corporate Finance - 1

Payment & Settlement - 48

Trading & Sales - 15

Commercial Banking - 18

Agency Services - 3

Asset Management - 1

Geographical Distribution of Advances - 2009

Western - 79%

Central - 4%

Eastern - 2%

North Central - 1%

Northern - 1%

North Western - 4%

Sabaragamuwa - 3%

Southern - 4%

Uva - 2%

Risk Management


InsuranceThe Bank’s existing insurance arrangements have been extensively reviewed during the year in order to make use of Insurance as a mechanism of risk transfer. Insurance policies have been risk reviewed to identify any uncovered areas, and, the respective business units have been provided with recommendations for improvements.

Managing Legal RiskLegal Risk is treated as a component of Operational Risk as a negative impact could arise by way of fines, penalties, litigations etc. The Bank has an in-house Legal department headed by a Chief Legal Officer.

An on going review of products, services, policies, processes and systems and legal documentation including contracts with external parties by the legal department, ensures conformity with the applicable laws and regulations. Where specific expertise is required, we obtain professional services of external legal experts.

Market Risk Management

Market Risk is the risk that ‘on’ or ‘off’ balance sheet positions will be adversely affected by market variables viz: interest rates, exchange rates, equity and commodity prices.

Sampath Bank has established a Market Risk Policy, which has taken into account the risks such as foreign exchange risk, liquidity risk etc. The policy was reviewed incorporating the guidelines issued by the Central Bank of Sri Lanka during the year, Basel II recommendations and the industry best practices and approved by the Board in the last quarter.

Asset and Liability Management Committee (ALCO) of the Bank overlooks the management of the Bank’s overall liquidity position, and is responsible for Liquidity Risk and Interest Risk Management of the Bank, thus ensuring that the bank is self-sufficient, and is in a position to meet its obligations as and when they fall due. This is achieved through proper representation of key business heads, fortnightly ALCO meetings and continuous monitoring of the liquidity position of the Bank.

Liquidity RiskLiquidity risk arises due to unmatched maturities of assets and liabilities, and hinders honouring commitments as and when they fall due. It is the policy of the Bank to ensure that adequate liquidity is maintained in all currencies to meet its obligations. This is performed through cash flow management, maintenance of liquidity ratios such as statutory .reserve ratio, statutory liquid asset ratio and advances/deposit ratio.

Foreign Exchange RiskForeign Exchange risk arises out of the impact of volatility in foreign exchange rates on open foreign exchange positions. Forex risk is managed through a framework of BOD approved limits, including currency specific open position limits, dealer limits, day light/overnight limits, loss limits per deal/day, CBSL overnight position limits, counterparty limits, stop loss limits, financial derivative limits etc.

The limits are in line with the CBSL regulations, business requirements of the Bank and industry best practises. Middle Office monitors adherence to limits on a daily basis, and reported through Management Reports.

Interest Rate Risk (IRR)The management of Interest rate risk which is monitored and controlled by ALCO is one of the critical components of market risk management in the Bank. Interest Rate Risk is created from volatility of interest rates, when pricing of assets and liabilities are not matched.

The management of IRR in the Bank aims at capturing the risks arising out of maturity and re-pricing mismatches and is measured from a both, earnings and economic value perspective.

Middle OfficeThis Market Risk management function which is separate from the Treasury, was setup in late 2008 and was further strengthened during the year under review.

Current monitoring activities of Market Risk/Middle Office includes daily monitoring of adherence to Board approved limits and overnight exposure limits set by the Central Bank, and weekly monitoring of Central Bank Reserve Requirements. In addition, monitoring of trading platform conversations and usage of internal systems by dealers is also done on a daily basis. The bank will continue to strengthen the Middle Office Function in 2010.

Risk Management

Risk Management


Treasury SoftwareThe Treasury Software system project which commenced in mid 2009 is nearing completion. The system will assist the Middle Office to monitor the treasury transaction as per the limits, conduct transactions in a proper manner, and value the asset portfolio. The respective procedural controls, Treasury processes and monitoring would be further developed and strengthened as per CBSL requirements and industry best practises, and implemented along with the Treasury system during the early part of 2010.

Reputation Risk Management

Reputation Risk amounts from the negative effects of public opinion, customer opinion and market reputation, and the damage caused due to brands by failure to manage public relations.

Sampath Bank considers its reputation as one of the primary factors that ensures public confidence in the Bank’s stability. Customer concerns and grievances are channelled through a public help line that is manned throughout the day, 365 days of the year. Notable events reported as customer or public grievances are recorded, discussed and appropriate action taken at Corporate Management and BRMC meetings.

A Product policy was implemented to ensure that all products/services of the bank are operating to customer satisfaction. In addition, the bank’s intellectual property rights are constantly monitored to ensure its sole ownership of uniquely designed banking services/products.

Reputational Risk management and mitigation aspects are embedded in the Bank’s Policies, procedures and training programmes.

Strategic Risk Management

Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes.

It arises from the compatibility of an organisation’s strategic goals, the business strategies used to achieve those goals, the resources deployed, and the quality of implementation.

The Bank prepares a comprehensive three year Strategic Plan, which is used as a base document for defining business goals, budgets, resource planning, and to link to individual employee goals. The Board of Directors is directly involved in strategic planning and goal setting activities. Periodic performance reviews and annual strategic planning process ensures achievement of corporate objectives.

CORPORATE RISK REGISTERAnother notable improvement during the year is the creation of a Corporate Risk Register, which contain an overall risk profile. The Risk Register lists all the identified risks, results of risk analysis (Rating) and mitigating measures that are in place to reduce the risk/loss to an acceptable level.

The Corporate Risk Register shows the risks faced by the Bank in a nutshell. It is used as a management tool to track and proactively evaluate the risks involved within the products, processes and systems, the Bank is exposed to. An operational risk rating will also be declared for the each risk. The Risk Register is an evolving document that is updated over time, with those risks that are no longer applicable being removed and emerging ones added.

The assigned Risk Ratings are indicative of the impact of respective risks, in case if such events occur. The Risk Register is reviewed periodically, and approved by the BRMC.

Risk Management

Organisational Risks (Risk Register)

Reputational Risk Strategic

Risk

Operational

Risk

Credit Risk

Mar

ket R

isk


Risk Description Risk Rating Mitigating Action

Credit Risk

1 Credit Concentration Risk

Risk of losses due to the Bank’s credit exposure concentrated on one of few lending sectors, and insufficiently diversified with respect to industry, geography etc.

Significant 1. Maximum Exposure Limits2. Portfolio Monitoring and Management3. Lending Product Limits

2 Sovereign Risk Risk of a government becoming unwilling or unable to meet its loan obligations, or reneging on loans it guarantees

Marginal 1. Country ratings2. Political/Economic/Regulatory, Conditions

Analysis/Monitoring3. Maximum exposure limits4. Portfolio monitoring and management

Operational Risk

1 Processing and Behaviour Risk

Problems with products or services due to failed internal controls, information systems, employee integrity, errors and mistakes, negligence, accident, fraud or through weaknesses of operating procedures

Critical 1. Risk and Compliance Review of processes, new products and procedures

2. Fraud prevention measures3. Customer Grievance handling4. Business Continuity Planning5. Training

2 Human Resources Risk

Failure to recruit, develop or retain employees with the appropriate skills and knowledge or to manage employee relations

Critical 1. HR Policies and Procedures2. Annual remuneration reviews and employee

benefits3. Grievance handling mechanisms4. Succession and development plans

3 Technology Risk Failure to plan, manage and monitor performance of technology related projects, products, services, processes, staff and delivery channels

Significant 1. IT policies & Procedures2. Information Security Management and

Systems Audit3. Risk review of IT Projects

4 Facilities and Operating Environment Risk

Loss or damage to operational capabilities caused by problems with premises, facilities, services or equipment

Significant 1. Periodic maintenance and routine checks2. Monitoring processes3. Business Continuity Planning

5 Control Frameworks Risk

Inadequate design or performance of the existing risk management framework

Significant 1. Risk Management Planning2. Reviews by Board Risk Management

Committee , Risk Steering Committees and Asset and Liability Management Committee

3. Internal Audits4. Risk Control Self Assessments

6 Information Security Risk

Unauthorised disclosure or modification of information, loss of availability of information, or inappropriate use of information

Significant 1. Systems Audit2. Backup and Disaster recovery procedures3. Business Continuity Planning

Risk Management

Risk Management



7 Legal and Regulatory Compliance Risk

Failure to comply with the laws of the countries where business operations are carried out, failure to comply with any regulatory, reporting or taxation standards, failure to comply with contracts, or failure of contracts to protect business interests

Significant 1. Risk Management & Compliance2. Policies & Procedures3. Monthly Compliance certificate by SBU’s4. Chief Legal Officer function5. Company Secretary function6. Finance function

8 Management Information Risk

Inadequate, inaccurate, incomplete or untimely information to support the management decision making processes

Significant 1. Updated MIS systems2. Reconciliation and day to day balancing

procedures3. Periodic Management Reporting4. Data warehouse

9 System Risk Risk of financial losses due to system and telecommunication failures, including temporary system shut-downs, malfunction, hacking and disruptions caused by external parties.

Significant 1. Periodic maintenance and upgrades2. Backup and disaster recovery procedures3. Business Continuity Planning

10 Corporate Governance Risk

Failure of directors to fulfil their personal statutory obligations in managing and controlling the company

Significant 1. Governance Policies and Procedures2. Compliance and Risk Management functions3. Whistle Blowing 4. Company Secretariat function 5. Training and awareness building

11 Geopolitical Risk Loss or damage caused by political instability, poor quality of infrastructure, cultural differences and misunderstanding etc.

Significant 1. Planning and periodic monitoring2. Training and communication 3. Mass Media communication4. CSR projects

12 Project Management Risk

Failure to plan and manage resources required to achieve tactical project goals, leading to budget overruns, time overruns, failure to complete the projects, or failure to manage integration aspects with existing sections of the business and impact the changes can have on business operations

Significant 1. Project Risk Management2. Financial Planning3. Project HR aspects planning4. Expertise building and training

13 Supplier Risk Failure to evaluate adequately the capabilities of suppliers leading to breakdowns in the supply process or substandard delivery of supplied goods and services; failure to understand and manage the supply chain issues

Significant 1. Procurement Policies and Procedures2. Review by Outsourcing committee3. Service Level Agreements4. Periodic review of performance5. Business Continuity Planning6. Internal Audits

Risk Management



14 Criminal and illicit acts Risk

Loss or damage caused by fraud, theft, wilful neglect, gross negligence, vandalism, sabotage, extortion etc.

Marginal 1. Physical controls and security2. Security technology such as CCTV3. Training4. Prompt action against fraudsters 5. Insurance

15 Tangible Assets Risk

Risk of financial losses to tangible assets from events such as natural disasters, utility service accident etc.

Marginal 1. Business Continuity Planning and Disaster Recovery

2. Insurance

16 Climate and Weather Risk

Loss or damage caused by unusual climate conditions, including drought, heat, flood, cold, storm, winds and tsunami etc.

Marginal 1. Insurance2. Business Continuity Planning

17 Country Risk Risk of financial losses due to political/ economic instability or other factors of a country, which the organisation deals with

Marginal 1. Evaluation of Country Ratings2. Monitoring Status of the country’s

infrastructure, literacy, defense aspects, international relations

3. Legal Agreements4. Insurance

18 Cultural Risk Failure to deal with cultural issues affecting employees, customers or other stakeholders, including language, religion, morality, dress codes and other community customs, practises

Marginal 1. HR procedures 2. Public relations3. Grievance handling4. Managing cultural diversity among employees5. Whistle Blowing

19 Ethics Risk Damage caused by unethical business practices, including those of business partners. Issues include racial and religious discrimination, exploitation of child labour, pollution, environmental issues, behaviour towards disadvantaged groups etc

Marginal 1. Risk reviews2. CSR projects3. Public Relations4. Accounting Standards5. Whistle Blowing

20 Health and Safety Risk

Threats to personal and health safety of staff, customers and general public

Marginal 1. Training2. Workplace Safety practices /Ergonomics 3. Business Continuity Planning4. Employee Insurance

Risk Management

Risk Management



Market Risk

1 Liquidity risk Liquidity risk is the possibility that the bank suffers a loss due to not having sufficient financial resources at its disposal, to meet its obligations, as and when they fall due.

Significant 1. Monitoring by ALCO2. Market Risk Management 3. Prudential Limits

2 Interest Rate Risk

Interest Rate Risk is the possibility of adverse effects due to interest rate movements on net interest income

Significant 1. Portfolio Monitoring2. Monitoring by ALCO 3. Prudential Limits4. Value at Risk Calculations

3 Foreign Exchange Risk

Forex risk is the risk that a bank may suffer losses as a result of adverse exchange rate movements during a period in which it has an open position, either spot or forward, or a combination of the two, in an individual foreign currency

Significant 1. Monitoring by ALCO2. Prudential Limits3. Value at risk calculations4. SWAPS5. Hedgeing

Reputational Risk

1 Reputational Risk

Negative effects of public opinion, customer opinion and market reputation, and the damage caused due to brands by failure to manage public relations

Critical 1. Customer response and grievance handling programmes

2. Policies and Procedures3. Risk reviews4. Public relations management and corporate

campaigns5. Business Continuity Planning6. Training

Strategic Risk

1 Strategic Risk Failure to manage long term strategic goals of the business, including dependence on any estimated or planned outcomes that may be in the control of the third parties

Significant 1. Strategic Planning2. Corporate Governance3. Risk and Compliance Management4. Training

Risk Management Capacity BuildingRisk Management capacity building in line with CBSL directives and industry best practises is considered a critical building block of Sampath Bank’s success in Risk Management. Both internal and external training and exposure opportunities are provided to officers attached to Risk Management and Compliance. In addition, the Bank makes use of professional consulting for specific expertise on a case by case basis.

TrainingInternal training and orientation for new recruits are primarily based on inculcation of throughout the year to ensure that a fair number of trained staff members are present in all branches and departments.

Road Map for Basel ll ComplianceIn accordance with the CBSL guidelines Sampath Bank is in conformity with the Basel II basic indicator/standardised approaches. However, the Bank is committed to migrate to Basel II advanced approaches ahead of the timelines stipulated by the regulator.

Risk Management


A snapshot of our progress and priorities identified for the year 2010 and beyond to achieve this goal, is given below;

2009

• Policy Gap analysis• Treasury/Market Risk System

implementation• Post Mortem Analysis• Appointment of CRCO• Review and development of all

Risk/Compliance Policies• Improving and re-drafting existing

Credit Rating Models• Data Cleansing on all facilities/

borrowers• Publishing of Outsourcing Policy

and setting-up of Outsourcing Committee

• Monitoring Insurance Cover, Outsourcing arrangements/Service Level Agreements and Intellectual Property Rights of the bank

• Identification of priorities from Gap Analysis and recommendations on Integrated Risk Management Framework

Up to 2008

• Setting up of Risk Management Unit

• Internally developed Internal Credit Rating Models

• Credit & Operational Risk Policies

• Internal Loss Event Data Collection

• Formalising Risk Review and issue of internal instructions

• Board Risk Management Committee (BRMC)

• Monthly BRMC Reporting by Risk

• Basic IT systems support• Gap Analysis study and

recommendations for Integrated Risk Management Framework

2010 and beyond

• Professional review and implementation of Internal Credit Rating Models, implementation and validation

• Obtaining external professional expertise on further developing Risk Management efforts

• Selection and implementation of IT Systems for Credit and Operational Risk

• Expanding Scope of pre granting Credit Facility review

• AML System• Business Line Segregation of Income • Risk Control Self Assessments and Key

Risk Indicators• Operational Loss Event Models• Consolidation and strengthening of

Market Risk Middle Office with Treasury Software and Market Data Systems

• Investment Portfolio valuation and other advanced Market Risk Management functions

• Implementation and follow-up of identified priorities from Gap Analysis study

• Migrating to advanced approaches in Basel II

Constructive steps are presently being taken to implement the key compliance principles in a timely manner which include the submission of a quarterly report encompassing compliance sign-offs from respective business lines, to the Board of Directors. A monthly Compliance Certificate is presented to the Board Risk Management Committee highlighting salient bank wide compliance aspects including AML transaction monitoring and reporting.

Adherence to Know Your Customer (KYC), Customer Due Diligence (CDD) rules and guidelines issued by the Financial Intelligence Unit (FIU) are practiced on a risk based approach with regard to all new accounts opened as well as the existing accounts as an ongoing activity, and is monitored for speedy completion.

Risk Management

Regulatory ComplianceSampath Bank PLC has established a strong framework to install a robust compliance function in order to assess the Bank’s compliance with laws, regulations, regulatory guidelines, internal controls and approved policies in business operations.

• The Head of Compliance is responsible for Regulatory Compliance, dissemination of Regulator Instructions across the Bank, and for Anti Money Laundering compliance. • The Bank’s Compliance related policies and procedures are established to cover all areas of operations in line with recommendations from Basel committee on Banking supervision as well as directives issued by the Central Bank from time to time. All policies are reviewed annually incorporating due and timely changes.

Risk Management


Key Regulatory instructions issued in 2009 are;

Regulatory requirement Status

Banking Act Directions Amendment to Directions on Ownership of Issued Capital Carrying Voting Rights for licensed commercial banks

Will be complied as applicable

No 1 of 2009

No 3 of 2009 Directions on Risk management relating to foreign exchange business of licensed commercial banks

Steps are being taken to ensure compliance as per dead lines indicated i.e. 31 March 2010

No 4 of 2009 Lease-Backed Trust Certificates /Lease Receivables as approved security for accommodation to any director or close relation of a director or to any concern in which the director has substantial interest

Internal due diligence arrangements are in place to monitor compliance when facilities are considered

No 5 of 2009 Identifying, reporting, transferring and maintaining, abandoned property of licensed commercial banks

Complied on 24 November 2009 by transferring to CBSL

Compliance relating to re registration as per the new Companies Act applicable to limited liability companies with whom the Bank maintains account relationships is being closely followed up by the Compliance Department.

Sampath Bank PLC is also an active participant in Anti Money Laundering efforts initiated by Financial Intelligence Unit of Central Bank of Sri Lanka, and working groups formed by AML Compliance Officers Association.

Compliance Department is being augmented with required resources including the acquisition of a robust AML software to carry out an effective compliance function, while a Chief Risk and Compliance Officer (CRCO) was appointed in 2009.

IT System NeedsIT Support Systems for Risk Management has been identified as one of the top priorities during 2009.

As an initial step, the Bank commenced implementation of the Treasury system, which also covers baseline Market Risk Management aspects. The system would be fully functional by the first quarter of 2010.

The Bank is hopeful that the common Anti Money Laundering system selected by all banks would be in place by the end of 2010. Sampath Bank is planning to acquire IT systems infrastructure supporting Credit, Operational Risk Management needs such as Risk Control Self Assessments, Key Risk Indicators, Credit Rating Models, Internal Loss Event Data Collection and

Analysis etc. The CRCO and RMU have already commenced working on this aspect, and are confident that suitable IT systems would be in place by end 2010, with the active support of the BRMC and the Board of Directors.

Risk, Compliance and Business Integration

The combined efforts of all Integrated Risk Management activities would ultimately lead to a robust and integrated Risk Management structure within the Bank.

This will, at the same time ensure adequate support is provided to business units to achieve the Bank’s corporate objectives, while the Bank migrates to Basel II advanced approaches well within the timelines stipulated by Central Bank of Sri Lanka.

RiskPortfolio

Management

RiskAssessment& Mitigation

Risk /Compliance Strategy

Sampath Bank Business Strategy/

Objectives

Risk/Compliance Organisational Structure

Risk

Optimisa

tion

Risk Management

FINANCIAL CALENDAR

First & Final Dividends for 2008 was paid on 6th April, 2009Annual Report and Accounts for 2009 signed on 17th February, 2010Twenty-Forth Annual General Meeting to be held on 30th March, 2010First & Final Dividends for 2009 proposed to be paid on 6th April, 2010

“We all seek progress. Creating a platform that facilitates the re-birthing of a golden era of prosperity is pivotal, for all our future endeavors. We at Sampath Bank believe in providing and fostering a spirit of entrepreneurship that does just this. We inspire people.”

Our NationInspiring

Financial ReportsAnnual Report of the Board of Directors on the Affairs of the Company 116Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 133Directors’ Responsibility for Financial Reporting 134Risk Management Committee Report 135Audit Committee Report 136Human Resources & Remuneration Committee Report 138Auditors’ Report 139Income Statement 140Balance Sheet 141Cash Flow & Reconciliation Statement 142Statement of Changes In Equity 144Significant Accounting Policies 145Notes to the Financial Statements 157Income Statement in US$ 202Balance Sheet in US$ 203

Financial Reports


Annual Report of the Board of Directors on the Affairs of the Company

Annual Report of the Board of Directors on theAffairs of the Company

Contents of this Report are in accordance with the statutory requirements, the requirements of relevant regulatory authorities for the listed companies in the financial industry and best accounting practices.

GENERALYour Directors have pleasure in presenting their Annual Report on the State of Affairs, together with the Audited Financial Statements for the year ended 31.12.2009 of Sampath Bank PLC, a licensed Commercial Bank, listed on the Colombo Stock Exchange. Sampath Bank PLC which was incorporated in Sri Lanka on 10th March 1986 under the Companies Act No. 17 of 1982 and approved as a licensed Commercial Bank under the Banking Act No. 30 of 1988 has now become a holding company having many subsidiaries and a company, which functioned as an overseas associate till 3rd August 2009. In compliance with the requirements of the New Companies Act No. 07 of 2007 the bank was re-registered under the name Sampath Bank PLC with The Registrar General of Companies. The Re-registration No. of the Company is PQ 144.

This Report was approved by the Directors on 17th February 2010.

PRINCIPAL ACTIVITIESThe Company’s principal business activities are banking and related financial services. The principal activities and nature of operations of the group are described in the Corporate Information on Inner Back Cover as well as under each company in the report.

BankThe principal activities of the Bank includes accepting deposits, personal banking, trade financing, off-shore banking, resident and non-resident foreign currency operations, travel related services, corporate and retail credit, import and export financing, project financing, lease financing, pawning, issuing of local and international debit and credit cards, chip cards, telebanking facilities, internet banking, bullion trading and dealing in Government securities.

SubsidiariesSampath Bank PLC had five subsidiaries as at 31.12.2009, namely, Sampath Centre Limited, S C Securities (Private) Limited, Sampath Leasing and Factoring Limited, Sampath Trade Services (Hong Kong) Limited and Sampath Information Technology Solutions Limited. Sampath Surakum Limited a fully owned subsidiary, was amalgamated with Sampath Bank PLC and ceased to exist with effect from 03rd November 2009.

Significant ShareholdingSampath Bank PLC has a 17.15% shareholding (significant) in Union Bank of Colombo Ltd., and 13.55% shareholding in LankaBangla Finance Limited in Bangladesh.

The Subsidiaries

NameNature of Business

Directors Holding %

Financial Results

2009Rs. Mn

2008Rs. Mn

Sampath Centre Limited

Renting office space and providing Ancillary services to tenants

Mr. I.W. SenanayakeMr. M.A. AbeynaikeMr. S.G. WijesinhaMr. S.P. KannangaraMr. M.Y.A. Perera

97.14% Turnover Profit before TaxTaxationProfit after tax

187.987.14.9

82.1

163.481.9

4.980.2

Sampath Surakum Limited was amalgamated with Sampath Bank PLC and ceased to exist with effect from 03rd November 2009.

Financial ReportsSampath Bank PLC | Annual Report 2009 117


NameNature of Business

Directors Holding %

Financial Results

2009Rs. Mn

2008Rs. Mn

S C Securities(Pvt) Limited

Stock brokering Mr. I.W. SenanayakeMr. E.A. GunasekeraMr. M.Y.A. PereraMr. N.H.K. Feranando

51% Turnover Profit before TaxTaxation Profit after tax

48.714.65.49.2

18.83.81.62.2

Director Mr. G.L.H. Premaratne resigned from the Board on 26th May 2009.

Sampath Leasing& Factoring Limited

Leasing & Factoring

Mr. I.W. SenanayakeMr. L.J.K. HettiaratchiMr. S.G. WijesinhaMr. G.L.H. Premaratne

100% Turnover Profit before TaxTaxationProfit after tax

527.2(51.5)

2.9(48.5)

715.5(31.5)

(2.3)(33.8)

The Joint Chief Executive Officers Mr. R. Samaranayake & Mr. N. Hulangamuwa resigned from the said positions of the Company on 27.02.2009, 15.3.2009 respectively and Mr. Upul Karunaratne was appointed as the Chief Executive Officer with effect from 19.02.2009.

Sampath Trade Services (Hong Kong) Limited (Under De- Registration

Trade Services including documentary credit & collection and associated services & products

Mr. I.W. SenanayakeMr. G.L.H. Premaratne

100%

The registered office of the Company is at, 7/F City Plaza Four, 12 Taikoo Wan Road, Taikooshing, Island East, Hong Kong. The Bank is in the process of liquidating this company.

Sampath Information Technology Solutions Ltd.

Providing IT related services

Mr. L.J.K HettiaratchiMr. E.A.GunasekeraMr. G.L.H. PremaratneMr. M.Y.A. Perera

100% TurnoverProfit before TaxTaxationProfit after tax

29.01.00.50.5

13.4(3.4)(1.2)(2.2)

Mr. M.Y.A. Perera joined the Board of Sampath Information Technology Solutions Limited with effect from 05th March 2009.

Financial StatementsThe financial statements of the company and group are given on pages 140 to 201. Given below is the summarised financial statements:-

Interest income constitutes the Bank’s main income. The total income for 2009 and 2008 was as follows:-

2009Rs. Mn

2008Rs. Mn

25,213 22,243

Details are given in Note 1 on page 157 to the Financial Statements.

Financial Reports



ProfitThe profit before tax for the Bank and the Group was up by 55.1% and 43.7% respectively. [15.6% and 16.9% in 2008] and the profit after tax up by 48.4% and 36.6% respectively [34.4% and 26.9% in 2008]. Details regarding the profit of the Bank are given below.

2009(Rs. Mn)

2008(Rs. Mn)

Profit for the year after payment of All expenses –Providing for depreciation, possible Loan losses, Financial VAT and Contingencies 3,976.2 2,564.0

Provision for Taxation 1,877.9 1,150.1

Net profit after Taxation 2,098.3 1,413.9

Unappropriated profit brought

Forward from previous year - -

Profit available for appropriation 2,098.3 1,413.9

Appropriations

Final Dividend proposed at Rs 6.25 per share 473.6

(Final Dividend paid -2008) Dividend per share Rs 4.00 - 275.6

Transfer to the Reserve Fund 1,624.7 1,138.3

Unappropriated profit to be carried forward - -

Auditors’ ReportThe Auditors of the Company are M/s Ernst & Young, Chartered Accountants. Their report on the financial statements is given on page 139. They come up for re-election at the Annual General Meeting, with the approval of the Audit Committee and Board of Directors.

Significant Accounting PoliciesThe significant accounting policies adopted in preparation of the financial statements are given on pages 145 to 156.

Directors’ Interest RegisterUnder the provisions of Section 192 of the Companies Act No. 07 of 2007, the Interest Register is maintained by the Company. The Directors have made the necessary declarations, in terms of the Section 192(1) of the Companies Act No. 07 of 2007, which are recorded in the Interest Register and this is available for inspection in terms of the Act. The entries in the Register made during the accounting period are detailed on pages 125 to 132.

Directors’ RemunerationDirectors’ remuneration and other benefits of directors in respect of the company and the group are given in Note 37 to the Financial Statements on page 191.

DonationsGiven below is the total donations made by the Company during the year. The Company does not make donation for political purposes.

Donations 2009Rs. Mn

Donations 2008Rs. Mn

1.95 1.64

Donations in excess of Rs 50,000 are disclosed in Note 05 on page 158 to the Financial Statements.



DirectorateThe names of the directors of the Bank during the period 01.01.2009 to 31.12.2009 are given below. The classification of directors into Executive, Non-Executive and Non-Executive Independent Directors is given against the names as per Colombo Stock Exchange listing requirements and Corporate Governance rules and Central Bank’s mandatory rules on Corporate Governance.

NAMEAPPOINTED WITH EFFECT

FROMREMARKS

I W Senanayake 16th March 1987 Appointed as Chairman on 1st October 2008, Non-Executive Director

M A Abeynaike 27th July 1995 Independent, Non-Executive Director

S G Wijesinha 14th October 1996 Appointed as Deputy Chairman on 1st October 2008, Non-Executive Director

D J Gunaratne 29th January 1998 Independent, Non-Executive Director

S Kelegama 01st January 1998 Independent, Non-Executive Director

L J K Hettiaratchi 10th December 1998 Non-Executive Director

J D Bandaranayake 17th July 2001 Independent, Non-Executive Director

E A Gunasekera 17th July 2001 Independent, Non-Executive Director

W M P L De Alwis 15th January 2002 Independent, Non-Executive Director

K D D Perera 01st August 2007 Non-Executive Director

G L H Premaratne 25th November 2008 Executive Director / Chief Executive Officer

M Y A Perera 25th November 2008 Executive Director / Chief Operating Officer

R Samaranayake 01st January 2009 Executive Director / Group Chief Financial Officer

All Non-Executive Directors of the Bank have given a signed declaration in terms of Colombo Stock Exchange’s, continuing listing rules clarifying their position either as an independent Director or Non-Independent Director. These have been tabled at the Board Meeting held in 28th January 2010.

The Bank is in compliance with Colombo Stock Exchange Corporate Governance Code and details are given on pages 86 to 97 of the Annual Report under Corporate Governance.

Recommendation for re-electionIn terms of Article No. 86 and 87 of the Articles of Association of the Company, Mr. J.D. Bandaranayake, Mr. D.J. Gunaratne, Dr. S. Kelegama and Mr. S.G. Wijesinha retire by rotation and being eligible offer themselves for re-election, on a unanimous recommendation of the Board of Directors.

Mr. E A Gunasekera who is above the age of 70 years come up for re-election, under the Companies Act No. 7 of 2007.

A special notice dated 5th February 2010 has been received on that day by the Company from Mr. W.A.D. De Silva a shareholder of the Company giving notice of his intention to move the following resolution with regard to the age limit of Mr E.A. Gunasekera under and in terms of Section 210 of the Companies Act.

“Resolved that the age limit of 70 years referred to in Section 210 of the Companies Act No. 07 of 2007 shall not apply to Mr. E.A. Gunasekera”

A special notice dated 5th February 2010 has been received on that day by the Company from a Mr. W.A.D. De Silva shareholder of the Company.

To approve under and in terms of Section 211 of the Companies Act the appointment of Mr. E.A. Gunasekera as a Director.

“Resolved that the appointment of Mr. E.A. Gunasekera who is 73 years of age is be and hereby approved in terms of Section 211 of the Companies Act No. 07 of 2007”.

The Board of Directors unanimously recommend that the shareholders approve his re-election subject to Section 211 of the Companies Act.

Financial Reports



Directors’ Interest In Contracts and DebenturesDirectors’ Interest in contracts of the company are disclosed on pages 130 to 132. The Directors have no direct or indirect interest or proposed contract other than those disclosed.

The Directors have at the meetings declared all material interests in contracts if any involving the company and have refrained in participating when decisions are taken.

Directors’ Interest in Shares and Debentures

ShareholdingNo. of Shares

As at 31.12.2009No. of Shares

As at 31.12.2008

I W Senanayke 276,266 276,266

M A Abeynaike 50,000 50,000

S G Wijesinha 621 621

D J Gunaratne - -

S Kelegama - -

L J K Hettiaratchi 2,100 2,100

J D Bandaranayake 7,777 7,777

E A Gunasekera 777 777

W M P L De Alwis 137,510 137,510

K D DPerera* Vallibel Leisure (Pvt) Ltd

*Vallibel Investments (Pvt) Ltd

3,412,7693,442,800

3,444,200

3,412,7693,442,800

(Registered as per permission of Monetary

Board)3,444,200

G L H Premaratne - -

M Y A Perera 775 775

R Samaranayake 516 516

DebenturesNo. of DebenturesAs at 31.12.2009

No. of DebenturesAs at 31.12.2008

K D D Perera 100,000 (2007/2012) 70,000 (2004/2009)100,000 (2007/2012)

Note : Mr. S.G. Wijesinha, Mr. M.A. Abeynaike and Mr. L.J.K. Hettiaratchi held jointly 47,025 number of shares as Trusteesfor shareholders who hold excess shares at the Bonus issue in 2004.

Directors’ Interest in Shares & Debentures of Subsidiaries:None of the Directors directly hold any debentures in any Subsidiary.

Messrs. L.J.K. Hettiaratchi, E.A. Gunasekera, G.L.H. Premaratne, M.Y.A. Perera and R. Samaranayake hold 01 share each in Sampath Information Technology Solutions Ltd, as subscribers. These shares are held in Trust for Sampath Bank PLC.

Messrs. I. W. Senanayake and M.Y.A. Perera hold 01 share each in S C Securities (Pvt) Ltd for and on behalf of Sampath Bank PLC.



AuditorsIn accordance with Companies Act No. 07 of 2007, a resolution proposing the re-appointment of M/s Ernst & Young, Chartered Accountants as Auditors to the Company is being proposed at the Annual General Meeting.

M/s Ernst & Young were paid a fee of Rs. 4.3 Mn as Auditors Fee for the final year ending 31.12.2009. (Rs. 4 Mn for 2008)

Auditors’ Interest and dealings with SubsidiariesFor acting as advisors on taxation matters M/s Ernst & Young were paid a fee of Rs. 0.51 Mn for the financial year ended 31.12.2009 (Rs 0.57 Mn for 2008).

M/s Ernst & Young who are the Bank’s auditors are also the auditors for the Bank’s subsidiary companies namely, Sampath Centre Limited, S C Securities (Private) Limited, Sampath Leasing and Factoring Limited and Sampath Information Technology Solutions Limited.

Review of the year’s performanceThe Message from Chairman and the Message from Chief Executive Officer on pages 14 and 18 respectively deals with the year’s performance, economic outlook and the future prospects.

Registered Office and Head OfficeThe registered office and head office of the Bank is situated at No. 110, Sir James Peiris Mawatha, Colombo 2.

Stated CapitalThe Stated Capital of the Bank is Rs. 1,581,653,635/-

The number of shares in issue of the Bank as at 31.12.2009 stood at 68,887,628. There was no new issue during the year.

No. of Shares in issue 2008

No. of shares in issue 2009

68,887,628 68,887,628

The details are given in Note 33 on page 188 to the Financial Statements

Debt CapitalSampath Bank has issued 15,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures listed on the Colombo Stock Exchange. These were issued at a par value of Rs. 100/- in May 2004 and were redeemed in 07 th June 2009.

Sampath Bank has issued 15,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are listed on the Colombo Stock Exchgange. The par value of a debenture is Rs. 100/- and will be redeemed in August 2012.

Sampath Bank has issued 5,500,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are unlisted. The par value of a debenture is Rs. 100/- and will be redeemed in December 2011 and June 2012.

The details are given in Note 32.1 on page 186 to the Financial Statements.

BondSampath Bank has issued a deep discounted zero coupon bond with a maturity value of Rs. 3,458,108,968 for 20 years. The present paid up value of this bond is Rs 1,052.5 Mn and this forms part of the Tier II Capital.

The details are given in Note 32.2 on page 187 to the Financial Statements.

ReservesTotal Reserves of the Bank stood at Rs 10,264.5 Mn as at 31.12.2009 and details of which are given in Note 34 on page 188 of the Annual Report.

Financial Reports



Vision and ValuesThe Bank’s Vision and Values are given on page 3 of the Report. The Bank conducts its business at a high level of ethical standard in achieving its Vision.

Internal ControlsThe Board of Directors has put in place an effective and comprehensive system of Internal Controls covering financial operations, compliance and risk management which are required to carry on the business of banking prudently and secure as far as possible the accuracy and reliability of records. A process of assessing the effectiveness of internal controls is also in place.

Solvency TestYour Directors have made an assessment of the Solvency of the Bank, immediately after the proposed dividend and confirm that the Bank satisfies the Solvency Test required by the Section 57 of Companies Act No. 07 of 2007.

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Bank to reflect a true and fair view of the state of its affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 07 of 2007 thereafter, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Banking Act No. 30 of 1988 and amendments thereto the Listing Rules of the Colombo Stock Exchange and the Mandatory Corporate Governance Code for Licensed Commercial Banks issued by Central Bank of Sri Lanka.

Corporate Governance for Licensed Commercial Banks in Sri LankaBanking Act, Direction 11 of 2007, mandates that all licensed Commercial Banks, to commence compliance with effect from 01st January 2008 and be fully compliant with provision of the Direction by 01st January 2009, except where extended compliance dates have been specially provided for in the Direction.

The Board of Directors wishes to state that, the Bank has commenced compliance with the Direction from 01st January 2008 as required by the Direction and with regard to requirements for which extended compliance dates have been provided, the Bank has taken steps to be compliant by such dates.

Corporate Governance Code of the Colombo Stock ExchangeThe Bank is in compliance with the above code wherever applicable.

DividendThe Directors recommend that a final dividend of Rs 6.25 per share on the 75,776,390 shares issued as the final dividend for the year ended 2009. The dividend to be paid out of profits, will be subject to withholding tax.

With this dividend payment, the Bank is fulfilling the deemed dividend requirement according to the provisions of Inland Revenue Act.

The details are given in Note 11 on page 161 to the Financial Statements.

Capital ExpenditureThe Bank incurred capital expenditure on the acquisition of premises and equipment during the financial year. The summarised details of capital expenditure in 2009 and 2008 are as follows:

Capital Expenditure

2009Rs. Mn

2008Rs. Mn

496.7 578.6

The details are given on page 142 to the Financial Statements.



Statutory PaymentsThe directors are satisfied to the best of their knowledge and belief, that statutory payments to all authorities have been paid up to date, on a timely basis.

ShareholdingThe number of registered shareholders of the company as at 31st December 2009 was 14,662 compared to 14,759 as at 31st December 2008. The Schedule indicating the shareholders’ analysis is on page 209.

Register of Directors & SecretariesThe Bank maintains a Register of Directors and Secretaries which contain the name, surname, former name (if any), residential address and business occupation of each member.

Board Sub CommitteesIn keeping with the principles of Corporate Governance, Transparency and Accountability, the Board has initiated the formation of the following Board Sub-Committees. These Sub-Committees have been re-constituted in keeping to the new mandatory code of Corporate Governance of the Central Bank of Sri Lanka.

Audit Committee Messrs M A Abeynaike (Chairman) , I W Senayayake, S G Wijesinha and L J K Hettiaratchi

Nominations Committee Messrs I. W. Senanayake (Chairman), M A Abeynaike, S G Wijesinha and D J Gunaratne

Credit Committee Messrs. E. A. Gunasekera (Chairman), M A Abeynaike, D J Gunaratne, L J K Hettiaratchi, G L H Premaratne, M Y A Perera and R Samaranayake

Chairman Mr. I.W. Senanayake resigned on 28 th May 2009 and Mr. S.G. Wijesinha was appointed as the Chairman of the Credit Committee. On 26 th November 2009 the Chairman Mr. S. G. Wijesinha stood down and Mr. E.A. Gunasekera was appointed as the Chairman of the Committee.

Human Resources & Remuneration Committee

Messrs J D Bandaranayake (Chairman), L J K Hettiaratchi, W M P L De Alwis, S G Wijesinha, G L H Premaratne and M Y A Perera

Strategic Planning Committee Messrs. I W Senanayake (Chairman), M A Abeynaike, S G Wijesinha, L J K Hettiaratchi, J D Bandaranayake, K D D Perera, G L H Premaratne and R Samaranayake

Board Risk Management Committee

Messrs. W M P L De Alwis (Chairman), D J Gunaratne, K D D Perera and L J K Hettiaratchi, G L H Premaratne, M Y A Perera and R Samaranayake

Shareholder Relations Committee

Messrs. D J Gunaratne (Chairman), E A Gunasekera and W M P L De Alwis

Our Team MembersThe Bank believes that its real potential rests on the strength and capabilities of its team members in a rapidly changing scenario. All efforts are directed at having a motivated and competent team in order to grow and achieve results as projected in the Strategic Plan and the Budget.

As at 31st December 2009, the number of employees on the payroll of the Bank was 2,388 as compared to 2,364 as at 31st December in 2008.

New Branches19 new Branches were opened during the year under review, bringing the total number of branches to 131 at the end of 2009.

Market Value of Freehold PropertiesAll freehold land and buildings of the Bank were last re-valued by professional valuers as at 31 st December 2007 and gains or losses brought in to Financial Statements, with the concurrence of Central Bank of Sri Lanka.

The Directors are of the opinion that the values stated are not in excess of the current market value of such properties.

The details are given in Note 24 on pages 180 to 182 to the Financial Statements.

Financial Reports



Capital CommitmentsCapital Commitments are shown in Note No 36 on page 190.

Value AddedValue Added details are shown on page 55.

Risk ManagementThe ongoing process at the Bank in identifying, evaluating and managing both banking and non banking risks is detailed on pages 100 to 113 of the Annual Report.

Provision for TaxationThe Bank’s policy is to provide for deferred taxation on timing differences based on the liability method. Provision for taxation has been complied at the rates given in Note 9 on pages 159 & 160 to the Financial Statements.

Annual General MeetingIn complying with the good governance practices, the Annual Report of the Company is dispatched as soon as possible after the end of the financial year and completion of the audit.

The Annual General Meeting will be held at the ‘Mihilaka Medura’ of BMICH, Colombo 07 on 30th March 2010. The notice of meeting is given on page 224 of the Annual Report.

Outstanding LitigationThe Directors in consultation with the Bank’s lawyers are of the view, that litigations currently pending against the Bank will not have material impact on the reported financial results of future operations of the Bank. Details of litigations pending against the Bank are given on page 190 of the Annual Report.

Events after the Balance Sheet DateConsolidation and splitting of sharesThe Board of Directors at its Board Meeting held on 28th January 2010 decided to propose to the shareholders, a share consolidation of ten (10) shares into one (1), and an immediate share sub-division of one (1) share into eleven (11) shares.

If approved by the shareholders at an Extra-ordinary General Meeting this would result in an increase in the number of shares in the hands of shareholders.

