Sampath Bank PLC - Colombo Stock Exchange · Sampath Bank PLC Legal Form ... [email protected] Web Page Auditors Ernst & Young Chartered Accountants Lawyers Nithya Partners Attorneys

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CORPORATE INFORMATION

Name of Company Sampath 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. 07 of 2007.

Registration NumberPQ 144

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

Telephone+94(011)2300260+94(011)2358358+94(011)4730630+94(011)5331441+94(011)5600600

Fax+94(011)2303085

SWIFT CodeBSAMLKLX

[email protected]

Web Pagewww.sampath.lk

AuditorsErnst & YoungChartered Accountants

LawyersNithya PartnersAttorneys - at - Law

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

Stock Exchange Listings162,736,665 Ordinary Shares 15,000,000 Unsecured Subordinated Debentures of Rs. 100/- each - 2012/2017

VAT Registration Number134001194 - 7000

Credit RatingRAM Rating AA (Stable)Fitch Rating AA-(lka) (Stable)

Board of Directors (As at 25/10/2012)Mr. Dhammika Perera - ChairmanMr. Channa Palansuriya - Deputy ChairmanMr. Sanjiva Senanayake - Senior DirectorMr. Deepal Sooriyaarachchi - Non-Executive DirectorProf. Malik Kumar Ranasinghe - Non-Executive DirectorMrs. Dhara Wijayatilake - Non-Executive DirectorMiss. Annika Wickremasinghe Senanayake - Non-Executive DirectorMr. Deshal De Mel - Non-Executive DirectorMr. Ranil Pathirana - Non-Executive DirectorMrs. Saumya Amarasekera - Non-Executive DirectorMr. Aravinda Perera - Managing DirectorMr. Ranjith Samaranayake - Group Chief Financial Officer/ Executive Director

Subsidiary Companies

Name of the Company Holding % Nature of Business

Sampath Centre Ltd 97.14Renting of Commercial Property

S C Securities (Pvt) Ltd 100.00 Stock Broking

Sampath Leasing & Factoring Ltd

100.00 Leasing & Factoring

Sampath Information Technology Solutions Ltd

100.00Developing Software Solutions and Maintenance of Hardware

For investor relations and clarifications on the report, Please contact;Group Company SecretarySampath Bank PLCNo. 110, Sir James Peiris Mawatha, Colombo 2, Sri LankaE-mail : [email protected]. : +94(011) 4730418/420/548

1Sampath Bank PLC

2 Annual Repor t 2012

AHEAD OFOUR TIME.

3Sampath Bank PLC

As we celebrate our Silver Jubilee marking 25 great years of service to the nation, we know we have made a significant contribution to the banking and financial service industry of Sri Lanka.

We’ve never been satisfied with ‘good enough’. From pioneering cutting-edge banking technology to creating the island’s biggest ATM network and winning a host of industry awards, we have been setting benchmarks of excellence in many different ways. It has always been our aim to bring the most innovative and contemporary financial services to every Sri Lankan and that idea still holds true. 25 years young and going strong, we shall strive to be outstanding in our industry and always ahead of our time.


THE GROWING FORCE IN

OUR VISIONO

UR

VA

LUES

SRI LANKAN FINANCIAL SERVICES

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.

5Sampath Bank PLC

CO

NTE

NTS

Sampath Bank at a Glance 6Financial Highlights 8Milestones 10Chairman’s Statement 14Managing Director’s Review 18Board of Directors 30Board of Directors Profiles 32Corporate Management 38Senior Management 41Management Discussion & Analysis 46Corporate Governance 96Audit Committee 144Nominations Committee Report 148Credit Committee Report 150Report of The Risk Management Committee 152Human Resources & Remuneration Committee Report 155Strategic Planning Committee Report 158Shareholder Relations Committee Report 160Treasury Committee Report 162Marketing Committee Report 163Risk Management 164Sustainability Report 200Annual Report of the Board of Directors on the Affairs of the Company 274Directors Statement on Internal Control Over Financial Reporting 287Independent Assurance Report to the Board of Directors of Sampath Bank PLC 288

Managing Director’s and Group Chief Financial Officer’s Responsibility Statement 289Directors’ Responsibility For Financial Reporting 290Independent Auditors’ Report to the Shareholders of Sampath Bank PLC 291Income Statement 292Statement of Other Comprehensive Income 293Statement of Financial Position 294Cash Flow & Reconciliation Statement 295Statement of Changes In Equity 297Significant Accounting Policies 298Notes to the Financial Statements 318Ten Years at a Glance 394Value Addition 395Sources & Distribution of Income 396Compliance with the Disclosure Requirements Specified by the Central Bank of Sri Lanka 397Share Information 400Debenture Information 406Branch Network 408Nostro Accounts Maintained in Specific Currencies 413Correspondent Banks and Exchange Companies 415Capital Adequacy 419Glossary of Financial and Banking Terms 424Notice of Annual General Meeting 430Form of Proxy 431Corporate Information Inner Back Cover


5.325%

Bn

Group profitAfter tax

The robust infrastructure of the Bank and its heritage as a pioneer in leveraging technologies to provide a superior service was the foundation for its reasonably strong credit, asset and deposit growth in 2012.

SAMPATH BANK AT A GLANCE

GROWTH IN ASSETS

41%GROWTH IN INCOMEGroup Income 40 Bn Group Assets 314 Bn

7Sampath Bank PLC

24% 23%

209BRANCHES264 ATMS

GROWTH IN DEPOSITS GROWTH IN ADVANCESBank Deposits 243 Bn Bank Advances 208 Bn


FINANCIAL HIGHLIGHTS

BANK GROUP

2012 2011 Change 2012 2011 Change (Rs Mn) (Rs Mn) % (Rs Mn) (Rs Mn) %

ProfitabilityIncome 38,794 27,577 40.7 39,725 28,267 40.5Total operating income 17,869 14,572 22.6 18,377 15,128 21.5Operating expenses, impairment losses and VAT on Financial Services 10,604 9,578 10.7 10,860 9,753 11.3Profit before tax 7,265 4,994 45.5 7,517 5,376 39.8Provision for taxation 2,129 1,606 32.5 2,172 1,670 30.0Profit for the year 5,136 3,387 51.6 5,346 3,705 44.3

Assets & LiabilitiesDue to banks & other customers (Deposits only) 243,575 195,900 24.3 243,332 195,799 24.3Loans and receivables from banks & other customers after provision for impairment losses (before staff loan fair value adjustment) 209,587 170,767 22.7 213,883 173,063 23.5Total equity 25,101 20,900 20.1 27,275 22,867 19.3Total assets 308,681 247,085 24.9 314,326 250,995 25.2

Investor InformationLoans & receivables from banks & other customers to due to banks & other customers (%) 85.81 86.84 (1.2) 87.66 88.06 (0.5)Net asset value per share (Rs.) 154.24 130.19 18.5 167.60 142.44 17.7Market value at year end (Rs.) 200.50 195.00 2.8 200.50 195.00 2.8Earnings per share - Basic (Rs.) - - - 32.98 23.00 43.39Earnings per share - Diluted (Rs.) 32.94 22.88 43.97Dividend yield ( %) 6.0 4.6 29.7 - - -Dividend per share (Rs.) 12.00 9.00 33.3 - - -Dividend cover (Times) 2.6 2.4 8.3 2.7 2.6 3.8Gross dividends 1,953 1,427 36.9 1,953 1,427 36.9Market capitalization 32,628 30,587 6.7

Key IndicatorsLoan impairment losses to total operating income (%) 0.77 2.94 (73.8) 0.83 2.64 (68.6)Loan impairment allowance to loans & receivables to other customers (%) 3.2 4.2 (23.8) 3.2 4.2 (23.8)Return on average assets (%) - before tax 2.6 2.3 13.0 2.7 2.4 12.15 - after tax 1.8 1.5 20.0 1.9 1.7 11.8Return on equity (after tax) (%) 22.3 16.2 37.6 21.3 16.2 31.5Cost to income ratio (%) 59.0 61.5 (4.1) 58.7 60.6 (3.2)Liquid assets Ratio (%) 22.4 25.0 (10.2) - - -

Capital adequacy ratios (%) -Tier 1 (%) - Core 11.8 10.2 15.6 11.9 10.5 13.3 -Tier 1 & 11 (%) - Total 13.6 11.5 18.2 13.8 11.8 16.9

RAM Rating AA (Stable) AA (Stable)Fitch Rating AA-(lka) AA-(lka) (Stable) (Positive)

9Sampath Bank PLC

Capital Adequacy Ratio (%)

0

5

10

15

08 09 10 11 12Tier 1 Tier 11

Dividend per Share (Rs.)

0

2

4

6

8

10

12

08 09 10 11 12

Net Asset Value per Share (Rs.)

0

50

100

150

200

08 09 10 11 120

1,000

2,000

3,000

4,000

5,000

6,000

08 09 10 11 12

Net Pro�t After Tax - Bank (Rs. Mn)

Total Advances (Rs. Mn)

0

50,000

100,000

150,000

200,000

250,000

08 09 10 11 12

Total Deposits (Rs. Mn)

0

50,000

100,000

150,000

200,000

250,000

08 09 10 11 12

It has been a year for enhancing performance and stability to position the Bank to reap the dividends of the branch expansion programme. The results are encouraging and augur well for the sustained growth and profitability of the Bank.


1986 Sampath Bank

was incorporated as Investment & Credit Bank Ltd, it received the certificates to commence business on 10th March 1986

1987 The Bank ceremonially opened

for business on 15th May 1987. Mr. N U Jayawardena became the Chairman of the Bank, Mr. Janaka de Silva was appointed as the General Manager.

1987 The Bank introduced a cheque

guarantee card, a saving account with checking facilities and extended banking hours till 3.00 pm for the first time in the country.

1988

The ATM (SET) facility was introduced and Sampath bank became the first bank in Sri Lanka to operate a multi-point network of Automated Teller Machines.

1989

Uni-Banking system was introduced to the country for the first time.

1996

“asiamoney” the prestigious financial magazine in Asia voted Sampath Bank as the ‘Best Commercial Bank of the year’ in Sri Lanka.

1997 The Bank introduced

the DEBIT CARD, another first in South Asia, in association with CIRRUS and MAESTRO.

1998

The bank was honoured with the award BEST COMMERCIAL BANK OF THE YEAR 1998 by “Asiamoney” for the third year in succession.

1999

The Bank successfully migrated to a more versatile banking package, Bancs2000 which provided a competitive edge considering the variety of services and products it offers. It also invested in a new state of the art ATM switch, which also assisted the continued efforts of improving products and services offered by the bank.

2000

Sampath Bank launched an Internet banking facility “Sampathnet” in July.

2001

Quality Approved Status for the Bank - Sampath Bank became the first Sri Lankan organisation to achieve the “Quality Approved Status” of best practice, which is presented by the Chartered Institute of Management Accountants.

2002

Sampath Bank was appointed as the settlement bank for US Dollar cheque clearing system in Sri - Lanka.

AN EVENTFUL QUARTER CENTURYIt has been an amazing twenty five years of operations for the bank. This timeline looks at the defining events in a quarter century of growing our business, touching lives and staying ahead of our time…

1986 -2012

11Sampath Bank PLC

2003

The Bank became the first in Sri Lanka to introduce “one day clearing” for all cheques drawn on any Sampath Bank branch, collected by any Commercial Bank in the island & presented through Sri Lanka Automated Clearing House (SLACH).

2004

The first ever Cheque Imaging & Truncating (CIT) site in Sri Lanka was launched by us on 25th of October.

2005

The Bank was adjudged the Best Corporate Citizen for the year 2005 in the top ten category.

2007

Telecommunication technology was infused into banking technology with the introduction of ‘Sampath Mobile Cash’, a money transfer process using mobile phones.

2008

Honoured at the National Science and Technology Awards 2008 for the category of Locally Developed New Technologies which have resulted in successfully marketed product/services for our innovative product “Sampath eRemittance System”

2009

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.

2010

Creating history in the banking industry of Sri Lanka, the Bank opened 40 branches and 39 ATMs during the year, bringing total number of branches to 171 and total number of ATMs to 222 by end of 2010.

2011

Introduced the Super branch concept of 365-day banking at Dharmapala Mawatha and Kiribathgoda.

2012

We celebrated our silver jubilee marking 25 great years of service to the nation.


13Sampath Bank PLC


Over the next few years, I believe we have the capacity to become the number one bank in Sri Lanka. We need to believe in our capability to achieve this. Our shareholders, I ask for your support and commitment to grow the business and enhance our services on our way to the leadership position.

CHAIRMAN’SSTATEMENT

15Sampath Bank PLC

Dhammika PereraChairman


As a Bank that is 100% homegrown, we have proudly upheld our Sri Lankan identity whilst being an innovator and a trendsetter at the same time.

CHAIRMAN’SSTATEMENT

25 years to the future, we are ahead of our times It is with great pleasure that I welcome all of you, our valued shareholders, to the 27th Annual General Meeting of Sampath Bank PLC and present to you the Audited Financial Statements and Annual Report for the financial year 2012.

Back in 1987, a group of far sighted persons saw the need for a local bank with a local culture and local values; a bank by the people for the people. The visionary late Mr. N. U. Jayawardena was invited to be the first Chairman of the Bank. And thus was born what was to become a revolutionary change agent for Sri Lanka’s banking industry. Sampath Bank over the course of the next two and a half decades transformed Sri Lanka’s banking experience, leading the way with technological innovation and excellence in customer service. And thus was born what was to become a revolutionary change agent for Sri Lanka’s banking sector. Sampath Bank over the course of the next two and a half decades transformed Sri Lanka’s banking experience, leading the way with technological innovation and excellence in customer service.

25 years on, Sampath Bank is a stalwart in Sri Lanka’s financial landscape. But, our legacy is not just our past. It is also our future. Today, you, our shareholders, will agree that we will be defined by what we are to become in the next 25 years. And we have already begun the next leg of this journey, we are embracing change as the only constant in delivering value, creating wealth and making progressive steps towards continuing to change the face of Sri Lanka’s banking sector.

Over the next few years, I believe we have the capacity to become the number one bank in Sri Lanka. We need to believe in our capability to achieve this. Our shareholders, I ask for your support and commitment to grow with the business and enhance our services on our way to the leadership position. As we grow, we will need to enlarge our resources and to invest towards them. We need to constantly visualize the future of banking and offer services that ensure we stay ahead of our times. I believe if we do this consistently, we will carve for ourselves a differentiator that will be hard to match.

As a Bank that is 100% homegrown, we have proudly upheld our Sri Lankan identity whilst being an innovator and a trendsetter at the same

25 years on, Sampath Bank is a stalwart in Sri Lanka’s financial landscape. But, our legacy is not just our past. It is also our future. Today, you, our shareholders, will agree that we will be defined by what we are to become in the next 25 years. And we have already begun the next leg of this journey,

17Sampath Bank PLC

time. It is these two values that will define who we are in the future. I reiterate what I noted in my statement in the previous financial year; it is our unique identity, tradition, foresight and innovative spirit that will pave the way for greater future successes.

Our shareholders and stakeholders will agree that by staying ahead of our times, Sampath Bank will lead Sri Lanka into it’s next phase of economic growth. Our vision for the future is beyond the realms of our own operations. We measure our success against the successes of our nation. Ours is a sustainable business model that values inclusive banking, and respects the rights of the individual. We believe that these percepts are fundamental to our future achievements.

We have achieved 25 years of banking excellence, and now as we look to 25 years into the future, let me assure you that we will stay ahead of our times to deliver wealth to all our stakeholders.

My sincere appreciations to the Board of Directors, Managing Director, Management Team and the Sampath Bank team for their unstinted dedication towards realizing our goals for this financial year. Let us march on with resolute dedication. Let us stay ahead of our times.

Dhammika Perera

Chairman

22nd February 2013

5.1b

BANK PROFIT

Growth of the bottom line was achieved through growth of business volumes and careful management of resources to maximize earnings


2012 was a period of consolidation for Branch expansion and rapid business growth for Sampath Bank set within the country’s monetary policy framework designed to moderate credit expansion and improve stability in the Banking sector. Our performance reflects the success of this strategy with Rs.5.1 Bn Profit after tax, an increase of 51.6% over 2011.

MANAGINGDIRECTOR’S REVIEW

19Sampath Bank PLC

Aravinda PereraManaging Director


Sampath Bank has turned in a well-rounded performance in almost all areas and I am deeply appreciative of the visionary guidance of the Board and the commitment and dedication of all our staff which has enabled a happy outcome.

MANAGING DIRECTOR’S REVIEW

2012 was a period of consolidation for Branch expansion and rapid business growth for Sampath Bank aligned within the country’s monetary policy framework designed to moderate credit expansion and improve the stability of the Banking sector. Our performance reflects the success of this strategy with Rs.5.1 Bn Profit after tax, an increase of 51.6% over 2011, and improved performance indicators across the Board are testimony to the Bank’s enhanced efficiency and stability as we celebrate our 25th year in operation in Sri Lanka, particularly considering the challenging conditions that prevailed during the year.

Our loans and advances portfolio grew by 23% of which the local component was limited by the 23% ceiling imposed by Central Bank of Sri Lanka (CBSL) whilst the foreign currency loan portfolio grew by 29%. Significant areas of growth for credit were retail banking, credit cards and SME lending which requires specialised skills and efforts were required with organic growth in corporate banking. We also see exposure increasing in the regions outside the Western Province which has been the result of focussed efforts to support economic activity in the regions. Regional expansion of our loan book requires more intense activity and support by way of seminars and workshops to ensure that customers are financially literate and understand the terms and conditions of their facilities. The requirement for a loan impairment provision decreased by Rs 532.6 Mn, mainly due to the charge for loan impairment decreasing by Rs 287.1 Mn in 2012 compared with previous year and higher bad debt recoveries amounted to Rs 782.7 Mn in 2012, which is included as other operating income. This is attributable to our centralised approval model supported by a robust IT platform which enabled the bank to

provide an efficient service whilst safeguarding the asset quality and also our proactive strategy for handling recoveries.

Deposits grew by 24% during the year as our branch network matured and enhanced its performance. The industry observed a shift of deposits from current and savings accounts to time deposits which increased the pressure on net interest margins and Sampath Bank was similarly affected. Due to these issues we looked to other sources of funds to finance our forecast expansion.Financing portfolio growth through increased foreign borrowing was a strategy we pursued as

Significant areas of growth for credit were retail banking, credit cards and SME lending together where specialist skills and efforts were required with organic growth in corporate banking. We also see exposure increasing in the regions outside the Western Province which has been the result of focussed efforts to support economic activity in the regions.

21Sampath Bank PLC

11.6Net Interest Income

Net interest income recorded a growth of 29.8% over due to prudent credit growth, diverting resources to more remunerative products and effective reprising of both asset and liability products

we perceived the benefits of lower pricing and easing liquidity constraints. Accordingly in March 2012, immediately prior to the imposition of the credit ceiling, we raised US$62.5 Mn through a syndicated loan which opened for US$ 30 Mn and was oversubscribed more than two fold. The syndicate was arranged by Bank Muscat S.A.O.G., Citigroup Global Markets Asia Limited and Emirates NBD Bank PJSC. This was our second venture to raise funds off shore, having raised US$ 45 Mn in 2007 through a similar syndication, which was settled as scheduled. The confidence of the foreign investors in the Bank’s performance to date and our ability to sustain and grow was amply evidenced by the interest shown in the current syndication by the foreign markets. A strong balance sheet and related financials coupled with its tremendous growth resulted in the overwhelming response to the syndicate participation amidst the prevailing global economic issues. During the year we signed agreements to raise US$ 20 Mn funds from Proparco Group in France for renewable energy projects and raised US$ 45 Mn from China Development Bank for trade with China. This has enabled us to reduce our cost of funds and to ease the pressure on Net Interest Margin. We recognise that this strategy changes our risk profile but are confident that we have the mechanisms in place to monitor and manage the risk and also the resilience to absorb a normal degree of stress. We are appreciative of the guidance provided by Central Bank in this regard.

Growing net interest income (NII) presented challenges during the year due to tighter liquidity and intense competition between banks for deposits. Sampath Bank was able to grow NII by 29.8% to Rs.11.6 Bn by increasing foreign borrowings as described above and also

taking advantage of our favourable maturity profile which enabled us to re-price assets and liabilities according to market trends. Fee & Commission Income grew by 18.7% despite the decline in import and export volumes due to the high standard of customer service and superior relationship management. Profitability was further enhanced as we were able to improve the ratio of costs to income from 61.5% in 2011 to 59.0% in 2012. The charge for loans and investments impairment decreased from Rs.618.0 Mn in 2011 to Rs.64.9 Mn in 2012 ,which was mainly due to the fact that there was a mark to market gain on Treasury Bills as against a loss recorded in 2011 and the charge on loan impairment for the year is well below the last year. We have also been able to reduce the effective tax rate from 32.2% to 29.3% due to effective tax planning. Profit after tax growth of 51.6% to Rs.5.1 Bn was achieved through understanding the trends and forces that are shaping the industry and responding effectively to the same using the strengths that have characterised our progress, high standards of customer service coupled with technological innovation.

Capital adequacy also improved during the year with Core Capital moving up from 10.24% in 2011 to 11.80 % in 2012 and Total Capital (Tier I + Tier II) moving in a similar manner from 11.45% to 13.61%. Sampath Bank has turned in a well-rounded performance in almost all areas and I am deeply appreciative of the visionary guidance of the Board and the commitment and dedication of all our staff which has enabled a happy outcome. The high rankings for management profile honesty (#3) and financial performance (#3) together with

bn


the overall ranking of #5 in the most respected entities in Sri Lanka, recognised by LMD is testimony to the calibre of Team Sampath and its capabilities.

A Challenging Landscape Global economic growth continued to slow down during the year and is estimated at 3.3% for 2012 by the International Monetary Fund. Uncertainty over the viability of the Euro zone and fiscal policy in the US continue to heighten the global risks. Deceleration in growth is evident in India and China as well further dampening the growth projections for emerging economies. Sluggish output in major advanced economies, fragile financial conditions and elevated unemployment in most parts of the world remain key concerns.

The Sri Lankan economy grew at 6.5% in 2012 compared to 8.3% in 2011 as the economy was impacted by weak demand for exports due to the above conditions as well as geo-political uncertainty, sanctions on Iran and persistently high petroleum prices. Excessive credit demand, a drought that affected the performance of the agriculture sector and the hydro power generation followed by floods in the last quarter which affected food supplies were critical local factors that impacted our economy. Several policy measures were taken to address these issues in the economy which have proved effective and stabilised the economy although many had adverse impact on the performance of the Banking sector. Monetary policy changes effected to stabilise the economy included increasing policy interest rates and imposing a ceiling on credit growth of 18% with a provision to increase up to 23% if foreign funds were raised to finance such expansion. Exchange rate policy was relaxed allowing greater flexibility continuing the devaluation that commenced

with the 3% introduced in the budget proposal in November 2011. Consequently the Rupee devalued by 11.6% during the year opening the year at Rs 113.90 and closing at Rs 127.65 per US$. It is significant that the rupee appreciated by 5% during the 2nd half of the year reflecting the success of the policy measures implemented. Fiscal policy measures were taken to address the growing trade deficit by imposition of higher tariffs and excise duties on selected imports which resulted in a decline in import volumes during the year. Greater pass through of energy and transport prices was allowed during the year to address the budget deficit. These measures resulted in the contraction of the trade deficit by 2.1 % during first 11 months and a surplus in the balance of payments of US$ 100 Mn whilst annual average inflation increased from 6.7% in 2011 to 7.6% in December 2012.

It was a challenging year for the Banking sector as it dealt with the credit ceiling imposed in the 1st quarter, higher interest rates, volatile exchange rates and tightening liquidity. The sector demonstrated resilience and maintained stability while expanding at a more moderate pace in comparison to 2011. Regulations were


Global economic growth continued to slow down during the year and is estimated at 3.3% for 2012 by the International Monetary Fund. Uncertainty over the viability of the Euro zone and fiscal policy in the US continue to heighten the global risks.

It was a challenging year for the Banking sector as it dealt with the credit ceiling imposed in the 1st quarter, higher interest rates, volatile exchange rates and tightening liquidity.

23Sampath Bank PLC

strengthened and risk management was enhanced to ensure the stability of the sector. Safety net mechanisms and consumer protection were also strengthened during the year. Total assets of the Banking sector grew from Rs.4.3 trillion in 2011 to Rs. 5 trillion as at November in 2012 with loans and advances growing from Rs.2.6 trillion to Rs.3.1 trillion over the same period. Deposits grew from Rs.3.1 trillion in 2011 to Rs.3.5 trillion as at November in 2012. Leading banks with sound track records and strong balance sheets, including Sampath Bank, secured a total of US$ 973 Mn of which 70% were long term funds as advised and encouraged by Central Bank in order to finance the expansion of the credit portfolios. There was significant pressure on the Net Interest Margins due to the high interest rate regime and the shift of deposit mix from the low cost current and savings deposits to more costly term deposits. Overall, the performance of the sector is testimony to the stability and resilience of the Banking sector and relaxing of policy measures in January 2013 sets the stage for stable growth in the year that has commenced.

Supporting National Priorities As a systemically important bank in Sri Lanka, we recognised the need to lend support to the national priorities and aligned the Bank’s strategy to national strategies wherever possible. Accordingly we have prioritised business expansion in the North & East, increased exposure to priority sectors such as SMEs, supported the e-government initiative and invested in foreign currency ATM’s to support tourism which was launched in early 2013. Two foreign currency exchange supported ATMs have already been installed in Colombo Metro area and few more of such ATM’s are ready for installation in Kandy,

Negombo and Beruwala which will enable tourists to exchange their currency for rupees supporting this vital sector. Thirty fully fledged branches in the North and East, the promotion and disbursement of loans to SMEs under the “Pibidena Uthura” scheme, and the launch of products designed to stimulate economic activity in these regions taking into account their special needs and circumstances are evidence of our commitment to the economic prosperity of this region. We have increased our lending to the SME sector through promotion of credit lines and utilised the entire allocation of the Investment Fund Account for this purpose. The Sampath Payment Gateway supports the e-government initiatives for the Registrar of Companies, the Ministry of Transport, the “Api Wenuwen Api” initiative of the Ministry of Defence, and the National Health Development Fund. We were proud to note that our efforts were recognised in the rankings of the Most Respected Entities in Sri Lanka where Sampath Bank was ranked 2nd for Nation Mindedness.

Consolidation and Business Expansion 2012 was a year of consolidation and business expansion for Sampath Bank - a strategy suited to the economic and regulatory landscape that prevailed during the year. These two seemingly contradictory goals were actually complementary as we focussed on increasing the business flow from the branches and also expansion of the business lines, particularly through the electronic banking channels. We have sufficient geographical coverage with 209 fully fledged branches throughout the island enabling us to achieve higher penetration levels both in the urban and rural communities. Our focus this year was on enhancing productivity and performance efficiency, training recently recruited staff, strengthening our risk management and compliance functions.

Asset & Liability Growth

Growth rates for deposits, advances and total assets surpassed the industry’s aver-age Growth rates for the second consecutive year.


We are also exploring new avenues of growth and expansion beyond traditional banking. Our extensive involvement in electronic payment processes holds the key to the future as paper based payment method usage decline. As audit trails of electronic payments have improved enabling real time transfer of funds securely, volumes of payments handled through electronic channels have grown dramatically. Financial intermediaries who propagate new ideas and innovative payment methods making direct transfer of funds possible will be the players of the future. Sampath Bank as a trendsetter in technological innovation in banking will continue to set the pace for the industry in this fast evolving area of operations. Sampath Mobile Cash which was improved and re-launched this year is an example of this initiative where any person can transfer funds using their mobile phone or CDMA phone to any other person who has a mobile phone or CDMA Phone. We have made arrangements to launch a banking Application Programming for the iPhone and iPad. Our electronic banking products including Sampath Vishwa, Sampath PayEasy and the Sampath Payment Gateway are all products that can support this line of business and provide scalable and cost effective solutions for facilitating payments. We have a competitive edge in this at present but are fully aware of the need for continuous innovation and improvement required to maintain our leadership in this line of business.

Brand building Sampath Bank is ranked within the country’s top ten brands in the LMD Brands Annual 2012 and it is a household name that is synonymous with responsible business practices. We have embarked on a programme to ensure that the ambiance of our premises nationwide reflect our

brand in an appropriate manner enhancing the experience of the people who interact within our premises. For the employee who spends a greater part of their adult life in the Bank, it must be a place that is conducive to performance and where their efforts are appreciated. For the customer, it must be a place where they are able to do business within a framework that supports their wealth creation process, their custom is valued and advice is provided on areas of concern. For other stakeholders it must be a place where their rights are safeguarded and where they upheld and they can conduct their business with dignity, respect and convenience. The project vision is beyond the mere tangible aspects of pleasant interiors and accessibility of branches but also addresses the softer aspects of creating a great


Managing Director addressing the gathering at the launch of the First Foreign Currency conversion ATM in SL.

25Sampath Bank PLC

place to work or to conduct business. This principle will extend to our electronic banking channels as well, enhancing the customer experience with the Bank. Standard forms are being reviewed to ensure that they are fit for purpose in the current operating environment and are also fit for the future. All customer touch points will be reviewed and analysed to ensure that our processes are customer friendly, lean, secure and fit for purpose with unnecessary tasks being eliminated. We strongly believe that focussing on needs of the people in this manner will have a significant positive impact on the Sampath Bank brand and also prove cost effective for the Bank as we learn to do more with less resources.

Investing in People We believe that our team provides us with our greatest sustainable competitive edge. Ours is an established learning and mentoring culture that ensured that the spirit of the Sampath Values is nurtured and passed on to the new recruits. As we experienced accelerated growth in staff numbers over the past two years, we now have approximately 1000 staff, who are relatively new, enthusiastic and eager to prove themselves. This poses challenges to maintaining our culture of learning and mentoring as we now have a ratio of two internally trained staff to each new recruit, who are knowledgeable of what Sampath Bank stands for, our ways and our standard of customer service. Our new team members need

to specialise but also have a general knowledge of functions beyond their own and understand what we stand for. We have prioritised their training and mentoring to ensure that our values such as honesty and integrity and the spirit of innovation are passed on and their technical skills are regularly updated and enhanced to enable performance at desired levels. Face to face learning, e-learning and on the job training is provided to fast track their integration in to the Sampath team. We have also identified the need to train future leaders who will have specialised training to develop their leadership skills with the Sampath Leadership Academy. Additionally, the Corporate Management Team has been nominated to the Boards of our subsidiaries to provide leadership opportunities and also gain greater synergies within the Group. The results presented, in this Annual Report, bears testimony of the hard work of a team of 3,455 people united with the common goal of driving the performance of our Bank to greater heights. I have been privileged to lead this dynamic and dedicated team to achieve our strategic goals and sincerely thank each and every team member for their efforts and cooperation in a challenging year. Our retention rate of 96% speaks for the loyalty of the team and the results are testimony of their capability. We have laid strong foundations for our future growth over the years which were further consolidated in 2012 and I look to their continued support and commitment as we look to reach higher goals and widen our horizons.

Compliance & Regulatory Framework This year the financial statements of the Bank are prepared according to the Sri Lanka Financial Reporting Standards which are based on the International Financial Reporting Standards.

2012 2011

ROA increased in line with the growth in profits and remained at high level above industry average of 1.7%

ROA

1.8

%

1.5

%


CBSL has strengthened and streamlined the regulations for commercial banks during the year which contributed to the improved stability of the financial system in the country.

Compliance with guidelines and other regulatory frameworks is a matter of priority for the Bank and is monitored by the Audit Committee and the Risk Management Committee who report to the Board of Directors in this regard. Monthly compliance certificates are provided to the committees by the Risk Management Unit and the Compliance Unit to provide assurance on compliance with regulations. We have also been strengthening our Risk Management functions as we move towards compliance with the Basel II Advanced Approaches. The Bank is ahead of the implementation time frame for these and is also looking ahead to Basel III requirements. As per CBSL guidelines the Compliance function was segregated from the risk management function during the year with structural changes. Additionally the Chief Risk Officer’s role was expanded to include subsidiaries as well and designated as Group Risk Officer. We continue to engage with the regulators to implement and advocate for best practice in this vital area.

Sustainability & Corporate Responsibility This year we have continued our process of integrating strategy of sustainability with our business strategy. We present our first integrated report this year to our stakeholders as sustainability reporting has progressed to integrated reporting. Our 4E’s sustainability model was improved to include a fifth E, Ethics and Values as we feel this is a necessary dimension of the model and incorporating it would ensure continued emphasis. Stakeholder engagement

has been the driver for charting our course and we are committed to further improving our level of engagement. Responsible business practices was a key issue we recognised across all stakeholder segments and this has been the central theme of our sustainability report highlighting the culture we have built up at Sampath Bank. Many issues identified have been addressed during the year and examples of these are the concessions provided to shareholders, implementation of the customer charter and the extensive and varied

As a systemically important bank in the country, we look to continue our tradition of setting industry standards through technological innovation and customer service. We have a team that is motivated and inspired to achieve whilst pushing boundaries to take the Bank...


engagement with local communities by our branch network. We recognise that our sustainability agenda requires continuous improvement and look forward to taking up new challenges and widening our horizons in the coming year.

Silver Jubilee Sampath Bank completed 25 years in operation on 22th March 2012. One of the reasons the Bank came into being was because the founders saw the need for an innovative, truly Sri Lankan bank and we have done our best to accomplish that with our focus on technological innovations focusing on customer service. Our technological advances which shaped the banking industry in this country include the first interconnected ATM

27Sampath Bank PLC

network, South Asia’s first debit card and many others. Similarly, our customer service standards also raised the bar for the industry as we were the first bank to offer extended banking hours, enable customers to access their account from any branch, provide speedy clearance of cheques and also introduced the Super Branch concept with further extended hours. Many of these firsts are now industry standards and we are proud of our pioneering vision that has dramatically changed the way established industry leaders conducted their business and made banking a more customer centric industry in line with the vision of our founders. We have powered the interbank ATM network which brings together ten banks and one non-bank financial institution to provide customers access through more than 1700 ATM’s throughout the country. We are today

a Bank that has Rs.309 Bn in assets, income of Rs.39 Bn, profits of Rs.5.1 Bn, 3455 employees and a network of 209 branches – an achievement that is inspirational considering the short space of time in which it was accomplished. Blessings of our religious leaders from all major religions were invoked on this auspicious occasion and we also felicitated the employees and shareholders who have remained loyal to the Bank through-out our inspiring journey. We have nurtured the spirit of innovation and customer service in the Bank and these themes are as relevant today as they were twenty five years ago. These concepts will guide our journey through the future as we chart our course to deliver increasing value to our stakeholders.

Future Outlook As a systemically important bank in the country, we look to continue our tradition of setting industry standards through technological innovation and customer service. We have a team that is motivated and inspired to achieve whilst pushing boundaries to take the Bank to a wider playing field and greater efficiencies. We will look to grow our earnings and assets by at least 20% in 2013 whilst safeguarding the asset quality to maintain minimum impairment charge to the income statement. We will continue to develop electronic banking channels and promote them aggressively with branch expansion being pursued at a more moderate pace as there is sufficient coverage. We will continue to focus on enhancing the profitability of our branch network through effective centralised action supported by our robust IT platforms, enabling our frontline staff to provide a higher standard of service to their communities. Our focus on inclusive banking will also continue in 2013 as we seek to achieve MD handing over the 25th Anniversary Coffee Table Book to Dr. Ajith C Perera


higher penetration of banking services outside the Western Province through understanding the issues and providing solutions. We are reviewing the potential for venturing to other countries and are likely to widen our playing field. Financing for growth will come through foreign borrowings as in 2012 and also through deposit mobilisation. It is noteworthy that we hope to realise the investments made in IT and branches in the coming year to further improve cost efficiency ratios.

The Road Map for 2013 has been presented by CBSL and outlines proposals for economic stability and growth with single digit inflation, high rate of employment and stable exchange rates. Parameters for tightening or relaxing monetary policy have been outlined and goals set for a US$ 100 Bn economy and US$ 4k per capita income before 2016. The Road Map also provides a “To Do” list for Banks, many of which are already included in our strategy.

Challenges We foresee challenges arising from the operating environment and the Bank’s strategy which can impact our growth and earnings targets. Challenges arising from the operating environment include the development goals and the savings gap whilst the main challenge arising from our strategy is improving our asset quality further.

Despite the relaxing of monetary policy, it is possible that progress towards realising the country’s development goals and consequently, the demand for credit, will be lower than forecast. The project pipeline, particularly from the private sector, needs to improve sufficiently for economic growth to be in line with forecasts. If the project pipeline is lean, growth for individual players in

the industry will be through intense competition and taking market share from other players. We remain committed to financing growth sectors such as tourism and renewable energy to achieve our growth targets.

The country’s savings growth is not in line with investment required for forecast growth. Banks are encouraged to finance their requirements through foreign borrowings which in effect mean financing the country’s growth through savings of other countries. As this cannot remain a long term solution, measures must be taken to address the savings gap in order to achieve stability in the long term.

Combining the roles of the most aggressive lender and having the lowest NPA ratio in the industry is a challenge that we are gearing up to meet. We have reduced the NPA ratio from 10% down to 2% over the past 5 years and have set ourselves the goal of maintaining the NPA ratio below 2%. Our systems are in place for pre-disbursement


The overall return to shareholders is amongst the highest in the sector and the market.

Dividend per Share

12Rs.

29Sampath Bank PLC

screening and post disbursement follow up to prevent facilities falling in to arrears. Attention to detail and prompt action are necessary to achieve this goal which will then be the lowest in the industry.

The centre of economic growth has shifted to Asia and to emerging economies as growth rates of developed economies have fallen or failed to recover in 2012. Slower growth in India and China represent cause for concern as these economies are impacted by weak demand from the developed economies. Our country’s progress is dependent on export growth and investment in identified growth sectors which may be adversely impacted by events shaping the global economy. We have also aligned our strategy with the national strategy in a number of areas where the business case has been sound or the social criteria compelling for long term growth and stability. In this context we recognise that the course charted both for the country and the Bank is challenging but achievable. It is an exciting period in which to lead an innovative and agile Bank to new areas of growth. I look to the Board to provide guidance, counsel and strategic direction as they did in 2012 towards achieving our strategic goals and look to my team for their continued support.

Aravinda Perera

Managing Director

22nd February 2013


BOARD OFDIRECTORS

31Sampath Bank PLC

Boa

rd o

f D

irect

ors Left to right

Mr. Dhammika Perera / Chairman (Non-Executive), Mr. Aravinda Perera / Managing Director (Executive), Mr. Channa Palansuriya / Deputy Chairman (Non-Executive), Miss. Annika Senanayake / Director (Non-Executive), Prof. Malik Ranasinghe / Director (Non-Executive), Mr. Ranil Pathirana / Director (Non-Executive), Mr. Sanjiva Senanayake / Senior Director (Non-Executive), Mr. Deepal Sooriyaarachchi / Director (Non-Executive), Mr. Deshal de Mel / Director (Non-Executive), Mrs. Saumya Amarasekera / Director (Non-Executive), Mrs. Dhara Wijayatilake / Director (Non-Executive), Mr. Ranjith Samaranayake / Group Chief Financial Officer (Executive)


BOARD OF DIRECTORS PROFILES

Mr. Dhammika PereraSkills & Experience: Extensive governance experience gained through membership of the Boards of Sampath Bank, Pan Asia Banking Corporation, NDB Bank and other financial institutions; visionary extraordinaire Business Strategist with over 25 years of experience in managing companies to deliver high performance with demonstrated competencies in business re-engineering.

Appointed to the Board: 1st August 2007. Appointed as Chairman on 1st January 2012. Non-executive.

Membership of Board Sub-Committees: Chairman, Strategic Planning Committee and Member of Nominations Committee.

Current appointments: Secretary, Ministry of Transport, Sri Lanka. Member of the Board of Strategic Enterprise Management Agency of Sri Lanka. Chairman of Vallibel One PLC, Vallibel Finance PLC, Delmege Pvt Ltd., Vallibel Power Erathna PLC, The Fortress Resorts PLC, and Greener Water Ltd. Deputy Chairman of Hayleys PLC., Royal Ceramics Lanka PLC, LB Finance PLC. Director of Amaya Leisure PLC, Haycarb PLC, Hayleys MGT Knitting Mills PLC., Hotel Services (Ceylon) PLC, Dipped Products PLC, Orit Apparels Lanka (Pvt) Ltd., Nirmalapura Wind Power (Pvt) Ltd., Alutec Anodising & Machine Tools (Pvt) Ltd., and Sri Lanka Insurance Corporation.

Former appointments: Chairman, Board of Investments, Sri Lanka.

Mr. Channa Probodha PalansuriyaSkills & Experience: Extensive experience in the apparel sector through leadership of Orit Group of companies. Has won awards for Sri Lankan Entrepreneur of the Year in 2002 and the Silver Award of the National Chamber of Exporters of Sri Lanka for the Garment Extra Large category in 2004.

Appointed to the Board: 1st January 2012 as Independent Non-Executive Director. Appointed Deputy Chairman on 26th January 2012.

Membership of Board Sub-Committees: Chairman Nominations Committee (until November 2012) and Shareholder Relations Committee; Member of Risk Management Committee, Human Resources and Remuneration Committee, Nominations Committee and Strategic Planning Committee.

Current Appointments: Chairman/Managing Director, Orit Group comprising Orit Apparels Lanka (Pvt) Ltd., and Orit Trading Lanka (Pvt) Ltd. Chairman GC Lanka Clothing (Pvt) Ltd. Basnayake Nilame of the Hendala Temple.

Former Appointments: Director, Board of Investment, Sri Lanka from 2005 to 2010; Executive Member of Joint Apparel Association Forum (JAAF), Board Member of Sri Lanka Institute of Textile & Apparel; Executive Member of the Sri Lanka Apparel Exporters Sourcing Association, Member of Apparel Exporters Association 200 Garment Factory Program during 2006 to 2008.

33Sampath Bank PLC

Mr. Sanjiva SenanayakeSkills & Experience: Extensive local and overseas experience in the financial services sector having served in the senior management capacities at premier financial institutions and as an independent consultant.

Appointed to the Board: 1st January 2012 as Independent Non-Executive Director and appointed as Senior Director with effect from 26th January 2012.

Membership of Board Sub-Committees: Member of the Audit Committee, Credit Committee, Risk Management Committee and Strategic Planning Committee.

Current Appointments: Non Executive Director of Asian Hotel & Properties PLC, Hemas Power PLC, Hemas Pharmaceuticals (Pvt) Ltd.

Former Appointments: Senior Investment Officer, Global Financial Markets Department, International Finance Corporation (Private sector investment arm of World Bank); International Finance Corporation Resident Representative for Sri Lanka & Maldives; Assistant General Manager (Treasury & Investment Banking) at National Development Bank of Sri Lanka; Consultant (Treasury & Business Development) Commercial Bank of Ceylon, Citibank Sydney, Citibank Brunei, Citibank Colombo, Co-ordinating Engineer, Greater Colombo Economic Commission; Development Planning Assistant, United Nations Development Program.

Mr. Deepal SooriyaarachchiSkills & Experience: Counts over 30 years experience in Sales, Advertising, Marketing, Human Resources, Development & Strategy with extensive experience in the field of insurance. Fellow member of the Chartered Institute of Marketing UK and a Chartered Marketer. Past President of Sri Lanka Institute of Marketing. Holds an MBA from the University of Sri Jayawardenapura. Pioneered the disseminating of management knowledge in Sinhala Language. A leading Management Development Consultant and Author.

Appointed to the Board: Appointed to the Board on 5th August 2010 as Independent Non-Executive Director.

Membership of Board Sub-Committees: Chairman of HR & Remuneration and Marketing Committees, Member of Audit Committee.

Current Appointments: Independent Non-Executive Director at Aviva NDB Insurance PLC; Pan Asian Power PLC, Hemas Manufacturing (Pvt) Ltd, Commissioner of Sri Lanka Inventors Commission, Member of National Administrative Reforms Committee (NARC) and Member, Council of the University of Kelaniya.

Former Appointments: Managing Director Aviva NDB Insurance PLC.


Prof. Malik RanasingheSkills & Experience: Extensive governance experience as a Non-Executive Director on corporate boards. A Fellow Member and International Professional Engineer of the Institute of Chartered Engineers, Sri Lanka; Fellow of the National Academy of Sciences, Sri Lanka; PhD from University of British Columbia, Vancouver, Canada in Civil Engineering as a Canadian Commonwealth Scholar; published papers on Environmental Economics with Project Management, recipient of accolades and awards including the General Research Committee Award for outstanding Contribution to Sri Lankan Science from the Sri Lanka Association for Advancement of Science and Hiran Tilekeratne Research Fund and University Grants Commission award for Outstanding Postgraduate Research in the Academic Discipline of Engineering amongst others.


Membership of Board Sub-Committees: Chairman of Credit Committee, Member, Audit Committee and Strategic Planning Committee.

Current Appointments:Senior Professor in Civil Engineering, University of Moratuwa; Independent Non-Executive Director of Hemas Power PLC, Textured Jersey Lanka PLC and Access Engineering PLC.

Former Appointments: Vice-Chancellor of the University of Moratuwa, Chairman of the Committee of Vice Chancellors and Directors of Sri Lanka, Council Member of the Association of Commonwealth Universities, Fellow of the National University of Singapore, Non Executive Director of the Colombo Stock Exchange and Lanka IOC PLC.

Mrs. Dhara WijayatilakeSkills & Experience: Extensive experience as a Senior Public Official in the Ministry of Justice and the first woman to hold the post of a Secretary to a Cabinet Ministry. An Attorney-at-Law counting over 30 years experience and holds a Bachelor of Laws (LLB) Degree. in the legal field. Bachelor of Law.


Membership of Board Sub-Committees: Chairperson, Risk Management Committee, Member Audit Committee.

Current Appointments: Secretary to Ministry of Technology & Research

Former Appointments: Secretary to the Ministry of Justice, Secretary to the Ministry of Plan Implementation.


35Sampath Bank PLC

Miss. Annika SenanayakeSkills & Experience: Graduate of Arts in Management Studies from the University of Nottingham. Heads Corporate Planning for IWS Holdings (Pvt) Ltd., in diversified business interests in telecommunications, broadcasting, aviation, automobiles, shipping, warehousing and logistic support services, packaging and food processing.

Appointed to the Board: Appointed to the Board as a Non-Executive Director on 1st January 2012.

Membership of Board Sub-Committees: Member of Nominations Committee and Human Resources & Remuneration Committee.

Current Appointments: Chief Executive Officer of ART Television Broadcasting Company(Pvt) Ltd., and IWS Geographical Information Systems Ltd. Director of IWS Holdings (Pvt) Ltd.

Mr. Deshal de MelSkills & Experience: Master of Science degree in International Political Economics from the London School of Economics, Bachelor of Arts degree with Honours in Philosophy, Political Science and Economics from University of Oxford.

Appointed to the Board: Appointed to the Board on 1st January 2012 as an Independent Non-Executive Director.

Membership of Board Sub-Committees: Member of Credit Committee, HR & Remuneration Committee, Strategic Planning Committee & Shareholder Relations Committee.

Current Appointments: Senior Economist, Hayleys PLC.

Former Appointments: Economist, Institute of Policy Studies, Sri Lanka.

Mr. Ranil PathiranaSkills & Experience: Extensive experience in finance and accounting in the financial services sector, apparel sector and energy sector. Fellow Member of the Chartered Institute of Management Accountants, UK and holds a Bachelor of Commerce degree from the University of Sri Jayawardenapura.

Appointed to the Board: Appointed to the Bank as an Independent Non-Executive Director from 1st January 2012.

Membership of Board Sub-Committees: Chairman of Audit Committee, Member of Strategic Planning Committee.

Current Appointments: Group Finance Director Hirdramani Group of Companies, Non-Executive Director of Hayleys PLC.

Former Appointments: Chief Executive Officer, Vanik Bangladesh Securities; AVP of Vanik Incorporation.


Mrs. Saumya AmarasekeraSkills & Experience: Counts over 24 years in active legal practice in Civil Law, practicing in the Original, Apellate & Supreme Court as an Attorney-at-Law. Holds a Masters in Law from the University of Pennsylvania with particular emphasis on Insurance Law, Privacy and Defamation Law. Has experience in areas relating to Money Recovery, Property, Testamentary, Condominium Disputes, Family Law and litigates on behalf of financial services sector clients and has specialised in local and international Arbitrations.

Appointed to the Board: Appointed as an Independent Non-Executive Director on 1st June 2012.

Membership of Board Sub-Committees: Chairperson of Nominations Committee (from November 2012) Member of the Marketing Committee.

Current Appointments: Legal practitioner Member of the Bar Association of Sri Lanka and a Lecturer at the Continuous Legal Education Programme conducted by the Bar Association of Sri Lanka.

Mr. Aravinda PereraSkills & Experience: Counts over 25 years in the Banking sector. Fellow Member of Institute of Bankers, Sri Lanka; Fellow Member of the Chartered Institute of Management Accountants, UK; Chartered Engineer and member of the Institute of Engineers, Sri Lanka; MBA from the University of Sri Jayawardenapura; Bachelor of Science degree in Engineering from the University of Moratuwa.

Appointed to the Board: Appointed as an Executive Director on 25th November 2008.

Membership of Board Sub-Committees: Member of Credit Committee, Board Risk Management Committee, HR & Remuneration Committee and Strategic Planning Committee.

Current Appointments: Managing Director, Sampath Bank PLC; Director, SC Securities (Pvt) Ltd. and Sampath Leasing and Factoring Ltd.

Former Appointments: Chief Operating Officer, Deputy General Manager, Corporate Banking and other roles spanning a career of 25 years at Sampath Bank. Senior Project Officer, DFCC and Departmental Manager and Service Engineer at Ceylon Tobacco Company, Engineer at National Milk Board.


37Sampath Bank PLC

Mr. Ranjith SamaranayakeSkills & Experience: Extensive experience as Head of Finance & Planning at National Savings Bank, Commercial Bank PLC and Sampath Bank. Counts over 37 years experience of managing finance in the financial services sector. Holds a Bachelor of Commerce (Accountancy Special) Degree from the University of Peradeniya.

Appointed to the Board: Appointed to the Board as an Executive Director from 01st January 2009.

Membership of Board Sub-Committees: Member of Credit Committee, Risk Management Committee and Strategic Planning Committee.

Current Appointments: Group Chief Financial Officer, Sampath Bank PLC. Director Sampath Leasing & Factoring Ltd.

Former Appointments: Senior Deputy General Manager, Finance & Planning at Commercial Bank PLC.


CORPORATEMANAGEMENT

39Sampath Bank PLC

Mr. Aravinda Perera / Managing Director Mr. Ranjith Samaranayake / Group Chief Financial Officer / Executive Director Mr. Nanda Fernando / Deputy General Manager - Personal Banking Mr. Saman Herath / Deputy General Manager - International & Commercial Credit Mr. Lalith Jayakody / Deputy General Manager - Finance & Planning Mr. W. P. Dambawinne / Deputy General Manager - Treasury Mr. Tharaka Ranwala / Deputy General Manager - Marketing & Business Development Mr. Aruna Jayasekera / Deputy General Manager - Human Resources Mrs. Anoja Karunaratne / Group Chief Risk Officer Mrs. Hiranthi De Silva / Assistant General Manager - Corporate Credit Mr. Dinusha Ihalalanda / Assistant General Manager - Operations Mr. S. Sudarshan / Group Company Secretary Mr. Najill Farouk / Assistant General Manager - Branch Credit Mr. Deepal Samarasekera / Assistant General Manager - Branch Credit I Mr. Amanda Abeyweera / Assistant General Manager - Administration

Cor

pora

te M

anag

emen

t


CORPORATEMANAGEMENT

Mr. Upali Dharmasiri / Assistant General Manager - RecoveriesMrs. Nimali Abeyratne / Assistant General Manager - Branch Credit IIMrs. Shashi Jassim / Assistant General Manager - Corporate Finance and FCBU

Cor

pora

te M

anag

emen

t

41Sampath Bank PLC

SENIORMANAGEMENT

Mrs. Anuja Goonetilleke / Group Chief Compliance Officer Mrs. Nirosha De Silva / Chief Manager - Card Centre Mr. Rajendra Ranasinghe / Chief Manager - Systems & Procedures Mr. Pununuwan Wickramasekera / Chief Legal Officer Mr. Sanath Abeyratne / Head of Trade Services Mr. Manoj Akmeemana / Chief Manager - Branch Credit Mr. Ajith Salgado / Head of Information Technology Mr. Prasad Polwatte / Head of Internal Audit

Chi

ef M

anag

ers


SENIORMANAGEMENT

43Sampath Bank PLC

Mr. Mangala Wickramasinghe / Head of Enterprise IT Solutions Mr. Harsha De Alwis / Head of Remittances Mr. Ajith Jayasekera / Senior Manager - Planning Mr. Sujith Abeyratne / Senior Manager - Branch SupervisionMr. Dushyantha Dassanayake / Senior Manager - Systems DevelopmentMr. Asoka Menikgoda / Senior Manager - Recoveries Mr. Ananda Wijitha / Senior Manager - IT Communication & NetworksMr. Javana Atukorale / Senior Manager - ComplianceMr. Upul Nawaratne Bandara / Senior Manager - MarketingMr. Thilak Abeysinghe / Head of Deposits Mr. Mahil Kuragama / Senior Manager - Operations Mr. H B Keerthiratne / Senior Manager - FinanceMr. Amal Kirihena / Senior Regional ManagerMr. Sisira Dabare / Senior Regional ManagerMr. Saman de Silva / Senior Regional Manager

Sen

ior

Man

ager

s


45Sampath Bank PLC

Mr. Vijith Deshapriya / Senior Manager- Computer Operations Mr. Priyam Kasturiratne / Senior Manager - Operational & Market RiskMrs. Achala Wickramaratne / Senior Regional ManagerMr. Sanjaya Gunawardana / Senior Regional ManagerMr. Prasada Goonaratne / Senior Manager - Database Administration Mr. Nayana Peiris / Senior Regional ManagerMrs. Chamila Bandara / Senior Regional ManagerMr. Thusitha Nakandala / Senior Manager - Development BankingMr. Hemantha Marasinghe / Senior Manager - Engineering ServicesMr. Chatura Rudesh / Senior Manager - Trade ServicesMr. Prasantha de Silva / Chief DealerMr. Nalaka Gunawardane / Senior Manager - Systems Audit Mrs. Ayodya Iddawela / Senior Manager - Corporate Credit

Sen

ior

Man

ager

s


FINANCIAL REVIEWSampath Bank Group is one of Sri Lanka’s largest banking groups with an asset base of Rs.314Bn and 3,688 employees. The Bank offers a wide range of financial services and products to individuals, corporate entities and institutional clients in Sri Lanka and is reputed for being an innovative bank, successfully combining technology and financial services to provide greater access to financial services to all the clients.

Group Structure The Group comprises of Sampath Bank and 3 subsidiaries engaged in providing specialised financial services to clients and another subsidiary engaged in providing various other services to the Bank. The Bank contributes 95% of the Group’s pre-tax profit and is the most significant entity within the group.

Sampath Bank Group comprises Sampath Bank PLC and its four subsidiaries, namely; Sampath Leasing and Factoring Ltd, S C Securities (Pvt) Ltd, Sampath Information Technology Solutions Ltd and Sampath Centre Ltd, with a staff strength of more than 3,600 and an asset base of Rs.314Bn.

MANAGEMENT DISCUSSION & ANALYSIS

Core Areas of Operation Sampath Bank is the third largest private sector commercial bank in the cuntry, in terms of total assets, focussing on delivering futuristic financial services to individuals, corporates and other institutions. We are organised in to the following core areas of operations;

Personal Banking - Caters to a wide range of customers facilitating management of personal finances through a range of products that address their investment, with transactional and financing needs.

Corporate Banking - Delivers financial solutions tailored to meet corporate investment and operational needs through our sub-divisions; Corporate Finance, Development Banking, Trade Services, Corporate Credit and the Foreign Currency Banking Unit.

Corporate Credit - Provides credit facilities across a spectrum of products tailored to the corporate sector.

Stock Broking

Sampath Bank Group

Provides Leasing and Factoring

activities

Provides IT related services to the parent and to financial sector clients

Renting of commercial

property

Sampath Leasing and Factoring Ltd

100%

SC Securities (Pvt) Ltd100%


100%

Sampath Centre Ltd97%

Stock Broking

47Sampath Bank PLC

Development Banking - Focuses on financing the business commencing operations utilising credit lines available to the banking industry, concessionary funds from our own funding base and an allocation from the Investment Fund Account.

Trade Services - Provides documentary credit and related facilities to importers and exporters harnessing technology effectively to provide a fast and reliable service.

Corporate Credit - Merchant Banking & Professional Corporate Services, Advisory and other corporate services.

Foreign Currency Banking Unit - Providing solutions and expertise for corporate clients’ foreign currency financing needs.

Treasury Operations - Carriesout interbank operations to manage the Bank’s exposure to exchange rate risk, interest rate risk and liquidity risk arising from normal banking activities.

Credit & Debit cards - Offers a range of cards to suit the diverse lifestyle needs of Sri Lankans with unmatched promotions and the highest security for all transactions.

E-Banking - Develops and maintains a range of products facilitating electronic transactions for the convenience of our customers. These range from Mobile Cash to the Sri Lanka e-gateway for tourist visas to Sri Lanka.

Operating Environment Global economic growth was 3.3% in 2012 dampened by weak recovery on both sides of the Atlantic with emerging economies continuing to be the main engine of growth. The growth of the

emerging economies was also moderated due to weak demand for goods and services from the developed economies.

Despite a difficult global and domestic environment, the Sri Lankan economy recorded a growth of 6.5%, as opposed to 6.8% growth expected earlier, following two consecutive years of robust growth of over 8.0%. The moderation of the growth in 2012 is due to the weakening global economy, in particular the US and the European zone which has adversely affected the demand for exports. Consequently, exports declined by 7.4% in 2012, largely due to lower prices and low demand in international markets for key items.

Coordinated policy action by the Government and the Central Bank during the first quarter of 2012 to curtail the growth of credit and reduce import demand in order to stabilise the external sector, had a moderating impact on the country’s growth momentum. The imposition of a credit ceiling and the withdrawal of duty concessions aimed at reducing the balance of payments and the balance of trade have been effective. The depreciation of the exchange rate supported export competitiveness, whilst curtailing import expenditure which has contributed significantly to the reduction in the trade deficit. This is reflected in (trade deficit is expected to contract to 15.1% of GDP in 2012, from 16.4% in 2011) the balance of trade at the end of 2012 despite the decline in export earnings due to the decrease in imports of 5.8% in first eleven months of 2012 as imports of both consumer goods and intermediate goods declined significantly.

Mobilisation of foreign capital by the Bank’s and increased worker remittances have contributed to the positive change in the balance of payments and the gross official reserves. The oversubscribed


The depreciation of the exchange rate supported export competitiveness, whilst curtailing import expenditure which has contributed significantly to the reduction in the trade deficit.


CEPELLOR ADITAM, SAME MAGNIS APIENIETUR APELIGENDIT HARIAND

International Sovereign Bond issue of USD 1Bn issued to finance the infrastructure development also provided a boost to the official reserves and reflected confidence in the Sri Lankan economy. The gross official reserves have increased to USD 6.8Bn by end 2012 from USD 6Bn end 2011, as at end December 2012 which is equivalent to 4.4 months of imports.

Inflation was 7.6% driven by both increasing food prices resulting from the drastic weather patterns and the increasing costs of essential services such as electricity and transport. Overall, it has been a year of stabilised growth and the policy measures taken have been effective in addressing the areas of concern.

Sri Lanka - Economic Indicators

2009 2010 2011 2012

GDP Growth 3.5 8.0 8.3 6.5

Inflation (Headline inflation) 4.8 6.9 6.7 7.6

Exchange Rate (Year End) 114.38 110.95 113.90 127.65

Exports (USD Mns) 7,085 8,626 10,559 8,991**

Imports (USD Mns) 10,207 13,451 20,269 17, 574**

Per-capita Income (USD) 2,057 2,400 2,836 2,922*

Worker’s Remittance (USD Bns) 3.33 4.12 5.14 6.01*

Gross Official Reserve (USD Bns) 6.3 6.4 6.0 6.8

Trade Balance (USD Mns) (3,122) (4,825) (9,710) (8,947)

Balance of Payment (USD Mns) 2,725 921 (1,061) 100*

Source: Central Bank Annual Report 2011 / Road Map 2013 /CBSL Presentations for CEOs* Projected by CBSL ** January to November 2012

49Sampath Bank PLC

In�ation (%)

4

5

6

7

8

09 10 11 12

The Banking Sector The Banking sector is a key player in the country’s financial system accounting for 69.7% of the total financial sector’s assets. There are 33 banks in operation as at end December 2012 comprising 12 domestic licensed commercial banks, 12 foreign commercial banks and 9 licensed specialised banks. These banks have a network of 2,193 branches,4,103 other banking outlets

and 2,331 ATM’s as at end of 2012, of which 63 branches, 49 other banking outlets and 94 ATM’s were opened during 2012.

In March 2012, the CBSL imposed a credit ceiling of 18% of total outstanding credit or Rs.800Mn, whichever is higher with a provision that the ceiling of 18% could be increased to 23% or Rs.1Bn whichever is higher if the corresponding funds were raised from overseas sources. The larger banks were successful in raising funds from overseas sources including Sampath Bank which resulted in total inflows of USD137.5Mn which enabled the Bank to grow the lending portfolios up to 23%. The interest shown by foreign investors in these banks was encouraging and demonstrated the confidence in the Sri Lankan Banking Sector. Due to the above, the credit growth was limited to 24.8% in comparison to the 33.6% achieved in 2011. It is noteworthy that asset quality improved as evidenced by the decrease in individually impaired loan ratio to 1.9% compared to 2.0% in 2011.

The profitability of the sector was impacted by the volatility of the interest and exchange rates, the withdrawal of duty concessions, weak export demand and the lacklustre performance of the stock market. The country’s low savings rate of 16% of GDP also contributed to the tight liquidity position observed in the sector mainly during the 1st half of 2012. Consequently the Net interest Margin declined marginally from 4.2% in 2011 to 4.1% in 2012 due to the rising interest rates, increasing cost of funds. Return on Assets remained at 1.7% in 2012, as compared to 2011. Return on Equity has increased from 19.7% in 2011 to 20.2% in 2012. Overall liquidity which declined during the 1st half of the year gradually returned to healthy levels as credit growth limits were reached by the end of the 3rd quarter.

GDP Growth (%)

2

4

6

8

10

09 10 11 12

Worker Remittances (USD Bn)

0

1

2

3

4

5

6

7

8

09 10 11 12

Gross Of�cial Reserves (USD Bn)

0

1

2

3

4

5

6

7

8

09 10 11 12


We recorded an impressive increase than the banking industry growth in all key areas


The industry is well capitalised as indicated by the Tier 1 Capital Adequacy Ratio of 13.3% and the Total Capital Ratio of 15.0% in September 2012 which had decreased marginally from 14.3% and

16.0% respectively in 2011. The strong regulatory measures taken to stabilise the banking sector have addressed the areas of concern in the sector and renewed confidence in the growth and stability of the same.

Banking Sector Soundness Indicators

Indicator 2008 2009 2010 2011 Sep-12 Dec-12

Capital Adequacy Ratio - Tier 1

Capital Ratio (%) 12.5 14.1 14.3 14.3 13.3 -

Capital Adequacy Ratio - Total

Capital Ratio (%) 14.5 16.1 16.2 16.0 15.0 -

Return on Assets ( % ) 1.1 1.0 1.8 1.7 - 1.7

Return on Equity (%) 13.4 11.8 22.0 19.7 - 20.2

Liquidity Ratio (%) - SLAR

Domestic Banking Unit 28.0 31.3 35.2 32.4 - 26.5

Financial Performance of Sampath Bank Infrastructure GrowthFollowing an aggressive branch expansion programme over the past 3 years, the Bank focussed on consolidating its position in these strategic locations where the branches were set up and enhancing profitability in a challenging operating environment, in line with the strong regulatory measures taken to stabilise areas of concern in the economy. The Bank now has adequate coverage of the locations with a potential in the country and is focussing on growing business volumes and enhancing profitability of its new branches. Three new branches were opened during the year to complete the branch expansion programme taking the total

of branches to 209. The ATM network was also enhanced by 8 installations in 2012 taking the total to 264 ATMs. The Bank also added mobile banking, increasing its banking channels offering full services through multitude alternate banking channels.

Asset & Liability GrowthThe robust infrastructure of the Bank and its heritage as a pioneer in leveraging technology to provide a superior service was the foundation for its reasonably strong credit, asset and deposit growth in 2012.

Growth rates for deposits, advances and total assets surpassed the industry’s average growth rates for the second consecutive year.

51Sampath Bank PLC

Careful and co-ordinated planning during the expansion phase has enabled the Bank to expand without compromising the credit quality. A key strength of the Bank’s impaired loan management mechanisms is pre-sanctioning of credit quality by a centralised credit approval system where authority for credit approval is delegated to Regional Managers and not the Branch or Relationship Managers who initiate business which ensures that credit is granted by a highly specialised staff. This system has been successful due to avoidance of delays by successfully leveraging technology through robust IT systems which is part of the Bank’s heritage.

Total assets grew by 24.9% almost within the credit ceiling imposed by CBSL and this growth was funded partially through increased due to customers (deposits) which grew at 24.3%. Whilst due to customers (deposits) grew at a marginally lower rate than assets and over a lower base and scheduled repayment of borrowings caused a gap that had to be funded through borrowings.

Sampath Bank successfully raised a syndicated loan of USD62.5Mn to finance its asset growth, taking advantage of the conducive business environment and flexibility to obtain foreign funding in line with Central Bank’s encouragement for Sri Lankan banks and corporates to raise offshore funds. The syndicate which opened for a USD 30Mn

2012 (Rs.Mn)

2011 (Rs.Mn)

Growth (%)

Industry Growth (%)

Total Advances 217,415 178,750 21.6 20.9

Total Assets 308,681 247,085 24.9 20.0

Deposits 243,575 195,900 24.3 17.1

Borrowings 31,963 24,326 31.4 26.7

loan was oversubscribed twofold and closed at USD 62.5Mn. The confidence of the foreign investors in the Bank’s performance to date, a strong balance sheet and ability to sustain the growth momentum was amply evidenced by the interest shown in the syndication by foreign markets. The deal was put together by the Mandated Lead Arrangers, Bank Muscat S.A.O.G, Citigroup Global Markets Asia Limited and Emirates NBD Bank PJSC. This was Sampath Banks’ second venture to raise funds offshore, having raised USD45Mn earliar in 2007 through a similar syndication, which was paid off as scheduled.

The Bank also issued 15,000,000 unsecured subordinated redeemable debentures at a par value of Rs.100 in October in 2012 with the objective of strengthening the Tier II capital adequacy. The issue which is listed on the Colombo Stock Exchange was oversubscribed on the date of issue.

Total borrowings increased by 31.4% from Rs.24,326Mn as at end 2011 to Rs.31,963Mn at the end of 2012. However, the mix of foreign

Total Assets, Deposits & Advances (Rs. Bn)

0

50

100

150

200

250

300

350

Total Deposits

2011

Total Advances

Total Assets

2012


We were able to overcome key challenges faced during 2012 and reported a considerable growth.


currency borrowings and rupee borrowings changed significantly in 2012 due to the syndicated loan raised during the year.

Profitability Sampath Group recorded a satisfactory growth in profits despite a challenging environment in 2012. Contribution to the Group profit from Subsidiaries has decreased from Rs.318Mn in 2011 to Rs.209Mn in 2012, mainly due to lesser contribution by Sampath Leasing & Factoring Ltd as a result of decline in operations due to the drop in vehicle imports in the market. Sampath Bank, the main entity of the group contributed 96% of the group profits.

Key Challenges The operating environment for the Bank presented a number of key challenges. The limit on growth in advances to 23% as discussed above required a change in strategy to achieve the desired growth in profits. The weakened demand for exports and the withdrawal of duty concessions and the consequent reduction in import volumes also limited the opportunities to grow both in interest income and fee income which is largely dependent on trade volumes. To address this, lending was channelled to the more remunerative retail products including pawning which is reflected in the product mix at the end of 2012. Additionally, advances in foreign currency which were not subject to the credit ceiling has grown by 6.4% despite the lower trade volumes in the country.

Managing the cost of funds was also a key challenge as liquidity tightened and interest rates increased. The proportion of Current and Savings Accounts (CASA) in the due to customer mix (deposit mix) continued to decrease in line with the industry trends with customers shifting funds from current and savings accounts to time

deposits to take advantage of the higher interest rates. However, the Bank addressed this through timely and effective re-pricing of both asset and liability products to safeguard the Net Interest Margin. The Bank was in a favourable position to re-price, as most products were short term and could be re-priced.

Safeguarding asset quality in the current operating environment was another challenge that the Bank addressed effectively. Although the amount of Individually Significant Impaired Loans increased during the year from Rs.3,589Mn to Rs.4,153Mn, Individually Significant Impaired Loan ratio declined from 2.0% in 2011 to 1.9% in 2012 which was achieved through effective management of loan portfolios using more predictive and proactive tools and techniques.

Although growth in business volume was limited, the Bank had a higher cost base with a larger branch network to support and inflation edging up to the high single digits. Managing the product portfolio to maximise profitability and curtailing expenditure to deliver profit growth, whilst balancing long term objectives presented many challenges and the results achieved in both growth and profitability in 2012 are a testimony to the Bank’s strong balance sheet and ability to compete effectively in a challenging environment.

Net Interest Income (NII) Interest income in 2012 was Rs.31,882Mn and accounted for 82.1% of total income. Growth of interest income was 51% which was due to both growth in business volumes and the upward trend of interest rates in the industry. Interest expense increased by 66.6% to Rs.20,269Mn compared to Rs.12,168Mn in 2011 due to the increasing trend in interest rates as a consequence of the widening budget deficit and rising inflation. The

53Sampath Bank PLC

industry observed a decline in low cost current and savings account balances and the shift to higher priced time deposits which was aggravated by the tighter liquidity and intense competition for deposits from all players in the financial services sector. Net Interest Income recorded a growth of 29.8% over previous year to Rs.11,613Mn due to prudent credit growth, diverting resources to more remunerative products and effective re-pricing of both asset and liability products. Net Interest Margin increased marginally from 4.08% in 2011 to 4.18% in 2012 due to the measures taken to manage NII. NII contributed 65% of the Bank’s Operating Income.

Commission & Fee Based Income Net commission & fee based income grew by 18.7% from Rs.1,811Mn in 2011 to Rs.2,149Mn in 2012 due to the increased business volumes. Increasing business volumes presented a challenge as most of the sources of fee based and commission income are linked to lending activity which was limited due to the credit ceiling imposed. Commission and fee based income accounted for 12.0% of Operating Income in 2012 compared with 12.4% in 2011 and the reduced proportion is due to higher growth in other segments of operating income.

Exchange Income Earnings from foreign exchange derived from Treasury Operations grew by 123% from Rs. 964Mn in 2011 to Rs. 2,149Mn in 2012 mainly due to the depreciation of the rupee despite the declining volumes of both imports and exports. Accordingly, the proportion of foreign exchange earnings to operating income increased to 12.0% from 6.6% in 2011. Profit from revaluation of FCBU Retained Profits also increased from

Composition of Income - 2012

Interest IncomeFee Commission

Trading IncomeOthers

Interest Income, Interest Expenses & Net Interest Income (Rs. Mn)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Interest Income

2011

InterestExpenses

Net Interest Income

2012

2011 2012

Composition of Commission Income (Rs. Mn)

0 100 200 300 400 500 600 700 800

Other banking services

Credit & Debit card services

Foreign remittancerelated services

Trade related services

Professional services



Rs.148Mn in 2011 to Rs.972Mn in 2012, a six fold growth due to the depreciation of the rupee. As the rupee has stabilised, we expect foreign exchange earnings to be moderated in the next year and the proportion of income from volatile sources to stabilise at a lower level.

Operating Income Operating income included dividend income and bad debt recoveries which amounted to Rs.156Mn and Rs.783Mn. Whilst dividend income increased by 254.9%, recoveries declined by 30.3% from the amounts recorded in 2011 which amounted to Rs.44Mn and Rs.1,124Mn respectively. Bad debt recoveries are likely to continue its declining trend due to improved asset quality.

Operating Expenses The increase of operating expenses from Rs.8,059Mn in 2011 to Rs.9,397Mn in 2012 is mainly due to increases in staff costs and payments for banking services arising from a larger network of branches for which a full years cost was incurred for the first time in 2012. Growth of operating expenses has been managed carefully and has been curtailed to 16.6% in comparison to the growth of operating income in 2012 which was 22.6%. This was possible as the Bank adopted a low cost branch model with many branches occupying rented premises with a business model of deposit mobilisation and marketing of credit products, with approval for credit being handled by Regional Managers. Effective use of technology has enabled the Bank to operate this cost efficient structure which has one of the lowest staff per branch ratios in the industry at 16 employees per branch and successfully leveraging on the Bank’s competitive strengths. The rate of increase of

operating expenses is expected to decline with the moderation of the rate of branch expansion.

Individually Significant Customer Loan Impairment Provision & Provision Cover The loan impairment provision decreased by Rs.533Mn in 2012, mainly due to the charge for loan impairment decreasing by Rs.287Mn in 2012, compared with the previous year. In addition, bad debt recoveries amounted to Rs.783Mn in 2012, which is included as other operating income.

2012 2011

Gross individual significant customer loan impairment ratio 1.9% 2.0%

Net individually significant customer loan impairment ratio (Net of impairment loan loss provision)

0.6% 0.5%

Impairment Provision Cover 68.1% 77.0%

The Bank has one of the lowest impairment ratios in the industry at 1.9%. The total impairment provisions cover as at end 2012 was 68.1% which is a decrease compared to 77.0% as at end 2011.

Pre & Post Tax Profit The Bank’s pre-tax profit was Rs.7,265Mn, an increase of 45.5% over the pre-tax profit of 2011 which was Rs. 4,994Mn. Post tax profit grew by 51.6% from Rs. 3,387Mn in 2011 to Rs.5,136Mn in 2012. Growth of the bottom line was achieved through growth of business volumes and careful management of resources to maximise

55Sampath Bank PLC

earnings through improved risk management in a constrained business environment. Income taxes increased in line with the rise in income before taxes and grew from Rs.1,606.4Mn to Rs.2,128.6Mn.

Shareholders’ Funds Shareholders’ funds increased sharply compared with the previous year. The main contributor was Profit After Tax of Rs.5,136Mn. Stated Capital increased from Rs.2,743.7Mn to Rs.3,564.2Mn compared with 2011 and this was primarily driven by the scrip dividend of Rs.644.5Mn and the exercise of options of Rs.176.0Mn by the staff under ESOP 2010.

Dividends The Directors have recommended a final dividend of Rs.12.00 per share, which will be paid 50% in cash and 50% in the form of scrip dividends.

Cash Flow We increased cash provided by operating activities from the negative level of Rs.1,813.7Mn in 2011 to a positive of Rs.6,682.1Mn in 2012. This was largely a result of the high after-tax earnings.

Performance Ratios

2012 2011

Cost Income Ratio 59.0% 61.5%

Return on Assets (after tax)

1.8% 1.5%

Return on Equity (after tax) 22.3% 16.2%

The cost to income ratio improved significantly due to deceleration of the branch expansion programme upon achieving the desired coverage. This ratio is expected to improve with the focussed programme for branch business development to expedite their breakeven points which will continue in 2013 as well.

Both ROA and ROE increased in line with the growth in profits and remained at high levels above the industry average of 1.7% and 20.2% for ROA and ROE respectively.

Pro�tability & Taxes (Rs. Mn)

0 2,000 4,000 6,000 8,000 10,000

Pro�t before VAT

VAT

Income Tax

Pro�t for the year

2011 2012



Tier I, Tier II and total capital adequacy ratios improved during the year due to increased profits and the debenture issue to address Tier II capital. The Statutory Liquid Assets ratio declined marginally due to credit expansion and is maintained at a reasonably high level over the regulatory requirement. It is lower than the industry average of 32% as the Bank maintains a prudent trade-off between liquidity and earning assets.

The Bank has now completed its preparations for migration to Basel II advanced approaches and looks forward to better management of capital using techniques available in Basel II.

The dividend per share paid in 2011 was the highest in the Banking sector and comprised 50% cash dividend and 50% scrip dividend which also helped to strengthen the Bank’s capital structure. The overall return to shareholders is amongst the highest in the sector and the market. In 2012, we focussed on consolidation after 3 years of aggressive branch expansion to enhance the performance of the Bank and retain the leadership position that it commands in the industry today. This was possible due to the fact

Regulatory Requirement Ratios 2012 2011 Regulatory Requirement

Statutory Liquid Assets Ratio 22.40% 24.95% 20.00%

Capital Adequacy – Tier I 11.80% 10.24% 5.00%

Capital Adequacy – Tier II 1.81% 1.21%

Total Capital 13.61% 11.45% 10.00%

that we now have adequate coverage of the country in the strategic locations with growth in business volumes whilst safeguarding asset quality. This strategy was appropriate for this year given the constraints on credit growth and the volatility of interest and exchange rates. In formulating this strategy, we have taken in to account the needs of our stakeholders and ensured that it provides for sustainable growth in returns and stability through enhanced governance and risk management for our shareholders, customers, employees, regulators, Government, suppliers and the community.

Return to Shareholders

2012 2011 % change

Market price per share (year end) (Rs.)

200.50 195.00 2.82

Market capitalisation (Rs.Mn) 32,628 30,587 6.67

No. of shares in issue 162,736,665 156,854,190 3.75

Earnings per share Bisic (Rs.) 32.98 23.00 43.39

Dividend per share (Rs.) 12.00 9.00 33.33

Total Return 8.50 (75.99) 111.18

Benchmarks:

ASPI 5,643 6,074 (7.09)

MPI 5,119 5,229 (2.10)

Regulatory Requirement Ratios (%)

Statutory LiquidAssets Ratio

Capital Adequacy- Tier I

Capital Adequacy- Tier II

Total Capital

2011Regulatory Requirement 2012

0 5 10 15 20 25

57Sampath Bank PLC

It has been a year for enhancing performance and stability to position the Bank to reap the dividends of the branch expansion programme. The results are encouraging and augur well for the sustained growth and profitability of the Bank.

The diagram below depicts the core strategy of the Bank defining areas of growth within the risk appetite of the Bank linked to support services and delivery channels necessary to support the defined growth.

Ambitious organic growth through inclusive banking

Consolidate branch operations

Improve profitability through responsive pricing and cost management

Safeguard asset quality

Technology driven banking

Focus on key customer groups

Business growth through innovative products and pioneering services



Core areas of operation

Stakeholders Products Delivery Channels Strategy

Personal Banking Senior Citizens ‘Sampath Sanhinda’ Savings & FD’s

Bra

nch

Net

wor

k

ATM

Net

wor

k

Inte

rnet

Ban

king

Mob

ile B

anki

ng

Growth through innovative product design and outreach

Children ‘Pubudu’ & ‘Sapiri’ Minor Savings

Teenagers ‘X Set’ Savings

Professionals ‘Supreme’ Current Accounts, Local & Foreign Currency Savings, FD’s, Housing & Other Loans

Families ‘Sevana Dayada’ Housing Loans

Corporate Banking

Corporates Working Capital Financing, Import & Export Financing, Leasing, Guarantees, Corporate Payment System

Organic growth through superior service

Development Banking

Corporates Project FinancingSME LoansMicro Financing

Selective growth

SME’s

Small Entrepreneurs

Trade Services Corporates LC’s, Bills CollectionsImport Financing, Shipping GuaranteesVehicle Import Facilities

Professional service using cutting edge technology

SME’s

Individuals

Treasury Operations

Corporates Treasury Bills, Bonds, Repos & Reverse Repos

Understanding customer needs and delivering best solution

SME’s

Individuals

Credit & Debit Card Operations

Professionals Master & Visa credit cardsAffinity cards

Achieve Industry LeadershipEmployed Persons

Self -Employed

Safeguard Asset Quality

Maintain Stability

Improve Risk Management, Compliance & Corporate Governance

Sustainable growth in returns

Employees Shareholders Customers Suppliers & Service Providers

Government & Regulators

59Sampath Bank PLC

The divisional performance of the Bank by core area of operation is given below:

IncomeRs. Mn

Assets Rs. Mn

DepositsRs. Mn

Personal Banking 29,070 141,810 214,901

Corporate Banking 5,152 84,774 22,559

Development Banking 599 5,115 -

Treasury Operations 1,521 19,974 -

Card Centre Operations 1,497 4,821 -

The Bank’s key area of growth has been Personal Banking facilitated by the branch network followed by Corporate Banking which are the most significant contributors to both income and operating profit.

Personal Banking Our ProductsThe Personal Banking Division caters to the needs of a wide array of customers through the Bank`s branch network, its network of ATM`s, e-delivery channels (online banking) and mobile phone based services.

Deposit Products Advances Products Channel Products

Current Accounts Normal Current Accounts Sampath Supreme - An elite current

account brand dedicated to most respected customers

Payment Guaranteed Cheques - This exclusive offer is for an elite clientele, selected for their unwavering integrity in their partnership with Sampath Bank

Housing Loans Sampath Sevana - General Housing

Loan Scheme Sampath Sevana Dayada - A unique

Housing loan scheme which empowers customers to apply for housing loan even at the age of 55

Sampath Sevana for Professionals - Housing loan designed to match the potential career growth of a professional

Branch Banking Network of 209 Branches Super Branches - 365 day Banking

Centres with extended banking hours Platinum Plus - Priority Banking

Centres

Savings Accounts Pubudu & Sapiri - Minor Savings

Accounts X Set - Teen Savings Accounts Double S - Personal Savings Accounts Hit Saver - Investment Savings

Accounts Sanhinda Saver - Senior Citizen’s

Accounts

Leasing Vehicles - Personal & Commercial Machinery

Telephone Banking Mobile Cash SMS Alertz Mobile Banking Telebanking




Term Deposits Kalin Cash - Fixed Deposit which pays

interest upfront Easy FD - Fixed Deposits with ability to

withdraw whenever required, without a penal interest

Sanhinda FD - Fixed Deposit Account for Senior Citizens

Normal Fixed Deposits

Loans against gold Pawning Biz Cash - Instant business loan or

overdraft against gold

ATM Banking Branch ATMs Off-site ATMs Extended ATM Network - More than

1,600 ATMs of BOC, DFCC Vardhana, HDFC, HNB, NTB, NDB Bank, PABC and Union Bank connected through one common switch

Sampath Easy Cheque Deposits Machines

Foreign Currency Exchange ATM’s

Foreign Currency Accounts NRFC Accounts - Non-Resident Foreign

Currency Accounts RFC Accounts - Resident Foreign

Currency Accounts SFID Accounts - Special Foreign

Investment Deposit Account RNNFC Accounts - Resident Non-

National Foreign Currency Accounts Securities Investment Accounts Export Foreign Currency Accounts

Personal Loans & Student Loans CIMA, SLIM, IPM, PIM, IIT and RIC

Student Loans

Internet Banking Sampath Vishwa - Total online banking

experience Sampath PayEasy - General payment

system including payment of utility bills

E- Wallet - A virtual pouch (e-purse) used to store all Credit and Debit Card information

Sampath Payment Gateway - Online Payment Gateway powered by Sampath Bank

Special Accounts Rupee Accounts for Non-Resident Sri

Lankan Investments

Credit Cards VISA Infinite VISA Signature VISA Platinum Card Gold & Silver - VISA & Master cards Affinity Cards & Co-branded cards

ATM & Debit Cards VISA Debit Card X-SET Sanhinda Saver VISA Debit card Sampath-Cargills Co-Branded card

61Sampath Bank PLC

Infrastructure Growth The Bank has countrywide coverage through its branch network and consequently only 3 new branches were opened during the year and a new regional office was opened in Vanni to provide more focus on the needs of the clientele in this area taking the total number of Regional Offices to 21. All our products are offered at all branches based on the Bank`s principle of inclusive banking and our belief that a customer`s banking needs should be comprehensively addressed under one roof. We operate a low cost branch model leveraging

on our technology capabilities which has enabled us to maintain a low staff to branch ratio of 16 staff per branch. Three branches were converted to Super Branches during the year to provide extended banking hours till 10.00 p.m. and 365 day banking to cater to the needs of customers with time constraints. We have also embarked on a programme to upgrade the older branches to reflect the brand in a readily recognisable manner and to improve accessibility and convenience to our customers.


Business Financing Export Finance Packing Credit Export Bills Purchasing Facility Link to

Trade Services

Import Financing Documentary Credit Acceptances Import Short Term Loans Import Loans Trust Receipt Loans Pledge Facilities

Working Capital Financing Overdraft Facilities Term Loans

E- Remittance - Instant Money Transfer Facility

Other Facilities Guarantee Facilities SME Loans

OtherDoor Step Banking



Our ATM Network stood at 264 by the end of 2012 and our customers were able to access a total of 1,677 ATM’s which include ATMs networked with other Banks.

We continue to enhance the arrangements with Correspondent Banks and Exchange Houses to facilitate inward remittances channelled by migrant workers. 51 Correspondent arrangements cover the worldwide network.

Performance The focus of the Personal Banking in 2012 was to grow its deposit base, the credit portfolio and remittances whilst safeguarding asset quality to enable the bank to reap the benefits of the accelerated branch expansion carried out in the past three years. The table below provides the evidence of the successful implementation of this strategy.

MD, Mr. Aravinda Perera opening the re-located Pelawatta Branch

Highlights of Personal Banking Sector

2012 2011 Change %

Income (Rs.Mn) 29,070 20,140 44.34

Deposits (Rs.Mn) 214,901 174,645 23.05

Advances (Rs.Mn) 135,506 103,758 30.60

Total Assets (Rs.Mn) 141,810 108,616 30.56

Total Branches 209 206

Personal Banking accounts more than 80% of the deposit base, 54% of the loans and advances of the Bank and contributes 49% to operating profit. Growth in deposits and advances was above the industry averages. The foundations for growth in this increasingly important division were laid in the accelerated branch expansion carried out in the past three years and product awareness campaigns. Regulation of credit

Branch & ATM Spread (Nos.)

Branches

08ATMs

09 10 11 120

50

100

150

200

300

250

Distribution of Branches in 9 provinces - 2012

Western - 89Uva - 9Southern - 22Sabaragamuwa - 12North Western - 19

North Central - 9Northern - 13Eastern - 17Central - 19

63Sampath Bank PLC

growth provided an added impetus as the need to channel funding to the most profitable areas was imperative for sustained profit growth resulting in rapid expansion of this division. The principles of inclusive banking to customers at all levels of the pyramid and creating time through ease of transacting with the bank were key strengths which facilitated the successful execution of the personal banking growth strategy.

Deposits Average deposit rates increased significantly during the year as competition amongst financial institutions for the deposits intensified consequent to the rising interest rates. This created a shift in the deposit mix resulting in a decline in the proportion of low cost current and savings accounts to interest bearing deposits from 40.9% in 2011 to 34.5% in 2012 and was in line with the trends observed in the banking sector. The country’s low savings ratio of 16% which is one of the lowest in South Asia continues to be a key challenge for growth in this vital area for the industry. Additionally, the attractive term deposit rates that prevailed in the entire financial sector provided an attractive incentive to customers to shift from savings to term deposits which also contributed to the shift in the deposit mix. Despite the challenging environment we were able to maintain a growth in savings and demand deposits despite the negative growth shown by some of the competitors and were above industry average and in line with targeted growth. Leading Products were Minor Savings, Double S and Sampath Sanhinda which proved popular due to various promotional activities, attractive interest rates and gift schemes offered. Our ability to re-price products due to the favourable maturity profile proved to be a strength that enabled us to maintain profitability in 2012.

Advances Personal Banking Advances grew by 31% compared to the maximum growth of 23% permitted for the Bank in 2012. Randiriya, our popular pawning product grew by 33.4% from Rs.41Bn in 2011 to Rs.55Bn in 2012 and now accounts for 25.3% of the Bank’s total advances. This remarkable growth was spurred by unmatched service quality, increasing gold values, effective rewards and marketing campaigns including the popular interest wipe off. Our competitive edge is our ability to offer the highest advance at lower rates in the market and the superior service offered at our branches. The product has universal appeal in all areas of the country and was particularly popular in the North and East. Whilst this growth elevates the Bank’s level of market risk arising from gold prices, the historically lower number of articles being auctioned due to non-payment mitigate the risks associated with the product.

Deposit Mix (%)

0

20

40

60

80

100

Demand

Savings

Call Deposits

Fixed Deposits

Certi�cate of Deposits

Margin Deposits

10 11 12



In addition, Risk Management unit monitors the variables such as market gold prices, exchange rate etc. on a daily basis and carryout stress testing / scenario analysis periodically. This will ensure that the risk taken would be within the Risk Appetite of the Bank.

Despite the regulatory controls of a restriction in credit growth, overdrafts continued to grow meeting the short term requirements of financing. In view of anticipated increase in costs, and being a product in which rates are locked, leasing improved at a lower rate.

Sevana Housing loans grew by 14.8% from Rs.9.0Bn in 2011 to Rs.10.3Bn, reflecting an encouraging increase over the growth rate of 12.3% over the previous year despite the increase in interest rates.

Microfinance was introduced during the year to meet the special needs of the small entrepreneurs in the North and East. Many customers in areas affected by the three decades of conflict, face difficulties in providing collateral for the loans as their records at the land registries may have been destroyed. Introduction of microfinance was expedited in consideration of their needs and the Bank also conducted number of seminars to provide insight into doing business for the entrepreneurs in these areas.

Many seminars were conducted to educate small entrepreneurs in the North and East

Advances Mix (%)

0

20

40

60

80

100

Term Loans & OD's

Pawning

Leasing

Housing

Import & Export Loans

Bills of exchange

Others

10 11 12

65Sampath Bank PLC

Remittances Inward remittances from migrant workers back to their families in their home country is an important source of income to the country and in this endeavour Sampath Bank has expanded its reach to overseas locations in support of Sri Lankan migrant workers to remit their hard earned money to their loved ones in a speedy and secured method at an affordable cost.

The total value of remittances to Sri Lanka has been increasing steadily over the past decade and it has been estimated that in 2012 the total value will exceed USD6.0Bn as per Central Bank of Sri Lanka. This is an increase of 26% increase over the previous year involving some 1.7Mn Sri Lankans working abroad.

Presently, Sampath Bank has remittance arrangements with 51 overseas business partners and deputized 12 Business Promotion Officers in Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, Cyprus, Dubai & Italy and is planning to further strengthen the gulf region. In addition, the Bank will expand its remittance operations to Bahrain and Jordan for the benefit of migrant workers, in the near future.

During the year 2012, for the first time in Sri Lanka, Sampath Bank has implemented web service Application Programming Interface System integration with their overseas partners to provide speedy service where migrant workers could remit funds to the beneficiary within a few seconds.

For the benefit of Sri Lankan migrant workers, Sampath Bank participated as the main sponsor for many Sri Lankan events organized by the key Sri Lankan Associations in different corridors and

conducted 2 main raffle draws ‘Cash Wasi’ during the year to give away cash prizes to beneficiaries.

As a responsible bank, Sampath Bank will continue to add value to migrant workers as well as their beneficiaries through various schemes and innovations in the future.

YoY Growth in Remittance Income (%)

0

5

10

15

20

25

09 10 11 12

YoY Growth in Remittance Volumes (%)

0

4

8

12

16

20

09 10 11 12



Credit quality & Recoveries Credit quality has been maintained despite rapid expansion in the advances due to the segregation between credit marketing and credit evaluation. Credit is marketed and initiated by Branch Managers. Credit proposals are evaluated by the Regional Managers and their staff who have specialised skills to evaluate same. This is underpinned by a robust technology platform that has facilitated the smooth operation of the credit approvals. Effectiveness of the process is reflected in the improved NPL ratio which is 2.1% as at end of 2012 in comparison with 2.7% for 2011. We have also been actively monitoring overdue facilities with a view to identifying customers who face genuine difficulties.

Investing in PeopleThe Personal Banking Division has 2,534 staff employed in head office and branches. We have invested in training our staff through face to face seminars and also e-learning products to ensure that there is a culture of risk awareness and sufficient knowledge of the Bank’s systems and processes. We have retained the services of international experts complemented with involvement of our senior staff to provide a comprehensive training programme to enable them to function more effectively and facilitate an enhanced and consistent service to our customers.

Future Outlook The focus in the next year and the medium term will be on growing our deposits, advances and remittances to increase our market share in each of these portfolios. We will achieve this through our continued focus on customer convenience through extended hours, a variety of delivery channels and taking our services to the customer in order to further enhance value to customer. Leveraging our strong IT platform which revolutionised banking with innovative products, will lead the way forward for us to achieve our vision of creating time for the customer through product and service innovations. Current projects in the pipeline include facilitating a travel card which will have e-tickets and reloading facility. The call centre which operates on weekdays during office hours will be developed to add further value to customers by increasing the operating hours and the addition of more services.

We will remain responsive to the needs of the customers served by our branch network and introduce products tailored to their special needs as we have done this year with microfinance for the customers resident in the North & East. Inclusive banking will be the way forward for our country and including those in rural areas can be done only by being responsive to their needs and understanding the limitations presented by their environment.

The key challenges for the coming year will be the pressure on margins as competition intensifies and customer expectations reach new heights due to the array of products and options on offer. We believe that superior product delivery and customer convenience will be our key strengths to gain market share in this environment using technological innovation to add value to the customers.

67Sampath Bank PLC

Credit & Debit Cards Sampath Bank is the only bank in Sri Lanka having the world`s three leading card franchises, namely Visa, MasterCard and American Express and offers a wide range of credit and debit cards to suit the diverse lifestyle needs of Sri Lankans around the country. We are the leading local bank in the issue of cards and our strategy is to achieve overall leadership for the issuing of credit and debit cards through provision of greater convenience, value, security and transparency in fees to our customers.

Industry Performance Credit cards account for approximately 4% of the total loans and advances of the Banking Sector. The number of active cards in the country increased from 862,352 in December 2011 to 935,108 by September 2012, an increase of 8.4%. Globally accepted cards account for 93.5% of the total active cards and cards accepted only locally account for the remaining 6.5%. Outstanding balances on credit cards grew at 9.5% during the year from Rs.37.63Bn to Rs.41.19Bn by September 2012, a higher rate of increase than the number of cards reflecting increasing usage of cards. CBSL has a cap on the interest chargeable on credit cards, due to disparities of rates charged historically, which was increased from 24% to 28% in April 2012 in line with the interest rate movements in the country.

Bank’s PerformanceThe Bank`s performance has been encouraging as seen by the growth of both credit cards and debit cards as evidenced by the charts above. We added the American Express card to our portfolio, thus becoming the only bank to offer the top three cards in Sri Lanka. Credit card balances grew by

Future Outlook

We will continue to provide revolutionized banking with innovative products and introduce products tailored to special needs

Growth in acquiring volumes (Rs. Mn)

5,000

10,000

15,000

20,000

25,000

08Local acquiring

1009 11 12International acquiring

Growth in card volumes (Nos. ‘000)

60

90

120

150

Total Credit Cards

08 1009 11 12

Growth in Market Share (%)

3

6

9

12

15

08Active Cards

09 10 11Outstanding Balances

1Q 12 2Q 12 3Q 12



41.1% during the year due to positioning of our cards in the market as the `Responsible Choice` and our exclusive promotions such as `Town on Sale‘ and the waiver of one instalment on the zero interest easy payment scheme. Canvassing by our branch network was supported by the centralised card unit operations and island-wide marketing campaigns to increase brand awareness and position the product in the market. We have been able to increase our penetration across many market segments of the social pyramid due to the wide appeal of our promotions and the simplicity of our fee structure in keeping with our values and principles of inclusive banking. During 2012, the merchant network has also grown by 8.8% and include the largest retail chains in Sri Lanka whom we are able to support through our branch network as the regional activity on credit and debit cards grows. As per global rankings issued by Visa International, we are on course to achieving our goal of reaching market leadership. It is noteworthy that the growth in balances has been higher than the growth in the number of cards reflecting increased usage of cards which augurs well for the future. The centralised model of approval for cards and proactive monitoring of dues has enabled us to curtail the growth of NPAs from 8.1% in 2011 to 5.6% in 2012.

Future OutlookWe look forward to building on the foundations laid this year as the leading local credit card issuer and achieving our goal to become the leading issuer of cards in the country. We expect to

achieve a growth rate of over 30% on the number of cards issued and the income earned which will be derived mainly from growth in volumes through branding and positioning of our cards as providing the best value in the market.

Corporate Banking Corporate Banking meets the operational, investment and term financing needs of its clients by providing tailored solutions through the specialised sub-divisions which comprise Corporate Finance, Trade Services, Corporate Credit, Corporate Branch, Development Banking and Foreign Currency Banking Unit. Our income is derived from interest income from loans and advances, commission on remittances, documentary credits and commission on conversion of foreign currency. We are the main Bank repatriating foreign currency notes collected from all banks and foreign currency dealers which provides an additional source of income to the division.

69Sampath Bank PLC

Advance Products Complementary Services

Business Financing Working Capital Financing

Overdraft Facilities Money Market Loans Import Financing

Trust Receipt Loans Pledge Loans Short Term Revolving

Export Financing Pre shipment Packing Credit Pledge Loans Short Term Revolving Post shipment Bill Purchasing

Term Loans Short, Medium & Long Term Financing

Guarantee Facilities Bid Bonds Performance Bonds Advance Payment Bonds Letters of Guarantee

Loan Syndications Arrangement Participation Management

Securitisation Structuring Investments

Margin Trading Facilities

Structuring & Investments in commercial paper Debt & Equity Financing Management of IPO’s, Rights Issues & Handling of

dividend payments Issuance of Corporate Credit Cards Corporate payment facilities Dealer financing Maintenance of collection accounts ESCROW management services

Telephone Banking SMS Aletz Telebanking facilities Mobile Banking Facilities

Corporate Banking Products & Complementary ServicesCorporate BankingWe will offer an extensive range of products to cater customer’s specific needs



Advance Products Complementary Services

Leasing Vehicles Machinery

Trade ServicesImports

Documentary Credit Inbills Acceptances

Documentary Collections Shipping Guarantees

Exports Advising & Confirmation of Documentary

Credit Purchasing/Negotiation of Documentary

Credits & Documentary Collections Bills sent on collection

Internet Banking Sampath Vishwa - Total online banking experience Payeasy - General payment system including

payment of utility bills Sampath Payment Gateway - Online Payment

Gateway powered by Sampath Bank Sampath Vishwa Corporate Trade

Foreign Currency Banking Unit (FCBU)Facilities in foreign currency

Performance The focus of the Corporate Banking Division was to grow business volumes rather than increasing margins in order to provide a cost effective service to our customers. This was achieved through competitive pricing, extended banking hours and ease of transacting with the Bank through our branch network. Trade finance services operate a centralised service model supporting the branches to provide an efficient service to our customers. The Bank will grow its volumes by effective support to branches and its focus on process improvements.

2012 Rs. Mn

2011Rs. Mn

Change %

Income 5,152 3,740 37.77

Export turnover 21,264 19,800 7.39

Import turnover 115,223 105,728 8.98

Deposits 22,558 16,843 33.93

Advances 65,771 60,927 7.95

Total Assets 84,774 76,694 10.54

We believe that our tailored financial solutions will satisfy your corporate investment and operational needs.

71Sampath Bank PLC

Growth of loans and advances was a moderate 12% in 2012 compared to 36% in 2011 due to a number of factors which were both external and internal. Sri Lanka’s exports grew by 15% due to the devaluation of the rupee which made exports cheaper whilst imports grew marginally by 3% as a result of the withdrawal of duty concessions and the devaluation of the rupee. We also observed that clients expanded their local sourcing and reduced imports as a hedging strategy to mitigate the uncertainties arising from the volatility of the exchange rate. Additionally, importers increasingly utilised flexibility afforded by the liberalisation of controls over foreign exchange to shift to Open Account method from other payment methods. The outreach of our banking services outside the Western province provided us with an expanded base for trade services. However, the need to shift funds to the more profitable retail banking business in order to maintain profit growth due to the credit ceiling had a moderating impact during the year. Despite these challenges, the Bank recorded a growth of 13.9% in imports and 14.8% in exports.

Corporate Branch A new Corporate Branch was set-up during the year by amalgamating the Corporate Credit Department and the Headquarters Branch to

facilitate access to a low cost deposit base for Corporate Credit activities of the Bank enabling competitive pricing.

The Corporate Branch recorded a growth of 24% during the year with the Rupee advances capped at 23% in line with the credit ceiling imposed by CBSL. Growth of the portfolio was achieved mainly due to exceptional relationship management and customer service to promote maximum utilisation of facilities and enhancement of limits to existing customers. This strategy enabled us to achieve our growth targets despite rising interest rates and declining trade volumes in the country. Import turnover increased by 26% during the year despite significant reduction in the volumes of vehicle imports by increasing imports in the agriculture, manufacturing and consumer sectors. Export turnover grew by 19% despite the lacklustre performance of this sector which was impacted by weak global demand and declining exports to the Middle East.

Future OutlookWe will continue our strategy of growth whilst maintaining credit quality and encouraging high utilisation of credit limits extended to customers. Additional growth is expected through sectors such as tourism and infrastructure development as we look to grow our exposures in these industry segments. Increasing the deposit base of the Corporate Branch will be a priority which will be achieved through aggressive canvassing within our corporate clientele and their employees. We have already taken measures to enhance value to current and savings account holders enabling us to implement this strategy effectively.

Performance 2012 (Rs.Mn) 2011 (Rs.Mn) Change (%)

Advances 39,874 32,240 23.7

Deposits 16,207 12,048 34.5

NII 1,598 1,155 38.4

Fee Income 333 301 10.6

NPA % 1.81 2.27 (25.4)



Trade Services Trade Services extended the banking hours to facilitate later cut-off times and processing of documentary credits on the same day. This centralised department now works on a shift basis supporting our branch network with their specialised knowledge in trade finance. It also enabled us to provide competitive rates to our customers for both foreign currencies and tariffs due to productivity efficiencies. Minimising processing times and errors has been possible due to the robust IT platforms which form the backbone of our infrastructure. Sampath Vishwa Corporate Trade creates time for the customers by allowing them to request Documentary Credits and inquire on import and export transactions entirely online. Additionally, the Trade Services Department was refurbished to create a more spacious customer friendly environment for trade customers. These initiatives enabled us to increase import volumes by 11% and export volumes by 18% during the year due to successful implementation of the strategy described above.

Bank Notes Operations Performance

2012 (Rs.Mn)

2011 (Rs.Mn)

Growth (%)

Exchange gain

124.3 79.7 44.6

Net Profit 82.0 54.5 50.7

The Bank Notes Operation has been another area of growth for the Bank. Sampath Bank is the sole importer of foreign currency notes and the main Bank repatriating foreign currency notes

from which we derive fee based income. These operations were extended by the addition of two more outlets at Chatham Street and Negombo for collection of bank notes from other banks and authorised foreign currency dealers. We will also install Foreign Currency Exchange Machines which are ATM’s with the capability of converting foreign currency to local currency, in selected locations. This is the first time such a facility is being provided in the country and we are proud to add yet another innovative milestone in the year of our Silver Jubilee. The initial machines will be installed in the tourist hubs of Colombo, Negombo, Galle and Kandy. We were able to capture the bulk of volume of increase resulting from the free float of rupee against the USD with our superior services, continuous training and door to door collection facility to achieve a twofold volume increase in 2012.

Governor of the Central Bank, Mr.Ajith Nivard Cabraal making the first transaction in the Foreign Currency Exchange Machine

73Sampath Bank PLC

Future OutlookAs the Sri Lankan economy is import driven, we expect changes in the restrictions which have curtailed the growth of imports and consequentially, a growth in trade volumes. We expect inward and outward telegraphic transfers to increase with trade related transactions migrating towards open account method. The centralised model enables us to handle the expected increase in volumes with greater efficiency and a superior customer service. We are confident that the initiatives taken to strengthen the Bank Notes Operations will enable us to retain our leadership position as the largest exporter of foreign currency in the country. We expect the strategy of growth through branches with centralised support services to continue in the future as it is a tested, cost effective model that is scalable to support future growth.

Foreign Currency Banking Unit (FCBU) FCBU profits grew by over 15% despite a lack of significant growth in assets, whilst contributing significantly to increase the banks export/import volumes which in turn contributed to increased fee income. This was a challenging year due to reduced FDI inflows, lack of expansion in the export sectors and stagnant import volumes. The off-shore lending was also impacted by increased risk in traditional markets such as Maldives and Bangladesh. The dominance of foreign banks in this sector with cheaper funds remains a challenge to local banks who compete intensely in the market. We were able to achieve the growth mainly due to high standards of customer service and the extended hours operated by Trade Services which enabled our customers to enhance their performance in turn.

Future OutlookWe expect to grow our portfolio of advances by 25% by managing the cost of funds to provide a competitive offering to our clients. Sourcing funds from off-shore markets to finance the growth is a key strategy for 2013 and we have taken several measures to ensure that we meet our targets in this area.

Corporate Finance The credit ceiling and the consequent need to divert resources to areas where returns could be optimised impacted the growth of the Corporate Finance loan book which grew by 6% in 2012. We focussed growth into products which would enable us to earn a higher yield such as investments in corporate debt instead of direct lending, such as structuring commercial paper. Despite the restricted growth in assets, were able to increase profits by over 45% through increased fee income and syndications where our knowledge and expertise gave us the competitive advantage that clients relied on. There was little scope for activity in equity markets as the Colombo bourse remained in the doldrums for much of the period under review.

Corporate Finance was at the forefront of arranging the US$62.5Mn syndicated loan facility for the Bank in March which was oversubscribed by more than two fold. We went on to arrange a loan for development of trade with China from the China Development Bank for US$45Mn with a tenor of 5 years. These activities enabled the Bank to significantly reduce its cost of funds and enhance profitability.



Press conference held on the arrangement of USD62.5Mn Syndicated Loan

Future OutlookWe will maximise the opportunity offered to corporates to raise funds offshore as provided in the 2013 Budget and look to build on our expertise gained in this area. Additionally, we plan to increase our support to the leisure sector through rupee and foreign currency loans which they can access now as the revenue streams of this sector are in foreign currency. Securitisation is another area we have identified for growth for the Corporate Finance Unit. Leveraging our skills and expertise gained in these specialised areas will be our key competitive edge to deliver the stretched targets we have set for ourselves.

Development Banking The Development Banking provides financing for business start-ups mainly utilising credit lines available to the banking industry as well as concessionary funds from our own funding

base and an allocation from the Investment Fund Account. Our strategic focus was to contribute positively towards the economic development of the nation with a vision to be the premier development banking unit in the country.

Development Banking is necessary if our country is to achieve the stated ambition of doubling the size of our economy in the next 6 years driving the structural changes to re-align the contributions from the agriculture, industrial and services sectors to 12%, 28-30% and 60% respectively. It is a high priority sector for the government as evidenced by the tax exemptions for SMEs in the 2013 budget. We support this vision at the Bank by promoting credit lines as a Participating Credit Institution, concessionary lending through the Investment Fund Account and promoting the Small and Medium Enterprise Development Facility Project, Microfinance and lending from our own funds at concessionary rates. Our competitive advantage was the ease of banking provided to our customers with the countrywide coverage of our branch network backed by regional approval of credit facilities by highly specialised staff. The seamless co-ordination of the process was enabled by our strong IT capabilities. Our focus on promoting clean energy financed projects that added 19MW of hydro power and 11MW of wind power to the national grid. We have also taken steps to support the local entrepreneurs who are engaging in hydro turbine and wind blade manufacturing industries. Several programmes were conducted by the Development Banking Unit to enhance awareness of the Kapruka Ayojana scheme with a view to supporting new cultivation of coconut plants which has been promoted by the Government.

75Sampath Bank PLC

Wind Power Project financed by Sampath Bank

Construction underway in a Hydropower Project

The Development Banking Unit recorded a growth of 15% in gross advances during the year due to the country wide coverage of our branch network and our in depth knowledge of the credit needs in specific areas. Despite the growth, we have managed to reduce the NPA from 6.1% in 2011 to 4.1% in 2012 due to the tailored financial solutions offered expeditiously to customers facing repayment difficulties and restructuring credit facilities to match the cash flow of borrower. These initiatives have enabled the Bank to prevent new entrants in to the non-performing portfolio during the year.

Performance

2012Rs. Mn

2011Rs. Mn

% Change

Income 599 401 49.4

Net Profit 334 211 58.3

Gross Advances 5,281 4,700 12.3

Total Assets 5,115 4,478 14.2



Promoting Refinance Credit Lines The Bank promoted Credit Lines made available to local commercial banks as a Participating Credit Institution through awareness programmes for the branches and training programmes for communities, especially in the Northern and Eastern provinces. Additionally, a special SME officer was assigned to the Northern Regional Office to expand the SME portfolio in this region. The credit lines operated during 2012 is given in the chart.

Investment Fund AccountThe Investment Fund account was set up from the reduction of the income tax on profit from 35% to 28% through provisions of the Inland Revenue Act of 2011, to provide concessionary funding for priority sectors such as Agriculture, Livestock, Fisheries, Industry, SMEs, IT & Business Process Outsourcing, Infrastructure and Education. Accordingly, Rs.1.5Bn was available under this scheme and Rs.1.35Bn was utilised by the Bank to finance SMEs engaged in the priority sectors identified by the Government. Priority was given to SME’s located in lagging provinces to address regional imbalances.

Credit Line Objective

Saubagya Aimed at developing the Micro, Small & Medium Enterprises operating in lagging provinces

Resumption of Economic Activities in Eastern Province (Negenahira Udanaya)

Aimed at stimulating economic activities in agriculture, livestock and among Micro and Small Enterprises in the East

Small Plantation Entrepreneurship Development Project

Aimed at stimulating economic activities in agriculture, livestock and among Micro and Small Enterprises in the Nuwaraeliya, Kandy, Kegalle and Moneragala

Resumption of Economic Activities in Northern Province (Pibidena Uthura)

Aimed at stimulating economic activities in agriculture, livestock and among Micro and Small enterprises in the North

Poverty Alleviation Microfinance Project (Prabodhini)

To assist in initiating viable livelihood development projects for the poor

Kapruka Ayojana Aimed at assisting coconut cultivators to develop their estates

Agro Livestock Development Project (Abhivurdhi)

Aimed at assisting the development of the diary industry and related sectors

Small and Medium Enterprise Development Facility ProjectThis line of credit funded by World Bank commenced mid 2011 and was aimed at improving access to finance for SMEs affected by the global financial crisis. The project comprised of two components, the Financing and Risk Sharing Facility (RSF) and the Policy and capability enhancement for SME Banking.

Sampath Bank is the only Participating Financial Institution that applied for inclusion under RSF component of the SME Development Facility with which we aim to stimulate SME’s in the North, East, Uva and Sabaragamuwa provinces. The Risk Sharing Facility is introduced in this credit line as

Lending Mix from Investment Fund Account

Agriculture - 5%Factory/Mills Modernization - 33%SMEs - 34%Infrastructure Development - 9%Education - 3%Construction of hotels - 16%

77Sampath Bank PLC

a novel way of financing SMEs who are incapable of providing 1st class or acceptable security for their borrowings. Application of equitable criteria in distributing refinance funds enable us to assist all eligible SME borrowers who applied for credit under this credit line and utilised total allocation by the beginning of the 4th quarter.

We have accomplished a number of tasks under the Policy and Capability Enhancement for SME Banking component of the SME Development Facility. Risk rating modules were developed for Project Finance & SME sector and these have been validated by ICRA Management Consultancy Services India. The models have been further improved by incorporating their recommendations and are now being used to rate the risk of SME customers and update records accordingly. Additionally, we have acquired the IT systems to support the BASEL II requirements and for capturing the SME credit module data directly from the main operating system. We have trained 25 Senior Credit Officers selected from 20 regions on Cash Flow and Working Capital Analysis using the

services of external resource personnel. A 3 day certificate programme on Environmental Appraisal was conducted by the Institute of Environmental Professionals of Sri Lanka for Regional Managers and Credit Officers to enable them to conduct the environment appraisals competently and disseminate the knowledge gained through the branch network. We have already conducted 2 SME Customer Training programmes based on the needs identified by the credit officers attached to Regional Offices.

Micro FinanceToday, as our nation strives to include all Sri Lankans in all regions in our economic progress Microfinance is very much the need of the hour to achieve not just the Bank`s but the country`s goals. Development of our microfinance product, SampathSaviya, takes in to account the challenges of men and women from low income communities in the heartlands of Sri Lanka, who, due to the prolonged conflict and natural disasters, unequal resource distribution across

Sectorwise Analysis of Re�nancing Advances Portfolio - 2012

Agriculture & Fishing - 23%Manufacturing - 14%Tourism - 7%Construction - 4%Traders - 8%Infrastructure - 36%Other Services - 7%Consumers - 1%

Sectorwise Analysis of Advances Portfolio - 2012

Agriculture & Fishing - 11%Manufacturing - 14%Tourism - 3%Transport - 1%Construction - 10%Traders - 20%Banks, Financial & Business Services - 6%Infrastructure - 3%Other Services - 3%Consumers - 29%



the nation or simply due to their inability to access finance as a result of inadequate knowledge and assets; have become excluded from mainstream development. It is aimed at uplifting the economic and social status of grass-root level communities and supporting sustainable livelihoods through borrowing, repaying and saving as a responsible group and as individuals. Our efforts to improve their financial literacy will not only make their individual enterprises sustainable, but in turn, help to increase the national savings rate across the country to levels required to spur national development.