Change in CEO, Sampath Leasing and Factoring LtdMr. U Karunaratne, CEO of Sampath Leasing resigned with effect from 31st January 2010. Mr. Roshan Nanayakkara was appointed as CEO with effect form 9th February 2010.

Going ConcernThe Directors after making necessary inquiries and reviews including reviews of the Groups budget for the ensuing year, capital expenditure requirements, future prospects and risks and cash flows, are satisfied that the company and the Group have adequate resources to continue operations into the foreseeable future.

Environmental ProtectionThe Bank/Group has not knowingly engaged in any activity which is harmful to the environment.

For and on behalf of the Board of Directors.

I W Senanayake S G Wijesinha G L H Premaratne S SudarshanChairman Deputy Chairman Executive Director/CEO Company Secretary

17th February 2010Colombo, Sri Lanka



Note: Directors’ Interest Register (Changes during the year ending 31.12.2009)

I W Senanayake (Chairman)

Directorship in Subsidiary Companies:

Bank/Company Name Position held Date appointed Date Resigned

SC Securities (Pvt) Ltd Chairman 23.01.2001 -

Sampath Leasing and Factoring Ltd Chairman 22.10.2008 -

Sampath Centre Ltd Chairman 12.11.2008 -

Sampath Trade Services (Hongkong) Ltd Director 17.11.2008 -

Directorship/Officer/Trustee in other Entities:


American President Lines Lanka Ltd Chairman 14.05.1992 -

Germania Colombo (Pvt) Ltd Chairman 17.06.1982 -

Interfreight (Pvt) Ltd Chairman 17.07.1987 -

Comexco International (Pvt) Ltd Chairman 27.05.1996 -

Dynacom Engineering (Pvt) Ltd Chairman 01.09.1990 -

Regency Automobiles (Pvt) Ltd Chairman 23.05.1995 -

Eurocars (Pvt) Ltd Chairman 10.10.1996 -

Dynanet Ltd Chairman 21.04.1998 -

Interfreight Haulage Ltd Chairman 11.04.2001 -

IWS Logistics (Pvt) Ltd Chairman 30.03.1999 -

IWS Technologies Ltd Chairman 11.12.2002 -

ART Television Broadcasting Co (Pvt) Ltd Chairman 27.11.2007 -

IWS Aviation (Pvt) Ltd Chairman 05.12.2007 -

IWS Geographical Information Systems (Pvt) Ltd Chairman 19.08.2004 -

The Model Network (Pvt) Ltd Chairman 07.06.2006 -

IWS Engineering Services (Pvt) Ltd Chairman 29.06.2004 -

Dynatel Communications (Pvt) Ltd Chairman 18.04.1994 -

IWS Leisure (Pvt) Ltd Chairman 25.06.2004 -

Dish Lanka (Pvt) Ltd Chairman 07.07.2006 -

Universal Auto Assembling (Pvt) Ltd Chairman 04.10.2007 -

Your Foods Limited Chairman 12.07.2007 -

Interpack (Pvt) Ltd Chairman 27.09.1988 -

I W S Holdings (Pvt) Ltd Chairman 28.06.1994 -

Precision Motors (Pvt) Ltd Chairman 02.05.1995 -

Dynacom Electronics (Pvt) Ltd Chairman 27.05.1996 -

Financial Reports



M A Abeynaike



Sampath Surakum Ltd Chairman 14.11.2008 03.11.2009(Company amalgamated)

Sampath Centre Ltd Director 31.07.1996 -



Regency Teas (Pvt) Ltd Chairman 1997 -

Asia Pacific Investments (Pvt) Ltd Chairman 30.11.1994 -

S G Wijesinha (Deputy Chairman)



Sampath Leasing & Factoring Ltd Director 22.10.2008 -




Dankotuwa Porcelain PLC Chairman/ Managing Director 01.07.2005 -

National Chamber of Commerce of Sri Lanka

Vice President 31.01.2009 -

D J Gunaratne

Substantial Interest in other entities other than Banks

Company Name Position held Date appointed Date Resigned

Bibile Trading & Forwarding Agency

Chairman 03.01.2005 -

United Eastern (Pvt) Ltd Chairman 05.01.1990 -

Ascot Holdings PLC Director 17.12.2009 -

Dr S Kelegama



Sampath Surekum Ltd Director 11.11.1999 03.11.2009(company amalgamated)





Institute of Policy Studies Executive Director 03.02.1995 -

Singer (Sri Lanka) PLC Director 01.06.2006 -

National Enterprise Development Authority

Director 08.09.2006 -

Singer Finance Ltd Director 13.11.2008 -

Regnis Lanka PLC Director 21.08.2008 -

L J K Hettiaratchi



Sampath Surakum Ltd Director 11.11.1999 03.11.2009(company amalgamated)

Sampath Leasing and Factoring Ltd

Director 03.03.2005 -

Sampath Information Technology Solutions Ltd

Chairman 03.11.2006 -


Bank/Company Name/Association Position held Date Resigned

Institute of Technology University of Moratuwa Member Board of Management -

University of Moratuwa Member of the Council -

Ceylon Buddhist Congress Member -

World Fellowship of Buddhists Member -

German Dharmaduta Society Trustee -

Bodu Sahana Aramudala(Charity for Buddhist Activities)

Hony. Secretary -

Organisation of Professional Association Trustee -

National Education Committee Member -


Company Name Position held

Mackply (Pvt) Ltd Director

L K Domain Ltd Director

South Asia Partnership Chairman

Ingrin Institute of Printing and Graphics Director

Financial Reports



J D Bandaranayake


Bank/Company Name Position held Date Appointed Date Resigned

Ceylon Tobacco Co PLC Chaiman 25.03.2008Director since 01.03.1990

-

Hayleys PLC Director 01.07.2004 -

Coca Cola Beverages Sri Lanka PLC Director 19.01.2000 -

Finlays Colombo PLC Director 01.07.2002 -

West Coast Power (Pvt) Ltd Director 14.05.2007 -

Union Assurance PLC Director 01.04.2007 15.02.2010

Board of Investments of Sri Lanka Director 30.05.2007 -

E A Gunasekera



SC Securities (Pvt) Ltd Director 04.09.2001 -

Sampath Information Technology Solutions Ltd Director 03.11.2006 -



Buddhist Activities Fund Trustee 21.04.2006 -

W M P L De Alwis



Junior Chamber Sri Lanka National President 01.01.1997 31.12.1997

Junior Chamber Training Institute Chairman 01.01.1998 31.12.1998

Consumer Affairs Authority Member - -

Ministry of Export Development and International Trade Advisor to the Hon. Minister From May 2007 -

Colombo Institute for Advanced Study of Society & Culture Director - -

K D D Perera



Board of Investment of Sri Lanka (BOI) Chairman/Director General 17.04.2007 -

Sri Lanka Export Development Board (SLEDB) Member of the Board 01.06.2007 -

Strategic Enterprises Management Agency (SEMA) Member of the Board 24.04.2006 -





Vallibel Holdings (Pvt) Ltd Chairman

Vallibel Lanka (Pvt) Ltd Chairman

Vallibel Leisure (Pvt) Ltd Chairman

Vallibel Investments (Pvt) Ltd Chairman

Vallibel Marine Management (Pvt) Ltd Chairman

Anuradha Traders (Pvt) Ltd Chairman

Vallibel Power Ltd Chairman

Vallibel Power Erathna PLC Chairman

Vallibel Finance Ltd Chairman

Vallibel Exports (Pvt) Ltd Chairman

Vallibel Technologies (Pvt) Ltd Chairman

Vallibel Plantations (Pvt) Ltd Chairman

Alternate Power Systems (Pvt) Ltd Chairman

The Fortress Resorts PLC Chairman

Star Tower Developers (Pvt) Ltd Chairman

Country Energy (Pvt) Ltd Chairman

Royal Ceremics Lanka PLC Deputy Chairman

LB Finance PLC Deputy Chairman

Amaya Leisure PLC Deputy Chairman


Asian Alliance Insurance PLC Director

Hayleys PLC Director

Hayleys – MGT Knitting Mills PLC Director

Haycarb PLC Director

Royal Porcelain (Pvt) Ltd Director

Royal Ceramics Distributors (Pvt) Ltd Director

Rocell Bathware Ltd Director

Rocell Roofing Ltd Director

Rocell Ceramics Ltd Director

Culture Club Resorts (Pvt) Ltd Director

Kandyan Resorts (Pvt) Ltd Director

Connaissance Air Travels (Pvt) Ltd Director

CDC Convention (Pvt) Ltd Director

Connaissance Hotel Management (Pvt) Ltd

Director

Hotel Reefcomber PLC Director

The Beach Resorts Ltd Director

La Fortresse (Pvt) Ltd Director

G L H Premaratne



Sampath Surakum Ltd Director 14.11.2008 03.11.2009(Company amalgamated)

Sampath Leasing and Factoring Ltd

Director 22.10.2008 -

Sampath Trade Services (HongKong) Ltd

Director 17.11.2008 -

SC Securities (Pvt) Ltd Director 01.12.2008 26.05.2009


Director 07.11.2008 -

Financial Reports




Asiri Hospitals PLC Director

Asiri Surgical Hospitals PLC Director

Asiri Central Hospitals PLC Director

Softlogic Group of Companies Director

M Y A Perera




SC Securities (Pvt) Ltd Director 01.12.2008 -


Director 05.03.2009 -



Credit Information Bureau of Sri Lanka

Director

Lanka Clear (Pvt) Ltd Director

Lanka Financial Services Bureau Ltd Director

R Samaranayake



Sampath Surakum LtdDirector 14.10.2008

03.11.2009(Company amalgamated)

Directors’ interest in Contracts with the CompanyRelated party disclosures as required by the Sri Lanka Accounting Standard No.36 on Related Party Disclosures (Revised 2005) is detailed in Note 37 on pages 191 to 193 to the Financial Statements. In addition, the Bank carries out transactions in the ordinary course of the business at an arm’s length basis with entities where the Chairman or a Director of the Bank is the Chairman or a Director of such entities as detailed below.

Also this complies with the requirements of Section 168 of the Companies Act No 7 of 2007 and Directions issued under Section 47 (3),(4),(5) & (6) of the Banking Act No 30 of 1988.



Company Relationship Nature of Current Limit Balance Balance Facility Outstanding Outstanding As at 31.12.2009 As at 31.12.2008 (Rs. Mn) (Rs. Mn) (Rs. Mn)

Mr.J. D. Bandaranayake Ceylon Tobacco Co. PLC Chairman Loans & Advances 35.000 17.56 Cr 2.844 Mr.S. G. Wijesinha Dankotuwa Porcelain PLC Chairman Loans & Advances 94.870 95.573 44.550 Off Balance Sheet Accommodations 50.000 24.500 - Sampath Leasing & Factoring Director Loans & Advances 884.800 507.890 160.890 Off Balance Sheet Accommodations 1,000.000 376.790 1.750 Sampath Centre Ltd Director Loans & Advances 170.000 138.600 - Dr. S. Kelegama Singer Sri Lanka PLC Director Loans & Advances 300.000 267.060 13.040 Off Balance Sheet Accommodations 150.000 48.100 18.920 Singer Finance Ltd Director Loans & Advances 25.000 1.14 Cr - Regnis Lanka PLC Director Loans & Advances 35.000 2.970 - Off Balance Sheet Accommodations 50.000 41.740 - Mr. K. D. D. Perera Royal Ceramics Lanka PLC Director Loans & Advances - - 0.028 cr Off Balance Sheet Accommodations - - 3.050 Asian Alliance Insurance PLC Director Loans & Advances 15.000 8.070 4.680 Off Balance Sheet Accommodations - 0.300 0.300 L B Finance Ltd Director Loans & Advances - - 34.375 Mr. D. J. Gunarathne Uni East Agencies (Pvt ) Ltd Chairman Loans & Advances 0.500 0.433 0.048 Mr. I. W. Senanayake Sampath Leasing & Factoring Chairman Loans & Advances 884.800 507.890 160.890 Off Balance Sheet Accommodations 1,000.000 376.790 1.750 SC Securities (Pvt) Ltd Chairman Loans & Advances 59.500 31.300 0.035 Cr Off Balance Sheet Accommodations 1.750 1.750 1.750 Sampath Centre Ltd Chairman Loans & Advances 170.000 138.600 - Mr. E. A. Gunasekara SC Securities (Pvt) Ltd Director Loans & Advances 59.500 31.300 0.035 Cr Off Balance Sheet Accommodations 1.750 1.750 1.750 Sampath Information Technology Solutions (Pvt) Ltd Director Loans & Advances 9.940 9.270 3.395 Mr. L. J. K. Hettiarachchi Sampath Leasing & Factoring Director Loans & Advances 884.800 507.890 160.890 Off Balance Sheet Accommodations 1,000.000 376.790 1.750 Sampath Information Technology Solutions (pvt) Ltd Chairman Loans & Advances 9.940 9.270 3.395


Financial Reports


Company Relationship Nature of Current Limit Balance Balance Facility Outstanding Outstanding As at 31.12.2009 As at 31.12.2008 (Rs. Mn) (Rs. Mn) (Rs. Mn)

Mr. G. L. H. Premaratna Sampath Leasing & Factoring Ltd Director Loans & Advances 884.800 507.890 160.890 Off Balance Sheet Accommodations 1,000.000 376.790 1.750 Sampath Information Technology Solutions (Pvt) Ltd Director Loans & Advances 9.940 9.270 3.395 Mr. M. Y. A. Perera SC Securities (Pvt) Ltd Director Loans & Advances 59.500 31.300 0.035 Cr Off Balance Sheet Accommodations 1.750 1.750 1.750 Sampath Centre Ltd Director Loans & Advances 170.000 138.600 - Sampath Information Technology Solutions (Pvt) Ltd Director Loans & Advances 9.940 9.270 3.395 Mr. M. A. Abeynaike Sampath Centre Ltd Director Loans & Advances 170.000 138.600 -

Fully secured facilities in the form of International Master (credit) and VISA (Web) Cards were made available to the following directors during the year.

Name of the Director Credit Limit Balances as at Security Security Credit Limit Balances as at 2009 31.12.2009 Type Value 2008 31.12.2008 (Rs. Mn) (Rs. Mn) (Rs/USD. Mn) (Rs. Mn) (Rs. Mn)

Mr. S.G. Wijesinha 0.200 0.127 Tr. Bills Rs 0.290 0.200 0.064Mr. E.A. Gunasekera 0.050 - Fixed Deposits Rs 0.200 0.050 -Mr. J.D. Bandaranayake 1.000 - Surety from CTC Rs 1.000 1.000 -Mr. W.M.P.L. De Alwis 0.500 - Fixed Deposits Rs 0.500 0.500 -Mr. G.L.H. Premaratne 0.525 0.094 - - 0.500 -Mr. M.Y.A. Perera 0.500 0.245 - - 0.490 0.048Mr. R. Samaranayake 0.500 0.002 - - - -

The borrowings of Directors as at 31st December 2009 are as follows:

Name of Director Limit Balances Security Limit Balances as at as at 2009 31.12.2009 2008 31.12.2008 (Rs. Mn) (Rs. Mn) (Rs. Mn) (Rs. Mn)

Mr. L.J.K. Hettiaratchi 0.623 0.130 Cr R F C balance 0.623 0.347 & F DMr. S.G. Wijesinha 0.800 0.130 Cr R F C balance 0.800 0.05 Cr



Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement

Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement

The Financial Statement of the Sampath Bank Group are prepared in compliance with the requirements of the Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka, the requirements of the Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act No 15 of 1995, Banking Act No 30 of 1988 and amendments thereto, the Listing Rules of the Colombo Stock Exchange and the Code of and the Code of Best Practice on Corporate Governance issued jointly by The Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

The Accounting Policies are consistently applied by the Group. The Significant accounting policies and estimates that involve a high degree of judgement and complexity were discussed with the Bank’s external auditors and Audit Committee. Comparative information has been reclassified wherever necessary to comply with the current presentation.

The Board of Directors and the management of the Bank accept responsibility for the integrity and objectivity of these Financial Statements. The estimates and judgments relating to the Financial Statements were made on a prudent and reasonable basis, in order that the Financial Statements reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company’s state of affairs. To ensure this, the Bank has taken proper and sufficient care in installing a system of internal controls and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis. Our Internal Auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Bank were consistently followed. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal controls and accounting.

The Financial Statements of the Group were audited by M/s. Ernst & Young, Chartered Accountants, and their report is given on page 139 of this Annual Report. The Audit Committee of the Bank meets periodically with the Internal Auditors and the External Auditors to review the manner in which these auditors are performing their responsibilities and to discuss auditing, internal control and financial reporting issues. To ensure complete independence, the External Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to discuss any matter of substance.

The Audit Committee pre-approves the audit and non-audit services provided by M/s. Ernst & Young, in order to ensure that the provision of such services does not impair M/s. Ernst & Young’s independence.

It is also declared and confirmed that the Bank has complied with and ensured compliance by the Auditor with the guidelines for the audit of listed companies where mandatory compliance is required. It is further confirmed that all the other guidelines have been complied with.

We confirm that the Bank and all its subsidiaries have complied with all applicable laws and regulations and guidelines and that there are no material litigations against the Group other than those disclosed in Note No 36.2 on page 190 of the Financial Statements in this Annual Report.

G L H PremaratneExecutive Director /Chief Executive Officer

R SamaranayakeExecutive Director/ Group Chief Financial Officer 17th February 2010Colombo, Sri Lanka

Financial Reports


Directors’ Responsibility for Financial Reporting

The responsibility of the Directors in relation to the Financial Statements of the Bank and its subsidiaries prepared in accordance with the provision of the Companies Act No.07 of 2007 is set out in the following statements.

Your Directors are aware that in addition to being a guardian for the shareholders, they also have a duty towards the depositors and other customers of the bank, specially as the depositors funds are far in excess of the shareholder funds.

The Directors are personally liable if they have not performed their expected role. As per the provisions of the Companies Act No.07 of 2007, the Directors are required to prepare Financial Statements for each financial year and place them before a general meeting.

The Financial Statements comprise of;• The Balance Sheet as at 31st December 2009• The Income Statement

These documents present true and fair view of the Company and its subsidiaries, in conformity with the requirements of the Companies Act.

The accounts are prepared under the supervision of the Group Chief Financial Officer who is an Executive Director of the Bank. The Accounts are circulated and reviewed by the Audit Committee and Board of Directors.

The Directors are required to ensure that, in preparing these Financial Statements;

(i) The appropriate accounting policies have been selected and applied in a consistent manner and material departures, if any have bee disclosed and explained

(ii) Judgments and estimates have been made which are reasonable and prudent; and

(iii) All applicable Accounting standards, as relevant, have been followed.

Financial Statements prepared and presented in the report are consistent with the underlying books of Account and are in conformity with the requirements of Sri Lanka Accounting Standards, Companies Act No.07 of 2007, Sri Lanka Accounting and Auditing Standers Act No.15 of 1995, Banking Act No.03 of 1988 and amendments thereto and the continuing Listing Rules of the Colombo Stock Exchange.

The Audit Committee of the Bank reviews the quarterly account and later recommends them to the Board prior to release of these Financial Statements. The Annual Report of the Board of Directors on the State of Affairs of the Company gives a synopsis of the Company and the Group.

Your Directors have taken reasonable steps open to them to safeguard the assets of the Bank while taking steps to prevent and detect frauds if any and any other irregularities. For this purpose your Directors have

Directors’ Responsibility for Financial Reporting

instituted an effective and comprehensive system of internal control comprising internal audit, internal check, financial and other controls in order to carry on the operations in an orderly manner, safeguard the assets and secure as far as practicable, the accuracy and reliability of the records.

The setting up of the Board Sub-Committee on Integrated Risk Management (Board Risk Management Committee) which is looking at all areas to mitigate the Risks of the Bank, keeping in line with provisions of the Central Bank of Sri Lanka, Corporate Governance Codes issued by the Central Bank of Sri Lanka and the Colombo Stock Exchange.

The Bank’s Auditors, M/s. Ernst & Young carries out reviews and sample checks on the system of internal control and recommend improvements to Control Systems as they consider appropriate and also to the Board Risk Management Committee of the Board independently.

M/s Ernst & Young, Chartered Accountants, the Auditors of the Company have examined the Financial Statements made available to them together with all financial records, related data, minutes of shareholders’ meetings, Directors’ Meetings, Audit Committee Meetings and other Board Sub-committee meetings and express their opinion as reported by them in the Report on Page 139.

COMPLIANCE REPORTThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes on behalf of and in respect of its Team Members and the Team Members of its subsidiaries, and all other known statutory dues as were due and payable by the Company and its subsidiaries at Balance Sheet date have been paid or where relevant, provided for.

The Directors are of the view that they have discharged their responsibilities as set out in the above statement.

By order of the Board,

S SudarshanCompany Secretary17th February 2010Colombo, Sri Lanka


Risk Management Committee Report

Risk Management Committee Report

At Sampath Bank, the Board is primarily responsible for risk management initiatives and has delegated its authority to the Board Risk Management Committee (BRMC) to manage the risk management function of the bank in accordance with the Mandatory code of corporate governance issued by the Central Bank of Sri Lanka.

A detailed approach to the management of key risk process has been dealt with by the Chief Risk and Compliance Officer on pages 100 to 113 of this report.

Resulting from the recommendations of the consultancy project done in 2008 on risk management, the regulatory requirements by the Central Bank of Sri Lanka, Basel II compliance as well as International best practices, the Bank has realigned its risk organisational responsibilities during the year under review.

The centralised Risk Management function which oversees the risk exposures arising from the Bank’s business activities and segregated from the business operating units is headed by the Chief Risk and Compliance Officer and reports directly to the BRMC.

The BRMC, consists of Four Non - Executive directors, including the undersigned as the Chairman, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Risk and Compliance Officer and Key Management Personnel supervising broad risk categories. The committee works closely with the key management personnel and makes decisions on behalf of the Board within the delegated authority levels and responsibilities assigned to the committee. BRMC MeetingsMeetings are held by the BRMC on a monthly basis to assess all types of risk management including the business continuity plan. Seven meetings were held during 2009 and minutes of the meetings are recorded by the Secretary to the Board of Directors and circulated to the committee members and Board of Directors.

ResponsibilitiesThe committee assesses all risks i.e. credit, market, liquidity, operational and strategic risks to the Bank on a monthly basis. The Risk Management Unit coordinates with all relevant business units and provide the relevant information through various pre approved risk indicators. The committee recommends and if necessary takes any corrective action promptly to mitigate the effects of specific risks if they are considered at levels beyond the prudent levels decided

by the Committee in accordance with the Bank’s policies and regulatory requirements.

A report is submitted to the Board after each meeting seeking the concurrence as and where necessary.

The committee also oversees the compliance function to ensure that the bank is fully compliant with the laws, regulations, regulatory guidelines, internal controls and approved policies for all areas of business operations. The dedicated compliance officer carries out the compliance function and report to the committee regularly.

Key risk management initiatives/decisions affected by the BRMC in 2009 are :

• Development of risk management strategic plan for 2009-2012.• Reviewing and restructuring of operational risk and credit risk

steering committees.• The appointment of market risk steering committee.• Review and approval of market risk, credit risk, anti money

laundering and whistle blowing policies.• Approval of product policy, compliance policy and outsourcing

policy.• Risk review of Insurance arrangements.• Setting up of outsourcing committee.• Constant review of gap analysis and recommendations of

KPMG, and implementing suitable processes to put in place a comprehensive integrated risk management function.

• Monthly review of operational loss data, to identify any weak processes and controls and recommend corrective action accordingly.

• Monthly review of the advanced portfolio to evaluate the composition, trends in portfolio behavior to be in line with the bank’s strategic objectives.

The committee maintains continuous awareness of any changes in the Bank’s risk profile to ensure that the Bank’s business activities are in line with the overall risk strategy.

W M P L De AlwisChairmanRisk Management Committee17th February 2010Colombo, Sri Lanka

Financial Reports


Audit Committee Report

Composition of the Audit CommitteeThe Audit Committee comprises of four non-executive directors. The Chairman of the Audit Committee is a Senior Chartered Accountant.The members of the Audit Committee are:

Mr. M A Abeynaike (Chairman)Mr. I W SenanayakeMr. S G wijesinhaMr. L J K Hettiaratchi

The Executive Director/Chief Executive Officer, Executive Director/Chief Operating Officer, Executive Director/Group Chief Financial Officer, Deputy General Manager – Finance & Planning, Head of Internal Audit, Manager-Systems Audit and representatives of the External Auditors were present at the meetings held by invitation. The Company Secretary functions as the Secretary of the Committee.

MeetingsThe committee held 06 meetings during the year under review. The attendance of the members of these meetings is given on page 98 of the Annual Report. The proceedings of the Audit committee are regularly reported to the Board of Directors.

Terms of Reference The functions of the committee are regulated by the rules governing the Audit Committee by the Banking Act, Colombo Stock Exchange, the Institute of Chartered Accountants of Sri Lanka, the Securities and Exchange Commission and the guidelines issued by the Central Bank of Sri Lanka. The objectives and responsibilities of the Audit Committee as per the terms of reference approved by the Board of Directors, which are in accordance with the above rules are as follows:

Financial Statements(a) To review the half-year and annual financial statements before

submission to the Board, focusing particularly on :

(i) Any changes in accounting policies and practices(ii) Major judgmental areas(iii) Significant adjustments resulting from the audit(iv) The going concern assumption(v) Compliance with accounting standards(vi) Compliance with stock exchange and other legal requirements

External Audit(b) To discuss problems and reservations arising from the interim and

final audits and any matters the auditor may wish to discuss (in the absence of management where necessary);

(c) To discuss with the external auditor before the audit commences, the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved;

(d) To review the external auditor’s Management Letter and management’s responses;

(e) To consider the appointment of the external auditor, the audit fee, and any questions on resignation or dismissal;

Internal Controls(f) To review the Company’s statement on internal

control systems prior to endorsement by the Board;

Internal Audit(g) To review the internal audit programme, to ensure

co-ordination between the internal and external auditors and ensure that the internal audit function is adequately resourced and has the appropriate standing with the Company;

(h) To consider the major findings from internal investigations and management’s responses;

Summary of ActivitiesDuring the year under review the Committee discharged its duties by

Financial Statements(a) Review of the financial statements ( including

quarterly interim statements ) prior to publication to ensure compliance with statutory provisions, accounting standards and accounting policies which are consistently applied

(b) Review of the financial reporting system to ensure the accuracy and timeliness of the financial statements produced

External Audit(c) Review of the Audit Plan submitted by the external

auditors prior to commencement of the audit

(d) Review of the management letter issued by the external auditors on completion of the audit, to ensure that their recommendations are implemented



(e) Review of all fees paid to the external auditors prior to payment

Internal Controls(f) Review of the effectiveness of the internal control

procedures, accounting systems, credit monitoring procedures, provisioning policies and business risk systems of the Bank.

Internal Audit (g) Review of the Internal Audit / Systems Audit

programmes to ensure that implementation of internal control and risk management systems is monitored and their adequacy is assessed on a continuous basis

(h) Review of Internal Audit / Systems Audit reportand monitoring implementation of

recommendations made therein

(I) Review of the resources available and the organisational framework for the effective performance of the Internal Audit function

Good GovernanceIn furtherance of the Bank’s continuous commitment to maintain high standards of Corporate Governance, Bank’s ‘ Whistle Blowing Policy’ is intended to serve as a channel of managing corporate fraud risks.

The policy encourages any team member who has a legitimate concern on an existing or potential ‘wrong doing’ at work to raise his concern to the notice of the Audit Committee of the Board.

At all times the protection of the identity of the employee making the disclosure is assured.

ConclusionThe Committee reports to the Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

The Committee has recommended to the Board of Directors that Messrs Ernst & Young be reappointed as Auditors for the year ending 31st December 2010 subject to the approval of the shareholders at the Annual General Meeting. The Committee will recommend the fees payable to the Auditors for approval by the Board.

Mohan A AbeynaikeChairmanAudit Committee17th February 2010Colombo, Sri Lanka


Financial Reports


Human Resources & Remuneration Committee Report

The committee is represented by four Non-Executive Directors headed by Mr. J D Bandaranayake as the Chairman. The other members are Mr. S G Wijesinha, Mr. L K J Hettiarachi, and Mr. W M P L De Alwis. The Chief Executive Officer as well as other executive staff attend meetings by invitation and assist in their deliberations by providing relevant information and participating in the analysis of information, except when their own compensation packages or other matters relating to them are reviewed.

The principal function of the committee continues to be the determination of salary policy relating to all staff including directors, the Chief Executive Officer and key management personnel of the bank. This is one of the more important functions as set out in the governance code applicable to commercial banks determined by the Central Bank of Sri Lanka.

In the review of remuneration, data on levels of pay among competitor banks, as well as competing organisation of the market place prepared by independent specialists are considered.

The other specific function specified in the governance code, such as setting goals and targets and evaluating the performance of key personnel and relating some of the remuneration and benefits to performance are the other matters that have been receiving the consideration of this committee. It has been acknowledged that greater emphasis on a performance culture across the Bank is necessary to set the stage for the achievement of this requirement specified in the code of governance.

The committee in its deliberation will underpin the overall philosophy of ensuring that compensation decisions are consistent and aligned with the performance of the bank. The compensation philosophy is intended to attract and retain qualified and competent personnel that blend into the culture of the bank.

As highlighted in the previous year’s report, the committee will increasingly address the softer issues of motivation and spirit, leading to the creation of a culture which will provide the Bank a distinct competitive advantage. To do so, issues such as productivity, continuous improvement, elimination of waste, a culture that supports highest standards of service will be targeted. In order to successfully achieve these demanding goals, organisational capability will be built so that change can be introduced with full participation of involvement of the stakeholder groups including importantly the employees of the bank. The Bank’s rich history of functioning as one team with the requisite skills and spirit to support the strategic goals of the Bank is considered a vital ingredient to succeed in this endeavor.

Similarly in the adoption of appropriate HR practices, the committee will draw on rich experiences and good practices from elsewhere.

The committee usually targets to meet quarterly to review the compensation structures, salary movements, recruitment and retention of talent and the cultural aspects which are vital to position the Bank as a lead Bank in the country. The committee has met on eight occasions during the year under review.

J D BandaranayakeChairmanHuman Resources & Remuneration Committee17th February, 2010Colombo, Sri Lanka

Human Resources & Remuneration Committee Report


Auditors’ Report

INDEPENDENT AUDITORS’ REPORT TO THESHAREHOLDERS OF SAMPATH BANK PLC

REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Sampath Bank PLC (‘Bank’), the consolidated financial statements of the Bank and its subsidiaries which comprise the balance sheets as at 31 December 2009, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTSManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes; designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

SCOPE OF AUDIT AND BASIS OF OPINIONOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OPINIONIn our opinion, so far as appears from our examination, the Bank maintained proper accounting records for the year ended 31 December 2009 and the financial statements give a true and fair view of the Bank’s state of affairs as at 31 December 2009 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 December 2009 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Bank.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIn our opinion, these financial statements also comply with the requirements of Sections 151 (2) and 153 (2) to 153 (7) of the Companies Act No.07 of 2007.

Ernst & YoungChartered Accountants19th February, 2010Colombo, Sri Lanka

Auditors’ Report

Financial Reports


Income StatementIncome Statement

Bank GroupFor the year ended 31st December Page No Note 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Income 157 01 25,212,896 22,242,543 13.4 25,560,156 23,068,765 10.8Interest Income 157 02 20,969,778 19,451,026 7.8 21,345,030 20,103,056 6.2Less : Interest Expenses 157 03 13,164,599 12,801,392 2.8 13,472,178 13,501,604 (0.2)

Net Interest Income 7,805,179 6,649,634 17.4 7,872,852 6,601,452 19.3Foreign Exchange Profit 157 02.1 774,489 647,211 19.7 774,489 647,211 19.7Fees & Commission Income 157 02.2 1,205,529 1,355,049 (11.0) 1,205,529 1,355,049 (11.0)Other Income 158 04 2,263,099 789,257 186.7 2,235,107 963,449 132.0Operating Income 12,048,297 9,441,151 27.6 12,087,978 9,567,161 26.3

Operating Expenses 158 05Personnel Costs 2,194,166 1,952,880 12.4 2,254,817 2,018,447 11.7Premises, Equipment & Establishment Expenses 1,802,934 1,675,177 7.6 1,773,373 1,665,538 6.5Provision for Retirement Benefits 158 06 467,892 185,573 152.1 469,195 187,723 149.9Loan Losses and Provisions - Specific 159 07 324,011 595,360 (45.6) 428,405 632,571 (32.3) - General 159 07 (39,397) 213,670 (118.4) (39,397) 213,670 (118.4)Diminution/ (Appreciation) in Value of Investments 159 08 917,508 442,987 107.1 917,508 410,448 123.5Other Overhead Expenses 2,404,966 1,811,446 32.8 2,439,540 1,832,145 33.2Operating Expenses 8,072,080 6,877,093 17.4 8,243,442 6,960,542 18.4

Operating Profit before Provision for Taxation and Associate Company’s Profit 3,976,217 2,564,058 55.1 3,844,536 2,606,619 47.5Add/(Less): Share of Profit before Tax of Associate Company - - - 160,391 180,802 (11.3)Profit before Tax 3,976,217 2,564,058 55.1 4,004,927 2,787,421 43.7Less : Provision for Taxation 159 09 1,877,910 1,150,146 63.3 1,921,170 1,262,412 52.2Profit after Tax 2,098,307 1,413,912 48.4 2,083,756 1,525,009 36.6

Attributable to:Equity Holders of the Parent 2,098,307 1,413,912 48.4 2,072,483 1,494,770 38.6Minority Interest - - - 11,273 30,239 (62.7)Profit for the year 2,098,307 1,413,912 48.4 2,083,756 1,525,009 36.6

Earnings per Share - Basic / Diluted (Rs.) 161 10 30.08 21.70 38.6Dividend per Share - Gross 161 11 Final Proposed 6.25 4.00 6.25 4.00Dividend per Share - Net 161 11 Final Proposed 5.78 3.60 5.78 3.60

The Accounting Policies and the Notes from pages 145 to 201 form an integral part of these Financial Statements.


Balance SheetBalance Sheet

Bank GroupAs at 31st December Page No Note 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

AssetsCash and Short Term Funds 162 12 3,395,087 2,829,704 20.0 3,402,599 2,830,254 20.2Balance with Central Bank of Sri Lanka 162 13 7,397,703 6,878,897 7.5 7,397,703 6,879,379 7.5Government of Sri Lanka Treasury Bills & Bonds 162 14 31,767,817 20,281,933 56.6 31,797,446 20,741,036 53.3Commercial Papers 459,389 - 100.0 459,389 - 100.0Dealing Securities 164 15 276,207 1,223,594 (77.4) 276,207 1,223,594 (77.4)Placements and Loans with Other Banks 166 16 2,473,108 4,093,262 (39.6) 2,473,108 4,093,262 (39.6)Investment Securities 166 17 7,264,149 5,397,180 34.6 7,451,439 5,397,236 38.1Securities Purchased Under Re-sale Agreements 169 18 2,676,615 - 100.0 2,676,615 2,871 93,141.2Loans and Advances 19 Bills of Exchange 170 19.1 2,874,909 2,658,106 8.2 2,874,909 2,658,106 8.2 Loans and Advances 170 19.2 86,817,992 81,633,694 6.4 86,102,302 81,428,608 5.7 Lease Receivable within One Year 170 19.3.1 1,745,466 2,130,193 (18.1) 2,401,937 3,172,838 (24.3) Lease Receivable from One to Five Years 170 19.3.2 1,711,060 3,244,268 (47.3) 2,597,405 4,508,606 (42.4) Lease Receivable after Five Years 171 19.3.3 27,305 46,274 (41.0) 27,305 46,914 (41.8)Investment in Associate Company 176 20.1 - 146,252 (100.0) - 364,060 (100.0)Investment in Subsidiary Companies 177 20.2 991,626 823,626 20.4 - - -Interest and Fees Receivable 178 21 1,854,370 2,301,518 (19.4) 1,854,370 2,324,671 (20.2)Other Assets 178 22 937,440 1,452,206 (35.4) 1,394,925 1,834,167 (23.9)Goodwill and Other Intangible Assets 178 23 71,171 109,093 (34.8) 82,630 126,958 (34.9)Property, Plant and Equipment 179 24 3,420,483 3,288,747 4.0 4,731,762 4,646,353 1.8Total Assets 156,161,897 138,538,550 12.7 158,002,050 142,278,913 11.1

LiabilitiesDeposits 183 25 125,689,890 106,931,481 17.5 125,573,183 106,891,678 17.5Unclaimed Dividends 29,880 32,004 (6.6) 29,880 32,004 (6.6)Refinance Borrowings 183 26 4,819,327 4,592,071 4.9 4,819,327 4,592,071 4.9Other Borrowings 184 27 871,860 3,828,211 (77.2) 1,542,880 6,150,875 (74.9)Securities Sold Under Re-purchase Agreements 184 28 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4Other Liabilities 184 29 5,854,855 5,515,950 6.1 6,277,503 5,781,638 8.6Taxation 186 30 578,757 670,104 (13.6) 583,664 668,760 (12.7)Deferred Taxation 186 31 481,199 254,941 88.7 478,636 268,703 78.1Other Liabilities Evidenced by Paper 186 32 3,102,468 4,514,214 (31.3) 3,102,468 4,514,214 (31.3)Total Liabilities 144,315,716 128,762,221 12.1 145,295,022 131,339,496 10.6

Shareholders’ FundsStated Capital 188 33 1,581,654 1,581,654 - 1,581,654 1,581,654 -Reserves 34Capital ReservesStatutory / Risk Reserve Funds 188 34.1 471,013 407,731 15.5 471,301 422,281 11.6Other Capital Reserves 189 34.2 1,152,615 1,157,576 (0.4) 1,768,546 1,755,392 0.7Revenue Reserves 189 34.3 8,640,899 6,629,368 30.3 8,790,300 7,060,500 24.5 11,846,181 9,776,329 21.2 12,611,800 10,819,827 16.6Minority Interest 189 35 - - - 95,228 119,590 (20.4)Total Equity 11,846,181 9,776,329 21.2 12,707,028 10,939,417 16.2Total Liabilities and Shareholders’ Funds 156,161,897 138,538,550 12.7 158,002,050 142,278,913 11.1Net Asset Value per Share ( Rs) 171.96 141.92 21.2 183.08 157.06 16.6Commitments and Contingencies 190 36 62,021,644 41,523,400 49.4 62,021,644 41,523,400 49.4

The Accounting Policies and the Notes from Pages 145 to 201 form an integral part of these Financial Statements.

These financial statements are in compliance with the requiments of the Companies Act No 07 of 2007.

Ranjith SamaranayakeExecutive Director / Group Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statatements.Approved and signed for and on behalf of the Board

I W Senanayake S G Wijesinha Harris Premarathne S SudarshanChairman Deputy Chairman Executive Director / CEO Company Secretary

17th February 2010Colombo, Sri Lanka

Financial Reports


Bank GroupFor the year ended 31st December 2009 2008 2009 2008 Page No Note (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Cash flows from operating activities Interest & commission receipts 157 1 22,175,308 20,806,075 22,550,560 21,458,105 Interest payments 157 3 (13,164,599) (12,801,392) (13,472,178) (13,501,604) Receipts from other operating activities 1,353,631 1,299,042 1,503,072 1,506,325 Cash payments to employees and suppliers (4,072,053) (3,426,612) (4,061,909) (3,440,566) Payments for other operating activities (2,404,966) (1,811,445) (2,439,540) (1,832,144)

Operating profit before changes in operating assets & libilities [ note (a)] 3,887,321 4,065,668 4,080,004 4,190,116(Increase)/Decrease in operating assets - Short term funds 166 16 1,620,154 2,549,446 1,620,154 2,549,446 Balance with Central Bank of Sri Lanka 162 13 (518,806) 818,639 (518,324) 818,608 Funds advanced to customers 170 19 (3,748,808) (2,289,997) (2,577,794) (2,289,101) Other assets 178 21/22 961,907 (769,124) 909,544 (696,280) (1,685,553) 308,964 (566,420) 382,673Increase/(Decrease) in operating liabilities Deposits from customers 183 25 18,662,087 6,707,147 18,585,183 6,687,557 Negotiable certificates of deposit 183 25 96,322 1,340,022 96,322 1,340,022 Other liabilities 184 29 338,910 364,576 495,870 416,772 19,097,319 8,411,745 19,177,375 8,444,351

Net cash flow from operating activities before income tax 21,299,087 12,786,377 22,690,959 13,017,139 Income tax paid 186 30 (1,742,999) (1,285,409) (1,796,333) (1,401,224)Net cash flow from operating activities 19,556,088 11,500,968 20,894,626 11,615,915

Cash flow from investing activities Dividends received 158 4 20,790 16,411 - - Income from investments 158 4 95,631 119,468 87,829 220,024 Investment in Subsidiary companies 176 20 (318,000) - - - Acquisition of Minority share - - 13,926 - Government of Sri Lanka Treasury Bills & Bonds 162 14 (11,485,897) (8,163,488) (11,056,423) (7,082,934) Securities Purchased under re-sale agreements 169 18 (2,676,615) 112,000 (2,673,744) 11,023 Securities Sold under re-purchase agreements 184 28 464,235 693,199 447,928 (247,081) Commercial papers (459,389) 100,000 (459,389) 100,000 Purchase of Investments 166 17 (1,777,363) (1,448,063) (1,777,363) (1,415,523) Sale of dealing securities 164 15 26,997 3,051,441 26,997 3,051,441 Proceeds from sale of Associate Company’s shares 1,618,698 - 1,618,698 - Amalgamation of Subsidiary* 402,057 - - - Proceeds from disposal of property, plant and equipment 13,429 2,885 21,418 987 Purchase of property, plant and equipment 179 24 (496,763) (578,580) (498,289) (617,998)Net cash flow from investing activities (14,572,190) (6,094,724) (14,248,414) (5,980,061)

Cash flow from financing activities Increase in Bonds 186 32 88,254 80,854 88,254 80,854 Minority Interest 189 35 - - (3,710) (323,238) Redemption of Debentures 186 32.1 (1,500,000) - (1,500,000) - Increase/(Decrease) in other borrowings 183/184 26/27 (2,729,085) (4,924,270) (4,380,739) (4,830,423) Dividends paid (277,674) (197,667) (277,674) (197,667)

Net cash flow from financing activities (4,418,515) (5,041,083) (6,073,869) (5,270,474)Net Increase/(Decrease) in cash and cash equivalents 565,383 365,158 572,344 365,380Cash and cash equivalents at the beginning of the year 162 12 2,829,704 2,464,546 2,830,254 2,464,874Cash and cash equivalents at the end of the year [ note (b) ] 162 12 3,395,087 2,829,704 3,402,599 2,830,254

* Amalgmation of SubsidiaryTotal assets and liabilities transferred to the Bank on 03.11.2009 upon the amalgamation of Sampath Surakum Ltd. were as follows.