To date, we have disbursed 898 loans to the value of approximately Rs. 97.4 Mn to start up or expand micro enterprises related to agriculture, livestock farming, trading and the provision of services through micro finance. During the year , we have made a difference in the lives of over 1,388 families across Sri Lanka through a network of 24 Branches dedicated to promoting SampathSaviya in; Vavuniya, Jaffna, Kilinochchi, Manipay, Nelliady, Chunnakam, Chankanai, Mannar, Kyts, Thirunaveli, Chavakachcheri, Mallawi, Chenkaladi, Kalawanchikudy, Oddamawadi, Kaththankudi, Kinniya, Trincomalee, Kantale, Muttur, Batticaloa and Nithvr.

This year, as part of our efforts to make our SampathSaviya model relevant to the microfinance needs of the people who have gone through difficulties due to the conflict, we have started specialized livelihood development project with the assistance of GIZ and CEFS to help 100 war widows to start income generating projects in the Batticaloa District. These able women entrepreneurs were financed through refinance credit lines after they had completed comprehensive training on business development provided by the aforesaid organization.

Future OutlookIn a country that has emerged from three decades of conflict, development banking is very much a need of the hour to address an aspiring middle income country’s ambitious growth targets and to address regional imbalances that are key to the political and economic stability. A key area of growth will be renewable energy in the coming years as due to the expertise gained in this area and the reputation the Bank has built in financing renewable energy projects. We plan to extend our exposure to renewable energy from hydro and wind to include biomass, solar power and agricultural and municipal waste considering the potential need in the country. All these projects will be financed through a special senior credit line approved by the European Fund Agency. IT, value added exports, import substitution, agricultural export and commercialisation of new products will be considered on a priority basis for lending to support the development objectives of the country. We also believe that there is potential to finance niche projects in the leisure sector such as health tourism, community based tourism, sports, eco and agro based tourism. The Bank will continue to support small and medium entrepreneurs engaged in priority sectors and persuade them to follow the norms of social and environmental concerns. Capacity building activities and entrepreneur development programmes will be conducted to support the country’s vision of creating a sustainable and viable SME sector and assist with bringing their products to markets using the existing network capability of the bank.

Treasury Operations Treasury is the centralised fund administrator of the bank and directs the funds of the Bank through prudent investment and financial decisions, to improve shareholder wealth whilst managing

79Sampath Bank PLC

its risk exposure within a range of defined parameters. The objective of the Bank’s Treasury is to maintain an optimum level of return to Treasury in terms of currency management, cash management, liquidity management and interest rate management. Sensitivity and responsiveness to changes in the external environment including macro and micro economic trends and policies is key to our performance.

PerformanceThe dawn of 2012 was challenging as banks stepped in to the domestic currency market with a high degree of uncertainty arising from the 3% devaluation announced in the national budget in November 2011. Further volatility was observed in February 2012 when CBSL allowed the rupee to float freely by ceasing interventions which maintained it in a narrow price range. The spot rate which was Rs.113.90 at the beginning of the year depreciated drastically from February and continued until June 2012, reaching an all-time high of Rs.134.40.

The bleak outlook caused forward premiums to rise sharply, six month and one year premiums doubled from 500 bps (basis points) to 700 bps and 700 bps to 1300 bps respectively. The rupee stabilised towards the 3rd quarter at a higher level and volatility decreased with forward premiums closing at 500 bps and 1100 bps for six months and one year respectively.

Liquidity management of the Bank has been very moderate as we maintained an optimum level of liquidity to achieve a low cost and higher return from all aspects of liquidity management whilst ensuring that all excess funds are invested to achieve an acceptable rate of return. This enabled Treasury to manage its liquidity plan in line with bank’s liquidity strategy.

Interest rates were volatile during the year, but the overall trend was upward and this is expected to continue in 2013 as well. The one year Treasury Bill yield was at 9.31% at the beginning of 2012 and the one year yield as at end of 2012 was 11.69%.

Treasury Operations

Our Treasury ensures that bank maintains an optimum level of return in terms of currency management, cash management, liquidity management and interest rate management

One year Treasury Bill rate movement in 2012 (%)

8

9

10

11

12

13

14

15

16

Feb-1

2M

ar-1

2Ap

r-12

May

-12

Jun-1

2Ju

l-12

Aug-1

2Se

p-12

Oct-1

2No

v-12

Dec-1

2Ja

n-13

USD/LKR Movement in 2012 (Rs.)

100

110

120

130

140

Jan-1

2Fe

b-12

Mar

-12

Apr-1

2M

ay-1

2Ju

n-12

Jul-1

2Au

g-12

Sep-1

2Oc

t-12

Nov-1

2De

c-12



Average weighted prime lending rate (AWPLR) was at 10.77% at the beginning of 2012 and end of 2012 the rate was at 14.40%. This is a significant increase during the year and an indication of the upward trend of the interest rates.

We have been able to increase our fixed income operations by engaging in Repo, Reverse Repo and in the secondary market of Government Securities. The primary dealer unit (PDU) has been continuously bidding for the weekly auctions and has been successful in obtaining the best possible rates in the market. The Regulator was very active throughout the year, bringing in more regulation to Treasury operations to maintain transparency of Treasury transactions. A key success area of the Treasury is the foreign exchange operations in terms of corporate treasury sales, interbank trading and bank notes operations.

Interbank trading contributed more than 50% of the total foreign exchange gains. Corporate Treasury sales operation has contributed the second highest portion for overall foreign exchange

gains. However, global markets have been highly challenging with economic downturn due to the debt crisis in the US and Euro zone. These effects had direct impacts on the Sri Lankan economy.

Bank Notes Operation (BNO) continued to grow and strengthen its dominance in the currency repatriation business with competitive pricing and superior customer service. BNO achieved a significant milestone reaching the all time high repatriation volume in the history of the bank and also generated the highest ever profit. BNO operation continued the importation of foreign currency to the market through a special approval from the central bank based on our market dominance in currency repatriation for the consecutive third year. As a result of such expansion and the achievements, leading banks within and outside the region have shown their interest to partner with us for the repatriation business in the future.

These achievements highlight the strength of the Bank’s Treasury and the resilience of the Bank to macroeconomic factors. The main focus of the Treasury is to improve internal and external customer satisfaction by building long term relationships using cutting edge technology. Streamlining Treasury operations to implement lean processes for efficiency and effectiveness of the Treasury continues to be an area of focus.

The treasury managed to maintain high service quality standards on par with industry standards through continuous on-site and off-site training provided by the bank such as dealing simulation training programmes during 2012.

We successfully raised a Debenture of rupees 1.5Bn for 2012/2017 to strengthen the Bank’s Tier II capital in an unpredictable volatile environment.

We successfully raised a debenture of Rs.1.5Bn for 2012/2017 to strengthen bank’s Tier II capital in an unpredictable volatile environment.

AWPLR Movement in 2012 (%)

8

9

10

11

12

13

14

15

16

Feb-1

2M

ar-1

2Ap

r-12

May

-12

Jun-1

2Ju

l-12

Aug-1

2Se

p-12

Oct-1

2No

v-12

Dec-1

2Ja

n-13

81Sampath Bank PLC

Furthermore, Treasury was able to approach overseas centres for funding requirements which is also a national concern.

Future OutlookThe outlook is very optimistic as the centre of economic gravity is shifting towards Asia. This positive sign will help Treasury to deal with bigger financial centres and leading investment banks to strengthen our overseas presence. Sri Lanka is experiencing a high level of economic growth compared to other countries in the region, in this context Treasury will be able to turn its cog wheels much faster in the future.

In 2013, the foreign exchange market is expected to maintain a stable outlook as more flexible exchange rate regime will be introduced by the regulator to support the business and economic cycles. These cycles will have negative effects if higher fluctuations persist. Furthermore,

diversification of the Sri Lankan financial market will experience new financial instruments such as derivatives which will be introduced with a broader perspective.

In achieving a USD100Bn economy and a USD 4,000 per capita income targets by 2016, the future outlook is well positioned for the country’s financial market, where continuous efforts by the Regulator and the government are mainly focused to develop a vibrant and liquid bond market and an equity market. Such paradigm shifts will help the bank to earn incremental revenue to support its bottom-line.

In 2013 and beyond, the treasury will continue its success story which has been maintained for the last 25 years. Therefore, we look forward to provide customer focus operations in years to come with positive approach in terms of customer needs. Treasury will be obliged to perform its duty to support in achieving the interests of all the stakeholders of the bank.

Information Technology 25 years ago Sampath Bank revolutionised the traditional banking services and set a new set of standards that completed a customer transaction within minutes as against hours, calculated interest daily as against the quarterly minimum balance, untied the customer from a single branch and allowed autonomous banking access through ATMs.

For the past 25 years the bank has been able to maintain this trend, and always be ahead of the curve. Today, the banking public take for granted the array of services available from banks. With great modesty we can state that we made it happen. We brought the banking industry in

We proudly introduced the first ever Foreign Currency Exchange ATM’s to Sri Lanka

ForeignCurrency Exchange

ATM’s



Sri Lanka to the 21st century. A banking landscape that Sampath Bank is proud to have helped shape.

Sampath Bank’s founding premise has been to avail the cutting edge technology the world has to offer to the Sri Lankans. Looking back, it is heartening to note that Sampath Bank has played this role of technology leader successfully throughout our existence.

Our technical competence provides us with a strategic competitive advantage which, together with the expanded branch network, enables us to create synergies across our operations

and strategic partners, adding value to our stakeholders. We are committed to utilising all delivery channels to reach the unbanked public including the base of the socio economic pyramid in a cost effective manner.

As we celebrate our Silver Jubilee this year, we reflect on the many ‘Achievements in IT’ of Sampath Bank and how we shaped banking history in the country by focusing on principles of customer convenience and inclusive banking for all Sri Lankans which has given us a competitive edge and defined our identity.

Pioneering Innovations

Year Milestone Result

1987 Unprecedented in banking history, the bank made a sizable investment in a state of the art computer system and banking software

Extended banking hours from 9 a.m. to 3 p.m., average transaction time in minutes, daily interest

Branch premises with modern ambience Transformed the dreary bank branch environment to a pleasant experience

1988 Introduced a multi-point network of Automated Teller Machines (ATM’s)

Set the customers free from Branch Banking and gave them autonomy to access the bank beyond office hours

1989 Introduced international credit cards to Sri Lanka under license from MasterCard International Inc., USA

Global banking products brought to Sri Lanka

Uni-Banking System was introduced to Sri Lanka Freed the customer from being tied to a single branch

1994 Pioneer SWIFT network member Enabled our customers to enjoy speedy and secure international banking facilities

1995 Telephone Banking service using Interactive Voice Response Technology

Freed the customers more from the branches enabling banking sitting at their favourite armchair at home

1997 First bank in South Asia to introduce debit cards in association with MasterCard Inc.

Made the familiar SET a global card with access throughout the world and introduced the concept of debit cards

1998 Implemented Bancs 2000 core-banking system The bank made a leap frog in technology by switching from main frame computers to open systems enabling far greater levels of scalability

83Sampath Bank PLC


2000 Introduced ‘Sampath Net’ Internet Banking Internet banking enabled the customers to access the bank 24x7 from anywhere in the world

2001 Introduced SMS Banking Banking mobility through ‘the bank in your pocket’First bank in Sri Lanka to introduce the Internet Payment Gateway

Facilitated the mushrooming .com industry in Sri Lanka, enabling businesses to perform e-Commerce transactions

2002 Launched first Visa Platinum Card in Sri Lanka Acquaint Sri Lankans with novel banking products2003 Migrated from Bancs2000 to Finacle 7.0.6 Another step in the direction of technological superiority

with greater banking system enhancementsFirst bank to introduce one day clearing for cheques drawn on any Sampath Bank Branch, collected by any commercial bank in the island and presented through Sri Lanka Automated Clearing House

Sampath Bank has the highest level of efficiency among all banks in Sri Lanka in this area

First Bill Payment Portal with Payment accepted from any Debit/Credit and Internet Accounts

Facilitated e-bill payment in the ever increasing list of customer centric banking services

2004 Launched first ever Cheque Imaging and Truncating site in Sri Lanka

Efficient outward cheque clearing system enabling customers faster access their funds

Introduced SMS Alerts All events transactions alerted via SMS giving customers more control of their money and accounts

2006 Launched first Online Real Time ATM Cash Deposit with cash recognition facility in South Asia

More and more autonomous services for customers

2007 First (and only bank up to date) to offer mobile based peer to peer funds transfer facility encompassing the fusion of telecommunication and banking technology innovative banking services

Innovative use of mobile technology to facilitate person to person funds remittances for customers as well as non-customers

Launch of first Visa Mini Debit Card in South Asia Innovative global banking products for Sri Lankans2009 Implemented Finacle Treasury solution Enabled the bank to considerably improve the efficiency of

Treasury operations and money management2010 Implemented Multi Bank ATM system in Sri Lanka providing

access to more than 1600 ATMs across the country to our customers

Enabled other banks’ customers to our ATMs and vice versa

2011 First bank in South Asia to introduce Online Real-Time Cheque Deposit at ATMs

More self-service avenues and enabling more convenience for customers

AML (Anti Money Laundering) System was implemented More stringent control on banking activities to prevent terrorist financing and malpractices

Risk Management System was implemented Introducing the bank to global banking practices and regulatory compliance



PerformanceWith major changes in the monetary policies brought forth by the Central Bank, the competitive landscape in banking and financial service space has changed drastically. Mobile payment guidelines issued by the Central Bank has weakened the entry barriers that were in place for new entrants to break in to the financial services industry.

Therefore, enhancing electronic delivery channel capability, particularly in the mobile category, is a key area of growth for the Bank. Mobile Cash was revamped and re-launched in 2012 to cater to this market. General mobile banking systems were re-engineered to cater to the ever growing volumes, particularly in SMS alerts. We are confident that with the current technology portfolio and the strategic IT roadmap, we will have no difficulty in facing any threat in the foreseeable future from any new entrant.

Greater usage of electronic delivery channels will be a key driver that enables us to maintain a low cost income ratio whilst providing scalable solutions to our customers’ needs.


2012 Became a service provider for ATM Switch services to other banks and institutions

National level initiative of unification of all banks through a single ATM network enabling a customer of any bank to access their funds through ATM of any other bank

We have also focused on improving areas that support the core banking system such as governance, compliance and risk management systems in order to enhance the Bank’s capabilities in these vital areas. These projects collectively have contributed significantly towards improved customer service and increased productivity. Sampath Bank has one of the lowest staff per branch ratio at 16 staff per branch reaping the dividend of investing in enabling technology. This number increased marginally from 16 staff per branch in 2011 to support the growth in Bank operations during the year. Additionally, systems development processes have been streamlined adopting global best practices and quality assurance process. The table below provides information on the key projects the technology team focussed on in 2012.

85Sampath Bank PLC

Area of focus Project Description Status

Operations e-Reconciliation system

Automation of back-office functions of branches involving reconciliation and monitoring data. The system integrates routine audit functions, central monitoring and risk management activities to improve efficiency levels across the Bank

Completed and in operation

Automated covering approval system

An online system for approval of facilities which has reduced consumption of paper and increased productivity with the replacement of the manual system

Completed and strengthened in 2012 to deliver further efficiencies

Governance Register of Directors’ Interests

An automated system for tracking Directors’ interests Completed and in operation

e-Board Papers System to deliver and maintain history of Board papers to Directors over secure connections to iPads with ability to approve online


HR Systems e-Learning platform

Infrastructure provided to HR to facilitate roll out of e-learning to facilitate staff training

Completed and running

e-Circulars Platform for disseminating circulars electronically and enabling retrieval on demand


Delivery Channels

Sampath Mobile Cash

Enables any person whether irrespective of them being customers to send money instantly to any person having any brand of mobile or CDMA phone with any service provider. This provides a cost effective and faster alternative to the traditional postal and money orders, revitalising the inland money transfer system across the country

150% increase in usage over previous 4 years average

Internet Banking Enhanced to provide additional featuresView inward chequesPayment templatesEnabled investments in fixed income securitiesView entire banking portfolioOpen savings and term deposit accounts

38% increase of transactions and 21% growth of the user base over year 2011

Mobile Banking Application

An e-banking application was designed for the iPhone and iPad Completed and in operation

Enhanced SMS Alerts

Features enhanced to facilitate notifications of all transactions via SMS making Sampath the only bank to provide a comprehensive service


Enhancements to Corporate Clients Module

Enhanced to enable submission of Employees Provident Fund and Employee Trust Fund remittances online via e-Bank solution providing a single portal for multiple functions


Key System Development Projects implemented in 2012



A new area of focus for the Bank was implementing an analytical framework to harness the value of Data Mining and Business Intelligence (BI) using globally recognized tools and technologies and adopting industry standard best practices. This is another pioneering initiative by Sampath Bank that will shape the local banking industry. With the growing demand for business information by internal business users, The Bank has focused more on leveraging the information asset of the Bank to improve its business and overall profitability by providing information timely and accurately to all business users. This has enabled the users to have an insight of respective business area and facilitated proactive decision making based on facts and figures. Key business indices are frequently computed and observed through Dashboards for better performance monitoring. Implementation of the Data Warehouse has also enabled the Bank to efficiently comply with regulatory authorities which demand for information for monitoring purposes.

Keeping our electronic delivery channels live and managing downtime is key to a reliable service and we monitor our performance in this vital area to ensure that we uphold the highest standards of customer service on a consistent basis. The

Area of focus Project Description Status

Delivery Channels

Margin Trading Margin Trading module linked to internet banking enabling customers to view their portfolio and to alert the Bank on limits, providing a faster and more comprehensive service to clients


Risk Management

Credit & Operational Risks

Implemented a new system to manage Credit & Operational Risks Completed and in operation

Credit Scoring A new system was implemented to automate credit scoring Completed and in operation

Reporting of loss events

A new system was designed and implemented to report defined loss events


statistics below demonstrate our evidence of our commitment to this seemingly mundane but vital area of IT operations.

2012 2011

Total Sampath ATMs 264 255

Total ATMs in Inter - Bank Link

1,677 1,495

ATM uptime 99.9% 99.9%

During 2012, NTB was added to the network of ATM’s

We focused on improving areas that support the core banking system such as governance, compliance and risk management in order to enhance our capabilities.

87Sampath Bank PLC

Future OutlookWe will look to retain our identity of being a technological innovator shaping the way Sri Lankans conduct their financial transactions as we move forward to an era defined by technological innovation.

The mobile telephony industry has grown exponentially within the last few years. In 2012 the number of mobile connections exceeded the population count, making the mobile device the best medium to reach the unbanked in Sri Lanka. We therefore believe that the mobile phone based banking and payment systems are key to banking inclusiveness and will look to retain our leadership in this delivery channel, building on our considerable strengths in this area.

The bank is poised to introduce two new technologies in 2013 which will revolutionize the payment industry in the island. These enabling technologies will take the bank to the far corners of the economic landscape in the island, gradually closing the vast gap between the banked and the unbanked.

Internet banking still remains an option for the more urban customer with a mere 1.1Mn Internet and e-mail accounts in the country. We will look to provide relatively more sophisticated solutions for this segment of customers through Sampath Vishwa on a portfolio wide basis to suit not only their transacting needs but also their investment needs. As these are scalable solutions rolling it out to a greater population of customers as internet usage increases is a relatively easy step and we expect the demand for internet banking to grow in line with the number of internet accounts. However, we envisage a convergence of these two technologies making the mobile Internet the de facto medium of banking delivery in the future.

We will embrace the future with the constant assimilation of new technologies into banking services.

We look to provide support for the internal operations of the Bank through implementation of IT solutions for governance, risk management and stakeholder management. The implementation of the Data Warehousing and Business Intelligence projects will provide a platform for better decision making and productivity, paving the way for us to gain leadership in key operating areas.

Today, after a mere quarter of a century, the bank is 209 branches strong, reachable throughout the island and globally via internet. Equipped with an impressive array of banking technologies, we are poised to start our journey into the next 25 years with the confidence that we will always be the technology trendsetter in the banking and financial serves industry.

YoY Growth of Sampath Vishwa users (%)

0

9

18

27

36

45

08 1009 11 12



Recoveries The Recoveries Unit is focused on minimising the Non Performing Advances through expeditious recovery of overdue advances through simplified, collaborative interventions with the regional offices, the branch network and the Credit and Legal Divisions.

PerformanceThe overall objectives for 2012 were to control and minimise new entrants to Non Performing Advances (NPA), maximise recoveries in order to reduce NPA ratio and to maintain a healthy specific provisioning cover and improve customer service standards. Performance indicators for the Recoveries Division given below are testimony to the performance of this division which has contributed immensely to the Bank having the lowest NPA ratio and the highest provision cover ratio in the industry.

This year the Bank complied with the CBSL direction to classify all credit facilities extended to a borrower as NPA when one or more credit facilities have been classified as NPA and the aggregate amount of outstandings of such NPAs exceeds 30% of total credit facilities extended to the borrower. The impact of this was exacerbated by the rule that NPAs could be re-classified as performing loans only if total arrears of interest and principal were both paid up. The imposition of a minimum limit for parate execution action of Rs. 5Mn presented a challenge as all NPA’s below Rs. 5Mn had to be transferred for Mortgage Bond action which involves a lengthy and costly legal process. In view of the above, the Recoveries Unit implemented several proactive measures to improve performance.

Bank 2012 Bank 2011 Industry 2011 (Q 3)

NPA Ratio (%) 2.1 2.7 3.6

Provision Cover Ratio (%) 73.6 77.3 42.3

NPA as a % of total loan portfolio 2.3 3.0 3.6

Arrears are monitored and notified to Regional and Branch Managers who are supported in their follow up procedures by the Credit Control Unit. Action Plans are developed through this process by identifying client issues and implementation of these are monitored by the Credit Control Unit. Remedial measures such as re-scheduling of credit facilities are also carried out if necessary during this period. Arrears of over two months are discussed by the Credit Control Unit, the Regional Managers and the Branch Managers to review if the action plans developed are working with a view to identifying early warning signs. Focus on this process of early identification of potential problems has been a key success factor in controlling the number of new entrants to NPA category.

The Recoveries unit engages in negotiations with clients whose facilities are in arrears for over 6 months and seek to resolve issues without litigation through discussion. Cases below Rs.5Mn where recoveries have to be made through mortgage bond action are also identified for regular visits to clients to educate them about the benefits of settling outside court and this was incentivised through flexible repayment plans. This strategy proved successful and many loans were recovered in this manner.

Recovery of arrears that remain unresolved even after the negotiation process can be done through parate execution, mortgage bond action or normal

89Sampath Bank PLC

legal action. These cases are monitored closely through monthly reports to track performance of the unit and to renew focus on targets. A separate unit was established to handle and manage acquired properties and to expedite the disposal process. Although this unit was established in 2011, its impact was felt this year through the disposal of 46 properties which raised Rs.198 Mn.

The remaining NPA balances comprise mainly of hardcore facilities which are now under legal action in court. Decreasing this further is a challenge and we will revisit all cold cases to negotiate for out of court settlements to reduce legal and carrying costs. We have commenced this process and are encouraged by the results, which also has the benefit of easing the volume of work for the Bank’s legal team, enabling them to focus on key accounts. Under this method of settlement, we have provided concessionary plans especially for housing loan customers and refinance loans.

The above strategies were possible due to the specialised training given to our staff to acquire the skills and knowledge required to achieve a successful outcome. We have developed case studies from our experiences and shared the learnings to identify areas for further action. We have taken steps to maintain a friendly and understanding attitude to make the flexible process a success to ensure a favourable outcome.

Future Outlook We will continue to focus on managing new entrants to the NPAs category and also continue implementing the successful strategies for recovery of NPAs. We expect an impact on asset

valuations based on fair value in line with IFRS/SLFRS requirements and are working to assess the impact. With significant improvements in place to safeguard asset quality and effective recovery processes we hope to reduce the NPA levels further, outperforming industry benchmarks.

Human Resources The overall objective of the HR Department is to facilitate the implementation of the Bank’s business strategies by creating a performance oriented culture which inspires and motivate our staff to perform at consistently high standards. As employees are recognised as key stakeholders, the information on the performance of HR has been included in the Sustainability Supplement of the Annual Report form pages 200 to 271. Our employee retention rate of 96% is testimony to the benchmark HR practices adopted by us.

Future OutlookWe will focus on the aligning new staff to the culture and values of the organisation through innovative programmes to ensure that our values are lived on a day to day basis throughout the organisation. Our intense focus on training based on the analysis of training needs will continue in the coming years as well to upgrade the skills and competencies of our staff to meet the needs of a more competitive operating environment. Leadership development will continue through Sampath Leadership Academy. The revised organisation structure is expected to support business better and provide career paths for potential employees inspiring alignment of personal goals with those of the organisation.


Sampath Leasing and Factoring Ltd. (SLFL) SLFL is a fully owned subsidiary of Sampath Bank incorporated in May 2005. After a period of volatile performance, the Bank and the Board of SLFL have set a course for growth of the company by infusing capital, re-negotiating credit

PERFORMANCE OF SUBSIDIARIES

Subsidiary Nature of Business % Holding Financial Performance

2012Rs. Mn

2011Rs. Mn

Sampath Leasing & Factoring Ltd. (SLFL)

Leasing and Factoring 100% Turnover 1,112.0 608.8

Profit Before Tax 252.0 244.3

Profit After Tax 200.2 198.0

Total Assets 5,810.5 4,123.8

SC Securities (Pvt) Ltd. Stock broking 100% Turnover 34.6 128.2

Profit Before Tax -37.7 39.6

Profit After Tax -20.1 28.8

Total Assets 289.5 325.6

Sampath Information Technology Solutions Ltd. (SITS)

Providing IT related services

100% Turnover 54.2 46.4



Total Assets 86.0 17.6

Sampath Centre Ltd. Renting and management of commercial premises

97.14% Turnover 189.9 190.0



Total Assets 2,230.4 2,185.9


lines, restructuring management and accelerating recoveries to facilitate stable sustained growth. These sustained actions have ensured that SLFL remained profitable and set it on a growth trajectory. SLFL has 7 standalone branches and 8 service windows located within Sampath Bank Branches.

91Sampath Bank PLC

DirectorsMr. I. W. Senanayake (Chairman) (Independent, Non-Executive Director )Mr. S. G. Wijesinha (Independent, Non-Executive Director )Mr. W. M. P. L. De Alwis (appointed on 25.02.2011) (Independent, Non-Executive Director )Mrs. M. A. Karunaratne (Non-Executive Director )Mr. P. M. A. Sirimane (Independent, Non-Executive Director )Dr. H. S. D. Soysa (appointed on 01.01.2011) (Independent, Non-Executive Director )Mr. M. A. Abeynaike (appointed on 28.03.2012) (Independent, Non-Executive Director )Mr. M. Y. A. Perera (appointed on 28.03.2012) (Non-Executive Director )Mr. R. Samaranayake (appointed on 28.12.2012) (Non-Executive Director )

Industry Overview The year under review was challenging for the industry and plans for growth were revised and scaled down to reflect market realities. Increased duty on motor vehicles had a dampening effect on the market as affordability was negatively impacted on buyers. High interest rates increased the cost of new funds impacting the growth of the industry. Re-pricing of existing lines of credit reduced margins as leasing products are based on fixed interest rates. These factors contributed to the dampened growth rate in Loans & Advances for the Non-Bank Financial Institutions from 48.3% for the year ended 30th September 2011 to 26.6% for the year ended 30th September 2012. Total Asset growth was similarly impacted with the growth rate declining from 29.6% as at September 2011 to 26% by September 2012. Asset quality improved during the year for the

Non-Bank Financial Institutions from 5.5% in 2011 to 5% in 2012 although the total NPAs were higher due to the moderated growth.

Regulation was strengthened during the year with CBSL issuing 5 new guidelines during the year covering increase of core capital, use of core capital as yardstick for gearing ratio, corporate governance and borrowing definitions.

PerformanceSLFL recorded a satisfactory performance given the challenging industry conditions that prevailed during the year, recording a Profit before tax of Rs.252Mn. This was possible mainly due to prudent management of growth and borrowings to deliver an optimised performance with strong foundations for future growth. Safeguarding asset quality was a priority as the business sector was adversely impacted by rising costs and interest rates. Top line growth was 83% due to growth in business volumes and higher interest rates. However, rising interest costs impacted both new borrowings and re-pricing of existing borrowings reduced operating income margins. Increased personnel costs also impacted the Profit before Tax which increased by 3% to Rs.252Mn in 2012 from Rs.244.3Mn in 2011. Asset growth was 41% in 2012 due to increased business volumes in finance leases and hire purchasing which augurs well for the future of the company.

The company was rated during the year and awarded a rating of A(lka) Stable, by Fitch Ratings Lanka Ltd., with a positive outlook. SLFL also won the silver award in the specialised leasing company category at the 48th ICASL Annual Report Awards competition organised by the Institute of Chartered Accountants of Sri Lanka for the second consecutive year. This is particularly


commendable as the company has participated in this competition for two years only and is a testimony to outstanding reporting standards practiced by the company in endorsing significant elements such as transparency, good governance, sustainability and social responsibility within the organisation.

OutlookThe outlook for the industry is positive as policy measures taken to address the Balance of Payment deficit have been successful. Interest rates have also stabilised although vehicle import duties remain high. Widening the range of vehicles imported under permits provided a small measure of relief to the industry which is now set for sustainable organic growth underpinned by strong economic growth. SLFL plans to register as a Licensed Finance Company in 2013 to enable accelerated growth through a wider range of products and also to mobilise deposits to better manage the cost of funds and market risk. We will commence re-branding of the company on obtaining the license and effecting the name change to ensure that there is communication and visibility of the broader range of opportunities that SLFL can provide.

SC Securities (Pvt) Ltd. SC Securities (Pvt) Ltd., incorporated on the 16th October 1992, is the stock broking arm of the Sampath Group and a fully owned subsidiary of Sampath Bank. Being a debt and equity member firm of the Colombo Stock Exchange, the Company is governed by the regulatory framework of the Securities and Exchange Commission (Sri Lanka) and the Colombo Stock Exchange (CSE). SC Securities possess a well experienced team of investment advisors who adhere to ethical guidelines in providing investment advice to

clients. Moreover the investment advisors are backed by a research team and a competent back office. The company has opened three branches in Wellawatte, Kandy and Matara for the convenience of its retail clients and to promote investing in the share market in the regions.

DirectorsMr. D. J. Gunaratne (Chairman) (Independent, Non-Executive Director)Mr. E. A. Gunasekera (Independent, Non-Executive Director)Mr. Harsha Fernando (Executive Director)Mr. M. Y. A. Perera (Non-Executive Director)Dr. S. Kelegama (Independent, Non-Executive Director)Mr. M. N. R. Fernando (appointed on 18.12.2012) (Non-Executive Director)

Industry OverviewAlthough negative sentiment weighed markets down through most of 2012, total returns on the broad Index have shown a marginal improvement at –7.7% in 2012 up from -8.5% in 2011. Corporate earnings for the period up to September 2012 have improved, rising approximately 3.0% since September 2011. Market PERs (Price Earnings Ratio) have consequently decreased, with the PER at end-December at 11.85x (times) relative to 13.47x in the same period last year. Foreign inflows to the bourse meanwhile have remained consistently buoyant through 2012, hitting an all-time 2 Year to Day high of Rs.38.58Bn, a stark contrast to the net foreign outflows experienced over the last 3 years.

With interest rates having declined 250 bps (basis points) since its peak in September, prospects for equities in 2013 are likely to be strong; particularly in the context that slower GDP growth will likely imply lower interest rates.


Sampath Leasing and Factoring Ltd was rated during the year and awarded a rating of A(lka) Stable, by Fitch Ratings Lanka Ltd with a positive outlook.

93Sampath Bank PLC

Regulation was strengthened with the CSE introducing new regulations in the 1st quarter of 2012 covering trading practices, clients’ money, minimum standards for stockbroking firms, capital requirements and operational requirements. The change made by the SEC in November 2012 in the formula of computing credit was positive and we believe it will help the industry regain investor confidence.

Performance SC Securities, like other stock broking companies, was severely impacted by the lacklustre performance of the CSE in 2012 and the high interest rate regime. The situation was exacerbated by the intense competition within the broking houses and the declining number of institutional investors. This period was used to strengthen our retail operations and improve group synergies by using the Sampath Bank network to expand our client base. Corrective action taken by the CSE and the SEC in the latter part of the year saw normalcy returning to the market and we believe that 2013 will see an improved performance.

OutlookMarkets are likely to remain fundamentals-driven in 2013 as corporates continue to consolidate their post-war boom position. We expect the economic situation to improve in 2013 due to the policy measures implemented by the Government which in turn will have a positive impact on the performance of the CSE. Investing in the CSE at present will enhance the return on investment of shares that are backed with strong fundamentals as they have the potential to beat the average market returns and are trading at attractive prices.

Sampath Information Technology Solutions Ltd. (SITS) Sampath Information Technology Solutions Ltd., commenced operations in 2007 with a vision to provide ‘best in class IT solutions for the local market; with a Sri Lankan touch’ that would enable it to create sustainable long term value for all stakeholders. Its clientele naturally comprises banks and finance companies in the country. The goal of SITS, as encapsulated in its Quality Policy Statement, is to provide defect free software products conforming to customer requirements on time according to our quality management system and continuously improving its effectiveness through the quality objectives. Its product portfolio includes applications in Leasing & Hire Purchase, Loans, Savings, Fixed Deposits, Accounts, Inventory and the product for which SITS has market Leadership is Pawning. A separate unit handles outsourcing of IT functions for clients covering hosted and managed services, scanning services and hardware maintenance and networking services. SITS is also a partner for HP and an authorised distributor for Kaspersky Internet Security and Kingsoft Office Software. Our competitive advantage is derived mainly from our highly skilled and talented team who have diverse but complementary skills providing an atmosphere of creativity, excitement and novel thinking. Out solutions are based on J2EE, Microsoft, Net, Open Source, My SQL, MS SQL Server, and Oracle.


DirectorsMr. L. J. K. Hettiaratchi (Chairman) (Independent, Non-Executive Director)Mr. E. A. Gunasekera (Independent, Non-Executive Director)Mr. M. Y. A. Perera (Vacated office on 31.12.2012)Mr. D. J. Gunaratne (Independent, Non-Executive Director )Mr. N. J. Alwis (vacated office on 11.09.2012) Mr. N. R. Tillekeratne (vacated office on 15.03.2012) Mr. M. V. Indrasoma (Independent, Non-Executive Director )Ms. A. H. W. Senanayake (vacated office 01.01.2012)

PerformanceRevenue of the company grew by 16.8% in 2012 whilst Profit before Tax reduction was 28.6% during the year as the company shifted focus to more profitable products and restructured the company to enhance productivity. The tax concessions to software developers given in the 2012 Budget provided welcome relief and a doubling of profit after tax from 2011 to 2012 as given in page 90. Asset growth of the company was significant and comprised mainly of computers purchased for hiring to its key client, Samapth Bank which was financed by borrowings from the Bank. The Net Book Value of these computers account for 95% of its Property Plant & Equipment and 75% of its total assets. The funding profile has changed dramatically consequently enabling the company to perform more profitably.

OutlookThe company plans to grow its operations by increasing its BPO operations, particularly in segments such as scanning of documents, digital storage and data entry. The BPO/ICT industry segment is the 5th largest foreign exchange earner in the country and is a fast growing sector with the highest value addition within the country. The tax concessions for this growth sector are also attractive and we will look to leverage our competitive advantages to grow the operations of this promising subsidiary in 2013.

Sampath Centre Ltd. Sampath Centre was the first subsidiary of Sampath Bank established in 1996 to own and manage commercial buildings occupied by Sampath Bank. Hence, the primary source of revenue for the company is derived from lease rental of buildings occupied by the parent company.

DirectorsMr. I. W. Senanayake (Chairman) (Independent, Non-Executive Director) Mr. S. G. Wijesinha (Independent, Non-Executive Director)Mr. E. A. Gunasekera (Independent, Non-Executive Director)Mr. S. P. Kannangara (Independent, Non-Executive Director)Mr. L. R. Jayakody (Non-Executive Director)(appointed on 15.12 .2012)M. Y. A. Perera (vacated office on 31.12.2012)

Sampath Centre Ltd

Sampath Centre Ltd increased its profit after tax by 10% despite flat income through cost efficiencies and increased interest income from positive cashflows


95Sampath Bank PLC

PerformanceThe company increased its profit after tax by 10% despite flat income through cost efficiencies and increased interest income from positive cash flows. Its assets comprise the land, building and equipment of the premises occupied by Sampath Bank Head Office located at Navam Mawatha, Colombo 2 and is a landmark commercial property, set beside the scenic Beira Lake.

OutlookAs the operation of the parent company expands, Sampath Centre is exploring the possibilities of expanding the business of Sampath Centre as well to own and manage a larger real estate investment that maybe required. Additionally, the value of assets held by Sampath Centre is also likely to be higher than stated in the Balance Sheet due to conservative accounting policies. The company represents very good value for the investment made by the parent and is likely to continue to do so in the foreseeable future.


Responsible business practices, taking in to account the diverse stakeholder needs coupled with a long term vision, is necessary for sustained growth and stability of the financial services institutions.

CORPORATE GOVERNANCE

Chairman’s Statement

Dear Stakeholder,

The need for good governance continues to be highlighted globally with regulators increasing their vigilance and holding even the leading global financial brands accountable for their actions. The issues varied from manipulation of financial markets to money laundering and discrimination, highlighting the need for effective and efficient oversight and risk management combined with greater attention to the needs of all stakeholders, not merely shareholders. Responsible business practices, taking in to account the diverse stakeholder needs coupled with a long term vision, is necessary for sustained growth and stability of the financial services institutions. As we reflect on the milestones achieved in this Silver Jubilee year, we are extremely conscious that good corporate governance is key to setting the future milestones and creating sustainable value for all our stakeholders.

We have complied with the relevant codes and directions on corporate governance as detailed in the Corporate Governance Report that follows. Members of the Board are conscious of the need to set the right “tone at the top” and are supported in this by the Corporate Management. We have set in place the mechanisms to monitor and uphold high standards of business conduct.

The Board recognises the need to be informed about changes in our operating environment which includes changes in economic policy, the regulatory environment and also global events that shape the future of the industry. We have initiated a learning culture for the Board to address this need and guest speakers who are acknowledged leaders in their field of expertise

are invited when possible to provide us with insights and perspectives on matters related to the Banking industry and good governance. Additionally, the Corporate Management team make regular presentations on changes in the operating environment and are available for clarification on issues that are discussed at the Board Meetings.

We have also focused on initiatives to improve the effectiveness of the Board and improve transparency. Some of these initiatives include definition of the responsibilities of the Chairman, automation of the register of Directors’ interests, and appointment of two sub-committees on Treasury and Marketing to enhance the Bank’s capabilities in these areas. These are two key areas of operation and the directors’ expertise in these areas can be harnessed through the work of these committees as they provide direction and guidance to the Bank’s operations. We have also focussed on efficiency through technology and have implemented systems where by our members receive Board papers through secure electronic means. The nine sub-committees appointed by the Board have operated effectively and their activities are outlined in the respective reports. Members of the sub-committees have kept the Board apprised of matters addressed by them to ensure that the Board is fully aware of their activities and for ratification where necessary.

97Sampath Bank PLC

Six new non-executive Board members took office in 2012 and went through an induction programme with the Corporate Management Team and the senior Board members providing insights on current developments. We have created a culture where open debate and constructive challenges are encouraged and as Chairman, I am aware of the need to maintain and foster this system. The Board members collectively represent a diverse body of skills, knowledge and expertise in finance, law, banking, marketing, economics and management more fully described in their profiles on pages 32 To 37.

The Board welcomes engagement with stakeholders to identify areas where we can enhance governance, policies and sound business practices. We actively engage with investors, customers, regulators, suppliers and communities to obtain their feedback in a number of ways. We encourage our stakeholders to participate in shaping the future of Sampath Bank in setting new milestones where we can all be proud of.

Dhammika PereraChairman

22nd February 2013Colombo

High Standard of Conduct

The Bank’s values, ethics and code of conduct are embodied in the Blue Book which sets out the expectations from all employees to ensure that high standards of conduct are maintained throughout the Bank in conduct of business and our interactions with stakeholders.


The Board of Directors The Board of Directors’ main responsibility is to deliver sustainable value to our shareholders. We are also conscious of the need to deliver sustainable value to other significant stakeholder groups in order to realise the overall objectives of the Bank including creating long term value. We discharge this responsibility by determining the strategic direction of the Bank and its risk appetite


and oversight of the Corporate Management Team who are responsible for managing the performance of the Bank on a day to day basis. The Bank’s Strategic plans, policies and procedures are approved by the Board or its sub-committees to provide a framework for decision making and implementation of the strategies approved by the Board is delegated to the Corporate Management led by the Managing Director.

Highlights

Appointing 6 new directors to the Board -Mr.Channa Palansuriya, Mr.Sanjiva Senanayake, Ms.Annika Senanayake, Mr.Deshal de Mel, Mr.Ranil Pathirane and Ms.Saumya Amarasekera were appointed to the Board as Non-Executive Directors during the year. They are leaders in their respective fields and bring a wealth of experience and knowledge to the Board .

Establishing a new Sub-Committee for Treasury for oversight of its performance, profitability and liquidity by establishing Treasury policies, governance structures and advising the executive Asset & Liability Committee with the objective of optimising performance.

Establishing a new Sub-Committee for Marketing to have a closer focus on the Marketing Strategies of the Bank and their effectiveness.

Inviting leading professionals to Board Meetings for presentations on developments in their areas of expertise with a view to creating a learning culture.

Appointing Members of the Corporate Management Team to the Boards of Subsidiaries to provide opportunity for their career development and to facilitate deriving greater synergies.

Setting up an innovative loan scheme to help undergraduates in the field of Engineering to obtain their University and Professional education, to mark the Bank’s Silver Jubilee.

99Sampath Bank PLC

GOVERNANCE STRUCTURE

Subsidiaries

Board of Directors - Subsidiaries

Audit Committee

Nominations Committee

Credit Committee

Risk Management Committee

HR & Remuneration Committee

Strategic Planning Committee

Treasury committee

Shareholder Relations Committee

Marketing Committee

External Auditors

Board Committees

Shareholders

Board of Directors - Bank

Managing Director

Sampath Centre Ltd - Renting of Commercial Property

SC Securities (Pvt) Ltd - Stock Broking

Sampath Leasing & Factoring Ltd - Leasing & Factoring

Executive Director / Group Chief

Financial Officer

DGM - Marketing

& Business Development

DGM - Treasury

Treasury Front Office

Primary Dealer UnitLogistics &

Premises

DGM - International &

Commercial Credit

Trade Services

International Operations

Commercial Credit

Development Banking

DGM - Personal Banking

AGM Br.Cr I

Regional Offices

Branches

AGM Br.Cr II

Regional Offices

Branches

AGM - Administration

AGM - Operations

Operations

Central Cash

Network Service Centre

DGM - Finance & Planning

Treasury Back Office

Finance & Planning

Sampath Information Technology Solutions Ltd -

Software Solutions & Hardware

DGM HR

AGM - Recoveries

AGM - Corporate Finance

AGM - Corporate

Credit

Head of IT

Group Company Secretary

Treasury Middle Office

Group Compliance

Officer

Head of Internal Auditor

(1) Asset & Liability Committee(2) Deposit Mobilization Committee(3) Investments Committee(4) IT Steering Committee (5) Credit Policy Committee(6) Procurement Committee(7) IFRS Steering Committee(8) Internal Control Steering Committee

IT/EDP Risk Unit

Data Ware-house Unit

Group Chief Risk

Officer

Corporate Finance

Foreign Currency Banking

Unit

Chief Legal Officer

Recoveries

Marketing & Deposit

Mobilisation

Card Centre

Remittances

Electronic Banking

Unit

Legal Unit

Management Committees

IT/Systems Development


Composition & Structure of the Board The Board comprises of the Chairman, Deputy Chairman and ten other Directors. Ten Directors including the Chairman and Deputy Chairman are Non-Executive Directors. Among the Non Executive Directors, eight are Independent. The Bank also has an Independent Non Executive Director appointed as Senior Director. The two Executive Directors are the Managing Director and the Group Chief Financial Officer who are both

employees of the Bank and lead the Corporate Management. Non-Executive Directors bring outside perspectives, constructively challenge and participate in providing strategic directions, set goals and targets, evaluates performance of corporate management, and monitor the risk profile and the reporting of performance. We estimate that Non-Executive Directors spend more than 125 hours per annum and those members of the Audit Committee and Risk Management Committee spend more than 60 hours per annum on matters of the Bank.

Non-Executive Directors bring outside perspectives, constructively challenge and participate in providing strategic directions, set goals and targets....

Board of Directors

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and

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Internal Articles of Association

Policies & Procedures

Code of Ethics

Other Internal Documents

External Banking Act No.30 of 1988 and amendments

Companies Act No.7 of 2007

Code of Best Practice issued jointly by ICASL and SEC

Rules on Corporate Governance issued by the CSE

Directions issued by CBSL


101Sampath Bank PLC

Compliance with Codes on Corporate Governance The Board is guided in its governance by the Code of Best Practice on Corporate Governance issued jointly by the Securities & Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka which has been voluntarily adopted and complies with the Banking Act Direction No.11 of 2007 on Corporate Governance and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka and the Continuing Listing Requirements on Corporate Governance Rules for Listed Companies issued by the Colombo Stock Exchange. Our External Auditors, Messrs. Ernst & Young have provided Central Bank with a certificate of compliance on the requirements of the Banking Act Direction No.11 of 2007 on

Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka. We strive to go beyond mere compliance in our governance and look to international best practice as well in discharging our responsibilities.

Role of Chairman & Managing Director The positions of the Chairman and the Managing Director have been separated in line with best practice in order to maintain a balance of power and authority. The Chairman is a Non-Executive Director whilst the Managing Director is an Executive Director. The Bank has developed formal terms of reference during 2012 for the Chairman which includes all aspects specified in the Code, the continuing listing requirements of the CSE and the Banking Act Direction no.11 of 2007.

Key Responsibilities of the Chairman (Summary)

1. Provide leadership to the Bank and ensure the Board of Directors works effectively and discharges its responsibilities

2. Ensure the Bank lives its vision and has strategies which are attuned to the needs of all stakeholders and operates in compliance with statutory and regulatory requirements

3. Ensure all directors are properly briefed on issues arising at Board Meetings and that they receive information in a timely manner

4. Encourage all directors to make a full and active contribution to the Board’s affairs and ensure that the Board acts in the best interests of the Bank.

5. Facilitate effective contribution of Non-Executive Directors and a constructive relationship between Executive and Non-Executive Directors.

6. Supervision of Key Management Personnel or any other executive duties on need basis.

7. Ensure that appropriate steps are taken to maintain effective communication with shareholders and communicate their views to the Board.


How we operateThe Board approves policies, procedures, strategic plans and risk appetite, reviews reports on progress on strategic plans, risk management, key performance indicators and stakeholder relations. Chairpersons of Board Committees and the Managing Director report to each meeting of the Board on the activities of the Committees. The Board receives regular reports and presentations on strategy and developments in the operating environment for key business areas. Regular reports are also provided to the Board and Board Committees on the Group’s risk appetite profile, risk management, credit exposures and the Group’s loan portfolio, asset and liability management, liquidity, litigation, compliance and reputational issues. The agenda and supporting papers are distributed in advance of all Board and Committee meetings to allow time for appropriate review and to facilitate full discussion at the meetings. All Directors have full and timely access to all relevant information and may take independent professional advice if necessary at the Company’s expense.

Directors are given opportunities to update and develop their skills and knowledge, through briefings by the Corporate Management and externally conducted seminars throughout their directorship and while serving on committees.

The Bank’s values, ethics and code of conduct are embodied in the Blue Book which sets out the expectations from all employees to ensure that high standards of conduct are maintained throughout the Bank in conduct of business and our interactions with stakeholders. We have implemented a Whistle Blowing Policy to ensure that high standards of conduct are upheld and to serve as a channel of early identification of

corporate fraud or risk management. This policy enables any staff member of the Bank and its subsidiaries who has a legitimate concern on any potential “wrong doing” occurring within the Bank to voluntarily bring such concerns to the notice of the Chairman of the Audit Committee. The procedure is clearly set out in the intranet and Operational Circular to ensure that all staff members are aware of the procedure.

Setting Strategic Direction The Board sets strategic direction for the Bank through the Strategic Planning Process which is directed by the Board Committee on Strategic Planning. We have adopted a three year Revolving Strategic Planning model which has been in force since 2009 and serves the needs of the Bank well. The process covers an up to date review of the operating environment with emphasis on emerging trends, identification of the company’s strengths and areas for improvement within the overall objective of delivering sustainable stakeholder value through earnings, growth, stability and productivity. The Strategic Plan for 2013-2015 is in the process of being reviewed and finalized. The Budget 2013 was approved and decisions disseminated to the Regional Managers and Branch Managers.

The Board monitored progress against Strategic Plan 2012 – 2014 and the Budget for 2012 during the year using the Key Performance Indicators in the table on next page.

Ensure all stakeholder interests are considered in corporate decisions

The memorandum and articles of the Bank require the directors to take decisions taking into account the interest of the customers, shareholders, employees and the community.


103Sampath Bank PLC

Strategic Risk ManagementRisk Management is key to sustained growth in delivering stakeholder value. The Board sets the risk appetite for the Bank and receives regular reports from the committee on Risk Management which has oversight responsibility for the risk management of the Bank. The risk management framework and activities are fully described in the Risk Report on pages 164 to 197 and the Report of the Risk Management Committee on pages 152 to 154. Additionally, the Board has noted and complied with the directions and guidelines issued by CBSL during the 2012.

Internal ControlThe Bank maintains an effective system of Internal Controls to support business operations, to ensure compliance with regulations, internal policies and procedures, and to ensure reliable reporting. The Audit Committee reviewed the Bank’s statement on Internal Control prior to its endorsement by the Board. It also reviewed the policies and processes for identifying, assessing and managing business risks.

Fina

ncia

l Key

Per

form

ance

In

dica

tors

Business Volumes Earnings Growth Credit Quality

Deposits growth > 26% Return on Assets after Tax> 1.7% Individually significant impairment ratio < 2%Return on Equity> 23%

Credit Growth > 23%(maximum as per credit ceiling imposed by CBSL)

Net Interest Margin> 4%

Effective Tax & VAT rate< 32%

Cost to income ratio< 57% Open Credit Exposure (OCE) ratio < 8%.

(OCE ratio obtained by dividing NPLs less Loan loss reserves by Tier I Capital)

Assets growth > 23%Dividend Payout Ratio > 25%

Minimum Dividends per share > Rs 6.00

Non

Fin

anci

al K

ey

Per

form

ance

Indi

cato

rs

Risk Management Human Resource Development Infrastructure Growth

Completion of Risk & Control Self Assessment for key Strategic Business Units

Core areas of expertise covered in training

Online banking services enhanced

Credit facilities risk ratings/ proposals reviewed by RMU prior to granting

Training objectives met Mobile banking services enhanced

Market Risk Stress Testing was implemented and is now being done Quarterly basis.

Maintained less than 6% staff turn over.

ATM access points through partnerships with other banks increased.


The directors’ undertake an annual assessment of the effectiveness of internal control over financial reporting in accordance with the Banking Act Direction No.11 of 2007. As required by the Direction, the Bank has obtained reports from the Bank’s External Auditors, Messrs. Ernst & Young for the Internal Control over Financial Reporting for the year ended 31st December 2012.

Other Aspects of Corporate GovernanceThe Board has an approved internal approvals process and those matters which may be delegated. These principally relate to the

operational management of the Bank’s operation and include specified authority limits delegated by the Board to the Bank’s Managing Director for further delegation by him to enable effective day-to-day operations. The Management has established the following committees with written terms of reference which are kept under regular review. These committees are key elements of the Bank’s operational governance framework.

Additional Governance Committees

Additional Governance Committee

Purpose and Tasks

Asset and Liability Committee

Formulates monitors and reviews all asset and liability management strategies and their implementation. These include decisions on advances and liabilities pricing, maintaining the appropriate mix of assets and liabilities, liquidity management, introduction of new asset and liability products, fixed versus floating interest rate structures, debt structures, the magnitude of the interest rate and liquidity risks, buying and selling of securities, foreign exchange exposures and regulatory compliance.

Deposit Mobilization Committee

Mobilises adequate deposits to support credit expansions at a reasonable cost.

Investment Committee Evaluates and decides on the approval or rejection of new investment proposals received by the committee, if within their limits, or else, submits recommendations to the Board, where the Board is the approving authority.

Investment in Equity Stocks listed in the Colombo Stock Exchange (CSE) Investment in Debentures Investment in Sri Lanka Development Bonds (SLDB)

IT Steering Committee Takes responsibility for the feasibility, business case and the achievement of outcomes of operations, infrastructure, automation, development, procurement and security activities related to Information Technology at Sampath Bank, in line with the strategic vision and long term goals as stipulated by the Board of Directors. The Steering Committee will monitor and review the strategic alignment of the Bank’s overall vision, mission, and goals with that of the IT Department, as well as provide oversight of the deliverables and rollout of such strategies.


105Sampath Bank PLC

IT GovernanceIT Governance of the Bank creates value that fits into the overall Corporate Governance Strategy of the Bank, and is not a discipline on its own. IT governance of the Bank ensures that the investments in IT generate value, avoids failure and mitigates IT-associated risks by ensuring well defined roles and responsibilities for IT stakeholders including Information System Auditors, within an organisational structure that adequately defines the role of information, business processes, applications and infrastructure. Such a framework ensures that IT investments are aligned and delivered in accordance with corporate objectives and strategies. The following best practices in IT Governance have been successfully implemented by the Bank.

High-level framework – defining leadership, processes, roles and responsibilities, information requirements, and organisational structures.

Independent assurance - Internal / external audits (or reviews), provide timely feedback about compliance of IT with the Bank’s policies, standards, procedures, and overall objectives.

Resource management - through regular assessments, ensures that IT has sufficient, competent, and efficient resources to meet the Bank’s demands.

Risk management embedded in the responsibilities of the Bank, ensures that the Bank and IT regularly assess and report IT-related risks and organisational impacts.

Strategic alignment – a shared understanding between the Bank’s management and the IT department, enables the Board and senior management to understand strategic IT issues.

Value delivery demonstrates the benefits achieved from each IT investment.

Performance management reporting- Accurate, timely, and relevant portfolio, programme, and IT project reports to senior management, provides a thorough review of the progress being made towards the identified objectives of the IT project.

Additional Governance Committee

Purpose and Tasks

Credit Policy Committee

Determines the Credit Policy of the Bank. The Credit Policy Committee has the authority to make a final decision on approval or rejection of proposed transactions as well as to establish personal limits and client limits in accordance with its powers.

Procurement Committee

Evaluates and make recommendations to the Board with the concurrence of the Managing Director, on the capital expenditure proposals, where the Board is the approving authority. The Committee also acts as the approving authority on capital expenditure projects and purchases within certain limits.


The Group Company Secretary Mr. S. Sudarshan is the Secretary for all the Board Committees and the minutes of meetings are available in his custody. Written Terms of Reference that comply with the Code of Best Practice on Corporate Governance jointly issued by the Securities & Exchange Commission and the Institute of Chartered Accountants of Sri Lanka, the Banking Act Direction No.11 of 2007 and amendments thereto on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of

Membership of Committees of the Board

Sri Lanka and the Continuing Listing Requirements Section 7.10 on Corporate Governance Rules for Listed Companies issued by the Colombo Stock Exchange.

Board Meetings There were 21 Board Meetings during the year and 44 Committee meetings during the year. Their main focus areas and attendance at meetings are given below.


Directors Audit Committee


Credit Committee

Board Risk Management Committee

Human Resources and Remuneration Committee

Strategic Planning Committee


Treasury Committee

Marketing Committee

Mr. Dhammika Perera ü Chairman

Mr. Channa Palansuriya ü ü ü ü ü Chairman

Mr. SanjivaSenanayake

ü ü ü ü Chairman

Mr. Deepal Sooriyaarachchi

ü Chairman Chairman

Prof. Malik Ranasinghe ü Chairman ü ü

Mrs. Dhara Wijayatilake ü Chairperson

Miss. Annika Senanayake ü ü ü ü

Mr. Deshal De Mel ü ü ü ü ü ü

Mr. Ranil Pathirana Chairman ü

Mrs. Saumya Amarasekera

Chairperson ü

Mr. Aravinda Perera ü ü ü ü ü

Mr. Ranjith Samaranayake ü ü ü ü

Terms of Reference Available Available Available Available Available Available Available Available Available

Planned Frequency of Meetings

Quarterly Bi-annually Monthly Quarterly Quarterly Quarterly Annually Quarterly Bi-annually

Actual No. of Meetings 14 02 09 06 03 03 01 03 03

Circulation of agenda and papers

7 days prior

7 days prior 7 days prior 7 days prior 7 days prior 7 days prior 7 days prior 7 days prior

7 days prior

Focus Area %

Main Banking Operations

35

Performance Review 12

Strategy and Budget

12

Risk Related Items 12

Governance 15

Succession Planning

5

Shareholder Matters

5

Others 4

107Sampath Bank PLC

Directors BoardMeetings

Audit Com-mittee


Credit Com-mittee


Human Resources and Remu-neration

Committee

Strategic Planning

Committee

Shareholder Relations

Committee

Treasury Committee

Marketing Committee

Mr. Dhammika Perera

21 18 - - 02 02 - - - - - - 03 03 - -

Mr. Channa Palansuriya

21 19 - - 02 02 09 06 06 06 03 01 03 03 01 01

Mr. Sanjiva Senanayake

21 21 14 14 09 08 06 06 - - 03 03 - - 03 03

Mr. Deepal Sooriyaarachchi

21 21 14 13 - - - - 03 03 - - - - 03 03

Prof.Malik Ranasinghe

21 21 14 14 09 08 - - - - 03 03 - - 03 02

Mrs.Dhara Wijayatilake

21 21 14 12 - - 06 06 - - - - - -

Miss Annika Senanayake

21 19 - - 02 02 08 07 - - 03 03 - - - - 03 03

Mr. Deshal De Mel

21 21 - - 09 08 - - 03 03 03 03 01 01 03 03 03 03

Mr. Ranil Pathirana

21 18 14 14 01 01 - - - - 03 02 - -

Mrs. Saumya Amarasekera

11 10 - - - - - - - - - - - - 02 02

Mr. Aravinda Perera

20 20 - - 09 09 06 06 03 03 03 03 - - 03 03

Mr. Ranjith Samaranayake

20 19 - - 09 09 06 06 - - 03 03 - - 03 02

Total No. of Meetings

21 - 14 - 02 - 09 - 06 - 03 - 03 - 01 - 03 - 03 -

‘*’ Mrs Saumya Amarasekera was appointed to the Board in June 2012 and appointed as Chairperson of the Nominations Committee on 01.12.2012

‘**’ Mr Ranil Pathirana resigned from the Credit Committee after his first meeting as a Credit Committee member as he was appointed Chairman of the

Board Audit Committee.

** One Board meeting was held by the Non-Executive Directors only.

Hel

d

Hel

d

Hel

d

Hel

d

Hel

d

Hel

d

Hel

d

Hel

d

Hel

d

Att

ende

d

Hel

d

Att

ende

d

Att

ende

d

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ende

d

Att

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d

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d

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Stakeholders’ Rights FrameworkThe Board recognises the rights of all stakeholders, established by law or through mutual agreements and has in place a Corporate

Special resolutions passed at the last Annual General Meeting (AGM)There were no matters that required passing of special resolutions at the AGM held on March 30, 2012.

Means of CommunicationWe communicate with our stakeholders through the following mechanisms:

The quarterly results are published in the newspapers and released to the Colombo Stock Exchange [CSE].

The financial results are displayed on the website www.sampath.lk in an area of devoted to Investor Relations.

Financial results and business strategies of the Bank are explained to investors, business leaders and media personnel through Investor forums and press releases.

Management Discussion and Analysis forms part of the Annual Report. (Pages 46 to 95)

Governance framework which encourages active co-operation between the Bank and stakeholders. The Commitments of the Bank are as follows:

Shareholders The Bank is committed to enhance long term shareholder value and facilitate the exercise of shareholders’ rights

Customers The Bank is committed to maintain and enhance its public reputation as a sound, professional, progressive, convenient place to conduct banking.

Employees The Bank is committed to build a work environment where employees can make a difference both as individuals and as part of a team.

Community The Bank is committed to meet its corporate responsibility and decisions on social and economic issues concerning activities of the Bank.

Regulators Ensure fulfilment of all regulatory requirements.

Statutory Compliance & PenaltiesThe Group Company has complied with the requirements of the Stock Exchange on all matters related to capital markets during the year. No penalties have been imposed on the Company by the authorities.

DeclarationI Aravinda Perera, Managing Director of Sampath Bank PLC, hereby declare that all the members of the Board of Directors and the Senior Management personnel have affirmed compliance with the Code of Conduct, applicable to them as laid down by the Board of Directors in terms of Section 3(8)(ii)(g) of the Banking Act Direction No. 11 of 2007, for the year ended December 31, 2012.

Aravinda PereraManaging Director22nd February 2013


109Sampath Bank PLC

The Code of Best Practice on Corporate Governance issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka

Principle Compliance & ImplementationCode of Best

PracticeCSE Listing

Requirements

Board of Directors

Effective Board The Bank Board of Directors comprises 12 Directors of whom ten are Non-Executive including the Chairman. The two Executive Directors are the Managing Director and the Group Chief Financial Officer who are also part of the Corporate Management to whom the day to day running of the organisation has been delegated. The Board has appointed committees to assist in discharge of their collective duties and also approves policies, governance structures and the delegation of authority to provide a conducive business environment for effective performance of the Bank. Additionally, the Board is closely involved in developing strategy and setting the short, medium and long term goals of the Bank and regularly monitors performance against pre-determined Key Performance Indicators which include both quantitative and qualitative measures.

A1

Regular Meetings Board meetings are held monthly whilst special Board meetings are convened if the need arises. During 2012 the Board held 21 meetings. Additionally the following Committees also met regularly:

Audit Committee Nominations Committee Credit Committee Board Integrated Risk Management Committee Human Resources & Remuneration Committee Strategic Planning Committee Shareholder Relations Committee Treasury Committee Marketing Committee

This year the Board members were provided with iPads to access their Board papers via secure connections and directors are able to join meetings even from outside the Board Room. Details of Board meetings, Committee Meetings and attendance are given on page 107 of this report.

A1.1

Board’s Responsibilities: The following procedures are carried out to strengthen the safety and soundness of the Bank



PracticeCSE Listing

Requirements

Board of Directors

Ensure the formulation and implementation of sound business strategy

The Board is responsible for setting strategy, policies and for monitoring performance against agreed goals and Key Performance Indicators. During the year, the Board had 3 Strategic Planning Meetings where they reviewed the proposals of the Corporate Management and re-aligned strategy upon issuance of the CBSL directive on the Credit Ceiling in March and approved the medium term strategy for the period 2013 to 2015.

A1.2

Ensure that the Managing Director (MD) and management teampossess the skills, experience and knowledge to implement the strategy

The Board Nominations Committee ensures that the Key Management Personnel (KMPs)have the required skills, experience and knowledge to implement strategy.KMPs include the Board of Directors of the Bank, Key Employees who are holding Directorship in Subsidiary Companies of the Bank and Executives who directly report to the Board Committees.

A1.2

Ensure effective MD and senior managementsuccession strategy

Formal succession plan for Key Management Personnel are being developed by the HR Department and is to be submitted to Nominations Committee together with the revised Organization Structure to be presented with its recommendation to the Board for approval.

A1.2

Ensure effective systems to secure integrity of information, internalcontrols and risk management

Refer to Directors’ statement on Internal Control, Audit Committee and Risk Management Committee

A1.2

Ensure compliance with laws, regulations and ethical standards

There is a separate Compliance function reporting directly to the Board Risk Management Committee which has responsibility for compliance.

A1.2

Ensure all stakeholder interests are considered in corporate decisions

The memorandum and articles of the Bank require the Directors to take decisions taking into account the interests of the customers, shareholders, employees and the community.

A1.2



111Sampath Bank PLC


PracticeCSE Listing

Requirements

Ensure that the company’s values and standards are set with emphasison adopting appropriate accounting policies and fostering compliancewith financial regulations

Audit Committee & the Board review accounting policies annually to ensure that they are in line with the business model of the Bank and evolving international and local accounting standards and industry best practices. This year there have been significant change in the accounting policies due to changeover to SLFRS for which we have sought clarifications , advice and implementation support from our external auditors, Messrs Ernst & Young.

A1.2

Fulfill such other Board functions which are vital, given the scale, natureand complexity of the business concerned

The Board is committed to fulfill their functions in a regulatory framework while fulfilling the legal and good governance practices adopted by the Bank.

A1.2

Act in accordance with lawsrelevant to the organisation and procedurefor Directors to obtain IndependentProfessional advice at company expense

The Board obtains independent professional advice as and when necessary in accordance with Central Bank guidelines and the Board approved policy on independent professional advice and these functions are co-ordinated through the Group Company Secretary. Independent professional services were sought on matters during the year in accordance with the above provision.

A1.3



PracticeCSE Listing

Requirements

Board of Directors

Access to and appointment or removal of Company Secretary

All Directors have the opportunity to obtain the advice and services of the Group Company Secretary, Mr.S.Sudarshan who is a Chartered Corporate Secretary which is an approved qualification under the Companies Act No.7 of 2007. He is responsible for ensuring follow up of Board procedures, compliance with rules and regulations, directions and statutes, keeping and maintaining minutes and relevant records of the Bank.

The Articles of the company specifythat the appointment and removal of the CompanySecretary should be by resolution involving the whole Board.(As per Article 120 (I) & (ii))

A1.4

Independent Judgement

The Directors of the Bank have no conflicts and take decisions on matters before them using independent judgement.

A1.5

Dedicate adequate time and effort to matters of theBoard and the Company

Dates of regular Board meetings and Board Committee meetings are scheduled well in advance and the relevant papers are circulated a week prior to the meeting. There is provision to circulate papers closer to the meeting on an exceptional basis.

It is estimated that Non-Executive directors dedicate more than 125 hours per annum for the affairs of the Bank and those directors who are also on Committees dedicate more than 60 hours for the affairs of the Bank. The attendance at meetings for the Board and its sub-committees are given in page 107.

A1.6

Training for Directors

The Group Company Secretary draws up the training curricula in consultation with the Chairman. The first item of the agenda is occasionally devoted to hearing an outside expert views on matters relevant to the Bank. During 2012 the following areas were covered

Directors’ responsibilities State of the economy and future outlook

Additionally, the Board encourages knowledge sharing amongst the directors. They also participate in the sessions organised by professional bodies and Sri Lanka Institute of Directors. The annual self-assessment by directors also covers aspects on training to identify training needs.

A1.7



113Sampath Bank PLC


PracticeCSE Listing

Requirements

Division of responsibilities between Chairman and Managing Director

Chairman’s role in preserving Good Corporate Governance

The positions of the Chairman and the Managing Director have been separated in line with best practice in order to maintain a balance of power and authority. The Chairman obtains the views of all Directors and takes decisions in the best interest of the Bank.

A2

Role of Chairman

Conduct Board proceedings in a proper manner

The Bank has developed a formal Terms of Reference during 2012 for the Chairman which includes all aspects specified in the Code, the continuing listing requirements of the CSE and the Banking Act Guideline No. 11 of 2007.

A3

Financial Acumen

Availability of financial acumen and knowledge to offer guidance on matters of finance

Financial acumen has been a key attribute of successful careers of the following directors who have held senior management positions related to finance in other leading financial institutions:1 Mr.Sanjiva Senanayake2 Mr.Deepal Sooriyaarachchi3 Mr. Ranil Pathirana4 Mr. Ranjith SamaranayakeAdditionally the Chairman, Mr. Dhammika Perera has served on the Boards of a number of financial institutions. Two directors, including the Managing Director have MBA’s and one director is a Fellow Member of the Chartered Institute of Management Accountants, UK and another Director is a Senior Professor in Civil Engineering.

A4

Board Balance A5

Non-Executive Directors of sufficient calibre andnumber

The Board comprises 10 Non-Executive Directors including the Chairman and 2 Executive Directors who are the Managing Director and the Group Chief Financial Officer. The Non-Executive Directors are professionals/academics/business leaders, holding senior positions in their respective fields and therefore deemed to be of sufficient calibre. As the majority of the Board comprises Non-Executive Directors, their opinions and views carry significant weight in the Board decisions.

A5.1&

A5.2

Section 1

Independence of non-executive directors

8 Non-Executive Directors are independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent Judgement.

A5.3 Section 2



PracticeCSE Listing

Requirements

Board Balance A5

Annual declarations of independence from Directors

Annual declarations of Independence or Non-Independence have been obtained from the directors for 2012.

A5.4 Section 2

Annual evaluation of independence

The Board makes an annual evaluation of independence of the Directors based on the submission of the annual declarations. Based on these, the following Directors are deemed to be independent:

Mr. Sanjiva Senanayake Mr. Deepal Sooriyarachchi Prof. Malik Ranasinghe Ms. Dhara Wijayatilake Ms. Annika Senanayake Mr. Deshal De Mel Mr. Ranil Pathirana Mrs. Saumya Amarasekera

There were no directors deemed independent where all criteria were not met.

A5.5 Section 2

Senior independent director

Mr. Sanjiva Senanayake has been appointed as a Senior Independent Director in view of the requirements of the Banking Act Direction No. 11 of 2007.

A5.6 &

A5.7

Chairman to hold meetings with non-executive directors, without Executivedirectors being present

During 2012, the Non-Executive Directors and the Chairman met once without the Executive Directors.

A5.8

Recording of Directors’ concerns in Board Minutes

Board minutes are prepared in order to record any concerns of the Board as a whole or those of individual directors regarding matters placed for their approval/guidance/action. These minutes are circulated and formally approved at the subsequent Board meeting, Additionally, directors have access to the past Board papers and minutes.

If a director resigns over an unresolved issue, the Chairman will bring the issue to the attention of the Board. The director concerned is also required to provide a written statement to the Chairman forcirculation to the Board.

A5.9



115Sampath Bank PLC


PracticeCSE Listing

Requirements

Supply of Relevant Information

Provision of appropriate and timely information

The management provides comprehensive information including both quantitative and qualitative information for the monthly Board Meetings generally seven days prior to the Board/ Committee meetings. The directors also have free and open access to Management at all levels to obtain further information or clarify any concerns they may have. As described above, they also have the right to seek independent professional advice at the Company’s expense and copies of advice obtained in this manner are circulated to other directors who request it.

A6.1

Chairman to ensure all directors are properlybriefed on issues arising at Board meetings

All directors are adequately briefed on matters arising at Board meetings through comprehensive Board papers. Additionally, the relevant members of the Management team are on standby for further clarifications as may be required by Directors or will make presentations at Board meetings.

Any Director who does not attend a meeting is updated on proceedings prior to the next meeting through:

Formally documented minutes of discussions. Separate discussions at start of meeting regarding matters arising

from the previous meeting. Archived minutes and Board papers accessible at the convenience of

the Directors.

Non-Executive Directors have an open invitation to attend the meetings of the Management Committees and have the opportunity to interact with senior management after Board Meetings.

A6.1

Board papers and agenda to be circulated seven days prior to meetings.

As described above, Board papers are generally circulated seven days before the meeting. There is provision for circulation of urgent papers within a shorter time frame and also for approval of matters by circulation but such instances are the exception and not the rule.

A6.2



PracticeCSE Listing

Requirements

Appointments to the Board

Formal and transparent procedure for newappointments through an established Nominations Committee

The Board has established a Nominations Committee whose Terms of Reference comply with the Specimen given in the Code. Membership of this important Board Committee is given on page 148 to 149 of the Annual Report. Accordingly, new Directors including the Managing Director, Group Chief Financial Officer and Key Management Personnel are appointed by the Board upon consideration of recommendations by the Nominations Committee.

A7.1

Nominations Committee annually assess Board composition

The Board is in the process of assessing its composition to ascertain whether the combined knowledge and experience of the Board match the strategic demands facing the Company . This is a continuous process.

A7.2

Disclosure of information to shareholders upon appointment of new Directors

All new appointments are communicated to the shareholders via the Colombo Stock Exchange. The profiles of the current Directors are given on page 32 to 37 in this report which have also been translated in to Sinhala.

A7.3

Re-Election

All directors should submit themselves for re-election at regular intervals

As per the Articles, 1/3rd 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. In accordance with this provision, the following directors retire and offer themselves for re-election:

Mr. Dhammika Perera Prof. Malik Ranasinghe Mrs. Dhara Wijayatilake Mr. Sanjiva Senanayake

Directors appointed to the Board since the last AGM will stand for election for the first time in accordance with the provisions in the Articles of Association. In accordance with this provision, Mrs Saumya Amarasekera offers herself for re-election. A brief resume of Directors is provided in English and Sinhala in the Annual Report to enable shareholders to make a decision.

The Board is actively engaged in succession planning for both Executive and Non-Executive roles to ensure that Board composition is periodically renewed and that the Board retains its effectiveness at all times.

A8



117Sampath Bank PLC


PracticeCSE Listing

Requirements

Non-Executive Directors are subject to re-election

non executive Directors are subject to re-election in terms of the Articles of Association.

A8.1

All Directors including Chairman to be subject to re-election at first opportunity after appointment and re-election at least every three years thereafter

Described in response to A8 above. A8.2

Appraisal of Board Performance

Appraisal of Board Performance

The Board annually appraises its own performance to ensure that they are discharging their responsibilities satisfactorily. This process requires each Director to fill a Board Performance Evaluation Form in line with the provisions of this section of the Code. The responses are reviewed by the Group Company Secretary who compiles a report which is discussed at a Board Meeting.

A9.1

Appraisal of Board Sub-Committees

The Board committees are in the process of evaluating the performance of its members to ensure that they are discharging their responsibilities satisfactorily.

A9.2

Disclosure of Information in respect of directors

Annual Report to disclose specified information regarding Directors

Information specified in the Code with regards to directors are disclosed within this Annual Report as follows:

Name, qualifications, expertise, material business interests and brief profiles on pages 32 to 37.

Related Party Transactions on page 107. Membership of sub-committees and attendance at Board Meetings

and committee meetings on page 107.

A 10.1

Appraisal of Managing Director

Set reasonable financial and non-financial targets to be met by the MD

The Board discussed and set financial and non-financial targets to be achieved during the year by the Managing Director with reference to the short, medium and long term objectives of the Bank at the beginning of 2012. The targets for 2013 have also been set at the time of reporting.

A11.1



PracticeCSE Listing

Requirements

Appraisal of Managing Director

Evaluate performance of the MD with reference to targets

HR & Remuneration committee is in the process of evaluating performance against the set targets and goals of the Managing Director.

A11.2

Directors’ Remuneration

Appointment of a HR & Remuneration Committee

The Board has established a HR & Remuneration Committee chaired by an Independent non executive director which consist of a majority of independent non executive Directors to develop policy and determine remuneration for the directors, management and executive staff. No Director is involved in deciding his own remuneration. The Terms of Reference complies with Schedule C of the Code, other investor guidelines and requires the Committee to ensure that the Company adopts a remuneration policy which rewards Directors, Management and Executive Staff for their contribution to sustainably and responsibly enhanced shareholder value.

Further information regarding the HR & Remuneration Committee is given on pages 155 to 157.

B1.1

Remuneration Committee to comprise exclusively non-executive Directors

The Remuneration Committee comprises the following directors majority of them are Independent Non Executive Directors

Mr. Deepal Sooriyaarachchi (Chairman) Mr. Channa Palansuriya Ms. Annika Senanayake Mr. Deshal De Mel Mr. Aravinda Perera

B1.2&

B1.3

Section 4

Remuneration for non-executive directors

Remuneration of non-executive directors is recommended by the HR & Remuneration Committee for approval of the Board in line with market practice.

B1.4

Remuneration of executive directors

Remuneration of executive directors is determined by the HR & Remuneration Committee who have access to professional advice from within or outside the company in formulating their proposals which then are discussed with the Board.

B1.5



119Sampath Bank PLC


PracticeCSE Listing

Requirements

Level of remuneration

Remuneration for executive directors should attract, retain and motivate

Remuneration for executive directors is designed to attract, retain and motivate the executive Directors as determined by the Remuneration Committee. Their remuneration comprises a fixed salary component, which includes perquisites and allowances. The Remuneration Committee takes in to account market practices and seeks professional advice when required in order to discharge its responsibilities.

B2.1&

B2.2

Positioning company remuneration levelsrelative to other companies

The HR & Remuneration Committee reviews the Bank’s remuneration levels in relation to other Banks in the country.

B2.3

Performance related elements ofremuneration for executive directors

There are no performance related elements of remuneration for Executive directors.

B2.4

Share option schemes

The employees have a uniform employee share ownership scheme based on grade and salary of the employee. This scheme expires on 30th June 2014.

B2.5

Designing schemes of performancerelated remuneration

No schemes of performance related remuneration have been implemented in the Bank.

B2.6

Compensation commitments in the eventof early termination

There are no provisions for compensation for early termination in the letters of contract/appointment. However, the directors would determine this on a case by case basis.

B2.7

Dealing with early termination

Directors determine this on a case by case basis. B2.8

Levels of remuneration for non-executivedirectors

The HR & Remuneration Committee determines the levels of remuneration for non-executive directors taking in to account the timecommitment and responsibilities of their role andmarket practices. Remuneration for non-executive directors do not include share options.

B2.9



PracticeCSE Listing

Requirements

Disclosure of Remuneration

Composition of HR & Remuneration Committee, Remuneration Policy and disclosure of aggregate remuneration paid to Directors

The composition of the HR & Remuneration Committee and its policy is given on page 155 to 157.The aggregate remuneration to executive and non-executive directors are given on page 320.

B3.1 Section 4

Relations with Shareholders

Constructive use of the AGM & Other General Meetings

The Annual General Meeting is the main forum of contact between retail shareholders and the Board. A separate Committee of the Board, Shareholder Relations Committee has been set up for the purpose of building up relations with the shareholders and addressing their concerns. This committee conducts an open session with the shareholders immediately after the AGM each year.

The Annual Report is circulated to all shareholders 21 days prior to the AGM and a Sinhala version is published each year to meet the needs of the diverse group of shareholders. Additionally, the message by Chairman’s and the Managing Director are translated in to Tamil each year.

In line with market practice, the Managing Director has regular contact with the major shareholders and the Chairman also participates in many such meetings.

C1

Count of all proxy votes lodged

All proxy votes lodged, together with the votes of shareholders present at the AGM are considered for each resolution.

C1.1

Separate resolutions for each substantiallyseparate issue

A separate resolution is proposed at the AGM for each substantially separate issue. The adoption of the report and accounts is proposed as a separate resolution.

C1.2

Availability of Board Committee chairmen at AGM

All Board Committee Chairmen are present at the AGM to answer any questions raised at the AGM and will respond when requested to do so by the Chairman.

C1.3



121Sampath Bank PLC


PracticeCSE Listing

Requirements

Circulation of notice of AGM and relateddocuments to shareholders

Notice of the AGM and related papers are sent to shareholders at least 21 calendar days prior to the meeting in accordance with the regulations.

C1.4

Summary of procedures governing votingat the AGM

A summary of the procedures governingvoting at the AGM is provided in the proxyform, which is circulated to shareholders21 calendar days prior to the AGM.

C1.5

Disclosure of major transactions

Disclosure of major transactions

The Company’s future strategies and theirpotential impact have been disclosedin the following sections of this annualreport.

Chairman’s Statement pages 14 to 17. Managing Director’s Review page 18 to 29. Management Discussion and Analysis pages 46 to 95.

C2

Disclosure of all facts of transactionswhich have a material impact on net assets

The Bank will comply with the regulation in case of need but the situation has not arisen.

C2.2

Accountability & Audit

Present a balanced and understandable assessment of theCompany’s financial position, performance and prospects

The company’s position and prospectshave been discussed in detail in thefollowing sections of this annual report.

Chairman’s Statement pages 14 to 17. Managing Director’s Review pages 18 To 29. Management Discussion and Analysis pages 46 to 95.

D1



PracticeCSE Listing

Requirements

Accountability & Audit

Interim reports, price-sensitive public reports, regulatory reports andstatutory information requirements

Interim reports were published in newspapers within 45 days of each quarter and included information to assist shareholders gain an understanding of the state of affairs of the Bank.

Price sensitive information was disclosed in a comprehensive but concise manner to the Colombo Stock Exchange on a timely basis.

Reports required by the regulators including Central Bank, Inland Revenue, Registrar of Companies, Colombo Stock Exchange were all filed in a timely manner in compliance with their requirements and these provided a sufficient information for the user to obtain a balanced assessment of the Bank’s operations.

D1.1

Declaration in Annual Report of the Board of Directors Report

The Annual Report of the Board of Directors Report on pages 274 to 281, contains the declarations as required by the Code.

D1.2

Responsibilities of the Board for the preparation and presentation of financialStatements and statement by the Auditors about their reportingresponsibilities

The Statement of Directors’ Responsibility for Financial Reporting and Report of the Auditors which includes a statement about their reporting responsibilities are provided on page 290.

D1.3

Include a Management Discussion & Analysis

The Management Discussion & Analysis is set out on pages 46 to 95 and covers the information specified in the Code as given below

industry structure and developments; opportunities and threats; risks and concerns; internal control systems and their adequacy ; social and environmental protection activities carried out by the

Company; financial performance; material developments in human resource/industrial relations and prospects for the future.

D1.4



123Sampath Bank PLC


PracticeCSE Listing

Requirements

Declaration of the Directors that the business is a going concern

This information is provided in the Reportof the Directors on pages 274 to 281.

D1.5

Notify shareholders in case net assets of the company fall below 50% of stated capital

This situation has not arisen. D1.6

Internal Control

Maintain a sound system of internal control to safeguardshareholders’ investments and the Company’s assets.

The Board is responsible for formulating and implementing appropriate and adequate internal control systems. The Board Audit Committee has responsibility to the Board to ensure that the system of internal controls is sufficient and effective. Reviews of the adequacy and effectiveness of these internal control systems are carried out by the Internal Audit Department who report on a regular basis to the Board Audit Committee.

D2.1

Review need for Internal Audit Function

As the Bank has an Internal Audit function, this is not applicable. D2.2

Audit Committee

Establish arrangements for selection and application of accounting policies, financialreporting and internal control principles

The Bank has an Audit Committee in keeping with good governance since 1997. The principal responsibility of the Audit Committee was oversight over financial reporting, internal controls and monitoring external auditor independence. Its duties include gaining assurance on the control over financial reporting processes and the integrity of the Bank’s financial reports, monitoring the performance, objectivity and independence of the external auditor and reviewing work of the internal auditor. The Audit Committee Report is given on page 144 to 147, of the Annual Report.

D3 Section 5

Composition and Terms of Reference for Audit Committee

The Audit Committee consists of non-executive directors. Members are selected to provide a broad set of financial, commercial and other relevant experience to meet the Committee’s objectives. The Managing Director, Executive Director/Group Chief Financial Officer, Deputy General Manager - Finance/Planning, Group Chief Risk Officer, Head of Internal Audit, Senior Manager Systems Audit and representatives of the External Auditors are invited to attend the meetings.

D3.1



PracticeCSE Listing

Requirements

Audit Committee

Review of External Audit functions and relationship with External Auditors

The Committee has a key oversight role in relation to the external auditor Ernst & Young, whose primary relationship is with the Committee. The Bank’s Auditor Independence Policy ensures that the independence and objectivity of the auditor is not impaired. 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. The audit fee is determined by the Audit Committee who also assesses the effectiveness and the independence of the external auditors.

D3.2

Terms of Reference The Terms of Reference for the Audit Committee complies with the Code of Best Practice on Corporate Governance issued by the SEC and ICASL and the Code of Best Practice on Audit Committees issued by ICASL. This document is available with the Group Company Secretary.

D3.3

Disclosures regarding Audit Committee

The Directors Report on pages 274 to 281, provide the following disclosures:

The composition of the Audit Committee A statement regarding the independence of the auditors

D3.4

Code of Business Conduct & Ethics

Code of business conductand ethics for directors and seniormanagement

Codes of conduct are to be developed for directors and senior management.

D4.1

Affirmative declaration by Chairman of compliance with Code of Business Conduct & Ethics

This will be implemented along with the Code of Conduct. D4.2

Corporate Governance Disclosures

Corporate Governance Report

The Corporate Governance Report on pages 96 and 163 provides information regarding Corporate Governance practices in the Bank which are in compliance with the Code of Best Practice on Corporate Governance.

D5.1



125Sampath Bank PLC


PracticeCSE Listing

Requirements

Shareholders – Institutional Investors

Encourage voting at AGM

The Bank has a history of active shareholder involvement at general meetings and all shareholders are regularly encouraged to state their intentions to vote and translate it into practice.

E1

Regular structured dialogues with institutional investors

The Managing Director has regular structured meetings with institutional investors and the Chairman often participates in such meetings. Board Members are briefed about the matters discussed at such meetings.

E1.1

Encourage institutional investors togive due weight to relevant governancearrangements

Institutional investors are kept apprised of the Bank’s governance practices through the Annual Report and any new initiatives are highlighted at regular meetings to ensure that due weightage is given to good corporate governance.

E1.2

Shareholder Relations – Individual Shareholders

Individual shareholders are encouraged to do their own analysis or seek independent advice

The annual report contains sufficient information for a potential investor to carry out their own analysis. The annual report is published in both Sinhala and English to facilitate better understanding by retail investors. This, together with the interim financial statements published each quarter, provide sufficient information to enable retail investors make informed judgements regarding the performance of the Bank.

Additionally, there is a separate part of the company website dedicated to Investor Relations which provides this information online to all investors.

F1

Encourage shareholders to participate and vote and AGM

It is a tradition at Bank to encourage all shareholders to participate and vote at the AGM. Additionally, they are encouraged to do so through the Shareholder Relations Committee

F2



The Banking Act Direction No.11 of 2007 and subsequent amendments thereto on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka.

Section Principle Compliance & Implementation

3 (1) Responsibilities of the Board

The Board has strengthened the safety and the soundness of the Bank in the following manner:

a. Strategic objectives and corporate values

The Bank’s strategic objectives and corporate values are determined by the Board and are given on page 4. These are communicated to all levels of staff through regular briefing sessions and reinforced by the Corporate Management Team. Additionally the values are included in the Employee Blue Book.

b. Overall Business Strategy including Risk Policy and Management

The Bank strategy is set by the Board in consultation with the Corporate Management and the Strategic Plan for 2013-2015 is in the process of being reviewed and finalized. The risk appetite, policy, management framework and mechanisms have also been approved by the Board in line with the strategic plan. Measurable goals for the Bank as a whole have been set and performance is measured in line with these goals regularly at monthly Board Meetings.

c. Risk Management The Board has appointed a Board Risk Management Committee tasked with recommending to the Board the Bank’s Risk Policy, defining the risk appetite, identifying principal risks, setting governance structures and implementing systems to measure, monitor and manage the principal risks. The following reports provide further insights in this regard:

Risk Management Report on pages 164 to 197 Risk Committee Report on pages 152 to 154.

d. Communication with all stakeholders

The Board has approved and implemented the following communication policies with regard to the following stakeholders:

Shareholders – The Board has appointed a Committee on Shareholder Relations tasked with identifying and addressing the shareholders concerns. It is the first listed company in Sri Lanka to have such a committee. This committee conducts an annual Shareholder Relations Forum to identify shareholder concerns. Additionally, the AGM is also a key forum for contact with shareholders and the Bank has a proud history of well attended AGMs where shareholders take an active role in exercising their rights. The Annual Report is translated in to Sinhala and the Message by the Chairman and the Managing Director are translated in to Tamil as well to facilitate greater communication with shareholders.

127Sampath Bank PLC


d. Communication with all stakeholders (Contd.)

Customers - Customers include depositors, lenders, creditors and debtors. The Bank has a Customer Complaint Handling Policy which has been printed in all three languages and disseminated to all customer contact points of the Bank. This document outlines the complaints handling policy of the Bank, provides contact numbers of the Bank for this purpose and also of the Financial Ombudsman. There is a 24 hour customer hotline set up for this purpose .Additionally, a customer satisfaction survey is carried out by external consultants to evaluate service levels provided by the Bank.

Staff – Staff members who are members of the Sampath Bank Employees Association (SBEA) and their representatives are given unrestricted access to the management to voice their concerns. The Group Company Secretary co-ordinates communication between the Board and the SBEA. It is noteworthy that 98% of staff are members of the SBEA.

e. Internal Control System and Management Information Systems

The Board Audit Committee is tasked with reviewing the adequacy and the integrity of the bank’s internal control systems and management information systems. Accordingly this Sub-Committee reviewed reports from the Internal Audit Department which reports directly to the Audit Committee and also the external auditors in carrying out this function.

f. Key Management Personnel [Directors, Deputy General Managers, Group Compliance Officer, Head of Internal Audit and Group Company Secretary]

The Board has identified Key Management Personnel, as defined in the International Accounting Standards and the Sri Lanka Accounting Standards, who significantly influence policy, direct activities and exercise control over business activities, operations and risk management. All appointments of designated Key Management Personnel are recommended by the Nomination Committee and approved by the Board.

g. Define areas of authority and Key Responsibilities for Executive Directors and Key Management Personnel

Areas of authority and key responsibilities have been defined for the Executive Directors and Key Management Personnel during 2012.

h. Oversight of affairs of the Bank by Key Management Personnel

Key Management Personnel make regular presentations to the Board on matters under their purview and are also called in by the Board to explain matters relating to their areas.

i. Assess effectiveness of own Governance practices

The Board appraises its performance by using the Board Evaluation Form which is filled by each Director in relation to business strategy and contributions of Board members based of their field of expertise. The responses are collated by the Group Group Company Secretary and matters of concern are brought to the attention of the Board by the same Committee.




j. Succession plan for Key Management Personnel

Formal succession plan for Key Management Personnel have been developed by the HR department and presented to the Nominations Committee for their approval.Nominations Committee and the Board are yet to approve the succession plan for KMPs.

k. Regular meetings with Key Management Personnel

Key Management Personnel are regularly present for discussions at the meetings of the Board and its Committees. Progress towards corporate objectives is discussed regularly at Board meetings.

l. Regulatory environment and maintaining an effective relationship with regulator

Directors are briefed about developments in the regulatory environment at Board Meetings to ensure that their knowledge is updated regularly to facilitate effective discharge of their responsibilities.

Compliance Reports submitted to CBSL which includes all returns to regulators are presented to the Board quarterly and monitored closely by the Board.

m Hiring and oversight of external Auditors

The Audit Committee carries out the necessary due diligence regarding the hiring of the External Auditor and makes recommendations to the Board. Oversight of the external Auditor is carried out by the Audit Committee and the Board is briefed of any concerns in this regard if the necessity arises.

3 1 (ii) Appointment of Chairman and Managing Director and defining and approving their functions and responsibilities

The Board has appointed the Chairman and the Managing Director and also approved their functions and responsibilities maintaining the balance of power between the two roles.

3.1. (iii) Regular Board Meetings Regular monthly Board meetings are held and special meetings are scheduled as and when the need arises. The Board met 21 times during 2012. We have minimised obtaining approval via circular resolutions and it is done only on an exceptional basis and such resolutions are ratified by the Board at the next meeting.

3.1.(iv) Arrangements for Directors to include proposals in the agenda

Monthly meetings are scheduled and informed to the Board at the beginning of each calendar year to enable submission of proposals in the agenda for regular meetings where such matters and proposals relate to the promotion of business and the management of risk of the Bank.

3.1.(v) Notice of Meetings Notice of Meetings, agenda and Board papers for the Board meetings are circulated to the directors seven days prior to the meeting giving Directors time to attend and submit any urgent proposals.


129Sampath Bank PLC


3.1 (vi) Directors Attendance The directors are apprised of their attendance in accordance with the Articles of the Company and the Corporate Governance Code. Detail of the directors attendance is set out on page 107. No Director has been absent from 3 consecutive meetings during the 12 months as per the Corporate Governance Codes of CBSL and all Directors have attended at least 18 out of 21 meetings held.

3.1 (vii) Group Company Secretary The Board has appointed a Group Company Secretary who satisfies the provisions of Section 43 of the Banking Act No.30 of 1988 and whose primary responsibilities shall be to handle the secretariat services to the Board and shareholder meetings and carry out other functions specified in the statutes and other regulations.

3. 1 (viii)

Directors access to advice and services of Group Company Secretary

All members of the Board have opportunity to obtain advice and services of the Group Company Secretary who is a Chartered Corporate Secretary and who is responsible to the Board for follow up of Board procedures, cCompliance with rules and regulations, directions and statutes and keeping and maintaining Minutes and relevant records of the Bank.

3.1 (ix) Maintenance of Board Minutes Group Company Secretary maintains the minutes of the Board Meetings and circulates same to all Board Members. The minutes are approved at the subsequent Board Meeting. Additionally, the Directors have access to the past Board papers and Minutes.

3.1 (x) Minutes to be of sufficient detail and serve as a reference for regulators and supervisory authorities

The Minutes of the meetings include:(a) a summary of data and information used by the Board in its deliberations; (b) the matters considered by the Board; (c) the fact-finding discussions and the issues of contention or dissent(d) the testimonies and confirmations of relevant Executives with regard to the

Board’s strategies and policies and adherence to relevant laws and regulations; (e) matters regarding the risks to which the Bank is exposed and an overview of the

risk management measures including reports of the Board Risk Management Committee; and

(f) the decisions and Board resolutions including reports of all Board committees

3.1 (xi) Director’s ability to seek Independent Professional advice

The Board committees and various professionals in corporate and senior management advice the Board on various matters relevant to them. In addition, directors are able to obtain independent professional advice, as and when necessary, in discharging their responsibilities and also Board approved policy is in place for the same. These functions are co-ordinated by the Group Company Secretary.




3.1 (xii) Dealing with Conflicts of Interest The Directors are conscious of their obligation to deal with situations where there is a conflict of interest in accordance with the Articles of Association of the Bank and the Banking Act Direction No.11 of 2007. The Bank maintains an electronic register of Director’s & Key Management Personnel’s Interests which is regularly updated and includes interests of the spouse, children under 18 years of age and their business concerns. Directors abstain from participating in the discussions, voicing their opinion or approving in situations where there is a conflict of interest. Additionally he/she is not counted in the quorum in such instances.

3.1 (xiii) Schedule of matters reserved for Board decision

During the year the Board reviewed the schedule of matters defined in the Articles and developed new schedule of matters reserved for its decision to ensure that the direction and control of the Bank is within its authority in line with regulatory codes, guidelines and international best practice.

3.1 (xiv) Inform Central Bank if there are solvency issues

The Board is aware of the need to inform the Director of Banking Supervision prior to taking any decision or action if the Bank is about to become insolvent or about to suspend payments to its depositors and other creditors. Such a situation has not arisen.

3.1 (xv) Capital adequacy The Board monitors capital adequacy and other prudential measures vis a vis regulatory requirement, the Bank’s defined risk appetite and industry benchmarks on a monthly basis. The Bank is in compliance with the minimum capital requirements.

3. 1 (xvi)

Publish Corporate Governance Report in Annual Report

The Board publishes the Corporate Governance Report in the Bank’s Annual Report.

3.1 (xvii)

Self-assessment of directors The Board has adopted a scheme of self-assessment to be undertaken by each Director annually and records of these assessments are maintained with the Group Company Secretary. The Chairman discusses these with the Directors individually.

3.2 The Boards composition

3.2 (i) Number of directors As per CBSL Governance Direction, the number of directors should not be less than seven or more than 13. The Bank’s Board comprises 12 directors as at 31st December 2012.

3.2 (ii) Period of service of a Director The period of services of Directors is limited to 9 years excluding the Managing Director as per the Corporate Governance Code for Licensed Commercial Banks. There are no Directors whose tenure of service has exceeded 09 years on the Board.

3.2 (iii) Board Balance There are 2 executive directors and 10 non-executive directors which is well within the requirement to limit the number of executive directors to 1/3 of the total.

3.2 (iv) Independent Non-Executive Directors

The Board has eight Independent non executive directors which is higher than the requirement.


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3.2 (v) Alternate independent directors Mr. Deepal Sooriyaarachchi and Prof.Malik Ranasinghe are alternate directors for each other and Mr Sanjiva Senanayake is alternate director to Mr Deshal de Mel. They maintain similar independent profiles as required.

3.2 (vi) Criteria for non-executive directors Non-executive directors are persons with credible track records and have necessary skills and experience to bring an independent judgment to bear on issues of strategy, performance and resources. These are detailed on pages 32 to 37.

Directors nominate names of eminent professionals or academics from various disciplines to the Nominations Committee who peruse the profiles and recommend suitable candidates to the Board.

3.2 (vii) More than half the quorum to comprise Non-Executive Directors

This requirement is strictly observed and it is noteworthy that the majority are Non-Executive Directors.

3.2 (viii) Identify Independent Non-Executive directors in communications disclose categories of Directors in Annual Report

The Independent Non-Executive Directors are expressly identified as such in all corporate communications that disclose the names of Directors of the Bank. The composition of the Board, by category of directors, including the names of the Chairman, Executive Directors, Non-Executive Directors and Independent Non-Executive Directors are given on page 276 of the Directors Report.

3.2(ix) Succession planning and appointments to the Board

The Board has established a Nominations Committee whose Terms of Reference comply with the Specimen given in the Code of Best Practice on Corporate Governance. Accordingly, new Directors including the Managing Director and Group Chief Financial Officer are appointed by the Board upon consideration of recommendations by the Nominations Committee. The Board has also developed a succession plan together with the Nominations Committee to ensure the effectiveness of the Board.

3.2(x) Re-election of directors filling casual vacancies

Directors appointed to the Board since the AGM will stand for election at the first AGM in accordance with the provisions in the Articles of Association.

3.2 (xi) Communication of reasons for removal or resignation of director

Resignations of Directors and the reasons are informed to the regulatory authorities and shareholders as per CSE requirements together with a statement confirming whether or not there are any matters that need to be brought to the attention of shareholders.

3.2(xii) Prohibition of directors or employees of a Bank becoming a director at another Bank

The Board and the Nominations Committee take in to account this requirement in their deliberations when considering appointments of Directors. The Employee Code of Ethics (Blue Book) prohibits employees to be elected/nominated as a Director of another Bank.

3.3 Criteria to assess fitness and propriety of Directors

3.3(i) Age of director should not exceed 70

There are no Directors who are over 70 years of age.




3.3(ii) Directors should not be Directors of more than 20 companies and not more than 10 companies classified as Specified Business Enterprises

There was one director holding office as Director of more than 20 companies and another Director holding Directorships of more than 10 specified Business Entities.

3.4 Management Functions delegated by the Board

3.4 (i) Understand and study delegation arrangements

The Board periodically reviews and approves the delegation arrangements in place and ensures that the extent of delegation address the needs of the Bank whilst enabling the Board to discharge their functions effectively.

3.4 (ii) Extent of delegation should not hinder Board ability to discharge its functions

3.4 (iii) Review delegation arrangements periodically to ensure relevance to operations of the Bank

3.5 The Chairman and Managing Director

3.5 (i) Separation of roles The roles of the Chairman and Managing Director are separate.

3.5 (ii) Non-Executive Chairman and appointment of a Senior Independent Director

The Chairman is a non-executive director but not an independent director as he holds more than 1% holding through a company controlled by him. The Board has appointed Mr Sanjiva Senanayake as the Senior Independent Director with relevant Terms of Reference. Terms of reference is being evaluated and to be strengthened.

3.5 (iii) Disclosure of identity of Chairman and Managing Director and any relationships with the Board members

The identity of the Chairman and Managing Director are disclosed in the Annual Report on pages 32 to 37 and there are many references to these roles throughout the Annual Report.

There are no material financial, business or family relationships between the Chairman, Managing Director and other members of the Board as per the annual declarations and the register of directors Interests is updated regularly.

3.5 (iv) Chairman to ;(a) provide leadership to the

Board; (b) ensure that the Board works

effectively and discharges its responsibilities;

(c) ensure that all key and appropriate issues are discussed by the Board in a timely manner.

The Board approved the key responsibilities of the Chairman during the year and this document includes the matters identified in relevant guidelines and codes.


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3.5 (v) Responsibility for agenda lies with Chairman but may be delegated to Company Secretary

The Group Company Secretary draws up the agenda for the meetings in consultation with the Chairman.

3.5 (vi) Ensure that Directors are properly briefed and provided adequate information

The Chairman ensures that the Board is adequately briefed and informed regarding the matters arising at Board. The following procedures are in place to ensure this:

Board papers are circulated seven days prior to the Board meetings Relevant members of the management team are on hand to provide the

necessary explanations and clarifications Management information is provided in agreed formats on a regular basis to

enable Directors to assess the performance and stability of the Bank Directors are able to seek independent professional advice on a need basis at

the Bank’s expense

3.5 (vii) Encourage active participation by all Directors and lead in acting in the interests of the Bank

This requirement is addressed in the Chairman’s Responsibilities document approved by the Board.

3.5 (viii) Encourage participation of Non-Executive Directors and relationships between Non-Executive and Executive Directors

Ten out of the 12 members of the Board are Non-Executive Directors which creates a conducive environment for active participation by the Non-Executive Directors. Chairman and seven non-executive directors chair Sub-Committees of the Board providing further opportunity for active participation. The Bank has also appointed a senior independent director which supports the participation of the Non-Executive Directors.

3.5 (ix) Refrain from direct supervision of Key Management Personnel and executive duties

The Chairman does not get involved in the supervision of Key Management Personnel or any other executive duties.

3.5 (x) Ensure effective communication with shareholders

The Bank historically has active shareholder participation at the Annual General Meeting and at the Shareholder Relations Meeting which is held immediately after the AGM where shareholder issues are discussed. A Board Committee has been appointed to ensure that there is effective communication with shareholders.

3.5 (xi) CEO functions as the apex Executive in charge of the day to day operations

The day to day operations of the Bank has been delegated to the Managing Director.




3.6 Board appointed committees

3.6(i) Establishing Board Committees, their functions and reporting

Nine committees have been established by the Board with written terms of reference for each. The Group Company Secretary serves as the Secretary for all committees and maintains minutes and records with oversight by the respective Chairpersons. The reports of the committees are included in the Annual Report

Audit Committee on pages 144 to 147. Nominations Committee on pages 148 to 149. Credit Committee on pages 150 to 151. Board Risk Management Committee on pages 152 to 154. Human Resources & Remuneration Committee on pages 155 to 157. Strategic Planning Committee on pages 158 to 159. Shareholder Relations Committee on pages 160 t0 161. Treasury Committee on page 162. Marketing Committee on page 163.

The chairpersons of the committees are available at the AGM to clarify any matters that may be referred to them by the Chairman.

3.6 (ii) Audit Committee

Chairman to be an Independent Non-Executive Director with qualifications and experience in accountancy and/or audit

The Chairman of the Audit Committee is an independent non-executive director who is a fellow member of the Chartered Institute of Management Accountants, UK.

Committee to comprise solely of Non-Executive Directors

All members of the Audit Committee are Non-Executive Directors.

Audit Committee functions In accordance with the Terms of Reference, the Audit Committee has made the following recommendations:(i) the appointment of the external auditor for audit services to be provided in

compliance with the relevant statutes; (ii) the implementation of the Central Bank guidelines issued to auditors from

time to time; (iii) the application of the relevant accounting standards; and (iv) the service period, audit fee and any resignation or dismissal of the auditorThe Audit Committee ensures that the service period of the engagement of the external Audit partner shall not exceed five years, and that the particular Audit partner is not re-engaged for the audit before the expiry of three years from the date of the completion of the previous term

d. Review and monitor external auditor’s independence and objectivity and the effectiveness of the audit processes

The Audit Committee obtains representations from the external auditor on their independence and that the audit is carried out in accordance with the Sri Lanka Accounting Standards.


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e. Provision of non-audit services by external auditor

The Bank is in the process of preparing a procedure.

f. Determines scope of audit The Committee discussed and finalised with the external auditors the nature and scope of the audit to ensure that it includes:(i) an assessment of the bank’s compliance with the relevant Directions in

relation to corporate governance and the management’s internal controls over financial reporting;

(ii) the preparation of financial statements for external purposes in accordance with relevant accounting principles and reporting obligations;

As all audits within the group are carried out by the same external auditor, there was no requirement to discuss arrangements for co-ordinating activities with other auditors.

g. Review financial information of the Bank

The Audit Committee reviews the financial information of the Bank, in order to monitor the integrity of the financial statements of the Bank, its annual report, accounts and quarterly reports prepared for disclosure, and the significant financial reporting judgments contained therein. The review focuses on the following: (i) major judgmental areas; (ii) any changes in accounting policies and practices(iii) significant adjustments arising from the audit(iv) the going concern assumption (v) the compliance with relevant accounting standards and other legal

requirements.The Audit Committee makes their recommendations to the Board on the above on a quarterly basis.

h. Discussions with External Auditor on Interim and Final Audits

The Audit Committee discusses issues, problems and reservations arising from the interim and final audits with the external auditor. The Committee met on 01 (on 13/07/2012) occasion with the External Auditors in the absence of executive staff of the Bank.

i. Review of Management Letter and Bank’s response

The Audit Committee has reviewed the external auditor’s management letter and the management’s response thereto.

j. Review of Internal Audit function The Audit Committee has oversight of the Internal Audit function and carries out the following duties with regard to the same:(i) Reviews the adequacy of the scope, functions and resources of the internal

audit department, and ensures that the department has the necessary authority to carry out its work;

(ii) Reviews the internal audit programme and results of the audits and ensures that appropriate actions are taken on the recommendations of the internal audit department;




j. Review of Internal Audit function (iii) Reviews appraisals of the performance of the head of the internal audit department.

(iv) Recommends any appointment or termination of the head of the Internal Audit.(v) Ensures that the committee is appraised of resignations of senior staff

members of the internal audit department including the Chief Internal Auditor, and provides an opportunity to the resigning senior staff members to submit reasons for resigning;

(vi) Ensures that the internal audit function is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care

Bank will make arrangements for the Internal Systems Auditor to report either to the Head of Internal Audit or directly to Audit Committee.

k. Internal investigations The Audit Committee has reviewed the major findings of internal investigations and management’s responses thereto. It has also ensured that the recommendations of such investigations are implemented.

l. Attendees at Audit Committee Meetings

The Managing Director, Group Chief Financial Officer, Deputy General Manager – Finance & Planning, Group Chief Risk Officer, the Head of Internal Audit and Senior Manager System Audit and a representative of the external auditors normally attend meetings. Other Board members may also attend meetings upon the invitation of the committee. The committee met with the external auditors without the Executive Directors being present.

m. Explicit authority, resources and access to information

The Audit Committee has: (i) explicit authority to investigate into any matter within its terms of reference;(ii) the resources which it needs to do so; (iii) full access to information; and (iv) authority to obtain external professional advice and to invite outsiders with

relevant experience to attend, if necessary.

n. Regular Meetings The Audit Committee has scheduled regular quarterly meetings and additional meetings are scheduled when required. Accordingly, the Committee met 14 times during the year. Members of the Audit Committee are served with due notice of issues to be discussed and the conclusions in discharging its duties and responsibilities are recorded in the Minutes of the meetings maintained by the Secretary to the Board Audit Committee.

o. Disclosure in Annual Report The Report of the Audit Committee on pages 144 to 147, includes the following:(i) details of the activities of the Audit Committee; (ii) the number of Audit Committee meetings held in the year; and (iii) details of attendance of each individual Director at such meetings.


137Sampath Bank PLC


p. Maintain Minutes of meetings The Group Company Secretary serves as the Secretary for the Audit Committee and maintains minutes of the committee meetings.

q. Whistle blowing policy and relationship with external auditor

The Bank has a Board approved Whistle Blowing Policy whereby an employee of the bank and its the subsidiaries may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters. The Secretary to the Board Audit Committee forwards all communications received in this regard, including anonymous communications, to the Chairman of the Audit Committee who addresses the issue in an appropriate manner.

The Audit Committee is the key representative body for overseeing the bank’s relations with the external auditor and meets the Auditor on a regular basis to discharge this function.

Human Resources & Remuneration Committee

3 (6) (iii)

HR & Remuneration Committee The HR & Remuneration Committee is responsible for determining the following with regards to the Executive Directors including the Managing Director and Key Management Personnel as set out clearly in its Terms of Reference:(a) HR & Remuneration Committee will develop a policy to determine the

remuneration (salaries, allowances and other financial payments) for Managing Director and the KMPs.

(b) Sets the goals and targets (c) Performance of the Managing Director and the KMPs will be evaluated by

the committee against the set targets and goals to determine the basis for revising remuneration, benefits and other payments for them.

(d) The Managing Director attends the meetings of the committee except when matters relating to the Managing Director are being discussed.


3(6) (iv) Appointment of Directors, Managing Director and Key Management Personnel

The committee has developed and implemented a procedure to appoint and select new Directors. The Committee is developing a revised procedure to appoint new Directors, Managing Director and Key Management Personnel.

b. Re-election of Directors The committee makes recommendations regarding the re-election of current Directors, taking into account the performance and contribution made by the Director concerned towards the overall discharge of the Board’s responsibilities.




c. Eligibility criteria for appointments to Key Managerial Positions including Managing Director

The Committee sets the eligibility criteria to be considered, including qualifications, experience and key attributes, for appointment or promotion to Key Managerial positions including the position of the Managing Director. The committee considers the applicable statutes and guidelines in setting the criteria.

Job descriptions completed for the Managing Director and Key Management Personnel and these were tabled at the Nominations Committee during 2012.

HR department has documented the criteria such as qualifications, experience and key attributes required for eligibility to be appointed or promotion to the grades of Managing Director and KMPs based on their job description. These will be submitted to the Nominations Committee along with the Organization Structure for recommendation to the Board for approval.

d. Fit & Proper Persons The Group Company Secretary obtains annual declarations from Directors, Managing Director and Key Management Personnel to ensure that they are fit and proper persons to hold office as specified in the criteria given in Direction 3(3) and as set out in the Statutes.

e. Succession Plan and new expertise

Formal succession plan for KMPs is being developed by the HR department and this will be approved by the Nominations Committee. The need for new expertise may be identified by the Board or its committees and brought to the attention of the Nominations Committee who will take appropriate action.

f Committee to be chaired by an Independent Director and be constituted with a majority of independent directors

Committee is chaired by an Independent Director. Committee is constituted with equal number of Independent and Non Independent Directors. Steps will be taken to increase the number of Independent Directors during 2013.

3.6 (v) Integrated Risk Management Committee/Board Risk Management Committee

a. Composition of Risk Management Committee

The committee comprises three Non-Executive Directors, Managing Director, Group Chief Financial Officer, Group Chief Risk Officer, Group Compliance Officer and other Key Management Personnel supervising credit, market, liquidity, operational and strategic risk. The committee works closely with Key Management Personnel within the framework of authority and responsibility assigned to the committee

b. Risk Assessment The committee has approved the policies on Credit Risk Management, Market Risk Management and Operational Risk Management which provides a framework for management and assessment of risks. Accordingly, monthly information on pre-established risk indicators is reviewed by the committee in discharging its responsibilities as per the Terms of Reference.


139Sampath Bank PLC


c. Review of management level committees on risk

The committee reviews the reports of the management level Credit Policy Risk and Portfolio Review Committee to assess their adequacy and effectiveness in addressing specific risks and managing the same within the quantitative and qualitative risk limits set by the Committee.

d. Corrective action to mitigate risks exceeding prudential levels

The committee takes prompt corrective action to mitigate the effects of specific risks in the case such risks are at levels beyond the prudent levels decided by the committee on the basis of the Bank’s policies and regulatory and supervisory requirements. The key risk indicators and the desired levels are given on page 173.

e. Frequency of meetings The committee has regular quarterly meetings and schedules additional meetings when required. The agenda covers matters assessing all aspects of risk management including updated business continuity plans.

f. Actions against officers responsible for failure to identify specific risks or implement corrective action

Action will be taken to adopt a formal document on disciplinary action procedure with regard to officers responsible for failure to identify specific risks.

g. Risk assessment report to Board Minutes of the Board Risk Management Committee meeting are submitted to the Board after each committee meeting by the Secretary of the committee for their information, views, concurrence or specific directions.

h Compliance function A compliance function has been established to assess the bank’s compliance with laws, regulations, regulatory guidelines, internal controls and approved policies on all areas of business operations. This function is headed by the Group Compliance Officer who reports direct to the Board Risk Management Committee and is responsible for providing the following:(i) A detailed quarterly report on statutory and mandatory reporting requirements

indicating the status of compliance to the Board(ii) A monthly compliance certificate with sign-off from all business unit heads to

the Committee

3.7 Related Party Transactions

3.7 (i) Avoid conflict of interest There is a documented process approved by the Board in January 2012 identifying related parties, types of related party transactions and favourable treatment granted to said parties in order for Board members to avoid any conflict of interest in this regard.Directors who have related party transactions are individually requested to declare their transactions to the Bank on a quarterly and annual basis.




Related party transactions covered by direction

Definitions of related party transactions covered by the above Board process and declarations by Directors and Key Management personnel include :a) The grant of any type of accommodation, as defined in the Monetary Board’s

Directions on maximum amount of accommodation,b) The creation of any liabilities of the Bank in the form of deposits, borrowings

and investments,c) The provision of any services of a financial or non-financial nature provided to

the Nank or received from the Bank,d) The creation or maintenance of reporting lines and information flows between

the Bank and any related parties which may lead to the sharing of potentially proprietary, confidential or otherwise sensitive information that may give benefits to such related parties.

3.7 (iii) Monitoring of related party transactions defined as more favourable treatment

The Bank will take steps to monitor the report and identify the transactions and to ensure that there is no favourable treatment offered to related parties. Additionally, the staff concerned are informed through operational circulars to refrain from granting accommodations with more favourable treatment as defined in the Banking Act Direction no.11 of 2007

3.7 (iv) Granting accommodation Director or close relation of a Director

A procedure is in place for granting accommodation to Directors or to close relations of Directors. Such accommodation requires approval at a meeting of the Board of Directors, by not less than 2/3rds of the number of Directors other than the Director concerned, voting in favour of such accommodation. The terms and conditions of the facility include a proviso that it will be secured by such security as may from time to time be determined by the Monetary Board as well.