Rs’000

Total Assets 450,856Less:- Total Liabilities (48,799)Net Assets transferred to Bank 402,057

Cash Flow & Reconciliation StatementCash Flow Statement

Cash Flow & Reconciliation Statement


Bank Group As at 31st December Page No Note 2009 2008 2009 2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Note (a)Reconciliation of operating profitProfit before provision for income tax 3,976,217 2,564,058 4,004,927 2,787,421 (Profit) / Loss on disposal of property, plant & equipment 158 4 (8,381) (1,548) (9,661) (1,548) Income from investments 158 4 (95,631) (119,468) (78,225) (102,788) Provision for diminution in value of dealing securities 159 8 917,508 442,987 917,508 410,448 Inter company dividends 158 4 (20,790) (16,411) - - Capital gain from sale of associate company’s shares (1,559,156) - (1,418,637) - Share of profit before tax of Associate Companies - - (160,391) (180,802) Depreciation 179 24 392,939 387,019 435,476 431,142 Bad debt provision 159 7 284,614 809,031 389,008 846,241 Operating profit before changes in operating assets/liabilities 3,887,321 4,065,668 4,080,004 4,190,116

Note (b)Reconciliation of cash and cash equivalents Local currency in hand 162 12 2,393,681 1,806,740 2,393,790 1,806,817 Foreign currency in hand 162 12 363,526 643,634 363,526 643,634 Balances with local banks 162 12 37,704 13,428 45,107 13,901 Balances with foreign banks 162 12 600,176 365,902 600,176 365,902Cash and cash equivalents at the end of the year 3,395,087 2,829,704 3,402,599 2,830,254

Cash Flow & Reconciliation Statement

Reconciliation Statement

Financial Reports


(Rs.’000)

Stated Revaluation Statutory Risk General Retained Total

Note Capital Reserve Reserve Reserve Reserve Profit

Fund Fund

Bank

Balance as at 1st January 2008 1,581,654 1,157,576 379,452 - 5,243,626 206,772 8,569,080

Final Dividend Paid - 2007 11 - - - - - (206,663) (206,663)

Net profit for the year - - - - - 1,413,912 1,413,912

Surplus/(Reversals) on revaluation of property - - - - - - -

Transfers during the year 34.3 - - 28,279 - 1,110,083 (1,138,362) -

Balance as at 31st December 2008 1,581,654 1,157,576 407,731 - 6,353,709 275,659 9,776,329

Final Dividend Paid - 2008 11 - - - - - (275,550) (275,550)

Net profit for the year - - - - - 2,098,307 2,098,307

Surplus/(Reversals) on revaluation of property 34.2 - (4,961) - - - - (4,961)

Transferred from Sampath Surakum Ltd upon amalgamation* - - - 14,262 237,795 - 252,057

Transfers during the year 34.3 - - 41,966 7,054 1,575,683 (1,624,704) -

Balance as at 31st December 2009 1,581,654 1,152,615 449,697 21,316 8,167,187 473,712 11,846,181

% 13.4 9.7 3.8 0.2 68.9 4.0 100.0

* The General Reserve Balance and the Risk Reserve Balnace as at 03.11.2009 of Sampath Surakum Ltd. were transferred to the Bank upon the amalgamation.

(Rs.’000)

Stated Revaluation Statutory Risk General Retained Total Minority Total

Capital Reserve Reserve Reserve Reserve Profit Shareholders Interest Equity

Fund Fund Funds

Group

Balance as at 1st January 2008 1,581,654 1,755,392 379,740 10,914 5,243,740 577,966 9,549,406 412,589 9,961,995

Final Dividend Paid - 2007 11 - - - - - (206,663) (206,663) - (206,663)

Net profit for the year - - - - - 1,494,770 1,494,770 30,239 1,525,009

Interim Dividend Paid - 2008 35 - - - - - - - (28,238) (28,238)

Surplus/(Reversals) on revaluation of property - - - - - - - - -

Redemption of Preference Shares - - - - - - - (295,000) (295,000)

Transfers during the year 34.3 - - 28,279 3,348 1,110,083 (1,141,710) - - -

Change in Holding of Associate Company Share - - - - (17,680) - (17,680) - (17,680)

Balance as at 31st December 2008 1,581,654 1,755,392 408,019 14,262 6,336,140 724,360 10,819,833 119,590 10,939,421

Adjustments

Final Dividend Paid - 2008 11 - - - - - (275,550) (275,550) - (275,550)

Net profit for the year - - - - - 2,072,483 2,072,483 11,273 2,083,756

Interim Dividend Paid - 2009 35 - - - - - - - (3,710) (3,710)

Surplus/(Reversal) on revaluation of property 34.2 - (4,961) - - - - (4,961) - (4,961)

Transferred from Sampath Surakum Ltd upon amalgamation - - - (14,262) (237,795) - (252,057) - (252,057)

Transferred to Bank upon amalgamation - - - 14,262 237,795 - 252,057 - 252,057

Redemption of Preference Shares - - -

Transfers during the year 34.3 - - 41,966 7,054 1,575,683 (1,624,703) - - -

Change in Holding of Subsidiary Company - 18,115 - - - (18,115) - (31,926) (31,926)

Balance as at 31st December 2009 1,581,654 1,768,546 449,985 21,316 7,911,825 878,475 12,611,803 95,228 12,707,028

% 12.4 13.9 3.5 0.2 62.3 6.9 99.3 0.7 100.0

Statement of Changes In EquityStatement of Changes In Equity


1. Corporate Information1.1 GeneralSampath Bank PLC (‘The Bank’), is a Licensed Commercial Bank established under the Banking Act No 30 of 1988. It is a Public Limited Liability Company, listed on the Colombo Stock Exchange, incorporated and domiciled in Sri Lanka. The registered office of the Bank is located at No 110, Sir James Peiris Mawatha, Colombo 02.

The staff strength of the Bank as at 31st December 2009 is 2,388 (2,364 as at 31st December 2008).

1.2 Consolidated Financial StatementsThe Consolidated Financial Statements of the Bank for the year ended 31st December 2009 comprise the results, assets & liabilities of the Bank and its Subsidiaries i.e. Sampath Centre Ltd., S C Securities (Pvt) Ltd., Sampath Leasing and Factoring Ltd., Sampath Trade Services (Hong Kong) Ltd., and Sampath Information Technology Solutions Ltd.

1.3 Principal Activities and Nature of Operations1.3.1 BankThe Bank provides a comprehensive range of financial services encompassing accepting deposits, corporate & retail banking, project financing, trade finance, treasury and investment services, issuing of credit cards and debit cards, off shore banking, resident & non-resident foreign currency operations, telebanking, internet banking, money remittance facilities, pawning & leasing, etc.

1.3.2 SubsidiariesThe following Subsidiaries have been consolidated.• Sampath Centre Ltd. - Renting of Commercial

Property• Sampath Surakum Ltd. - Primary Dealer in

Government Securities (Sampath Surakum Ltd. was a subsidiary company

of the Bank up to 3rd November 2009) • S C Securities (Pvt) Ltd. - Share Brokering• Sampath Leasing & Factoring Ltd. - Leasing &

Factoring• Sampath Trade Services (Hong Kong) Ltd. -

Re-issuing of Trade Documents• Sampath Information Technology Solutions Ltd. -

Developing Software Solutions & Maintenance of Hardware

1.3.3 AssociateThe principal activities of the Bank’s associate is;• LankaBangla Finance Ltd. - Leasing & Issuing of Credit Cards (LankaBangla Finance Ltd. was an associate of the Bank up to 3rd

August 2009)

1.4 Date of Authorisation for IssueThe Financial Statements of the Group for the year ended 31st December 2009 were authorised for issue in accordance with a resolution of the Board of Directors on 17th February 2010.

2. Basis of PreparationThese Financial Statements are prepared under the historical cost basis, except for certain Land & Buildings, Government of Sri Lanka Treasury Bills & Bonds and Dealing Securities which are stated at market values as explained in Note 24, 14 and 15 to the Financial Statements.

All values presented in the Financial Statements are in Sri Lanka Rupees thousands (Rs’000), unless otherwise stated.

2.1 Statement of ComplianceThe Balance Sheet, Statement of Income, Statement of Changes in Equity and Cash Flow Statement, together with Accounting Policies and Notes, (‘Financial Statements’), i.e: Consolidated Financial Statements and Separate Financial Statements of the Bank, as at 31st December 2009 and for the year then ended, have been prepared in accordance with Sri Lanka Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07 of 2007 & the Banking Act No. 30 of 1988 and amendments thereto.

2.2 Materiality & AggregationIn compliance with Sri Lanka Accounting Standard No. 3 (Revised 2005) on Presentation of Financial Statements, each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or functions are presented separately, unless they are immaterial.

2.3 Comparative InformationThe accounting policies have been consistently applied by the Group with those of the previous financial year, in accordance with Sri Lanka Accounting Standard No. 3 (Revised 2005) on Presentation of Financial Statements.

Comparative information is reclassified wherever necessary to comply with the current presentation.

2.4 Basis of ConsolidationThe Group Financial Statements comprise consolidation of the Financial Statements of the Bank and it’s subsidiaries in terms of the Sri Lanka Accounting Standard No. 26 (Revised 2005) on Consolidated & Separate Financial Statements.

Significant Accounting PoliciesSignificant Accounting Policies

Financial Reports


2.4.1 SubsidiariesThe Group has an interest of over 50% of these companies voting rights and has the power directly or indirectly, to govern the financial and operating policies of the companies to obtain benefits from its activities.

The Financial Statements of Sampath Bank PLC. and its subsidiary companies included in the consolidation are prepared to a common financial year, ending 31st December.

Sampath Bank PLC. holds 97.14% and 51.00% of the stated capital of Sampath Centre Ltd and S C Securities (Pvt) Ltd., respectively as at 31st December 2009 and Sampath Leasing & Factoring Ltd., Sampath Trade Services (Hong Kong) Ltd., and Sampath Information Technology Solutions Ltd., are fully owned subsidiaries of Sampath Bank PLC as at 31st December 2009.

The total profit for the year of the subsidiaries is included in the Consolidated Income Statement. The total classified as minority interest in the Consolidated Income Statement represents the portion of the consolidated profit after taxation, of the subsidiary, applicable to the non-group shareholders.

The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control effectively commences until the date that control effectively ceases.

The total Assets and Liabilities at the balance sheet date of the subsidiaries are included in the Group Balance Sheet. The proportionate interest of the non-group shareholders in the consolidated net assets of the subsidiaries is separately disclosed as minority interest in the Consolidated Balance Sheet.

2.4.2 AssociatesAssociates are those enterprises in which the group has significant influence, but not control, over the financial and operating policies.

The Consolidated Financial Statements include the group’s share of the total recognised gains and losses of associates on an equity method; from the date that significant influence effectively commences until the date that significant influence ceases.

The related investments are carried forward in the Consolidated Balance Sheet at cost plus post acquisition changes in the group’s share of net assets of the associate, less any impairment in value.

2.4.3 Business Combinations and GoodwillBusiness combinations are accounted for using the Purchase Method of Accounting as per the requirements of Sri Lanka Accounting Standard No. 25 (Revised 2004) on Business Combinations. This involves recognising identifiable assets (including previously unrecognised intangibles) and liabilities (including contingent liabilities) of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.

If the cost of acquisition is less than the fair values of the identifiable net assets acquired, the discount on acquisition is recognised directly in the Income Statement in the year of acquisition.

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Bank’s interests in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Sri Lanka Accounting Standard No. 25 (revised 2004) on Business Combinations requires that following initial recognition goodwill to be measured at cost less any accumulated impairment losses and goodwill to be reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, as at the acquisition date, any goodwill acquired after 1st July 2005 is allocated to each of the cash-generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group of units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences and unamortised goodwill is recognised in the Income Statement.

Goodwill acquired in a business combination prior to 1st July 2005 as disclosed in Note No. 23 on page 178 to the Financial Statements, was amortised to revenue till 30 June 2005, over a period of five years commencing from the first year of acquisition.

2.4.4 Transactions eliminated on ConsolidationIntra-group balances, transactions and any unrealised gains arising from Intra-group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are eliminated in the same way as unrealised gains, except that they are

Significant Accounting Policies


only eliminated to the extent that there is no evidence of impairment in value.

2.5 Going ConcernThe Directors have made an assessment of the Bank’s ability to continue as a going concern and they do not intend either to liquidate or to cease operations.

2.6 Significant accounting judgments, estimates and assumptions

2.6.1 JudgmentsIn the process of applying accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognized in the Financial Statements.

2.6.1.1 Impairment Losses on Loans and Advances:In addition to the allowances made for doubtful recoveries based on Central Bank guidelines and directives for specific and general loans and advances, the Bank reviews its problem loans and advances at each reporting date to assess whether an allowance for impairment should be recorded in the Income Statement. Judgement by management is required in the estimation of these amounts and such estimations are based on assumptions about number of factors and actual results may differ, resulting in future changes to the allowance.

2.6.1.2 Impairment Losses on Foreign Currency Bonds:Foreign currency bonds are generally marked to market. If there is any indication of impairment, an impairment review is performed to determine any possible impairment loss, instead of marking to market and provide for impairment losses so identified.

2.6.1.3 Review of Impairment of Non Financial Assets:The assessment of impairment in non financial assets includes the estimation of the value in use of the asset computed at the present value of the best estimates of future cash flows generated by the asset adjusted for associated risks. These estimation has inherent uncertainties. Impairment losses, if any are charged to Income Statement immediately.

2.6.2 Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a

material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below. The respective carrying amounts of assets and liabilities are given in related notes to the Financial Statements.

2.6.2.1 Fair value of Property, Plant and Equipment:The Land and Buildings of the Group are reflected at fair value. When current market prices of similar assets are available, such evidences are considered in estimating fair values of theses assets. In the absence of such information the company determines within a reasonable fair value estimates, amounts that can be attributed as fair values, taking in to consideration discounted cash flow projections based on estimates, derived evidence such as current market rents for similar properties and using discount rates that reflect uncertainty in the amount and timing of cash flows.

2.6.2.2 Defined Benefit Plans:The cost of defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty.

2.7 Financial InstrumentsThe Bank uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks, associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are stated at fair value.

The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

3. Valuation of Assets and their Measurement Bases 3.1 Foreign Currency TranslationThe Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Bank’s functional and presentation currency. Each entity in the Group detemines its own functional curency and items included in the Fianancial Statements of each entity are measured using that functional currency.

3.1.1 Transactions and BalancesAll foreign currency transactions are converted to Sri Lanka rupees which is Group’s functional & reporting currency, at the rates of exchange prevailing at the time the transactions were effected.

Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to Sri Lanka Rupees using the year end spot foreign exchange rate and all differences are taken to Income Statement.


Financial Reports


Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Foreign exchange differences arising on the settlement or reporting of monetary items at rates different from those which were initially recorded are dealt with in the Income Statement.

Forward exchange contracts are valued at the forward market rates ruling on the date of the Balance Sheet. Resulting net unrealised gains or losses are dealt with through the Income Statement.

3.2 Government of Sri Lanka Treasury Bills & Bonds3.2.1 Investments in Treasury Bills and Treasury Bonds held for

TradingInvestment in Treasury Bills and Treasury Bonds held for trading are carried at the market value in the Balance Sheet with any Gains and losses are dealt with through the Income Statement.

3.2.2 Investment in Treasury Bills and Bonds held to MaturityInvestments in Treasury Bills and Bonds held to maturity are carried at the value of the Bills/Bonds purchased and the discount /premium accrued thereon. Discount received/premium paid is amortized and recognized in the Income Statement based on a pattern reflecting a constant periodic rate of return, in accordance with the Sri Lanka Accounting Standard No. 22 on Accounting for Investments.

3.2.3 Securities Purchased under Re-sale AgreementsSecurities purchased under agreements to re-sell are classified as part of the assets. Obligation to repurchase resulting from securities sold under repurchase agreements is accounted for as a liability and is classified under liabilities.

3.3 Investments3.3.1 Securities Held for Dealing PurposesThese are marketable securities acquired and held with the intention of resale over a short period of time. Such securities are recorded at market value, with any resultant gain or loss recognised in the Income Statement as per the provisions under Sri Lanka Accounting Standard No. 22, Accounting for Investments.

3.3.2 Investment SecuritiesThese investments are acquired and held for yield or capital growth in the long to medium term. Such securities are recorded at cost of acquisition. Provision is made for diminution in value of these investments only if they are expected to be permanent.

Investments in units of Unit Trust are carried at cost.

3.3.3 Investments in AssociatesInvestments in Associates are accounted for under the Cost Method in the Bank’s Separate Financial Statements and under the Equity Method in Consolidated Financial Statements in accordance with the Sri Lanka Accounting Standard No. 27 on Investments in Associates.

3.3.4 Investments in SubsidiariesInvestments in Subsidiaries are stated at cost in the Bank’s Separate Financial Statements in accordance with the Sri Lanka Accounting Standard No. 26 - Consolidated and Separate Financial Statements.

3.4 Loans and Advances to CustomersLoans and Advances to customers are stated in the Balance Sheet net of provisions for possible loan losses and net of interest, which is not accrued to revenue.

3.4.1 Non- Performing Loans & AdvancesLoans and advances which are in arrears of due capital and/or interest are classified as non-performing as per the Direction No. 3 of 2008 as amended by the Direction No. 9 of 2008 on ‘Classification of Loans and Advances, Income Recognition and Provisioning’ issued by the Central Bank of Sri Lanka. For this purpose, all credit facilities are classified as non-performing on the following basis.

Type of Facility Point of Classification

Overdrafts Outstanding balance in excess of the sanction limits continuously for a period of 90 days or more

Credit facilities repayable in monthly installments

Three consecutive installments, principal and/or interest have not been paid

Credit facilities repayable in quarterly /half yearly installments

Installment is not paid within 90 days of the due dates

Credit facilities repayable in one installment at the end of a specified period or on a due date (bullet payments)

Payment is not made within 90 days from the end of the agreed period or the due date

Credit Cards Minimum payment is in arrears for 90 days from the due date



The Bank reclassifies non-performing loans as performing loans in accordance with the guidelines given in Direction No. 9 of 2008.

3.4.2 Foreclosed PropertiesForeclosed properties represent properties acquired in full or partial settlement of loans and advances are accounted for at the lower of cost or market value on an individual property basis. The shortfall between the prevailing market value of the foreclosed assets and the related loan outstanding is recognized as a provision for loan losses in the Income Statement in the year of taking over the foreclosed properties in satisfaction of the debt. The Bank reviews these properties at each reporting date or more frequently, if events or changes in circumstances indicate that the properties impaired.

Foreclosed properties are shown under non-performing loans and advances (note 19.6.1 to the financial statements) until they are disposed. Subsequent gains and losses on the disposal of the said properties are treated as provisions written back or charged to Income Statement, respectively. Those properties are recorded under loans and advances until those are disposed off.

3.4.3 Provision for Loan Losses3.4.3.1 Specific ProvisionsSpecific provisions for possible loan losses are made on the basis of a continuous review of all advances to customers. This provision relates to identified bad and doubtful advances as stipulated by the Central Bank of Sri Lanka based on a classification of advances as given below;

Classification Facility Type Overdue Period

Minimum Provision

Requirement (Net of

Security)

Substandard Credit CardsLoansOverdrafts

4 - 6 months6 - 12 months180 - 360 days

25%20%20%

Doubtful Credit CardsLoansOverdrafts

6 - 8 months12 - 18 months360 - 540 days

50%50%50%

Loss Credit CardsLoansOverdrafts

Over 8 monthsOver 18 monthsOver 540 days

100%100%100%

When a loan is uncollectible it is written-off against the related provision for loan losses. Subsequent recoveries of loans are credited to the Income Statement against which such sums had been previously written-off.

3.4.3.2 General ProvisionsBeginning from the year ended 31st December 1995, a general provision was maintained in addition to the specific provision, to cover bad debts which are inherent in the loan portfolio of the Bank but not yet identified.

As per the direction issued by the Monetary Board of the Central Bank, beginning from the quarter ended 31st December 2006, a general provision was maintained of total performing and overdue loans and advances net of interest in suspense and advances secured by cash deposits, gold or government securities with the Bank. The Bank is compliant with the requirement of 1.0% from 31st December 2008 as per the Central Bank directions.

3.5 Finance Leases3.5.1 Rental ReceivablesAssets leased to customers under agreements that transfer substantially all the risks and rewards associated with ownership other than legal title, are classified as finance leases. Lease rentals receivable in the balance sheet, represents total lease payments due net of unearned interest income not accrued to revenue, provision for bad and doubtful recoveries and the initial rentals received.

3.5.2 Provision for Lease ReceivableSpecific provisions have been made in relation to bad and doubtful leases as stated in 3.4.3.1 above. In addition, a general provision for possible losses on lease receivables is made as specified in 3.4.3.2 above.


Financial Reports


3.6 Interest and Fees ReceivablesInterest receivables are stated at the amounts they are estimated to realize net of provisions for bad and doubtful receivables. Fees and other dues from related parties are recognized at cost less provisions for bad and doubtful receivables.

3.7 Intangible Assets3.7.1 Basis of RecognitionAn Intangible Asset is recognized if it is probable that future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably in accordance with SLAS 37 on Intangible Assets. Accordingly, these assets are stated in the Balance Sheet at cost less any accumulated amortisation and accumulated impairment losses.

3.7.2 AmortisationThe useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expenses on intangible assets with finite lives are recognised in the Income Statement.

The useful lives and the amortization methods of intangible assets with finite lives are as follows:

The class of intangible

assets

Useful life Amortization Method

Computer software

4 Years Straight line method

3.7.3 Gains/Losses on Derecognition Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Income Statement, when the asset is derecognised.

3.8 Property & Equipment3.8.1 Basis of RecognitionProperty, Plant & Equipment are recognized if it is probable that future economic benefits associated with the asset will flow to the entity and the cost of the asset can be measured reliably in accordance with SLAS 18 on Property, Plant & Equipment.

Cost ModelEquipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition cirteria are met.

Revaluation ModelLand and buildings are measured at fair value, less depreciation on buildings and impairment charged subsequent to the date of the revaluation.

Valuations are performed every 3-5 years to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

Any revaluation surplus is credited to the revaluation reserve included in the equity of the Balance Sheet, except to the extent that is reverses a revaluation decrease of the same asset previously recognized in Income Statement, in which case the increases is recognized in Income Statement. A revaluation deficit is recognized in Income Statement, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the asset revaluation reserve.

Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

3.8.2 Subsequent CostWhen each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as equipment as a replacement if the recognition criteria are satisfied.

3.8.3 DerecognitionAn item of Property & Equipment is recognized upon disposal or when no economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in the Income Statement in the year the asset is derecognized.

3.8.4 DepreciationThe provision for depreciation is calculated by using the straight line method on cost or valuation of the Property & Equipment other than freehold land.



The rates of depreciations are given below;

Asset Category Rate of Depreciation

Freehold Buildings 2.0% - 2.5 % per annum

Motor Vehicles 25.0% per annum

Computer Equipment 16.67% per annum

Furniture, Office & Household Equipment

5.0% - 20.0 % per annum

Building Integrals 10% - 25 % per annum

The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

3.8.5 Property, Plant & Equipment on Finance Leases

Property, Plant and Equipment on finance leases, which effectively transfer substantially all of the risk and benefits incidental to ownership of the leased item are capitalised at the inception of the lease at the fair value of the leased property, or if lower, at the present value of the minimum lease payments.

Capitalised leased assets are disclosed as property, plant and equipment and depreciated consistently with that of owned assets as described under property, plant and equipment.

The corresponding principal amount payable to the lessor together with the interest payable over the period of the lease is shown as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability.

The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.

3.9 Impairment of Non Financial AssetsThe Group assesses at each reporting date or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, whether there is an indication that a non-financial asset may be impaired. If any such indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. When the carrying amount of an asset (or cash generating unit) exceeds its recoverable

amount, the asset (or cash generating unit) is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exists or may have decreased. If such condition exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount.

4. Liabilities and Provisions4.1 Deposits from CustomersDeposits include non interest bearing deposits, saving deposits, term deposits, deposits payable at call and certificate of deposits. They are stated in the Balance Sheet at amount payable. Interest paid/payable on these deposits is charged to the Income Statement.

4.2 BorrowingsBorrowings include refinance borrowings, call and term borrowings, foreign currency borrowings, credit balances of nostro accounts and finance lease payables. They too are stated in the Balance Sheet at amount payable. Interest paid/payable on these deposits is charged to the Income Statement.

4.3 Securities Sold under Repurchase AgreementsThese are borrowings collateralized by sale of Treasury Bills and Treasury Bonds held by the Bank to the counterparty from whom the Bank borrowed, subject to an agreement to repurchase them at a predetermined price. Such Treasury Bills and Treasury Bonds remain on the Balance Sheet of the Bank and the liability is recorded in respect of the consideration is received.

4.4 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risks specific to the liability. Where discounting is used the increase in the provision due to the passage of time is recognised as an interest expense.


Financial Reports


4.5 Retirement Benefit Obligations4.5.1 Defined Benefit Plan4.5.1.1 GratuityIn compliance with the Gratuity Act No.12 of 1983 provision is made in the accounts from the first year of service for gratuity payable to employees who joined the Bank on or after 1st June 2003, as they are not in pensionable service of the Bank.

Provision is not made in the accounts for gratuity payable to employees who joined prior to 1st June 2003 and complete 5 or more years of continuous service, as the Bank has it’s own non-contributory pension scheme in force. However, if employees who are eligible for pension resign before retirement age, the Bank is liable to pay gratuity to such employees.

The Bank measures the present value of the promised retirement benefits for gratuity, which is a defined benefit plan with the advice of an independent professional actuary using the Projected Unit Credit method (PUC) as required by Sri Lanka Accounting Standards No. 16, Employee Benefits (Revised 2006).

An actuarial valuation is carried out at every year to ascertain the full liability under the Fund. The valuation was carried out as at 31st December 2009 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.

For Group companies other than the Bank, the liabilities ascertained using the formula specified in Appendix E of SLAS 16.

Recognition of Actuarial Losses / GainsActuarial losses / gains to be recognized in this year’s retirement expense was calculated according to the 10% corridor method specified by the SLAS 16 – para 92. None was recognized this year as the unrecognized actuarial losses / gains as at 1.1.2009, as this was within the specified corridor limit.

Expected Return on AssetsExpected return on assets is zero as the plan is not pre funded.

Interest CostInterest cost is the expected increase due to interest during the period in the present value of the plan liabilities because the benefits are one year closer to settlement.

Funding ArrangementsThe Gratuity liability is not externally funded.

The principal assumptions, which have the most significant effect on the valuation, are the rate of Discount at 9%, rate of increase in salaries at 9%, rate of turnover at selected ages, rate of disability, death benefits and expenses. However, due to the long term nature of employment

benefits, such estimates are subject to significant uncertainty. Further details of assumptions together with an analysis of their sensitivity as carried out by the management in relation to the above key assumptions and the results of the sensitivity analysis are given in Note No. 29.1 on page 184 in Notes to the Accounts.

4.5.1.2 Pension FundThe Bank has a Pension Fund for all members who joined the Bank for permanent employment before 1st June 2003. A member is eligible for a monthly pension after attainment of 55 years of age and completion of 10 years uninterrupted service.

The Bank measures the present value of the Pension obligation, which is a defined benefit plan with the advice of an independent professional actuary using the Projected Unit Credit method (PUC) as required by Sri Lanka Accounting Standards No. 16, Employee Benefits (Revised 2006).

An actuarial valuation is carried out at every year to ascertain the full liability under the Fund. The last such valuation was carried out as at 31st December 2009 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.

Recognition of Actuarial Losses / (Gains)Actuarial losses / (gains) occur when the actual plan experience differ from the assumed experience. This actuarial losses / (gains) will be considered for recognition in the next year’s retirement benefit expense.

Expected Return on AssetsExpected return on assets is the expected return on pension fund at the assumed rate of return.

Interest CostInterest cost is the expected increase due to interest during the period in the present value of the plan liabilities because the benefits are one year closer to settlement.

Funding ArrangementsThe assets of the fund are held separately from those of the Bank assets, which is administered independently.



The principal assumptions, which have the most significant effect on the valuation, are the rate of discount at 9%, rate of increase in salaries at 9%, annual return on assets at 9%, rate of turnover at selected ages, rate of disability, death benefits and expenses. However, due to the long term nature of employment benefits, such estimates are subject to significant uncertainty. Further details of assumptions together with an analysis of their sensitivity as carried out by the management in relation to the above key assumptions and the results of the sensitivity analysis are given in Note No. 29.2 on page 185 in Notes to the Accounts.

4.5.2 Defined Contribution PlansContributions to defined contribution plans covering all employees are recognised as an expense in the income statement, as incurred.

4.5.2.1 Employees’ Provident FundThe Bank and Employees contribute to the approved private Provident Fund at 12% and 8% respectively.

4.5.2.2 Employees’ Trust FundThe Bank contributes to the Employees’ Trust Fund at 3%.

4.6 TaxationIncome Tax expense comprises of current and deferred tax. Income tax expense is recognized in the Income Statement.

4.6.1 Current TaxationCurrent tax assets and liabilities consist of amounts expected to be recovered from or paid to the Commissioner General of Inland Revenue in respect of the current year and any adjustment to tax payable in respect of prior years. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.

Provision for current taxation is made for Sampath Bank, S C Securities (Pvt) Ltd., Sampath Surakum Ltd., Sampath Leasing and Factoring Ltd., and Sampath Information Technology Solutions Ltd., on the basis of the profit for the year as adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 10 of 2006, and amendments thereto.

Sampath Centre Ltd., is a company approved under BOI law, as such the company was exempted from taxation for a period of 7 years commencing from the first year of assessment. Accordingly, the company is liable for taxation at the rate of 2.0% of the revenue from the year of assessment commencing 2006/2007.

4.6.2 Deferred TaxationDeferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profits nor taxable profits or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:

• Where the deferred tax assets relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss; and

• In respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilised.Unrecognised deferred tax assets are re-assessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.


Financial Reports


Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the assets are realised, or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date.

Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity and not in the Income Statement.

Deferred tax assets and liabilities are set off if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

4.6.3 VAT on Financial ServicesVAT on Financial Services is calculated in accordance with Ammended VAT Act No. 7 of 2003.

4.6.4 Social Responsibility Levy (SRL)SRL was introduced with effect from 1st January 2005 by Finance Act No. 5 of 2005 and amendments thereto. The current rate of this levy with effect from 1st April 2008 is 1.5% on all taxes and levies chargeable as specified in the first schedule of the Act.

4.7 Commitments and ContingenciesAll discernible risks are accounted for in determining the amount of all known liabilities.

Contingent Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefits is not probable or can not be readily measured. Contingent Liabilities are not recognized in the Balance Sheet but are disclosed unless its occurrence is remote.

4.8 Post Balance Sheet EventsAll material events occurring after the Balance Sheet date are considered and where necessary adjustments or disclosures are made to the Financial Statements.

5. Income Statement5.1 Revenue Recognition5.1.1 Interest Income on Loans & AdvancesInterest receivable is recognised on accrual basis. Interest from loans and advances ceases to be taken into revenue when the recovery of interest or principal is in arrears for over one month for loans, and over three months for overdrafts. Thereafter, interest income on advances is accounted for on a cash basis, until in the opinion of the management, the financial position of the borrower has improved to the extent that the receivables are deemed collectible.

Interest on all non-performing advances is credited to the ‘Interest in suspense’ account, which is netted in the Balance Sheet against the relevant advances.

5.1.2 Lease IncomeThe excess of aggregate lease rental receivable over the cost of the leased asset constitutes the total unearned lease income at the commencement of a lease. The unearned lease income is taken into income over the term of the lease, commencing with the month in which the lease is executed in proportion to the declining receivable balance.

Gross earnings under finance leases in respect of lease rentals due, cease to be taken to revenue when they are in arrears for over one month. Thereafter, such income is recognised on a cash basis.

5.1.3 Income from Government Securities and Securities Purchased under Resale Agreement

Discounts/Premiums on Treasury Bills and Treasury Bonds are amortised over the period to reflect a constant yield. The coupon interest on Treasury Bonds is recognized on an accrual basis. The interest income on Securities Purchased under Resale Agreements is recognized in the Income Statement on an accrual basis over the period of agreement.

Interest income from Treasury Bills and Treasury Bonds is grossed by the addition of the tax credit inputted to 10% withholding tax on discount allowed at the time of issue. This notional tax credit is 1/9th of the net interest income.

5.1.4 Interest Income on InvestmentsInterest income from investments is recognised on an accrual basis.

5.1.5 Dividend IncomeThe Dividend Income received from the subsidiary and the quoted public company shares are recognised on an accrual basis in the period in which they are declared.

5.1.6 Income on Discounting of Bills of ExchangeIncome on discounting of Bills of Exchange is recognized proportionately over the period of the instrument.



5.1.7 Gains or losses arising from the sale of securities

Gains or losses arising from the sale of dealing securities, investment securities, shares, foreign bonds & units are accounted for on an accrual basis.

5.1.8 Gains or Losses on Disposal of Property, Plant and Equipment

Gains or losses of a revenue nature arising from the disposal of Property, plant and equipment are accounted for on an accrual basis.

5.1.9 Fees and Commission IncomeFees and commission income are recognised in the income statement on an accrual basis.

5.1.10 Rental IncomeRental income is recognised on an accrual basis.

5.1.11 Interest & Fees Receivable on Credit CardsFees & Commission income on credit cards is recognised on an accrual basis. Interest and fees ceases to be taken in to revenue when the recovery of minimum payment is in arrears for over three months. Thereafter, interest is recognised on cash basis.

5.1.12 Other IncomeOther income is recognised on an accrual basis.

5.2 Expenses5.2.1 Interest Expenses and Other ExpensesInterest payable is recognised on an accrual basis. All other expenses have been recognised in the accounts as they are incurred in the period to which they relate. All expenditure incurred in the operation of the business and in maintaining the capital assets in a state of efficiency has been charged to revenue in arriving at the Bank’s profit for the year.

5.2.2 Borrowing CostsBorrowing costs are recognised as an expense in the period in which they are incurred.

5.2.3 Off-Balance Sheet TransactionsThe Bank enters into off balance sheet transactions such as forward exchange contracts and currency swaps. At the year-end, gains/losses on such transactions are dealt with through the Income Statement.

6. Cash Flow StatementThe cash flow statement has been prepared by using ‘The Direct Method’, whereby gross cash receipts and gross cash payments of operating activities, finance activities and investing activities have been recognised.

Cash and cash equivalents comprise cash balances, call deposits and short-term funds.

7. Fiduciary AssetsAssets held in a fiduciary capacity are not reported in these financial statements as they are not the assets of the Bank.

8. Dividends on Ordinary SharesDividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Bank’s shareholders. Interim dividends are deducted from equity when they are declared and are no longer at the discretion of the Bank.

Dividends on ordinary shares for the year that are recommended by the Directors after the Balance Sheet date for approval of the shareholders at the Annual General Meeting are disclosed as an event after the Balance Sheet date.

9. Segment ReportingSegment information is presented in respect of the group’s business in accordance with the Sri Lanka Accounting Standard No. 28 on Reporting Financial Information by Segment. These segments comprise Banking, Leasing, Investment and Share brokering.

10. Directors’ Responsibility StatementThe Board of Directors takes the responsibility for preparation and presentation of these Financial Statements. Please refer page 97 for the statement of the directors’ responsibility for financial reporting.

11. Effect of Sri Lanka Accounting Standards Issued but not yet Effective: The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka and are effective for the accounting periods on the dates specified below.

a) Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44) and Sri Lanka Accounting Standard 45 Financial Instruments; Recognition & Measurement (SLAS 45).

SLAS 44 and 45 become effective for financial years beginning on or after 1 January 2011. Accordingly, the Financial Statements for the year ending 31 December 2011 will adopt SLAS 44 and 45, for the first time.


Financial Reports


These two standards together provide comprehensive guidance on identification, classification, measurement and presentation of financial instruments (including Derivatives) into financial assets, financial liabilities and equity instruments.

In order to comply with the requirements of these standards, the Bank is in the process of setting up an implementation plan and assessing the effect of adoption of the aforesaid two standards. Due to the complex nature of the effect of these standards the impact of adoption is not estimable as at the date of publication of these financial statements.

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

SLAS 39- Share based payments, effective for periods beginning on or after 1st January 2010 will be first adopted in the year ending 31 December 2010. This standard require an expense to be recognized where the Bank buys goods or services in exchange for shares or rights over shares (equity- settled transactions), or in exchange for other assets equivalent in value to a given number of shares or rights over shares (cash- settled transactions). For equity-settled share-based payment transactions, the Bank is required to apply SLAS 39 to grants of shares, share options or other equity instruments that were granted after 1 January 2010.

The Bank is in the process of evaluating the impact of this standard, and the impact of the same is not currently estimable as at the date of the publication of these financial statements.



Bank GroupFor the year ended 31st December 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

01 IncomeInterest Income ( Note No. 2 ) 20,969,778 19,451,026 7.8 21,345,030 20,103,056 6.2Foreign Exchange Profit ( Note No. 2.1 ) 774,489 647,211 19.7 774,489 647,211 19.7Fee & Commission Income ( Note No. 2.2 ) 1,205,529 1,355,049 (11.0) 1,205,529 1,355,049 (11.0)Other Income ( Note No. 4 ) 2,263,099 789,257 186.7 2,235,107 963,450 132.0 25,212,896 22,242,543 13.4 25,560,156 23,068,765 10.8

02 Interest IncomeCustomer Advances 15,648,771 16,384,013 (4.5) 16,019,777 16,889,710 (5.2)Placements with Other Banks 75,336 333,207 (77.4) 75,336 333,207 (77.4)Treasury Bills,Treasury Bonds & Money Market Instruments 5,226,300 2,713,096 92.6 5,230,305 2,859,059 82.9Other Interest Income 19,371 20,711 (6.5) 19,612 21,080 (7.0) 20,969,778 19,451,026 7.8 21,345,030 20,103,056 6.2

A Notional Tax Credit on Secondary Market Transactions ( As per Section 137 of the Inland Revenue Act No 10 of 2006)Net interest income of the Bank from Treasury Bills & Treasury Bonds (Interest income accrued or received on outright or reverse purchase transaction on such security, Bond or Bill less interest expenses on repurchase transaction with Securities, Treasury Bonds or Treasury Bills from which such interest income was earned) for the period 01st January 2009 to 31 st December 2009 has been grossed up by Rs. 434.338 Mn ( 2008 - Rs 187.192 Mn) for the notional tax credit, consequent to the interest income on above instruments being subjected to withholding tax ( Note No. 9.2(h)).

Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

2.1 Foreign Exchange ProfitExchange Income Currency Notes 180,837 119,425 51.4 180,837 119,425 51.4Exchange Income Revaluation 593,652 527,785 12.5 593,652 527,785 12.5 774,489 647,211 19.7 774,489 647,211 19.7

2.2 Fees & Commission IncomeProfessional Services 438,339 453,298 (3.3) 438,339 453,298 (3.3)Trade Related Services 322,231 314,454 2.5 322,231 314,454 2.5Foreign Remittances 100,762 66,230 52.1 100,762 66,230 52.1Credit & Debit Card Services 190,530 302,190 (37.0) 190,530 302,190 (37.0)Other Banking Services 153,667 218,877 (29.8) 153,667 218,877 (29.8) 1,205,529 1,355,049 (11.0) 1,205,529 1,355,049 (11.0)

03 Interest ExpensesCustomer Deposits 11,632,728 10,722,869 8.5 11,624,540 10,722,204 8.4Short Term Borrowings 293,286 628,578 (53.3) 293,286 1,107,124 (73.5)Refinance Borrowings 372,835 316,596 17.8 372,650 316,596 17.7Repurchase Agreements 305,963 346,739 (11.8) 303,071 512,391 (40.9)Due to Banks 88,254 80,854 9.2 407,098 137,534 196.0Debentures 471,534 705,756 (33.2) 471,534 705,756 (33.2) 13,164,599 12,801,392 2.8 13,472,178 13,501,604 (0.2)

Notes to the Financial StatementsNotes to the Financial Statements

Financial Reports



04 Other IncomeIncome from Investment Securities 60,230 96,660 (37.7) 60,230 96,660 (37.7)Income from Dealing Securities 7,449 6,128 21.6 7,449 6,128 21.6Income from Investments in Subsidiaries 20,790 16,411 26.7 - - -Income from Investments in Associates 17,405 16,680 4.3 - - -Capital Gain on Sale of Associate Company’s Shares 1,559,156 - 100 1,418,637 - 100Capital Gains from Dealing Securities & Unit Trusts 10,546 5,990 76.1 10,546 5,990 76.1Profit / (Loss) on Sale of Property, Plant & Equipment 8,381 1,548 441.5 9,661 1,548 524.3Rental and Other Income 3,864 3,617 6.8 38,075 35,256 8.0Charges Recovered 377,339 473,054 (20.2) 377,339 473,054 (20.2)Others 197,938 169,171 17.0 313,169 344,813 (9.2) 2,263,099 789,257 186.7 2,235,107 963,449 132.0

05 Operating ExpensesOperating expenses include the following;Depreciation / Amortisation 392,939 387,019 1.5 435,476 431,142 1.0Professional & Legal Expenses 32,530 36,352 (10.5) 38,168 43,206 (11.8)Auditors’ Remuneration 4,391 4,000 9.8 5,769 4,822 19.6Non-Audit Fees 505 577 (12.5) 505 774 (34.7)Rent Expenses 410,454 339,919 20.8 273,414 204,387 33.8Electricity, Janitorial, Security,Postage ,Telephone & Fuel Expenses 623,338 597,021 4.4 669,847 653,321 2.5Advertising & Business Promotion Expenses 376,649 248,258 51.7 378,502 250,168 51.3Employer’s Contribution to EPF 160,304 140,605 14.0 165,999 148,315 11.9Employer’s Contribution to ETF 40,076 35,152 14.0 41,400 36,543 13.3Financial Value Added Tax 1,385,300 962,800 43.9 1,387,153 967,670 43.3Donations 1,947 1,636 19.0 1,948 1,643 18.6 (Donations in excess of Rs. 50,000/= include the following;)

Wildlife & Nature Protection Society of Sri Lanka 414The World Fellowship of Buddhists 350N U Jayawardene Charitable Trust 1,000Sri Lanka Cancer Society 173


06 Provision for Retirement BenefitsContribution Made to Pension Fund ( Note No. 6.1) 413,224 170,532 142.3 413,224 170,532 142.3Contribution Made to Gratuity Fund ( Note No.6.2) 54,668 15,041 263.5 55,971 17,191 225.6 467,892 185,573 152.1 469,195 187,723 149.9

6.1 Contribution Made to Pension FundCurrent Service & Interest Cost 339,228 170,532 98.9 339,228 170,532 98.9Expected Return on Assets & Recognition of Actuarial Loss/ ( Gain ) (201,314) - (100.0) (201,314) - (100.0)Recognition of Transitional Liability / ( Asset ) 275,310 - 100.0 275,310 - 100.0 413,224 170,532 142.3 413,224 170,532 142.3

Notes to the Financial Statements



6.2 Contribution Made to Gratuity FundCurrent Service & Interest Cost 26,725 15,041 77.7 28,028 17,191 63.0Expected Return on Assets & Recognition of Actuarial Loss/ ( Gain ) - - - - - -Recognition of Transitional Liability / ( Asset ) 27,943 - 100.0 27,943 - 100.0 54,668 15,041 263.5 55,971 17,191 225.6

07 Provision for Credit LossesSpecific Provision for Loans and Advances 456,188 746,410 (38.9) 456,188 746,410 (38.9)General Provision for Loans and Advances (39,718) 213,670 (118.6) (39,718) 213,670 (118.6)Specific Provision for Pawning (164,859) (241,984) (31.9) (164,859) (241,984) (31.9)Specific Provision for Credit Card Receivables 32,682 90,934 (64.1) 32,682 90,934 (64.1)General Provision for Credit Card Receivables 321 - 100.0 321 - 100.0Specific Provision for Leases - - - 104,394 37,211 180.5 284,614 809,030 (64.8) 389,008 846,241 (54.0)

Movement in the provision for bad & doubtful debts is given in Note No. 19.4

08 Diminution/ (Appreciation) in Value of Investments

Securities held for dealing purposes - Shares ( quoted ) (149,030) 67,698 (320.1) (149,030) 67,698 (320.1) - Bonds 1,069,421 388,553 175.2 1,069,421 388,553 175.2Treasury Bills & Bonds - Trading 13 (13,265) (100.1) 13 (45,804) (100.0)Reversal of Provision made for Investment Securities (2,896) - (100.0) (2,896) - (100.0) 917,508 442,987 107.1 917,508 410,448 123.5

Details are given in Note No. 14,15 & 17 in the financial statements.

09 Provision for TaxationTaxation based on profits for the year (Note No. 9.1) 1,647,356 1,364,561 20.7 1,668,507 1,372,946 21.5Transfers to/ (from) deferred taxation (Note No. 31) 226,258 (180,523) (225.3) 209,934 (175,171) (219.8)(Over)/under provision in the previous year (Note No. 9.1) 4,297 (33,892) 112.7 9,687 (35,920) (127.0)Share of Income Tax of Associate Company (Note No. 9.1) - - - 33,042 100,557 (67.1) 1,877,910 1,150,146 63.3 1,921,170 1,262,412 52.2

The Group tax expense includes the tax expense of following subsidiaries. Sampath Centre Ltd. - - - 4,956 4,415 12.3 Sampath Surakum Ltd. - - - - - - S C Securities (Pvt) Ltd. - - - 5,419 1,807 199.9 Sampath Leasing & Factoring Ltd. - - - (660) 5,487 (112.0) Sampath Information Technology Solutions Ltd. - - - 502 - 100.0


Financial Reports


9.1 Reconciliation of the Accounting Profit to Income Tax Expense Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Profit before Tax 3,976,217 2,564,058 55.1 3,943,764 2,540,816 55.2Add: Disallowable expenses 5,729,053 4,972,747 15.2 6,204,207 5,361,442 15.7Less: Tax deductible expenses (2,828,532) (3,062,289) (7.6) (3,212,197) (3,456,709) (7.1) Exempt Income (2,097,933) (469,721) 346.6 (2,097,933) (469,721) 346,.6Adjusted Profits/(Loss) for tax purposes 4,778,806 4,004,795 19.3 4,837,841 3,975,828 21.7Income from other sources - - - 11,915 15,234 (21.8)Assessable income 4,778,806 4,004,795 19.3 4,849,757 3,991,062 21.5Less: Qualifying payments (500) (1,636) (69.4) (500) (1,636) (69.4) Tax Losses - - - (21,923) (5,332) 311.2Taxable income 4,778,306 4,003,159 19.4 4,827,333 3,984,094 21.2

Turnover Liable for Income Tax - - - 184,004 163,446 12.6

Income Tax @ 35% 1,556,582 1,268,781 22.7 1,573,741 1,273,773 23.5Income Tax @ 20% 66,186 75,614 (12.5) 66,186 75,614 (12.5)Income Tax @ 2% on Liable Turnover (Note No.9.2.(g)) - - - 3,680 3,269 12.6Social Responsibility Levy at 1.5% (Note No. 9.2.(f)) 24,588 20,166 21.9 24,900 20,290 22.7Income Tax on current year profit 1,647,356 1,364,561 20.7 1,668,507 1,372,946 21.5(Over) / under provision in respect of previous years 4,297 (33,892) (112.7) 9,687 (35,920) (127.0)Increase / (decrease) in current year provision ( Note No. 30) 1,651,652 1,330,669 24.1 1,678,194 1,337,026 25.5Deferred tax charge/ ( credit ) ( Note No. 9.3) 226,258 (180,523) (225.3) 209,934 (175,171) (219.8)Share of Income Tax of Associate Company - - - 33,042 100,557 (67.1)Income tax expense 1,877,910 1,150,146 63.3 1,921,170 1,262,412 52.2Effective Tax Rate 47.2% 44.9% 5.3 48.0% 45.3% 5.9Effective Tax Rate (excluding deferred tax) 41.5% 51.9% (20.0) 42.7% 51.6% (17.2)

9.2 Applicable Rates of Tax 2009 2008

9.2 (a) Income Tax on Sampath Bank (a) Domestic operation of the Bank 35% 35% (b) Foreign currency Banking unit of the Bank (1) On-shore operation 35% 35% (2) Off-shore operation 20% 20%

9.2 (b) Income tax on Sampath Surakum Ltd. 35% 35%9.2 (c) Income tax on S C Securities (Pvt) Ltd. 35% 35%9.2 (d) Income tax on Sampath Leasing & Factoring Ltd. 35% 35%9.2 (e) Income tax on Sampath Information Technology Solutions Ltd. 35% 35%9.2 (f) Social Responsibility Levy 1.5% 1.5%

9.2 (g) Income Tax on Sampath Centre Ltd. Sampath Centre Limited is a company approved under BOI Law and the Company was exempted from taxation for a period of seven years commencing from the first year of assessment. The first year of assessment is the year in which the Company commenced making profits in relation to its transactions in that year, or any year of assessment not later than five years from the date of its first commercial operations, whichever is earlier. Accordingly they are liable for taxation at the rate of 2.0% of the revenue from the year of assessment commencing 2006/2007.



9.2 (h) A Notional Tax Credit on Secondary Market Transactions (for withholding tax)Any Company which derived income from the secondary market transactions involving any security or Treasury Bonds or Treasury Bills on which the income tax has been deducted at the rate of 10% at the time of issue of such security, such Company is entitled to a notional tax credit at 10% of the grossed up amount of net interest income from such secondary market transaction to an amount of one ninth of the same. Accordingly the net interest income earned by the Bank from above transactions has been grossed up in the Financial Statements for the period 01 st January 2009 to 31 st December 2009 and the notional tax credit amounts to Rs.434.338 Mn.

9.3 Deferred Tax Expense / (Income) Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Deferred Tax Expense/ (Income) arising due to origination and reversal of temparory differences ( Note No. 31) 226,258 (180,523) (225.3) 209,933 (175,171) (219.8) 226,258 (180,523) (225.3) 209,933 (175,171) (219.8)

10. Earnings per Ordinary shareBasic earning per share is calculated by dividing the net profit for the year attributable to Ordinary Shareholders by the Weighted average number of Ordinary shares outstanding during the year, as per the Sri Lanka Accounting Standard 34 - Earnings Per Share.

Group 2009 2008 Change (Rs.’000) (Rs.’000) %

Amount used as the NumeratorProfit attributable to Ordinary shareholders 2,072,483 1,494,770 38.6Amount used as the DenominatorWeighted average number of Ordinary shares( Note No.10.1) 68,887,628 68,887,628 -Basic Earnings per Ordinary share (Rs ) 30.08 21.70 38.6

10.1 Ordinary Shares as at 01st January 68,887,628 68,887,628 -Effect of shares issued during the current year -Weighted average number of Ordinary shares 68,887,628 68,887,628 -

The Board of Directors of the Bank at a meeting held on 28th January 2010 resolved to recommend to the shareholders a consolidation and sub-division (splitting) of the existing 68,887,628 ordinary shares of the Bank, without any change to the stated capital of the Bank of Rs.1,582 Mn. subject to obtaining shareholders’ approval at an Extra Ordinary General Meeting for the said purpose and for the amendments to be made to the Articles of Association in that regard, if necessary. Upon the aforesaid consolidation and the sub-division, the resulting number of shares would be 75,776,390. Shareholders would in effect receive one share for every ten shares held by them.

11. Dividends Paid & Proposed Bank Bank 2009 2008 (Rs.’000) (Rs.’000) Gross Dividend Net Gross Dividend Net Dividend Tax Dividend Dividend Tax Dividend

Final Dividend Paid for the years 2008 & 2007 respectively. Out of Dividend received - free of Tax 111,450 - 111,450 51,693 - 51,693 Out of Normal Profits 164,100 16,410 147,690 154,970 15,497 139,473Gross cash dividend paid 275,550 16,410 259,140 206,663 15,497 191,166

Final Dividend Proposed - 2009 & 2008 respectively. Out of Dividend received - free of Tax 115,719 - 115,719 111,450 - 111,450 Out of Normal Profits 357,883 35,788 322,095 164,100 16,410 147,690Gross cash dividend paid/ payable 473,602 35,788 437,814 275,550 16,410 259,140

Dividend per Ordinary share (Rs) - Final Proposed 6.25 5.78 4.00 3.60


Financial Reports


As explained above, dividend will be paid on 75,776,390 ordinary shares after effecting the said sub-division of the ordinary shares of the Bank.

In accordance with Sri Lanka Accounting Standard No. 12 (Revised) on Events After Balance Sheet Date, above proposed final dividend has not been recognised as a liability as at the year end.

12 Cash and Short Term Funds Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Local currency in hand 2,393,681 1,806,740 32.5 2,393,790 1,806,817 32.5Foreign currency in hand 363,526 643,634 (43.5) 363,526 643,634 (43.5)Balances with local banks 37,704 13,428 180.8 45,107 13,901 224.5Balances with foreign banks 600,176 365,902 64.0 600,176 365,902 64.0 3,395,087 2,829,704 20.0 3,402,599 2,830,254 20.2

13 Balance with Central Bank of Sri Lanka 7,397,703 6,878,897 7.5 7,397,703 6,879,379 7.5

Represents the statutory reserve required to be maintained with the Central Bank of Sri Lanka under section 93 of the Monetary Law Act Chapter 422 and clearing balances in the name of the Bank. At present the minimum cash reserve requirement is 7% of the Rupee Deposit Liabilities (2008 - 7.75%). There is no reserve requirement for deposit liabilities of the foreign currency banking unit and foreign currency deposit liabilities of the Domestic Banking Unit.

14 Government of Sri Lanka Treasury Bills & Bonds Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Treasury Bills - Trading - - - - 9,144 (100.0)( Note No. 14.4 )Treasury Bills - Investment 30,780,335 15,495,038 98.6 30,809,964 15,495,038 98.8(Note No. 14.1 & Note No. 14.5)Treasury Bonds - Trading(Note No. 14.2) - 49,820 (100.0) - 49,820 (100.0)Treasury Bonds - Invstments(Note No. 14.3 & Note No. 14.6) 987,482 4,737,075 (79.2) 987,482 5,187,034 (81.0)

31,767,817 20,281,933 56.6 31,797,446 20,741,036 53.3

14.1 Treasury Bills - InvestmentBank 2009 2009 2008 2008 Cost Market Cost Market Value Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

30,780,335 29,581,731 15,495,038 15,459,282



14.2 Treasury Bonds - Trading Bank Bank 2009 2009 2008 2008 Face Year Cost Market Face Year Cost Market Value of Value Value of Value (Rs.’000) Maturity (Rs.’000) (Rs.’000) (Rs.’000) Maturity (Rs.’000) (Rs.’000)

- - - - - - - - - - - - 50,000 2009 49,962 49,820

- - - 50,000 49,962 49,820

Add/(Less):Provision for appreciation/(diminution) in market value b/f - (13,407)Provision for diminution in market value write back/( made) during the year - 13,265Total for the Bank & Group - - 49,820 49,820

14.3 Treasury Bonds - Investment Bank Bank 2009 2009 2008 2008 Face Year Market Face Year Market Value of Cost Value Value of Cost Value (Rs.’000) Maturity (Rs.’000) (Rs.’000) (Rs.’000) Maturity (Rs.’000) (Rs.’000)

400,000 2010 398,545 399,276 3,572,260 2009 3,539,980 3,486,826 550,000 2011 527,602 532,573 670,000 2010 636,180 591,717 9,948 2012 9,974 10,338 550,000 2011 509,251 436,579 50,000 2013 51,360 43,425 - 2012 - - - 2014 - - 50,000 2013 51,664 32,527 1,009,948 987,482 985,613 4,842,260 4,737,075 4,547,649

14.4 Treasury Bills - TradingSampath Surakum Ltd. 2009 2009 2008 2008 Cost Market Cost Market (Rs.’000) Value (Rs.’000) Value (Rs.’000) (Rs.’000)

- - 9,131 9,144Add/(Less):Provision for appreciation/(diminution) in marketvalue b/f - - (1,400) -Provision for diminution in marketvalue write back/( made)during the year - - 1,413 - - - 9,144 9,144


Financial Reports


14.5 Treasury Bills - Investments 2009 2009 2008 2008 Cost Market Cost Market Value Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Sampath Centre Ltd. 21,572 21,008 - -S C Securities (Pvt( Ltd. 8,056 8,115 - - 29,629 29,124 - -Bank 30,780,335 29,581,731 15,495,038 15,459,282Group 30,809,964 29,610,855 15,495,038 15,459,282

14.6 Treasury Bonds - InvestmentSampath Surakum Ltd. 2009 2009 2008 2008 Face Year Cost Market Face Year Cost Market Value of (Rs.’000) Value Value of (Rs.’000) Value (Rs.’000) Maturity (Rs.’000) (Rs.’000) Maturity (Rs.’000)

- - - - 450,000 2009 449,959 449,280

- - - 450,000 449,959 449,280Bank 987,482 985,613 4,737,075 4,547,649Group 987,482 985,613 5,187,034 4,996,929

15 Securities Held for Dealing Purposes (Quoted) - Bank & Group15.1 Shares 2009 2009 2009 2009 2008 2008 2008 Name of the quoted company No of Cost of % of Market No of Cost of Market Ordinary Investment Total Value Ordinary Investment Value Shares (Rs.’000) Cost (Rs.’000) Shares (Rs.’000) (Rs.’000)

Banks, Finance & InsuranceNations Trust Bank PLC 170,000 6,453 2.0% 6,248 170,000 6,454 3,783Commercial Bank PLC - - - - 40,133 4,222 2,689Pan Asia Banking Corporation PLC 517,700 8,861 2.8% 10,483 517,700 8,861 5,306Merchant Bank of Sri Lanka PLC 138,400 2,523 0.8% 2,699 174,000 3,172 1,262DFCC PLC - - - - 147,854 18,601 7,836 17,837 5.5% 19,430 41,310 20,876Construction & EngineeringColombo Dockyard PLC - - - 41,790 1,459 2,090 - - - 1,459 2,090Diversified HoldingsHayley’s PLC 304,740 41,054 12.8% 52,339 304,740 41,054 26,208Hemas Holdings PLC 109,400 10,999 3.4% 13,429 109,400 10,999 6,044JKH PLC 150,501 19,659 6.1% 25,811 150,501 19,659 7,525 71,712 22.3% 91,579 71,712 39,777



15 Securities Held for Dealing Purposes (Quoted) - Bank & Group Contd.15.1 Shares contd. 2009 2009 2009 2009 2008 2008 2008 Name of the quoted company No of Cost of % of Market No of Cost of Market Ordinary Investment Total Value Ordinary Investment Value Shares (Rs.’000) Cost (Rs.’000) Shares (Rs.’000) (Rs.’000)

HealthcareCeylon Hospitals PLC (Durdens ) - - - - 2,000 81 58Asiri Hospital PLC - - - - 12,000 702 591Asiri Surgical Medical Services PLC - - - - 56,250 503 323 - - - 1,286 972Hotel & TravelAsian Hotels & Propertis PLC 644,600 34,671 10.8% 60,915 644,600 34,671 15,954Fortress Resort PLC 671,000 13,187 4.1% 8,220 671,000 13,187 2,885Connaissance Holding PLC - - - - 210,060 6,107 3,729Taj Lanka Hotels PLC - - - - 138,600 1,789 970 47,858 14.9% 69,134 55,754 23,538ManufacturingRoyal Ceramics Lanka PLC 266,600 11,200 3.5% 17,729 285,600 12,003 7,997Chevron Lubricants Lanka PLC - - - - 21,800 1,876 2,006 11,200 3.5% 17,729 13,879 10,002Land & PropertyC T Land Development PLC 325,000 4,853 1.5% 7,069 414,500 6,189 5,492 4,853 1.5% 7,069 6,189 5,492PlantationsBogawanthalawa Plantations PLC - - - - 16,000 341 176Kegalle Plantations PLC 11,000 700 0.2% 369 11,000 700 308 700 0.2% 369 1,041 484Power & EnergyLanka IOC PLC 3,911,000 156,965 48.8% 67,465 3,911,000 156,965 59,644 156,965 48.8% 67,465 156,965 59,644TradingRichard Peiris Exports PLC 5,000 195 0.1% 125 5,000 195 36Singer ( Sri Lanka ) PLC - - - - 25 2 1 195 0.1% 125 197 37TelecommunicationDialog Telekom PLC 456,290 10,354 3.2% 3,308 456,290 10,354 2,738 10,354 3.2% 3,308 10,354 2,738

Total 321,675 100% 276,207 360,146 165,650Less:Provision for appreciation/(diminution) in market value b/f (194,496) (60.5%) (126,798)Provision for diminution in market value write back/( made) during the year ( Note No.8) 149,030 46.3% (67,698) 276,207 85.9% 165,650

Securities held for Dealing purposes (Quoted Shares) are marked to market and carried at market value determined at the Colombo Stock Exchange and any gains or losses on marked to market are included in the income statement.


Financial Reports


15.2 Foreign Currency Bonds and Other Paper Denominated in Foreign Currency 2009 2008 Cost Directors’ Change Cost Directors’ Change (Rs.’000) Valuation % (Rs.’000) Valuation % (Rs.’000) (Rs.’000)

at cost B/F 1,327,524 3,824,391Add/(Less):AdditionsDisposals (2,496,867)Exchange rate effect 17,270at cost C/F 1,344,794 - 100.0 1,327,524 1,057,944 25.5Add/(Less):Provision b/f (269,580) 118,974Provision for appreciation during the year ( Note No.8) - 73,642Reversals made during the year for sold securities ( Note No.8)Exchange rate effect (5,793)Provision for diminution in market value - (69,221)Provision for impairment ( Note No.8) (1,069,421) (392,975) - - 1,057,944 1,057,944Total for the Bank and the Group 276,207 276,207 1,223,594 1,223,594

16 Placements with Other Banks & Financial Institutions Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Money at call and short notice 30,000 1,130,000 (97.3) 30,000 1,130,000 (97.3)Placements with banks 2,443,108 2,963,262 (17.6) 2,443,108 2,963,262 (17.6) 2,473,108 4,093,262 (39.6) 2,473,108 4,093,262 (39.6)

17 Investment Securities Quoted ( Note No. 17.1 )Units ( Note No. 17.1.1 ) - 20,725 (100.0) - 20,725 (100.0)Shares ( Note No. 17.1.2) 86,710 - 100.0 273,944 - 100.0Debentures ( Note No. 17.1.3 ) - - - - - - 86,710 20,725 318.4 273,944 20,725 1,221.8Un-quoted ( Note No. 17.2 )Preference Shares ( Note No. 17.2.1 ) 365,104 435,604 (16.2) 365,104 435,604 (16.2)Ordinary Shares ( Note No. 17.2.2 ) 278,110 278,110 - 278,166 278,166 -Debentures ( Note No. 17.2.3 ) 10,000 22,500 (55.6) 10,000 22,500 (55.6)Bonds ( Note No. 17.2.4 ) 6,261,509 4,093,990 52.9 6,261,509 4,093,990 52.9Leased backed Trust Certificate ( Note No. 17.2.5 ) 262,717 546,250 (51.9) 262,717 546,250 (51.9) 7,177,439 5,376,455 33.5 7,177,495 5,376,511 33.5Total Investment 7,264,149 5,397,180 34.6 7,451,439 5,397,236 38.1



17.1 Quoted - Shares/Units/Debentures Bank Group 2009 2008 2009 2008 Cost Market Value Cost Market Value Cost Market Value Cost Market Value / Directors’ / Directors’ / Directors’ / Directors’ Valuation Valuation Valuation Valuation (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

17.1.1 Quoted - UnitsPyramid Unit Trust - - 5,668 4,715 - - 5,668 4,715(564,042 Units -2008)

Ceybank Unit Trust - - 15,057 15,406 - - 15,057 15,406(1,471,395 Units -2008)

- - 20,725 20,121 - - 20,725 20,121

17.1.2 Quoted - Shares

LankaBangla Finance Ltd 86,710 3,098,700 - - 273,944 3,098,700 - -(6,000,000 Ordinary Shares -2009)(8,800,000 Ordinary Shares -2008)(Holding Percentage - 13.55%)(Investment in LankaBangla Finance Ltd. in 2008is given in Note No. 20.1.1) 86,710 3,098,700 - - 273,944 3,098,700 - -

17.1.3 Quoted - Debentures

Vanik Incorporation Ltd 750 - 750 - 750 - 750 -(7,500 Debentures of Rs 100/- each -2009)(7,500 Debentures of Rs 100/- each -2008)( 17% redeemable un-secured debentures )(Redeemable on or before 31st August 2003) 750 - 750 - 750 - 750 -Add/(Less):Provision for appreciation/(diminution) in market value b/f (750) (750) (750) (750)Provision for diminution in market value write back/( made) during the year - - - - - - - -


Financial Reports


17.2 Un-quoted - Shares/Debenture/Bonds Bank Group 2009 2008 2009 2008 Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’ Valuation Valuation Valuation Valuation (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

17.2.1 Un-quoted - Preference SharesTexpro Industries Ltd 12,604 12,604 12,604 12,604 12,604 12,604 12,604 12,604(1,260,365 Preference Shares of Rs 10/- each -2009)(1,260,365 Preference Shares of Rs 10/- each -2008)(Non cumulative redeemable preference shares@ 15% interest. Redeemable over the periodof 6 years Commencing from 30/06/2003)

Dialog Telekom PLC 352,500 352,500 423,000 423,000 352,500 352,500 423,000 423,000(352,500,000 Preference Shares of Rs 1/- each -2009)(423,000,000 Preference Shares of Rs 1/- each -2008)(Rated cumulative redeemable preference shares@ AWPLR minus 0.9% interest)(Redemption Dates 31st May 2008, 31st May 2009,31st May 2010, 31st May 2011 & 31st May 2012 andRedemption per preference share 10%, 15%25%, 25% & 25% respectively) 365,104 365,104 435,604 435,604 365,104 365,104 435,604 435,604

17.2.2 Un-quoted - Ordinary SharesUnion Bank of Colombo 255,000 255,000 255,000 255,000 255,000 255,000 255,000 255,000(25,500,000 Ordinary Shares -2009)(25,500,000 Ordinary Shares -2008)(Holding Percentage - 17.15%)

Credit Information Bureau 170 170 170 170 226 226 226 226(1,700 Ordinary Shares -2009)(1,700 Ordinary Shares -2008)

S.W.I.F.T 65 65 65 65 65 65 65 65

Fitch Rating Lanka Ltd 625 625 625 625 625 625 625 625(62,500 Ordinary Shares -2009)(62,500 Ordinary Shares -2008)

Lankaclear (Pvt) Ltd 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000(2,000,000 Ordinary Shares -2009)(2,000,000 Ordinary Shares -2008)

Lanka Financial Services Bureau Ltd. 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250

Produce of Paradise (Pvt) Ltd - - 2,896 - - - 2,896(289,600 Ordinary Shares -2008)Add/(Less):Provision for appreciation/(diminution) in market value b/f (2,896) (2,896) (2,896) (2,896) -Provision for diminution in market value write back/( made) during the year 2,896 - 2,896 -

278,110 278,110 278,110 278,110 278,166 278,166 278,166 278,166



17.2.3 Un-quoted - Debentures Bank Group 2009 2008 2009 2008 Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’ Valuation Valuation Valuation Valuation (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

DSI Holdings PLC - - 12,500 12,500 - - 12,500 12,500(12,500 Debentures of Rs 1000/- each -2008)( Floating Interest rate equal to the AWPLR + 2%)(Cap-18.50% & Floor- 11.50%)(Redemption Dates 31st December 2007,31st Dec. 2008 & 31st Dec 2009 andRedemption sum per debenture (Rs.)100/-, 400/- & 500/- respectively)

Seylan Bank PLC 10,000 10,000 10,000 10000 10,000 10000 10,000 10,000(100,000 Debentures of Rs 100/- each -2009)(100,000 Debentures of Rs 100/- each -2008)(Unsecured subordinated redeemable debentures 2007/2012)(Redeemable on 9 th December 2012)( Floating Interest rate equal to the 3 months weighted averageTBill rate + 2.5%) 10,000 10,000 22,500 22,500 10,000 10,000 22,500 22,500

17.2.4 Sri Lanka Development Bonds (SLDBs) (Redeemable Development Bonds ) 6,261,509 6,391,574 4,093,990 4,182,472 6,261,509 6,391,574 4,093,990 4,182,472(Redeemable on or before 22 nd September 2012) 6,261,509 6,391,574 4,093,990 4,182,472 6,261,509 6,391,574 4,093,990 4,182,472

17.2.5 Leased backed Trust CertificatesIssued by Deutsche Bank o/a Peoples’ Leasing PLC 235,417 235,417 493,750 493,750 235,417 235,417 493,750 493,750Issued by Deutsche Bank o/a Orient Financial Services Corporation Ltd. 27,300 27,300 52,500 52,500 27,300 27,300 52,500 52,500

262,717 262,717 546,250 546,250 262,717 262,717 546,250 546,250

18 Securities Purchased Under Resale Agreements Bank GroupAs at 31st December 2009 2008 Change 2009 2008 Change (Rs. ‘000) (Rs. ‘000) % (Rs. ‘000) (Rs. ‘000) % 2,676,615 - 100.0 2,676,615 2,871 93,141.2


Financial Reports


19 Loans and Advances ( Net of Provision for Possible Credit Losses and Interest in Suspense) Bank Group 2009 2008 Change 2009 2008 Change (Rs. ‘000) (Rs. ‘000) % (Rs. ‘000) (Rs. ‘000) %

19.1 Bills of ExchangeCheques Purchased - Local 58,400 83,077 (29.7) 58,400 83,077 (29.7) - Foreign 84,786 71,070 19.3 84,786 71,070 19.3Bills Purchased - Export 2,290,165 1,995,574 14.8 2,290,165 1,995,574 14.8 - Import 552,079 677,660 (18.5) 552,079 677,660 (18.5) 2,985,431 2,827,381 5.6 2,985,431 2,827,381 5.6Less: Provision for credit losses ( Refer Note No. 19.4 ) (110,522) (169,275) (34.7) (110,522) (169,275) (34.7) 2,874,909 2,658,106 8.2 2,874,909 2,658,106 8.2

19.2 Loans and AdvancesSri Lanka Rupee Loans & AdvancesOverdraft 14,346,124 17,248,827 (16.8) 14,267,687 17,192,134 (17.0)Term Loans 41,071,973 41,160,613 (0.2) 40,434,720 41,012,217 (1.4)Trust Receipts 290,259 385,825 (24.8) 290,259 385,825 (24.8)Staff Loans 2,082,573 1,444,183 44.2 2,082,573 1,444,183 44.2Pawning Advances 18,140,861 13,167,675 37.8 18,140,861 13,167,675 37.8Other Advances 35,907 194,328 (81.5) 35,907 194,328 (81.5) 75,967,696 73,601,451 3.2 75,252,006 73,396,362 2.5Foreign Currency Loans & AdvancesOverdraft 2,389,943 2,007,732 19.0 2,389,943 2,007,732 19.0Trust Receipts 96,054 130,461 (26.4) 96,054 130,461 (26.4)Packing Credit 115,280 165,624 (30.4) 115,280 165,624 (30.4)Term Loans 11,798,615 9,959,566 18.5 11,798,615 9,959,566 18.5Other Advances 1,821,281 1,515,311 20.2 1,821,281 1,515,314 20.2 16,221,173 13,778,694 17.7 16,221,173 13,778,697 17.7Total Rupee & Foreign Currency Loans & Advances 92,188,868 87,380,145 5.5 91,473,179 87,175,058 4.9Less:Specific Provision for Credit Losses ( Refer Note No.19.4 ) (3,923,512) (3,900,094) 0.6 (3,923,512) (3,900,094) 0.6General Provision for Credit Losses ( Refer Note No.19.4 ) (678,741) (718,502) (5.5) (678,741) (718,502) (5.5) (4,602,253) (4,618,596) (0.4) (4,602,254) (4,618,596) (0.4)Loans & Advances after Credit Loss Provision 87,586,615 82,761,549 5.8 86,870,925 82,556,463 5.2Less: Interest Suspended (Refer Note No.19.5 ) (768,623) (1,127,855) (31.9) (768,623) (1,127,855) (31.9) 86,817,992 81,633,694 6.4 86,102,302 81,428,608 5.7

19.3 Receivable on Leases19.3.1 Lease rentals receivableWithin one year from balance sheet date 2,324,971 2,917,846 (20.3) 3,415,522 4,491,297 (24.0)Unearned Income (552,297) (760,445) (27.4) (816,445) (1,225,713) (33.4)Provision for credit losses ( Refer Note No.19.4 ) (27,208) (27,208) - (197,140) (92,746) 112.6 1,745,466 2,130,193 (18.1) 2,401,937 3,172,838 (24.3)

19.3.2 Lease rentals receivableAfter one year but before five years from balance sheet date 2,004,590 3,885,152 (48.4) 3,025,936 5,427,195 (44.2)Unearned income (293,530) (640,884) (54.2) (428,530) (918,589) (53.3) 1,711,060 3,244,268 (47.3) 2,597,405 4,508,606 (42.4)



Bank Group 2009 2008 Change 2009 2008 Change (Rs. ‘000) (Rs. ‘000) % (Rs. ‘000) (Rs. ‘000) %

19.3.3 Lease rentals receivableAfter five years from balance sheet date 29,185 49,433 (41.0) 29,185 50,108 (41.8)Unearned income (1,880) (3,159) (40.5) (1,880) (3,194) (41.1)

27,305 46,274 (41.0) 27,305 46,914 (41.8)

3,483,831 5,420,735 (35.7) 5,026,648 7,728,358 (35.0)

Securities under the Bank’s control pending realization of the loans in default are classified under loans and advances. ( Note No. 19.6 )

19.3.4 Analysis of Advances Portfolio - Productwise Bank Group 2009 2008 2009 2008 % % % %

Bills of ExchangeCheques Purchased - Local 0.1% 0.1% 0.1% 0.1% - Foreign 0.1% 0.1% 0.1% 0.1%Bills Purchased - Export 2.3% 2.1% 2.3% 2.0% - Import 0.6% 0.7% 0.6% 0.7%Total Bills of Exchange 3.0% 2.9% 3.0% 2.8%

Sri Lanka Rupee Loans & AdvancesOverdraft 14.4% 17.8% 14.1% 17.2%Term Loans 41.3% 42.4% 40.1% 41.0%Trust Receipts 0.3% 0.4% 0.3% 0.4%Staff Loans 2.1% 1.5% 2.1% 1.4%Pawning Advances 18.2% 13.6% 18.0% 13.2%Other Advances - 0.2% - 0.2%Total Rupee Loans & Advances 76.3% 75.8% 74.6% 73.4%

Foreign Currency Loans & AdvancesOverdraft 2.4% 2.1% 2.4% 2.0%Trust Receipts 0.1% 0.1% 0.1% 0.1%Packing Credit 0.1% 0.2% 0.1% 0.2%Term Loans 11.9% 10.3% 11.7% 10.0%Other Advances 1.8% 1.6% 1.8% 1.5%Total Foreign Currency Loans & Advances 16.3% 14.2% 16.1% 13.8%Total Rupee & Foreign Currency Loans & Advances 92.6% 90.0% 90.6% 87.2%

LeasesLease rentals receivable within one year from Balance sheet date 2.3% 3.0% 3.4% 4.5%Lease rentals receivable after one year but before five years from Balance sheet date 2.0% 4.0% 3.0% 5.4%Lease rentals receivable after five years from Balance sheet date - - - -Total Leases 4.3% 7.1% 6.4% 9.9%Total Advances 100.0% 100.0% 100.0% 100.0%

The maturity analysis of Loans & Advances is given in Note No. 38.


Financial Reports


19.4 Movement in the Provision for Bad and Doubtful Debts19.4.1.1 Movements in the provision for loan losses - Bank As at Provisions Amounts Translation As at As at Change 01.01.2009 during the Written-off Difference on 31.12.2009 31.12.2008 % Year FCBU Conversion (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Provision against advancesSpecific-Bills of Exchange 169,275 - (58,753) - 110,522 169,275 (34.7%)Specific-Loans & Advances 3,724,300 477,308 (289,658) 11,562 3,923,512 3,724,300 5.3%Specific-Pawning 175,794 (164,859) (10,934) - - 175,794 (100.0%)Specific-Leases 27,208 - - 27,208 27,208 -Specific-Total 4,096,577 312,449 (359,345) 11,562 4,061,243 4,096,577 (0.9%)General-Loans & Advances 718,502 (49,861) (364) 10,464 678,741 718,502 (5.5%)Specific & General-Total 4,815,079 262,588 (359,709) 22,026 4,739,984 4,815,079 (1.6%)

19.4.1.2 Movements in the provision for loan losses - Group As at Provisions Amounts Translation As at As at Change 01.01.2009 during the Written-off Difference on 31.12.2009 31.12.2008 % Year FCBU Conversion (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) Provision against advancesSpecific-Bills of Exchange 169,275 - (58,753) - 110,522 169,275 (34.7%)Specific-Loans & Advances 3,724,300 477,308 (289,658) 11,562 3,923,512 3,724,300 5.3%Specific-Pawning 175,794 (164,859) (10,934) - - 175,794 (100.0%)Specific-Leases 92,746 104,394 - - 197,140 92,746 112.6%Specific-Total 4,162,115 416,843 (359,345) 11,562 4,231,175 4,162,115 1.7%General-Loans & Advances 718,502 (49,861) (364) 10,464 678,741 718,502 (5.5%)Specific & General-Total 4,880,617 366,982 (359,709) 22,026 4,909,916 4,880,617 0.6%

* The Bank has significantly strengthend efforts in minimizing its non performing advances. It has also provided for all possible credit losses under specific loan loss provisions.

** General ProvisionAs per the direction issued by the Monetary board of the Central Bank , beginning from the quarter ended 31st December 2006, a general provision was maintained of total performing and overdue loans and advances net of interest in suspense and advances secured by cash deposits, gold & government securities with the bank.As at 31st December 2009 General provision maintained for above requirement was Rs. 678.7 Mn (1.02%)As at 31st December 2008 General provision maintained for above requirement was Rs. 718.5 Mn (1.03 %)

*** Valuation of Securities for Provisioning PurposesAs per the amendment to the directions issued by the Central Bank of Sri Lanka under section 46 (A) of the Banking Act No. 30 of 1988, as amended by Banking (Amendment) Act No. 33 of 1995 the extent up to which securities can be discounted for provisioning purposes are as follows.

Category % of Forced Sale Value of Immovable property that can be considered as the Value of Security

At the time of 1 st provisioning 75%1 to 2 years in the loss category 60%2 to 3 years in the loss category 50%3 to 4 years in the loss category 40%Over 4 years in the loss category The discretion of the management

As per the above amendment, an additional provision made by the Bank during the year was Rs. 236.9 Mn.( 2008 - Rs. 275.8 Mn. )



19.4.2.1 Loan losses and provision for loan losses - Bank Bills of Loans & Pawning Leases Bank Bank Change Exchange Advances 2009 2008 % (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Opening balance 169,275 4,442,802 175,793 27,208 4,815,078 4,007,862 20.1%Specific provision on loans and advances - 477,308 (164,859) - 312,449 595,360 (47.5%)General provision on loans and advances - (49,861) - - (49,861) 213,670 (123.3%)Translation Difference on FCBU Conversion - 22,026 - - 22,026 31,417 (29.9%)Written off during the year (58,753) (290,022) (10,934) - (359,709) (33,230) (982.5%)Closing balance 110,522 4,602,253 - 27,208 4,739,984 4,815,079 (1.6%) 2.3% 97.1% - 0.6% 100.0%

19.4.2.2 Loan losses and provision for loan losses - Group Bills of Loans & Pawning Leases Group Group Change Exchange Advances 2009 2008 % (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Opening balance 169,275 4,442,802 175,794 92,746 4,880,617 4,036,189 20.9%Specific provision on loans and advances - 477,308 (164,859) 104,394 416,843 632,571 (34.1%)General provision on loans and advances - (49,861) - - (49,861) 213,670 (123.3%)Translation Difference on FCBU Conversion - 22,026 - - 22,026 31,417 (29.9%)Written off during the year (58,753) (290,022) (10,934) - (359,709) (33,230) (982.5%)Closing balance 110,522 4,602,253 - 197,140 4,909,916 4,880,617 0.6% 2.3% 93.7% - 4.0% 100.0%

19.5 Movement in Interest in Suspense & Shortfall19.5.1 Movement in Interest in Suspense & Shortfall - Bank Bank Bank 2009 2008 Interest in (Rs.’000) Interest in (Rs.’000) Shortfall Suspense Total Shortfall Suspense Total

Opening balance 2,899,889 1,127,855 4,027,743 2,625,684 1,191,481 3,817,165Interest suspended during the year 9,222,896 299,810 9,522,707 8,210,313 349,189 8,559,502Suspended interest recovered (8,875,986) (659,042) (9,535,028) (7,936,108) (412,815) (8,348,923)Closing balance 3,246,799 768,623 4,015,422 2,899,889 1,127,855 4,027,744 80.9% 19.1% 100.0% 72.0% 28.0% 100.0%


Financial Reports


19.5.2 Movement in Interest in Suspense & Shortfall - Group Group Group 2009 2008 Interest in (Rs.’000) Interest in (Rs.’000) Shortfall Suspense Total Shortfall Suspense Total

Opening balance 2,899,889 1,127,855 4,027,743 2,625,684 1,191,481 3,817,165Interest suspended during the year 9,222,896 299,810 9,522,707 8,210,313 349,189 8,559,502Suspended interest recovered (8,875,986) (659,042) (9,535,028) (7,936,108) (412,815) (8,348,923)Closing balance 3,246,799 768,623 4,015,422 2,899,889 1,127,855 4,027,744 80.9% 19.1% 100.0% 72.0% 28.0% 100.0%

19.6 Non Performing AdvancesNet exposure on non performing loans and advances as at 31st December before setting off the value of securities obtained is given below.

Bank As a % of Bank As a % of Group As a % of Group As a % of total total total total 2009 Advances 2008 Advances 2009 Advances 2008 Advances (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Bills of exchange 159,165 0.2 176,001 0.2 159,165 0.2 176,001 0.2Loans & advances* 7,714,431 7.9 7,514,893 7.9 7,714,431 7.8 7,514,893 7.8Lease rental receivable 368,934 0.4 493,476 0.5 612,183 0.6 781,183 0.8Gross Non-performing Advances 8,242,530 8.4 8,184,370 8.7 8,485,779 8.6 8,472,077 8.8Less; Interest in suspense included in overdrafts (768,623) (1,127,855) (768,623) (1,127,855)Net non performing advances 7,473,907 7.6 7,056,515 7.5 7,717,156 7.8 7,344,222 7.6Less: Specific provision for credit losses (4,061,243) (4,096,577) (4,231,175) (4,162,115)Net Exposure 3,412,664 3.5 2,959,938 3.1 3,485,981 3.5 3,182,107 3.3

NPA Cover ( Gross) = 4,061,243 = 4,096,577 = 4,231,175 = 4,162,115 ( Specific Provisions to Gross 8,242,530 8,184,370 8,485,779 8,472,077Non-performing Loans ) 49.3% 50.1% 49.9% 49.1%

NPA Cover ( Net) = 4,061,243 = 4,096,578 = 4,231,175 = 4,162,115 ( Specific Provisions to Net 7,473,907 7,056,515 7,717,156 7,344,222Non-performing Loans ) 54.3% 58.1% 54.8 56.7%

* This includes ‘Foreclosed properties,’ the details of which are given in Note No.19.6.1.


x100 x100 x100 x100

x100 x100 x100 x100



19.6.1 Foreclosed Properties

The foreclosed properties included under loans and advances as at December 31, include the following:

Bank Bank 2009 2008 Extent Cost / WDV Forced Cost / WDV Forced Sale Value Sale Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Land & Building at No.19, Gangadara Mawatha, Attidiya, Ratmalana 2A 0R 23 P 246,350 280,000 - -

A = Acres, R = Roods, P = Perches

Bank acquired this property during the year in settlement of debt due to Bank, to dispose in the near future.