3.7 (v) Accommodations granted to persons, or concerns of persons, or close relations of persons, who subsequently are appointed as Directors of the Bank

The Group Company Secretary obtains declarations/affidavits from all Directors prior to their appointment and they are requested to declare any further transactions.

Employees of the Bank are aware of the requirement to obtain necessary security as defined by the Monetary Board if the need arises.

Processes for compliance with this regulation are also monitored by the Compliance Unit.

This situation has not arisen in the Bank to date.

Favourable treatment or accommodation to Bank employees or their close relations

No favourable treatment /accommodation is provided to Bank employees other than staff benefits. Employees of the Bank are informed through operational circulars to refrain from granting favourable treatment to other employees or their close relations or to any concern in which an employee or close relation has a substantial interest.


141Sampath Bank PLC


Remittance of accommodations subject to Monetary Board approval

This situation has not arisen in the Bank upto date.

Disclosures

3.8 (i) Publish annual and quarterly financial statements

Annual audited financial statements and quarterly financial statements are prepared and published in accordance with the formats prescribed by the supervisory and regulatory authorities and applicable accounting standards in Sinhala, Tamil and English.

3.9 (ii) Disclosures in Annual Report

a. A statement to the effect that the annual audited financial statements have been prepared in line with applicable accounting standards and regulatory requirements, inclusive of specific disclosures.

A statement to this effect is included in the following: Directors Responsibility for Financial Reporting on page 290. Annual Report of the Board of Directors on pages 274 to 281. Managing Director’s and Group Chief Financial Officer’s Responsibility

Statement on page 289

b. Report by the Board on the Bank’s internal control mechanism

The Annual report includes the following reports where the Board confirms that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of financial statements for external purposes has been done in accordance with relevant accounting principles and regulatory requirements:

Statement of Directors Responsibility for Financial Reporting on pages 290. Annual Report of the Board of Directors on the Affairs of the Company pages

274 to 281.

c External Auditor’s Assurance Report on the effectiveness of the internal control mechanism

Board has obtained the Assurance Report issued by the auditors under “Sri Lanka Standard on Assurance Engagements SLSAE 3050 - Assurance Reports for Banks of Directors’ Statements on Internal Control” and included in the Annual Report of 2012 on page 288.

d Details of Directors, Details of directors are given on pages 32 to 37.Directors’ interests in contracts with the Company are given pages 285 to 286.Remunerations paid by the Bank are given in Notes to the Financial statements on page 320.




e Total accommodations granted to each category of related parties and as a percentage of the Bank’s regulatory capital

Related Party Transactions are given in Notes to the Financial Statement on pages 367 to 369.

Direct and Indirect accommodation granted to each category of related parties is given below

Category of Related Party Transactions

Amount (Rs.Mn) %

Key Managerial personnel (KMP) 48.66 0.2

1,107.29 4.5

Entities control by KMPs and their close family members

2,709.56 11.1

f. Aggregate values of remuneration to, and transactions with Key Management Personnel

The aggregate values of remuneration paid to KMP are given in Notes to the Financial Statement on page 367 and the aggregate value of transactions of the Bank with KMPs are given in Notes to the Financial Statements on pages 367 to 369.

g. Confirmation by the Board in its Annual Corporate Governance Report in relation to “Factual Finding Report” issued by the Auditors

Board has confirmed in the Annual Corporate Governance report that all the findings of the ‘Factual Findings Reports’ of auditors issued under “Sri Lanka Related Services Practice Statement 4750 have been incorporated in the Annual Corporate Governance Report.

h. Report confirming compliance with prudential requirements, regulations, laws and internal controls

The Statement of Directors’ Responsibility for Financial Reporting on page 290 clearly sets out details regarding compliance with prudential requirements, regulations, laws and internal controls. There were no instances of material non-compliance to report on corrective action taken during the year.

i. Non-compliance Report There were no supervisory concern lapses in the Bank’s Risk Management Systems or non-compliance with these directions that have been pointed out by the Director of the Banks Supervision Department of the CBSL and therefore there is no disclosure to be made in this regard.

3.9 Transitional and other general provisions

The Bank has complied with the transitional provisions

Continuing Listing Requirements Section 7.10 on Corporate Governance Rules for Listed Companies issued by the Colombo Stock Exchange

The disclosures below reflect the Bank’s level of conformance to the above rules which comprises five fundamental principles, namely;

Non executive directors Independent directors Disclosure relating to directors HR & Remuneration Committee Audit Committee

The structure is in place and conformance to the requirement and expectations are tabulated below under the said five fundamental principles.


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1 Non executive directors The Bank has ten Non executive directors and two executive directors.

2 Independent Directors All Non executive directors have submitted their confirmations whether they are Independent/or not as per the criteria set by the Bank which is in line with the regulatory requirements

3 Disclosure relating to Directors

The Board assessed the independence declared by the directors and determined the directors who are independent.

Eight out of ten Non executive directors are Independent Directors namely: Mr Sanjiva Senanayake, Mr Deepal Sooriyaarachchi, Mrs Dhara Wijayatilake, Professor Malik Ranasinghe, Mr Ranil Pathirana, Mr Deshal de Mel, Ms Annika Senanayake and Mrs Saumya Amarasekera.

The Bank discloses the changes of directors to the Colombo Stock Exchange whenever it discloses to the Central Bank of Sri Lanka and the public.

4 HR & Remuneration Committee

The composition of the HR & Remuneration Committee is given in page 155.The Committee is chaired by an independent non executive director and majority of the members of the Committee are Non Executive Directors.Report of the HR & Remuneration committee is given on pages 155 to 157.

5 Audit Committee The Audit Committee of the Bank in 2012 comprised of all Independent Non Executive Directors. The composition of the Committee is given in page 144.The Chairman of the Committee is a member of a professional accountancy body. Managing Director, Group Chief Fianance Officer, Head of Internal Audit, Deputy General Manager – Finance & Planing attends Committee meetings by invitation.

The basis of determination of the independence of the Auditor is also given in the Audit Committee Report on pages 144 to 147.


AUDIT COMMITTEE REPORT

The Board Audit Committee (BAC) assists the Board in carrying out its responsibilities in relation to financial reporting requirements, risk management, internal auditing and the assessment of internal controls. The BAC also reviews the effectiveness of the Bank’s internal controls through review and follow-up of the Bank’s internal audit reports and manages the Company’s relationship with the External Auditors.

The Board of Directors will periodically review and authorize the Board Audit Committee Charter and Terms of Reference of BAC for the purposes of delegating the authority, scope, and responsibilities of BAC. With its delegated powers BAC will determine the scope and duties of Internal Audit Function by way of Sampath Bank Group Internal Audit Charter and recommend it to the Board of Directors for approval.

The BAC comprises of the following directors, who conduct Committee proceedings in accordance with the terms of reference approved by the Board of Directors.

Mr. Ranil Pathirana (Chairman) Independent, Non Executive Director

Mr. Sanjiva Senanayake Independent, Non Executive Director

Mr. Deepal Sooriyaarachchi Independent, Non Executive Director

Prof. Malik Ranasinghe Independent, Non Executive Director

Mrs. Dhara Wijayatilake Independent, Non Executive Director

Mr. Ranil Pathirana, was appointed the Chairman and Mr. Sanjiva Senanayake, Prof. Malik Ranasinghe and Mrs. Dhara Wijayatilake as committee members, of the Audit Committee from January 2012. Mr. Deepal Sooriyaarachchi was appointed as a member on 29th September 2011.

By invitation of the BAC, the Managing Director, Executive Director/Group Chief Financial Officer, Deputy General Manager - Finance & Planning, Head of Internal Audit, Senior Manager-Systems Audit and the External Auditors also attend the BAC meetings. Also invited to attend certain meetings are relevant people from the business to present sessions on issues designed to enhance the BAC awareness of key issues and developments in the business which are relevant to the Board Audit Committee in the performance of its role. The Group Company Secretary functions as the Secretary of the BAC.

Regulatory Compliance The Roles and functions of the BAC are regulated by the Banking Act Direction No. 11 of 2007, the mandatory Code of Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka, the Rules on Corporate Governance as per section 7.10 for Listed Companies issued by the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and Exchange Commission (SEC).

Qualifications Mr. Ranil Pathirana, the Chairman of the BAC, an independent non-executive director, is a Fellow Member of the Chartered Institute of Management Accountants, U.K., and counts many years of experience in the financial services industry.

Duties and Role of the Board Audit Committee

The BAC is responsible for:

Review of the financial information of the Bank, in order to monitor the integrity of the

145Sampath Bank PLC

financial statements of the Bank, its annual report, accounts and quarterly reports prepared for disclosure.

Reporting to the Board on the quality and acceptability of our accounting policies and practices.

Reviewing accounting and financial reporting, risk management processes and regulatory compliance;

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.

Review internal audit reports and liaise with corporate management in taking precautionary measures to minimize control weaknesses, procedure violations, frauds, and errors.

Assessing the independence and monitoring the performance and functions of Internal Audit, including overseeing the appointment of the Head of Internal Audit.

Overseeing the appointment, compensation, resignation, dismissal of the External Auditor, including review of the external audit, its cost and effectiveness and monitoring of the External Auditor’s independence;

Reviewing effectiveness of the Bank’s systems of internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes has been done in accordance with applicable accounting standards and regulatory requirements.

Engaging independent advisors on specialized functions where it is deemed necessary.

During the year ended 31 December 2012 the principal activities of the BAC were as follows:

Performance Meetings of the Board Audit CommitteeThe committee had 14 meetings during the year under review. The Managing Director, Executive Director/Group Chief Financial Officer, Deputy General Manager – Finance & Planning, Head of Internal Audit, Senior Manager-Systems Audit and the External Auditors also attended these meetings by invitation. Four meetings were to consider and recommend to the Board of Directors the Bank’s quarterly and annual financial statements. The committee met on two separate occasions with the External auditors and Internal Auditors with no executive or staff member present.

Financial Reporting The Audit Committee reviewed and discussed with Management and the External Auditors the quarterly and annual financial statements focusing on, without limitation, the quality and acceptability of accounting policies and practices, the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements. To aid their review, the BAC considered reports from the Executive Director/Group Chief Financial Officer and also reports from the External Auditors, M/S Ernst and Young, on the scope and outcome of their half-year review and annual audit.

Internal Control Over Financial Reporting (ICOFR)The Bank is required to comply with the Section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance issued by Central Bank of Sri Lanka and assess the effectiveness of internal control over financial reporting as of 31 December 2012.

The Bank assessed the effectiveness of its internal control over financial reporting as of 31st December 2012 based on the criteria set out in the Guidance for Directors of Banks on ‘The Directors’ Statement of Internal Control’, issued


by the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2010.

The Bank’s assessment was based on processes documented by the respective process owners. For the successful implementation of this task a steering committee headed by the Executive Director/Group Chief Financial Officer comprising of Corporate Management and other relevant department heads was formulated in 2010 with the guidance of the Bank’s External Auditor (Ernst & Young) which continued to function in 2012 too. Internal Audit department carried out work through tests on the documented processes to establish their adequacy and commented where necessary.

Based on Internal Audit’s and External Auditor’s assessments, Board has concluded that, as of 31st December 2012, the Bank’s Internal Control Over Financial Reporting is effective. Director’s report on the Bank’s Internal Control Over Financial Reporting is provided on page 287. The Bank’s External Auditors have audited the effectiveness of the Bank’s internal control over financial reporting and have reported to the Board that nothing has come to their attention that causes them to believe that the financial reporting is inconsistent with their understanding of the processes adopted by the Board in the review of the design and effectiveness of the internal control system of the Bank. External Auditor’s Report on the Bank’s Internal Control Over Financial Reporting is provided on page 288.

Annual Corporate Governance Report As required by the directions issued by the Central Bank of Sri Lanka (CBSL), on Corporate Governance for Licensed Commercial Banks, Section 3(8)(ii)(g) of the Banking Act Direction No. 11 of 2007, the External Auditor of the Bank should report on the Bank’s compliance with the Corporate Governance Directions in the Corporate Governance Reports published by the Bank.

Annual Corporate Governance Report for 2012 is provided on pages 96 to 163.

Internal Audit The BAC monitored and reviewed, the scope, extent and effectiveness of the activity of the Bank’s Internal Audit Department that included updates on audit activities and achievements against the Bank’s audit plan, advising corporate management to take precautionary measures on significant audit findings and assessment of resource requirements of the Internal Audit Department. The BAC had necessary interactions with The Chief Internal Auditor throughout the year.

During the year, BAC reviewed the internal audit plan and monitored the progress on a regular basis. The sections covered and the regularity of audits depends on the risk level of each section, with higher risk sections being audited more frequently.

The Internal Audit department, comprises of 3 broad areas namely, Branch/Department/ Relationship Manager Audits, Trade Finance, Forex and Treasury Audits, and Forensic and Fraud Investigations. The Branch/Department/ Relationship Manager Audits are distributed amongst 8 teams.

In 2012 BAC reviewed internal audit reports of 153 branches, 27 departments, 2 Subsidiaries and 24 relationship managers. Audit findings presented in the reports are prioritised based on the level of risk. The committee followed up on internal audit recommendations with the corporate management. Internal audit reports are made available to external auditors as well.

The initiative commenced in 2011 to outsource selected areas of audit to recognized Audit Firms did not materialize and therefore the staff cadre approved for 2012 was 46 and this requirement was fully complemented towards mid 2012.

AUDIT COMMITTEE REPORT

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Keeping with the resource allocations Internal Audit department has maintained an average audit cycle of 18 months per audit.

Trade Finance, Forex and Treasury Audits are assigned with equal prominence and emphasis considering its complexities and importance in the context of current economic environment.

The Forensic and Fraud Investigation process has leaped into new approaches and is fast evolving with the documentation of a procedure for Audit Inquiries hitherto not available.

Along with the significant findings Internal Audit department has been engaged in sharing and providing knowledge through regular training to Bank’s staff on better control awareness.

In keeping with BAC recommendations Internal Audit has also provided inputs to the Corporate Management for effective control and prevention of fraud, which are regularly addressed to stay on course.

External Auditors The BAC reviewed and monitored the independence of the External Auditors and the objectivity and effectiveness of the audit process and provided the Board of Directors with its recommendation to the shareholders on the reappointment of M/S Ernst and Young as External Auditors for the financial year ended 31st December 2013 at the next Annual General Meeting. The BAC recommended the scope and fees for audit and permitted non-audit services provided by M/S Ernst and Young.

The committee has received a declaration from M/S Ernst and Young as required by the Companies Act No. 7 of 2007, confirming that they do not have any relationship or interest in the company, which may have a bearing on their independence within the meaning of the Code of Conduct and Ethics of the Institute of Chartered Accountants of Sri Lanka.

The committee reviewed the external audit plan as well as management letters and followed up on issues raised. Private meetings were held with M/S Ernst and Young to ensure that there were no restrictions on the scope of their audit and to discuss matters without management being present.

Whistle Blowing Sampath Bank’s Whistle Blowing Policy is intended to serve as a channel of corporate fraud risk management. The policy will allow any Team Member who has a legitimate concern on an existing or potential “wrong doing”, done by any person within the Bank, to come forward voluntarily, and bring such concern to the notice of an independent designated authority. Concerns raised are investigated and the identity of the person raising the concern is kept confidential, as even anonymous complaints are looked at. In fact this procedure will be operated by the BAC of the Board

Board Audit Committee effectiveness The BAC conducts a formal review of its effectiveness annually, and concluded its performance was effective.

On behalf of the Audit Committee

Ranil PathiranaChairman - Audit Committee



NOMINATIONS COMMITTEE REPORT

The Nominations Committee consists of four non-executive directors as at 31st December 2012.

The following Directors serve on the Nominations Committee:

Mrs. Saumya Amarasekera (Chairperson) - Independent Non-Executive Director

Mr. Dhammika Perera Non-Executive Director

Mr. Channa Palansuriya Non-Executive Director

Miss. Annika Senanayake Independent Non-Executive Director

Mr. Channa Palansuriya ,Mr. Dhammika Perera and Miss. Annika Senanayake were appointed as members of the committee from January 2012. Mr. Channa Palansuriya served as the Chairman of the Nominations Committee from January 2012 until November 2012. Mrs. Saumya Amarasekera was appointed to the committee and its Chairperson from 01st December 2012. The quorum for a meeting is three non-executive directors. The Committee is chaired by an independent non-executive director. The Managing Director and any other advisors may be present by invitation at meetings.

The Group Company Secretary acts as the Secretary to the Nomination Committee.

Committee Meetings During the year two meetings were held to review, consider and recommend new directors in place of those directors who have resigned or relinquished their services. The committee also assesses the fitness and propriety of each of the directors currently holding office keeping in line with the Directions published by the Monitory Board of the Central Bank of Sri Lanka relating to Corporate Governance and other relevant provisions of Law.

Scope of Work The Nominations Committee has the power and authority to seek out any needed information from any bank officer or employee, in connection and in line with its scope.

The Nominations Committee has the authority delegated by the Board to seek needed independent advice when it’s deemed necessary.

The Committee Continuously reviews the structure and

composition of the Board. The committee also reviews the skill set, knowledge, expertise and experience the Board of Directors require in comparison to the current position of the banking environment. The committee can also make recommendation to the Board with regard to any changes they think fit for the progression of the success of the bank.

Recommends appointments to the Board after careful consideration and proposing of the position by a description by the committee on the role and competency required for the particular appointment.

Considers and recommends the requirements of additional/new expertise of existing Directors and to create succession plans for directors resigning or relinquishing their positions.

Carefully reviews management progression and Succession Planning for the top management. The committee ensures that management personnel of high calibre are appointed to guide the bank to achieve greater heights.

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The committee sets criteria such as qualification, experience & key attributes required for eligibility to be considered for appointment or promotion to the post of Managing Director and other Key Management Personnel.

The committee is also responsible for nominating members to the Board for Board approval when and if a board vacancy occurs. It is mandatory for the Board to evaluate the balance of skill, knowledge and experience on the board before any such appointment. The Committee is accountable to make a description of the role that is vacated, they should clearly analyses the capabilities and skill set required for a particular appointment.

The committee is accountable to make recommendations after review to reappoint non-executive directors at the expiry of their term in office or when they are due for re-appointment.

The Committee must report to the Board of Directors on the activities of the Committee meetings, and must make available to the members of the board the minutes of the committee meetings.

The Committee must determine the independence of the directors of the Board, the independence must be based on standards and norms set out in the Central Bank Regulations, Colombo Stock Exchange regulations and other relevant Statues.

To make recommendation on any other matter delegated by the Board of Directors.

Reporting to the Board Minutes of the Nominations Committee meeting are circulated by the Secretary to the committee members and will be made readily available to all other members of the Board.

Performance The members of the Nominations Committee work closely with the Board of Directors, in reviewing the structure and skills needed for a steadfast, strong and successful Board of Directors. The committee further reviews its own performance, constitution and terms of reference to ensure that it is operating effectively, and if need calls recommend any necessary changes to the Board.

On Behalf of the Nominations Committee

Mrs. Saumya Amarasekera Chairperson – Nominations Committee

22nd February 2013


CREDIT COMMITTEE REPORT

Composition of the Credit Committee The Credit Committee comprises of five non-executive directors and two executive directors. The following directors serve on the Credit Committee.

Professor Malik Ranasinghe (Chairman) – Independent, Non-Executive Director

Mr Sanjiva Senanayake – Independent, Non-Executive Director

Mr Channa Palansuriya – Non-Executive Director

Miss Annika Senanayake – Independent, Non-Executive Director

Mr Deshal De Mel – Independent, Non-Executive Director

Mr Aravinda Perera – Executive Director

Mr Ranjith Samaranayake – Executive Director

Mr. E. A. Gunasekera served as an advisor to the Committee, due to his expertise in the Banking sector. A minimum of 2 non-executive directors and 2 executive directors is the quorum for a Credit Committee meeting.

Meetings During the year the committee met on 09 occasions. The Group Company Secretary is the secretary to the Credit Committee and the minutes of the meetings are reported to the Board of Directors. The attendance of the committee members is stated in the Corporate Governance Report on page 107 Members of the senior management of the Bank are invited to participate at the meetings as and when required.

Role & Responsibilities While financial institutions have faced various difficulties over the years for various reasons, the major causes of serious banking problems have been directly linked to lax credit standards for borrowers and counterparties, poor portfolio management or lack of attention to changes in the economic environment.

The committee derives its scope and authority from the Board of Directors decision to set it up and increase its authority in keeping with the expansion of the Bank.

It is the responsibility of this committee to:1. Operate a sound credit granting process

Review proposals in respect of credit policies and standards and approve them and also submit credit requests beyond their scope to the Board.

Review credit policy changes initiated by the management of the Bank and recommend them with or without modifications to the Board of Directors for approval.

Ensure compliance with the Bank’s credit policies and statutory requirements prescribed by the regulatory/supervisory authorities.

Request rapid portfolio reviews or sector/industry reviews, where deemed appropriate.

2. Maintain an appropriate credit administration, measuring and monitoring process

Define credit approval framework and assign credit delegated limits in line with the Bank’s policy.

Review and recommend to the Board, facilities that they believe should have Board approval.

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3. Ensuring adequate controls over credit risk Ensure credit risk exposure keeps within

acceptable limits to maximize Bank’s risk adjusted rate of return.

Monitor capital allocation and define limits in line with the risk appetite.

Ensure stress tests are conducted, where deemed appropriate.

4. Identification and administration of problem credits

Monitor on an ongoing basis the Bank’s credit quality, review periodic credit portfolio reports and assess portfolio performance

Ensure post-credit monitoring and post-mortem reviews are performed, where deemed appropriate

5. Proper evaluation of new business opportunities

Ensure all new credit risk related products are reviewed from a credit risk management perspective

6. Cyclical aspects of the economy (both internal and external)

Monitor the resulting shifts in the composition and quality of the loan portfolio

Review of the Committee The Board undertakes a regular review of the committee’s performance, objectives and responsibilities.

On behalf of the Credit Committee

Malik RanasingheChairman – Credit Committee

22nd February 2013


RISK MANAGEMENT COMMITTEE REPORT

The Board Risk Management Committee (BRMC) is responsible for advising the Board on high-level risk-related matters, risk governance and for non-executive oversight of risk management, compliance with regulatory requirements and internal controls which are relevant to risk management (other than over financial reporting). The Risk Management Committee was established as a committee of the Board in compliance with the Banking Act Direction No.11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka, issued by the Monetary Board of the Central Bank of Sri Lanka under section 46(1) of the Banking Act No.30 of 1988 as amended.

Governance All of the Bank’s activities involve, to varying degrees, the measurement, evaluation, acceptance and management of risk or a combination of risks. The Board, advised by the Risk Management Committee, requires and encourages a strong risk governance culture which shapes the Group’s attitude to risk. The Board and the committee oversee the maintenance and development of a strong risk management framework by the continual monitoring of the risk environment and current and emerging risks facing the Group, and the mitigating actions that are planned and taken. The committee monitors the effectiveness of the

The governance structure for the management of risk at the Bank is set out below.

Authority Membership Responsibilities

Board ofDirectors(BOD)

All members of the Board Determine risk appetite Ensure that significant risks are

competently managedBoard RiskManagement Committee(BRMC)

Ms. Dhara Wijayatilake (Chairperson)Independent, Non-Executive DirectorMr. Sanjiva Senanayake Independent, Snr. Non-Executive DirectorMr. Channa PalansuriyaNon-Executive DirectorMr. Aravinda Perera (MD)Executive DirectorMr. Ranjith Samaranayake (GCFO)Executive Director

Formulates risk policies and recommends to Board for adoption

Advises the Board and makes recommendations on:

risk appetite and alignment with strategy

appointment of senior risk officers Reviews the effectiveness of the

Group’s systems of risk management and internal controls (other than over financial reporting)

Monitors compliance Monitors the progress on implementing

Basel II Reviews Disaster Recovery and

Business Continuity plans Oversees the maintenance and

development of a supportive culture in relation to the management of risk

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Authority Membership Responsibilities

Integrated Risk Management Unit & Compliance Unit

Group Chief Risk OfficerGroup Compliance Officer

Formulating the policy framework addressing multiple and interdependent risks and recommending to Board Risk Management Committee,

measuring and monitoring risk, compliance with regulatory and

supervisory requirements and benchmarking with international best

practice

Group’s risk management and internal controls other than controls over financial reporting, which are monitored by the Audit Committee.

Risk Assessment Reporting & Monitoring The Committee received quarterly reports on key risk indicators and reviewed management actions taken with regard to maintaining risks at an established level within the Bank’s risk appetite. Planned activities and projects for the current year and the next were reviewed, particularly with reference to moving toward full compliance with Basel II Advanced Approaches. The Committee also receives updates from ALCO and the Credit Policy, Risk and Portfolio Review Committee, which are the two executive committees involved in risk management. The BRMC is supported by the Integrated Risk Management unit and Compliance Unit of the Bank, headed by Group Chief Risk Officer & Group Compliance Officer respectively, in discharging its responsibilities.

Risk Appetite Assessing the Bank’s Risk appetite is a key component of the management of risk at Sampath Bank. The Board, advised by the BRMC, approves the Bank’s risk appetite, which describes the types and levels of risk that the Bank can accept in executing our strategy. The Risk Appetite Statement and the related monitoring and reporting framework across the Bank has continued to be an area of significant focus during

the year under review. Regular reports have been provided to the Board on the performance of identified risk indicators and the prudential limits defined and approved by the Board.

Committee Activities Maintaining a culture of risk awareness amongst its members in line with local and global developments in risk management and determining its applicability to the operations of the Bank and its operating environment is a priority for the BRMC. Key risk indicators and changes to the risk profile of the Bank are discussed at each meeting to ensure that all members are aware of developments in this fast changing area that is vital for the Bank’s stability and sustained profitability.

The BRMC undertook the following activities in discharging its responsibilities during the year:

Oversight of executive risk management - Regular reports and presentations were received from the Group Chief Risk Officer including risk profiles for categories of risk identified in the Banks Risk Appetite Statement and proposed mitigating actions for identified risks.

Stress testing – Reviewed stress testing reports for identified risks which include credit and market risk indicators and recommended appropriate action to improve the Bank’s tolerance levels


Risk Appetite and Risk Management Policies –Reviewed the risk appetite statement and recommended changes to better align risk appetite with the Bank’s strategy taking in to account the Bank’s performance against risk indicators, stress test results and industry best practice. The Risk Management Policies were also reviewed to ensure that they reflected the changes required for managing risks in line with the changes in Risk Appetite.

Basel II Advanced Approaches – Progress towards compliance with the Basel II Advanced Approaches was monitored to ensure that it is completed well ahead of the time frame set by Central Bank. Accordingly, work relating to the Internal Risk Based Approach in Credit Risk and Market Risk and Standardised Approach in Operational Risk has been completed pending review by the Bank Supervision Department of Central Bank. The committee engaged the services of external consultants to review the models and has considered their feedback in assessing the progress.

IT systems support – The BRMC monitored the implementation of IT systems to support credit and operational risk management in the Bank and approved allocation of resources for this purpose.

Compliance – The Committee received compliance reports and reviewed these to assess extent of compliance with regulatory requirements. The compliance function was segregated from the Risk Management function with the appointment of a Group Compliance Officer. The Group Compliance Officer will report directly to the BRMC in addition to the Group Chief Risk Officer.

Internal Controls – The Committee reviewed internal loss event reports and the adequacy of internal controls and procedures (except over financial reporting) regularly and have made recommendations for improvements to the executive management.

Review of Middle Office activities – BRMC also received reports of compliance with Board approved treasury operating limits monitored by the Middle Office.

Customer complaints – The committee reviewed customer complaints to assess their implications on the risk management of the Bank and recommended actions where appropriate.

Outsourced activities - Monitoring of outsourcing activities of the Bank through the outsourcing committee to ensure that such activities are within the CBSL directives and guidelines and due diligence tests are in place to monitor the activities of third party service providers.

Promoting a culture of Risk Awareness – The committee actively promoted a culture of risk awareness within the Bank by monitoring training for employees in Risk Management and business units to ensure that adequate risk focused training is carried out at all levels.

Meetings of the BRMC There were 6 Meetings during 2012. The minutes of the BRMC were recorded by the Group Company Secretary and circulated amongst the members of the Committee. Minutes were submitted to the Board on confirmation.

Key management personnel supervising the Credit, Market, Liquidity, Operational and Strategic risks also attended the meetings of the BRMC by invitation.

On behalf of the Risk Management Committee

Dhara WijayatilakeChairperson – Risk Management Committee

22nd February 2013

REPORT OF THE RISK MANAGEMENT COMMITTEE

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The Composition The Human Resources and Remuneration Committee comprises four non-executive directors and one executive director. The directors who serve on the committee are:

Mr. Deepal Sooriyaarachchi (Chairman) - Independent, Non-Executive Director

Mr. Channa Palansuriya - Non-Executive Director

Miss. Annika Senanayake - Independent, Non-Executive Director

Mr. Deshal de Mel - Independent, Non-Executive Director

Mr. Aravinda Perera - Executive Director

Meetings During the financial year ended 31st December 2012, 3 meetings were held. The attendance of the members of these meetings is given on page 107, of the Annual Report. The Executive Director/Group Chief Financial Officer and Deputy General Manager Human Resources 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.

Duties and Roles The overall scope of the committee is to provide strategic direction to build an effective and efficient HR organization for the Bank.

Based on the Direction issued by the Monetary Board of the Central Bank of Sri Lanka under Section 46(1), Banking Act No. 30 of 1988 as amended and Banking Act Direction No. 11 of 2007 Corporate Governance for Licensed

HUMAN RESOURCES & REMUNERATION COMMITTEE REPORT

Commercial Bank in Sri Lanka, the committee at its meeting held on 09th August 2011 decided on the following scope and responsibility:

Scope and Responsibility The committee shall determine the

remuneration policies (salaries, allowances and other financial payments) relating to Directors, Managing Director and Key Management Personnel of the Bank.

The committee shall set goals and targets for directors, Managing Director and Key Management Personnel.

The committee shall evaluate the performance of the Managing Director and Key Management Personnel against set targets and goals periodically and determine the basis for revising remuneration, benefits and other payments of performance based incentives.

The committee shall take on any other areas and enlarge its scope which in its view or in the Board’s view is desirable if it were handled by the committee.

The committee shall advise the HR Head of the Bank with regard to revision of salaries of Bank staff and of any major organisational changes needed for the Bank’s purpose.

Performance during the Year/ Key HR Initiatives During the year under review, Three (3) Branches were established increasing the permanent staff strength from 3,230 to 3,455 at the end December 2012. A comprehensive HR Scorecard was developed to monitor key HR performance indicators during the year and monthly updates are submitted to the Board of Directors for review.

As per the Human Resources Strategic Plan, the following initiatives were taken by the HR


Department during the year 2012 in order to align HR strategy with the business strategy and to enhance the effectiveness of the HR function of the Bank.

Employee Resourcing In order to provide the required staff, the recruitment, selection, transfer and promotion processes were further streamlined and improved to meet the human capital needs of the Bank.

Accordingly, the Bank has recruited 368 front liners during the year and 698 team members were confirmed in the Bank. A total of 354 were promoted to the next higher grades as at 31st December 2012.

Career & Succession Planning To prepare the Bank to face future challenges and to facilitate career and succession planning, a new organization structure was developed by the Human Resources & Remuneration Committee and submitted for ratification by the Nominations Committee of the Board. This process will also contribute to develop business leaders at all management levels and ensure career and succession planning for all key managerial positions.

In order to ensure career path and to obtain optimum contribution, a Multi Skilling Programme was introduced for non-bankers. Twenty Seven (27) team members were selected through a rigorous selection process. At the successful completion of the programme, they will be absorbed to the mainstream banking in 2013.

Training & Development Training & Development function of the Bank has strengthened in terms of diversity and delivery channels to develop knowledge and skills of our team members focusing on enhancing overall performance of the Bank. Based on Training Need Analysis 2012, the Training Master Plan for 2012 was prepared and the following are the key initiatives taken during the year:

Leadership/Managerial Competency Development Programme for Senior Management: Twenty Five (25) Senior Managers have undergone intensive training conducted by National University of Singapore (NUS). The learnings of this programme has been cascaded to the next level of Managers in order to further optimise the outcome of the programme.

Each participant of the NUS Programme has undertaken a project that will contribute to the bottom line of the Bank. Most of these projects have been already successfully implemented and the progress of these projects will be reviewed by the Board quarterly.

Technical Competency Development Programme : Resource Persons from Asian Institute of Technology (AIT), Thailand conducted a special programme for Regional Managers of the Bank to develop technical capabilities, strategic thinking and leadership skills of Regional Managers.

E-Learning: Re-launched E-learning modules with additional features /animations and user friendly interface.

Online Learning – Online English Proficiency Programme: Introduced an online version of English Proficiency Programme, especially designed for Sinhala and Tamil speaking team members.

HUMAN RESOURCES & REMUNERATION COMMITTEE REPORT

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Regional Training: With a view to address regional specific training needs, this concept has been initiated during the year covering all 13 remote regions. Training facilities in the regions were also upgraded.

Certification Programme on Environmental Appraisals: Conducted a Certification Programme on Environmental Appraisals, collaborated with Institute of Environmental Professionals Sri Lanka (IEPSL). Now bank has 24 team members certified as Environmental Professionals.

According to the feedback received from participants on training effectiveness, the Bank has been able to achieve an overall rating of 95% Excellent and Good ratings which reflects the effectiveness of the training initiatives.

Employee Relations Industrial Relations: This plays a critical role in maintaining industrial harmony. Open door policy, consistency and transparency of the HR Policies and constant dialogue with employee representatives paved the way for conducive industrial relations climate in the Bank.

Employee Communication: Introduced a Bank-wide two way communication plan, in order to minimise communication gap between the Management and members of the Sampath team.

Appointment of Regional HR Co-ordinators: As a pioneering effort, the Bank has appointed Regional HR Co-ordinators in order to foster positive relationship with all team members spreading in the Branch network. Under this programme, HR

Co-ordinators visit Branches and conduct one-to -one discussions with team members, to address their HR related issues.

Rewards and Recognition Scheme for Children of Sampath Team: A special scheme for children of Sampath team was launched in order to recognise achievements in the areas of Education, Sports and extra curricular activities.

Performance Management: An objective based Performance Management System (PMS) was designed for Executives and higher grades to align the team with the business.

In order to strengthen the employee relations performance coaching, counselling and grievance handling processes are available.

Compensation and Benefits The Management has negotiated with representatives of the employee and agreed for an upward revision of salaries for two consecutive years (2012 and 2013) which is supportive for smooth operations of the business.

On behalf of the Human Resource and Remuneration Committee

Deepal SooriyaarachchiChairman - Human Resource and Remuneration Committee

22nd February 2013


STRATEGIC PLANNING COMMITTEE REPORT

The Strategic Planning Committee was established to assist the Board in setting strategic direction and defining the Bank’s objectives to reach greater heights in the banking industry. The committee spearheads the bank’s long term goals and identifying strategies for accomplishing these goals and targets.

Composition of the Strategic Planning Committee The 8 member committee is a combination of 6 non-executive directors and 2 executive directors. The committee is chaired by a non-executive director.

Mr. Dhammika Perera (Chairman) - Non-Executive Director Mr. Sanjiva Senanayake - Independent, Non-Executive Director Prof. Malik Ranasinghe - Independent, Non-Executive Director Mr. Ranil Pathirana - Independent, Non-Executive Director Mr.Channa Palansuriya - Non-Executive Director Mr. Deshal De Mel - Independent, Non-Executive Director Mr. Aravinda Perera - Executive Director Mr. Ranjith Samaranayake - Executive Director

The Group Company Secretary acts as Secretary to this committee.

Frequency of Meeting The Committee has met on 3 occasions within the financial year- 2012. The members of the committee worked with dedication to fulfil its obligations.

Scope of Work 1. Strategic Vision & Mission of the Bank:

Examine the Bank’s current mission, strategic positioning and the Strategic Vision and provide guidelines to the Bank’s Strategic planning process.

2. Review of the impact of external trends and issues: Examine the external challenges and opportunities relevant to the strategic vision and key goals of the Bank.

3. Review the internal strengths and weaknesses of the Bank and give guidelines to the management.

4. Oversee and monitor the planning process that leads to the formulation of the Strategic Plan.

5. Examine the effectiveness of key strategies for achieving the goals and objectives.

6. Review the Bank’s resources and capabilities in the context of achieving its strategic objectives.

7. Review the adequacy and composition of the Bank’s capital structure in the context of the growth targets.

8. Make recommendations to the Board on key strategic decisions and investments.

Reporting to the board Minutes to the Committee meeting are circulated to all members of the Committee and made available to all other members of the Board.

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Performance The committee reviewed performance of the Bank during the year against the Rolling three year Plan and Annual budget for 2012 to identify areas of concern which needed changes in strategic direction. The committee engaged in discussions with the Corporate Management and Strategic Planning Team to determine the strategic direction for the Bank for the period 2013 to 2015 which formed the basis for the development of the Strategic Plan for this period. The Rolling Three Year Plan was submitted to the Board of Directors for their information and approval was obtained for the Annual Budget for 2013 which was developed in line with the strategy document.

The Committee regularly reviews its own performance, constitution and scope of work to entrust that it is operating smoothly and efficiently. Its scope also extends to making recommendations to the board when the need arises.

On behalf of the Strategic Planning Committee

Dhammika PereraChairman – Strategic Planning Committee

22nd February 2013


SHAREHOLDER RELATIONS COMMITTEE REPORT

Sampath Bank, is the first listed Company in Sri Lanka which has setup a Shareholder Relations Committee to identify and address shareholders’ concerns as deemed appropriate through dialogue with shareholders/investors.Composition of the Shareholder Relations Committee

Comprises of two non executive directors and two advisors to the Board.

Mr. Channa Palansuriya (Chairman) - Non-Executive Director

Mr. Deshal de Mel - Independent, Non Executive Director

Mr. Ernest Gunasekera - Advisor

Mr. Prasantha Lal de Alwis - Advisor

The Group Company Secretary acts as the Secretary to the Committee.

Mr. Channa Palansuriya has been acting as the Chairman to the Committee since 1st January 2012, Mr. Deshal de Mel too serves as a member of the committee.

Mr. Ernest Gunasekera and Mr. Prasantha Lal de Alwis serve as Advisors to the committee.

Frequency of Meetings Meetings are held when the needs arises. The Committee met once during the year attended to by all the members. By invitation of the Shareholder Relations Committee, the Managing Director and Executive Director/Group Chief Financial Officer, also attended the Shareholder Relations Committee Meeting. The Shareholder Relations Forum was convened after the Annual General Meeting giving a much awaited opportunity for the eager shareholders to voice out their opinions

and suggestions to improve relations between stakeholders and the Bank. Role played by the Shareholder Relations Committee1) Providing suggestions to the Board to

improve shareholder/investor relations of the Bank.

2) Organizing forums that encourage dialogue between the Board of Directors and Shareholders/Investors.

3) Providing guidance to the Board in matters of investor relations.

Activities of the Committee The Shareholder Relations Committee is a vital Board committee established to facilitate smooth and continuous dialogue between the Board and shareholders to address their concerns, if any. The committee concentrates on developing and preserving a good rapport with the shareholders. The committee ensures that the Bank’s latest information and financial results are swiftly communicated to the shareholders through Interim and Annual Reports, notifications to the Colombo Stock Exchange and timely press releases. In addition to these avenues of information our shareholders have easy access through our corporate website, www.sampath.lk to all relevant information, which also gives our shareholders access to the Bank for any query. Shareholders can freely raise any questions to the Board of Directors at the Annual General Meeting and Shareholder Relations General Meetings. These forums also encourage our shareholders to openly voice of concerns and make suggestions and requests.

This year has seen regular two-way dialogue between the shareholders and the Board of Directors. The Group Company Secretary has played a vital role in the accomplishment of many

161Sampath Bank PLC

goals of the Shareholder Relations committee. The Board of Directors are kept informed of shareholder outlook through regular reports.

Shareholders can also write to the Chairman and any Director of Sampath Bank, they can express any concern or view regarding the Bank which gives another avenue to the shareholder to express their opinion in person.

Performance The committee meets when it’s deemed necessary. This year the committee has headed many events. The main objective of these events was to facilitate better shareholder relations.

The committee meets as and when necessary and report on the activities to the Board. The following activities were initiated by the Committee during the year:

Shareholders’ Forum was held soon after the Annual General Meeting on 30th March 2012, where the members of the committee listened to the shareholders’ concerns and formulated plans to address material concerns raised by them.

During the Silver Jubilee year the Bank invited our top 20 shareholders to a celebratory dinner and recognised the loyalty of 150 shareholders, who have been with the Bank from inception through the issue of a souvenir silver coin, a coffee table book and a dinner in March 2012 to mark the occasion.

Concessions were given to shareholders on banking transactions as follows:

All commissions to be on actual cost basis, meaning that all internal commission charges to be waived off. However, in the case of foreign bank charges and other local bank charges, the actual cost will be collected. This excludes the cheque return commissions & postal charges.

On opening of current accounts, the initial deposit to be 50% of the normal initial deposit.

The annual fee charged for VISA credit cards is reduced to 50% of the actual fee charged for the period.

SET cards to be issued free of charge. However, this does not include per transaction fee.

On behalf of the Shareholder Relations Committee

Channa PalansuriyaChairman – Shareholder Relations Committee

22nd February 2013


TREASURY COMMITTEE REPORT

The Treasury Committee was established in April 2012 following a decision taken at the Board Meeting of March 2012 in order to place more emphasis on the Treasury function.

Composition of the Committee The Treasury Committee comprises three independent non-executive directors and two executive directors:

Mr. Sanjiva Senanayake (Chairman) - Independent Non-Executive Director

Prof. Malik Ranasinghe - Independent Non-Executive Director

Mr. Deshal de Mel - Independent Non-Executive Director

Mr. Aravinda Perera - Executive Director

Mr. Ranjith Samaranayake - Executive Director

Mr. Manjula Ekanayake of the Bank’s Treasury Department served as the Secretary. Other officials of the Bank were invited to attend as deemed necessary. Proceedings of the Treasury Committee were regularly reported to the Board of Directors and approval sought for policies recommended and other matters.

Meetings The Treasury Committee held three meetings during the period under review at which all members of the committee were present.

Role & Responsibilities The Treasury Committee is instituted to provide guidance to the Treasury in carrying out its functions and to monitor its performance with a view to optimising earnings, stability and growth of the Bank.

The main responsibilities of the committee are: Establish Treasury policy and recommend to

Directors Ensure Treasury Dealing Room operations

are carried out in accordance with this policy

Monitor liquidity of the Bank Provide guidance to the Asset & Liability

Management Committee consisting of corporate management to optimise performance

Monitor the management of foreign exchange and interest rate risks by the Bank

Monitor compliance with Central Bank regulations managed by the Treasury including capital adequacy, statutory reserve ratios, and statutory liquid assets.

Performance The Treasury Committee focussed on the following areas during the year:

Making the Asset & Liability Committee (ALCO) process more efficient and business oriented

Better management of available funds Optimising the returns from statutory

liquid assets held to satisfy regulatory requirements

Internal pricing of funds to provide desired incentives internally and better evaluate performance of business units

Development of new products

During 2013 efforts will be concentrated on further improving operational coordination among departments and implementation of joint initiatives to help the Treasury to achieve higher profitability.

On behalf of the Treasury Committee

Sanjiva SenanayakeChairman – Treasury Committee

22nd February 2013

163Sampath Bank PLC

MARKETING COMMITTEE REPORT

This Committee was set up to have a closer focus on the marketing strategies of the Bank and their effectiveness.

The following directors serve on the Marketing Committee:Mr. Deepal Sooriyaarachchi (Chairman) – Independent, Non-Executive DirectorMs. Annika Senanayake – Independent, Non-Executive DirectorMr. Deshal De Mel – Independent, Non-Executive DirectorMrs. Saumya Amarasekera – Independent, Non-Executive Director The Key Terms of Reference of the committee are to:-

Review the customer strategy and performance against set objectives

Review Brand strategy and it s performance Monitor customer service and customer

service strategies in line with the customer charter

Monitor the CSR policy of the Bank and progresses of same.

Since establishment of the Committee in June 2012 it met 3 times.

The findings of the comprehensive customer satisfaction survey was reviewed by the Sub committee along with the research agency and the marketing team of the bank before making recommendation to the board to further improve areas of customer satisfaction.

The committee will establish marketing effectiveness measurement matrixes review performance and provide guidance where necessary.

Review of the Committee The Board undertakes a regular review of the performance of the Committee, objectives and responsibilities.

On behalf of the Marketing Committee

Deepal SooriyaarachchiChairman – Marketing Committee

22nd February 2013


At Sampath Bank we believe on a proactive and forward looking Risk Management philosophy that is clearly understood throughout the organisation

RISK MANAGEMENT REPORT

Risk Report Globally, rapidly evolving regulation of the financial services, sovereign debt concerns and alleged violations of existing regulations made headline news throughout the year highlighting the importance of risk management in financial services. The need for a more resilient global financial services structure has become more apparent as global recovery weakened with further cracks appearing in struggling economies. Whilst Sri Lanka’s financial system remained stable and resilient underpinned by domestic economic growth, it is probable that there will be some moderating effects on the local economy as well in the near future. As the business of banking is about assuming appropriately priced risk and prudent management of risk portfolios, there is a renewed focus on risk management that is inevitable given the current global and local operating environment. At Sampath Bank we believe that a proactive and forward looking risk management philosophy that is clearly understood throughout the organisation, effective governance structures, policies and risk management tools and techniques are pre-requisites to achieve sustainable growth and deliver value to our stakeholders whilst strengthening our position as a bank that stays ahead of the curve.

Risk is managed in accordance with the following principles within the Bank

Risks assumed must be approved within the risk management framework and risk appetite

Returns must be sufficient for the risks assumed

Risks must be measured, monitored and managed continuously

Awareness of risk and a strong risk management culture is key to managing risk and maintaining stability

The Bank’s risk management objectives are To identify, measure, evaluate, monitor

and manage significant risks to Bank on a forward looking basis

To define Bank’s risk appetite and align Bank’s risk portfolios and business strategy in line with the defined risk appetite

To maintain the Bank’s capital strength and strong liquidity position

To optimise risk – return decisions To ensure that business growth plans

are properly supported by effective risk infrastructure

To achieve competitive advantage through efficient and affective risk management and control

To strengthen governance, controls and accountability across the organisation

With these objectives in view, we have identified the major risks which are considered to be significant to the Bank as credit risk, market risk, liquidity risk, operational risk, legal and regulatory risk and reputation risk.

Identified Major Risks to the Bank are

Credit risk, Market Risk, Liquidity Risk, Operational Risk, Legal/Regulatory Risk and Reputational Risk

165Sampath Bank PLC

Continuous Improvement Risk management continues to be a key area of focus and indeed, provides the framework for the stable foundation of the Bank. As the operating environment changes our structures, tools and techniques also have to change to be able to identify, measure and manage the risks.

The road map of the risk management initiatives that have been implemented during the year and initiatives planned for the next year in line with the Bank’s strategy, regulatory requirements and international best practices is given below.

Risk Management

Credit Risk

Market Risk

Con

cent

ratio

n R

isk

Proc

ess

Ris

k

Inte

rest

Rat

e R

isk

Operational Risk

Cou

nter

part

y R

isk

Peop

le R

isk

Fore

ign

Exch

ange

Ris

k

Def

ault

Ris

k

IT/S

yste

ms

Ris

k

Liqu

idity

Ris

k

Sus

tain

abili

ty R

isk

Exte

rnal

Eve

nts

Equi

ty R

isk

Cou

ntry

Ris

k

Lega

l Ris

k

Com

mod

ity R

isk

Reg

ulat

ory

& C

ompl

ianc

e R

isk

Rep

utat

iona

l Ris

k

Str

ateg

ic R

isk

Bank’s Risk Appetite Framework

Internal Capital Adequacy Assessment Process

Basel II Guidelines

Central Bank Guidelines

International/Industry Best Practice


2012 2013 and beyond

Implemented 7 credit risk rating /scoring models validated by independent consultants

Risk Based Pricing

Continuation of data collection in order to migrate to IRB approaches

Applying to Central Bank of Sri Lanka (CBSL) for migrating to Credit Risk - Internal Ratings Based (IRB) foundation approach

Defined Qualitative and Quantitative Risk Appetite Limits and Policy Ranges for Risk areas such as Credit and Operational Risks

Monitoring of Risks to ensure that they are within the accepted range even during adverse conditions

Commenced Implementation of IT system for Credit and Operational Risk Management, and completion of Phase I of the implementation

Completion of IT Systems Implementation and Project Sign-off

The Standardised Approach (TSA) Calculation for Operational Risk Capital, and submission for CBSL review

The Standardised Approach Calculation for Operational Risk Capital to be submitted to CBSL approval

High Risk Areas identified through Risk and Control Self Assessments (RCSA) and Key Risk Indicator (KRI) monitoring carried-out for key business units and processes

Strengthening of Internal Controls based on the Risk Levels identified during Risk and Control Self Assessments (RCSA) and Key Risk Indicators

Anti Fraud Assessment Improvements to Anti Fraud Framework

Sri Lanka Financial Reporting Standards (SLFRS) adoption and Risk Disclosures

SLFRS adoption and Risk Disclosures ongoing improvements

Upgrading of existing Risk Dashboards and regular reporting to BRMC

Expanding the scope and coverage of Risk Dashboards to other areas such as Market, Liquidity and Compliance areas

Value at risk calculations for Market Risk Internal Models Approach

Anti Money Laundering (AML) Software System implemented. Centralised Transaction monitoring

Continuous improvement of AML monitoring

Internal Capital Adequacy Assessment Process (ICAAP) Programme commenced

ICAAP Programme Document to be submitted to CBSL. ICAAP Implementation – Basel II Pillar II compliance. Identifying the material Risks not covered in Pillar I of Basel II will be assessed and monitored with the implementation of ICAAP

Preliminary work on Basel II Pillar III and Basel III implementation


167Sampath Bank PLC

Basel II Compliance The Bank is currently compliant with the Basel II (Pillar I) Standardised approach in Credit and Market Risk and Basic Indicator approach in Operational risk. We have completed the work relating to the Basel II Advanced approaches including Internal rating Based foundation (IRB) Approach in Credit Risk, and Standardised Approach in Operational Risk. The Bank remains fully committed to migrating to the advanced approaches of Basel II within the time frame set by the Central Bank of Sri Lanka and the Road Map above demonstrates this commitment.

Internal Capital Adequacy Assessment Process (ICAAP)Internal Capital Adequacy Assessment Process is a part of Pillar II of Basel II framework, which focuses on bridging the gap between the Regulatory Capital and Economic Capital requirements of the Banks. ICAAP will capture all

material Risks such as Reputational, Liquidity and Strategic Risks etc. that are not covered in Pillar I of Basel II. In accordance with the Central Bank of Sri Lanka Guidelines, the Banks are required to submit the ICAAP document and the Bank’s approach to Capital Management to the regulator by end January 2013. In order to comply with this requirement, we have secured the assistance of an internationally reputed consultant to complete the ICAAP implementation planning.

Basel IIIBASEL III is the next upgraded global regulatory standard on managing capital adequacy and liquidity of banks, which is planned to be implemented between 2013 and 2019. Basel III aims to strengthen capital requirements of the Banks by introducing new requirements on liquidity and leverage.

Basel III will call for a series of regulatory directives and regulations at national level, as well as improvements to the existing Risk Management structures and practices in Banking sector.

Risk Management Framework & Risk Governance The Board of Directors has overall responsibility for defining the risk appetite of the Bank and for ensuring that the most significant risks to the Bank are competently managed. Accordingly, they determine the risk appetite, set the risk objectives and approve the Integrated Risk Management Framework, policies and ensure that relevant procedures are in place for effective risk management.

Internal Capital Adequacy Assessment Process (ICAAP) is a part of Pillar II of Basel II framework, which focuses on bridging the gap between the Regulatory Capital and Economic Capital requirements of the Banks.

ICAAP


The Integrated Risk Management of the Bank has been assigned to an Independent Risk Management Committee of the Board in compliance with the Central Bank of Sri Lanka Directive 11 of 2007. This committee is empowered to review the Bank’s risk management policies as well as regulatory and compliance issues. It monitors the Bank`s risk profile against the agreed risk appetite through regular reviews and related controls. It also reviews

The Risk Management Governance structure is depicted in the chart below.

Board of Directors (BOD)

Managing Director

Group Chief Risk Officer

Group Compliance

OfficerInternal Audit

Board Risk Management Committee (BRMC)

Board Audit Committee

Credit Policy Risk & Portfolio Review

Committee

Risk Management Unit (RMU)

Credit Risk Management Unit (CRMU)

Operational Risk Management Unit

Market Risk Management Unit

AML & Compliance Unit

Assets & Liability Management Committee

Basel II implementation, Business Continuity and Disaster Recovery plans, key risk indicators and the implementation of the Integrated Risk Management framework.

Credit Policy, Risk and Portfolio Review Committee is responsible for reviewing the overall credit policy and portfolio, credit procedures and credit risk management and also resolve significant credit policy issues. The Committee is chaired by the

The Board of Directors has overall responsibility for defining the risk appetite of the Bank and for ensuring that the most significant risks to the Bank are comprehensively managed through a robust Risk Management framework


169Sampath Bank PLC

Managing Director and the other members of the committee are the Heads of Credit Departments, Recoveries and Group Chief Risk Officer.

Asset & Liability Management Committee (ALCO) comprising the Bank`s senior management, headed by the Managing Director, is the top executive committee for managing the balance sheet of the Bank from a risk return perspective, including Market Risk within the risk appetite defined by the Board. This Committee meets regularly and the committee reports are reviewed by the Board Risk Management Committee. As these committee members sit on other committees, there is a formal and informal dissemination of knowledge to other business areas.

Integrated Risk Management Unit The Integrated Risk Management unit manages the Bank`s risk function and is independent of profit and volume targets. The Unit is headed by the Group Chief Risk Officer and is responsible for formulating the policy framework addressing multiple and interdependent risks, measuring and monitoring risk, and benchmarking with international best practice. Accordingly the unit reviews and assesses key risk indicators covering Credit risk, Operational Risk, Market Risk, Interest rate risk, Liquidity risk, Equity Price Risk

and Foreign exchange risk within the framework, including stress test results, for various risks. It also carries out an assessment of the capital adequacy based on the requirements under Basel II norms.

Compliance Unit The functions of Risk and Compliance were segregated during the year to comply with the regulatory recommendations. Accordingly, the position of Group Compliance Officer was created to monitor compliance with regulatory and supervisory requirements including anti-money laundering on a group wide basis. The AML and Compliance Unit now reports to the Group Compliance Officer who, in turn, reports to the Board Risk Management Committee.

Three Lines of Defence The Three Lines of Defence has earned high level of acceptance as a standard model in a modern approach to managing uncertainty and preventing risk. This model could be used as the primary means to demonstrate and structure roles, responsibilities and accountabilities in decision making, risk and controlling functions to achieve effective risk management, governance and assurance objectives. The Bank`s overall risk governance model is based on the concept of Three Lines of Defence model whereby business management, risk management and assurance functions are carried out independently of one another.

Integrated Risk Management Unit

The Unit headed by Group Chief Risk Officer manages the Bank`s Risk independent of profit and volume targets and, is responsible for formulating the policy framework addressing multiple and interdependent risks, measuring and monitoring risk, and benchmarking our practices with International Best Practices.


1st Line of Defense 2nd Line of Defense 3rd Line of Defense

Decentralised Primary Responsibilties Business Support units

Centralised Oversight Risk Management

Assurance: Independent of All others Complianceé /Audit

Primary responsibility for identifying, managing and reporting risk

Self assessment of risk and controls

Compliance with all policies and procedures

Promoting strong risk culture and awareness of risk elements in business activities

Training as a way of mitigating risks in business operations

Setting the IRM Framework Providing support to the

business units, review and report key risks to BRMC

Challenges the self assessments and inherent risks identified by business units and review controls

Independently identify and assess risk

Oversees setting of Policies

Compliance Regulatory Compliance Regulatory Reporting Anti Money Laundering Internal Audit Independent assurance of the

robustness of the different risk management processes and methodologies

Independent oversight function with oversight ability to communicate with external auditors and the Board Audit Committee

Ensure that the Bank is compliant with the risk management framework

Credit Risk Management Credit risk is the potential for loss due to the failure of a customer or counterparty to meet its obligations to pay in accordance with agreed terms and conditions. In addition to lending, credit risk may arise from areas of international trade, treasury and off balance sheet exposures such as guarantees. Since granting of credit is the main line business of the bank, it is the highest contributor to overall risk exposure.A comprehensive framework of policies and procedures for identification of credit risk, measurement, review and control which is

aligned to risk portfolio strategies is core to the effective management of credit risk. The Credit Risk Management Policy of the Bank is based on the Integrated Risk Management Guidelines issued by CBSL, Basel II guidelines, international best practices and the risk appetite of the Bank. It reflects the tolerance for risk in pursuit of the bank`s business objectives and provides guidance on

Establishing and maintaining an appropriate credit risk environment

Operating a sound credit granting process Ensuring an adequate control over credit

risk


171Sampath Bank PLC

Maintaining an appropriate credit administration, measurement and monitoring process

Proper evaluation of new business opportunities

We use a number of methods and analytical tools to manage Credit Risk at the Bank.

Structured and standardised credit appraisal process –This is our first line of defence and is carried out by specialised staff who are competent in assessing credit risk. Prudent client selection with reference to industry and regional strategies and client due diligence is key to managing credit risk and care is taken to ensure that policies and procedures in this regard are understood and enforced in all business units of the Bank. Transaction originators’ assessments are reviewed by a committee level approval system to provide additional safeguards.

Delegated authority levels – Authority is delegated by the Board of Directors to the Board Credit Committee, Executive Advance Committee, Advance Committee and to Managing Director. The Managing Director has sub delegated Credit Approval limits to the senior management where appropriate. The delegation is reviewed periodically to ensure that limits set reflect changes to internal and external environment.

Segregation of duties - Credit approval and management, Risk Management, Credit Administration, Credit Control and Credit Audit have been clearly segregated. Credit appraisal and evaluation is handled by specialised team members at the Head Office Credit Departments and the Regional offices whilst initiation is with the Branches and Relationship Managers.

Independent Review by Credit Risk Management Unit – An independent pre-credit review is carried out by CRMU for all exposures above a certain threshold and for credit with weak ratings.

Internal Risk Rating and risk measurement – Internal risk ratings in accordance with the Basel II Advanced approaches assist the Bank to more accurately assess the quality of the portfolio. These internally developed models were validated by an external consultant and the Bank’s portfolio is now rated in accordance with this.

Monitoring of Post Credit Risk – The Bank has established procedures for Post Credit Risk identification, monitoring and management. Branch/Relationship Managers have primary responsibility for identifying internal and external Early Warning Signals (EWS) that may impact credit quality and notifying their respective Credit Committees. Facilities and clients indicating Early Warning Signals and deteriorating credit quality would be Watch Listed with the approval of the respective Credit Committees for more stringent monitoring.

Loan Review Mechanism - Credit Risk Management Unit carries out a comprehensive interim review of selected large exposures routed through the unit, within 3-4 months from the date of approval. The unit will evaluate adherence to approval conditions, interim financial position and utilisation/conduct of facilities for selected exposures and alert on any Early Warning Signals detected during the review. A detailed report on this on-going activity is submitted to the Credit Policy, Risk and Portfolio Review Committee periodically.

Key areas in our Credit Risk Management.

Structured and standardised credit appraisal process, Delegated authority levels , Segregation of duties, Internal Risk Scoring/Rating, Monitoring of Post Credit Risk, Loan Review Mechanism and Stress Testing are key areas in our Credit Risk Management.


Concentration Risk Management–CRMU also focuses on managing the Concentration risk on a portfolio basis to ensure that the Bank’s lending is well diversified across a wide range of products, industries and customers. Portfolio concentration is analysed and monitored by various parameters such as counterparty, sector, industry and geography. Desired diversification is achieved through setting maximum exposure guidelines for individuals, companies, groups and sectors. CBSL guidelines on maximum exposures are taken into account when setting these prudential limits in addition to the Bank’s own risk criteria and business objectives. Credit Risk concentration positions are reported to the Board Risk Management Committee on a periodic basis. Analytical tools such as the Herfindahl-Hirschman Index, Gini Coefficient are used to quantify Concentration Risk.

Sustainability Risk - During the year, the Development Banking criteria were revised and enhanced to meet environmental criteria as part of the initiatives to integrate sustainability principles and criteria in to the normal business activities of the Bank.

Stress Testing - Specific forward looking scenarios are generated to analyse how the Bank’s profitability and capital adequacy will be impacted if the operating environment becomes more challenging. This enables the Bank to take necessary action to mitigate or minimise the risks that are likely to arise from anticipated movements or trends in the operating environment. The Bank’s Stress Testing Policy and framework have been approved by the Board and a number of variables relevant to management of Credit Risk are included in the Stress Testing.

Risk Appetite - Limits and tolerances under normal and also under stressed conditions have been formulated to ensure that risks stay within an acceptable range even during adverse conditions. These, limits would be reviewed by the Board of Directors annually or earlier if required

We focus on managing the Concentration risk on a portfolio basis to ensure that the Bank’s lending is well diversified across a wide range of products, industries and customers.


Risk Appetite Policy Range

Criteria

Credit Quality

Gross NPA% (i.e. Gross NPA - Interest in Suspense(IIS)/Gross Adv.-IIS) 2.5% - 3.5%

Net NPA % (i.e. (Gross NPA-IIS-total provision) / (Gross Adv.-IIS)) Below 0.5%

Provision Cover(Specific Prov.)/ (Gross NPA-IIS) % Minimum 60%

Provision Cover(General +Specific Prov.)/ (Gross NPA-IIS)% Minimum 70%

Open Credit Exposure(Gross NPA-IIS-Specific Prov.) /Capital Base % Below 10%

Exposure above rating of C+ to total advances 80%

173Sampath Bank PLC

Credit Risk Management: A Pictorial Review The weakening global economy and the political unrest in the Middle East can impact the growth of our economy. Locally, rising interest rates, the depreciation of the Sri Lankan rupee, tightening liquidity can adversely impact credit risk as well. However, we have taken various measures as described above to detect early warning signs and limit our exposures to accounts at risk. The Bank’s strong credit risk management practices are reflected in the pictorial representation of factors that impact credit risk.

Risk Appetite Policy Range

Criteria

Credit Concentration

Single Borrower Limit (Individual) -LKR/Mn as per CBSL

Single Borrower Limit (Group) -LKR/Mn as per CBSL

Aggregate exposure(funded +non funded) to large borrowers(i.e. over 15% of the Capital)/Total exposure(funded +non funded) (%)

as per CBSL 55%

Lending to Agriculture (%) – mandatory requirement 10% 10% - 15%

Exposure Against Shares/Credit Portfolio (%) <= 7.5%

Top 20 Adv. (direct)/Total Adv.(%) Below 25%

Lending to Maldives(FCBU)/Total Advances % Cap at existing level

Aggregate term loans over 3yrs (residual maturity)/Total Advances % 40%

(OD+ Money Market Loans)/Total Advances (%) Below 20%

Sector wise Concentration (HHI Score) below 0.16

Product wise Concentration (HHI Score) below 0.16

The risk indicators remained within the policy range during the year

Advance Portfolio by Sector

Transport - 1%Pawning - 24%Manufacturing - 13%Traders - 16%Agriculture & Fishing - 11%Other Customers - 10%Other Customers - Staff - 1%Fianance & Business Services - 6%Other Services - 3%Tourism - 3%Construction - 4%New Economy - 3%Infrastructure - 3%Credit Card - 2%

Sector concentration is within the limits established by the Board of Directors


Base Data as at 31.12.2012 (Rs Mn)

Base Data as at 31.12.2011 (Rs Mn)

a) Capital Adequacy Ratio(CAR) 13.61% 11.45%

b) Capital 24,401 18,548

c) Risk Weighted Assets 179,297 162,027

d) Total NPA – Gross 4,995 5,236

e) NPA Ratio – Gross 2.33% 3.00%

f) CAR as per CBSL requirementTire I 5%Tire I + II 10%

Tire I 5%Tire I + II 10%


Credit Risk Stress Testing As per the CBSL guidelines on Integrated Risk Management (Directive 07 of 2011) and the stress testing policy, the following has been computed to assess the impact of non performing advances on the banks capital adequacy ratio.

The highest concentration is in the Western Province reflecting the country’s concentration of economic activity and due to the centralization of Corporate Banking, FCBU activities.

Geographical Concentration

Central - 4% Eastern - 1.36% North Central - 2.32% North Western - 2.55% Northern - 0.59%

Sabaragamuwa - 1.65% Southern - 3.78% Uva - 1.19% Western - 82.96%

Exposure of Top 20 Customers - 27%

Exposure of Other Customers - 73%

Concentration on Top 20 Customers - 2011

Exposure of Top 20 Customers - 21%

Exposure of Other Customers - 79%

Concentration on Top 20 Customers - 2012

Loans and Advances by Sector Quality

ManufacturingTraders

Agri & FishingOther customers

Other Customers - StaffFin. & Busi Services

Other ServicesTourism

ConstructionNew Economy Infrastructure

Transport

0-30 Days

31-90 Days

91-180 Days

181-365 Days

366-545 Days

above 546 Days

Colletral Wise Breakdown

Documentary Bills - 1%Fds,cds & Other Deposits - 8%Govt. Securities - 0.01%Hire Purchase Agreements - 2%Immov.property, Plant & machinery - 27%Other Securities - 14%Person.guarant & Pronotes - 2%Rfc,nrfc & Rnnfc Accounts - 0.04%Shares,bonds,life Policy - 4%Stock In Trade - 10%Tractors & Motor Vehicles 2%Unsecured Loans - 3%Gold - 25%Clean - 2%

Sector Concentration (HHI score)

0.05

0.10

0.15

0.20

Sector Concentration(HHI Score)Low ConcentrationHigh Concentration

Dec-1

0

Mar

-11

Jun-

11

Sep-

11

Dec-1

1

Jun-

12

Sep-

12

Dec-1

2

175Sampath Bank PLC

(Scenario 3, NPA (net ) ratio results - minimum capital requirement prescribed by the CBSL)

at Present Scenario 1 Scenario 2Scenario 3

Breakeven point

g) Magnitude of the shock (NPA%)

2.32% 5.00% 10.00% 13.92%

h) Total Advances 215,183 215,183 215,183 215,183

i) Gross NPA (Mn) - incl. IIS(h x g)

4,995 10,759 21,518 29,953

j) Int. in suspenseIIS (Mn)

549 1,184 2,367 3,295

k) Specific Provision 3,247 6,993 13,987 19,470 l) NPA (NET)

(i–j–k)1,199 2,582 5,164 7,189

m) Revised Capital(b–l)

23,202 21,819 19,237 17,213

n) Revised RWA(c–l)

178,098 176,715 174,133 172,108

o) Revised CAR% - Tier I & II(m/n x 100)

13.03% 12.35% 11.05% 10.00%

1. Shift in performing loans to NPAThe following scenarios explain the impact of the NPA ratio being increased to 5%, 10% & 13.92% of the total Loan portfolio. This is directly

2. Negative shift in NPL categories

Rs (Mn) As at 31.12.2012

% Rs (Mn) As at 31.12.2011

%

Special Mention 412.02 8.25 451.84 8.63

Substandard, 417.87 8.37 309.45 5.91

Doubtful 234.22 4.69 323.69 6.18

Loss 3,930.71 78.70 4,150.90 79.28

downgraded and transferred to loss category and eventually will be written off from the P & L. It is assumed that the increase in specific provision is set–off against the expected profits.

Credit Risk Stress Testing provides us an opportunity to think ahead about more challenging situations in managing Credit Risk, and to appropriately plan for successfully facing them.


The following scenarios explain the impact of 50%, 80% & 100% downward shift in NPA categories(Special Mention, Substandard, Doubtful and Loss) and the resultant impact on provisioning.

Eg: Scenario1 50% of the advances in special mention

category would shift to substandard category


Scenario I Scenario 2 Scenario 3

Magnitude of the shock 50% Magnitude of the shock 80% Magnitude of the shock 100%

as at 31.12.2012

(RsMn)

as at 31.12.2011

(RsMn)

as at 31.12.2012

(RsMn)

as at 31.12.2011

(RsMn)

as at 31.12.2012

(RsMn)

as at 31.12.2011

(RsMn)

Total NPA 4,995 5,236 4,995 5,236 4,995 5,236

Weighted NPA’s 4,131 4,375 4,131 4,375 4,131 4,375

Weighted NPA’s after shift in categories

4,294 4,547 4,391 4,651 4,456 4,720

Increase in provisions 162 173 260 276 325 345

Revised Capital 24,239 18,376 24,142 18,272 24,077 18,203

Revised RWA 179,135 161,855 179,037 161,751 178,972 161,682

Revised CAR% 13.53% 11.35% 13.48% 11.30% 13.45% 11.26%

The position as at 31.12.2012 has improved compared to 31.12.2011 due to overall improvement in the capital base, along with the reduction in NPA.

Fluctuation of world market gold prices on the pawning portfolioPawning consist of approximately 24% of the Bank’s portfolio. Wide fluctuation was observed in the world market gold prices during the last few months. Hence, the following calculations consider the stress on the capital adequacy due to the adverse fluctuation of exchange rate & gold prices.

50% of the advances in substandard category would shift to doubtful category

50% of the advances in doubtful category would shift to loss category

Pawning advances as at 31.12.2012

Rs. 50,659Mn

Current gold price in world market (as at 31.12.2012) 24k

1Oz =1,665 USD

177Sampath Bank PLC

Assumptions:1) All customers would re-pawn their articles to

obtain the benefit of the current high rate of pawning advances / low interest rate.

2) Appreciation of the rupee (approx. to LKR/USD 125.00) and the immediate drop in

Scenario IIf Gold value falls to USD1500

& exchange rate LKR/USD drop to 125/-

Scenario 2If Gold value falls to USD1400

& exchange rate LKR/USD drop to 125/-

LKR value of Pawning advance after re-pawning (assumption 1) Rs. 61,958.33 Mn Rs. 61,958.33Mn

If value of Gold Oz decline to (assumption 2) USD 1,500 USD 1,400

Value of the security i.e. gold in rupees. (LKR/ USD @ 125/-) Rs. 59,566.20 Mn Rs. 55,595.12 Mn

Mark to market loss (assumption 3) Rs.2,392.13 Mn Rs.6,363.21 Mn

Revised Capital Rs. 22,009.33 Mn Rs. 18,038.25 Mn

Revised RWA Rs. 179,297.25 Mn Rs. 179,297.25 Mn

Revised CAR (%) 12.28% 10.06%

Market Risk Management Market Risk impacts many areas of banking businesses and is defined as the potential for change in the market value of our trading and investment positions. Market Risk can arise from changes in interest rates, credit spreads, foreign exchange rates, equity prices, commodity prices and other relevant parameters. The main objective of Market Risk management is to optimise the risk reward relationship without exposing the Bank to unacceptable losses outside our risk appetite.

The Bank has a well-established framework for managing Market Risk with the Market Risk Management Policy, Asset and Liability Management Policy and the Treasury Policy forming the basis for structure, procedure, processes

market value of gold to the levels indicated in the scenarios.

3) Fall in value of the security is immediately adjusted in the P&L.

and controls in line with Basel II requirements, CBSL regulations and international best practice. These policies reflect the bank’s risk appetite in pursuance of its business objectives and provides guidance on:

Establishing and maintaining an appropriate structure for managing market risk

Ensuring Treasury Operations are efficiently and effectively managed

Establishing appropriate limits for all areas of Treasury activities, including trading and investment positions

Monitoring and managing impacts arising from the operating environment on relevant parameters, including results of Stress Testing

Evaluation of new business opportunities


Key tools and techniques used to manage various aspects of market risk are described below.

Asset & Liability Committee – ALCO is the key management committee that has responsibility for managing the Bank’s Assets and Liabilities and its key components interest rate risk, exchange rate risk, and liquidity risk as described in the functions of this committee. Equity risk is monitored by the committee, but has a lower profile as the bank’s exposure to Equity risks are relatively less. Commodity Risk (Gold Prices) is also monitored by this committee as the Bank has a significant exposure to Pawning. ALCO manages these risks through constant monitoring and implementing corrective action through various banking products and mechanisms such as the management of advances, deposits and investment portfolios. The Committee’s key functions include decisions on product pricing, determining the optimum mix of assets and liabilities and stipulating the liquidity gap position and interest rate risk limits, formulating views on interest rates, setting benchmark lending rates and determining the asset and liability management strategy in light of the current and expected operating environment.

Risk management and Monitoring by Middle Office –The Middle Office function, which is independent of Treasury, is an integral part of RMU and monitors the comprehensive framework of Treasury operating limits approved by the Board, including open position limits, dealer limits, counterparty limits, gap limits, FCBU and Domestic operations limits etc., which are

regularly reviewed and updated as per the prevailing business requirements, business opportunities, regulator guidelines, Basel II recommendations and industry best practices.

Stress Testing – Specific forward looking scenarios are generated to analyse how the Bank’s profitability and capital adequacy would be impacted if business conditions became significantly more challenging in line with the Bank`s Stress Testing Policy and Framework which has been established by the Board. The Stress Testing results for Exchange Rate Risk, Liquidity Risk and Equity Price Risk are given overleaf.

Managing Foreign Exchange (Forex) Risk - Forex Risk arises from the possible volatility of foreign exchange rates on open foreign exchange positions. We manage this through a framework of board approved limits that are also being monitored by the Market Risk/Middle Office. Such limits include currency wise overnight / intraday limits for open positions, Dealer Limits, Stop Loss Limits, Counter Party Limits, Country Limits, and Gap Limits in line with CBSL regulations and business requirements of the Bank. Limit exceptions are escalated to respective approving authorities, and also to the Board Risk Management Committee at regular meetings.

The Middle Office

Operates independent of Treasury, is an integral part of Risk Management Unit and monitors the comprehensive framework of Treasury operating limits approved by the Board, including open position limits, dealer limits, counterparty limits, gap limits, FCBU and Domestic operations limits


179Sampath Bank PLC

Equity Portfolio valuation against Market Indices

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

ASPI

Equity portfolio Book value

Equity portfolio Market value

Q1 Q2 Q3 Q4

Liquid Assets and Liabilities (Rs. Mn)

0

50,000

100,000

150,000

200,000

250,000

300,000

Liabilities

Liquid assets

Q1 Q2 Q3 Q4

Liquid Assets Ratio (%)

20

21

22

23

24

25

Liabilities

Liquid assets

Q1 Q2 Q3 Q4

Exchange Rate movement and Exchange Gains / Loss (Rs. Mn)

-300

0

300

600

900

1,200

1,500

USD Rate

Exchange Gain/Loss

Q1 Q2 Q3 Q4


Market Risk Stress Testing

Exchange Rate RiskOverall Net Open Position of the Bank including the on and off balance sheet exposures have been given adverse shocks of 5%, 10% and 15%.

As at 31-12-2012 (a) Open Position 430.482 LKR Mn (b) Capital Base 24,401 LKR Mn (c) Risk Weighted Amount 179,297 LKR Mn

Scenario 1 Scenario 2 Scenario 3

Magnitude of Shock 5% 10% 15%

Net Exposure of the Foreign Exchange (Rs Mn) 430.482 430.482 430.482

Loss on Exchange Rate (Rs Mn) 21.5241 43.0482 64.5723

Revised Capital (Rs Mn) 24,380 24,358 24,337

Revised RWA (Rs Mn) 179,276 179,254 179,233

Revised CAR % 13.60% 13.59% 13.58%

Total Capital Adequacy Ratio remains over 10% minimum value under all 3 stress testing scenarios.

Liquidity RiskThis evaluates the resilience of the Bank if the Bank is unable to maintain its current ability to raise funds in the market. It has been computed with 10%, 20% and 30% reductions in the level of liabilities existing as at the balance sheet date. The equivalent amounts have been deducted from the liquid assets assuming the fall in liabilities is met by a corresponding fall in the liquid assets of the Bank.

Stress Testing Result For Liquidity Risk As at 31-12-2012 (a) Liquid Assets 59,934 LKR Mn (b) Liquid Liabilities 267,540 LKR Mn



Liquid Assets (Rs Mn) 59,934 59,934 59,934

Liquid Liabilities (Rs Mn) 267,540 267,540 267,540

Fall in Liquid Liabilities(Rs Mn) 26,754 53,508 80,262

Revised Liquid Liabilities (Rs Mn) 240,786 214,032 187,278

Revised Liquid Assets (Rs Mn) 33,180 6,426 -20,328

Ratio after Shock % 13.78% 3.00% -10.85%

At 10% shock, Liquid Assets to Liquid Liabilities ratio stands at 13.78%, at 20%, it is reduced to 3%, and at 30% shock, the ratio shifts to a negative value.


Market Risk Stress tests for challenging scenarios involving Exchange Rate movements, Liquidity issues and Equity price movements help us to simulate stressful situations and to proactively plan for them.

181Sampath Bank PLC

Equity Price RiskThe test assesses the impact of the fall in the stock market prices to the Market Value of the Equity Portfolio. The current market value of all the on and off balance sheet securities listed on the stock exchange including shares, mutual funds, etc., has been given shocks of 10%, 20% and 40% fall in their value and the impact on capital due to resultant change is re-calculated under each scenario.

As at 31-12-2012 (a) Total Exposure in Stock Market 998.375 LKR Mn (b) Capital Base 24,401 LKR Mn (c) Risk Weighted Assets 179,297 LKR Mn



Total Exposure in Stock Market (Rs Mn) 998.375 998.375 998.375

Fall in the Value of Stocks(Rs Mn ) 99.8 199.7 399.4

Revised Capital(Rs Mn) 24,302 24,202 24,002

Revised RWA (Rs Mn) 179,197 179,098 178,898

Revised CAR % 13.56% 13.51% 13.42%

The total CAR remains over 10% minimum value under all Stress Testing Scenarios, which indicates that a 40% overall decline in market value of shares can be absorbed by the Bank, and still maintain CAR at the levels required by the CBSL regulations.

Operational Risk Management Operational Risk is the risk of losses as a consequence of failed or incomplete internal processes, people issues, systems issues, or from external events. Basel guidelines also incorporate Legal Risks under Operational Risk but exclude Strategic and Reputational Risks. We manage Operational Risk through a comprehensive set of internal controls and management processes that drive risk identification, assessment, control and monitoring as an ongoing activity.

Sampath Bank’s operational Risk Management governance framework is defined in the Operations Risk Management Policy approved by the Board of Directors. This policy provides a broad framework for identification and assessment of risk and controls, new product and process approval framework, measurement through incidents

and exposure reporting, monitoring through Key Risk Indicators and risk mitigation through process enhancement and insurance as a Risk Transferring mechanism. It also aims to ensure clear accountability, responsibility and mitigation of Operational Risk Management in the Bank.

Operational Risk at the Bank is managed as described below:

The prime responsibility for achieving the organisational objectives and management of Operational Risk lies with the business/functional units where risk arises. A comprehensive Policy, Procedure and Directive Framework stemming from the Bank’s Vision, Values and Corporate Strategy and approved by the Board of Directors provides the links between achieving organisational objectives whilst managing risks in the process.


All new, amended or reviewed Policies, Procedures and directives are reviewed by the RMU to ensure appropriate risk mitigation strategies are embedded in them. Policies are reviewed annually or more frequently if the need arises and submitted for approval to the Board of Directors..

The Operational Risk function reviews the need to introduce new policies as a continuing activity in line with the regulatory environment, industry best practice and any gaps identified in consultation with the BRMC.

Risk Management, Compliance and Systems Audit units are represented in all New Product Committees and appropriate sign off is obtained prior to implementing new or improved products. Additionally, Legal, Finance and Internal Audit functions are appropriately involved and sign off obtained as required.

Systems developments, new system acquisitions and upgrades are reviewed by Operational Risk Management Unit and they are also represented in project teams handling systems implementations or changes.

All key business units of the Bank carry out annual Risk and Control Self Assessments for their business processes in order to identify and review the inherent risks and controls available to mitigate or manage such risks. RMU has conducted workshops with the business units to assess the residual risks and to introduce additional mitigants/controls where necessary depending upon the severity and probability of the residual risk. This is in line with the Basel II Standardised and Advanced Measurement Approaches.

The Bank has developed a Key Risk Indicator Framework that reflects the risks faced by key business areas/business units. These KRI’s have a high utility as they are presented in a non-technical and meaningful manner that clearly communicates the nature of risks and the related trends to the business units and the senior management. The KRIs are updated quarterly and appropriate risk mitigation activities are initiated at corporate management level.

Business units are required to report their operational risk losses on regular and event driven basis to RMU and these are classified according to the Basel II business lines. The Operational Risk Function rates the loss events based on severity and impact. Events rated over and above an agreed threshold are regularly reported to corporate management and the BRMC. Additionally, low risk events which accumulate to substantial losses over a period of time are detected during the trend analysis and similarly reported to corporate management and BRMC. Analyses of events and trends have led to significant improvements notably in the areas of cash counter operations, ATM operations, pawning, foreign remittances and outsourced services.

All contractual documents such as product applications and Service Level Agreements with external parties are approved by the Chief Legal Officer and reviewed by Risk, Compliance and Systems Audit functions. Where specific expertise is required, professional services of external legal experts are sought.


183Sampath Bank PLC

Operational Risk

Impacts all areas of the organisation. We manage Operational Risk through a comprehensive set of internal controls and management processes that drive risk identification, assessment, control and monitoring that are integrated with the operational processes.

Internal Loss Event Data Reporting - Report Count in 2012 (%)

Payment & SettlementRetail BankingTrading & Sales

Percentage of Operational Losses by Basel Loss Event Type

0 20% 40% 60% 80% 100%

Business Disruption andSystem Faliure

Clients, Products & Business Practices

Damage to Physical Assets

Employment Practices andWorkplace safty

Execution, Delivery & Process Management

External Fraud

Internal Fraud

Percentage of Operational Loss Reports by Basel Loss Event Type - 2012

0 10% 20% 30% 40% 50% 60% 70% 80%

Business Disruption andSystem Faliure

Clients, Products & Business Practices

Damage to Physical Assets

Employment Practices andWorkplace safty

Execution, Delivery & Process Management

External Fraud

Internal Fraud

No of Key Risk Indicators De�ned & Monitored

0 1 2 3 4 5 6

Organisational Controls

Legal & Compliance

Staf�ng & HR

Contingency Planning

Technology

Products & Procedures

Audit Issues

Risk Reviews conducted During 2012 (%)

PoliciesProceduresDirectivesService Level Agreements/MOUNew Product Concepts/ Sign offsGuidelinesOther Proposals


Computation of Operational Risk Capital Calculation under Basel II The Standardised Approach (TSA) Basel II defines eight Business Lines in Banking Operations. Out of these eight, the Bank is currently engaged in five areas, and therefore the

Bank’s Gross Income is appropriately allocated to those Business Lines only.

The Standardised Approach calculation shown below is a computation shown only for information purposes.

Operational Risk Appetite Limits We have defined BRMC and Board approved Operational Risk Appetite Limits for year 2013, based on last 3 years’ loss data trends. The overall Risk Appetite Limit is set at Rs. 50 Mn., and Sub-Limits have been assigned to each Basel II loss type considering historical loss trends.


Accordingly, higher sub limits have been assigned for losses under Internal/External Frauds, Execution/Deliver & Process Management, where major portion of historical losses have occurred.

The actual losses will be monitored as and when they occur, and BRMC will be regularly updated along with suitable recommendations.

Operational Risk Appetite Limits indicate our willingness to accept a certain level of risk faced during banking operations. The actual losses are monitored against the limits as and when they occur, and appropriate steps would be taken to improve internal controls.

Risk Weighted Amount [RWA] for Operational Risk = Capital Charge X 10 Therefore RWA for Operational Risk under TSA = 1,923,560 X 10 = 19,235,603 = Rs. 19,235.6 Mn

(Rs 000)

Corporate Finance

Trading & Sales Retail Banking Commercial Banking

Payment & Settlement

Total

3 year Average Gross Income

56,202 -217,335 9,096,120 5,648,307 76,577 14,659,871

Beta Factor 18 18 12 15 18

Capital Charge 10,116 -39,120 1,091,534 847,246 13,784 1,923,560

Operational Risk Capital Charge Calculation as at 31-12-2012 - The Standardised Approach

However operational risk RWA under basic indicator approach for the year 2012 is Rs. 21,989.8 Mn

185Sampath Bank PLC

Risk Type Category Level 1

Definition Sub Limits for Maximum Exposure as a percentage of

Overall Limit

1 Internal Fraud Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/ discrimination events, which involves at least one internal party

20%

2 External fraud Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party

50%

3 Employment Practices and Workplace Safety

Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity / discrimination events

10%

4 Clients, Products & Business Practices

Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product.

10%

5 Damage to Physical Assets

Losses arising from loss or damage to physical assets from natural disaster or other events.

10%

6 Business Disruption and System Failures

Losses arising from disruption of business or system failures 10%

7 Execution, Delivery & Process Management

Losses from failed transaction processing or process management, from relations with trade counterparties and vendors

60%

Outsourcing The Bank’s policy on Outsourcing of Banking and ancillary functions is reviewed annually and updated to reflect any changes with CBSL guidelines and industry best practice. The policy addresses the criteria for selection of areas for outsourcing, selection of service providers, periodic reviews on outsourced activities and

execution of Service Level Agreements. A Board committee approves new outsourcing activities and existing arrangements are assessed as per CBSL guidelines to ensure compliance. BRMC is regularly updated on the status of outsourced activities of the Bank and recommendations are duly implemented.


Reputational Risk Management Reputation Risk arises from the negative effects of public opinion, customer opinion and market reputation, and the damage caused to brands by failing to manage public relations. The Bank has implemented the following to manage reputation risk:

Reputation risk management and mitigation aspects are embedded in the Bank’s policies and procedures, training programmes, the Business Continuity Plan and through the Audit and Board Risk Management Committees.

A Customer Grievance Handling Policy has been established under which the customers have a range of options through which they can forward their grievances to the Bank including a public help line that is manned on a 24 hour basis. There is a senior officer tasked with coordinating such grievances and handling customer relations. Significant public or customer grievances are submitted for appropriate action by corporate management and review by BRMC

The Bank has a Whistle Blowing Policy approved by the Board providing a channel for employees, customers and general public to raise issues, if any, on breaches of any law, statutory, regulatory or other ethical concerns shared by them

Strategic Risk Management Strategic risk is the possibility of current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions or lack of responsiveness to industry changes. The Bank manages Strategic Risk in the following manner:

A three year Strategic Plan has been formulated by the Corporate Management and the Board. This is updated annually and is used as the foundation for defining new business goals, budgets and resource planning.

The Strategic Plan is linked to individual employee performance through a goal setting process and periodic performance reviews are carried out to motivate employees and create a performance culture to ensure that business goals and objectives are achieved, thus mitigating strategic risk.

Anti Fraud Programme The recent expansion of the Bank in terms of branches, products, services, technology and workforce exposes the Bank’s operational areas into a much wider range of Fraud related Risks. In order to arrest the situation and proactively define our defences, we have conducted an assessment of our Anti-Fraud Framework with the assistance of an International Consulting firm. The assessment includes a Gap Analysis to identify current weaknesses in Governance, Policies, Procedures and internal structures. The findings of the Gap Analysis, and the status of existing Anti-Fraud Programme have been compared with the industry best practices during the study. The recommendations provided by

Strategic Decision Making Process

Three Year Strategic Plan helps us to face the future with confidence, while maintaining a performance oriented culture that aligns business goals and objectives with Individual performance goals

Managing our Reputation is one of our top priorities. Customer Grievance Handling and Whistle Blowing Policies provide us the framework for addressing negative effects of public/customer opinion, market reputation and the possible impact to brands by failing to manage public relations


187Sampath Bank PLC

the consultants are to be suitably implemented commencing from 2013, making Sampath Bank one of the first Banks in the country to conduct an independent assessment on its Anti-Fraud Programme, and to implement recommendations.

Employee Capacity Building Employee capacity building is a critical factor in successful Risk Management and Compliance thereby creating a culture of Risk/Compliance awareness. Staff employed within the RMU, Compliance Unit and business units have been trained on risk/compliance at local and international courses and also provided in-house training to ensure that there is the required level of knowledge. This is an on-going activity to ensure that there is continuous professional development and knowledge sharing.

The Bank carries out a range of capacity building initiatives to ensure that all employees have a high awareness of risk and changes in the operating and regulatory environment. The Bank actively supports and encourages all employees in the RMU to acquire internationally recognised professional certifications in risk management.

Anti-Fraud Assessment was done in 2012 with the assistance of an International Consulting firm, thereby Sampath Bank becoming one of the first Banks in the country to conduct an independent assessment on its Anti Fraud Programme

Compliance Risk Management Compliance unit of the Bank headed by the Group Compliance Officer comprises of the Regulatory compliance unit and the Anti-Money Laundering Unit. This unit is responsible for ensuring that operating and business units comply with regulatory and internal guidelines in accordance with the Bank’s Compliance Policy on a group wide basis. This policy communicates the bank’s compliance philosophy, the basic principles governing the compliance function, the broad structure and processes to ensure effective and timely management of Compliance Risk. The Bank has also established an AML policy communicating the standards of AML compliance which applies to all business units within the Bank and its subsidiaries. In formulating these policies the Bank takes in to account the regulatory/legal requirements, the strategic challenges and opportunities that regulatory developments may present for the Bank’s business model and how the Bank should discharge its corporate responsibility.

Anti Fraud

Programme


Compliance Unit carries out the following actions to manage Compliance Risk in the Bank:

The Compliance Unit adopts a risk based approach to proactively identify, document and mitigate compliance risk which is inherent in the day to day business activities of the Bank on a regular basis. The regulatory requirements are disseminated to the business units for necessary action on a regular basis as the business units are responsible for embedding compliance

requirements with its operations and ensuring that they operate within the boundaries set by the Bank and the regulator.

Facilitates the incorporation of regulatory requirements into operational procedures, corrective action to remedy instances of non-compliance and to mitigate compliance risk exposure

Submits a monthly Compliance Certificate to BRMC covering the following.

Regulatory

Customer Due-

Diligence

Anti-Money Laundering

Know Your Customer

Statutory

Industry Best Practice

Compliance Framework


Compliance Risk Management takes in to account the strategic challenges and opportunities that regulatory developments may present for the Bank’s business model and how the Bank should discharge its corporate responsibility

189Sampath Bank PLC

Monitoring and reporting of suspicious transactions which include large and structured transactions above a specified threshold as per applicable regulatory and internal guidelines. Accordingly accounts are categorised as High, Medium and Low risk and a higher level of due diligence and monitoring is carried out in high risk areas. The new AML software solution implemented

Compliance Certificate to

BRMC

Compliance on statutory/mandatory

reporting requirements

Significant new regulations/ Directions

Significant non compliance events. Regulatory/Potential

breaches

Training/awareness undertaken and/

or identification of training needs

Compliance monitoring on

Regulatory/Anti- Money Laundering

in 2011 identify unusual transaction patterns, suspicious transactions and enable reports to the Financial Intelligence Unit.

Establishing a compliance culture that contributes to the overall function of prudent risk management


Key regulatory instructions issued in 2012 and status of compliance within the Bank

Regulatory Requirement Status

Monetary Law Act Order No 1 of 2012 -Ceiling of credit growth of licensed banks dated 12.03.2012

Direction, for licensed banks to limit the growth of their credit in 2012 to 18% from the total outstanding of credit as at end of year 2011 or Rs. 800 million, whichever is higher, whilst, allowing those banks raising funds from abroad to expand their credit by a further 5%, up to 23% of the total outstanding of credit as at end of year 2011 or Rs. 1000 Mn.

Compliant

Threshold age of the senior citizens for transactions, with licensed banks dated 19.03.2012

CBSL has requested the licensed banks to use a common threshold of 55 years of age in identifying senior citizens.

Compliant

Disclosures in Annual Report-Banking Act Directions on Corporate Governance dated 29.03.2012

Monetary Board’s approval in accepting substitute disclosure requirements, in compliance with the directions 3(8)(ii)c and 3(8)(ii)g of the Banking Act direction No 11 of 2007

Compliant

Gazette Extraordinary No 1756/27 dated 04.05.2012 by Financial Intelligence Unit(FIU)

Amendment to the following rules of Gazette Extraordinary No 1699/10 dated 28.03.2011

Compliant

Payments for Foreign Exchange Trading dated 01.06.2012

Authorized Dealers were informed that, they should not permit, payments for foreign exchange trading through electronic fund transfer cards or by any other mode of payments, and they should exercise due diligence and be vigilant to prevent such payments

Compliant

Loans in Rupees to Sri Lankans Employed Abroad

Authorized Dealers are permitted to extend loans in Sri Lankan Rupees, to Sri Lankans employed abroad to be utilized for any purpose in Sri Lanka, subject terms and conditions specified

Compliant

Foreign Exchange Earners’ Account (FEEA) dated 11.07.2012

All residents, who earn foreign exchange, are channelled through a new account named FEEA was introduced.

Compliant

Special payments /benefits to Directors at their retirement 17.07.2012

The Monitory Board requirement for licensed banks to obtain prior approval of shareholders for any special payments/benefits made to banks directors at their retirement in addition to normal remuneration.

Compliant

Banking Act Direction No 1 of 2012 dated 18.09.2012

Directions on Foreign Exchange Trading Activities of LCB’s Compliant

Definition of Liquid Assets under Section 86 of the Banking Act No. 30 of 1988, as amended dated 15.10.2012

The monetary Board has determined that the Reverse Repurchase Agreements in Treasury Bills and Treasure Bonds shall be treated as liquid assets in terms of item (g) of the definition of “liquid assets” under Section 86 of the Banking Act No. 30 of 1988.

Compliant


191Sampath Bank PLC

Risk RegisterThe Bank’s Corporate Risk Register lists the risks faced by the Bank, action taken to mitigate and minimise the possibility of losses that could arise, and also provides a tracking mechanism for changing impact of various risks. The final risk

Serial No

Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating

1 CREDIT RISK

1-A DEFAULT RISK

Potential loss due to borrower/ counterparty unable or unwilling to meet its obligations.

High 1. Key Committees : BRMC, Credit Committees, Credit & Policy Review Committees

2. Credit Risk Monitoring Unit3. Structured & standardized

credit sanction process.4. Internal Risk Rating5. Pre-Credit Risk Evaluation/

Loan Review Mechanism6. Post-Credit monitoring

1. Board approved credit policies/procedures, framework, annual review

2. Delegated authority levels, reviewed regulations segregation of duties between loan originator, administration & risk.

3. Key input from the Risk Department for pre/post approved risk

4. Independent Pre-credit Risk evaluation by CRM for over Rs. 100 M.

5. Watch listing, EWS – Portfolio management

Medium

1-B CONCENTRATION RISK

Credit exposure being concentrated on one or few lending sectors, groups, insufficient diversification

High 1. Review the Bank’s concentration in a number of areas, such as Top 20 exposure as a % of total portfolio, Top 20 NPAs product-wise /sector wise region-wise etc.

2. Identify principal risk factors which affect the portfolio and required to be stressed.

3. Concentration risk assessed based on HHI

1. Board approved limits on maximum exposure guidelines

2. Setting of prudential limits, on maximum exposure, reviewed annually.

3. Establishment of Risk Appetite Framework

4. CBSL guidelines - single borrower/related party

5. Monitoring of exposure against the limits and NPAs on MOM & YOY basis.

6. Trends analysis reported to BRMC.7. Stress testing/Sensitivity analysis

results reported to management / BRMC on quarterly basis for necessary action.

Low

rating considers the impact of the respective risk in the event it occurs and how well the mitigating measures have contributed to bring down the level of risk to an acceptable level. Salient Risks are outlined below.


Serial No


1 CREDIT RISK

1-C COUNTRY RISK

The exposure to a loss in cross-border lending, caused by events in a particular country.

Low 1. Sovereign Risk rating2. Monitoring of specific

sanctions on countries3. Assessment of the political

& economical situation

1. Limitations on lending/caps on lending.2. Monitoring of country-wise exposure

Low

2 MARKET RISK

The Risk that the value of ‘on’ or ‘off’ balance sheet positions will be adversely affected by movement in equity prices, interest rates ,foreign exchange rates and commodity prices

High 1. Asset & Liability Committee (ALCO)

2. Setting-up of Middle Office separated from Treasury

3. Board approvals for Treasury Activities

1. Treasury and Market Risk Management Policies to reflect regulatory requirements

2. Articulate Bank’s view on various market variables.

3. Track magnitude of market risk4. Stress Testing5. Staff skills development on Scientific

Risk Measurement techniques

Medium

2-A FOREIGN EXCHANGE RISK

Risk of losses arising from unhedged foreign exchange positions and poor treasury controls

High 1. Board approved limits on open positions, gaps etc as per CBSL requirements depending on the capital & risk management capability.

2. Segregation of responsibilities between Front Office, Middle Office & Back Office.

1. IT System in place enables tracking and monitoring exposure

2. Monitoring exposures by Middle Office 3. Monitoring of forex exposures with

preparation of maturity of assets & liabilities

4. Revaluation and Mark to Market analysis

5. Stress Testing

Medium

2-B INTEREST RATE RISK

Adverse effects due to interest rates movement on NIM (Net Interest Margin)

Medium 1. Policies / prudential limits re. maximum maturity, duration, stop loss etc.

2. Policies & prudential limits

1. Maturity gap analysis (various time bands) – residual term maturity (Fixed Rate) / or next re-pricing (floating rate)

2. Reporting & analysis at ALCO3. Stress Testing and Scenario Analysis

Low


193Sampath Bank PLC

Serial No


2 MARKET RISK

2-C EQUITY PRICE RISK

Adverse movements in stock market

High 1. Equity Performance / Portfolio

2. Investment Committee

1. Return of equity portfolio / movements in stock market closely monitored

2. Mark to market of the investment portfolio

3. Stress Testing

Low

2-D LIQUIDITY RISK

Inability to meet obligations as and when they fall due

High 1. Measurement through key ratios such as Net loans to Assets, loans to customer deposits, liquid assets to Short Term liabilities etc.

2. Preparation of maturities of Assets and liabilities statement into various time bands

3. Fixing of prudential mismatch limits

4. Measurement of liquidity in all major currencies.

1. Reporting to ALCO, analysed and decisions taken at ALCO.

2. Evaluation of liquidity profile under various stress situations.

3. Preparation of contingency plans4. Availability of back-up liquidity support

in the form of committed lines of credit

Medium

2-E CAPITAL RISK

Risk of insufficient capital resources, to ensure the Bank is well capitalized relative to the minimum regulatory requirements

High 1. Capital adequacy ratios computed regularly.

2. Stress testing under various adverse scenarios

1. Fluctuation in capital Adequacy ratios are monitored (Finance)

2. Depending on the outcome, capital augmentation measures are put in place (Finance/ALCO)

3. Economic Capital Calculation under Internal Capital Adequacy Assessment Process (ICAAP)

Medium


Serial No


3 OPERATIONAL RISK

The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risks

High 1. Adequacy & effectiveness of operational Risk Policies regularly assessed by Risk Management Unit

2. Managed by business units in accordance with internal control requirements.

1. Operational Risk Policy, reviewed annually. Updated when required.

2. Comprehensive operational loss database is in place to track losses by incident type and business line as per Basel II

3. Operational Risk Appetite Limits defined and approved by the Board.

4. Material losses regularly analysed by cause & action taken to improve system and controls to prevent future recurrence

5. Risk review on new products, processes, external suppliers/outsourced service providers.

6. Risk Management monitoring through newly installed Operational Risk IT System

Low

3-A PEOPLE RISK

Lack of appropriate human resources, failure to manage performance and reward link, unauthorised or inappropriate employee activity and failure to comply with employment related requirements.

High 1. Manpower planning in line with expansion & changes in business requirements.

2. Recognition of specialized skills

3. Recruitment, Pre employment screening, employer feedback

4. Quarterly reviews/assessment of performance

5. Exit interviews

1. HR Policies2. Review of annual rewards & employee

benefits3. Training4. Grievances handling mechanism5. Disciplinary procedures6. Succession & development plans7. Anti-Fraud assessment by independent

International Consultancy Firm.

Medium


195Sampath Bank PLC

Serial No


3-B TECHNOLOGY RISK

Risk arising from non -availability of IT systems, systems breakdowns and disruptions, or not keeping in line with the trends in technology and delivery channels.

High 1. Technology planning is conducted during the annual strategic planning.

2. Perform systems audit for each & every system before deploying into the production environment

3. External/Internal vulnerability assessment with risk management. Process of identifying and assessing risk.

4. Bank’s IT Department/Steering Committee together with the business lines, continuously review and analyse new cost efficient delivery channels.

1. Based on the outcome of the systems audit, necessary controls are implemented before live implementation.

2. External vulnerability assessment carried out by a Specialised Consulting company.

3. IT policies/ procedures investment in latest technology, IT systems, ensure competitive advantage.

4. Back-up & disaster recovery, planning & testing. (BCP)

Medium

3-C LEGAL RISK

Risk arising from litigation against the Bank, faulty documentation Business not being conducted as per the applicable laws

High 1. Independent Legal department

2. Specialist legal advice obtained from external consultants on a need basis.

3. Adequacy & effectiveness of the controls reviewed by Legal department

1. Policies & procedures in place to ensure that proper framework in place

2. All legal documents/ Service Level Agreements are specifically approved by Chief Legal Officer & also signed off by Risk & Compliance.

3. Company Secretary function/compliance to ensure compliance with specific regulatory requirements.

Low


Serial No


4 REGULATORY COMPLIANCE RISK

* Failure to comply with the laws of the country (regulatory/statutory) where business operations are carried out including risk of non adherence to Anti- Money Laundering regulations.

High 1. Managed by Compliance Unit.

2. Well structured compliance framework to carry out this function, which includes Anti-Money Laundering Unit to ensure adherence to the FIU (Financial Intelligence Unit) requirements.

3. The Bank has implemented the Software System for AML monitoring during 2011.

1. Compliance Policy2. Anti Money Laundering Policy3. Compliance programme/Assessment of

compliance risks4. Quarterly sign-offs to the Board of

Directors on regulatory /statutory requirements/returns

5. Monthly compliance certificate to BRMC including all significant non-compliance issues.

6. Compliance sign-off on all new Products /procedures / processes.

7. Sample testing8. Dissemination of regulatory directives

through internal circulars9. Transaction monitoring and submission

of reports to FIU10. Regular training

Medium

5 STRATEGIC RISK

Failure to manage medium / long-term strategic goals of the business

Medium 1. Bank’s 2-3 year strategic plan covering all business units approved by the Board.

1. Regularly monitoring by business line heads/Planning Division

2. Monthly / quarterly reporting of assessment of the stages achieved, submitted to the Board of Directors for review.

3. Review actions/ plans depending on the outcome and any external, economic environment changes.

Low


197Sampath Bank PLC

Serial No


6 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.

High 1. Timely & efficient communications among all stakeholders.

2. Corporate Governance practices

3. Board approved complaint handling policy in terms of the customer charter as per CBSL guidelines.

4. Procedure for receiving customer complaints and resolution mechanism is in place.

5. Complaints and process of resolution relating to operational risk / compliance if significant is escalated to corporate management / Risk Committee.

1. Timely and accurate financial reporting2. Code of conduct for Board/

management/dtaff3. Comprehensive internal control system.4. Compliance Structure5. Responding promptly & accurately to

the regulator / customer.6. Customer response and grievance

handling programme.7. Business Continuity Planning8. Training on improving customer service

and effective communication.9. Whistle Blowing

Low


199Sampath Bank PLC


MD’s Message Sustainability at Sampath Bank is about doing the business of banking in a responsible and inclusive manner based on sound principles and best practices to provide sustainable growth in earnings and wealth to our stakeholders. Internally, it is about integrating sustainability principles in to everything we do in the Bank, whether it is the design of a branch or how we increase our capital. Our heritage of being a bank that is close to the grass roots has created a culture of taking a balanced approach to decision making and problem solving which is now being explicitly stated in the policies that are being put in to place.

Engagement with our stakeholders to identify their varying needs is the basis for our strategy as our growth is driven by our aspiration to be a national bank in Sri Lanka in the true sense which caters to all sectors, segments and communities on a uniform and consistent basis throughout the country. Through our branch expansion programme we have covered most of the country to enable us to reach communities which are under banked. We have designed products tailored to needs of specific regions to help them overcome obstacles which previously excluded them from mainstream banking. The principle that we need to improve our customers’ quality of life has been a key driver in the development of our products and delivery channels in recognition of their needs to suit a busy lifestyle. We have supported national priorities and also engaged in public-private partnerships that helped to drive the country’s economic growth. Introduction of environmental criteria to our project financing facilities and training to our credit officers in environmental assessment aspects ensures that we lend in a responsible manner in accordance with sustainability principles.

SUSTAINABILITY REPORT

“our strategy as our growth is driven by our aspiration to be a National Bank in Sri Lanka in the true sense which caters to all sectors, segments and communities on a uniform and consistent basis throughout the country.”

“The principle that we need to improve our customers’ quality of life has been a key driver in the development of our products and delivery channels in recognition of their needs to suit a busy lifestyle.”

In addition, doing business in a responsible manner, we also believe that we have a responsibility to society and the environment in which we operate which looks beyond the business goals to the stewardship of the resources and capabilities that we have built up. We have carried out a number of community projects through our branches in discharge of this responsibility to make a positive impact to communities that we operate in. We have also carried out a national awareness project together with the Ministry of Environment and the Ministry of Education to carry out a waste management and tree planting campaign in schools using our branch network and providing finances for the project. We value and appreciate the employees’ enthusiasm in formulating these projects and carrying them out as it is their commitment that makes Projects successful.

The adoption of GRI Guidelines provides us a framework for reporting our initiatives to improve the way we impact our key stakeholders and the communities we operate in. We are committed to continuous improvement in our systems and processes to achieve the sustainability goals we have set for ourselves and look forward to setting new goals at the end of the year which are broader and even more challenging. We invite our stakeholders to engage with us by sharing their views, concerns and suggestions to improve the way we impact them and in shaping our sustainability agenda.

Aravinda PereraManaging Director

22nd February 2013

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Awards Won for Annual Reports We are indeed proud to announce that, the following prestigious International and Local awards were Secured by our Annual Report 2011- Riding the Wave-

a) GOLD Winner- International ARC Awards of USA, 2012 for Financial Data ; Banks- National category

b) GOLD Award - Chartered Accountants (CA) 2012 Annual Report Awards for Management Commentary–Overall category

c) Lanka Clear Limited Awards 2012 Sampath Bank won two prestigious awards

from the award ceremony of Lanka Clear Ltd Highest outward volume contributor in SLIPS Bank with the highest growth rate in SLIPS

About Sustainability Reporting This is our first Integrated Report combining financial, social and environmental performance for the year ended 31st December 2012. We seek to present our business strategies, governance, risk management and other relevant factors that shape Sampath Bank’s performance to enable our stakeholders to be better informed about their interactions with the Bank. This initiative follows three years of producing separate Annual Reports and Sustainability Reports, of which the most recent was for the financial year ended 31st December 2011.

Mr. Dammika Perera and Mr. Aravinda Perera with The World Finance Award for Best Banking Group in Sri Lanka 2012

Award received Mr. Ihalalanda from Governor of CBSL Mr. Ajith Niwad Cabral at Award ceremony of Lanka Clear Ltd.


Sampath Bank adheres to the internationally recognised Global Reporting Initiative Sustainability Reporting Guidelines which is a voluntary standard comprising a set of indicators for economic, environmental and social aspects of business performance that enables company’s stakeholders to compare companies’ performance. We have used the G3.1 Financial Services Sector Supplement guidelines and a Compliance Index is provided for easy reference on pages 257 to 271 of this report. Our disclosures have been drawn up to an Application Level B+ according to the criteria set out in the guidelines.

The Bank’s Financial Statements for the year ended 31st December 2012 have been audited by Ernst & Young who have also provided assurance on the social and environmental information presented in the Sustainability Report for the year ended 31st December 2012. The Financial Statements, Accounting Policies and significant assumptions used in the preparation of the financial statements for the Bank and the Group are set out on pages 292 to 318 of this report. The environment, social and governance information relates to the Bank, excluding its subsidiaries and is derived mainly from factual records maintained by the Business Units using standard measurements and does not require assumptions or complex calculations to be performed in this regard.

The materiality of the social and environmental issues presented in the Sustainability chapter of the Annual Reports determined based on the initiatives and processes in place within the Bank to improve our stakeholder inclusiveness and have been individually identified for customers, shareholders, employees, suppliers and society. Society includes the communities we operate in, the Government and media. We have considered

Sustainability Report

the severity of impact and the probability of occurrence in assessing the materiality of issues discussed in the report to ensure that our report remains relevant, complete and concise.

Information on Governance and Risk Management of the Bank are detailed in separate segments included in this Integrated Report and are not duplicated in this segment. The Management Discussion & Analysis preceding the Sustainability Report also contains information relevant to stakeholders including commentary on our economic performance. References to relevant sections of these reports are provided in the GRI Index for the convenience of our readers.

This report is translated in to Sinhala and will be circulated to shareholders based on their preferred language. Tamil translations of the Chairman’s Message and the Management Discussion and Analysis are also available to our shareholders who request for it.

Outlook Going forward, we will continue to provide economic, social and environmental information in a single integrated report on an annual basis in English and Sinhala with selected excerpts in Tamil to facilitate better engagement with our stakeholders and for the inclusion of all communities, irrespective of their preferred language. We will also review the proposed Consultation Draft of the International Integrated Reporting Framework scheduled for release in April 2013 to incorporate recommendations in our next Integrated Report. As sustainability Reporting

Sustainability

The materiality of the social and environmental issues presented in the Sustainability chapter of the Annual Reports determined based on the initiatives and processes in place within the Bank to improve our stakeholder inclusiveness and have been individually identified for custom-ers, shareholders, employees, suppliers and society.

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evolves, we are committed to making the changes necessary to remain on par with international best practice in Sustainability Reporting.

Sustainability at Sampath Bank Our approach to sustainability is based on our 5E model that balances our organisational goals with national priorities, needs of our stakeholders and international best practice. This has evolved from a 3E model in 2010 to a 4E model in 2011 to what it is today. Sustainability

principles are embedded within the organisation through the strategy formulation process and communicated throughout the organisation by way of meetings, communiqués and training. We believe that creating a culture of awareness and responsiveness to the needs of our stakeholders is a key to our relevance and sustained growth, enabling us to stay ahead of the curve.

Our sustainability vision is aligned to our strategic goal to become the growing force in financial services. Corporate Responsibility has changed from a philanthropic focus to a strategic approach where sustainability principles are integrated with business strategy to take a long term view of issues that impact our key stakeholders creating a competitive advantage for us in the long term.

Sustainability Governance Sustainability within the Bank is driven by a Sustainability Committee which comprises members of the Corporate Management Team representing a number of departments. This arrangement together with awareness programmes conducted throughout the Bank has helped embed the sustainability principles in to our Strategic Planning processes and our day to day business activities. Governance structure given on page No 99, point out how the governance procedures are going on.

Stak

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Ethics & Values

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Outsourcing Policy The Bank does not outsource core banking services but several other services are outsourced and managed within the Outsourcing Policy of the Bank which complies with the guidelines issued by CBSL. The policy addresses the criteria for selection of areas for outsourcing, selection of service providers, regular reviews of outsourced activities and execution and monitoring of Service Agreements. The outsourcing activities are approved by the Outsourcing Management Committee of the Bank. The following activities are outsourced by the Bank:

Security arrangements for premises and cash transportation

Building maintenance and janitorial services Maintenance of computer hardware and

other IT support services Courier services within the Branch network Printing and dispatch of cheque books and

bank statements Canvassing for new credit card applications Document storage and scanning Delivery of Credit Cards

Future Outlook Whilst we have made satisfactory progress on a number of fronts as detailed in the Sustainability Supplement, there is more to be done. Our sustainability goals for 2013 and beyond are as follows:

Increase the scope and boundaries of the Sustainability Report to include all branches in the environment reporting indicators

Explore avenues to finance green investments


We believe that our commitment to doing business in a responsible manner through aligning our strategy to the needs of stakeholders and national priorities has served us well in our 25 year history and that this characterises who we are today.

Measure the carbon footprint of the Bank with a view to setting goals and targets to minimise the negative impacts of emissions

Establish a separate web portal for sustainability accessible to all stakeholders, globally and locally

Engage our employees in creating a culture that embraces the principles of sustainability through the newly established Sampath Nature Protection Club

Responsible Business Practices The headlines in the global financial arena in 2012 have been dominated by the failure of financial institutions to conduct business in a responsible manner. These failures highlight how the lives of customers, governments, employees, shareholders and communities are negatively impacted by such failures and we believe that focus is needed on this very simple and basic concept. Responsible business practices ensure that we take in to account the long term and short term consequences of our actions on our stakeholders and overall, the reputation, stability and growth of the Bank. We believe that our commitment to doing business in a responsible manner through aligning our strategy to the needs of stakeholders and national priorities has served us well in our 25 year history and that this characterises who we are today.

205Sampath Bank PLC

Inclusive Banking Inclusive banking is a national priority to address regional economic imbalances in the country and for continued peace. It must include not only the rural communities but also the low income groups in the urban townships and the entrepreneur who is just starting out. As our country’s infrastructure develops around the country, we are laying the foundations to reach out to all communities through a multitude of channels that add convenience to their lifestyle.

Reaching Diverse Markets Continue with Annual report page No 408 to 412.

SME Growth Refer Annual report page No. 20 to 21.