19.7 Concentration of Credit RiskAnalysis of Bank’s gross advances portfolio reflecting the exposure to credit risk in various sectors of the economy is detailed below.

19.7.1 Sector/Productwise Analysis of Gross Loans & Advances - Bank Bank Bank 2009 2008 Purpose Performing Non-performing Total Performing Non-performing Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Agriculture & Fishing 9,373,943 777,179 10,151,122 6,170,414 531,657 6,702,071Manufacturing 15,935,705 1,983,918 17,919,623 13,660,859 1,314,648 14,975,507Tourism 4,053,490 137,576 4,191,066 3,441,427 79,502 3,520,929Transport 1,473,637 90,691 1,564,328 1,319,038 87,214 1,406,252Construction 11,221,619 1,100,460 12,322,079 13,077,717 1,525,908 14,603,625Traders 14,202,253 1,725,891 15,928,144 17,034,653 2,119,561 19,154,214New Economy 1,922,164 38,251 1,960,415 709,505 6,437 715,942Financial and Business Services 2,057,879 668,932 2,726,811 3,394,487 383,287 3,777,774Infrastructure 1,643,439 269,340 1,912,779 157,477 440,143 597,620Other Services 4,443,721 481,597 4,925,318 4,571,867 370,103 4,941,970Credit Cards 1,490,028 268,339 1,758,367 1,537,746 218,558 1,756,304Pawning 18,140,861 - 18,140,861 13,167,675 - 13,167,675Other Customers 4,484,069 700,356 5,184,425 9,228,237 1,107,353 10,335,590 90,442,808 8,242,530 98,685,338 87,471,102 8,184,370 95,655,472

19.7.2 Sector/Productwise Analysis of Gross Loans & Advances - Group Group Group 2009 2008 Purpose Performing Non-performing Total Performing Non-performing Total (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Agriculture & Fishing 9,373,943 777,179 10,151,122 6,170,414 531,657 6,702,071Manufacturing 15,935,705 1,983,918 17,919,623 13,660,859 1,314,648 14,975,507Tourism 4,053,490 137,576 4,191,066 3,441,427 79,502 3,520,929Transport 1,473,637 90,691 1,564,328 1,319,038 87,214 1,406,252Construction 11,221,619 1,100,460 12,322,079 13,077,717 1,525,908 14,603,625Traders 14,202,253 1,725,891 15,928,144 17,034,653 2,119,561 19,154,214New Economy 1,912,550 38,251 1,950,801 705,106 6,437 711,543Financial and Business Services 1,488,016 668,932 2,156,948 3,197,121 383,287 3,580,408Infrastructure 1,643,439 269,340 1,912,779 157,477 440,143 597,620Other Services 4,443,721 481,597 4,925,318 4,571,867 370,103 4,941,970Credit Cards 1,490,028 268,339 1,758,367 1,537,746 218,558 1,756,304Pawning 18,140,861 - 18,140,861 13,167,675 - 13,167,675Other Customers 5,817,356 943,605 6,760,960 11,310,366 1,395,060 12,705,426 91,196,619 8,485,779 99,682,398 89,351,466 8,472,077 97,823,543

Financial Reports


19.7.3 Collateral wise Analysis of Gross Loans & Advances - Bank

Bank Credit Bank Credit 2009 Risk 2008 Risk (Rs.’000) % (Rs.’000) %

Cash/Gold 26,831,784 27.2% 20,071,429 21.0%Government Securities 33,952 - 35,690 -Immovable Properties 31,153,516 31.6% 31,115,514 32.5%Stock in Trade 12,514,964 12.7% 12,715,273 13.3%Personal Guarantees and Pro Notes 2,192,624 2.2% 2,130,616 2.2%Movable Properties 1,375,803 1.4% 2,072,250 2.2%Other Securities 18,192,053 18.4% 20,611,559 21.5%Unsecured 6,360,642 6.5% 6,903,141 7.2% 98,685,338 100.0% 95,655,472 100.0%

20 Investments in Associate & Subsidiary Companies20.1 Investments in Associate Companies Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Balance as at 1st January 146,252 146,252 - 364,060 300,496 21.2Additions - - - - - -Current year’s share of profit/ (loss) after tax - - - 109,944 63,564 73.0Less: Disposals / Transfers (Note No.20.1.1) (146,252) - (100.0) (474,003) - (100.0)Balance as at 31st December - 146,252 (100.0) - 364,060 (100.0)

Bank Bank Group Group 2009 2008 2009 2008 % of Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’ Ownership Valuation Valuation Valuation Valuation (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Unquoted20.1.1 LankaBangla Finance Ltd 13.55%( Incorporated Outside Sri Lanka)( 8,800,000 Ordinary shares of tk 10/- each - 2008) 146,252 - 146,252 146,252 114,533 - 114,533 114,533Additions - - - - - - - - 146,152 - 146,252 146,252 114,533 - 114,533 114,533Add: Share of Profit/(Loss) applicable to the bankbalance at the beginning of the year 249,527 185,963Current year’s share of profit / (loss) before Tax 160,391 180,801Less: Provision for Taxation (33,042) (100,557)Less: Dividend received during the year (17,405) (16,680)Current year’s retained profit / (loss) 109,943 63,564 474,003 364,060Less: Cost of Disposal (59,541) (200,060) - 86,710 146,252 273,944 364,060Transferred to Investment Securities (Refer Note 17.1.2) (86,710) (273,944) -

Balance at the end of year - - 146,252 146,252 - - 364,060 364,060

During the year, 9.31% of the shares in Bank’s associate company, i.e LankaBangla Finance Ltd. was sold by the Bank. As a result, Bank’s holding of 22.86% as at 31.12.2008 was reduced to 13.55% as at 31.12.2009. However, since the Bank had over 20% holing in the Company up to 03.08.2009, the equity method of accounting was adopted up to 03.08.2009 and there after the carrying value of the investment was considered as an ‘Investment Security’ and accounted as per SLAS 22 – Accounting for Investments. (Investment in LankaBangla Finance Ltd is given in Note No.17.1.2.)




20.2 Investments in Subsidiary Companies-Bank 2009 2008 Change (Rs.’000) (Rs.’000) %

Balance as at 1st January 823,626 823,626 -Additions 318,000 - 100.0Investment set off against stated capital of Sampath Surakum Ltd upon amalgamation (150,000) - (100.0)Balance as at 31st December 991,626 823,626 20.4

Principal % of 2009 2008 Activity ownership Cost Directors’ Cost Directors’ Name Valuation % Valuation % Unquoted (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Sampath Centre Ltd Renting of34,000,000 ordinary shares - 2009 Commercial33,000,000 ordinary shares - 2008 Property 97.14 447,000 447,000 45.1% 429,000 429,000 52.1%(Country of Incorporation - Sri Lanka)

Sampath Surakum Ltd * Primary Dealer15,000,000 ordinary shares in Government - - - - 150,000 150,000 18.2%(Country of Incorporation - Sri Lanka) Securities

S C Securities (Pvt) Ltd Share 51.00 15,626 15,626 1.6% 15,626 15,626 1.9%1,387,200 Ordinary Shares Brokering(Country of Incorporation - Sri Lanka)

Sampath Leasing & Factoring Ltd Leasing & 100.00 525,000 525,000 52.9% 225,000 225,000 27.3%52,500,000 ordinary shares - 2009 Factoring22,500,000 ordinary shares - 2008(Country of Incorporation - Sri Lanka)

Sampath Trade Services (Hong Kong) Ltd ** Re-issuing of 100.00 - - - - - -5 Ordinary shares of Hk 10/- each fully paid Trade(Incorporated Outside Sri Lanka) Documents

Sampath IT Solutions Ltd. Developing 100.00 4,000 4,000 0.4% 4,000 4,000 0.5%400,000 ordinary shares Software(Country of Incorporation - Sri Lanka) Solutions & Maintenance of Hardware 991,626 991,626 100.0% 823,626 823,626 100.0%

* Sampath Surakum Ltd.Sampath Surakum Ltd was amalgamated with the Bank w.e.f. 03.11.2009 and operated as the Primary Dealer Unit (PDU) of the Bank from 03.11.2009. Accordingly, Sampath Surakum Ltd ceased to be a subsidiary of the Bank from 03.11.2009 and 100% share holding of that Company (Investment of 150 Mn) was set off against it’s stated capital upon the amalgamation.

** Sampath Trade Services (Hong Kong) Ltd.During the year, it was decided by the Board of Directors of the Bank to liquidate Sampath Trade Services (Hong Kong) Ltd. Notice to the Central Bank of Sri Lanka was given on 18.8.2009 and the Bank was in the process of liquidation of the Company as at 31.12.2009.

Financial Reports


21 Interest and Fees Receivable Bank GroupAs at 31st December 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

1,854,370 2,301,518 (19.4) 1,854,370 2,324,671 (20.2)

22 Other Assets Bank GroupAs at 31st December 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Deposits and Pre-payments 274,721 209,613 31.1 334,446 239,122 39.9Other debtors 662,719 1,242,593 (46.7) 1,060,479 1,595,045 (33.5) 937,440 1,452,206 (35.4) 1,394,925 1,834,167 (23.9)

23 Goodwill and Other Intangible Assets Bank GroupAs at 31st December 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Unamortised balance of Goodwill as at 31st December (Refer Note No. 23.1) - - - 7,520 12,687 (40.7)

Computer Software (Refer Note No. 23.2) 71,171 109,093 (34.8) 75,110 114,271 (34.3)Balance as at 31st December 71,171 109,093 (34.8) 82,630 126,958 (34.9)

23.1 Goodwill on ConsolidationGoodwill as at 1st January - - - 12,687 12,687 -Additions - - - - - -Less: Disposals - - - (5,167) - (100.0)Unamortised balance of Goodwill as at 31st December - - - 7,520 12,687 (40.7)

23.2 Computer SoftwareCostBalance as at 1st January 595,326 532,127 11.9 603,094 532,127 13.3Additions 27,374 63,377 (56.8) 27,374 71,145 (61.5)Less: Disposals - (178) (100.0) - (178) (100.0)Transfers during the year 774 - 100.0 893 - 100.0Balance as at 31st December 623,474 595,326 4.7 631,361 603,094 4.7

Amortisation & ImpairmentBalance as at 1st January 486,233 404,382 20.2 488,823 404,382 20.9Disposals - (36) (100.0) - (36) (100.0)Amortisation charge for the year 66,071 81,887 (19.3) 67,581 84,477 (20.0)Transfers during the year - - - (152) - (100.0)Balance as at 31st December 552,303 486,233 13.6 556,251 488,823 13.8

Net Book ValueBalance as at 1st January 109,093 127,745 (14.6) 114,271 127,745 (10.5)Balance as at 31st December 71,171 109,093 (34..8) 75,110 114,271 (34.3)




24 Property, Plant and Equipment24.1 Bank As at Additions Disposals Transfers / As at As at Change (Rs.’000) 01.01.2009 during the year during the year Adjustments 31.12.2009 31.12.2008 %

AT COST / VALUATIONLand & Building 2,179,072 7,277 (9,203) - 2,177,146 2,179,072 (0.1)Leasehold Properties & Improvements 418,630 92,748 (1,030) - 510,348 418,630 21.9Computer Equipment 1,704,258 164,448 (36,176) 7,,902 1,840,431 1,704,258 8.0Motor Vehicles 73,912 44,285 (10,649) 22,551 130,099 73,912 76.0Office Equipment 761,380 135,541 (4,656) 507 892,772 761,380 17.3Work in Progress 16,150 25,089 - - 41,239 16,150 155.3SUB TOTAL 5,153,402 469,388 (61,715) 30,959 5,592,035 5,153,402 8.5

Finance LeasesMotor Vehicles 61,263 - - (22,551) 38,712 61,263 (36.8)SUB TOTAL 61,263 - - (22,551) 38,712 61,263 (36.8)TOTAL 5,214,665 469,388 (61,715) 8,409 5,630,747 5,214,665 8.0

ACCUMULATED DEPRECIATION As at Charge Disposals Transfers / As at As at Change On Cost / Valuation 01.01.2009 for the year during the year Adjustments 31.12.2009 31.12.2008 %

Building 44,215 10,590 (5) - 54,800 44,215 23.9Leasehold Properties & Improvements 291,254 47,522 (929) - 337,846 291,254 16.0Computer Equipment 1,081,488 169,353 (34,219) 6,878 1,223,500 1,081,488 13.1Motor Vehicles 26,997 18,207 (10,649) 22,551 57,106 26,997 111.5Office Equipment 435,747 74,594 (4,045) 447 506,743 435,747 16.3SUB TOTAL 1,879,701 320,265 (49,847) 29,876 2,179,995 1,879,701 16.0

Finance LeasesMotor Vehicles 46,217 6,603 - (22,551) 30,270 46,217 (34.5)SUB TOTAL 46,217 6,603 - (22,551) 30,270 46,217 (34.5)TOTAL 1,925,918 326,869 (49,847) 7,325 2,210,265 1,925,918 14.8

NET BOOK VALUE OF ASSETSAt Cost / Valuation 3,273,701 3,412,040 3,273,701 4.2On Finance Leases 15,046 8,442 15,046 (43.9)Total 3,288,747 3,420,483 3,288,747 4.0

Freehold land & buildings of the Bank were revalued by professionally qualified independent valuers as at 31 st December 2007. The revaluation surplus, amounting to Rs. 1,064,308 million was credited to the Revaluation Reserve Account.

The carrying amount of Bank’s revalued Land and Buildings if they were carried at cost less depreciation, would be as follows:

2009 2008 Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Land 732,938 - 732,938 736,763 - 736,763Freehold Buildings 384,863 52,706 332,157 377,996 41,347 336,649 1,117,801 52,706 1,065,095 1,114,759 41,347 1,073,412

Financial Reports


24.2 Property, Plant and Equipment 24.2 Group As at Additions Disposals Transfers / As at As at Change (Rs.’000) 01.01.2009 during the year during the year Adjustments 31.12.2009 31.12.2008 %

AT COST / VALUATIONLand & Building 3,560,528 7,277 (9,203) - 3,558,602 3,560,528 (0.1)Leasehold Properties & Improvements 418,630 92,748 (1,030) - 510,348 418,630 21.9Computer Equipment 1,743,559 164,738 (36,176) (7,888) 1,864,233 1,743,559 6.9Motor Vehicles 147,226 44,800 (14,849) 22,551 199,727 147,226 35.7Office Equipment 786,909 136,262 (4,656) - 918,515 786,909 16.7Work in Progress 16,150 25,089 - - 41,239 16,150 100.0SUB TOTAL 6,673,002 470,915 (65,915) 14,663 7,092,665 6,673,002 6.3

Finance LeasesMotor Vehicles 69,573 - (2,844) (22,551) 44,178 69,573 (36.5)SUB TOTAL 69,573 - (2,844) (22,551) 44,178 69,573 (36.5)TOTAL 6,742,575 470,915 (68,759) (7,888) 7,136,843 6,742,575 5.9

ACCUMULATED DEPRECIATION As at Charge Disposals Transfers / As at As at Change On Cost / Valuation 01.01.2009 for the year during the year Adjustments 31.12.2009 31.12.2008 %

Building 144,131 29,048 (5) - 173,175 144,131 20.2Leasehold Properties & Improvements 291,255 47,522 (929) - 337,848 291,255 16.0Computer Equipment 1,104,232 172,269 (34,219) (2,438) 1,239,844 1,104,232 12.3Motor Vehicles 58,831 33,390 (14,849) 22,551 99,923 58,831 69.8Office Equipment 445,486 77,343 (4,045) - 518,784 445,486 16.5SUB TOTAL 2,043,935 359,573 (54,047) 20,112 2,369,573 2,043,935 15.9

Finance LeasesMotor Vehicles 52,287 8,322 (2,550) (22,551) 35,509 52,287 (32.1)SUB TOTAL 52,287 8,322 (2,550) (22,551) 35,509 52,287 (32.1)TOTAL 2,096,222 367,895 (56,597) (2,438) 2,405,082 2,096,222 14.7

NET BOOK VALUE OF ASSETSAt Cost / Valuation 4,629,067 4,723,092 4,629,067 2.0On Finance Leases 17,286 8,670 17,286 (49.8)Total 4,646,353 4,731,762 4,646,353 1.8

Freehold land & buildings of the Group were revalued by professionally qualified independent valuers as at 31 st December 2007. The revaluation surplus, amounting to Rs. 1,664,688 million was credited to the Revaluation Reserve Account.

The carrying amount of Group’s revalued Land and Buildings if they were carried at cost less depreciation, would be as follows:

2009 2008 Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Land 867,938 - 867,938 871,763 - 871,763Freehold Buildings 1,030,941 161,666 869,275 1,024,074 141,263 882,811 1,898,879 161,666 1,737,213 1,895,837 141,263 1,754,574




Details of Group, land and building stated at valuation are given below.

Location Date of Method of Cost Revaluation valuation valuation (Rs. Mn ) (Rs. Mn )

Valuer - Mr.P.B. KalugalagedaraNo 999, People’s Park, Bodhiraja Mawatha, Pettah, Colombo 11 26.12.2007 Open Market / Fair Value basis 21.40 48.00No. 179 , High Level, Road, Nugegoda 26.12.2007 Open Market / Fair Value basis 29.19 67.23No 117, Ihalagama Road, Deniyaya 12.12.2007 Open Market / Fair Value basis 3.95 4.00No. 261,Galle Road, Ratmalana 27.12.2007 Open Market / Fair Value basis 25.50 36.00No 39, Moratuwa Road, Piliyandala 01.01.2008 Open Market / Fair Value basis 38.10 65.00No. 268, Main Street, Anuradhapura 10.01.2008 Open Market / Fair Value basis 10.90 45.00No. 5, Wakwella Road, Galle 02.01.2008 Open Market / Fair Value basis 26.80 52.00Nos. 103/15, 103/16, 105, 109 and 111 Dharmapala Mawatha, Colombo 07 31.12.2007 Open Market / Fair Value basis 26.20 597.00

Valuer - C. WellappiliNo. 81 , High Level Road, Maharagama 30.12.2007 Investment Basis / Contractor’s Principle 34.42 55.67No. 371 , Old Moor Street, Colombo 12 30.12.2007 Contractor’s Principle 38.28 112.22No 1022, Maradana Road, Borella 30.12.2007 Investment Basis / Contractor’s Principle 70.21 190.66

Valuer - S.G. FernandoNo 29 Cross Street, Kandy 12.12.2007 Income Method 102.18 180.00

Valuer - S.I.De Silva3, Hakmana Road, Matara 05.12.2007 Open Market / Fair Value basis 39.15 80.00

Valuer - M.B. KalawanegamaNo 31, Negambo Road, Kurunegala 12.12.2007 Contractor’s Method 77.05 128.87

Valuer - Mr.P.B. KalugalagedaraNo. 110, Sir James Peiris Mawatha, Colombo 2 31.12.2007 Income Method 597.61 1,300.00

24.3 Freehold Land & Buildings- BankLocation Buildings Cost or Extent Cost or Total Accumulated Net Book % Sq.ft Revaluation Perches Revaluation Value Depreciation Value of Buildings of Land (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Pettah 5,246 57,643 19 - 57,643 6,552 51,091 2.4%No 999, People’s Park, Bodhiraja Mawatha, Colombo 11Nugegoda Under 673 22 67,227 67,900 - 67,900 3.1%No 179, Highlevel Road , Nugegoda ConstructionBorella 9,100 68,672 26 127,500 196,172 8,749 187,423 8.7%No 1022, Maradana Road, Borella -Kurunegala 12,027 41,012 37 94,620 135,632 7,078 128,554 5.9%No 31, Negambo Road, KurunegalaWattala Bare Land - 43 44,199 44,199 - 44,199 2.0%No 280,280/1, Negombo Road, WattalaMatara 8,413 35,219 48 51,150 86,369 7,426 78,943 3.6%No 3, Hakmana Road, MataraMaharagama 5,400 27,802 15 30,900 58,702 4,287 54,415 2.5%No 81 Highlevel Road , Maharagama

Financial Reports


Location Buildings Cost or Extent Cost or Total Accumulated Net Book % Sq.ft Revaluation Perches Revaluation Value Depreciation Value of Buildings of Land (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Deniyaya Under 608 40 4,000 4,608 - 4,608 0.2%No 117, Ihalagama Road, Deniyaya ConstructionDeniyaya Bare Land - 18 15,000 15,000 - 15,000 0.7%No 69, Main Street, DeniyayaGampaha Bare Land - 25 20,000 20,000 - 20,000 0.9%No 150, Colombo Road, GampahaRatmalana 5,480 22,813 11 16,000 38,813 3,813 35,000 1.6%No 261, Galle Road, RatmalanaPiliyandala 8,200 31,264 35 38,000 69,264 5,735 63,529 2.9%No 39, Moratuwa Road, PiliyandalaAnuradhapura Under 6,214 41 45,008 51,222 - 51,222 2.4%No 268, Main Street, Anuradhapura ConstructionPanadura 5,550 14,362 27 28,044 42,406 1,034 41,372 1.9%No 373, Galle Road, Panadura Old Moor Street 8,248 4,859 24 108,000 112,859 862 111,997 5.2%No 371, Old Moor Street, Colombo 12Tissamaharama 4,000 22,932 22 11,000 33,932 1,013 32,919 1.5%No 25-27, Main Street, TissamaharamaKatugastota Under 28,109 24 14,351 42,460 - 42,460 2.0%No 187, Madawela Road, Katugastota ConstructionGalle 6,197 19,485 19 35,000 54,485 3,147 51,338 2.4%No 5 , Wakwella Road, GalleWellawatte Under 5,094 22 112,299 117,393 - 117,393 5.4%No 591, Galle Road, Wellawatte ConstructionNarahenpita Bare Land - 19 81,865 81,865 - 81,865 3.8%No 475, Elvitigala MW, colombo 05Kalutara Bare Land - 30 62,399 62,399 - 62,399 2.9%No.312,Galle Road,Kalutara SouthAlawwa 8,245 17,133 21 6,501 23,634 1,089 22,545 1.0%No 7, Giriulla Road, AlawwaHorana Bare Land - 21 18,500 18,500 - 18,500 0.9%No 167, Anguruwathota, HoranaKandy Corporate 15,026 64,076 26 121,850 185,926 4,015 181,911 8.4%No 29, Cross Street, KandyDharmapala Mawatha Bare Land - 119 597,000 597,000 - 597,000 27.6%No. 111 Dharmapala Mawatha,Colombo 07Total 467,970 753 1,750,414 2,218,384 54,800 2,163,584 100.0%

24.4 The cost of fully depreciated assets of the Bank amounts to Rs. 1,711.9 Mn. ( 2008 - Rs. 1,387.8 Mn ) Details of cost of fully depreciated assets classwise are given below. 2009 2008 (Rs.’000) (Rs.’000)

Asset Class Leasehold Properties & Improvements 232,115 195,903Computer Equipment 1,161,02 933,718Motor Vehicles 33,858 21,948Office Equipment 273,871 213,401Lease Vehicles 11,000 22,820Total 1,711,866 1,387,790




25 Deposits25.1 Type of Deposits Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) % Local Currency DepositsDemand 7,966,101 6,524,563 22.1 7,955,847 6,497,667 22.4Savings 37,490,575 28,413,959 31.9 37,490,575 28,413,959 31.9Call deposits 1,590,677 354,518 348.7 1,560,907 341,611 356.9Fixed deposits 57,873,423 51,675,464 12.0 57,796,740 51,675,464 11.8Certificates of deposits 5,247,181 5,150,859 1.9 5,247,181 5,150,859 1.9Local Currency Total 110,167,956 92,119,363 19.6 110,051,250 92,079,560 19.5

Foreign Currency DepositsDemand 1,661,034 1,866,107 (11.0) 1,661,034 1,866,107 (11.0)Savings 4,336,203 4,304,461 0.7 4,336,203 4,304,461 0.7Call deposits 58,685 129,199 (54.6) 58,685 129,199 (54.6)Fixed deposits 9,466,012 8,512,351 11.2 9,466,012 8,512,351 11.2Foreign Currency Total 15,521,934 14,812,118 4.8 15,521,934 14,812,118 4.8Total Deposits 125,689,890 106,931,481 17.5 125,573,183 106,891,678 17.5

25.2.1 Analysis of Deposits - Customer wiseDeposits from Banks 1,015,915 1,267,428 (19.8) 1,015,915 1,267,428 (19.8)Deposits from Finance Companies 386,171 62,717 515.7 386,171 62,717 515.7Deposits from other Customers 124,287,804 105,601,336 17.7 124,171,097 105,561,533 17.6 125,689,890 106,931,481 17.5 125,573,183 106,891,678 17.5

25.2.2 Analysis of Deposits Portfolio - Productwise Bank Group 2009 2008 2009 2008 % % % %

Local Currency DepositsDemand 6.3% 6.1% 6.3% 6.1%Savings 29.8% 26.6% 29.9% 26.6%Call deposits 1.3% 0.3% 1.2% 0.3%Fixed deposits 46.0% 48.3% 46.0% 48.3%Certificates of deposits 4.2% 4.8% 4.2% 4.8%Local Currency Total 87.7% 86.1% 87.6% 86.1%

Foreign Currency DepositsDemand 1.3% 1.7% 1.3% 1.7%Savings 3.4% 4.0% 3.5% 4.0%Call deposits - 0.1% - 0.1%Fixed deposits 7.5% 8.0% 7.5% 8.0%Foreign Currency Total 12.3% 13.9% 12.4% 13.9%Total Deposits 100.0% 100.0% 100.0% 100.0%

The maturity analysis of Deposits is given in Note No. 38.

26 Refinance Borrowings Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

4,819,327 4,592,071 4.9% 4,819,327 4,592,071 4.9%

Financial Reports


27 Borrowings27.1 Borrowings Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Call borrowings 350,000 - 100.0 350,000 - 100.0Term borrowings - 2,000,000 (100.0) 429,152 2,563,937 (83.3)Foreign currency borrowings 28,618 1,525,500 (98.1) 28,618 1,525,500 (98.1)Finance Leases ( Note No.27.2 ) 10,591 17,102 (38.1) 9,989 14,981 (33.3)Other borrowings 482,652 285,609 69.0 725,121 2,046,457 (64.6) 871,860 3,828,211 (77.2) 1,542,880 6,150,875 (74.9)

The maturity analysis of Borrowings is given in Note No 38 in the financial statements.

27.2 Details of Finance Leases Gross Liability to the Lessor 11,721 21,055 (44.3) 11,104 18,734 (40.7)Less: Finance Charges allocated to future periods (1,130) (3,953) (71.4) (1,115) (3,753) (70.3)Net Liability 10,591 17,102 (38.1) 9,989 14,981 (33.3)

Repayable within one yearGross Liability 7,630 9,325 (18.2) 7,013 7,686 (8.8)Less: Finance Charges allocated to future periods (985) (2,400) (58.9) (970) (2,220) (56.3)Net Liability 6,645 6,925 (4.0) 6,043 5,466 10.6

Repayable after one year before Five yearsGross Liability 4,091 11,730 (65.1) 4,091 11,048 (63.0)Less: Finance Charges allocated to future periods (145) (1,553) (90.7) (145) (1,533) (90.5)Net Liability 3,946 10,177 (61.2) 3,946 9,515 (58.5)

There were no lease rentals repayable beyond five years.

28 Securities Sold Under Repurchase Agreements Balance as at 1st January 2,423,245 1,730,045 40.1 2,439,553 2,686,634 (9.2)Additions / (Repayments) 464,235 693,200 33.0 447,928 (247,081) 281.3Balance as at 31st December 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4

The Assets pledged as security for repurchase borrowings are given in Note No 41 in the financial statements.

29 Other LiabilitiesCheques sent on clearing 31,863 23,565 35.2 31,863 23,565 35.2Margins 401,074 449,146 (10.7) 401,074 449,146 (10.7)Interest payable 3,288,649 3,577,812 (8.1) 3,288,649 3,684,253 (10.7)Provision for Retiring Gratuity (Note No. 29.1) 57,941 19,087 203.6 66,021 24,087 174.1Pension Fund (Note No. 29.2) 160,619 - 100.0 160,619 - 100.0Employees Provident Fund - - - - - -Other payable 1,914,709 1,446,340 32.4 2,329,277 1,600,587 45.5 5,854,855 5,515,950 6.1 6,277,503 5,781,638 8.6

29.1 Provision for Retiring GratuityBalance at the beginning of the year 19,087 23,567 (19.0) 24,087 23,567 2.2Provision made during the year (Note No.6.2) 54,668 - 100.0 55,971 - 100.0 73,755 23,567 213.0 80,058 23,567 239.7Benefits paid by the plan (15,814) (4,480) 253.0 (14,037) 520 (2,799.5) 57,941 19,087 203.6 66,021 24,087 174.1

An actuarial valuation of the ‘Retiring Gratuity’ was carried out as at 31st December 2009 by M/s. Piyal S Goonetilleke and Associates, a professional actuary. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by SLAS No.16 Employee Benefits.




Actuarial Assumptions 2009 2006 (Previous Valuation)Discount Rate 9% 9%Salary Increment 9% 10%Mortality GA 1983 Mortality Table GA 1983 Mortality TableRetirement Age 55 years 55 years

Sensitivity of Assumptions Employed in Actuarial Valuation

The following table demonstrates the sensitivity to a reasonable possible change in the key assumptions employed with all other variables held constant in the employment benefit liability measurement.

The sensitivity of the Income Statement and Balance Sheet is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and employment benefit obligation for the year. Sensitivity Effect on Sensitivity Effect on Income Statement Employment Benefit Increase/ (Reduction) Obligation Increase/ Increase / (Decrease) in Increase / (Decrease) in in results for the (Decrease) in the Discount Rate Salary Increment year 2009 (Rs. Mn) Liability (Rs. Mn)

1% 8.7 (8.7) (1%) (10.3) 10.3 1% (10.1) 10.1 (1%) 8.7 (8.7)

29.2 Pension Fund

The amounts recognized in the balance sheet are as follows: Bank Group 2009 2008 2009 2008

Present Value of Funded Obligations As at 31st December 2,398,198 1,956,315 2,398,198 1,956,315Fair Value of Plan Assets As at 31st December (1,908,452) (1,538,002) (1,908,452) (1,538,002) 489,746 418,313 489,746 418,313

Present Value of Unfunded obligations (412,965) (688,275) (412,965) (688,275)Unrecognised actuarial gains/(losses) 83,838 220,494 83,838 220,494Net Liability in Balance Sheet 160,619 (49,468) 160,619 (49,468)


Balance at the beginning of the year (49,468) 191,466 (125.8) (49,468) 191,466 (125.8)Provision made during the year (Note No. 6.1) 413,224 170,000 143.1 413,224 170,000 143.1Less: Payments/Investments made during the year (203,137) (410,934) (50.6) (203,137) (410,934) (50.6)Balance at the end of the year 160,619 (49,468) (424.7) 160,619 (49,468) (424.7)

An actuarial valuation of the ‘Pension Fund’ was carried out as at 31st December 2009 by M/s. Piyal S Goonetilleke and Associates, a professional actuary. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by SLAS No.16 Employee Benefits.

Actuarial Assumptions 2009 2006 (Previous Valuation)Discount Rate 9% 9%Salary Increment 9% 10%Mortality GA 1983 Mortality Table GA 1983 Mortality Table

Financial Reports


Sensitivity of Assumptions Employed in Actuarial ValuationThe following table demonstrates the sensitivity to a reasonable possible change in the key assumptions employed with all other variables held constantin the employment benefit liability measurement.

The sensitivity of the Income Statement and Balance Sheet is the effect of the assumed changes in discount rate and salary increment rate on the profitor loss and employment benefit obligation for the year. Sensitivity Effect on Sensitivity Effect on Income Statement Employment Benefit Increase/ (Reduction) Obligation Increase/ Increase / (Decrease) in Increase / (Decrease) in in results for the (Decrease) in the Discount Rate Salary Increment year 2009 (Rs. Mn) Liability (Rs. Mn)

1% 355.6 (355.6) (1%) (446.6) 446.6 1% (240.7) 240.7 (1%) 212.5 (212.5)

30 Current Taxation Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Balance brought forward / (Paid in advance) 670,104 624,844 7.2 668,760 632,401 5.7Current year provision ( Note No. 9.1) 1,651,652 1,330,669 24.1 1,711,237 1,437,583 19.0Less: Payment of Tax (1,742,999) (1,285,409) 35.6 (1,796,333) (1,401,224) 28.2Balance carried forward 578,757 670,104 (13.6) 583,664 668,760 (12.7)

31 Deferred TaxationBalance brought forward 254,941 435,464 (41.5) 268,703 443,874 (39.5)Increase/(decrease) in provision ( Note 9.3 ) 226,258 (180,523) (225.3) 209,933 (175,171) (219.8)Balance carried forward 481,199 254,941 88.7 478,636 268,703 78.1

32 Other Liabilities Evidenced by Paper Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Redeemable Debentures (Note No.32.1 ) 2,050,000 3,550,000 (42.3) 2,050,000 3,550,000 (42.3)Long Term Bond (Note No. 32.2) 1,052,468 964,214 9.2 1,052,468 964,214 9.2 3,102,468 4,514,214 (31.3) 3,102,468 4,514,214 (31.3)

32.1 Subordinated Debentures Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Balance as at 1 st January 3,550,000 3,550,000 - 3,550,000 3,550,000 -Debentures Issued - - - - - -Debentures Redeemed (1,500,000) - (100.0) (1,500,000) - (100.0)Balance as at 31 st December 2,050,000 3,550,000 (42.3) 2,050,000 3,550,000 (42.3)

(Note No.32.1.1, 32.1.2, 32.1.3 & 32.1.4)

32.1.1 The debentures consists of 15,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2004.They are quoted in the Colombo Stock Exchange.




No of 2008 2009 Allotment Maturity Rate of Interest Debentures Value Value Date Date (Rs.’000) (Rs.’000)

2,268,400 226,840 - 8 June 2004 7 June 2009 Fixed - 10.0 % per annum payable annually 451,500 45,150 - 8 June 2004 7 June 2009 Fixed - 9.75 % per annum payable bi-annually 12,280,100 1,228,010 - 8 June 2004 7 June 2009 Floating rate is equivalent to the three months 15,000,000 1,500,000 - Treasury bill rate (net) tax plus 2% p.a., payable quarterly.These debentures were redeemed on 7th June 2009.

32.1.2 The debentures consists of 3,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2006.


3,000,000 300,000 300,000 29 Dec 2006 28 Dec 2011 Floating rate is equivalent to the one year weighted avg. Treasury Bill rate (gross) 3,000,000 300,000 300,000 plus 1.5% p.a., payable annually.

32.1.3 The debentures consists of 15,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.They are quoted in the Colombo stock Exchange.


5,206,725 520,673 520,673 30 Aug 2007 29 Aug 2012 Fixed - 17.5 % per annum payable annually 222,650 22,265 22,265 30 Aug 2007 29 Aug 2012 Fixed - 15.5 % per annum payable Monthly 9,570,625 957,063 957,063 30 Aug 2007 29 Aug 2012 Floating rate is equivalent to the three months 15,000,000 1,500,000 1,500,000 Treasury Bill rate (gross) plus 1.5% p.a., payable quarterly.

32.1.4 The debentures consists of 2,500,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.


2,500,000 250,000 250,000 30 June 2007 28 June 2012 Floating rate is equivalent to the six months weighted avg. Treasury Bill rate (gross) 2,500,000 250,000 250,000 plus 1.75% p.a., payable semi annually. Debenture information are given on pages 212 and 213

32.2 Long Term Bond Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Balance as at 1st January 964,214 883,360 9.2 964,214 883,360 9.2Interest Accrued 88,254 80,854 9.2 88,254 80,854 9.2Balance as at 31st December 1,052,468 964,214 9.2 1,052,468 964,214 9.2

Financial Reports


33 Stated Capital Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Ordinary Shares 1,581,654 1,581,654 - 1,581,654 1,581,654 -(68,887,628 ordinary shares in 2008 & 2009) 1,581,654 1,581,654 - 1,581,654 1,581,654 -

Share information are given on Pages 208 and 211

33.1 Rights Preferences & Restrictions of classes of capital

The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the Annual General meeting of the Bank.

34 Reserves Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

34.1 Statutory / Risk Reserve FundsStatutory Reserve Fund (Note No. 34.1.1) 449,697 407,731 10.3 449,985 408,019 10.3Risk Reserve Fund (Note No. 34.1.2) 21,316 - 100.0 21,316 14,262 49.5 471,013 407,731 15.5 471,301 422,281 11.6


34.1.1 Statutory Reserve FundBalance as at 1st January 407,731 379,452 7.5 408,019 379,740 7.4Transfer to Statutory Reserve Fund ( Note No. 34.3 ) 41,966 28,278 48.4 41,966 28,278 48.4Balance as at 31st December 449,697 407,731 10.3 449,985 408,019 10.3

The statutory reserve fund is maintained as required by the section 20 (1) of the Banking Act no 30 of 1988. A sum equivalent to 5% of the profit after tax , but before any dividend is declared or any profits are transferred to elsewhere, transfer to above reserve until the reserve is equal to 50% of the paid-up capital of the Bank ( 50% of the paid-up capital as at 31st December 2009 is Rs. 344.5 Mn. ) and thereafter a further sum equivalent to 2% of such profits until the amount of the said reserve fund is equal to the paid-up capital of the Bank.( as at 31st December 2009 paid-up capital was Rs. 688.8 Mn.) The balance in the statutory reserve fund will be used only for the purposes specified in the Section 20(2) of the Banking act no 30 of 1988.


34.1.2 Risk Reserve FundBalance as at 1st January - - - 14,262 10,912 30.7Transferred from Sampath Surakum Ltd upon amalgamation 14,262 - 100.0 14,262 - 100.0Transferred to Bank upon amalgamation - - - (14,262) - (100.0)Transfer to Risk Reserve Fund ( Note No. 34.3 ) 7,054 - 100.0 7,054 3,350 110.6`Balance as at 31st December 21,316 - 100.0 21,316 14,262 49.5

A sum equivalent to 25% of the profit after tax of the Sampath Surakum Ltd was transferred to a special risk reserve as per direction issued by the Central Bank.( in terms of section 12 of the Regulations issued by the Minister of Finance under the Registered stock and securities Ordinance and the Local Treasury Bills Ordinance.)

After the amalgamation of Sampath Surakum Ltd with the Bank, 25% of profit after tax of Primary Dealer Unit was transferred to the same reserve.




Bank Subsidiary Group Revaluation Revaluation Total Reserve Reserve Reserve (Rs.’000) (Rs.’000) (Rs.’000)

34.2 Other Capital Reserves - Revaluation ReserveBalance as at 1st January 2009 1,157,576 597,816 1,755,392Additions - 18,115 18,115Disposals (4,961) - (4,961)Balance as at 31st December 2009 1,152,615 615,931 1,768,546

Revaluation reserve relates to the revaluation of Property, Plant & Equipment as described in Note No. 24.

2009 2009 2008 Bank Subsidiary/ Group Group Total Associate Total Total Change General Retained Revenue Retained Revenue Revenue Reserve Profits Reserves Profits Reserves Reserves % (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

34.3 Revenue ReservesBalance as at 1st January 2009 6,353,709 275,659 6,629,368 431,132 7,060,500 5,821,706 21.3Adjustments Net profit for 2009 - 2,098,307 2,098,307 23,646 2,121,953 1,558,101 36.2Appropriations Final Dividend Paid - 2008 - (275,550) (275,550) - (275,550) (206,663) 33.3Dividends from subsidiary & associate companies - - - (38,195) (38,195) (33,091) 15.4Minority interest - - - (11,273) (11,273) (30,239) (62.7)Balances transferred from Sampath Surakum Ltd upon amalgamation 237,795 - 237,795 (237,795) - - -Transfer to statutory reserve fund - (41,966) (41,966) - (41,966) (31,629) 32.7Transfer to risk reserve fund (7,054) - (7,054) - (7,054) - (100.0)Transfer to general reserve 1,582,738 (1,582,738) - - - - -Change in Holding Associate / Subsidiary Company Share - - - (18,115) (18,115) (17,680) 2.5Balance as at 31st December 2009 8,167,187 473,712 8,640,899 149,400 8,790,300 7,060,505 24.5 92.9 5.4 98.3 1.7 100.0

35 Minority Interest Group 2009 2008 Change (Rs.’000) (Rs.’000) %

Balance as at 1st January 119,590 412,589 (71.0)Profit/ (Loss) applicable for the year 11,273 30,239 (62.7)Dividends paid (3,710) (28,238) (86.9)Redemption of Preference Shares - (295,000) (100.0)Change in Holding of Share (31,926) - (100.0)Balance as at 31st December 95,228 119,590 (20.4)

Financial Reports


36 Commitments and Contingencies

36.1 In the normal course of business the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to its customers. No material losses are anticipated as a result of these transactions. Bank Group 2009 2008 Change 2009 2008 Change As at 31st December (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

CommitmentsCommitment for Unutilized facilities (direct advances) 15,802,061 14,215,008 11.16 15,802,061 14,215,008 11.16 15,802,061 14,215,008 11.16 15,802,061 14,215,008 11.16Contingent LiabilitiesAcceptances 3,399,904 2,387,941 42.4 3,399,904 2,387,941 42.4Documentary Credit 5,617,865 4,642,013 21.0 5,617,865 4,642,013 21.0Guarantees 12,397,993 12,301,507 0.8 12,397,993 12,301,507 0.8Bills Sent for Collection 331,648 97,613 239.8 331,648 97,613 239.8Stock on Travellers’ Cheques 463,210 846,734 (45.3) 463,210 846,734 (45.3) 22,210,621 20,275,808 9.5 22,210,621 20,275,808 9.5Forward Exchange Contracts (Net) 24,008,962 7,032,583 241.4 24,008,962 7,032,583 241.4 46,219,583 27,308,392 69.3 46,219,583 27,308,392 69.3

Commitments and Contingencies 62,021,644 41,523,400 49.4 62,021,644 41,523,400 49.4

36.2 Contingent Liabilities36.2.1 Litigation against the Bank (a) Three LT applications are before the Labour Tribunal in Case Nos. 1/14/06, 2/846/05 & 01/31/08 on termination of employment. (b) Three actions have been filed in District Court , Colombo by constituents in Case Nos. DLM/164/2008, DLM/214/2009, 21508//L, three in

DC Kaduwela in Case Nos. 104/L, 75/L, 74/L, one in DC Horana in Case No. 2504/MB, one in DC Gampaha in Case No. 1690/L, one in DC Kuliyapitiya in Case No. 15315/L, one in DC Avissawella in Case No. 25293/L, two in DC Matale in Case Nos. 6408/L, 6257/L, one in DC Hambantota in Case No. 5380/SPL and one in DC Nugegoda in Case No. 267/L to prevent the Bank from enforcing the mortgages to recover it’s dues.

Six actions have been filed in DC Colombo in Case Nos. DHP/00033, 58032/M, DMR/01138, 53009/MHP, DMR/7359/09, DMR/7358/09 & one in

DC Bandrawela in Case No. 15/CLAIM clamming damages from the Bank. One action has been filed in DC Gampaha in Case No. 316/CLAIM to prevent the Bank from executing rights in favor of the Bank. Eight actions have been filed in DC Colombo in Case Nos. DSP/205/2008, DSP/00174/2009, DP/00251/09, DSP/00231/2009, DSP/00216/2009,

DSP/00214/2009, DSP/00191/2009 & DSP/00172/2009 in which the Bank has been made a party only for the purpose of giving notice and no relieves claimed against the Bank.

(c) Nine applications are pending before the Court of Appeal in Application Nos. CALA/286/2006,CA/REV/1707/2005, CA/REV/690/2005,

CALA/64/2006, CALA/457/2006, CALA/320/2001, CALA/132/2006, CA/694/95/F & 97/2009/LA. (d) Commercial High Court Case No. 11/2004/HC(civil) The above Case has been filed against the Bank in the Commercial High Court by Claremont

Capital Limited (a company incorporated in the British Virgin Islands) for the recovery of a sum of Rs 273,232,259.16 on the allegation that the Bank had wrongfully debited the said amount from the bank account of Claremont Capital Limited. The said party has also claimed a sum of Rs. 53,411,299.34 on account of the alleged loss suffered by them up to date of institution of the action and a sum of Rs.4,906,796.63 per month as alleged continuing losses. Both the management and the Bank’s lawyers maintain that there were no wrongdoings and the case is being contested.

(e) Apart from the above, six cases have been filed against the Bank in the Commercial High Court Case Nos. CHC/168/2005, CHC/171/2004,

320/2009/MR/CHC, CHC/CIVIL/595/2009, HC/721/2009/MR & 22/CA/KANDY.




36.2.2 Capital expenditure approved by the Board of Directors, for which provisions have not been made in these accounts, amounted to approximately;

As at 31st December Bank Group 2009 2008 2009 2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Approved and contracted for 138,088 237,220 138,088 237,220Approved but not contracted for 417,531 221,882 417,531 221,882 555,619 459,102 555,619 459,102

37 Related Party Transactions

The bank carries out transactions in the ordinary course of business with the related parties.

37.1 Transactions with Key Managerial PersonnelKey Managerial Personnel Include members of the Board of Directors of the Bank and Key Employees of the Bank holding directorships in Subsidiary and Associate Companies of the Bank.

37.1.1 Short Term Employment Benefits to Key Managerial personnel amounted to Rs. 29,174 Thousand for the year 2009. (Rs 15,731 Thousand in 2008)

37.1.1.1 Directors’ Fees & Expenses amounted to Rs. 16,075 Thousand for the year 2009. ( Rs 6,217 Thousand in 2008)

37.1.1.2 No Post Employment Benefit was paid to Key Managerial Personnel during the year 2009. (Rs 30,761 Thousand in 2008)

37.1.2 Loans & Advances to Key Managerial Personnel and their close family members are detailed below.

Limit Balances Limit Balances as at as at 2009 31st December 2009 2008 31st December 2008 (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)

- - 623 347

37.1.3 Credit card facilities to Key Managerial Personnel and their close family members are detailed below.

Limit Balances Limit Balances as at as at 2009 31st December 2009 2008 31st December 2008 (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)

3,875 513 3,920 237

37.1.4 Deposits and Investments from Key Managerial Personnel amounted to Rs. 68,098 Thousand for the year 2009. ( Rs 16,074 Thousand in 2008)

37.1.5 Entities controlled by Key Managerial Personnel & their close family members

Facility 2009 2008 (Rs. ‘000) (Rs. ‘000)

Loans & Advances 433 1,066

Financial Reports


37.2 Transactions with Subsidiary Companies

The Companies had the following financial dealings during the year with related parties 2009 2008 Subsidiary Company Nature of Balance Balance Facility / Outstanding Outstanding Transaction (Rs. ‘000) (Rs. ‘000)

Sampath Centre Ltd. Deposits 29,771 12,907 Loans & Advances 139,801 11,980 Income & fees received 148,577 148,356 Expenses & fees paid 9,844 - Other Assets 2,494 3,240 Other Liabilities 62,754 30,729

Sampath Surakum Ltd. Deposits - 8,534 Income & fees received 95,321 9,919 Reverse Repo - 588,000 Repo - - Expenses & fees paid 5,094 9,868 Interest Payable - - Interest Receivable - 2,489

Sampth Surkum Ltd. Was amalgamated with the Bank w.e.f 3rd November 2009.

S C Securities (Pvt) Ltd. Loans & Advances 49,832 1,385 off Balance Sheet Accommodations 1,750 1,750 Deposits 76,701 24 Income & fees received 10,359 14,843 Repo - 90,000 Expenses & fees paid 6,208 4,794 Other Liabilities 25 25

Sampath Leasing & Factoring Ltd. Loans & Advances 520,031 193,860 Deposits 10,235 18,337 Income & fees received 185 376 Expenses & fees paid 73,476 29,521 Lease Receivable 602 2,121

Sampath Information Technology Solutions Ltd. Loans & Advances 9,617 4,399 Expenses & fees paid 1,506 908

37.3 Transactions with Associate Company

LankaBangla Finance Ltd. Dividend Income Received 17,405 16,680

LankaBangla Finance Ltd. is no longer an associate of the Bank since 03.08.2009.




37.4 Transactions with Other Related Parties Nature of 2009 2008 Company Transaction (Rs.’000) (Rs.’000)

Produce of Paradise (Pvt) Ltd. Loans & Advances 12,600 18,805

Investment in Produce of Paradise (Pvt) Ltd. was sold on 30.12.2009. Therefore, it is no longer a related party of the Bank from such date.

37.5 Transactions with Entities where Key Managerial Personnel have either Significant Influence or Control

During the year, the Bank purchased goods and services to the value of Rs. 23.472 Mn from entities where Key Managerial Personnel have either significant influence or control.

37.6 Transactions with Post Employment Benefits of the Bank

Name of the Related Party Nature of 2009 2008 Transaction (Rs.’000) (Rs.’000)

37.6.1 Sampath Bank Employees’ Provident Fund Treasury Bills 1,187,284 1,080,902 Treasury Bonds - 126,740 Deposits 827,616 280,000 Investment in Sampath Bank Shares (Number of Shares) 3,444,310 3,444,310 Market Value as at 31st December 703,500 234,213

37.6.2 Sampath Bank Employees’ Pension Fund Fixed Deposits 926,254 422,623 Demand Deposits 1,417 1,417 Treasury Bills 968,598 1,051,710 Investment in Sampath Bank Shares (Number of Shares) 859,755 859,755 Market Value as at 31st December 175,605 58,463

Financial Reports


38 Maturity Analysis

An analysis of the interest bearing assets and liabilities based on the remaining period at the Balance Sheet date to the respective contractual maturity dates is as follows.

38.1 BankMaturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at years 31.12.2009 31.12.2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Interest Earning AssetsMoney at call & short notice 2,473,108 - - - - 2,473,108 4,459,164Sri Lanka Treasury Bills & bonds 17,650,256 13,528,625 537,576 51,360 - 31,767,817 20,281,933Dealing Securities 2,676,615 459,389 - - - 3,136,004 4,662,741Investment Securities 43,800 2,859,930 3,630,495 - - 6,534,225 1,057,946Bills of Exchange 2,874,909 - - - - 2,874,909 2,658,106Loans & advances 22,110,777 22,281,476 5,485,980 13,695,170 23,244,589 86,817,992 81,633,697Lease rentals receivable 476,456 1,269,011 1,589,243 121,816 27,305 3,483,831 5,420,735

Total Interest Earning Asset - 31.12.09 48,305,920 40,398,431 11,243,294 13,868,347 23,271,894 137,087,886 Total Interest Earning Asset - 31.12.08 51,086,536 31,449,955 19,515,837 7,275,186 10,846,808 120,174,322

Non Interest Earning AssetsCash and short term funds 2,794,911 600,176 - - - 3,395,087 2,463,802Balances with Central Bank 5,265,596 1,730,022 266,199 51,530 84,356 7,397,703 6,878,897Dealing Securities 276,207 - - - - 276,207 165,648Interest and fees receivable 1,854,370 - - - - 1,854,370 2,301,518Investment in subsidiaries & Associate Companies - - - - 991,626 991,626 969,878Other Investments - 130,104 235,000 - 364,820 729,924 734,439Property, plant and equipment - - - - 3,420,483 3,420,483 3,288,747Other Assets 662,718 195,373 - - 150,519 1,008,613 1,561,299

Total Non - Interest Earning Asset - 31.12.09 10,853,801 2,655,676 501,199 51,530 5,011,805 19,074,012Total Non - Interest Earning Asset - 31.12.08 11,216,199 1,693,913 365,392 255,032 4,833,692 18,364,228

Total Asset - 31.12.09 59,159,722 43,054,107 11,744,493 13,919,877 28,283,698 156,161,897Percentage - 31.12.09 37.9% 27.6% 7.5% 8.9% 18.1% 100.0%

Total Asset - 31.12.08 62,302,735 33,143,868 19,881,229 7,530,218 15,680,500 - 138,538,550Percentage - 31.12.08 45.0% 23.9% 14.4% 5.4% 11.3% - 100.0%

Interest Bearing LiabilitiesDeposits 81,091,661 28,953,301 3,987,244 770,010 1,260,538 116,062,755 98,540,810Refinance borrowings 354,284 810,791 1,420,741 884,752 1,348,760 4,819,327 4,592,071Securities Sold Under re-purchase agreement 2,328,335 557,152 1,993 - - 2,887,480 2,423,245Debentures/Securities evidenced by paper - - 2,050,000 - 1,052,468 3,102,468 4,514,214Other borrowings 379,918 487,617 4,326 - - 871,861 3,828,211

Total Interest Bearing Liabilities - 31.12.09 84,154,197 30,808,861 7,464,305 1,654,763 3,661,766 127,743,892Total Interest Bearing Liabilities - 31.12.08 74,945,923 26,808,885 3,115,830 4,643,733 4,384,180 113,898,551




38.1 Bank Contd.Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at years 31.12.2009 31.12.2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Non Interest Bearing LiabilitiesDeposits 9,627,135 - - - - 9,627,135 8,390,671Deferred Taxation - - - - 481,199 481,199 254,941Unclaimed Dividends 29,880 - - - - 29,880 32,004Other Liabilities 5,636,295 578,757 - - 218,560 6,433,612 6,186,049Shareholders’ Funds - - - - 11,846,181 11,846,181 9,776,334

Total Non - Interest Bearing Liabilities - 31.12.09 15,293,309 578,757 - - 12,545,940 28,418,006Total Non - Interest Bearing Liabilities - 31.12.08 13,919,533 670,104 - - 10,050,362 24,639,999

Total Liabilities & Shareholders’ Funds - 31.12.09 99,447,506 31,387,618 7,464,305 1,654,763 16,207,706 156,161,897Percentage - 31.12.09 63.7% 20.1% 4.8% 1.1% 10.4% 100.0%

Total Liabilities & Shareholders’ Funds - 31.12.08 88,865,456 27,478,989 3,115,830 4,643,733 14,434,542 - 138,538,550Percentage - 31.12.08 64.1% 19.8% 2.2% 3.4% 10.4% 100.0%

GAP 2009 (40,287,784) 11,666,488 4,280,188 12,265,114 12,075,993GAP 2008 (26,562,721) 5,664,879 16,765,399 2,886,485 1,245,958

38.2 GroupMaturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at years 31.12.2009 31.12.2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Interest Earning AssetsMoney at call & short notice 2,473,108 - - - - 2,473,108 4,459,164Sri Lanka Treasury Bills & bonds 17,674,173 13,534,337 537,576 51,360 - 31,797,446 20,741,036Investment Securities 43,800 2,859,930 3,630,495 - 187,290 6,721,515 4,665,668Dealing Securities 2,676,615 459,389 - - - 3,136,004 1,057,946Bills of Exchange 2,874,909 - - - - 2,874,909 2,658,106Loans & advances 22,029,105 22,276,699 5,039,512 13,669,298 23,087,687 86,102,302 81,428,608Lease rentals receivable 776,627 1,625,311 2,475,589 121,816 27,305 5,026,648 7,728,360

Total Interest Earning Asset - 31.12.09 48,548,337 40,755,665 11,683,172 13,842,475 23,302,282 138,131,931Total Interest Earning Asset - 31.12.08 51,894,698 31,942,715 20,719,814 7,334,154 10,847,505 122,738,886

Non Interest Earning AssetsCash and short term funds 2,802,423 600,176 - - - 3,402,599 2,464,352Balances with Central Bank 5,265,596 1,730,022 266,199 51,530 84,356 7,397,703 6,879,379Dealing Securities 276,207 - - - - 276,207 165,648Interest and fees receivable 1,854,370 - - - - 1,854,370 2,324,671Investment in subsidiaries & Associate Companies - - - - - - 364,060Other Investments - 130,104 235,000 - 364,820 729,924 734,439Property, plant and equipment - - - - 4,731,762 4,731,762 4,646,353Other Assets 968,797 330,509 - - 178,247 1,477,553 1,961,125

Total Non - Interest Earning Asset - 31.12.09 11,167,392 2,790,811 501,199 51,530 5,359,186 19,870,118Total Non - Interest Earning Asset - 31.12.08 11,627,350 1,697,145 367,876 255,032 5,592,624 19,540,027



Financial Reports


38.2 Group contd.Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at years 31.12.2009 31.12.2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Interest Bearing LiabilitiesDeposits 80,985,208 28,953,301 3,987,244 770,010 1,260,538 115,956,302 98,527,904Refinance borrowings 354,284 810,791 1,420,741 884,752 1,348,760 4,819,327 4,592,071Securities Sold Under re-purchase agreement 2,328,335 557,152 1,993 - - 2,887,480 2,439,553Debentures/Securities evidenced by paper - - 2,050,000 - 1,052,468 3,102,468 4,514,214Other borrowings 515,019 670,832 302,902 54,128 - 1,542,880 6,150,875

Total Interest Bearing Liabilities - 31.12.09 84,182,845 30,992,076 7,762,881 1,708,891 3,661,766 128,308,458Total Interest Bearing Liabilities - 31.12.08 76,485,491 27,183,814 3,486,799 4,644,037 4,424,476 116,224,617

Non Interest Bearing LiabilitiesDeposits 9,616,881 - - - - 9,616,881 8,363,774Deferred Taxation - - - - 478,636 478,636 268,703Unclaimed Dividends 29,880 - - - - 29,880 32,004Other Liabilities 5,949,263 583,664 - 100,917 227,323 6,861,167 6,450,392Shareholders’ Funds - - - - 12,611,801 12,611,801 10,819,833Minority Interest - - - - 95,228 95,228 119,590

Total Non - Interest Bearing Liabilities - 31.12.09 15,596,024 583,664 - 100,917 13,412,988 29,693,593Total Non - Interest Bearing Liabilities - 31.12.08 14,110,379 672,721 1,419 - 11,269,777 26,054,296

Total Liabilities and Shareholders’ Funds- 31.12.09 99,778,869 31,575,740 7,762,881 1,809,808 17,074,754 158,002,050Percentage - 31.12.09 63.1% 20.0% 4.9% 1.1% 10.8% 100.0%

Total Liabilities & Shareholders’ Funds - 31.12.08 90,595,870 27,856,535 3,488,218 4,644,037 15,694,253 - 142,278,913Percentage - 31.12.08 63.7% 19.6% 2.5% 3.3% 11.0% 100.0%

GAP 2009 (40,063,140) 11,970,737 4,421,490 12,084,197 11,586,714GAP 2008 (27,073,822) 5,783,326 17,599,472 2,945,149 745,876




38.3 Interest Rate Sensitivity - Interest rate risk analysis of assets and liabilities The Bank is exposed to various risks associated with the effects of fluctuations in the prevalling levels of market interest rates on its financial position and cashflow.

The following table indicates the periods in which the financial instruments are repriced or mature , whichever is earlier.

Bank Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Non Interest Total as at Total as at years Sensitive 31/12/2009 31/12/2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

AssetsCash and short term funds - 600,176 - - - 2,794,911 3,395,087 2,463,802Balances with Central Bank - - - - - 7,397,703 7,397,703 6,878,897Money at call & short notice 2,473,108 - - - - - 2,473,108 4,459,164Sri Lanka Treasury Bills & bonds 17,650,256 13,528,625 537,576 51,360 - - 31,767,817 20,281,933Commercial Papers - 459,389 - - - - 459,389 -Dealing Securities 2,676,615 - - - - 276,207 2,952,822 1,223,594Investment Securities 4,679,811 1,854,414 - - - 729,924 7,264,149 5,397,180Bills of Exchange 2,874,909 - - - - - 2,874,909 2,658,106Loans & advances 27,987,001 14,841,389 4,260,506 13,443,983 23,413,460 2,871,653 86,817,992 81,633,697Lease rentals receivable 426,391 1,132,808 1,422,247 109,016 24,436 368,933 3,483,831 5,420,735Investment in subsidiaries & Associate Companies - - - - - 991,626 991,626 969,878Interest and fees receivable - - - - - 1,854,370 1,854,370 2,301,518Other Assets - - - - - 1,008,611 1,008,611 1,561,299Property, plant and equipment - - - - - 3,420,483 3,420,483 3,288,747

Total Assets - 31.12.2009 58,768,090 32,416,801 6,220,329 13,604,359 23,437,896 21,714,421 156,161,897Percentage - 31.12.09 37.6% 20.8% 4.0% 8.7% 15.0% 13.9% 100.0%

Total Assets - 31.12.2008 50,219,639 35,584,927 14,183,712 6,591,124 11,314,861 20,644,285 138,538,550Percentage - 31.12.08 36.2% 25.7% 10.2% 4.8% 8.2% 14.9% 100.0%

LiabilitiesDeposits 82,783,490 28,953,301 3,717,416 589,933 18,614 9,627,135 125,689,890 106,931,481Refinance borrowings 354,284 810,791 1,420,741 884,752 1,348,760 - 4,819,327 4,592,071Securities Sold Under re-purchase agreement 2,328,335 557,152 1,993 - - - 2,887,480 2,423,245Debentures/Securities evidenced by paper 957,063 550,000 542,938 - 1,052,467 - 3,102,468 4,514,214Other Borrowings 379,917 4,966 4,326 - - 482,652 871,861 3,828,211Deferred Taxation - - - - - 481,199 481,199 254,941Unclaimed Dividends - - - - - 29,880 29,880 32,004Other Liabilities - - - - - 6,433,612 6,433,612 6,186,049Shareholders’ Funds - - - - - 11,846,181 11,846,181 9,776,334

Total Liabilities & Shareholders’ Funds 31.12.2009 86,803,089 30,876,210 5,687,414 1,474,685 2,419,840 28,900,657 156,161,897Percentage - 31.12.09 55.6% 19.8% 3.6% 0.9% 1.5% 18.5% 100.0%

Total Liabilities & Shareholders’ Funds 31.12.2008 75,510,924 28,308,401 2,803,617 2,891,430 4,384,180 24,639,998 138,538,550Percentage - 31.12.08 54.5% 20.4% 2.0% 2.1% 3.2% 17.8% 100.0%

Net Interest Sensitivity GAP 2009 (28,034,999) 1,540,529 532,915 12,129,674 21,018,056 (7,186,236)Net Interest Sensitivity GAP 2008 (25,291,284) 7,276,526 11,380,096 3,699,694 6,930,681 (3,995,713)

Financial Reports


38.4 Interest Rate Sensitivity - Interest rate risk analysis of assets and liabilitiesThe following table indicate the periods in which the financial instruments reprice or mature , whichever is earlier.

Group Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Non Interest Total as at Total as at years Sensitive 31.12.2009 31.12.2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

AssetsCash and short term funds - 600,176 - - - 2,802,423 3,402,599 2,464,352Balances with Central Bank - - - - - 7,397,703 7,397,703 6,879,379Money at call & short notice 2,473,108 - - - - - 2,473,108 4,459,164Sri Lanka Treasury Bills & bonds 17,674,173 13,534,337 537,576 51,360 - - 31,797,446 20,741,036Commercial Papers - 459,389 - - - - 459,389 -Dealing Securities 2,676,615 - - - - 276,207 2,952,822 1,223,594Investment Securities 4,679,811 1,854,414 - - 187,290 729,924 7,451,439 5,400,107Bills of Exchange 2,874,909 - - - - - 2,874,909 2,658,106Loans & advances 27,905,329 14,396,612 4,254,038 13,418,111 23,256,558 2,871,653 86,102,302 81,428,609Lease rentals receivable 708,046 1,445,657 2,249,571 106,112 23,785 493,477 5,026,648 7,728,358Investment in subsidiaries & Associate Companies - - 364,060Interest and fees receivable 1,854,370 1,854,370 2,324,671Other Assets 1,477,553 1,477,553 1,961,125Property, plant and equipment 4,731,762 4,731,762 4,646,353

Total Assets - 31.12.2009 58,991,991 32,290,585 7,041,185 13,575,583 23,467,633 22,635,072 158,002,050Percentage 31.12.09 37.3% 20.4% 4.5% 8.6% 14.9% 14.3% 100.0%

Total Assets - 31.12.2008 50,826,059 35,698,296 15,121,875 6,671,133 11,315,511 22,646,039 142,278,913Percentage 31.12.08 35.7% 25.1% 10.6% 4.7% 8.0% 15.9% 100.0%

LiabilitiesDeposits 80,985,208 28,953,301 3,987,244 770,010 1,260,538 9,616,881 125,573,183 106,891,678Refinance borrowings 354,284 810,791 1,420,741 884,752 1,348,760 - 4,819,327 4,592,071Securities Sold Under re-purchase agreement 2,328,335 557,152 1,993 - - - 2,887,480 2,439,553Debentures/Securities evidenced by paper 957,063 550,000 542,938 - 1,052,467 - 3,102,468 4,514,214Other Borrowings 515,018 188,180 302,902 54,128 - 482,652 1,542,880 6,150,875Deferred Taxation - - - - - 478,636 478,636 268,703Unclaimed Dividends - - - - - 29,880 29,880 32,004Other Liabilities - - - - - 6,861,167 6,861,167 6,450,392Shareholders’ Funds - - - - - 12,611,800 12,611,800 10,819,833Minority Interest - - - - - 95,228 95,228 119,590

Total Liabilities & Shareholders’ Funds - 31.12.2009 85,139,907 31,059,424 6,255,819 1,708,891 3,661,765 30,176,243 158,002,050Percentage 31.12.09 53.9% 19.7% 4.0% 1.1% 2.3% 19.1% 100.0%

Total Liabilities & Shareholders’ Funds - 31.12.2008 76,485,491 29,333,814 3,186,799 2,894,037 4,424,476 26,054,296 142,278,913Percentage 31.12.08 53.8% 20.5% 2.2% 2.0% 3.1% 18.3% 100.0%

Net Interest Sensitivity GAP 2009 (26,147,917) 1,231,161 785,366 11,866,692 19,805,868 (7,541,171)Net Interest Sensitivity GAP 2008 (25,659,432) 6,464,482 11,935,076 3,777,096 6,891,035 (3,408,257)




39 Segment Reporting

Financial statistics by segments as per the provisions under Sri Lanka Accounting Standards No.28, Reporting of Financial Statement by segment.

Dealing/ Elimination/ Total Banking Leasing Investment Others Unallocated 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Interest 20,182,420 18,414,775 11,889 179,586 3,436 3,268 (97,675) (67,900) 20,100,070 18,529,729Leasing 1,244,961 1,573,327 1,244,961 1,573,327Dividends 78,225 104,612 38,195 16,411 (38,195) (33,091) 78,225 87,932Commissions 1,205,529 1,355,049 1,205,529 1,355,049Exchange 774,489 647,211 774,489 647,211Others 2,146,678 670,058 68,504 175,730 35,467 8,269 185,312 176,892 (279,079) (155,432) 2,156,881 875,517Total revenue fromexternal customers 24,387,342 21,191,705 1,313,464 1,749,057 85,551 204,266 188,748 180,160 (414,950) (256,423) 25,560,156 23,068,765Inter segment revenue (78,225) (102,788) 78,225 102,788 -Total revenue 24,309,117 21,088,917 1,313,464 1,749,057 163,777 307,054 188,748 180,160 (414,950) (256,423) 25,560,156 23,068,765

Segment result 3,740,010 2,253,183 178,620 278,038 14,359 17,671 81,509 90,818 (169,962) (33,091) 3,844,536 2,606,619Share of profit of Associate Company 160,391 180,802Profit from Operations 4,004,927 2,787,421Income Tax Expenses 1,921,170 1,262,412Minority Interest 11,273 30,239Net profit for the year 2,072,483 1,494,770

Segment assets 143,668,945 127,455,466 14,474,164 13,806,102 200,592 1,244,045 1,341,712 1,341,712 (1,683,364) (1,568,412) 158,002,050 142,278,913Unallocated assets -Total assets 143,668,945 127,455,466 14,474,164 13,806,102 200,592 1,244,045 1,341,712 1,341,712 (1,683,364) (1,568,412) 158,002,050 142,278,913

Segment liabilities 133,696,707 119,341,594 12,191,869 11,978,358 71,402 721,738 273,084 273,084 (938,040) (975,280) 145,295,022 131,339,496Unallocated liabilitiesTotal liabilities 133,696,707 119,341,594 12,191,869 11,978,358 71,402 721,738 273,084 273,084 (938,040) (975,280) 145,295,022 131,339,496

Cash flows fromOperating activities 19,556,088 11,500,968 812,661 191,803 (60,744) 2,540 130,904 85,108 455,718 (164,504) 20,894,626 11,615,915Cash flows fromInvesting activities (14,572,190) (6,094,724) 844 (25,628) (223) (394) (573) (5,578) 323,728 146,266 (14,248,414) (5,980,061)Cash flows fromFinancing activities (4,418,515) (5,041,083) (667,884) (166,904) - - (84,753) (162,363) (902,717) 99,876 (6,073,869) (5,270,474)Capital Expenditure 496,763 578,580 731 25,628 223 394 573 5,578 - 7,818 498,289 617,998

Financial Reports


40 Trust Activities40.1 Employees’ Share Trust LoanThe Sampath Bank Employees’ Share Trusts namely, Sampath Trust, Sampath Team Trust & Sampath Middle Management Trust were set up by the directors of the Bank. This is in line with the Articles of the bank which empowers the directors to create an ESOP and 6,536,800 shares were purchased for this purpose, to be allocated to employees.

Payment for the shares being made by the trustees from the proceeds of loans ( Interest rate at 5 % ) granted by the Bank.

Sampath Trust Sampath Team Trust Sampath Middle Management Trust Trustees SSP Corporate Varners International Corporate Services Pvt Ltd Pvt Ltd Services Ltd 2009 2008 2009 2008 2009 2008 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Original Loan Amount ( Rs ‘000 ) 173,620 173,620 169,689 169,689 175,119 175,119Balance at beginning of the year 116,402 111,949 129,237 126,229 132,429 128,189Additions 3,138 6,288 2,799 3,899 3,449 5,404Repayments during the year (26,480) (1,835) (31,732) (891) (29,082) (1,164)Balance at end of the year 93,059 116,402 100,304 129,237 106,796 132,429Number of Shares ( ‘000 ) 2,581 2,581 2,465 2,465 2,579 2,579Market price 204.25 68.00 204.25 68.00 204.25 68.00Market value of the shares held ( Rs.’000 ) 527,169 175,508 503,476 167,620 526,761 175,372

41 Assets Pledged as SecurityThe following aseets have been pledged as securities for liabilities

41.1 Nature of assetsSecurities sold under repurchase agreements Bank Group 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Balance as at 1st January 2,423,245 1,730,045 40.1 2,439,553 2,686,634 (9.2)Additions 464,235 693,200 (33.0) 447,928 (247,081) (281.3)Balance as at 31st December 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4

41.2 Nature of liabilities Carring amounts pledged Bank Carring amounts pledged GroupAssets pledged as Security 2009 2008 Change 2009 2008 Change (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %

Treasury Bills & Bonds included under Note No. 14 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4




42 Post Balance Sheet EventsNo circumstances have arisen since the balance sheet date which would require adjustments to,or disclosure in the financial statements, other than the following.

The Board of Directors of the Bank at a meeting held on 28th January 2010 resolved to recommend to the shareholders a consolidation and sub-division (spliting) of the existing 68,887,628 ordinary shares of the Bank, without any change to the stated capital of the Bank of Rs.1,582 Mn. subject to obtaining shareholders’ approval at an Extra Ordinary General Meeting for the said purpose and for the amendments to be made to the Articles of Association in that regard, if necessary. Upon the aforesaid consolidation and the sub-division, the resulting number of shares would be 75,776,390. Shareholders would in effect receive one share for every ten shares held by them.

Accordingly, dividend will be paid on 75,776,390 ordinary shares after effecting the said sub-division of the ordinary shares of the Bank. However, in accordance with the Sri Lanka Accounting Standard 12 (Revised) on events after balance sheet date,proposed final dividends have not been recognised as a liability as at 31st December 2009.As required by section 56(2) of the Companies Act no 7 of 2007, the Board of Directors has confirmed that the bank satisfies the Solvency Test in accordance with section 57 of the Companies Act no 7 of 2007 and will be obtaining a certificate from the auditors, prior to recommending the final dividend of Rs. 6.25 per Share for this year, for approval by the Shareholders at the Annual General meeting to be held on 30th March 2010.

Financial Reports


Income Statement in US$

Bank Group 2009 2008 Growth 2009 2008 Growth For the year ended 31st December (US$.’000) (US$.’000) % (US$.’000) (US$.’000) %

Income 220,258 196,837 11.9 223,291 204,148 9.4

Interest Income 183,190 172,133 6.4 186,468 177,903 4.8Less : Interest Expenses 115,005 113,287 1.5 117,692 119,483 (1.5)

Net Interest Income 68,185 58,846 15.9 68,777 58,420 17.7Foreign Exchange Profit 6,766 5,728 18.1 6,766 5,728 18.1Fees & Commission Income 10,531 11,992 (12.2) 10,531 11,992 (12.2)Other Income 19,770 6,985 183.1 19,526 8,526 129.0

Operating Income 105,253 83,550 26.0 105,600 84,665 24.7

Operating ExpensesPersonnel Costs 19,168 17,282 10.9 19,698 17,862 10.3Premises, Equipment &Establishment Expenses 15,750 14,825 6.2 15,492 14,739 5.1Provision for Retirement Benefits 4,087 1,642 148.9 4,099 1,661 146.7Loan Losses and Provisions - Specific 2,831 5,269 (46.3) 3,743 5,598 (33.1) - General (344) 1,891 (118.2) (344) 1,891 (118.2)Diminution/ (Appreciation) in Value of Investments 8,015 3,920 104.5 8,015 3,632 120.7Other Overhead Expenses 21,010 16,030 31.1 21,312 16,214 31.4Operating Expenses 70,517 60,859 15.9 72,014 61,598 16.9

Operating Profit before Provision for Taxation 34,736 22,691 53.1 33,586 23,067 45.6 and Associate company’s ProfitAdd/(Less): Share of Profit before Tax of Associate Company - - - 1,401 1,600 (12.4)Profit before Tax 34,736 22,691 53.1 34,987 24,667 41.8Less : Provision for Taxation 16,405 10,178 61.2 16,783 11,172 50.2Profit after Tax 18,331 12,512 46.5 18,204 13,496 34.9

Attributable to:Equity Holders of the Parent 18,331 12,512 46.5 18,105 13,228 36.9Minority Interest - - - 98 268 (63.2)Profit for the year 18,331 12,512 46.5 18,204 13,496 34.9

Earnings per Share - - 0.26 0.19Dividend per Share - Gross Final Proposed 0.05 0.04 0.05 0.04Dividend per Share - Net Final Proposed 0.05 0.03 0.05 0.03

Income Statement in US$


Balance Sheet in US$

Bank GroupAs at 31st December 2009 2008 Growth 2009 2008 Growth (US$.’000) (US$.’000) % (US$.’000) (US$.’000) %

AssetsCash and Short Term Funds 29,659 25,042 18.4 29,725 25,046 18.7Balance with Central Bank of Sri Lanka 64,626 60,875 6.2 64,626 60,879 6.2Government of Sri Lanka Treasury Bills & Bonds 277,521 179,486 54.6 277,780 183,549 51.3Commercial Papers 4,013 - 100.0 4,013 - 100.0Dealing Securities 2,413 10,828 (77.7) 2,413 10,828 (77.7)Placements and Loans with Other Banks 21,605 36,224 (40.4) 21,605 36,224 (40.4)Investment Securities 63,459 47,763 32.9 65,095 47,763 36.3Securities Purchased Under Re-sale Agreements 23,383 - 100.0 23,383 25 91,943.9Loans and AdvancesBills of Exchange 25,115 23,523 6.8 25,115 23,523 6.8Loans and Advances 758,434 722,422 5.0 752,182 720,607 4.4Lease Receivable within One Year 15,248 18,851 (19.1) 20,983 28,078 (25.3)Lease Receivable from One to Five Years 14,948 28,710 (47.9) 22,691 39,899 (43.1)Lease Receivable after Five Years 239 410 (41.8) 239 415 (42.5)Investment in Associate Company - 1,294 (100.0) - 3,222 (100.0)Investment in Subsidiary Companies 8,663 7,289 18.9 - - -Interest and Fees Receivable 16,200 20,367 (20.5) 16,200 20,572 (21.3)Other Assets 8,189 12,851 (36.3) 12,186 16,232 (24.9)Goodwill and Other Intangible Assets 622 965 (35.6) 722 1,124 (35.8)Property, Plant and Equipment 29,881 29,104 2.7 41,336 41,118 0.5Total Assets 1,364,217 1,226,005 11.3 1,380,292 1,259,105 9.6

LiabilitiesDeposits 1,098,016 946,296 16.0 1,096,996 945,944 16.0Unclaimed Dividends 261 283 (7.8) 261 283 (7.8)Refinance Borrowings 42,101 40,638 3.6 42,101 40,638 3.6Other Borrowings 7,616 33,878 (77.5) 13,478 54,433 (75.2)Securities Sold Under Re-purchase Agreements 25,225 21,445 17.6 25,225 21,589 16.8Other Liabilities 51,148 48,814 4.8 54,840 51,165 7.2Taxation 5,056 5,930 (14.7) 5,099 5,918 (13.8)Deferred Taxation 4,204 2,256 86.3 4,181 2,378 75.8Other Liabilities Evidenced by Paper 27,103 39,949 (32.2) 27,103 39,949 (32.2)Total Liabilities 1,260,730 1,139,489 10.6 1,269,285 1,162,296 9.2

Shareholders’ FundsStated Capital 13,817 13,997 (1.3) 13,817 13,997 (1.3)ReservesCapital ReservesStatutory / Risk Reserve Funds 4,115 3,608 14.0 4,117 3,737 10.2Other Capital Reserves 10,069 10,244 (1.7) 15,450 15,534 (0.5)Revenue Reserves 75,486 58,667 28.7 76,791 62,482 22.9 103,487 86,516 19.6 110,176 95,751 15.1Minority Interest - - - 832 1,058 (21.4)Total Equity 103,487 86,516 19.6 111,007 96,809 14.7Total Liabilities and Shareholders’ Funds 1,364,217 1,226,005 11.3 1,380,292 1,259,105 9.6

Net Asset Value per Share ( Rs) 1.50 1.26 19.6 1.60 1.39 15.1Commitments and Contingencies 541,816 367,464 47.4 541,816 367,464 47.4

Balance Sheet in US$

Financial Reports


Capital Adequacy

Capital Adequacy Ratio (CAR) is the amount of minimum capital which should be maintained by the banks, against their total Risk Weighted Assets (RWA).

CAR = Capital / Total Risk Weighted Assets X 100

Central Bank of Sri Lanka has issued instructions to all commercial banks to calculate the CAR as per the Basel II guidelines with effective from 01.01.2008. Basel II is an improved version of Basel I issued by the “Basel Committee of the Bank of International Settlement (BIS)”. BIS is incorporated in the city of Basel- Switzerland.

The single pillar framework of Basel I has been improved to a three pillar framework under Basel II as follows.

BASEL IIBASEL I

Pillar IComputation of Regulatory Capital against Credit + Market +

Operational Risk

Computation of Regulatory Capital against Credit + Market

Risk

Pillar II

Supervisory Review by the Central Bank on the total capital requirements of the Bank, in particular the additional capital requirements if any, on

risks not covered in Pillar I. (ie Interest Rate Risk, Liquidity Risk etc.) and strategies on capital management

No Pillar II

Pillar IIIDisclosure requirements on Capital Adequacy, enabling the market forces

to react, aimed at imposing market discipline on banks.No Pillar III

There are two Tiers of Capital which required banks to maintain two CARs, named Tier I CAR & Tier I plus Tier II CAR. All commercial banks are liable to maintain a minimum of 5% of Tier I CAR and minimum of 10% of Tier I plus Tier II CAR.

Tier I CapitalTier I Capital is calculated by the summation of the paid up ordinary share capital, non redeemable and non cumulative preference shares and other capital and revenue reserves after deducting the total of intangible assets, ESOP Loans, half of the amount invested in shares and debentures of banks and financial companies and half of the amount invested in un-consolidating banks and financial companies.

Tier II CapitalTier II Capital is calculated by the summation of the half of the revaluation reserves (subject to Central Bank approval), general provisions on loans and advances (maximum up to 1.25% of the total RWA), hybrid capital instruments and approved subordinated term debts (maximum of 50% of Tier I Capital) after deducting the half of the amount invested in shares and debentures of banks and financial companies and half of the amount invested in un-consolidating banks and financial companies.

As an initial step all commercial banks are required to adopt the following approaches in calculating the RWA.1. Credit Risk – The Standardized Approach Under the Standardized Approach the ratings assigned to customers and

exposures by External Credit Assessment Institutions (ECAI) are applied to measure the Credit Risk. ECAIs accepted by the Central Bank of Sri Lanka are Fitch Ratings Lanka Ltd, Lanka Rating Agency Ltd, Moody’s, Standard and Poor and Fitch Ratings International. The applicable risk weights vary from 0% to 150%.

2. Market Risk – The Standardized Measurement Approach

Market Risk is defined as the risk of losses in on-balance sheet and off-balance sheet items arising from the movements in the market prices. It measures the market risks pertaining to interest rate related instruments, equities of the trading book, foreign exchange and gold positions. There are two principal methods of measuring market risk under the Standardised Measurement Approach, I.e.a “maturity” method and a “duration” method. Central Bank of Sri Lanka has instructed banks to proceed with the duration method in order to arrive at the capital charge on market risk. Accordingly, commercial banks are required to measure the general market risk charge by calculating the price sensitivity of each item of the trading book separately and adding the resulting price sensitivities based on a maturity ladder.

3. Operational Risk – The Basic Indicator Approach Operational Risk is defined as the loss resulting from

inadequate or failed internal processes, people, systems or any other internal or external events. Under the Basic Indicator Approach banks are liable to maintain capital for operational risk at a fixed percentage on the average positive income of the three immediately proceeding years. The negative values should be excluded from the calculation, if any. The current applicable fixed percentage is set at 15% by the Basel Committee.

Capital Adequacy


Computation of Capital Adequacy Ratios - Basel II (Rs. Mn) Bank Group 2009 2008 2009 2008 Assets Risk weighted Assets Risk weighted Assets Risk weighted Assets Risk weighted Assets Assets Assets Assets

Risk-weighted Assets for Credit RiskClaims on Central Government and Central Bank of Sri Lanka 48,196.9 - 31,205.0 - 48,226.5 - 31,655.4 -Claims on Public Sector Entities 160.9 160.9 51.7 51.7 153.0 153.0 51.7 51.7Claims on Banks Exposures 3,219.9 859.1 5,635.5 2,998.0 3,227.3 866.5 5,638.9 3,001.4Claims on Financial Institutions 2,033.5 1,702.6 1,888.0 1,109.4 1,779.2 1,448.3 1,888.0 1,109.4Claims on Corporates 55,461.6 54,896.5 53,672.6 53,023.2 56,198.3 55,608.9 55,553.0 54,903.5Retail claims 10,485.5 7,864.2 14,868.2 11,151.2 10,485.5 7,864.2 14,868.2 11,151.2Claims Secured by Residential Property 7,825.1 4,897.9 7,050.4 3,986.1 7,825.1 4,897.9 7,050.4 3,986.1Past Due Loans 2,706.0 3,995.2 1,813.4 2,678.2 2,779.3 4,068.5 2,035.5 2,900.4Past Due Residential Mortgage Loans 706.7 681.5 768.0 731.9 706.7 681.5 768.0 731.9Cash Items 29,736.4 23.3 24,184.7 68.6 29,736.5 23.3 24,184.8 68.6Other Assets 6,018.0 6,018.0 7,197.8 7,197.8 7,786.7 7,786.7 8,729.8 8,729.8 166,550.6 81,099.2 148,335.5 82,996.2 168,904.3 83,398.8 152,423.8 86,634.0

Outstanding balance of on-balance sheet exposure (on the asset side) and off balance

sheet exposures

Outstanding balance of on-balance sheet exposure (on the asset side) and off balance sheet exposures

Categorizing the above into risk groups(7 groups)

Categorizing the above into risk groups, several new categories, total 16 groups

Only 5 risk weights0%, 10%, 20%, 50%, 100%

More risk weights – total 7(The original 5 and new risk weights of 75% and 150%)

Risk weighted values of the risk groups and the grand total

Risk weighted values of individual customers and other risk groups and the total

No Credit RatingIndividual Credit Ratings in certain risk

groups

Other Risk Groups where individual credit rating is not needed. ie, SME,

Residential mortgage loans

Risk weightings of group totals, applying the risk weights, as specified in the Accord

Risk weighting of individual customers, applying the relevant risk weights,

depending on the credit ratingRisk weighting of group totals

Basel I Basel II

No adjustments o/a collateral Adjustments o/a of eligible collateral

Capital Adequacy

The main differences of Basel I and Basel II could be tabulated as follows.