Innovation to Support Needs We have a diverse clientele with varied needs and lifestyles who have their own preferences in conducting banking transactions. These vary from the traditional friendly personalised services at the local branch to mobile banking. As electronic devices have become a part of everybody’s life, technology enables us to provide the same ease of transacting across a wide range of appliances taking convenience to each and every business and household. Although these channels are under utilised at present, we strongly believe that this is the future of banking for all levels of the pyramid as it addresses many needs. We have a responsibility to provide our customers and communities with solutions that take in to account these needs and our investment in information technology provides us with the means to do so in a cost effective manner.

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Inclusive Banking

Innovation to support needs

Responsible Banking

Stability & Growth

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Mobile Cash The new and improved Sampath Mobile Cash enables anyone to send up to Rs. 200,000/- daily over any Mobile or CDMA network to anyone, anywhere in Sri Lanka! Beneficiaries/recipients are notified instantly on the transaction via Sampath SMS Alertz, There is no requirement of a pre-registration to send or receive money. Money can be collected instantly from any of Sampath Bank’s island-wide branch network or from any Sampath Bank ATM island-wide, 24-hours a day, 365 days a year. We believe that this product has the potential to change the way people do the business of banking whilst increasing the relevance of banking in their lives in a cost effective manner.

SMS Alerts SMS Alertz is a messaging facility, which will dispatch customer account transactions via SMS to their mobile phones, based on predefined parameters


207Sampath Bank PLC

Tele Banking Our Telebanking service is extensive, comprehensive and is designed to offer customer the opportunity to do their routine banking from any phone. You may reach the closest telephone and dial 0094-011-2303030 to obtain above facility

industry leadership

We continue our industry leadership in bulk note deposits 09 ATM machines and on-line real-time Cheque Deposit System through Easy Cheque Deposit system ATMs.

ATMs Having introduced the concept of ATMs to Sri Lanka in 1987, revolutionizing the country’s banking industry, we subsequently, pioneered the ATM Network Sharing concept, connecting over 1600 ATM’s locally. Substantiating a huge saving for customers in the form of fees paid to foreign financial institutions for ATM usage. This year we added 03 ATMs to our network and Nations Trust Bank also signed up as a partner. HNB, BOC, Union Bank, DFCC Vardhana, NSB, NDB Bank, HDFC and PABC continue as partners in the Sampath Interbank Link which now has a total of 10 banks accounting for our ATM market share. Sampath Bank will continue to expand its network through partnerships with other financial institutions and give customers more opportunities in order to live up to its promise: ‘we create time for you’.

We are proud to have initiated this ATM sharing network and believe this is another example of how we aligned the Bank strategy to national priorities as it enables the participating banks to provide cost effective services to their customers and save foreign exchange as the industry pools resources to create a more geographically dispersed infrastructure for inclusive banking.

We continue our industry leadership in bulk note deposit through 09 ATM machines and on-line real-time Cheque Deposit System through Easy Cheque Deposit system ATMs.


Online Banking Our online banking services enhance our mass scale inclusive banking capabilities. There are positive impacts on the environment as customer’s travel less if they use online banking services. Socially, online banking enables inclusive banking and enhances the lifestyle of customers as they spend less time on mundane transactional activities. Sampath Vishwa offers a complete online banking experience for regular banking services. Sampath PayEasy is a payment portal for utility bills offering ease of payment to customers whilst e-wallet enables them to store their credit or debit card information securely for online payments. Sampath Payment Gateway (SPG) enables businesses to sell their products or services online through a secure payment gateway. E Remittances enables Sri Lankan

Sampath Vishwa Sampathnet

SampathPayEasy

Sampath Payment Gateway

DC Direct

E-RemittancesOnline

Banking

expatriates to send money home to their families through the web service introduced to integrate global exchange houses and international remitting service companies with the Bank. DC Direct facilitates submission of documentary credits and amendments online.

We pioneered the Internet Payment Gateway for e-government services in partnership with the Information Technology Agency (ICTA), aligning our business strategy with national priorities. Our service delivery platform, Lanka Gate continued to successfully manage e-revenue licensing funds for the Ministry of Transport and a seamless transaction processing and reconciliation link with the Department of Immigration and Emigration to manage payments related to online visas.

...specific access of wheelchair constructed where it necessary. We plan to increase this ratio with a goal of achieving 95% coverage over the next 2 years.


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Responsible Banking We are conscious that banking must be fair to our customers and that we have a duty to ensure that project financing conforms to strict environmental criteria. We also believe in empowering the communities in accordance with our 5Es model and have incorporated these principles in to how we do business at Sampath Bank.

Customer Charter Our customer charter is published in all three languages and explicitly sets out our commitment to do business in a fair and transparent manner and also states our obligations to the Customers. The adoption of the charter protects the rights of the customer and ensures a consistent standard of service throughout our branch network for all

our customers with special attention to the needs of specific groups of customers. Accordingly, over 17% of our branch network is accessible by wheelchair with specific access constructed where necessary. We plan to increase this ratio with a goal of achieving 95% coverage over the next 2 years. We are particularly conscious of the need to explain clearly the financial products and services we offer to those customers with low literacy and our staff are encouraged to facilitate their understanding as we believe this is the way to retain customers.

Environment Concerns We have formulated an environment policy and six eco guidelines that shape the way we work. During the year we trained Regional Managers and Credit Officers to conduct environment appraisals competently and disseminate the knowledge gained through the branch network through a certificate programme on Environmental Appraisal conducted by the Institute of Environmental Professionals of Sri Lanka. We also included environment criteria in our credit assessment criteria integrating our environment policy and eco guidelines in to our business framework it describe under supporting the environment through lending page No 252. Our commitment to technological innovation has enabled us to reduce consumption of natural resources not just for the Bank but in the daily lives of our customers, employees and our Board of Directors. We are encouraged by the progress achieved to date and look forward to continuing and enhancing our initiatives to protect the environment. Further information on our actions is given on pages 247 to 252.


Stability & Growth Stability of Sampath Bank depends on its growth in size and earnings combined with sound business practices that are implemented throughout the organisation by a motivated and knowledgeable staff.

Achievement of business outcomes

We ensure the achievement of our long term strategic goals and annual targets through a rigorous strategic planning and performance management process that cascades from the Board of Directors to each individual employee through established reporting lines. The annual targets are adjusted through this process to reflect changes in the operating environment and strategic direction where appropriate. Our performance this year outlined on pages 06 to 11 is evidence of our commitment to achievement of defined strategic business outcomes despite the substantial changes in measurement of income and profits due to implementation of IFRS.

Employee Development The Bank has a strong learning and mentoring culture that enables our staff to grow, develop their careers and ability to realise their career aspirations by aligning their personal goals with the goals of the Bank. Having a skilled, empowered and motivated staff has been one of our greatest assets and we are committed to their development. Our initiatives in this regard are discussed comprehensively on pages 210 to 229.

At branch level Training

Improved Risk Management Risk Management is a key to our long term growth and is a rapidly evolving area in the wake of global shocks to the financial system. We are near completion of Basel II requirements and are ahead of the CBSL timeframes for implementation of the same. We strive to adopt international best practices in to our Risk Management systems and governance structures and these are described in detail in the Risk Report on pages 152 to 153.

Risk Management

Risk Management is a key to our long term growth and is a rapidly evolving area in the wake of global shocks to the financial system.


211Sampath Bank PLC

Stakeholder Management Understanding and being responsive to needs of our stakeholders are keys to our overall strategy and identifying emerging trends that shape our future. We recognise that early identification and addressing these needs gives us a competitive edge in business and is the only foundation for sustainable growth of Sampath Bank. Our heritage is steeped in the identification of stakeholder needs and whilst our vision has expanded and grown to adapt to the modern needs of a country that is poised for economic resurgence, identifying

Stakeholder RightsFramework

Management Approach

Increasing shareholder-wealth

Every shareholder and investor of Sampath Bank has the right to expect the Bank to enhance long term shareholder value and facilitate an environment in which they can exercise their rights.

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, reinventing our products and services, and an aggressive expansion plan: are all geared to ensure sustainable growth while creating greater wealth to all our stakeholders

Maximizing shareholder value and market capitalization

Proactive initiatives implemented based on investor relations


stakeholder needs remains top priority for us. We have a range of channels and mechanisms for gathering and monitoring feedback from our diverse stakeholder groups which are described below. Our Shareholder Relations Committee, a first in the entire corporate sector in Sri Lanka, is an example of our commitment to the principle of stakeholder engagement.

Helping hand from Kirulapone Branch

Ethics and values programme- Dankotuwa Branch

Engaging-in with National Priorities

Today our customers can choose to interact with us through internet banking, mobile applications or over 1600 ATMS island-wide as a result of our efforts.


213Sampath Bank PLC

Stakeholder Primary Engagement Mechanisms

Needs Identified Stakeholder Management Framework

Employees Team Briefings, Employee suggestion schemes, Grievance Reporting Procedure

Development Retention Responsible Business Practices Performance enabling environment Social Responsiveness

Staff has the right to expect a work ethos that is committed to build an environment where people can make a difference, both as individuals and as part of a team

Customers Tracking, analysis and giving feedback to complaints received via our call centres

Responsible business practices Customer service Convenience of transacting Improving financial inclusion,

education and advice Communication in language of choice

Every customer has the right to expect a sound, high quality, progressive and friendly place to conduct banking

Shareholders Shareholder Relations Forum conducted by the Shareholder Relations Committee of the Board,

Growth and stability of company and earnings

Wealth management Responsible business practices Preferential treatment Communication in language of choice Transparency in governance and

business

The Bank is committed to enhance long term shareholder values and facilitate the exercise of shareholders’ rights

Government & Regulators

Meetings, policy trend analysis and industry forums

Stability and growth of financial sector Responsible Business Practices Alignment of national priorities in

lending strategy Financial inclusion Compliance with regulatory direction

and contribution to on-going dialogue on financial sector reform

Value addition

The Bank is committed to meet its corporate responsibility and decisions on social and economic issues concerning activities of the Bank are developed and adopted by its governance bodies with the participation of Bank personnel.

Community Local branch engagement, media,

Responsible business practices Community Development Community Empowerment Employment

Suppliers and Service Providers

Regular meetings, written communications

Business growth Responsible Business Practices Ease of transacting Strategic partnerships



Employees Sampath Bank employs a dynamic team who serve in head office and in the branch network island-wide, providing us with a competitive edge in achieving the strategic goals of the Bank. We recruited 368 new team members in 2012 out of which 233 were to fill new positions during the year. Our talent pool has grown by 6.97% this year to facilitate the consolidation process consequent to our accelerated growth of the past three years. The Bank has invested Rs. 35 Mn on training and leadership development which covered 86% of our team members. The retention rate is high at 96% which is testimony to the satisfaction levels amongst our team members. The HR & Remuneration Committee of the Board has oversight responsibility for the functions of the HR Department, annual plans and policies. Recruitment of key management personnel are approved by them.


Management Approach

Every employee of the Bank has the right to expect a work ethos that is committed to build an environment where people can make a difference, both as individual and as a part of a team.

We believe that the key to our success and competitive advantage is our unique team commitment to continuous improvements 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 year ahead will create many horizontal and vertical opportunities, for which we have adopted HR management strategies that will;

I. Recognize the most competent people and build a HR pipeline that can cater to our business expansion plan,

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

III. Make managers accountable and responsible for their work, Team development

IV. Create a performance driven work culture, andV. Improve the efficiency of the entire HR processes.

Lear

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The Growing Force in Sri Lankan Financial Services

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Winning Culture

Transparent & Consistent HR Policies

Sampath Values

The retention rate is high at 96% which is testimony to the satisfaction levels amongst our team members.

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The internally developed HR model encapsulates the Vision and the Values of the Bank and provides a framework for HR planning and activities. Our HR policies are designed to develop our talent pool to meet strategic business needs and provide a performance oriented work environment. Majority of team members are located outside the head office. Therefore we introduced the Regional HR Coordinator Programme which is an innovative process to reach each individual team member in order to develop seamless partnerships with them to proactively recognise their specific issues, potential etc and provide HR solutions as appropriate.

During the year, we have implemented changes to the organization structure in order to facilitate continuous leadership pipeline for growth of the bank. The Performance Management System was revised for grades above the Executive level further enhancing the performance based culture. The Human Resource Information System (HRIS) implemented in 2011 has enabled us to improve the efficiency and effectiveness of HR processes including identification of training needs, recruitment, transfers, payment of benefits, leave management etc.

Overall Human Resource Policy

Recruitment Policy

Training & Development

Policy

Employee Relations Policy

Recognition Policy

Transfer Policy Industrial Relations Policy

Engaging Employees In addition to the primary engagement mechanisms described in Stakeholder Management on page 214. We also engage with them in other ways described below to address their information requirements and engage their interest in making Sampath Bank a great place to work.

Managing Director addresses all team members on the first working day of the year and share the future plans for the Bank over the next 12 months.

Opportunities are available for members of the staff to meet the Managing Director or any senior member of the management to provide suggestions and discuss their issues.

Quarterly results of the Bank are circulated to all staff to keep them apprised of financial and non financial position of the Bank and how the Bank has performed against key indicators.

Large numbers of team members are shareholders of the Bank and they get the opportunity to air their voices at the Annual General Meeting.

All team members are provided with intranet facilities and E-learning systems to increase the ease of communication, knowledge sharing and knowledge management.

HR policies are documented and available online and awareness of these is created at recruitment and promotions.



Sampath Sandeshaya, a quarterly newsletter updates team members on events and achievements of the Bank and its employees.

Diversity We are an equal opportunity employer with regard to recruitment and career development irrespective of gender, race and religion. Remuneration levels reflect the responsibilities, roles and performance and are neutral as to gender, race and religion. There is a gender representation across all levels of employment with a higher proportion of women in our workforce than seen in the total Sri Lankan workforce as per the survey of the Sri Lankan Labour Force for the 2nd quarter 2012. Our workforce includes ten differently-abled team members whose needs are given special attention and extra care to support their social and recreational activities.

Industrial Relations The Bank conforms to local labour laws and Guidelines of the International Labour Organisation (ILO) which promotes best practices in labour management, decent work and human rights. Further, as a continuous process, we benchmark best HR practices in relation to Industrial Relations. We do not employ persons under 18 years of age and do not condone the use of forced or compulsory labour within the Bank or in our engagements with stakeholders.Sampath Bank Employees Association (SBEA) represents over 90% of employees. Corporate Management conducts monthly meetings with them to address matters of mutual interest going beyond the collective bargaining mechanism. We encourage an open door communication policy within the organisation to identify issues that may arise which require attention.

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.

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Recruitment We recruited 368 employees during the year mainly to fill new positions created as a result of our growth. Our Recruitment policy aims to fill vacancies first from within the Bank and then provide opportunities for local hiring wherever possible. During 2012 over 90% of vacancies in senior positions were filled by internal candidates. We adopt different recruitment methodologies and selection techniques to attract and select the best talent in the market.

Career Development Our HR policies aim to align the career progression of our staff members in line with strategic requirements of the Bank.

Training & Development Based on the Training & Development Need Analysis, Annual Training Plan is prepared in order to implement and monitor training and development programs effectively.

Varieties of training channels are deployed in order to deliver training. These channels encompass internal training, external training,

217Sampath Bank PLC

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 4 %, which is lower than the industry average.M

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overseas training and e-learning. Latest addition is the Regional Training where we discuss regional specific training requirements and deliver training in a favourable location in the Region especially in outstation and difficult areas.

Training in progress

In 2012, we uploaded new animated e-learning modules under Teller Operations and Accounts Opening Operations. These modules are consisted with operational procedures, system demonstrations and best practices to enhance customer service. E-learning enables to reach a greater number of team members at once and provide them the opportunity to learn at their own pace.

Additionally, continuous programmes such as (Sampath Bank Toast Masters Club) “Make Your Mark” organized by SBTMC provides a learning environment for communication and leadership skills development.

Benefits We provide a host of benefits to staff in addition to statutory benefits as appended below.

Pension Plan Employee Share Ownership Plan Productivity and profit related bonuses Staff loan schemes on special interest rates

to cater to the needs of team members which encompass vehicle, housing, education, marriage etc.

Staff loan schemes for expenses related to childrens’ education, urgent family medical expenses, and for family bereavements



Comprehensive medical scheme Payment of fees for professional education,

training courses and examinations Fully furnished staff quarters, travelling

and accommodation allowances for staff attached to outstation branches

Fully furnished Holiday Bungalows.

These benefits are not provided for trainees and contractual members of staff.

Work Life Balance We have given an utmost priority to enhance work life balance of our team members which is essential to realize mutual objectives of the Bank and the team members. In relation to this aspect we have introduced an allowance for team members to encourage them to utilize their annual holiday leave. With the current trend of extended banking hours, we have introduced work rosters for identified business units to ensure that there is adequate time to attend to personal and family needs. “Sampath Dehena” is a monthly programme where employees discuss topics of common interest outside banking with external specialists.

Further we encourage our team members to improve and showcase their talents in other areas. We support outstanding achievers in the field of sports to reach higher and also encourage our sports teams to represent the Bank in mercantile and international tournaments. The Fourth “Sampath Tharu” was staged at Nelum Pokuna in 2012 to provide an incentive to develop their performing talents. We conduct annual events for team members and their families such as Sampath Nite, Sampath Pola, Sampath Family Day and Vesak Bhakthi Gee”.

Sampath Bank Annual Cricket Carnival

Marketing Campaign in Kegalle Branch

219Sampath Bank PLC

HR Department Premier League

Sampath Tharu held at Nelum Pokuna

Annual Trip- NSC Team- Habarana

Sampath Tharu held at Nelum Pokuna



Sampath Bank 25th Anniversary Pirith Ceremony

Sampath “Vesak Bhakthi Gee”

Occupational Health & Safety We maintain a zero accident work environment due to measures taken to provide a safe work environment for our team members. These include:

Maintaining a hazard free environment Business Continuity Plan that addresses

potential emergencies Co-ordinators at branches and each floor

at Corporate Office responsible for creating awareness of safety

The services of a dedicated Security Consultant to ensure that arrangements are discreet and emergency situations are handled with proper care

Good housekeeping practices Counselling and awareness of Occupational

Health & Safety procedures

Employee Information – Statistical Analysis

Employees Analysed By Category And Gender as at 31st December 2012

Male Female Total

Corporate Management 11 2 13

Senior Management 58 12 70

Executive Management 74 25 99

Middle Management 363 158 521

Junior Management 491 203 694

Operational Staff 1069 778 1847

Other Grades 40 171 211

2106 1349 3455

% of Sampath Employees 61% 39% 100%

221Sampath Bank PLC

Employees analysed by gender and Geographical Region

Province Male Female Total

Central Province 136 84 220

Uva Province 72 19 91

Southern Province 155 76 231

Sabaragamuwa 91 37 128

North Central 71 25 96

North Western 132 73 205

Northern 81 35 116

Eastern 122 29 151

Western 621 665 1286

Departments 625 306 931

Total 2106 1349 3455

Employees analysed by type of employment contract and gender

Male Female

Permanent Employment 1752 1228

Trainees 310 92

Probationers 40 28

Fixed Term Contract 4 1

Total 2106 1349

Employees Analysed by Age

Age (Yrs)

Corp. Mgt

Senior Mgt

Mgr Snr Exe & Executives

Jnr. Executives

Allied Trainees Total

>55 3 2 5

51-55 4 13 4 18 1 22 62

41-50 6 28 22 235 25 74 390

31-40 3 350 307 80 740

21-30 17 1806 33 371 2,227

<=20 31 31

Total 13 41 29 620 2139 211 402 3,455

Age Analysis of Employees 2012

<55 - 0.57% 51-55 - 1.79% 41-50 - 11.29%

31-40 - 21.42% 21-30 - 64.46% >=20 - 0.90%

Age Analysis of Employees 2011

<55 - 7.79% 51-55 - 8.05% 41-50 - 8.65%

31-40 - 25.24% 21-30 - 50.27%



Economic Value to Employees

2012 2011 % change

1 Salaries & Allowances 2,306,905,915.43 1,905,496,079.72 21.06%

2 Annual Leave Allowances 10,678,000.00 - -

3 Staff Medical Expenses 20,183,820.00 31,429,499.98 55.70%

4 EPF Contributions 257,058,130.11 213,401,957.09 20.45%

5 ETF Contributions 64,264,532.37 53,350,489.26 20.45%

6 Contribution to Gratuity Fund 13,921,047.95 16,615,902.00 19.35%

7 Contribution to Pension Fund 44,357,045.35 46,795,355.30 5.50%

8 Staff Loans 1,185,604,394.09 941,243,292.61 26.00%

Employees Analysed by Service Years

Period of Service Corp. Mgt

Senior Mgr

Mgr Snr.Ex & Ex

Jnr. Exes

Allied Trainees Total

Above 20 years 7 34 24 144 7 53 269

16 – 20 years 3 1 200 37 37 278

11-15 years 1 1 155 115 27 299

6 – 10 years 1 2 76 745 48 872

Below 6 years 4 3 2 45 1235 46 402 1737

Total 13 41 29 620 2139 211 402 3455

Career Progression – Internal Promotions to Employee category

Junior Executive – Grade II 145

Executive – Grade I 53

Executive – Grade II 57

Senior Executive – Grade I 57

Senior Executive – Grade II 16

Secretary Grades 26

Total Internal Promotions 354

Our Talent Pool

Our Talent pool has grown by 6.97% in this year and 90% of vacancies in the senior positions were filled by internal candidates.

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Recruitment

New Recruits Analysed by gender Number %

Male 278 76

Female 90 24

Total 368

New Recruits Analysed by age Number %

Under 30 361 98

30 – 40 2 1

40 – 50 4 1

Above 50 1 0

Total 368

New Recruits Analysed by Geographical Region

Number %

Central 64 17

Eastern 7 2

Northern 6 2

North Central 12 3

North Western 28 8

Sabaragamuwa 26 7

Southern 41 11

Uva 11 3

Western 173 47

Total 368



Training

Investment in Training & Professional Education

2012 2011 2010

Investment In Professional Education

13.745 Mn 11.608 Mn 8.136 Mn

Investment in Training 34.852 Mn 49.07 Mn 14.247 Mn

Total investment in Training & Professional Education

48.597 Mn 60.678 Mn 22.383 Mn

Total Training Hours 91623 104489 57177.5

Average Training Time per Employee 26 32 21

Staff Training Information

Direct Training

Area of Development Internal External - Local External - Foreign

No. of Participants

Training Hours

No. of Participants

Training Hours

No. of Participants

Training Hours

Banking Operations 5906 2846 516 1850 19 400

Trade Finance & International Operations

241 508 24 200 5 112

E-Learning

Skills Developed/Area of Focus No. of Employees Training Hours

Teller Operations/ Customer Care/ Banking Law/ Management/ Miscellaneous/ International Operations/ Branch Operations/ Risk Management/ Card Centre/ Security Features of Currency Notes/ Accounts Opening Operations/ Professional Customer Service/ Past Exam Papers

7601 Logins 1621.00

225Sampath Bank PLC

Sampath Bank Football Team

Sampath Bank Swimming TeamSampath Bank Badminton Team

Employee Achievements Team Achievements



Sport Event Result / Achievement

Athletics Mercantile Athletic Championship 2012 12th Place by winning 16 medals

Badminton Mercantile Inter Firm Team Championship 2012

Mercantile Inter Firm Team Doubles Badminton Championship 2012

Mercantile Inter Firm Team Doubles Badminton Championship 2012

Men’s & Women’s – Runner up

Grand Slam Champions

“Bowl” Category Runner Up (B Team)

Basketball Knock Out Tournament 2012 - MSBA Runners up“Continuation of National Captaincy of Sri Lanka Team-Chamath Danawansa”

Cricket Mercantile Knockout Semi FinalistHockey Mercantile 7s A Division Runner upSoccer Mercantile – Knockout

Mercantile – LeagueChampionsRunners up

Swimming President’s Challenge TrophyMercantile Swimming Championship 2012

Winners of 05 medals

Go Kart Speed Drome Bankers Go Kart Challenge 2012 Second Runner Up

Sampath Bank Team Member Thilini Jayasinghe Participation in London Olympics – 2012

Sampath Bank Team Member Jeewan Mendis selected to the National Team tour of Australia

227Sampath Bank PLC

Sampath Bank Team Member Rangana Herath - Ranked No. 2 bowler in the Reliance ICC Test Rankings

Diluka Weerasooriya and Harshana Hettiarachchi represented Sri Lanka Hockey team

Individual Achievements

Sport Achievement Player

Badminton Mix Doubles – Runner Up

Women’s Veterans – Runner Up

Men’s Doubles – 2nd Runner Up

Men’s Singles – 2nd Runner Up

Women’s Singles – 2nd Runner Up

Participation in London Olympics – 2012

Hasitha Chanaka & Thilini Jayasinghe

Tharanga Nishanthi

Hasitha Chanaka & Devendra Bandara

Hasitha Chanaka

Thilini Jayasinghe

Thilini Jayasinghe




Cricket World No. 2 bowler in the Reliance ICC world Rankings in November 2012

Selected to the National Team toured to Australia

3rd Sri Lankan Cricketer to reach the 150 test wickets

Appointed As Sri Lankan “A” Team Captain

Continues as a member of the Sri Lanka Cricket Selection Committee

Member of World T20 Runner up team

Rangana Herath

Rangana Herath and Jeewan Mendis

Rangana Herath

Kaushal Silva

Don Anurasiri

Rangana Herath and Jeewan Mendis

Rugby Selected for the National Team for Mumbai 7s and Shanghai 7s (Plate Champs)

Dilip Selvam

Hockey Vice Captain of the National Team Toured to Qatar for World League Round – 1 (Runners up)

Diluka Weerasooriya

Soccer Selected for Mercantile Football All Island Team (Senior Inter League Tournament)

Avinda Adikari and Dilum Ariyawansa

Swimming President’s Challenge Trophy Mercantile Swimming Championship 2012

Champions Category -1st PlaceNovices Category

1st Place – Back Stroke1st Place – Freestyle Stroke3rd Place - Breast Stroke

3rd Place – Freestyle Stroke

Kavinda Hulangamuwa

Nanda Ramanan Vijayan

Sameera Sandaruwan

Basketball National Captain of Sri Lanka Team Chamath Danawansa

Deaf Cricket Secretary, Sri Lanka Deaf Cricket Association, the Governing Body of National Deaf Cricket team who emerged as “Runners Up” in second Deaf Cricket Asia Cup 2012.

Asela Jayathilake

Deaf Cricket Member of National Deaf Cricket Team who emerged as “Runners Up” in the second Deaf Cricket Asia Cup 2012 held in Pakistan

Lakshan Fernando

229Sampath Bank PLC


Athletic Mercantile Athletic championship110 Hurdle – 1st PlaceJavelin Throw – 3rd Place

Men’s Novices CategoryLong Jump – 1st Place100 x 4- 3rd Place

Men’s Veteran over 40 CategoryShot Putt – 2nd PlaceLong Jump – 3rd Place

Men’s Veteran over 45 category100 m – 2nd Place

Men’s Veteran over 50 category1500m Race Walking – 3rd PlaceJavelin Throw – 3rd Place

Women Veterans CategoryDisc Throw – 1st PlaceShot Putt - 1st Place100 m – 2nd PlaceShot Putt – 3rd Place800m Race Walking – 1st Place800m Race Walking - 2nd PlaceJavelin Throw – 3rd Place

Member of National Rugby Selection Committee

Nuwan VidanagamageAmila Wijekoon

Malinga SurappuligeG A P RandikaAvinda AdikariLakmal JayasingheDilum Ariyawansa

Nalaka De SilvaAsela Jayathilake

Aruna Jayasekara

Ajith JayasekeraAjith Jayasekera

Sanjeewani PeirisSanjeewani PeirisRuwanmalee WickramasingheRuwanmalee WickramasingheRamani PereraSumi WeerasingheSumi Weerasinghe

Sajith Mallikarachchi


Customers We serve over 1.6 million customers through a network of 209 branch offices and networked agents providing a variety of products tailored to meet diverse needs. We offer our customers convenience in banking using innovative technology and high standards of customer service. Our goal is to create wealth. Therefore we maintain a to handle our customer complaints. According to that we are able to keep our response ratio at 100%. A number of the initiatives are discussed under Responsible Business Practices whilst others are described below.

Customer Charter We have adopted the Customer Charter issued by the Central Bank of Sri Lanka to ensure that our customers’ rights are protected and that they are fully aware of their entitlements and obligations when doing business with us. The customer charter is published on our website in all three languages and our staffs are trained to uphold the customer charter in their interactions.

...we maintain a system to handle our customer complaints. We are able to keep our response ratio at 100%.

Technological innovation for customer convenienceWe seek to enhance customer lifestyles through new technological innovation that will enable them to use their mobile or other electronic devices to carry out their financial transactions. Our track record is impressive with many firsts in technological innovations. Today our customers can choose to interact with us through internet banking, mobile applications or over 1600 ATMS island wide as a result of our efforts. We are committed to continue pushing boundaries to harness the power of technology to reach more customers and provide greater ease of transacting with us in a vital aspect of their lives.

Addressing diverse needs of customers through tailored products We strive to develop financial products and delivery channels by understanding the needs of our customers as the appropriate use of financial products that enables wealth creation and stimulates economic development. The following are examples of how we tailored our products to meet the needs of customers.

Customer Need Identified Product modification/feature

Facilities to receive funds from overseas family members

Money to Sri Lanka is an online remittance tracking facility which has been offered in collaboration with ICICI Bank. It is currently available in UK, Australia, USA, South East Asia and the Euro Zone.

Entrepreneurs in North and East needed financial assistance but were unable to provide acceptable security as land registry records were not available

SME loans were launched as Micro Finance to address the needs of entrepreneurs in these areas.


231Sampath Bank PLC

Training for higher levels of customer service We believe that a knowledgeable and motivated staff are key to customer satisfaction and undertake many initiatives more fully described in the Employees segment of the report on pages 214 to 229 Many of our training sessions are focused on enhancing our levels of customer service and knowledge of our products to enable our staff to provide a higher level of customer service. Memoranda and circulars relating to existing products and procedures are available on the intranet in addition to being incorporated in to the various training modules. Our staff is made aware of new developments in their respective fields through team briefings and circulars to ensure that their knowledge is current and comprehensive when advising customers.

Training on Customer Service

Train the trainers

Training Programme on Position Descriptions


Moving towards zero customer complaints A customer survey carried out by a third party was commissioned in November 2011 by the Board of Directors in order to understand the parameters that need to be maintained or strengthened and to evaluate customer satisfaction to understanding of the service levels. The Research Consultancy Bureau was commissioned to carry out the survey. Additionally We operate a Call Centre operating 24 hours over 24 years for the convenience of our customers.

Customer complaint handling policy The Customer Complaint Handling Policy is printed and displayed at all our branches and also available on our website. The policy complies with the requirements of the Banking Act Directive No.8 of 2011 – Customer Charter of Licensed Banks issued by the Central Bank of Sri Lanka which is also available on our website. It provides information regarding the complaint procedure, the Bank’s response mechanism and the contact details of the Financial Ombudsman in case the customer wishes to escalate the issue with this independent body. Telephone complaints are handled through the call centre. During day time there the capability is available to handle customers complaints in all tri-lingual hotline. Dedicated officer is available even outside banking hours. Customers may also register their complaints at the local branch, write or email for which contact details are provided. Complaints are addressed within 2 to 24 hours of receipts and the Call Centre Supervisor is informed of action taken within a day of the complaint. The process is managed by the Compliance Department of the Bank and a monthly report is submitted to the Board Risk Management Committee.

Accessibility& Physical Safety Customer service areas are designed to provide a safe and pleasant environment for conducting business. Over 17.70% of our branches have disability access and our electronic delivery channels provide ease of transacting for them.

Delighting Customers We reward customer loyalty and carry out special promotions of our products as a part of our normal business activities. A few stand out as they delight the customers.

Sanhinda Saver (senior citizens saving account) customers in and around Colombo were invited to Victor Ratnayake “SA” farewell concert.

Sanhinda Savers were also provided a free medical camp where comprehensive medical tests and eye screening were carried out

Customers depositing Rs.15,000/- during the Sinhala & Tamil New Year festive season were offered Tri-Lingual dictionaries published by M.D.Gunansena & Co.

Rewarding loyal eRemittance customers with cash rewards during the Sinhala & Tamil New Year festive season

Our Credit cardholder enjoyed a 10% of their bills at Food City during the Special season

Shareholders We have 17,518 shareholders and are committed to delivering sustainable growth and value to our shareholders and facilitating the exercise of their rights. Our committed efforts to create value through brand building have provided the shareholders the highest rate of return in the Banking sector in the Colombo Stock Exchange for 2012. We are encouraged by their loyalty and participation at the forums provided for interaction with the Board.


233Sampath Bank PLC

Customer Get-together - Galle Branch

Customer Get-together - Galle Branch


Management Approach

Increasing shareholder-wealth

Every shareholder and investor of Sampath Bank has the right to expect the bank to enhance long term shareholder value and facilitate an environment which they can exercise their rights.

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, reinventing our products and services, and an aggressive expansion plan; are all geared to ensure sustainable growth while creating greater wealth to all our stakeholders.

Maximizing shareholder value and market capitalisation.

Proactive initiatives implemented based on investor relations.


Shareholder Engagement Historically we have a culture of active shareholder participation and exercising of rights which we have enhanced through many initiatives. We collected 82.7 % of our shareholders proxy’s for the Annual General Meeting held on 30th March 2012 which was attended by 154 shareholders and 108 were represented by proxy. The Shareholder Relations Meeting held on the same day immediately after the AGM was attended by 97 of our shareholders. We have taken many initiatives to achieve this going beyond the legal requirements to ensure that opportunities are given to shareholders to voice their concerns and participate in voting as described below:

The Shareholder Relations Committee holds an annual forum to identify concerns of shareholders to enable shareholders to voice their concerns a committee comprising non-executive directors

The Annual Report is published in English & Sinhala and the Chairman’s and CEOs messages are published in Tamil thus ensuring information democracy

Quarterly financial statements are published in the newspapers and on our website in all three languages

We encourage an open dialogue at the Annual General Meeting

Press releases are issued on Bank’s performance, new products and financial achievements

Shareholders have direct access to Branch Managers and can meet the management staff by appointment

Preferential treatment at branches to shareholders

Investor Feedback Form available on the Corporate web site (www.sampath.lk) for shareholders to provide comments/queries

Written complaints submitted to the Company Secretary who acts on behalf of the Chairman, are reviewed by the Shareholder Relations Committee who initiate action to provide a solution and coordinate a response.

Shareholder Relations Committee Sampath Bank was the first listed company in Sri Lanka to introduce a Shareholder Relations Committee as a sub-committee of the Board of Directors. This committee holds a Forum for Shareholders immediately after the Annual General Meeting to identify shareholder concerns with a view to addressing legitimate concerns. Details of the key initiatives highlighted below are discussed in the Report of the Shareholder Relations Committee on pages 160 to 161.

Shareholder Concessions The Board has determined to offer the following concessions to shareholders as recommended by the Shareholder Relations Committee in this Silver Jubilee year:

Waiver of all internal commissions charged on our products and services

50% reduction of the normal initial deposit on opening current accounts.

50% waiver of the actual fee charged for the period.

Issue of SET card free of charge. Greater accessibility to Branch Managers.

Delivering Shareholder Value Our strategies for growth in earnings and stability have delivered value to shareholders as detailed below:


235Sampath Bank PLC

2012 2011 2010 2009 2008

Earnings per share(Basic) 32.98 23.00 22.29 30.08 21.70

Dividends per share 12.00 9.00 8.09 6.25 4.00

Gross Dividends paid 1,952,840 1,426,984 1,008,533 473,602 275,550

Capital Adequacy – Tier I 11.80 10.2 10.7 10.4 8.1

Capital Adequacy – Tier 1 + Tier II 13.61 11.5 12.9 13.5 11.9

Share Price (at close of business for year) 200.50 195 271.90 204.25 68

Sampath Market Capitalisation(Rs.Mn) 32,628 30,587 41,564 14,070 4,684

% Increase in Market Capitalisation of bank(Y on Y) 7 (26) 195 200 (43)

CSE Market Capitalisation(Rs.Mn.) 2,167,581 2,213,873 2,210,452 1,092,137 488,812

Sampath Market Capitalisation as a % of CSE 1.5 1.38 1.88 1.29 0.96

Market Capitalisation Rank 13 16 15 19 25

The strategies to enhance earnings, growth and stability are discussed in detail in the Management Discussion & Analysis on pages 46 to 95 of this report.

Government & Regulators Sampath Bank has a number of relationships with the government and regulators of which the principal ones are depicted below. Empowerment of Community and Ethics and Values, two aspects of our Sustainability model govern our approach in addressing the needs of this important stakeholder.

Recognising Initial Shareholders


Central Bank of Sri Lanka

Securities & Exchange

Commission of Sri Lanka

Department of Inland Revenue

Colombo Stock

Exchange

Sampath Bank

We have complied with the requirements of the Securities & Exchange Commission, the Central Bank of Sri Lanka and the Colombo Stock Exchange as set out in the Corporate Governance Report on pages 96 to 143, and the Directors Report from pages 274 to 287. The following amounts have been contributed to the government as set out in the Economic Value Added Statement on page 292.

2012 2011

Income Tax 2,108,885 1,484,408

Value Added Tax 1,142,709 901,484

Total 3,251,594 2,385,892

Alignment of Bank Strategy with national priorities Our Strategic Planning process involves review of national priorities as articulated in the Annual Budget as articulated in the annual National Budget and other government plans. We have aligned our strategy with national priorities in many areas as listed below:

Inclusive Banking – We share the vision of Inclusive Banking for all and have undertaken a country wide expansion of our branch network in the past three years to achieve this objective. Our branch model is one that offers the full range of services at our fully fledged branches offering convenient banking solutions to the communities where we have branch.

SME Growth - We have supported growth of this vital sector as outlined in the Management Discussion and Analysis on page 46. And in the Responsible Business Practices segment on page 205. Support for SME’s is comprehensive as we focus

Official Banker - International Book Fair 2012 at BMICH


237Sampath Bank PLC

not only in marketing our products to them but also on entrepreneur development to facilitate better business practices with the vision of building a more robust SME sector that is aware of the business risks they face.

Trendsetter in technological innovations for inclusive banking – We have introduced many technological innovations to the industry enabling cost effective scalable banking solutions enabling the industry to reach customers at the base of the pyramid. These are listed in the Management Discussion & Analysis segment on page 46 and include:

First local bank to introduce ATM’s and deploy a network of ATM’s facilitating customer convenience

Sampath Mobile Cash now enables even non-customers with mobile access to send or receive cash using their mobiles island wide instantly thus enabling those working in busy urban townships to send money to their families living elsewhere. With Colombo having a large migrant population, Mobile cash enables those even at the base of the pyramid to transfer funds at need.

Supporting Tri-lingual communication - Our quarterly financial statements are published in all three languages in the newspapers and our Annual Report is one of a handful that is published both in English and Sinhala. Additionally the Chairman’s and the Managing Director’s messages are published in Tamil as well.

This year we issued a Tri-lingual dictionary during the Sinhala & Tamil New Year season to promote this. We have promoted the concept internally as well and encouraged our staff to undertake internally offered training courses in language proficiency in English and Tamil.

Payment gateway for government e-services through a pioneering public private partnership supporting the national e-government services initiative – The Sampath Payment Gateway enables online payments to the Ministry of Transport for renewal of licenses, online visas for the Department of Immigration and Emigration, the Registrar of Companies, the Defence Fund and the National Health Fund.

Multi-Bank ATMs - Sampath Bank was responsible for pioneering the ATM Network Sharing concept, substantiating a huge saving for customers in the form of fees paid to foreign financial institutions for ATM usage. It also decreases the infrastructure costs for the entire banking sector enabling all partner institutions to significantly reduce their capital costs whilst offering greater convenience to their customers. Currently our network comprises several Partner financial institutions including Bank of Ceylon, Hatton National Bank, Union Bank, DFCC Vardhana Bank, Pan Asia Bank, National Savings Bank, HDFC, NDB Bank, L.B.Finance and Nations Trust Bank. The network comprises over 1500 ATMs island wide and accounts for over 60% & of the total ATM market share.


Communities

Corporate Responsibility (CR)

Every member of society has the right to expect the Bank to consider both, the social, and economic dimensions of its operations and activities.

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 recognized as socially sensitive business partners. And our efforts and approach have positioned Sampath Bank as a responsive and responsible corporate citizen.

Stakeholder Rights Framework

Management Approach

We engage with the community on both a national and localised basis to develop communities by empowering individuals and groups to challenge their operating boundaries to create wealth and improve livelihoods. Entrepreneur development, Education for development and Empowerment of Community, three of the 5Es from our model form the basis for project formulation and development for communities based on our assessments of needs from our interactions with them. Projects are formulated by Branches and Departments based on their understanding of needs from their engagements at community level and are submitted to the Sustainability Steering Committee for approval. The projects are implemented by the staff who volunteer their time and effort to add value to the project and ensure that it achieves the objectives.

Entrepreneur Development We believe that we have a duty to educate the entrepreneurs to facilitate their development and ensure that they have adequate knowledge to make informed choices. Such programmes are carried out with the objective of improving the success rates for business start-ups and to pave the way for wealth creation than to increase dependency on borrowings. The programmes cover the key areas that entrepreneurs must address in taking products to market, provide insights to avoiding common pitfalls and financial literacy.

Education for Development Education is necessary to bridge the social and economic inequality and provide livelihoods to those at the base of the pyramid. We have taken a number of initiatives to promote education and the dissemination of knowledge within the country as described below. The projects ranged from donations to schools affected by the civil war


239Sampath Bank PLC

to quiz competitions to encourage acquisition of knowledge outside the state curriculum.

Programme on Effective Presentation skills for Young Inventors (Sinhala Medium) by Sampath Bank Toastmasters Club (SBTMC)

Sri Lanka Inventors Commission has requested our Bank to conduct a special programme for Young Inventors on effective presentation skills. Sampath Bank Toastmasters Club (SBTMC) conducted the programme.

Scholarship Seminar in Pannala Branch

Coverage Project Details

Nation wide Issue of tri-lingual dictionary to customers depositing over Rs.15,000/- during Sinhala Tamil New Year season to promote tri-lingual communication towards lasting peace.

Nikawaratiya Fostering creativity in Nika/Wepathanga Maha Vidyalaya by sponsorship of project formulated by the school

Hingurakgoda Sponsorship of annual prize giving ceremony and contribution of stationery and cricket equipment to Viharagama Kanishta Vidyalaya

Marawila Art competition among orphan children in Holy Cross Children’s Home, Marawila

Deniyaya Region “Sampath Panasara” 2012, the annual quiz competition was organized in Central College Deniyaya with more than 25 schools in the region participating fostering interest in education beyond the national curriculum.

Ranmuthugala and Makola Project to facilitate education and rehabilitation of under privileged students of two remand homes at Ranmuthugala and Makola by donating Ordinary Level Study packs.

Divulapitiya Books were donated to Dhaham Pasal students at Pinnakele Priyadharshanaramaya temple which has won the award for the 13th consecutive time as the Best Daham Pasala in the area and has been conducting classes in both Sinhala & English medium with the guidance of the Indorouwe Gnanarathana Thero as most of the students are from very poor families and not in a position to afford any additional expenses for their education.

Dankotuwa Conducted seminar for 2000 school children from various schools on Ethics & Values in celebrating Children’s Day with the ambition of helping students of Dankotuwa area to apply, social and moral values to their lives as well as to emphasise the importance of social values.


Coverage Project Details

Padaviya Granting token of appreciations for prefect board of the school & best performing teachers in Padaviya Sri’Pura Maha Vidyalaya, Trincomalee which was affected and severely impacted by the war, to motivate and encourage their work.

Ratnapura Books have been donated to 100 students of Pahala Hakamuwa, Ratnapura who were from very poor families on Children’s Day.

Mallavi An awareness program on share trading and investing in the stock market followed by a quiz competition was conducted for seven hundred students covering 65 schools in Thunukkai Educational Zone.

Ampara Essential equipment for home science section, English Unit and lab of Udayagiri Vidyalaya Ampara which was severely affected by the ethnic war that lasted for three decades.

Empowering Future leaders-Padaviya

“Ride to Save Programme”-Batticaloa Branch


Objectives – To Develop effective presentation skills and groom selected students for a Reality programme which will be telecasted on ITN

Target Group – Grade 8 and above school students

Duration – 01 Day Medium – Sinhala No. of students to be covered – 192 (32

students per batch) No. of Programmes - 06

Senior Toastmasters of SBTMC has successfully conducted the 01st Programme on 12th December 2012 (Wednesday) at our 03rd floor Mini Auditorium, before the 1st recording scheduled on 16th December 2012 (Sunday) at Studio No. 1 at ITN.

241Sampath Bank PLC

Seminar on Share Market-Mallavi Branch

Dansala at Hettipola Branch

The Donations to Sansungama Primary Vidyalaya- Hingurakgoda Branch

Contents of the Programme Structuring a Speech Body Language and Eye Contact Voice Variation Case Study analysis as a Group and Group

Presentations Evaluation of Presentations and Feedback

Empowerment of Community Communities have diverse needs depending on the state of the infrastructure, the average household income and available opportunities for economic activity. As we believe in going to the grass roots and driving change, we have selected a model of empowering communities we engage with mainly through providing basic infrastructure or necessities to enable them to improve their existence and enhance their performance. We also recognise the role of supporting local cultures and some of our community projects reflect this important aspect that enriches our lives and inculcates values



Blood Donation-Palmadulla Branch Donations to District hospital-Kekirawa Branch

Hingurakgoda Branch has donated newly built house to an underprivileged family in Sansungama, their daughter excelled in the Scholarship Exam obtained 156 marks the highest in the area

243Sampath Bank PLC

Community Related Projects

Branch Project Description

Kohuwala Donation of Ceiling Fans to Grace Perera’s Elder’s Home

Muttur Painting of the female ward of Muttur Base Hospital and to assist in maintaining the hospital in a town severely affected by the ethnic war that lasted nearly for three decades.

Kirulapone Donation of Tricycle Chair to a disabled customer to assist him to do his day today work as a vendor.

Sabaragamuwa Blood & Eye Donation Camp were conducted to assist the Provincial General Hospital; Ratnapura which needed blood to treat their patients and to commence an Eye Donation Campaign which had not been carried out in this area during the last ten years. This campaign attracted over 100 donors.

Thambuththegama The patients of Thambuththegama Base Hospital are from lower income families and their children’s ward was colour washed to create a pleasant and clean environment for their speedy recovery.

Jaffna Refreshments were served to devotees participating in the Chariot festival at Nallur Kandaswamy Temple- Jaffna which goes on for 26 continuous days with an average of 75,000 devotees taking part in daily poojas from all over the country. Sponsorship for landscaping work at the new building of Jaffna Teaching Hospital to create pleasant environment for the dedicated staff of the teaching hospital and the patients who seek treatment.

Sabaragamuwa Refreshments were served to thousands of devotees who came in a queue over 7 km long to pay homage to the sacred Kapilawasthu Relics at the Pelmadulla Rajamaha Viharaya

Bandaragama Donation of medical cabinets to District Hospital, Bandaragama in order to enhance the productivity of the base hospital Bandaragama

Boralesgamuwa An eye care campaign was conducted free of charge by experienced professional opticians and facilitating patients to purchase spectacles at very special prices with an easy payment scheme.

Ratnapura Blood Donation Camp was organised to provide a supply to the Provincial Regional Hospital in Ratnapura which needed blood urgently to treat the large number of cases handled by them.

Kahatagasdigiliya Kahatagasdigiliya, situated 35Km away from Anuradhapura with population of 43,366 has Death Donation Societies which are strong community based establishments with a huge impact on local community. Chairs, ledger and CR books were provided to Death Donation Societies of Kahatagasdigiliya to help them to carry on their day to day activities successfully.

Hingurakgoda Construction of a house for the family of the student who got the highest marks for the scholarship exam in the area with the help of the 223rd Brigade of the Sri Lankan Army,our customers and other volunteers from the community Books, stationery and a computer with all the accessories were donated to the school to commence a library and refreshments were distributed among the school children.

Divulapitiya Blood donation camp was conducted by the Gampaha Base Hospital to meet its needs in the branch premises with the participation of about 100 donors. Refreshments were provided for all the blood donors.



Ethics and Values We believe the best way to build and to maintain trust is to conduct every element of our business according to the highest standards of integrity. Our ability to do so rests on the behaviour of our people, from upper level to lower level. We select our people based not just on their skills, accomplishments and potential, but also on their principles and values. A commitment to integrity and ethical behaviour is a critical factor in our

decisions regarding professional advancement and compensation.

The Bank maintains a Code of Ethics, supplemented to our employees Principles and compendium of internal policies, to inform and guide our employee in their roles.

While ethical behaviour requires us to comply fully with all laws and regulations, “compliance” with

Branch Project Description

Kekirawa Donation of 5 water filters to the Kekirawa District Hospital as clean water is a key concern in this area. Additionally a mini playground has been established in the hospital premises to help sick children gain a speedy recovery.

Pelmadulla Conducting Personal Development Programs on a monthly basis and donation of furniture for Mithuru Lama Sewana – Rilhena, Pelmadulla which has 21 boys ranging in age from 6 to 16 as they were studying seated on the floor.

Anuradhapura New Town A health campaign was conducted among Daham Pasal students of the Galkadawala Viharaya with Consultants and nurses. Drugs were distributed among the participants on prescriptions issued. Further a water filter was donated to the temple.

Kegalle Conducted a blood donation campaign for the blood bank of the Kegalle Teaching Hospital to meet their requirement of blood for patients undergoing surgeries at operation theatres.

Mahiyanganaya Blood donation campaign and Community health development project was conducted for the Vanniyalatto (the indigenous people) where blood sugar, ECG, blood pressure and urine tests for the kidney diseases were done.

Puttalam Office furniture was donated to the Coroner’s Office of the Puttalam Base Hospital on request to meet a vital need in the community.

Chankanai Colour washing and donating furniture to the Ladies’ Ward of the Chankanai Government Hospital to provide a pleasant environment and enhance efficiency.

Kandy Sponsored and organised a day out for the children at the Wattegama Girls’ Orphanage to visit the Temple of the Sacred Tooth Relic and the Peradeniya botanical gardens. Shoes, socks, stationary items, gifts for fun games and chocolates were distributed among them.

Chilaw Distribution of Water Bottles amongst families suffering from lack of drinking water, due to heavy floods by the staff of the Chilaw and Hettipola branches.

245Sampath Bank PLC

the law is the minimum standard to which we hold ourselves. Those who work with us honour not just the letter of existing laws

We do not look to prevailing “market practices” as an indication of appropriate behaviour. We base our decisions on legal and regulatory rules, our Code, our Business Principles and our values.

We are committed to addressing such conflicts with all appropriate disclosure and transparency. If a transaction generates a conflict that cannot be addressed, we would prefer to lose the business than to abandon our principles.

Our success has been and will continue to be dependent on the trust that our shareholders place in us. Everything we do, every piece of advice we give, every transaction we execute, every rupee we manage, every interaction in which we take part-must serve to strengthen our ethical values which we cherish.

Seminar for Children on “Reinforcing Value”

Suppliers

Stakeholder Rights Framework Management Approach

Our registered suppliers have the right to expect transparency and accountability from the Bank in assessing their capacities to deliver the goods and services required by the Bank.

We maintain a transparent process of supplier management which is based on best practices of anti-corruption, open dialogue and accountability for decisions.


We count on our suppliers to provide a reliable and cost effective service whilst upholding high standards of conduct and responsible business practices. Their right to a transparent process of supplier management based on best practices of anti-corruption, open dialogue and accountability is acknowledged and policies and procedures

Code of Ethics Whistle Blowing Policy

Procurement Procedure

Open door communication

policy

Training & Awareness of Anti-Corruption

Practices

Register of Suppliers

Stakeholders Protection Framework

have been implemented to conduct business in a responsible manner in accordance with our stated values. We look to our suppliers to become partners in progress with us over the long term.

Code of Ethics The code of conduct and the Blue Book sets out the company values and the standard of conduct and ethics expected from our staff in their dealings with external or internal parties. All staff is aware of this and it is available to them for clarification on the intranet. We believe these sets the benchmark for responsible business practices when engaging with suppliers and provide for a safe business environment where rights of each party are understood and respected.

Bank to voluntarily bring such concerns to the notice of the Chairman of the Audit Committee. Our firm resolve is that no staff member should be denied access to the Audit Committee and that a conductive environment should exist for exercising of their right.

Procurement Procedure This policy is designed to ensure ethical and professional relations with all our suppliers. It has clearly defined approval limits, procedures and limits for quotas, a process for maintaining the confidentiality of tenders and negotiations processes for negotiation of rates and modalities for resolution of disputes. The policy also addresses the need to attempt to ensure that we source our suppliers from the locality of the branches where ever possible, creating jobs and increasing the income of the local communities of the area.


Whistle Blowing Policy Our Whistle Blowing Policy has been formulated to promote transparency and deter fraudulent practices. The policy provides our staff who have legitimate concerns regarding existing or potential wrong doing by any person within the

247Sampath Bank PLC

Register of Suppliers The Bank maintains a register of Suppliers who are screened to ensure that they are capable of meeting our needs as specified, have the capacity to continue as going concerns and have business continuity plans in place to ensure that we receive an uninterrupted service in order to meet our service standards. This process has enabled us to engage effectively with our suppliers in partnering their progress and helping their businesses shift to more robust operating models by addressing areas for improvement.

Open-door communication policy Our open-door communication policy enables suppliers to voice their concerns and resolve issues without delay. Suppliers have access to the Administrative, Maintenance and Finance staff to resolve issues which may arise. This also enables us to identify common areas of concern and improve our processes and procedures to facilitate smooth operations which drive the cycle of continuous improvement.

Environment We believe that we have diverse roles to play in ensuring sustainability of the environment as a responsible corporate citizen who acts positively to minimise its foot print, a responsible financier of projects ensuring that environment issues are addressed, an employer who can take the message to a large captive employee base and as a disseminator of knowledge and an influencer of social norms to the communities we operate in. Our Environment Policy and Six Eco Guidelines are formulated to fulfil our diverse roles by embedding them in our operational framework.


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 team-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.

ECO Guidelines

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

Address critical environment related issues through a tripartite involvement, between the Bank, employees and the community

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

Ensure compliance with environmental regulations in all our business transactions

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

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

Eco Guidelines

Our Environment Policy and Six Eco Guidelines are formulated to fulfil our diverse roles by embed-ding them in our operational framework.


249Sampath Bank PLC

I. Lean Resource Consumption

Lean resource consumption principles are fully integrated in to our operations and our product development processes and we are reaping the benefits in the form of enhanced productivity, cost efficiencies and other qualitative aspects. However, we are aware of the need to push boundaries as

we progress and focus on continuous improvement in areas we have integrated whilst adding other areas in to the monitoring cycle.

New InitiativesThe table below lists the initiatives introduced this year to further extend the application of lean resource consumption practices in the Bank.

New Initiatives

E-Board Papers Our Board papers are circulated electronically to the directors through secure connections to further reduce paper consumption.

E-Learning We re-launched the e-learning platform with modifications to enable staff training. This has enabled us to reduce our consumption of fuel for travelling significantly as we can deliver significant components of training remotely. It has the additional benefit of enabling the staff to complete the modules at their pace and convenience which improves the quality of training as well.

Mobile Cash This cutting edge product was re-launched with a host of new features enabling customers to send money using mobile or CDMA phone irrespective of the TELCO network through Sampath Bank. This product eliminates not only the use of paper for transferring funds but also enhances productivity and enables further penetration to achieve our inclusive banking goals.

Energy ConsumptionThe Bank continued to promote low energy usage by creating awareness of the issues and introducing energy efficient infrastructure and equipment.

Consumption of Electricity - 2012 (Rs)

0

2,000,000

4,000,000

6,000,000

80,00,000

Sampath Bank

Jan

Feb

Mar Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec


Water ConsumptionThe Bank continues to promote minimising water usage through employee awareness programmes across the Bank.

II. Proper disposal of waste We promote proper disposal of waste through separation of waste and encouraging recycling.

Recycling This year we recycled 28,624.70kg of paper during the year through our partnership with our external recyclers Neptune Papers (Pvt) Ltd., and Sensaka (Pvt) Ltd. Each year we have reduced the paper recycled mainly due to our efforts to reduce consumption of paper.

III. Creating awareness A project to create awareness on waste management and tree planting was implemented during the year with the collaboration of the Ministry of Education and the Ministry of Environment covering 25 schools and 5,000 school children in the Western Province which

Powering Hydro power Projects

includes the Colombo, Gampaha and Kalutara education districts. The main objectives of the programme were as follows:

Introduce the fundamentals of waste management into students mind and create behavioural changes

Build-up the future generation, with an environment friendly attitudes

Reduce the load of waste to be collected by the Local Authority

Educate the children regarding the need for the recycling of waste

Introduction of alternative ways of power generation

Encourage the production of compost Beautification of the school and surrounding

environment

Twenty five interested schools were selected by the Zonal Education Director and programmes were conducted by officials of the Ministry of Environment and Sampath Bank ataff from the

Consumption of Water - 2012 (m3)

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

3,600

4,000

Sampath Bank

Jan

Feb

Mar Apr

May Jun Jul

Aug

Sep

Oct

Nov

Dec


251Sampath Bank PLC

Sampath Bank Nature Protection Club Installation Ceremony

Branches. Schools were provided with waste bins to facilitate sorting and children were provided souvenirs to secure their commitment to the cause under this project and the Principals of the schools were required to make quarterly progress reports. It is planned to follow up this project with a competition to determine the best Eco School in 2013 to ensure that this initiative is sustained and supported by the schools.