Financial Reports


Bank Group 2009 2008 2009 2008 Credit Principal Credit Principal Credit Principal Credit Principal Credit Conversion amount of Off- equivalent of amount of Off- equivalent of amount of Off- equivalent of amount of Off- equivalent of Factor (%) balance sheet Off-balance balance sheet Off-balance balance sheet Off-balance balance sheet Off-balance items sheet items items sheet items items sheet items items sheet items

Off-balance sheet ItemsDirect Credit Substitutes 5,560.5 5,560.5 5,667.1 5,667.1 5,560.5 5,560.5 5,667.1 5,667.1General Guarantees of Indebtedness 100.0 5,560.5 5,560.5 5,667.1 5,667.1 5,560.5 5,560.5 5,667.1 5,667.1Transaction-related Contingencies 4,945.3 2,772.2 4,254.4 2,367.2 4,945.3 2,772.2 4,254.4 2,367.2Performance Bonds, Bid Bonds & Warranties 50.0 2,948.3 1,474.2 2,334.2 1,167.1 2,948.3 1,474.2 2,334.2 1,167.1Others 65.0/62.5 1,997.0 1,298.0 1,920.2 1,200.1 1,997.0 1,298.0 1,920.2 1,200.1Short-Term Self-Liquidating Trade-Related Contingencies 9,648.5 1,929.7 7,823.3 1,564.7 9,648.5 1,929.7 7,823.3 1,564.7Shipping Guarantees 20.0 630.8 126.2 793.3 158.7 630.8 126.2 793.3 158.7Documentary Letters of Credit 20.0 5,617.9 1,123.6 4,642.0 928.4 5,617.9 1,123.6 4,642.0 928.4Trade related acceptances 20.0 3,399.9 680.0 2,387.9 477.6 3,399.9 680.0 2,387.9 477.6Other Commitments with an Original maturity of up to one year or which can be unconditionally cancelled at any time 15,031.2 - 12,765.1 - 15,031.2 - 12,765.1 -Undrawn Overdraft Facilities/Unused Credit Card Lines - 15,031.2 - 12,765.1 - 15,031.2 - 12,765.1 -Other Commitments with an Original Maturity of over one year 770.9 385.4 1,449.9 724.9 770.9 385.4 1,449.9 724.9Undrawn Term Loans 50.0 770.9 385.4 1,449.9 724.9 770.9 385.4 1,449.9 724.9Foreign Exchange Contracts 24,009.0 480.2 7,032.6 140.7 24,009.0 480.2 7,032.6 140.7Original Maturity-less than one year 2.0 24,009.0 480.2 7,032.6 140.7 24,009.0 480.2 7,032.6 140.7 59,965.3 11,128.0 38,992.4 10,464.5 59,965.3 11,128.0 38,992.4 10,464.5

Bank Group 2009 2008 2009 2008

Risk-weighted amounts for Market RiskInterest Rate Risk - 0.04 - 0.07General risk - 0.04 - 0.07Specific risk - - - -Equity Risk 44.66 36.22 44.66 36.22General risk 25.68 14.48 25.68 14.48Specific risk 18.98 21.74 18.98 21.74Foreign Exchange & Gold Risk 37.97 101.07 37.97 101.07Total Capital Charge for Market Risk 82.63 137.34 82.63 137.36Total Risk-weighted amount for Market Risk (Total Capital Charge X 10) 826.25 1,373.37 826.25 1,373.59

Bank Group 2009 2008 2009 2008

Risk-weighted Assets for Operational RiskAverage Net Income for last three financial years 9,647.2 7,781.1 9,736.2 7,917.6Deductions : - - - -Realised profits from the sale of securities (average of last three financial years) 628.7 83.2 534.8 41.3Extraordinary / irregular item of income (average of last three financial years) 5.3 3.9 5.7 3.9Gross Income 9,013.2 7,694.0 9,195.1 7,872.4Total Capital Charge for Operational Risk 1,352.0 1,154.1 1,379.3 1,180.9(Gross Income X 15%)Total Risk-weighted amount for Operational risk 13,519.8 11,541.0 13,793.5 11,808.6(Total Capital Charge for Operational Risk X 10)

Risk-weighted assets for credit risk 81,099.2 82,996.2 83,398.8 86,634.0Risk-weighted amounts for market risk 826.3 1,373.4 826.3 1,373.6Risk-weighted amounts for operational risk 13,519.8 11,541.0 13,793.5 11,808.6Total Risk-weighted Assets 95,445.3 95,910.6 98,018.6 99,816.2

Capital Adequacy


Bank Group 2009 2008 2009 2008

Calculation of Total Capital BaseCore Capital (Tier 1)Stated Capital 1,581.7 1,581.7 1,581.7 1,581.7Statutory Reserve Fund 471.0 407.7 471.3 422.3Published Retained Profits/(Accumulated Losses) 473.7 275.7 878.5 724.4General and Other Reserves 8,167.2 6,353.7 7,911.8 6,336.1Minority Interests (consistent with the above capital constituents) - - 95.2 119.6Deductions/Adjustments-Tier 1Goodwill - - 7.5 12.7Other intangible assets 71.2 109.1 75.1 114.3Advances granted to employees of the bank for the purchase of shares of the bank under a share ownership plan 296.7 378.1 296.7 378.150% of investments in unconsolidated banking and financial subsidiary companies. 262.5 187.5 - -50% investments in the capital of other banks and financial institutions 133.4 174.9 133.4 174.9Total Core Capital 9,929.8 7,769.2 10,425.7 8,504.1Supplementary Capital (Tier II)Revaluation Reserves (as approved by CBSL) 398.6 488.2 398.6 488.2General Provisions 678.7 718.5 678.7 718.5Approved Subordinated Term Debt 2,222.5 2,844.2 2,222.5 2,844.2Actual amount of Approved Subordinated Term Debt 3,102.5 4,514.2 3,102.5 4,514.2Deductions-Tier II 50% of investments in unconsolidated banking and financial subsidiary companies. 262.5 187.5 - -50% investments in the capital of other banks and financial institutions 133.4 174.9 133.4 174.9Eligible Tier II Capital 2,903.9 3,688.5 3,166.4 3,876.0Base Capital (Tier I + Tier II) 12,833.7 11,457.7 13,592.1 12,380.1LIMITS :(i) Approved subordinated Term Debt is limited to 50% of Total Tier 1 Capital.(ii) The total of Tier 11 Supplementary Elements should not exceed a maximum of 100% of Tier 1 Elements.(iii) General Provision should not exceed 1.25% of Risk Weighted Assets.

Bank Group 2009 2008 2009 2008

Core Capital Ratio ( Minimum Ratio - 5%) Core Capital (Tier 1) x 100 9,929.8 x 100 7,769.2 x 100 10,425.7 x 100 8,504.1 x 100 Total Risk-weighted Assets 95,445.3 95,910.6 98,018.6 99,816.2

Total Capital Ratio ( Minimum Ratio - 10% ) Capital Base x 100 12,833.7 x 100 11,457.7 x 100 13,592.1 x 100 12,380.1 x 100 Total Risk-weighted Assets 95,445.3 95,910.6 98,018.6 99,816.2

Core Capital (Tier 1) Ratio (%) 10.40 8.10 10.64 8.52Total Capital Ratio (%) 13.45 11.95 13.87 12.40

Capital Adequacy

Sampath Bank PLC | Annual Report 2009208Other Information

Share Information

Value Creation for Shareholders 2009 2008 Change %

Net Asset Value per Share (Rs.) 171.96 141.92 21.17Earnings Per Share - Group (Rs.) 30.08 21.70 38.6Dividends Per Share (Rs.) 6.25 4.00 56.25Market Price Per Share (Year end) 204.25 68.00 200.36Return On Equity (%) - After tax 19.41 15.41 25.96

Proposed Increase in the Number of Shares in Issue1. Consolidation of 10 Shares in to 12. The resulting 1 Share, sub - divided to 11 Shares

Share Information

0

60

30

120

90

180

150

Rs.

05 06 07 08 09

Shareholders’ Funds and NAPS

0

Rs. Mn.

8,000

4,000

2,000

6,000

10,000

12,000

NAPS (Rs)Shareholders’ Funds (Rs. Mn)

5,63

2

6,62

6

8,56

9

9,77

7

11,8

47

0

14

7

21

28

35

0

70

35

140

105

210

175

Rs.Rs.

05 06 07 08 09

Earnings and Highest Market Price Per Share

Highest Market PricePer Share (HMPPS)Earnings Per Share (ESP)-Group

12.5

4

15.5

6

16.6

2

21.7

0

30.0

8

Banks’ Market Capitalisation in Comparison to CSE 2009 2008 2007 2006 2005

Sampath Market Capitalisation (Rs.Mn.) 14,070 4,684 8,267 7,457 6,200% Increase in Market Capitalisation of Bank (Y on Y) 200.38 (43.34) 10.86 20.27 43.42CSE Market Capitalisation (Rs.Mn.) 1,092,137 488,812 820,700 834,800 584,040% Increase in Market Capitalisation of CSE (Y on Y) 123.43 (40.44) (1.69) 42.94 52.86Sampath Market Capitalisation as a % of CSE 1.29 0.96 1.01 0.89 1.06Market Capitalisation Rank 19 25 17 21 20

-50

0

-25

25

50

75

125

100

%

05 06 07 08 09

Fluctuation of Sampath Market Capitalisation

(Y on Y)

0

4,000

8,000

12,000

20,000

16,000

Rs. Mn.

05 06 07 08 09

Sampath Market Capitalisation

6,20

0

7,45

7

8,26

7

4,68

4

14,0

70

0

1.50

3.00

4.50

6.00

9.00

7.50

Rs.

05 06 07 08 09

Dividends per share

Sampath Bank PLC | Annual Report 2009 209Other Information

Share Information

Analysis of ShareholdersResident / Non - Resident 31.12.2009 31.12.2008 No of No of % No of No of % Shareholders Shares Shareholders Shares Resident Shareholders 14,389 61,072,592 88.65 14,568 57,219,137 83.06Non-Resident Shareholders 273 7,815,036 11.35 191 11,668,491 16.94Total 14,662 68,887,628 100.00 14,759 68,887,628 100.00

Individuals / Institutions 31.12.2009 31.12.2008 No of No of % No of No of % Shareholders Shares Shareholders Shares Individuals 14,301 27,557,972 40.00 11,435 12,729,631 18.48Institutions 361 41,329,656 60.00 3,324 56,157,997 81.52Total 14,662 68,887,628 100.00 14,759 68,887,628 100.00

Composition of Share Ownership - 2009( No of Shareholders ) No of Shareholders % No of Shares %

Shares 500 & Less 9,978 68.05 1,729,569 2.51Shares 501 - 5,000 4,138 28.22 5,790,217 8.41Shares 5,001 - 10,000 266 1.81 1,913,341 2.78More than 10,000 Shares 280 1.91 59,454,501 86.31Total 14,662 100.00 68,887,628 100.00

Share Trading - Market 2009 2008 2007 2006 2005

No of Transactions 1,266,299 776,244 876,928 952,382 1,100,451Number of Shares Traded 4,928,999,666 3,189,135,408 2,887,300,000 3,912,345,750 5,128,278,239Value of Shares Traded (Rs.Mn) 142,463 110,454 104,985 105,154 114,599

Composition of Share Ownership (No of Shares)

More than 10,000 Shares - 86%

Shares 5,001 - 10,000 - 3%

Shares 501 - 5,000 - 8%

Shares 500 & Less - 3%

Composition of Share Ownership (No of Shareholders)

More than 10,000 Shares - 2%

Shares 5,001 - 10,000 - 2%

Shares 501 - 5,000 - 28%

Shares 500 & Less - 68%


Share Trading - Sampath 2009 2008 2007 2006 2005

No of Transactions 8,578 1,280 3,071 2,858 3,628Number of Shares Traded 19,077,355 5,356,600 9,530,000 3,879,000 19,851,700As a % of total shares in issue 27.69 7.77 13.83 5.63 28.82Average Daily Turnonver (Rs.Mn.) 10.41 2.41 4.79 1.70 8.50Value of Shares Traded (Rs.Mn) 2,457.52 574.74 1,154.80 381.42 1,954.56

Sampath Share Price Fluctuation 2009 2008 2007 2006 2005

Minimum Market Price 65.00 65.00 100.00 75.25 61.00Maximum Market Price 205.00 120.00 135.00 117.25 114.00Price as at 31st December 204.25 68.00 120.00 109.75 90.00% Increase in Market Price (As at 31st Dec) 201.47 (43.33) 9.34 21.94 43.43

Share Information

0

5

10

15

25

20

Mn

05 06 07 08 09

Share Trading - Sampath Bank PLC

0

105

35

70

140

175

210

Rs.

05 06 07 08 09

Sampath Share Price Fluctuation

Price as at 31st December

Maximum Market Price

Minimum Market Price

Share Trading

0 0

3,000

Jan

- 05

Jan

- 06

Jan

- 07

Jan

- 08

Jan

- 09

150,000

6,000 300,000

9,000 450,000

12,000 600,000

15,000 750,000

18,000No. ‘000

900,000

Rs.’000

Volume TradedTurnover

0

40

20

60

80

100

%

05 06 07 08 09

Shareholding of Individuals & Institutions

as at 31st December

Institutions

Individuals/Public

Return on Equity &Market Interest Rates

05 06 07 08 09

Average 12 Mts. Treasury Bill RateAWDRSampath ROE

0.0

10.5

3.5

7.0

14.0

17.5

21.0

%

10.3

7

12.9

6

16.0

7

18.9

2

13.4

5

6.20

7.60

9.08

10.8

2

10.9

1


Share Information

Sampath Bank PLC (Ordinary Shares)Top 20 Shareholders as at 31st December 2009

Shareholder Name Shareholding %

1 ROSEWOOD (PVT) LIMITED 4,535,506 6.582 SAMPATH BANK LIMITED ACCOUNT NO 2 3,444,310 5.003 VALLIBEL INVESTMENTS (PVT) LIMITED 3,444,200 5.004 STASSEN EXPORTS LIMITED 3,443,688 5.005 VALLIBEL LEISURE (PRIVATE) LIMITED 3,442,800 5.006 SRI LANKA INSURANCE CORPORATION LTD-LIFE FUND 3,433,110 4.987 MR K.D.D. PERERA 3,412,769 4.958 MR P. SINGUPPULI ARATCHIGE DON 2,784,444 4.049 SSP CORPORATE SERVICES (PRIVATE) LIMITED A/C NO 01 2,581,483 3.7510 CORPORATE SERVICES LIMITED A/C NO 02 2,579,266 3.7411 CHINKARA GLOBAL FUNDS LIMITED PCC 2,566,666 3.7312 VARNERS INTERNATIONAL (PRIVATE) LIMITED 2,465,516 3.5813 ACCUGAIN INVESTMENTS LIMITED 2,269,333 3.2914 SENTINEL INTERNATIONAL LIMITED 1,980,866 2.8815 MR Y.S.H.I.K SILVA 1,383,709 2.0116 MR B.A. MAHIPALA 875,777 1.2717 SAMPATH BANK PENSION FUND 859,755 1.2518 KEYSTONE LIMITED 612,100 0.8919 J.B. COCOSHELL (PVT) LTD 508,766 0.7420 MR B.W. KUNDANMAL 497,433 0.72 47,121,497 68.40 Total No.of Shares Unregistered 0 0.00 Shares held by Directors 476,242 0.69 (Excluding Mr.K.D.D.Perera’s Shares) Blance held by other Shareholders (Registered) 21,289,889 30.91 Total No. of Shares 68,887,628 100.00

% of Shares held by Public 84.35% % of Shares held by Directors and others 15.65%

Sampath Bank PLC (Ordinary Shares)Frequency Distribution of Shareholders as at 31 December 2009

RESIDENT NON-RESIDENT Total No.of No of No of No of No of No of Range shareholders % Shares % Shareholders % Shares % Shareholders % Shares %

1 - 250 7,818 53.32 974,900 1.42 105 0.72 14,538 0.02 7,923 54.04 989,438 1.44 251 - 500 2,016 13.75 725,731 1.05 39 0.27 14,400 0.02 2,055 14.02 740,131 1.07 501 - 1000 1,850 12.62 1,297,184 1.88 45 0.31 34,619 0.05 1,895 12.92 1,331,803 1.93 1001 - 2000 1,441 9.83 1,976,494 2.87 37 0.25 52,003 0.08 1,478 10.08 2,028,497 2.94 2001 - 5000 746 5.09 2,365,074 3.43 19 0.13 64,843 0.09 765 5.22 2,429,917 3.53 5001 - 10000 254 1.73 1,827,254 2.65 12 0.08 86,087 0.12 266 1.81 1,913,341 2.78 10001 - 20000 118 0.80 1,650,822 2.40 5 0.03 73,448 0.11 123 0.84 1,724,270 2.50 20001 - 30000 41 0.28 1,050,224 1.52 1 0.01 21,300 0.03 42 0.29 1,071,524 1.56 30001 - 40000 14 0.10 469,085 0.68 1 0.01 34,000 0.05 15 0.10 503,085 0.73 40001 - 50000 18 0.12 848,255 1.23 1 0.01 50,000 0.07 19 0.13 898,255 1.30 50001 - 100000 28 0.19 2,021,207 2.93 3 0.02 236,933 0.34 31 0.21 2,258,140 3.28 100001 - 1000000 33 0.23 8,915,561 12.94 2 0.01 316,000 0.46 35 0.24 9,231,561 13.40 1000001 - Over 12 0.08 36,950,801 53.64 3 0.02 6,816,865 9.90 15 0.10 43,767,666 63.53 Total 14,389 98.14 61,072,592 88.66 273 1.86 7,815,036 11.34 14,662 100.00 68,887,628 100.00


Sampath Bank Debentures


In terms of rule 7.4 of Colombo Stock Exchange (CSE);

(a) Market Values

Debentures - 2004/2009 Fixed - 10.00% Fixed - 9.75% Floating rate Debentures - 2007/2012 Fixed - 17.5% Fixed - 15.5% Floating rate

Highest Lowest Year End

2009 2008 2009 2008 2009 2008

Redeemed on 07/06/2009 Redeemed on 07/06/2009 Redeemed on 07/06/2009

Not Traded Not Traded Not Traded

86.50 Not Traded Not Traded

89.99 Not Traded

73.66




80.00 Not Traded

73.66




89.99 Not Traded

73.66

(b) Interest Rates

Debentures - 2004/2009Fixed - 10.00%Fixed - 9.75%Floating rate

Debentures - 2007/2012 Fixed - 17.5% Fixed - 15.5% Floating rate

2009 2008

CouponRate

EffectiveRate

CouponRate

EffectiveRate


17.50%15.50%

-

17.50%16.65%

-

10.00%9.75%

-

17.50%15.50%

-

10.00%9.99%

-

17.50%16.65%

-

Debentures - 2004/2009Floating rate was equivalent to the three months Treasury bill rate (net) plus 2% p.a., payable quarterly.These debentures were redeeme on 7th June 2009.

Debentures - 2006/2011 (Not Listed)Floating rate is equivalent to the one year weighted avg. Treasury Bill rate (gross) plus 1.5% p.a., payable annually.

Debentures - 2007/2012Floating rate is equivalent to the three months Treasury Bill rate (gross) plus 1.5% p.a., payable quarterly.

Debentures - 2007/2012 (Not listed)Floating rate is equivalent to the six months weighted avg. Treasury Bill rate (gross) plus 1.75% p.a., payable semi annually.

(c ) Interest rate of comparable government securities

2 Year Treasury Bond3 Year Treasury Bond4 Year Treasury Bond5 Year Treasury Bond

2009 2008

9.75%11.02%11.01%12.11%

21.00%21.10%19.60%17.00%



( d ) Current Yield & Yield to maturity

Debentures - 2004/2009 Current yield Yield to maturity of last trade

Highest‘10%

Lowest‘9.75%

Year EndFloating Rate

2009 2008 2009 2008 2009 2008

Redeemed on 07/06/2009 Redeemed on 07/06/2009

11.56 23.55


Not Traded Not Traded



Debentures - 2007/2012 Current yield Yield to maturity of last trade

Highest‘17.50%

Lowest‘15.50%

Year EndFloating Rate

2009 2008 2009 2008 2009 2008


19.45 21.50




34.17 Not Traded

( e ) Ratios

Debt to Equity Ratio (%)Interest Cover ( Times)Quick Asset Ratio (%)

2009 2008

26.2%9.43

78.1%

46.2%4.63

80.5%


Rs.Mn. Year Ended 31st December 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Profit PerformanceIncome 4,220 5,269 5,432 6,044 6,953 8,704 12,340 17,400 22,243 25,213Interest Income 3,531 4,484 4,612 4,948 5,412 7,227 9,997 14,950 19,451 20,970Interest Expenses 2,169 3,191 2,834 2,602 2,859 3,913 5,890 9,947 12,801 13,165Net interest income 1,362 1,293 1,778 2,346 2,553 3,314 4,107 5,003 6,650 7,805Exchange Income 360 400 296 288 617 192 646 505 647 774Other income 513 472 569 808 924 1,284 1,697 1,944 2,144 3,469Operating expenses 1,304 1,466 1,682 2,094 2,308 3,493 4,183 5,234 6,877 8,072Profit before tax 535 429 525 740 965 1,297 2,268 2,218 2,564 3,976Income Tax on Profit 134 107 84 179 344 476 1,240 1,167 1,150 1,878Profit after tax 402 322 441 561 621 821 1,028 1,052 1,414 2,098

AssetsCash and Short Term Funds 1,293 1,678 2,115 1,581 1,932 2,359 2,324 2,465 2,830 3,395Bills of Exchange 1,918 2,139 1,945 2,262 2,424 2,748 2,572 2,947 2,827 2,985Loans and Advances 24,461 27,127 29,556 34,723 43,548 54,043 67,061 83,695 87,380 92,189Lease Rentals Receivable 266 246 238 677 1,972 3,304 6,337 6,788 5,448 3,511Investment in Associates & Subsidiaries 370 381 386 452 452 862 1,096 970 970 992Fixed assets 914 1,031 1,060 1,131 1,183 1,435 1,823 3,080 3,289 3,420Total assets 34,596 38,781 43,017 54,054 67,483 84,811 109,550 133,196 138,539 156,162

LiabilitiesDeposits 24,697 29,669 33,785 42,031 52,908 65,419 80,792 98,884 106,931 125,690Refinance Borrowings 653 732 844 1,123 1,564 1,900 2,774 4,157 4,592 4,819Other Liabilities evidenced by paper 500 500 500 1,128 2,196 2,491 2,734 4,433 4,514 3,102Other Liabilities 6,457 5,347 5,002 6,390 6,899 9,370 16,624 17,152 12,724 10,704Total Liabilities 32,307 36,248 40,130 50,672 63,566 79,180 102,924 124,627 128,762 144,316

SHAREHOLDERS’ FUNDSStated capital 443 443 443 443 517 689 1,582 1,582 1,582 1,582Reserves 1,847 2,091 2,444 2,940 3,401 4,943 5,044 6,987 8,195 10,265

Investor Information(for the year ended 31st Dec)Dividend paid 77.5 77.5 88.6 66.4 88.6 137.8 34.4 172.2 206.7 275.6Dividend cover (times) 5.2 4.2 5.0 8.4 7.0 6.0 29.8 5.1 6.8 7.6Net assets per share (Rs) 51.70 57.20 65.20 65.48 75.82 81.75 96.17 124.39 141.92 171.96Market price per share (Rs)-Max 70.50 72.00 79.80 133.00 105.00 114.00 117.25 135.00 120.00 205.00Market price per share (Rs)-Min 37.00 32.50 50.00 65.00 60.25 61.00 75.25 100.00 65.00 65.00Price as at 31 December (Rs) 41.50 63.00 72.00 83.50 62.75 90.00 109.75 120.00 68.00 204.25

Ten Years at a GlanceTen Years at a Glance


Year Ended 31st December 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Other Information(as at 31st December)Export turnover ( for the year) 15,001 18,370 15,669 15,823 17,240 19,524 18,789 24,071 23,800 20,648Import turnover ( for the year) 22,025 23,630 29,099 28,523 30,459 35,220 54,020 54,490 57,036 54,361Number of Staff 1,355 1,430 1,492 1,579 1,702 1,875 2,039 2,213 2,364 2,388Number of Branches 38 45 53 63 71 83 96 105 112 131

RATIOSGrowth of income (%) 34.6 24.9 3.1 11.3 15.0 25.2 41.8 41.0 27.8 13.4Cost to income ratio (%) 63.6 70.6 64.7 60.8 60.1 60.0 58.0 56.8 59.6 57.0Growth of deposits (%) 24.2 20.1 13.9 24.4 25.9 23.6 23.5 22.4 8.1 17.5Growth of advances (%) 28.3 11.0 7.5 18.7 27.3 25.3 26.4 23.0 2.4 3.2Dividend per Share 1.75 1.75 2.00 2.00 2.00 2.00 2.50 3.00 4.00 6.25Return on assets (after tax) (%) 1.31 0.88 1.10 1.19 1.02 1.08 1.06 0.87 1.04 1.42Return on equity (after tax) (%) 18.92 13.31 16.30 17.89 17.02 17.20 16.78 13.84 15.41 19.41Advance to Deposits & Refinance(%) 105.1 97.1 91.7 87.3 88.0 89.3 90.9 90.7 85.8 75.6Fixed Assets to Shareholders’ Funds(%) 39.9 40.7 36.7 33.4 30.2 25.5 28.9 35.9 33.6 28.9Total Assets to Shareholders’ Funds (Times) 15.1 15.3 14.9 16.0 17.2 15.1 17.4 15.5 14.2 13.2

(As specified in Banking Act No 30 of 1988)Liquid Assets to Liabilities(%) 21.2 27.9 25.2 27.4 23.6 25.3 31.3 29.0 29.5 35.6Capital Funds to Liabilities includingContingent Liabilities(%)Capital standards (%) -TIER 1 9.61 10.49 11.50 9.59 9.14 10.14 8.38 7.58 8.10 10.40-TIER 11 12.03 12.59 13.11 11.02 13.30 13.53 10.82 11.58 11.95 13.45

Ten Years at a Glance


1. AkkaraipattuNo. 61, Sulaiman Shopping Complex, Main Street, AkkaraipattuTel: (067) 2279198 - 9Fax: (067) 2279197Email: [email protected] Code: 111

2. AlawwaNo. 9, 9/1 Giriulla Road, AlawwaTel: (037) 2279209 - 2279463Fax: (037) 2279209Email:[email protected] Code: 053

3. AluthgamaNo. 405, Galle Road, AluthgamaTel: (034) 2290861 - 2Fax: (034) 2290863Email:[email protected] Code: 079

4. AmbalangodaNo. 18/A, New Road, AmbalangodaTel: (091) 2255571 - 2 Fax: (091) 2255573Email:[email protected] Code: 072

5. AmbalanthotaNo. 138 D, Tissa Road, AmbalanthotaTel: (047) 2225506 - 7Fax: (047) 2225508Email:[email protected] Code: 104

6. AmparaNo. 9, D S Senanayake Road, Ampara Tel: (063) 2223840 - 1Fax: (063) 2223444Email:[email protected] Code: 062

7. Anuradhapura No.38, Rex Building, Main Street, AnuradhapuraTel: (025) 2235026 - 7Fax: (025) 2235028Email:[email protected] Code: 021

8. AthurugiriyaNo. 106, Borella Road, AthurugiriyaTel: (011) 2563612Email:[email protected] Code: 067

9. AttidiyaNo. 202, Main Road, AttidiyaTel: (011) 2725668Email:[email protected] Code: 089

Branch Network

10. AvissawellaNo. 64, Yatiyanthota Road, AvissawellaTel: (036) 2222011 - 2Fax: (036) 2222010Email:[email protected] Code: 022

11. Baddegama*No. 112, Diyawagura, Kumme, BaddegamaTel: (091) 2293230 - 1Fax: (091) 2293232Email:[email protected] Code: 118

12. BadullaNo. 14, Dharmadutha Road, BadullaTel: (055) 2225450 - 1Fax: (055) 2225452Email:[email protected] Code: 093

13. BalangodaNo.117, Barnes Ratwatta Mawatha, BalangodaTel: (045) 2288793 - 4Fax: (045) 2288795Email:[email protected] Code: 097

14. BambalapitiyaNo.1-01, Majestic City, Station Road, Colombo 04Tel: (011) 2501829, 2502686Fax: (011) 2501829Email:[email protected] Code: 011

15. BandaragamaNo.61/A, Kalutara Road, BandaragamaTel: (038) 2289898 - 9Fax: (038) 2293056Email:[email protected] Code: 059

16. BandarawelaNo.253, 255, Main Street, BandarawelaTel: (057) 2223720 - 1Fax: (057) 2223722Email:[email protected] Code: 046

17. BattaramullaNo. 157, Main Street, BattaramullaTel: (011) 2861805 - 7Fax: (011) 2861807Email:[email protected] Code: 061

18.BatticaloaNo.32, Thamaraikeny Road, BatticaloaTel: (065) 2227581 - 2Fax: (065) 2227583Email:[email protected] Code: 107

19. BorellaNo. 1022, Maradana Road, Colombo 08Tel: (011) 2691121 - 3Fax: (011) 2686066Email:[email protected] Branch Code: 004

Branch Network

123124

4073 98

65127

3817

109103

1059464

104

83

1108

251281487

100

8539 19

115

107

22

47

113

106

53

11258

20

56

78

11

75

119

7

11443

49

18

51

16

2492

21

68

372

86

6979

76

12528 72

12126

16

12982

116

5

7733

490

8426

30

10150

111

29

41

27 96

13

3

52121

11899

5461

48 62108 361313480

8988

130

1208193

6035102

555759

46

15 45

122

117

91

9563

317071 67

669

44

10

74

2332

42

97


20. Chenkalady*Sellam Building, Boundary Road Junction, Main Road, ChenkaladyTel: (065) 2241348 - 9Fax: (065) 2241350Email:[email protected] Code: 121

21. ChilawNo. 64, Colombo Road, ChilawTel: (032) 2222677 - 8Fax: (032) 2222777Email:[email protected] Code: 108

22. Chunnakam*No.160, Sir Ponnambalam Ramanathan Veethy, ChunnakamTel: (021) 2240721 - 2Fax: (021) 2240723Email:[email protected] Code: 128

23. CityNo. 55, D.R.Wijewardena Mawatha, Colombo 10Tel: (011) 2448291, 2434431Fax: (011) 2434217Email:[email protected] Code: 001

24. DambullaNo.622, Anuradhapura Road, DambullaTel: (066) 2283085 & 87Fax: (066) 2283067Email:[email protected] Code: 090

25. DehiwalaNo. 155, Galle Road, DehiwalaTel: (011) 2738481 & 422Fax: (011) 2738461Email:[email protected] Code: 017

26. Deniyaya No. 28-30, Main Street, DeniyayaTel: (041) 2273225 & 255Fax: (041) 2273255Email:[email protected] Code: 014

27. DeraniyagalaNo. 63, Noori Road, Deraniyagala. Tel: (036) 2249500Fax: (036) 2249500Email:[email protected] Branch Code: 049

28. DiganaNo. 42, Mahiyangana Road, Digana, RajawellaTel: (081) 2376765Fax: (081) 2376765Email:[email protected] Branch Code: 085

29. EheliyagodaNo. 2, Ratnapura Road, EheliyagodaTel: (036) 2258032 & 2259174Fax: (036) 2258031Email:[email protected] Code: 020

30. EmbilipitiyaNo. 62, Main Street, EmbilipitiyaTel: (047) 2261203 - 4Fax: (047) 2261205Email:[email protected] Code: 043

31. Embuldeniya*No.282, Old Kottawa Road, Embuldeniya, NugegodaTel: (011) 2836410 - 1Fax: (011) 2836412Email:[email protected] Code: 114

32. FortNo. 98, Chatam Street, Colombo 01Tel: (011) 2447231 - 2Fax: (011) 2421453Email:[email protected] Code: 012

33. GalleNo. 5, Wakwella Road, GalleTel: (091) 2245646 - 7Fax: (091) 2245645Email:[email protected] Code: 035

34. GampahaNo. 8, Mangala Road, GampahaTel: (033) 2226640 - 1Fax: (033) 2226642Email:[email protected] Code: 016

35. GampolaNo.06, Panabokke Mawatha, GampolaTel: (081) 2350564 - 5 Fax: (081) 2350571Email:[email protected] Code: 101

36. GanemullaNo. 367/E, Kadawatha Road, GanemullaTel: (033) 2264630Fax: (011) 5336558Email:[email protected] Code: 078

37. GiriullaNo. 103/A, Negombo Road, GiriullaTel: (037) 2289482Fax: (037) 2289482Email:[email protected] Code: 095

38. Grandpass*No. 64, Jethawana Road,Colombo 14Tel: (011) 2472390 – 1Fax: (011) 2472392Email:[email protected] Code: 127

39. Gregory’s RoadNo. 106, Wijerama Mawatha, Colombo 07(Tel: 011) 2681144Email:[email protected] Branch Code:’070

40. Harbour ViewSetmil Maritime Centre, No. 256, Srimath Ramanathan Mawatha, Colombo 15Tel: (011) 2393017Fax: (011) 2393017Email:[email protected] Code: 058

41. HattonNo. 173, Dimbula Road, HattonTel: (051) 2225403 - 4Fax: (051) 2225405Email:[email protected] Code: 080

42. Head QuartersNo. 110, Sir James Peiris Mw, Colombo 02Tel: (011) 4730305 - 7Fax: (011) 5331485Email:[email protected] Code: 029

43. HingurakgodaNo.88, D S Senanayake Veediya, HingurakgodaTel: (027) 2245300 - 1Fax: (027) 2245302Email:[email protected] Code: 110

44. HomagamaNo. 46, 1st Lane, Station Road, HomagamaTel: (011) 2855975 - 6Fax: (011) 2855985Email:[email protected] Code: 069

45. Horana No 114, Somananda Mawatha, HoranaTel: (034) 2260345 - 6Fax: (034) 2260377Email:[email protected] Code: 057

46. Ja-elaNo.165, Realty Plaza, Negombo Road, Ja-elaTel: (011) 2245896 - 7 Fax: (011) 2245895Email:[email protected] Code: 098

47. Jaffna*No.56/16, Link Road, Off Stanley Road, JaffnaTel: (021) 2221025 - 6 Fax: (021) 2221027Email:[email protected] Code: 120

48. KadawathaNo. 174/3, Ragama Road, KadawathaTel: (011) 2921001 - 2 & 5Fax: (011) 2921001Email:[email protected] Code: 060

49. KaduruwelaNo.626B, Dharmasiri Building, Main Street, KaduruwelaTel: (027) 2225567 - 8Fax: (027) 2225569Email:[email protected] Code: 038

50. KalawanaNo. 54/B, 54/C, Manana, KalawanaTel: (045) 2255793 - 4Fax: (045) 2255795Email:[email protected] Code: 041

51. KalmunaiNo. 18, Police Station Road, KalmunaiTel: (067) 2220448 - 9Fax: (067) 2222020Email:[email protected] Code: 112

52. KalutaraNo. 314, Main Street, Kalutara South, KalutaraTel: (034) 2235600 - 1Fax: (034) 2235602Email:[email protected] Code: 050

53. KaluwanchikudyHospital Road, KaluwanchikudyTel: (065) 2251177, 2250807Fax: (065) 2250208Email:[email protected] Code: 125

54. KandanaNo. 72, Colombo Road, KandanaTel: (011) 2229218 - 9Fax: (011) 2229249Email:[email protected] Code: 076

55. KandyNo. 19, Dalada Veediya, KandyTel: (081) 2232778 - 80Fax: (081) 2232779Email:[email protected] Code: 007

56. Kandy – City Centre*Shop No.L 1-6 Level One, Kandy City Centre Building, Dalada Veediya, KandyTel: (081) 2205825 – 6Fax: (081) 2205827Email:[email protected] Code: 123

57. Kandy – CorporateNo. 29, Cross Street, KandyTel: (081) 2200096 - 7Fax: (081) 2200098Email:[email protected] Code: 100

58. Kattankudy*No.57,59, Main Street, KattankudyTel: (065) 2247930 - 1Fax: (065) 2247932Email:[email protected] Code: 115

59. KatugastotaNo. 6-8, Gohagoda Road, KatugastotaTel: (081) 2498932 - 4 Fax: (081) 2499123Email:[email protected] Code: 032

60. KegalleNo.142, 142A, Kandy Road, KegalleTel: (035) 2230597 - 8Fax: (035) 2230519Email:[email protected] Code: 064

Branch Network


61. KiribathgodaNo. 259, Kandy Road, Dalugama, KelaniyaTel: (011) 2910457, 2910514Fax: (011) 2910515Email:[email protected] Code: 005

62. KirindiwelaNo. 91, Gampaha Road, KirindiwelaTel: (033) 2247150, 5622833Fax: (033) 2247150Email:[email protected] Code: 083

63. Kirulapone*No. 136,138 & 140, Highlevel Road, KirulaponeTel: (011) 2513828 - 9Fax: (011) 2513830Email:[email protected] Code:117

64. KohuwelaNo. 81, S De S Jayasinghe Mawatha, KohuwelaTel: (011) 2814480Fax: (011) 2814480Email:[email protected] Code: 094

65. KotahenaNo. 165, George R De Silva Mw, Colombo 13Tel: (011) 2384010 – 1Fax: (011) 2384012Email:[email protected] Branch Code: 037

66. KottawaNo. 124/8, Highlevel Road, KottawaTel: (011) 2782684 & 690Fax: (011)2782686Email:[email protected] Code: 052

67. Kottawa – SunupNo. 364/10, Highlevel Road, KottawaTel: (011) 2783100Fax: (011) 2783100Email:[email protected] Code: 087

68. Kuliyapitiya259, Madampe Road, KuliyapitiyaTel: (037) 2281860 & 866 Fax: (037) 2281861Email:[email protected] Code: 023

69. KurunegalaNo. 31, Negombo Road, KurunegalaTel: (037) 2223500 - 2Fax: (037) 2223509Email:[email protected] Code: 006

70. MaharagamaNo. 81, Highlevel Road, MaharagamaTel: (011) 2840950 – 2Fax: (011) 2851352Email:[email protected] Code: 013

71. Maharagama - Singer MegaNo. 272, Highlevel Road, MaharagamaTel: (011) 2842442Fax: (011) 2842442Email:[email protected] Code: 092

72. MahiyanganaNo. 28 - 29, New Town, MahiyanganaTel: (055) 2258180Fax: (055) 2258181Email:[email protected] Code: 056

73. Main StreetNo. 110 – 114, Main Street,Colombo 11Tel: (011) 2386732 – 3Fax: (011) 2386734Email:[email protected] Code: 042

74. MalabeNo. 895, Athurugiriya Road, MalabeTel: (011) 2762222 – 3Fax: (011) 2762224Email:[email protected] Branch Code: 039

75. Mannar*No. 28, Field Street, Ward No.06, MannarTel: (023) 2251320 – 1Fax: (023) 2251322Email:[email protected] Branch Code: 119

76. MataleNo. 142 – 144, Trincomalee Street, MataleTel: (066) 2223861 - 2Fax: (066) 2224094Email:[email protected] Code: 025

77. MataraNo. 3, Hakmana Road, MataraTel: (041) 2223260 – 1Fax: (041) 2223268Email:[email protected] Branch Code: 010

78. MatugamaNo. 214A, Aluthgama Road, MatugamaTel: (034) 2247233 - 4Fax: (034) 2247235Email:[email protected] Code: 106

79. MawathagamaNo. 95, Kurunegala Road, MawathagamaTel: (037) 2296088Fax: (037) 2296088Email:[email protected] Code: 109

80. MinuwangodaNo. 31/1, Negombo Road, MinuwangodaTel: (011) 2299131 – 2Fax: (011) 2299133Email:[email protected] Code: 065

81. MirigamaNo. 54, Giriulla Road, MirigamaTel: (033) 2276901 - 2Fax: (033) 2276903Email:[email protected] Code: 086

82. MonaragalaNo. 75, Pothuwil Road, MonaragalaTel: (055) 2277290 – 1Fax: (055) 2277222Email:[email protected] Code: 074

83. MoratuwaNo. 653, Galle Road, Rawatawatta, MoratuwaTel: (011) 2644737 – 8Fax: (011) 2644739Email:[email protected] Code: 031

84. MorawakaRanaweera Building, Akuressa - Deniyaya Main Road, MorawakaTel: (041) 2282310 - 11Fax: (041) 2282312Email:[email protected] Branch Code: 015

85. NarahenpitaNo. 193, Kirula Road, Narahenpita, Colombo 05Tel: (011) 2552820 – 1Fax: (011) 2552822Email:[email protected] Code: 040

86. NarammalaNo.77 & 89 1/1, Kuliyapitiya Road, NarammalaTel: (037) 2248945 - 6Fax: (037) 2248947Email:[email protected] Code: 099

87. Nawam MawathaNo. No. 46/38, Nawam Mawatha, Colombo 02Tel: (011) 2305025 – 7Fax: (011) 2305028Email:[email protected] Code: 009

88. NegomboNo. 293, Main Street, NegomboTel: (031) 2224344 – 6Fax: (031) 2224347Email:[email protected] Branch Code: 024

89. Negombo - Singer MegaNo. 169, Colombo Road, NegomboTel: (031) 2227282Fax: (031) 2227282Email:[email protected] Code: 088

90. NeluwaDellawa Road, Main Street, NeluwaTel: (091) 3783010 - 11Email:[email protected] Code: 054

91. Nelliady*Nelliady Town New Market on Jaffna Road, NelliadyTel: (021) 2264950Fax: (021) 2264951Email:[email protected] Code: 129

92. NikaweratiyaNo. 136, Kurunegala Road, NikaweratiyaTel: (037) 2260918 - 9Fax: (037) 2260920Email:[email protected] Code: 102

93. NittambuwaSri Ramya Building, Kandy Road, NittambuwaTel: (033) 2295905 – 6Fax: (033) 2295907 Email:[email protected] Code: 071

94. Nugegoda No. 79 A, Stanley Thillekeratne Mw, NugegodaTel: (011) 2856907 - 9Fax: (011) 2856908Email:[email protected] Code: 003

95. Nugegoda - Singer MegaNo. 4D, Nawala Road, NugegodaTel: (011) 4306111Fax: (011) 4306111Email:[email protected] Code: 082

96. NuwaraeliyaNo. 01, Lawson Street, NuwaraeliyaTel: (052) 2222946 - 7Fax: (052) 2222948Email:[email protected] Code: 084

97. OddamavadyColombo Road, Mavadichenai, OddamavadyTel: (065) 2257372, 2258210Fax: (065) 2258211Email:[email protected] Code: 124

98. Old Moor StreetNo. 371, Old Moor Street, Colombo 12Tel: (011) 2452490 – 2Fax: (011) 2424074Email:[email protected] Code: 027

99. PanaduraNo. 373, Galle Road, PanaduraTel: (038) 2235100, 2231677Fax: (038) 2235101Email:[email protected] Code: 026

100. PelawattaNo. 424, Pannipitiya Road, Pelawatta , BattaramullaTel: (011) 2787209, 2786119Fax: (011) 2786118Email:[email protected] Code: 063

Branch Network


101. PelmadullaNo. 77B, Main Street, PelmadullaTel: (045) 2275920 - 1Fax: (045) 2275922Email:[email protected] Code: 103

102. PeradeniyaNo. 676 A, Peradeniya Road, KandyTel: (081) 2387876 - 7Fax: (081) 2384054Email:[email protected] Branch Code: 051

103. PettahNo. 999, People’s Park, Bodiraja Mw, Colombo 11Tel: (011) 2432324, 2432262Fax: (011) 2432303Email:[email protected] Code: 002

104. PiliyandalaNo. 61, Moratuwa Road, PiliyandalaTel: (011) 2614654, 2614665Fax: (011) 2614664Email:[email protected] Code: 019

105. PitakotteNo. 463, Kotte Road, PitakotteTel: (011) 2874574Fax: (011) 2874574Email:[email protected] Code: 091

106. PottuwilCassim Moulavi Building, Main Street, PottuvilTel: (063) 2248190, 2248194Fax: (063) 2248196Email:[email protected] Code: 130

107. Platinum PlusNo.18, Cambridge Place, Colombo 07Tel: (011) 2695073, 2695237Fax: (011) 2695196Email:[email protected] Code: 131

108. RagamaNos. 26/05, 26/06, UDA Premises, Kadawatha Road, RagamaTel: (011) 2960659, 2960629Fax: (011) 2960659Email:[email protected] Code: 073

109. Rajagiriya*No. 620, Kotte Road, RajagiriyaTel: (011) 2864922, 2864944Fax: (011) 2864988Email:[email protected] Code: 122

110. RatmalanaNo. 261, Galle Road, RatmalanaTel: (011) 2730820 – 1Fax: (011) 2730819Email:[email protected] Branch Code: 018

111. RatnapuraNo. 180 – 182, Main Street, RatnapuraTel: (045) 2232261 – 2Fax: (045) 2224361Email:[email protected] Code: 033

112. SainthamaruthuMain Street, Sainthamaruthu - 16Tel: (067) 2225310, 2225320 Fax: (067) 2225330Email:[email protected] Code: 126

113. Tangalle*No.61, Muhudu Mawatha, TangalleTel: (047) 2241865 - 6Fax: (047) 2241870Email:[email protected] Code: 116

114. ThambuththegamaNo.255 C, Anuradhapura Road, ThambuttegamaTel: (025) 2276633, 2276836Fax: (025) 2275072Email:[email protected] Branch Code: 048

115. ThimbirigasyayaNo. 154, Havelock Road, Colombo 05Tel: (011) 2505001 – 2Fax: (011) 2505003Email:[email protected] Code: 034

116. TissamaharamaNo. 25 – 27, Main Street, TissamaharamaTel: (047) 2237056, 2237008Fax: (047) 2237058Email:[email protected] Code: 028

117. TrincomaleeNo. 262, Central Road, TrincomaleeTel: (026) 2225387 - 9Fax: (026) 2225389Email:[email protected] Code: 066

118. Unichella - PanaduraNo. 124, Horana Road, PanaduraTel: (038) 4281245Fax: (038) 4281245Email:[email protected] Code: 047

119. VavuniyaNo. 25, Station Road, VavuniyaTel: (024) 2222959Fax: (024) 4589500Email:[email protected] Code: 055

120. VeyangodaNo. 121, Negombo Road, VeyangodaTel: (033) 2296330Fax: (033) 2296330Email:[email protected] Branch Code: 077

121. WadduwaNo. 555, Galle Road, WadduwaTel: (038) 2284505Fax: (038) 2284505Email:[email protected] Code: 075

122. WariyapolaNawinn Office & Shopping Complex, Kalugamuwa Road, WariyapolaTel: (037) 2268707 - 8Fax: (037) 2268144Email:[email protected] Code: 044

123. WattalaNo. 165, Negombo Road, WattalaTel: (011) 2931569 - 70Fax: (011) 2931568Email:[email protected] Code: 008

124. Wattala - Singer MegaNo. 811, Negombo Road, WattalaTel: (011) 2981644Fax: (011) 2981644Email:[email protected] Code: 096

125. WattegamaNo.134/A/1, Kandy Road, WattegamaTel: (081) 2470600Fax: (081) 2470600Email:wattegama.mgr@sampathBranch Code: 105

126. WelimadaNo. 54, Nuwara Eliya Road, WelimadaTel: (057) 2244466 – 7Fax: (057) 2244468Email:[email protected] Code: 081

127. WellampitiyaNo. 268, Kolonnawa Road, WellampitiyaTel: (011) 2533498Fax: (011) 2533498Email:[email protected] Code: 045

128. WellawattaNo. 445, Galle Road, Colombo 06Tel: (011) 2507607 – 8Fax: (011) 2507609Email:[email protected] Code: 036

129. WellawayaNo. 70/D, Kumaradasa Mawatha, WellawayaTel: (055) 2274445 – 2274419Fax: (055) 2274470Email:[email protected] Code: 113

130. WennappuwaNo. 191/A, Colombo Road, WennappuwaTel: (031) 2256925 - 7Fax: (031) 2256926Email:[email protected] Code: 030

Branch Network

131. YakkalaNo. 88, Kandy Road, YakkalaTel: (033) 2232670, 2234230Fax: (033) 4674602Email:[email protected] Code: 068

Extention Offices

KatunayakeBandaranayake International Airport, KatunayakeTel: (011) 2253776Fax: (011) 2253776Email:kpo&[email protected]

Passport OfficeNo.43, Ananda Rajakaruna Mawatha, Colombo 10Tel: (011) 2685098Fax: (011) 2685098Email:[email protected]

Moratuwa Sunup*No:6, Old Galle Road, MoratuwaTel: (011) 2641810Fax: (011) 2641810Email:[email protected]

* Branches and extention offices opened in 2009

Sampath Bank PLC | Annual Report 2009220Other InformationCorrespondent Banks

Correspondent Banks

Country SWIFT Code CCY*

1. AustraliaAustralia and New Zealand Banking Group Ltd. ANZBAU2SCitibank NA CITIAU2XHSBC Bank PLC MIDLAU2SJP Morgan Chase Bank N.A. CHASAU2XNational Australia Bank Ltd. NATAAU33 AUD

2. AustriaRaiffeisenlandesbank RVVGAT2B

3. BahrainHSBC Bank Middle East Ltd. BBMEBHBX

4. BangladeshDhaka Bank Ltd. DHBLBDDHStandard Chartered Bank SCBLBDDX ACU

5. BelgiumCommerzbank AG COBABEBXING Belgium SA/NV BBRUBEBBKBC Bank NV KREDBE35

6. BrazilDeutsche Bank S.A. DEUTBRSP

7. BulgariaUnicredit Bulbank AD UNCRBGSF

8. CanadaBank of Montreal BOFMCAT2 CADHSBC Bank Canada HSBCCA8VRoyal Bank of Canada ROYCCAT2Bank of Nova Scotia NOSCCATT

9. ChileBanco del Estado de Chile BECHCLRMCitibank NA CITICLRM


10. ChinaBank of China BKCHCNBJCitibank (China) Co. Ltd CITICNSXCommerzbank AG COBACNSXDeutsche Bank (China) Co., Ltd DEUTCNSHHSBC Bank (China) Co. Ltd HSBCCNSHJP Morgan Chase Bank (China) Co., Ltd CHASCNSHStandard Chartered Bank (China) Ltd SCBLCNSXWachovia Bank NA PNBPCNSH

11. CyprusSociete Generale Cyprus Ltd. SOGECY2N

12. Czech RepublicCommerzbank AG COBACZPX

13. DenmarkDanske Bank A/S DABADKKK DKKDnB NOR Bank ASA DNBADKKXNordea Bank Denmark A/S NDEADKKK

14. EgyptArab International Bank ARIBEGCXMashreq Bank MSHQEGCA

15. FinlandNordea Bank Finland PLC NDEAFIHHDanske Bank DABAFIHXDnB NOR Bank ASA DNBAFIHX

16. FranceBNP Paribas SA BNPAFRPPCalyon BSUIFRPPHSBC Bank PLC MIDLFRPXUnion de Banques Arabes et Francaises (UBAF) UBAFFRPP USD


17. GermanyBayerische Hypo -und Vereinsbank AG HYVEDEMM EURHypovereinsbankCommerzbank AG COBADEFF EURDeutsche Bank AG DEUTDEMM EURDnB Nor Bank ASA DNBADEHX

18. GreeceNational Bank of Greece SA ETHNGRAA

19. Hong KongBNP Paribas BNPAHKHHCitibank NA CITIHKHXCommerzbank AG COBAHKHXDeutsche Bank AG DEUTTHBKHongkong & Shanghai Banking Corp., Ltd HSBCHKHHJP Morgan Chase Bank N.A CHASHKHHStandard Chartered Bank (Hong Kong) Ltd. SCBLHKHH HKDUBAF (Hong Kong) Ltd. UBAFHKHXWachovia Bank NA PNBPHKHH

20. HungaryCIB Bank Ltd CIBHHUHBCommerzbank AG COBAHUHX

21. IndiaBank of Ceylon BCEYIN5M ACUCitibank NA CITIINBBDeutsche Bank AG DEUTINBBThe Hongkong & Shanghai Banking Corp., Ltd HSBCINBBICICI Bank Ltd. ICICINBBCTSMashreqBank MSHQINBBStandard Chartered Bank SCBLINBB ACUState Bank of India SBININBB


Correspondent Banks


22. IndonesiaCitibank NA CITIIDJADeutsche Bank AG DEUTIDJAThe Hongkong and Shanghai Banking Corp., Ltd, HSBCIDJAPT Bank Mandiri (Persero) BMRIIDJAStandard Chartered Bank SCBLIDJX

23. IrelandBank of Ireland BOFIIE2DCitibank Europe PLC CITIIE2X

24. IsraelBank Leumi le - Israel BM LUMIILIT

25. ItalyBanca Intesa SpA BCITIT22Banca Nazionale del Lavoro SpA BNLIITRR EURBanca UBAE S.P.A UBAIITRRCommerzbank A.G. COBAITMMHSBC Bank PLC MIDLITMXUnicredit SpA UNCRITMM EUR

26. JapanAustralia and Newzealand Banking Group Ltd. ANZBJPJXCitibank Japan Ltd. CITIJPJTCommerzbank AG,Tokyo COBAJPJXDeutsche Bank AG DEUTJPJTThe Hongkong & Shanghai Banking Corp., Ltd HSBCJPJTMizuho Bank Ltd. MHCBJPJTStandard Chartered Bank SCBLJPJT JPYSumitomo Mitsui Banking Corporation SMBCJPJT JPYThe Bank of Tokyo - Mitsubishi UFJ Ltd. BOTKJPJT JPYJPMorgan Chase Bank N.A. CHASJPJTWachovia Bank NA PNBPJPJT

27. JordanHSBC Bank Middle East Ltd. BBMEJOAXStandard Chartered Bank SCBLJOAX

28. KuwaitCitibank NA CITIKWKWNational Bank of Kuwait NBOKKWKW

29. MalaysiaCitibank Berhad CITIMYKLDeutsche Bank (Malaysia) Bhd DEUTMYKLHSBC Bank Malaysia Berhad HBMBMYKLStandard Chartered Bank Malaysia Bhd SCBLMYKL

30. MaldivesBank of Ceylon BCEYMVMVBank of Maldives PLC MALBMVMVThe Hongkong & Shanghai Banking Corp.,Ltd HSBCMVMV

31. NepalStandard Chartered Bank Nepal Ltd. SCBLNPKA

32. NetherlandsCommerzbank AG COBANL2XDeutsche Bank AG DEUTNL2AING Bank NV INGBNL2A

33. New zealandANZ National Bank Ltd. ANZBNZ22Bank of New Zealand BKNZNZ22 NZDCitibank NA CITINZ2XThe Hongkong & Shanghai Banking Corp., Ltd HSBCNZ2A


34. NorwayDnB Nor Bank ASA DNBANOKX NOK

35. OmanHSBC Bank Middle East Ltd. BBMEOMRX

36. PakistanThe Hongkong & Shanghai Banking Corp., Ltd HSBCPKKXStandard Chartered Bank (Pakistan) Ltd. SCBLPKKX ACU

37. PhilippinesCitibank NA CITIPHMXDeutsche Bank AG DEUTPHMMThe Hongkong & Shanghai Banking Corp., Ltd HSBCPHMM

38. PolandBank Handlowy w Warszawie SA CITIPLPXNordea Bank Polska S.A. NDEAPLP2

39. PortugalBanco Santander Totta SA TOTAPTPLBNP Paribas Portugal BNPAPTPLDeutsche Bank (Portugal) SA DEUTPTPL

40. QatarHSBC Bank Middle East Ltd. BBMEQAQXMashreq Bank MSHQQAQA

41. RomaniaRomanian Commercial Bank RNCBROBU

42. Saudi ArabiaSaudi Hollandi Bank AAALSARIThe National Commercial Bank NCBKSAJEThe Saudi British Bank SABBSARIAl Rajhi Bank RJHISARI

43. SingaporeThe Bank of Tokyo-Mitsubishi UFJ Ltd. BOTKSGSGCitibank NA CITISGSGCommerzbank AG COBASGSXDBS Bank Ltd. DBSSSGSGDeutsche Bank AG DEUTSGSGThe Hongkong & Shanghai Banking Corp., Ltd HSBCSGSGJP Morgan Chase Bank N.A CHASSGSGMizuho Corporate Bank Ltd. MHCBSGSGOversea-Chinese Banking Corp. Ltd. OCBCSGSG SGDStandard Chartered Bank SCBLSGSGUnion de Banques Arabes et Francaises (UBAF) UBAFSGSXUnited Overseas Bank Ltd. UOVBSGSG SGD

44. South AfricaABSA Bank Ltd. ABSAZAJJFirstRand Bank Ltd. FIRNZAJJ ZARNed Bank Ltd NEDSZAJJStandard Chartered Bank SCBLZAJJ

45. South KoreaCitibank Korea Inc. CITIKRSXDeutsche Bank AG DEUTKRSEThe Hongkong & Shanghai Banking Corp., Ltd HSBCKRSEJPMorgan Chase Bank NA CHASKRSXStandard Chartered First Bank Korea Ltd SCBLKRSEUnion de Banques Arabes et Francaises (UBAF) UBAFKRSXWachovia Bank NA PNBPKRSX


46. SpainBanco Bilbao Vizcaya Argentaria SA BBVAESMMBanco Santander SA BSCHESMMCommerzbank AG COBAESMX

47. SwedenDanske Bank A/S DABASESXSkandinaviska Enskilda Banken ESSESESG SEKSvenska Handelsbanken HANDSESG

48. SwitzerlandCredit Suisse CRESCHZZUBS AG UBSWCHZZ CHF

49. TaiwanCitibank NA CITITWTPDeutsche Bank AG DEUTTWTPThe Hongkong & Shanghai Banking Corp., Ltd HSBCTWTPJP Morgan Chase Bank NA CHASTWTXMizuho Corporate Bank Ltd. MHCBTWTPStandard Chartered Bank (Taiwan) Ltd SCBLTWTPWachovia Bank NA PNBPTWTP

50. ThailandCiti Bank NA CITITHBXDeutsche Bank AG DEUTTHBKThe Hongkong & Shanghai Banking Corp., Ltd HSBCTHBKKasikornbank Public Company Ltd. KASITHBKStandard Chartered Bank (Thai) PCL SCBLTHBX

51. TurkeyHSBC Bank AS HSBCTRIXTurk Ekonomi Bankasi AS TVBATR2A

52. United Arab EmiratesCitibank NA CITIAEADHSBC Bank Middle East Ltd. BBMEAEADLloyds TSB Bank PLC LOYDAEADMashreqBank PSC BOMLAEAD AEDStandard Chartered Bank SCBLAEAD

53. United KingdomBank of Ceylon BCEYGB2L GBPBarclays Bank PLC BARCGB22 GBPCitibank International PLC CITIGB2LThe Hongkong & Shanghai Banking Corp. Ltd HSBCGB2LJPMorgan Europe Ltd CHASGB22Lloyds TSB Bank PLC LOYDGB2L GBPStandard Chartered Bank SCBLGB2LWachovia Bank NA PNBPGB2L

54. United States of AmericaCitibank NA CITIUS33 USDDeutsche Bank AG DEUTUS33Deutsche Bank Trust Company Americas BKTRUS33 USDHSBC Bank USA NA MRMDUS33 USDJPMorgan Chase Bank NA CHASUS33 USDMashreqBank PSC MSHQUS33 USDStandard Chartered Bank SCBLUS33Wachovia Bank NA PNBPUS3NNYC USD

* Nostro Accounts maintained in specified currencies

Sampath Bank PLC | Annual Report 2009222Other InformationMilestones

1987• The bank was incorporated as ‘Investment and Credit Bank Ltd’. Mr. N U Jayawardena became the Chairman of the Bank; while Mr. Janaka De Silva was appointed as the General Manager.

1988• Automated Teller Machines were introduced to Sri Lanka for the first time.

1989• Uni – Banking system was introduced to the Country for the first time.

1991• Mr. Stanley William became the Chairman of the Bank.• Mr. Edgar Gunatunge joined the Board of Directors as the Deputy Chairman/Managing Director.

1993• Mr. Dunstan De Alwis became the Chairman of the Bank.

1996• Mr. Kumar Abayanayake assumed duties as the General Manager/Chief Executive Officer.• ‘asiamoney’ the prestigious financial magazine in Asia voted Sampath Bank as the ‘Best Commercial Bank of the year’ in Sri Lanka.

1997• The Bank was awarded The Best Small-Cap Bank in South Asia by the prestigious ‘Asia Banking Digest’.• The Bank was honoured with the award, ‘Best Commercial Bank of the Year’ by ‘asiamoney’ for the second year in succession.• Introduction of Debit Card in association with ‘Cirrus’ and ‘Maestro’ for the first time in South Asia.

1998• Mr.Edgar Gunatunge appointed as the Chairman of the bank.• The Bank was honoured with the award, ‘Best Commercial Bank of the Year’ by ‘asiamoney’ for the third year in succession.• In appreciation of the innovative steps taken, the Bank was awarded ‘Outstanding New Business Venture Project’ in 1988 by ‘Asian Banking Digest’.

1999• Mr. Anil Amarasuriya assumed duties as General Manager/Chief Executive Officer.• The ‘Forbes Global’ Magazine listed Sampath Bank under the 300 best small companies in the world.

2000• Sampath Bank was chosen ‘Bank of the year 2000’, in Sri Lanka by the prestigious magazine ‘The Banker’.

2002• Top award for Human Resource Management Services Sector – Large Companies was awarded to Sampath Bank at the National HRM Awards 2002.

2003• As a first step towards expanding in the South East Asian Region, the Bank invested in LankaBangla Finance Ltd., a leasing and credit card company in Bangladesh.

2004• The Bank won two prestigious awards i.e. First Runner-up in Overall Category and the award for best HR practice in the service sector large category at the National HRM Awards 2004.

2005• The Bank was adjudged the Best Corporate Citizen for the year 2005 in the top ten category and was also the joint winner in the Best Economic Performance for the year 2005.• The Bank won the Gold Award, in the Financial Category and award for ‘Best Financial Application’ presented by the Institute of Chartered Accountants of Sri Lanka at the ‘National Best Quality Software Awards 2005’ organised by the British Computer Society, Sri Lanka Branch for developing an IVR Based Bill Payment System in association with Dialog Telekom.• Sampath Bank was placed Second Runner-up in Banking Sector for business excellence at ‘National Business Excellence Awards 2005’ organised by The National Chamber of Commerce of Sri Lanka.

2006• The Annual Report 2005 was adjudged Runner-up for the second consecutive year in Banking Institutions category for Best Presented Accounts awarded by South Asian Federation of Accountants (SAFA) and was also selected as the Runner-up for the third consecutive year in’ Awards for Excellence in Annual Reports’ competition organised by the Institute of Chartered Accountants of Sri Lanka.• Credit rating was enhanced to AA- (lka) by Fitch Rating (Lanka) Ltd.

2007• ATM network reached 150 machines across the island and 100th Branch was opened.

2008• Mr.Arthur Senanayake assumed duties as the 5th Chairman of the Bank, while Mr Harris Premaratne was designated as the Chief Executive Officer.• Won a Gold and a Merit Award at the National Best Quality Software Awards 2008 for the in-house category for developing the ‘Credit Approval System (CAS)’ and ‘Electronic Money Transfer (EMTS)’ application. • Honoured at the National Science and Technology Awards 2008 for the category of ‘Locally Developed New Technologies which have resulted in a successfully Marketed Product / Services’ for our innovative product ‘Sampath eRemittance System’.

2009• Became the third largest private sector Bank in Sri Lanka in terms of total assets.• Eighteen Branches, One Extension Office and twenty nine ATM’s were opened during the year, bringing total number of branches to 131 and total number of ATM’s to 186 by end of 2009.• The Annual Report 2008 was adjudged Joint Runner-up in Banking Institutions category for Best Presented Accounts awarded by South Asian Federation of Accountants (SAFA) and was also selected as the Joint Runner-up in ‘Awards for Excellence in Annual Reports’ competition organised by the Institute of Chartered Accountants of Sri Lanka.• Honored with 4 accolades at the National Business Excellence Awards ceremony 2009, organized by the National Chamber of Commerce of Sri Lanka. Sampath Bank won the following awards:

* Silver Award for the Overall Competition for National Business Excellence

* First Runner-Up Award in the Extra Large Category

* Winner of the Banking Sector of Sri Lanka Award

* Winner in Excellence in Business & Financial Performance Award

• Sampath Bank reached a greater height by clinching the global accolade ‘Bank of the Year – 2009’ by the highly acclaimed international magazine ‘The Banker’ of Financial Times - London.• Placed among ‘The Ten Best Corporate Citizens’ in Sri Lanka for the 5th consecutive year at the Best Corporate Citizens Awards organised by The Ceylon Chamber of Commerce. Sampath Bank was awarded;

• Corporate Social Responsibility Award for 2009 (Best Corporate Citizen 2009)

• Winner in the Community Relations Category• Top Ten Corporate Citizens of the Country

for 2009• Sampath Surekum Ltd was amalgamated with the Bank.• The prestigious Magazine ‘Business Today’ selected Sampath Bank within top 10 Companies in Sri Lanka for the financial year 2008 - 2009.

Milestones


AcceptancesThe signature on a Bill of Exchange indicates that the person on whom it is drawn accepts the conditions of the bill. In other words a bill of exchange that has been accepted.

Accrual basisRecognition of the effects of transactions and other events when they occur without waiting for receipt or payment of cash or its equivalents.

Associate companyAn associate is an enterprise in which the investor has significant influence and which is neither a subsidiary nor a joint venture of the investor.

Bills of collectionA bill of exchange drawn by an exporter usually at a term, on an importer overseas and brought by the exporter to his bank with a request to collect the proceeds.

Capital adequacyThe ability of a bank to meet the needs of their depositors and other creditors in terms of available funds. As per requirement of Bank for International Settlements (BIS) and Central Bank of Sri Lanka, Local banks should maintain a stipulated minimum capital.

• TIER I CAPITAL (CORE CAPITAL) Core Capital includes selected items

of capital funds. Major core capital items are share capital, share premium, statutory reserve funds, retained profits, general reserves, surpluses/losses after tax arising from the sale of fixed and long-term investments.

• TIER II CAPITAL (SUPPLEMENTARY CAPITAL)

Supplementary Capital includes, approved revaluation reserves, general provisions, hybrid (debt/equity) capital items and approved subordinated term debts.

• TOTAL CAPITAL Capital base is summation of the core

capital (Tier I) and the supplementary capital (Tier II).

Capital gain (Capital Profit)The gain on the disposal of an asset calculated by deducting the cost of the asset from the proceeds received on its disposal.

Capital reservesUndistributed profits of a company that for various reasons are not regarded as distributable to shareholders as dividends. This reserve is set aside for specific purposes defined under the Banking Act No. 30 of 1988 and shall not be reduced or impaired without the approval of the Monetary Board.

Cash equivalentsShort-term highly liquid investments that are readily convertible to known amounts of cash and which subject to an insignificant risk of changes in value.

CommitmentsCredit facilities approved but not yet utilized by the clients as at the Balance Sheet date.

Cost methodA method of accounting whereby the investment is recorded at cost. The Income Statement reflects income from the investment only to the extent that the investor receives distributions from accumulated net profits of the investee arising subsequent to the date of acquisition.

DerivativesFinancial contracts whose values are derived from the values of underline assets.

Dividend coverThe number of times a company’s dividend to ordinary shareholders could be paid out of its net profits after tax in the same period.

Dividend yieldThat is the dividend expressed as a percentage of the share value.

Documentary creditA document from one banker to another, authorizing the payment of a specified sum to the person named in the documents on certain specified conditions.

Earning per share (EPS)The profit attributable to each ordinary share in the bank, based on the profit for the period after tax and after deducting minority interest and preference share dividends.

Effective tax rateProvision for taxation excluding deferred tax divided by the profit before taxation.

Equity methodA method of accounting whereby the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the investor’s share of net assets of the investee. The Income Statement reflects the investor’s share of the results of operations of the investee.

ESOP (Employee Share Ownership Plan)A method of giving employees shares in the business for which they work.

Finance leaseA lease in which the lesee acquires all the financial benefits and risks attaching to ownership of whatever in being leased.

Foreign exchange contractForeign exchange at a specified date in the future at an agreed exchange rate.

Foreign exchange incomeForeign Exchange Income arises from differences in exchange rates applied to valuation of assets and liabilities, which they were initially recorded and at the balance sheet date.

ContingenciesA condition or situation, the ultimate outcome of which, gain or loss, will be confirmed only on the occurrence or non-occurrence of one or more uncertain future events.

Corporate governanceThe process by which corporate entities are governed. It is concerned with the way in which power is exercised over the management and direction of entity, the supervision of executive actions and accountability to owners and others.

Correspondent bankA bank in a foreign country that offers banking facilities to the customers of a bank in another country.

Cost income ratioOperating expenses as a percentage of net income.

Dealing securitiesMarketable securities that are acquired and held with the intention of reselling them in the short-term.

Deferred taxationA sum set a side for tax in the accounts of an organization that will become payable in a period other than that under review. It arises because of timing differences between tax rules and accounting conventions.

Forward exchange contractAgreement between two parties to exchange one currency for another at a future date at a rate agreed upon on the day contracted.

Gross dividendThe portion of profits distributed to the shareholders including the tax withheld.

GuaranteesA promise made by a third party (Guarantor), who is not a party to a contract between two others, that the guarantor will be liable if the guarantee fails to fulfill the contractual obligations.

Interest marginNet interest income expressed as a percentage of interest earning assets.

Interest coverA ratio showing the number of times interest charges is covered by earnings before interest and tax.

Interest rate swapArrangement whereby one party exchanges one set of interest payments for another.

Interest in suspenseInterest suspended on non-performing loans and advances.

Investment securitiesSecurities acquired and held for yield or capital growth purposes and are usually held to maturity.

Letter of credit (L/C’s)Written undertakings by a bank on behalf of its customer (typically an importer), authorizing a third party (e.g. an exporter) to draw drafts on the bank up to a stipulated amount under specific terms and conditions. Such undertakings are established for the purpose of facilitating international trade.

Market CapitalisationThe value of a company obtained by multiplying the number of its issued shares by their market price.

Minority interestThe interst of individual shareholders, in a company more than 50% of which is owned by a holding company.

Net asset value per share.The value of a share calculated by dividing the amount of net assets by the number of shares in issue.

Off balance sheet transactionsA method of financing a company’s activities so that some or all of the finance and the corresponding assets do not appear on the balance sheet of the company. They would be recognized as an asset or liability, which give rise to contingencies and commitments.

Price-earnings ration (P/E ratio)The current market price of the share divided by the earnings per share of the bank.

PrudenceInclusion of a degree of caution in the exercise of judgment needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.

Return on average assetsAn accounting ratio, expressing the amount of profit for the financial year as a percentage of average assets.

Return on shareholders’ fundsAn accounting ratio, expressing the profit for the financial year as a percentage of average shareholders’ funds.

Revenue reservesReserves set aside for future distribution and investment.

Risk weighted assetsOn Balance Sheet assets and the credit equivalent of Off Balance Sheet assets multiplied by the relevant risk weighting factors.

Securities sold under repurchase agreement (REPO)REPO is an agreement whereby one party sells the security to another party and simultaneously agrees to repurchase the same security at a subsequent date at an agreed price.

Securities purchased under resale agreement (Reverse REPO)A reverse repo or resale agreement is the opposite of the repo transaction. In a reverse repo one party buys a security with an agreement to sell it back to the same party on a future date.

Segmental analysisAnalysis of financial information by segments of an enterprise specifically, the different industries and the different geographical areas in which it operates.

Shareholders’ fundsTotal of issued and fully paid share capital and capital and revenue reserves.

Single borrower limit30% of Tier II Capital.

Substance over formThe consideration that the accounting treatment and the presentation in Financial Statements of transactions and events should be governed by their substance and financial reality and not merely by legal form.

Subsidiary companyA subsidiary is an enterprise that is controlled by another enterprise (known as the parent).

Unit trustAn undertaking formed to invest in securities under the terms of a trust deed.

Value addedValue of wealth created by providing banking and other services less the cost of providing such services.

Yield to maturityDiscount rate at which the present value of future payments would equal the security’s current price.

Glossary of Financial and Banking Terms

Glossary of Financial and Banking Terms


Notice of Meeting

Notice is hereby given that the 24th Annual General Meeting of Sampath Bank PLC will be held at the “Mihilaka Medura” at Bandaranaike Memorial International Conference Hall, Bauddhaloka Mawatha, Colombo 07 on 30th March 2010 at 10.00 a.m. for the following purposes.

1. To receive and consider the Annual Report of the Board of Directors on the Affairs of the Company and the Statement of Audited Accounts for the year ended 31st December 2009 with the Report of the Auditors thereon.

2. To declare the recommended Dividend of Rs. 6.25 per share for the Financial Year 2009.

3. To re-elect Mr. J D Bandaranayake who retires at the Annual General Meeting, as a Director in terms of Article No. 87 of the Articles of Association of the Company.

4. To re-elect Mr. D J Gunaratne who retires at the Annual General Meeting, as a Director in terms of Article No. 87 of the Articles of Association of the Company.

5. To re-elect Dr. S Kelegama who retires at the Annual General Meeting, as a Director in terms of Article 87 of the Articles of Association of the Company.

6. To re-elect Mr. S G Wijesinha who retires at the Annual General Meeting, as a Director in terms of Article 87 of the Articles of Association of the Company.

7. A special notice dated 5th February 2010 has been received on that day by the Company from Mr. W.A.D. De Silva a shareholder of the Company giving notice of his intention to move the following resolution with regard to Mr Ernest Ananda Gunasekera who is over the age of 70 years under and in terms of Section 211 of the Companies Act.

“RESOLVED that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. Ernest Ananda Gunasekera and his appointment as a Director be approved under and in terms of Section 211 of the said Act.

8. To approve the Donations and Contributions made by the Directors during the year under Review.

9. To re-appoint M/s Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and to authorize the Directors to determine their remuneration.

By Order of the Board.

S. SudarshanCompany Secretary17th February 2010Colombo

Note:-A member is entitled to appoint a Proxy to attend and vote on his/her behalf and a Proxy need not be a member of the Company. A Form of Proxy is attached for the purpose. The instrument appointing a Proxy must be deposited at the Registered Office of the Bank at No. 110, Sir James Peiris Mawatha, Colombo 02, not less than forty eight (48) hours before the time fixed for holding of the Meeting.

You are kindly requested to bring with you, your National Identity Card or any valid source of identification. (eg. Driving license, Passport)

Notice of Meeting


Form of Proxy

Twenty Forth Annual General MeetingSampath Bank PLC110, Sir James Peiris MawathaColombo 02.

I/We, ........................................................................................................................................................................................................................................................of

................................................................................................................................................................................................................. being a member/members of Sampath Bank PLC hereby appoint Mr. Indulakshin Wickremasinghe Senanayake of No. 18/1, Alfred Place, Colombo 3, failing him Mr. Sunil Gamini Wijesinha of No. 146/8, Havelock Road, Colombo 5, failing him Mr. Mohan Asoka Abeynaike of No. 2A, De Fonseka Road, Colombo 5, failing him Mr. Denzil Jayalath Gunaratne of No. 410/8, Bauddhaloka Mawatha, Colombo 7, failing him Dr. Saman Kelegama of No. 99, St. Michael’s Road, Colombo 3, failing him Mr. Lakshman Jayaraj Kumar Hettiaratchi of No. 28/3, De Fonseka Place, Colombo 5, failing him Mr. Jayampathi Divale Bandaranayake of 196/2, Lake Drive, Colombo 8, failing him Mr. Ernest Ananda Gunasekera of No. 11, 1st Lane, Jambugasmulla Road, Nugegoda, failing him Mr. Watuthantrige Mahiman Prasantha Lal de Alwis of 40/4, Park Road, Colombo 5, failing him Mr. Kulappuarachchige Don Dhammika Perera of 27th Floor, East Tower, World Trade Centre, Echelon Square, Colombo 01, failing him Mr. Gardia Lokuge Harris Premaratne of 51/5, Weediya Bandara Mawatha, Ethul-Kotte, failing him Mr. Mahawaduge Yasalal Aravinda Perera of 370 F/2, Lake Road, Averihena, Hokandara (South), failing him Mr. Ranjith Samaranayake of 51A, Weerapuranappu Mawatha, Laxapathiya, Moratuwa, failing

him ......................................................................................................................................................................................................................................................... of

....................................................................................................................................................................................................................................................................as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty Forth Annual General Meeting of the Company to be held on 30th March 2010 and at any adjournment thereof. FOR AGAINST

1. To receive the Audited Financial Statements and the Annual Report of the Board for the year ended 31st December 2009.

2. To declare the recommended Dividend , Rs. 6.25 per share as the final Dividend for 2009.

3. To re-elect Mr. J D Bandaranayake who retires at the Annual General Meeting, as a Director under Article 87 of the Articles of Association of the Company.

4. To re-elect Mr. D J Gunaratne who retires at the Annual General Meeting, as a Director under Article 87 of the Articles of Association of the Company.

5. To re-elect Dr. S Kelegama who retires at the Annual General Meeting, as a Director under Article 87 of the Articles of Association of the Company.

6. To re-elect Mr. S G Wijesinha who retires at the Annual General Meeting, as a Director under Article 87 of the Articles of Association of the Company.

7. To approve a resolution that the age limit of 70 years referred to in Section 210 of the Companies Act No. 07 of 2007 will not apply to Mr Ernest Ananda Gunasekera and his appointment as a Director be approved under and in terms of Section 211 of the said Act.

8. To approve donations/contributions made by the Directors during the year under review.

9. To re-appoint M/s Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and authorize the Directors to determine their remuneration.

Mark your preference with “X”

Signed on this ……………………………………….........................................…………. Day of…...........................................................................................………. 2010

Signature ……………………………………………

NOTE: 1. Proxy need not be a member of the Company 2. Instructions re completion of Proxy are given in next page.

Form of Proxy


INSTRUCTIONS AS TO COMPLETION

1. Kindly perfect the form of proxy, after filling in legibly your full name and address, and by signing on the space provided.

2. The completed form of proxy should be deposited at the Registered Office of the Company at No. 110, Sir James Peiris Mawatha, Colombo 02, not less than 48 hours before, the appointed time for the holding of the meeting.

3. If you wish to appoint a person other than Chairman, Deputy Chairman or a Director of the Company as your proxy, please insert the relevant details in the space provided [below names of the Board of Directors] on the Proxy Form.

4. Article 73 of the Articles of Association of Company provides that:

“Any corporation which is a member of the Company may by resolution of its directors or other governing body, authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the Company”.

5. Please indicate with a ‘x’ in the space provided how your Proxy is to vote on each resolution, if no indication is given, the Proxy, at his discretion, will vote as he thinks fit.

6. In the case of a Company/Corporation, the Proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles of Association.

7. In the case of a Proxy signed by an Attorney the Power of Attorney must be deposited at the Registered Office of the Company for registration.

Name of Shareholder . ....................................................................................................

N.I.C. No. of Shareholder .....................................................................................................

Share Certificate No./ Membership No. .....................................................................................................

CDS A/C No. [if applicable] .....................................................................................................

No. of shares .....................................................................................................

Name of Proxyholder .....................................................................................................

N.I.C No. of Proxyholder .....................................................................................................

Form of Proxy


Investor Feedback Form

To request information or submit a comment/ query to the Company, please complete the following and return this page to –

Company Secretary Sampath Bank PLC 110, Sir James Peiris Mawatha Colombo 2 Sri Lanka.

Email : [email protected]

Name :Mailing Address :Contact Numbers - (Tel) : - (Fax) :E-mail :Name of Company : (If Applicable)Designation : (If Applicable)Company Address : (If Applicable)

What was your first contact with Sampath Bank :What is your interest in Sampath Bank :

Please tick (x) the appropriate box Yes No

Would you like to receive soft copies of the Sampath annual and interim reports via e-mail ?

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Would you like to receive any information on our products / services ?

Queries/ Comments

Investor Feedback Form


Notes

Notes

Corporate InformationName of CompanySampath Bank PLC

Legal FormA Public Limited Liability Company incorporated in Sri Lanka on 10th March 1986 under the Companies Act No. 17 of 1982 and listed in the Colombo Stock Exchange. A licensed Commercial Bank under the Banking Act No. 30 of 1988. Re-registered on 28th April 2008 under the Companies Act No. 7 of 2007.

Registration NumberPQ 144

Head Office & Registered Office110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka.

Telephone(011) 2300260. (011) 2358358, (011) 4730630, (011) 5331441, (011) 5600600

Fax(011) 2303085

SWIFT CodeBSAMLKLX

[email protected]

Web Pagewww.sampath.lk

AuditorsErnst & YoungChartered Accountants

LawyersNithya PartnersAttorneys-at-Law

Company SecretaryS SudarshanACIS(UK), MBA (Lincoln-UK)

Stock Exchange Listings68,887,628 Ordinary Shares 15,000,000 Unsecured Subordinated Debenturesof Rs 100/- each - 2007/2012

VAT Registration Number134001194 – 7000

Credit RatingFitch Rating (Lanka) Ltd has affirmed AA-(lka) National Ratingfor Sampath Bank PLC

Board of DirectorsMr Indulakshin W Senanayake - ChairmanMr Sunil G Wijesinha - Deputy Chairman Mr Mohan A Abeynaike - Non - Executive DirectorMr Denzil J Gunaratne- Non - Executive DirectorDr Saman Kelegama- Non - Executive DirectorMr Jayampathi D Bandaranayake- Non - Executive DirectorMr Ernest A Gunasekera- Non - Executive DirectorMr Lakshman J K Hettiaratchi- Non - Executive DirectorMr W M Prasantha Lal De Alwis- Non - Executive DirectorMr K D Dhammika Perera- Non - Executive DirectorMr G L Harris Premaratne - Executive Director/Chief Executive OfficerMr M Y Aravinda Perera - Executive Director/Chief Operating OfficerMr R Samaranayake - Executive Director/Group Chief Financial Officer

FOR INVESTOR RELATIONS AND

CLARIFICATIONS ON THE REPORT

PLEASE CONTACT

Company SecretarySampath Bank PLCNo. 110, Sir James Peiris MawathaColombo 02, Sri LankaE-mail : [email protected]: (011) 4730418/9

Subsidiary CompaniesName of the Company Holding % Nature of Business

Sampath Centre Ltd 97.14 Renting of Commercial PropertySC Securities (Pvt) Ltd 51.00 Stock BrokingSampath Leasing and Factoring Ltd 100.00 Leasing & FactoringSampath Trade Services (Hong Kong) Ltd 100.00 Documentary Collection and Documentary CreditSampath Information Technology 100.00 Developing Software Solutions and Solutions Ltd Maintenance of Hardware

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Sampath Bank PLC110, Sir James Peiris MawathaColombo 02Sri Lanka

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