We supported the Deyata Sevana campaign to plant 1.1mn trees throughout the island initiated by the President and the Ministry of Environment by arranging a programme to plant 200 trees along the main road together with the Divisional Secretary of Ninthavur area and providing the means to safeguard the young saplings until they grow.

IV. Tripartite Involvement Engaging employees is the most effective way to embed the sustainability principles throughout the organisation with the Bank as the sponsor and the community as beneficiaries and participators. All our staff make a Green Pledge which helps to create awareness and reinforces their commitment to upholding the principles in their day to day work.

We have also established a Sampath Bank Nature Protection Club, a volunteer entity comprising of members of the Sampath Family. This is the green arm of Sampath Bank, entrusted to promote the green concepts through Team Sampath. The club has adopted the theme “Love life - Love nature” reflecting the symbiotic relationship between Man and Nature. We hope to implement Sustainable

Sampath Bank Environment Pledge

I will make every endeavour to turn the earth a greener, healthier and better place for all living beings.

I will do my part by helping to preserve natural composition of air, water, soil and fauna and flora.

I am committed to reduce energy consumption, Recycle material, Reuse products and manage disposal of garbage to ensure low emission of harmful substances to air, water and soil since I believe that small positive changes can make a vast difference.

I promise to uphold eco friendly values and a cyclic lifestyle to achieve my mission.

I also make it a point to educate and influence those who are around me in order to preserve the natural beauty of earth and its resources for the future generations.


Environmental initiatives and sustainable banking initiatives through this club.

Additionally, employees are actively engaged in promoting environmental conservation, protection and regeneration as can be seen throughout this report.

V. Compliance with environment regulations

This year we have introduced environmental criteria in evaluation projects for project financing to ensure that the Bank finances only projects that comply with environment regulations and embed sustainability principles in to the business areas of the Bank. Additionally Credit Officers were trained on Environment Appraisal through a 3 day certificate course conducted by the Institute of Environmental Professionals in Sri Lanka in order to ensure that the environment criteria are evaluated in an appropriate manner by officers who are knowledgeable on the subject.

VI. Facilitate Green Enterprise The Bank has facilitated investment in projects that make a positive impact on the environment such as renewable energy projects, eco-friendly projects and plantation projects as detailed in the table below. We also secured a line of credit from Proparco, a French Development Finance Institution to finance renewable energy projects demonstrating our commitment to push the boundaries to support sustainability.

Supporting the Environment through Lending

2012 2011

Eco-Friendly Projects 188Mn 292Mn

MD addressing at Sampath Bank Nature Protection Club Inauguration Ceremony

Objectives of Sampath Nature Protection Club

I. Functioning as a common interest group, involved in developing strategies, policies and procedures relating to environmental protection and conservation including, energy conservation, pollution, recycling, green building and earth friendly practices within our focus group.

II. Influencing and advising the Management of the Bank to take eco friendly business decisions in every aspect of operations and facilitate Bank to be positioned as a Green Bank.

III. Taking Initiatives to encourage members to adopt to an eco friendly and cyclic lifestyle.

IV. Networking with Professional bodies, Research Institutes, Universities in relation to environmental protection and conservation and initiate joint activities to promote eco friendly concepts.


253Sampath Bank PLC

Report Profile Sustainability Report presented according

to the GRI Guidelines covers the operations of Sampath Bank during the period 1st January 2011 to 31st December 2012.

The last Sustainability Report of the Bank was released 2012 separate part from our Annual Report for 2011.

While the Bank presents its sustainability report according to an annual reporting cycle, certain information relating to activities outside this reporting span have been included to lend perspective to the sustainability risks the Bank may face.

Clarifications pertaining to this report may be addressed to DGM Marketing and Business Development - Sampath Bank PLC, No 110, Sir James Peiris Mawatha, Colombo 2, Sri Lanka. E-mail: [email protected], Tel: +94114730678, Fax +94114712014.

Report Scope and Boundary Information in this report excludes the

performance of the Group’s Subsidiaries. The materiality of the issues presented

was determined based on the initiatives and systems in place within the Bank to improve our stakeholder-inclusiveness and have been individually identified for: Customers; Shareholders; Employees; Society, including community, government and media; Suppliers; and the Environment, within the section titled ‘Stakeholder Management’.

Data on the Economic performance of the Bank is based on information available in the Bank’s Financial Statements for the year ended 31st December 2012, which have been audited by our External Auditors, Messrs Ernst and Young, Chartered Accountants. Accounting policies and significant assumptions used in the preparation of these Financial Statements are set out on pages 292 and 318 in the Annual Report 2012.

Environmental, Social and Governance (ESG) issues have been reported and based on data gathered from the relevant business units within the Bank

This report has been presented according to the Global Reporting Initiative (GRI) G3 Guidelines and self declared at a Level B.

Assurance Messrs. Ernst and Young, Chartered Accountants have provided their independent assurance on this Sustainability Report, in accordance with International Standard on Assurance Engagements (ISAE 3000).

Key Impacts, Risks and Opportunities This is explored in detail within pages 164 to 200 as part of the Risk Management Review of the Annual Report 2012, while the sustainability context of not addressing specific issues material to each stakeholder are set out within the ‘Stakeholder Management’ section on pages 211 to 247 in this Sustainability Report.

GRI Report Parameters



Governance, Commitments and Engagement The section on ‘Sustainability Vision’ on pages 202 to 204 in this Sustainability Report sets out the manner in which sustainability is driven within the Bank. The section on ‘Stakeholder Management’

on pages 211 to 247 in this Sustainability Report explores the process in place and initiatives adopted by the Bank to engage with stakeholders and increase stakeholder inclusiveness.

OUTP

UTOU

TPUT

OUTP

UT

ReportApplicaiton Level

G3 PerformanceIndicators &

Sector SupplementPerformance Indicators

Report on: 1.12.1 - 2.103.1 - 3.8, 3.10 - 3.124.1 - 4.4 , 4.14 - 4.15

Report on all criteria listed for Level C plus:1.23.9, 3.134.5 - 4.13, 4.16 - 4.17

Same as requirement for Level B

Not Required Management Approach Disclosures for each Indicator Category

Management Approach disclosed for each Indicator Category

Report on a minimum of 10 Performance Indicators, including at least one from each of: social, economic, and environment.

Report on a minimum of 20 Performance Indicators, at least one from each of: economic, environment, human rights, labor, society, product responsibility.

Respond on each core G3 and Sector Supplement* indicator with due regard to the materiality Principle by either: a) reporting on the indicator or b) explaining the reason for its omission.

C C+ B+ A+B A

Repo

rt Ex

tern

ally

Ass

ured

Repo

rt Ex

tern

ally

Ass

ured

Stan

dard

Disc

losu

res

Repo

rt Ex

tern

ally

Ass

ured

G3 ProfileDisclosures

G3 ManagementApproach

Disclosures

*Sector supplement in �nal version** Performance Indicators may be selected from any �nalized Sector Supplement, but 7 of the 10 must be from the original GRI Guidelines*** Performance Indicators may be selected from any �nalized Sector Supplement, but 14 of the 20 must be from the original GRI Guidelines

255Sampath Bank PLC

Introduction and scope of the engagementThe management of Sampath Bank PLC (the “Bank”) engaged us to provide an independent assurance on the following elements of the Sustainability Report- 2012(“the Report”)

Reasonable assurance on the information on financial performance as specified on page 200 and 252 of the Report

Limited assurance on other information presented in the Report

Managements’ responsibility for the ReportThe management of the Bank is responsible for the preparation and presentation of the Report in accordance with the Bank’s sustainability practices and policies some of which are derived from Global Reporting Initiatives (GRI-G3.1) Sustainability Reporting Guidelines. The GRI-G3.1 guidelines are publicly available at GRI’s global website at “www.globalreporting.org”. These responsibilities include among other things, identification of stakeholders and material issues, determining the sustainable performance criteria for reporting and establishing appropriate processes and internal control systems to measure and report the sustainability performance criteria.

Ernst & Young’s responsibility Our responsibility is to perform a reasonable and limited assurance engagement and express conclusions based on the work performed in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE- 3000): “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”, issued by the

Institute of Chartered Accountants of Sri Lanka (“ICASL”).Reasonable assurance is a high level of assurance. However, reasonable assurance is not an absolute level of assurance because there are inherent limitations of an assurance engagement.

A limited assurance engagement is substantially less in scope than a reasonable assurance engagement and consequently does not enable to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement.

This report is made solely to the Bank in accordance with our engagement letter dated 29 January 2013. We disclaim any assumption of responsibility for any reliance on this report to any person other than the Bank or for any purpose other than that for which it was prepared. In conducting our engagement, we have complied with the independence requirements of the Code for Ethics for Professional Accountants issued by the ICASL.

Key Assurance Procedures Financial informationWe reconciled the information on financial performance as reported on page 200 and 252 of the Report with the audited financial statements of the Bank for the years ended 31 December 2008, 2009, 2010, 2011 and 2012.

Other informationWe planned and performed following assurance procedures on other information presented in the Report:

Independent Assurance Report to the management of Sampath Bank PLC on the Sustainability Report-2012


Nothing has come to our attention that causes us to believe that other information presented in the Report are not fairly presented, in all material respects, in accordance with the Bank’s sustainability practices and policies some of which are derived from GRI -G3.1-Sustainability Reporting Guidelines.

Chartered Accountants25 February 2013Colombo

Interviewing relevant Bank’s personnel to understand the process for collection, analysis, aggregation and presentation of information in the Report

Review the systems used to generate, aggregate and report the information in the Report

Interview with the senior management and relevant staff at corporate level and selected business unit level and obtain the evidence concerning the sustainability strategy and policies for material issues and implementation of those across the operation of the Bank

Reviewing and validating the information contained in the Report

Checking the calculations performed by the Bank on a sample basis through recalculation

Reading the information presented in the Report to determine whether that information is in line with our overall knowledge of, and experience with the sustainability performance of the Bank.

Conclusions

Based on the procedures performed, as described above, we conclude that;

The information on financial performance as specified on page 200 and 252 of the Report are properly derived from the audited financial statements of the Bank for the years ended 31 December 2008, 2009, 2010 and 2011 and 2012;


257Sampath Bank PLC

Profile Disclosure

Description Direct Answer or reported section in Annual Report 2012/Sustainability Report 2012

Cross-reference page numbers to Annual Report 2012/Sustainability Report 2012

STANDARD DISCLOSURES PART I: Profile Disclosures

Strategy and Analysis

1. Strategy Analysis

1.1 Statement from the most senior decision-maker of the organization.

MD’S Statement on Sustainability SR 200

1.2 Description of key impacts, risks, and opportunities.

GRI Para Meters SR 257

2. Organizational Profile

2.1 Name of the organization. Sampath Bank PLC

2.2 Primary brands, products, and/or services. Sustainable FinanceManagement Discussion andAnalysis

SR 206 - 207 AR 46 - 95

2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures.

Organisational ProfileGovernance Structure

AR 99

2.4 Location of organization’s headquarters. Last page of Sustainability Report SR 254

2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.

The Bank Primarily Operates inSri LankaCorrespondent Banks andExchange Companies

AR 415

2.6 Nature of ownership and legal form. Public Limited Company Resisted Under Companies Act No. 07 of2007.

2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries).

Sustainable Finance AR 294

2.8 Scale of the reporting organization. EmployeesFinance ReportsTen Years Summary

AR 394

G3 Content Index Financial Services Sector SupplementApplication Level B


Profile Disclosure



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

MD’s ReviewSignificant Accounting Policies

AR 18AR 298

2.10 Awards received in the reporting period. Awards and Accolades for 2012 SR 201

3. Report Parameters

3.1 Reporting period (e.g., fiscal/calendar year) for information provided.

31 December 2012

3.2 Date of most recent previous report (if any). 31 December 2011

3.3 Reporting cycle (annual, biennial, etc.) Annual

3.4 Contact point for questions regarding the report or its contents.

Report Profile

3.5 Process for defining report content. Report scope and boundary SR 253-254

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance.

Report scope and boundaryOrganizational Profile

SR 253-254AR 5

3.7 State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope).

Report scope and boundary SR 253 - 254

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations.


3.9 Data measurement techniques and the bases of calculations


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

No such re-statements of information incurred during the year.

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

No such significant changes occurred from previous reportingperiods


259Sampath Bank PLC

Profile Disclosure



3.12 Table identifying the location of the Standard Disclosures in the report.

This GRI table SR 257-271

3.13 Policy and current practice with regard to seeking external assurance for the report.

Independent Assurance Statement SR 255-256

4. Governance, Commitments, and Engagement

4.1 Governance structure of the organization, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organizational oversight.

Sampath Bank & groupgovernance structure

AR 99

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

Corporate Governance Report AR 96-143

4.3 For organizations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members.


4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body.


4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance).

Report of the board of directors onthe affairs of the company

AR 274

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided.


4.7 Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organization’s strategy on economic, environmental, and social topics.



Profile Disclosure



4. Governance, Commitments, and Engagement

4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation.

Our Vision & ValuesCorporate Governance Report

AR 4-5AR 96-143

4.9 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally agreed standards, codes of conduct, and principles.


4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance.


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

Risk Management Report AR 164-197

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses.

GRI Report Parameters SR 257

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic.

National and Industry level partnerships

SR 237

4.14 List of stakeholder groups engaged by the organization.

Stakeholder Management SR 211-245

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

Report scope and boundary SR 253-254


261Sampath Bank PLC

Profile Disclosure



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

Stakeholder Management SR 211-245

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting.

Stakeholder ManagementCorporate Governance Report -Key actions of the board and Subcommittees during the year

SR 211-245AR 96-143

STANDARD DISCLOSURES PART II:

FSSS DMAs Disclosures on Management Approach

DMA PS

Aspects Product Portfolio Product Responsibility

FS1 Policies with specific environmental and social components applied to business lines.

Stakeholder Management -EnvironmentSociety

SR 211-248

FS2 Procedures for assessing and screening environmental and social risks in business lines.

Stakeholder Management -EnvironmentSocietyRisk Management Report

SR 211-248

FS3 Processes for monitoring clients’ implementation of and compliance with environmental and social requirements included in agreements or transactions.

Stakeholder Management -Environment

SR 211-248

FS4 Process (es) for improving staff competency to implement the environmental and social policies and procedures as applied to business lines.


SR 211-248

FS5 Interactions with clients/investees/business partners regarding environmental and social risks and opportunities.


SR 211-248

DMA SO Disclosure on Management Approach SO

Product and Service Impact

FS6 Percentage of the portfolio for business lines by specific region, size (e.g. Micro/SME/large) and by sector.

Sectors Concentrated though refinance loansCredit extended to diverse marketsSector wise analysis of advances portfolio

AR 20-21


Profile Disclosure



Product portfolio

FS7 Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose.

Leading the economic resurgenceof the north and east

SR 252

FS8 Monetary value of products and services designed to deliver a specific environmental benefit for each business line broken down by purpose.

Lending through the E-friendsrevolving credit line

SR 252

Audit

FS9 Coverage and frequency of audits to assess implementation of environmental and social policies and risk assessment procedures.

Environmental & social risks are assessed in credit evaluation process and reviews are conductedAll risks are assessed by department of risks and compliance. If any deviation is noticed reviews are conducted

SR 247-252AR 164

Active ownership

FS10 Percentage and number of companies held in the institution’s portfolio with which the reporting organization has interacted on environmental or social issues.

Other impacts of our operation on the environment

AR 247-253

FS11 Percentage of assets subject to positive and negative environmental or social screening.


SR 211-253

FS12 Voting polic(ies) applied to environmental or social issues for shares over which the reporting organization holds the right to vote shares or advises on voting.

Not Applicable

Economic performance Disclosures on Management Approach

EC1 COMM Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

Stakeholder Management- Environment EconomicContribution

SR 211-253


263Sampath Bank PLC

Profile Disclosure



EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change.

Risk Managements Report AR 164-197

EC3 Coverage of the organization’s defined benefit plan obligations.

Significant Accounting Polices AR 298

EC4 Significant financial assistance received from government.

Not Applicable

Market presence

EC5 Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation.

Not Reported

EC6 Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

Stakeholder Management -Suppliers

SR 245-247

EC7 Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation.

Stakeholder Management -Employees

SR 214-229

Indirect economic impacts

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement.

Stakeholder Management -Society

SR 238-244

EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts.

Stakeholder Management -Economic Contribution

SR 236SR 252

Environmental

G3.1 FSSS DMA EN

Disclosure on Management Approach EN Environment SR 247-252

Materials

EN1 Materials used by weight or volume. Stakeholder Management -Environment

SR 247-252

EN2 Percentage of materials used that are recycled input materials.


SR 247-252


Profile Disclosure



Energy

EN3 Direct energy consumption by primary energy source.

Not Applicable

EN4 Indirect energy consumption by primary source.


SR 247-252

EN5 Energy saved due to conservation and efficiency improvements.


SR 247-252

EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives.


SR 247-252

EN7 Initiatives to reduce indirect energy consumption and reductions achieved.


SR 247-252

Water

EN8 Total water withdrawal by source. Stakeholder Management -Environment

SR 247-252

EN9 Water sources significantly affected by withdrawal of water.

Not Applicable

EN10 Percentage and total volume of water recycled and reused.

Not Applicable

Biodiversity

EN11 Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas.

Not Applicable

EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.

Not Applicable

EN13 Habitats protected or restored. Stakeholder Management -Environment

SR 247-252

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity.


SR 247-252


265Sampath Bank PLC

Profile Disclosure



EN15 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk.

Not Applicable

Emissions, effluents and waste

Products and services

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.


SR 247-252

EN27 Percentage of products sold and their packaging materials that are reclaimed by category.

Not Applicable

Compliance

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.

Not Applicable

Transport

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce.

Not Reported

Overall

EN30 Total environmental protection expenditures and investments by type.


SR 247-252

Social: Labor Practices and Decent Work

G3.1 FSSS DMA LA

Disclosure on Management Approach LAEmployees

Employment

LA1 Total workforce by employment type, employment contract, and region.


SR 214-229

LA2 Total number and rate of employee turnover by age group, gender, and region.


SR 214-229


Profile Disclosure



Employment

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations.


SR 214-229

Labor/management relations

LA4 Percentage of employees covered by collective bargaining agreements.


SR 214-229

LA5 Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements.

Notice period defers based on the nature of the operational change and not specified in collective agreements except for noticed onResignations.

Occupational health and safety

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs.

None reported during the year 2012

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region.


SR 214-229

LA8 Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases.


SR 214-229

LA9 Health and safety topics covered in formal agreements with trade unions.


SR 214-229

Training and education

LA10 Average hours of training per year per employee by employee category.


SR 214-229

LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings.


SR 214-229


267Sampath Bank PLC

Profile Disclosure



LA12 Percentage of employees receiving regular performance and career development reviews.


SR 214-229

Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity.


SR 214-229

LA14 Ratio of basic salary of men to women by employee category.

No such discrimination for gender differences

Social: Human Rights

G3.1 FSSS DMA HR

Disclosure on Management Approach HR

Investment and procurement practices

HR1 COMM Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening.

Not reported

HR2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken.

Not reported

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained.

Employees are trained to make them concerns on human rights

Non-discrimination

HR4 Total number of incidents of discrimination and actions taken.


Freedom of association and collective bargaining

HR5 Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk, and actions taken to support these rights.

Not Applicable


Profile Disclosure



Child labor

HR6 Operations identified as having significant risk for incidents of child labor, and measures taken to contribute to the elimination of child labor.

Decent work and human rights

Forced and compulsory labor

HR7 Operations identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of forced or compulsory labor.

Decent work and human rights

Security practices

HR8 Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations.

All security personnel are trained in organisation’s policies, procedures concerning aspects of human rights relevant to operations.

Indigenous rights

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken.


Social: Society

G3.1 FSSS DMA SO

Disclosure on Management Approach SO

Community

SO1 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting.

Stakeholder Management -Society

SR 238-244

FS13 Access points in low-populated or economically disadvantaged areas by type.

Looking beyond traditional servicedelivery channels

FS14 Initiatives to improve access to financial services for disadvantaged people.

Financial Education


269Sampath Bank PLC

Profile Disclosure



Corruption

SO2 Percentage and total number of business units analyzed for risks related to corruption.

All business units analyzed for risks related to corruption.

SO3 Percentage of employees trained in organization’s anti-corruption policies and procedures.

Training on anti-corruption

SO4 Actions taken in response to incidents of corruption.

No significant incidents reported during the year 2012

Public policy

SO5 Public policy positions and participation in public policy development and lobbying.

Stakeholder Management -Society - Public Policy

SR 238-244

SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.

Stakeholder Management -Society - Public Policy

SR 238-244

Anti-competitive behavior

SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly practices and their outcomes.


Compliance

SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations.


Social: Product Responsibility

G3.1 FSSS DMA PR

Disclosure on Management Approach PR

Customer health and safety

PR1 Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures.

Product development processProduct Responsibility

SR 220SR 232


Profile Disclosure



PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes.


Product and service labelling

PR3 Type of product and service information required by procedures and percentage of significant products and services subject to such information requirements.

ll products are accompanied with required information on term,conditions and explanations.

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by type of outcomes.


PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

Customer satisfaction survey SR 232

FS16 Initiatives to enhance financial literacy by type of beneficiary.

Financial education SR 231

Marketing communications

PR6 Programs for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship.

All communications are in-line with established own banking systems and procedures which has derived from directions given by regulatory bodies

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship by type of outcomes.


Customer privacy

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data.



271Sampath Bank PLC

Profile Disclosure



Compliance

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services.



273Sampath Bank PLC

Financial information


ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANYYour Directors have pleasure in presenting their Annual Report on the State of Affairs, together with the Audited Financial Statements for the year ended 31.12.2012 of Sampath Bank PLC a licensed Commercial Bank, listed on the Colombo Stock Exchange and Consolidated Financial Statement of the Group, the Auditors’ Report on those Financial Statements. 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 significant investments in certain financial institutions. In compliance of 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 on 28th April 2008. The Re-registration number of the Company is PQ 144.

Completion and the Contents of this report are in accordance with the statutory requirements, the requirements of relevant regulatory authorities for listed companies in the financial services industry and best accounting practices which have been brought to the attention of the Shareholders and other Stakeholders.

These Audited Financial Statements were approved by the Directors at the Board Meeting held on 22nd February 2013.

Vision, Values and Corporate ConductThe Bank’s Vision and Values are given in page 4 of the report. The Bank conducts its business at a high level of ethical standard in achieving its Vision.

Activities, Business Review & Future DevelopmentsPrincipal Business ActivitiesThe Principal business activities of the Company 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 and under each Company in this 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, telebanking facilities, internet banking, dealing in Government Securities & Treasury related products and e-banking services.

SubsidiariesSampath Bank PLC had four subsidiaries as at 31.12.2012, namely;

Sampath Centre Ltd Renting of Commercial Property

S C Securities (Pvt) Ltd Share Brokering

Sampath Leasing and Factoring Ltd Leasing & Factoring


Developing Software Solutions & Maintenance of Hardware

Review of the year’s performanceA review of the Financial and Operational performance and future business developments of the Bank is contained in the message from Chairman (pages 14 to 17), the message from Managing Director (pages 18 to 29), Financial Review (pages 46 to 56) and the Management Discussion & Analysis (pages 57 to 95) of the Annual Report.

The Bank opened 03 new branches during the year under review, bringing the total number of branches to 209 as at the end of 2012. (As per the Section 168 (1) (a) of the Companies Act No. 07 of 2007)

Future DevelopmentsThe Bank embarked on a rapid branch expansion program in the recent past, under which the branch numbers were increased from 112 at the end of 2008 to 209 by the end of 2012, thereby substantially increasing the Bank’s market reach in the country. The Bank will therefore focus on a business expansion drive through this already expanded network, concentrating mainly on its core banking operations to increase its market share and profitability. This will be further supplemented by a more vigorous drive on innovative product development, process improvements and staff development, aimed at fulfilling the rapidly changing customer needs in the challenging market conditions and maximizing the value that we create for all the stakeholders.

Financial StatementsThe Financial Statements of the Bank and the Group for the year ended 31st December 2012 duly signed by the Group Chief Financial Officer, three of the Directors of the Bank and the Company Secretary are given on pages 292 to 391. ( As per the Section 168 (1)(b) of the Companies Act No. 07 of 2007)

Financial ResultsIncomeInterest income constitutes the Bank’s main income. The total income for 2011 and 2012 were as follows:

2011(Rs. Bn.)

2012(Rs. Bn.)

Group Bank Group Bank

Gross Income 28.27 27.57 39.72 38.79

Operating Income 15.13 14.57 18.38 17.87

Details are given in the Income Statement of the Financial Statements.

275Sampath Bank PLC

Profit & AppropriationsProfitThe profit before tax for the Bank and the Group were up by 45.48% and 39.84% respectively and the profit after tax up by 51.63% and 45.05% respectively. Details regarding the profit of the Bank are given below.

2011Rs. Mn.

2012Rs. Mn.

Profit for the year after payment of all expenses, providing for depreciation, possible loan losses, financial VAT and contingencies

4,993.64 7,265.04

Provision for taxation 1,606.43 2,128.61

Net profit after taxation 3,387.21 5,136.43

Balance brought forward from previous year 1,756.43 1,730.57

Realisation of Revaluation Surplus 59.69 2.64

Transfer from the Risk Reserve Fund of PDU (Correcting entry)

- 3.66

Profit available for appropriation 5,203.33 6,873.30

Appropriations

Transfer to the Statutory Reserve Fund 190.97 256.82

Transfer to the Risk Reserve Fund of the Primary Dealer

4.14 73.30

Transfer to Investment Fund Account 590.81 939.96

Transfer to General Reserve 1,678.30 2160.00

Dividend Paid

Final Scrip Dividend paid of Rs. 6.60 per share - 2010

1,008.53

Final Cash Dividend paid of Rs. 4.50 per share - 2011

713.51

Final Scrip Dividend paid of Rs. 4.50 per share - 2011

713.48

Balance carried forward 1,730.57 2,016.23

Dividend Proposed

Final Cash & Scrip Dividend proposed at Rs. 9.00 per share - 2011

1,426.99

Final Cash & Scrip Dividend proposed at Rs.12.00 per share - 2012

1,952.84

TaxationIncome tax rate applicable on the Bank’s domestic operations and on-shore and off-shore profits of the off-shore Banking Centre is 28%.

The Financial VAT and Income Taxes of the Bank are given in Income Statement and 07 to the financial statements.

The Bank’s policy is to provide for deferred taxation on temporary differences as permitted by the Lanka Accounting Standard No. 12 (LKAS12) on Income Taxes. Provision for taxation has been compiled at the rates given in Note 7 to the Financial Statements.

DividendThe Directors recommend that a final dividend of Rs. 12 per existing share, after providing for the 10% dividend Tax. This will be paid by 50% in the form of cash dividend and balance 50% in the form of scrip dividend.

Your 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.

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 09 to the Financial Statements.

Shareholders’ Fund & ReservesTotal Shareholders’ Funds including Reserves of the Bank stood at Rs. 25,101Mn as at 31.12.2012 and details of which are given in Statement of Changes in Equity on page 297 of in this Annual Report.

Directors’ Responsibility for Financial ReportingThe Directors are responsible for the preparation of Financial Statements of the Bank and the Group to reflect a true and fair view of the state of its affairs. The Directors are of the view that these Financial Statements appearing on pages 292 to 391 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. The Statement of Directors’ Responsibility for Financial Reporting is given on pages 290 of this Annual Report which forms an integral part of this Report and also confirm that the Bank has complied with prudential requirements, regulations, laws and internal controls.

Auditors ReportThe Auditors of the Bank are M/s Ernst & Young, Chartered Accountants. Their report on the consolidated Financial Statements for the year ended December 31, 2012 is given on page 291. They come up for re-election at the Annual General Meeting, with the recommendation of the Audit Committee and Board of Directors. (As per the Section 168 (1) (c) of the Companies Act No. 07 of 2007).

Significant Accounting PoliciesThe Bank has adopted its revised Sri Lanka Accounting Standards(LKAS/SLFRS) during the year 2012 and has restated the prior years in compliance with the transitional changes stated in the Sri Lanka Financial Reporting Standards 01 on “ First time adoption of Sri Lanka Accounting Standards” (SLFRS 01).

The significant changes to accounting policies are given in page 298 to 317. These financial statements comply with requirements of Lanka Accounting Standard 01 on “Presentation of Financial Statements” (LKAS 01) and comply with Section 168 (1) (d) of the Companies Act No. 07 of 2007.

Directors’ Interest RegisterUnder the provisions of Section 168 (1) (e) of the Companies Act No. 07 of 2007, the Interest Register is maintained by the Bank and the Group. Directors have made the necessary declarations, in terms of the Section 192 (2) 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 given as a footnote to this Report on pages 282 to 285.

Directors’ RemunerationDirectors’ remuneration and other benefits of Directors in respect of the Bank and the Group are given in Note 06 to the Financial Statements on page 320. (As per the Section 168 (1) (f) of the Companies Act No. 07 of 2007).

DonationsGiven below is the total donations made by the Bank during the year. The Bank does not make donations for political purposes.

Donations 2011 Donations 2012

Rs. 4.980 Mn Rs.3.922 Mn.

Donations in excess of Rs. 50,000/- are disclosed in Note 6 on page 320 to the Financial Statements. (As per the Section 168 (1)(g) of the Companies Act No. 07 of 2007).

DirectorateThe names of the directors of the Bank during the period 01.01.2012 to 31.12.2012 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. (As per the Section 168 (1)(h) of the Companies Act No. 07 of 2007).

The names of the Directors of the Bank during the period 01.01.2012 to 31.12.2012

Mr. Dhammika Perera was appointed as Chairman, and Mr. Aravinda Perera as Managing Director of Sampath Bank with effect from 01st January 2012. Mr. Sanjiva Senanayake, Mr. Channa Palansuriya, Mr. Deshal De Mel, Mr. Ranil Pathirana and Ms. Annika Senanayake were appointed as Non-Executive Directors with effect from 01st January 2012 and Mrs. Saumya Amarasekera was appointed as Non-Executive Director with effect from 01st June 2012.

Mr. Channa Palansuriya was appointed as Deputy Chairman and Mr. Sanjiva Senanayake was appointed as Senior Director, subsequently.

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 were tabled at the Board Meeting held on 24th January 2013.Recommendation for re-election

In terms of Article No. 86 and 87 of the Articles of Association of the Company, Mr. Dhammika Perera, Mr Sanjiva Senanayake, Prof Malik Ranasinghe and Mrs Dhara Wijayatilake retires by rotation and being eligible offer for re-election, on a unanimous recommendation of the Nomination Committee and Board of Directors.

Mrs Saumya Amarasekera was appointed as Non-Executive Director with effect from 01st June 2012. She offers herself for re-election by the shareholders in terms of section No. 93 of the Articles of Association of the Company on an unanimous recommendation of the Nomination Committee and the Board of Directors.

Re-election under Section 210 and 211 of the Companies Act.No existing Director has reached the age of 70 and therefore these sections of the Companies Act are not applicable.

Name Date of Appointment Remarks

Mr. Dhammika Perera Non-Executive Director since 01.08.2007 Appointed as Chairman w.e.f. 01.01.2012

Mr. Channa Palansuriya Non-Executive Director with effect from 01.01.2012 Appointed as Deputy Chairman w.e.f. 26.01.2012

Mr. Sanjiva Senanayake Non-Executive Director with effect from 01.01.2012 Appointed as Senior Director w.e.f. 26.01.2012 Independent

Mr. Deepal Sooriyaarachchi Non-Executive Director since 05.08.2010 Independent

Mrs. Dhara Wijayatilake Non-Executive Director since 30.08.2011 Independent

Prof. Malik Ranasinghe Non-Executive Director since 30.08.2011 Independent

Mr. Ranil Pathirana Non-Executive Director with effect from 01.01.2012 Independent

Mr. Deshal De Mel Non-Executive Director with effect from 01.01.2012 Independent

Ms. Annika Senanayake Non-Executive Director with effect from 01.01.2012 Independent

Mrs. Saumya Amarasekera Non-Executive Director with effect from 01.06.2012 Independent

Mr. Aravinda Perera Executive Director since 25.11.2008 Appointed as Managing Director w.e.f. 01.01.2012

Mr. Ranjith Samaranayake Executive Director since 01.01.2009

Alternate Directors

Prof Malik Ranasinghe Alternate Director to Mr. Deepal Sooriyaarachchi

Appointed with effect from 15.01.2012

Mr. Deepal Sooriyaarachchi Alternate Director to Prof. Malik Ranasinghe Appointed with effect from 31.01.2012

Mr Sanjiva Senanayake Alternate Director to Mr Deshal De Mel Appointed with effect from 26.04.2012

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY

277Sampath Bank PLC

Register of Directors & SecretariesThe Bank maintains a Register of Directors and Secretaries which contain the name, surname, former name (if any), residential address, business, occupation and dates of appointment and resignation of each member.

Directors’ Interest in ContractsThe Directors of the Bank have made declarations as provided for in section 192(2) of the Companies Act No. 07 of 2007.

Directors Interest in contracts of the Company are disclosed on pages 285 to 286. 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

Shareholding No. of Shares As at 31.12.2012

No. of Shares As at 31.12.2011

Mr. Dhammika Perera Nil Nil

*Vallibel Leisure (Pvt) Ltd Nil Nil

*Vallibel Investments (Pvt) Ltd Nil Nil

*Vallibel One PLC 24,371,697 23,445,302

Mr. Aravinda Perera (Managing Director)

18,597 1,755

Mr. Ranjith Samaranayake 20,690 1,168

Directorate - SubsidiariesNames of the Directors of Subsidiaries are given below;

Sampath Centre Ltd Sampath Leasing & Factoring Ltd S C Securities (Pvt) Ltd Sampath Information Technology Solutions Ltd

Mr. I W Senanayake (Chairman)

Mr. S G Wijesinha

Mr. E A Gunasekera

Mr. S P Kannangara

Mr. L R Jayakody (appointed on 15.12.2012)

Mr. M Y A Perera (vacated office on 31.12.2012)

Mr. I W Senanayake (Chairman)

Mr. S G Wijesinha

Mr. W M P L De Alwis (appointed on 25.02.2011)

Mrs. M A Karunaratne

Mr. P M A Sirimane

Dr. H S D Soysa (appointed on 01.01.2011)

Mr. M A Abeynaike (appointed on 28.03.2012)

Mr. M Y A Perera (appointed on 28.03.2012)

Mr. R Samaranayake (appointed on 28.12.2012)

Mr. D J Gunaratne (Chairman)

Mr. E A Gunasekera

Mr. Harsha Fernando

Mr. M Y A Perera

Dr. S Kelegama

Mr. M N R Fernando (appointed on 18.12.2012)

Mr. L J K Hettiaratchi (Chairman)

Mr. E A Gunasekera

Mr. M Y A Perera (Vacated office on 31.12.2012)

Mr. D J Gunaratne

Mr. N J Alwis (vacated office on 11.09.2012)

Mr. N R Tillekeratne (vacated office on 15.03.2012)

Mr. M V Indrasoma

Ms. A H W Senanayake (vacated office 01.01.2012)

Shareholding No. of Shares As at 31.12.2012

No. of Shares As at 31.12.2011

Mr. Deepal Sooriyaarachchi Nil Nil

Prof. Malik Ranasinghe Nil Nil

Mrs. Dhara Wijayatilake Nil Nil

Mr. Channa Palansuriya Nil Nil

Mr. Sanjiva Senanayake Nil Nil

Mr. Ranil Pathirana 6,363 Nil

Mr. Deshal De Mel Nil Nil

Ms. Annika Senanayake Nil Nil

Mrs Saumya Amarasekara Nil Nil

NOTE:- *A Company Controlled by Mr. Dhammika Perera

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, the Institute of Chartered Accountants, the regulation of Colombo Stock Exchange and the Bank’s requirements as envisaged by its Directors.

The duties, responsibilities and performance of the above sub-committees are discussed in the respective sub-committee reports in this Annual Report.


Audit Committee Mr. Ranil Pathirana (Chairman), Mr. Sanjiva Senanayake Prof. Malik Ranasinghe and Mrs. Dhara Wijayatilake were appointed to this committee w.e.f. 01st January 2012.

Mr. Deepal Sooriyaarachchi. continues as a member of the Committee.

The Report of the Audit Committee is given on pages 144 to 147.

Nomination Committee Mrs Saumya Amarasekera (Chairperson) was appointed on 01st December 2012Mr. Channa Palansuriya and Ms. Annika Senanayake were appointed to this Committee w.e.f. 01st January 2012.Mr. Dhammika Perera continues as a member of the Committee.Mr. Aravinda Perera (by Invitation)

The Report of the Nominations Committee is given on pages 148 to 149.

Credit Committee Prof. Malik Ranasinghe (Chairman),Mr. Sanjiva Senanayake, Mr. Channa Palansuriya, Ms. Annika Senanayake and Mr. Deshal De Mel were appointed to this committee w.e.f. 01st January 2012.

Mr. Aravinda Perera, Mr. Ranjith Samaranayake continue as members of the Committee.

Mr. Ranil Pathirana, Vacated office on 30th January 2012.

The Report of the Credit Committee is given on pages 150 to 151.


Mrs. Dhara Wijayatilake (Chairperson)

Mr. Sanjiva Senanayake, and Mr. Channa Palansuriya were appointed to this Committee w.e.f. 01st January 2012.

Mr. Aravinda Perera, Mr. Ranjith Samaranayake continue as members of the Committee.

The Report of the Board Risk Management Committee is given on pages 152 to 154.

Human Resources & Remuneration Committee

Mr. Deepal Sooriyaarachchi, (Chairman)

Mr. Channa Palansuriya, Mr. Deshal De Mel and Ms. Annika Senanayake were appointed to this committee w.e.f. 01st January 2012.

Mr. Aravinda Perera continues as a member of the Committee.

The Report of the Human Resources & Remuneration Committee is given on pages 155 to 157.

Strategic Planning Committee Mr. Dhammika Perera (Chairman)

Mr. Channa Palansuriya, Mr. Sanjiva Senanayake, Prof. Malik Ranasinghe, Mr. Deshal De Mel and Mr. Ranil Pathirana were appointed to this committee w.e.f. 01st January 2012.

Mr. Aravinda Perera and Mr. Ranjith Samaranayake continue as members of the Committee.

The Report of the Strategic Planning Committee is given on pages 158 to 159.


Mr. Channa Palansuriya (Chairman) and Mr. Deshal De Mel were appointed to this Committee w.e.f. 01st January 2012.

Mr. Ernest Gunasekera and Mr. Prashantha Lal De Alwis serve as Advisors to the Committee.

The Report of the Shareholder Relations Committee is given on pages 160 to 161.

Marketing Committee The Board has initiated the formation of the Marketing Board Sub-Committee on 28th June 2012.

Mr. Deepal Sooriyaarachchi (Chairman), Ms Annika Senanayake, Mr Deshal De Mel and Mrs Saumya Amarasekera were appointed to this Committee w.e.f. 28th June 2012.

The Report of the Board Marketing Committee is given on page 163.

Treasury Committee The Board has initiated the formation of the Treasury Board Sub-Committee on 31st May 2012.

Mr. Sanjiva Senanayake (Chairman) , Prof. Malik Ranasinghe, Mr. Deshal De Mel, Mr. Aravinda Perera and Mr. Ranjith Samaranayake were appointed to this committee w.e.f. 31st May 2012.

The Report of the Board Treasury Committee is given on page 162.


279Sampath Bank PLC

Directors’ Interest in Shares & Debentures of Subsidiaries:None of the Directors directly hold any debentures in any Subsidiary.

Mr. Aravinda Perera and Mr. Ranjith Samaranayake hold 01 share each in Sampath Information Technology Solutions Ltd, as subscribers. These shares are held in trust for Sampath Bank.Mr. Aravinda Perera holds 01 share in S C Securities (Pvt) Ltd for and on behalf of Sampath Bank PLC.

Directors’ MeetingsDetails of Directors meetings and Board sub-committee meetings are given in Corporate Governance Report on page 107 of this Annual report.

Auditors’ Interest and dealingsThe Auditors, M/s Ernst & Young were paid Rs. 10.333 Mn (Rs. 7.574 Mn in 2011) and Rs. 12.547 Mn (Rs. 9.185 Mn in 2011) respectively for the year ended December 31, 2012 as audit fees by the Bank and the Group.

In addition, they were paid Rs. 3.592 Mn (Rs. 4.032 Mn in 2011) and Rs. 4.981 Mn (Rs. 4.607 Mn in 2011) respectively for permitted non-audit related services including tax consultancy services by the Bank and the group.

M/s Ernst & Young who are the Bank’s auditors are also the auditors for the Bank’s subsidiary companies namely, Sampath Centre Ltd, SC Securities (Pvt) Ltd, Sampath Leasing and Factoring Ltd and Sampath Information Technology Solutions Ltd.

Registered Office and Head OfficeThe registered office and head office of the Bank is situated at No.110, Sir James Peiris Mawatha, Colombo 2.

ShareholdingThe number of registered shareholders of the Company as at 31st December 2012 was 17,518 compared to 17,515 as at 31st December 2011. The Schedule indicating the shareholders’ analysis is on pages 400 to 405.

Investors’ InformationInformation relevant to investors such as Earnings & Earning Yield, Dividend & Dividend Yield, Net Assets and Volume of Share trading and Market Capitalisations etc. are given on pages 8, 394 and 400 to 405.

Significant ShareholdingSampath Bank PLC has a 7.54% shareholding (significant) in Union Bank of Colombo PLC and 9.47% shareholding in LankaBangla Finance Limited in Bangladesh. Details are given in Note Nos 15 & 20 to the Financial Statements.

Stated CapitalThe Stated Capital of the Bank is Rs. 3,564.17Mn comprising of 162,736,665 Ordinary Voting Shares.

The number of shares in issue of the Bank increased from 156,854,190 ordinary shares to 162,736,665 ordinary shares as a result of the payment of final Scrip Dividend for 2011 and the exercise of options by employees under the ESOP 2010.

No. of shares issued in 2011 No. of shares issued in 2012

156,854,190 162,736,665

The details of the proportionate increments of the issued shares are given in Note 8 to the Financial Statements.

Debt CapitalSampath Bank PLC has issued 2,500,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are unlisted. The par value of these debentures is Rs. 100/- and these debentures were redeemed in June 2012.

Sampath Bank PLC has also issued 15,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are listed on the Colombo Stock Exchange. The par value of these debentures is Rs. 100/- and these debentures were redeemed in August 2012.

Sampath Bank PLC has issued 15,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are listed on the Colombo Stock Exchange. The par value of these debentures is Rs. 100/- and these debentures will redeemed in October 2017.

The details are given in Note 29.1 to the Financial Statements.

BondSampath Bank PLC has issued a deep discounted zero coupon bond with a maturity value of Rs. 3,458.1 Mn for 20 years. The present paid up value of this bond is Rs.1,368.7 Mn and this forms part of the Tier II Capital.

The details are given in Note 29.2 to the Financial Statements.

Corporate GovernanceThe Board of Directors is committed towards maintaining an effective Corporate Governance Framework and implementing processes required to ensure that the Bank is compliant with the Code of Best Practice on Corporate Governance, issued by the Institute of Chartered Accountants of Sri Lanka, the Central Bank of Sri Lanka, the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange. Details are given on Corporate Governance Report on pages 96 to 163 in this Annual Report.

As required by Section 3(8)(ii)(g) on Corporate Governance of the Direction No. 11 of 2007 of the Banking Act for Licensed Commercial Banks, issued by the Central Bank of Sri Lanka (CBSL), The Board of Directors have confirmed that all the findings of the “Factual Findings Reports” of auditors issued under “Sri Lanka Related Services Practice Statement 4750” have been incorporated in the annual Corporate Governance Report.

Internal ControlsThe Board of Directors has put in place an effective and comprehensive system of Internal Controls by:

(1) Ensuring that an adequate and effective system of internal control is established and maintained, by approving and periodically reviewing overall business strategies and significant policies of the Bank.

(2) Ensuring that delegated responsibilities are effectively carried out and setting appropriate internal control policies by the Corporate Management of the Bank.


(3) Ensuring that all personnel understand their role in the internal Control process and are fully engaged in the process.

(4) Recognising and assessing of material risks that could adversely affect the achievement of the Bank’s goals, covering all risks and revising Internal controls which should appropriately address any new or previously uncontrolled risks.

(5) An appropriate control structure is set up, with control activities defined at every business unit level.

(6) Identifying, minimising and monitoring of areas of potential conflicts of interest.

(7) Relevant financial, operational and compliance data, as well as external market information is maintained to provide reliable, timely, and accessible information.

(8) Monitoring the information systems to ensure that “hold and use data” in an electronic form is secured and supported by adequate contingency arrangements.

(9) Ensuring that effective channels of communication are available to all staff to understand and adhere to policies and procedures affecting their duties and responsibilities.

(10) Ensuring that business lines and internal audit are monitoring key risks which are part of the daily activities of the Bank.

(11) Ensuring that Internal Audit function is carried out by operationally independent, appropriately trained competent staff who report directly to Audit Committee of the Board.

(12) Ensuring that internal control deficiencies, identified by business lines, internal audit or other control personnel are reported to senior management and the Board of Directors in a timely manner.

Internal Control Over Financial Reporting (ICOFR) - Compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance.

The Group is required to comply with the Section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance issued by Central Bank of Sri Lanka and assess the effectiveness of internal controls over financial reporting for the year ended 31st December 2012.

Accordingly, the Bank assessed the effectiveness of its internal controls over financial reporting as at 31 December 2012, based on the criteria set out in the Guidance for Directors of Banks on “The Directors’ Statement” of Internal Control, issued by the Institute of Chartered Accountants of Sri Lanka (ICASL) in 2010.

The Directors’ Statement on Internal Control is detailed on page 287 in the Annual Report. Auditor’s Report on the Bank’s Internal Control Over Financial Reporting is provided on page 288 of this Annual Report.

Statutory PaymentsThe Directors are satisfied to the best of their knowledge and belief, that statutory payments due to the Government, other regulatory bodies and in relation to the employees have been paid up to date, on a timely basis.

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 2012, the number of employees on the payroll of the Bank was 3,455 as compared to 3,230 as at 31st December in 2011.ESOP 2010

Through this ESOP Plan the team members have got an opportunity to contribute towards the Capital of the Bank and to increase their portion of ownership of which the limit boundary is 2% of the total issued number of shares.

The option exercisable period would be 3 years, from the entitlement date of 30.06.2011 fixed in the scheme. In the event of options being fully exercised by the eligible staff, the stated capital of the Bank would rise by Rs. 244.5 Mn, as a result of the consideration to be paid by the staff under the ESOP.

No financial assistance will be provided by the Bank to the staff to purchase the share options. The remaining contractual life of share options is 1 year and 6 months.

ESOP 2010 Plan position as at

31st December 31st December 2012 2011Number of options available under this plan - 3,056,159 Shares - 3,056,159 SharesNumber of options exercised - 2,725,360 Shares - 524,924 SharesNumber of options remaining - 330,799 Shares - 2,531,235 SharesOption price - Rs. 80.00 - Rs. 80.00Weighted average market price as at - Rs. 200.89 - Rs. 221.00

Capital ExpenditureThe Bank incurred capital expenditure on the acquisition of premises and equipment during the financial year. The summarised details of capital expenditure in 2011 and 2012 are as follows:

Capital Expenditure for 2011 Capital Expenditure for 2012

Rs. 979.6 Mn Rs 918.9 Mn

The details are given in Note 23 and 24 on page 344 and 348 to the Financial Statements.

Capital CommitmentsCapital Commitments approved and contracted are shown in Note 36.4 on page 367.

Market Value of Freehold PropertiesAll freehold land and buildings of the Bank were last re-valued by professional values in 2010 and a revaluation surplus of Rs. 355.638 Mn. was brought in to Financial Statements.

Directors are of the opinion the value stated are not in excess of the current market value of such properties.

The details are given in Statement of Changes in Equity on page 297 to the Financial Statements.


281Sampath Bank PLC

Value AddedValue Added details are shown on page 395.

Risk ManagementThe Board and Corporate Management of the Bank have re-aligned its risk management structure with the objective of identifying, measuring and mitigating the risks.

The ongoing process at the Bank is detailed in the Risk Management Report on pages 164 to 197.

Outstanding LitigationIn the opinion of the Directors and in consultation with the Bank lawyers, 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 in Note 36.3 on page 365 to 366 of the Annual Report.

Events after the Balance Sheet DateThere have not been any material events that occurred subsequent to the date of the Balance Sheet that require adjustments to the Financial Statements, other than those disclosed, if any, in Note 40 to the Financial Statements.

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, and such other matters required to be addressed in the Code of Best Practice on Corporate Governance, issued by the Institute of Chartered Accountants of Sri Lanka, the Central Bank of Sri Lanka and the Securities and Exchange Commission of Sri Lanka are satisfied that the company and the Group have adequate resources to continue operations into the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Financial Statements.

Environmental ProtectionThe Bank/Group has not knowingly engaged in any activity which is harmful to the environment.

AuditorsThe Auditors of the Company are M/s Ernst & Young, Chartered Accountants. They come up for re-election at the Annual General Meeting, with the recommendation of the Audit Committee and the Board of Directors.

In accordance with Companies Act No. 7 of 2007, a resolution proposing the re-appointment of M/s Ernst & Young, Chartered Accountants as Auditors is being proposed at the Annual General Meeting.

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.

A data base has been developed and on requirement of shareholders and accordingly in compliance with the Colombo Stock Exchange Rules, the Annual Reports have been distributed in the form of a Diskette (a Soft copy) as well as Printed form.

Notice of MeetingThe 27th Annual General Meeting will be held at the Kingsbury Hotel, Colombo on 4th April 2013. The notice of meeting is given on page 430 of the Annual Report.

As required by Section 168(1)(k) of the Companies Act No. 07 of 2007 the Board of Directors hereby acknowledge the contents of this report.For and on behalf of the Board of Directors.

Dhammika Perera Channa Palansuriya Aravinda Perera S SudarshanChairman Deputy Chairman Managing Director Group Company Secretary

22nd February 2013Colombo, Sri Lanka


Note: Directors’ Interest Register (Changes during the year ending 31.12.2012)

Mr. Dhammika PereraDirectorship/Officer/Trustee in other Entities:

Company Name Position held Date appointed Date resigned

Strategic Enterprises Management Agency (SEMA)

Member of Board 24.04.2006 -

Ministry of Transport, Sri Lanka Secretary 21.01.2011 -

Substantial Interest in other Entities other than Banks

Company Name Position held

Vallibel Power Erathana PLC Chairman

Vallibel Finance PLC Chairman

Royal Ceramics Lanka PLC Deputy Chairman

LB Finance PLC Exe. Dep. Chairman

The Fortress Resorts PLC Chairman

Vallibel One PLC Chairman

Greener Water Ltd Chairman

Delmage (Pvt) Ltd Chairman

Hayleys PLC Deputy Chairman

Amaya Leisure PLC Director

Orit Apparels Lanka (Pvt) Ltd Director

Hotel Services (Ceylon) PLC Director

Hayleys – MGT Knitting Mills PLC Director

Haycarb PLC Director

Dipped Products PLC Director

Nirmalapura Wind Power (Pvt) Ltd Director

Alutec Anodising & Machine Tools (Pvt) Ltd Director

Sri Lankan Insurance Corporation Ltd Director

Mr. Aravinda PereraDirectorship in Subsidiary Companies:


Sampath Centre Ltd Director 31.08.2007 31.12.2012

S C Securities Pvt Ltd Director 01.12.2008 -

Sampath Information Technology Solutions Ltd Director 05.03.2009 31.12.2012

Sampath Leasing and Factoring Ltd Director 28.03.2012

Directorship/Officer/Trustee in other Entities:

Company Name Position held

Lanka Financial Services Bureau Ltd Director


283Sampath Bank PLC

Mr. Ranjith Samaranayake Directorship in Subsidiary Companies:


Sampath Leasing and Factoring Ltd Director 28.12.2012 -

Mr. Deepal SooriyaarachchiDirectorship/Officer/Trustee in other Entities:


AVIVA NDB Insurance PLC Non-Executive Independent Director 01.04.2010 -

Hemas Manufacturing (Pvt) Ltd Non-Executive Independent Director 03.05.2010 -

Pan Asian Power PLC Non-Executive Independent Director 27.07.2010 -

National Administrative Reforms Commission Member - -

Prof. V. K Samaranayake Endowment Fund Member - -

Council of the University of Kelaniya Member - -

Sri Lanka Inventor’s Commission Commissioner - -

Prof. Malik RanasingheDirectorship/Officer/Trustee in other Entities:


Hemas Power PLC Non-Executive Independent Director 01.07.2009 -

Textured Jersey Lanka PLC Non-Executive Independent Director 15.04.2011 -

Access Engineering PLC Non-Executive Independent Director 01.07.2011 -

Mrs. Dhara Wijayatilake Directorship/Officer/Trustee in other Entities:


Ministry of Technology and Research Secretary - -

Mr. Channa Palansuriya Directorship/Officer/Trustee in other Entities:


Orit Apparels Lanka (Pvt) Ltd Chairman 01/01/1997 -

Orit Trading Lanka (Pvt) Ltd Chairman -

Style Kraft Sportswear (Pvt) Ltd Chairman 02/02/2012 -

G C Lanka Clothing (Pvt) Ltd Chairman 2005 -

Joint Apparel Association Forum (JAAF) Deputy Chairman 2011 -

Sri Lanka Apparel Sourcing Association (SLASA) Executive Member 2006 -

Apparel Exports Association 200Gfp (AEA 200gfp) Executive Member 2006 -

Sri Lanka Institute of Textile and Apparel Board Member 2008 -


Mr. Sanjiva Senanayake Directorship/Officer/Trustee in other Entities:


Hemas Power PLC Non-Executive Independent Director -

Hemas Pharmaceuticals (Pvt) Ltd Non-Executive Independent Director -

Asian Hotel & Properties PLC Non-Executive Independent Director -

Mr. Ranil Pathirana Directorship/Officer/Trustee in other Entities:


Hayleys PLC Non-Executive Director June 2011

WindForce (Pvt) Ltd Director 25 August 2010

Hirdramani Apparels Holdings (Pvt) Ltd Director 22 July 2011

Star Packaging (Pvt) Ltd Director 18 October 2001

Start Park Investment (Pvt) Ltd Director 29 September 2009

Ceylon Knit Trend (Pvt) Ltd Director 01 November 2000

Hirdramani Industries (Pvt) Ltd Director 21 November 2000

Hirdramani Mercury Apparel (Pvt) Ltd Director 06 July 2005

Hirdramani Garments Katunayake (Pvt) Ltd Director 27 November 2000

CKT Apparel (Pvt) Ltd Director 20 December 2006

HI Fashion Holdings (Pvt) Ltd Director 18 August 2009

Hirdramani Leisure Holdings (Pvt) Ltd Director 22 July 2011

Union Residencies (Pvt) Ltd Director 31 July 2003

Hirdramani (Pvt) Ltd Director 20 October 2005

Hirdramani Investment Holdings (Pvt) Ltd Director 22 July 2011

Nirmalapura Wind Power (Pvt) Ltd Non-Executive Director 23 August 2010

Gurugoda Hydro (Pvt) Ltd Director 24 March 2009

Esna Power (Pvt) Ltd Director 01 September 2011

Rosewood (Pvt) Ltd Director 18 August 2010

Hirdramani International Exports (Pvt) Ltd Director 11 December 2008


285Sampath Bank PLC

Company Relationship Nature of Facility Current Limit(Rs. Mn)

Balance OutstandingAs at 31.12.2012

(Rs. Mn)

Balance Outstanding

As at 31.12.2011(Rs. Mn)

Mr. Dhammika Perera

Hayleys Mgt Knitting Mills PLCDirector Over Draft 75.000 74.744 74.362

Loan & Advances 90.781 65.879

USD 0.711 USD 0.516

Export bill purchased

10.000

Off Balance Sheet Item

USD 1.975 USD 0.500

Royal Ceramics Lanka PLC Deputy Chairman

Export bill purchased

30.000

Haycarb PLC Director Over Draft 100.000 0.002 Cr 65.152

Alutec Anodising & Machine Tools ( Pvt ) Ltd

Director Over Draft 20.000 0.758 Cr 5.440Loan & Advances 2.098 2.098

L B Finance Ltd Director Over Draft 200.000 202.800 201.390

Mr. M Y A Perera

S C Securities (Pvt) LtdDirector

Over Draft 50.000 58.463 28.870Off Balance Sheet Accommodations

1.750 1.750 1.750


Director Loans & Advances 2,375.000 970.963 1,600.130

Off Balance Sheet Accommodations

1,560.128 1,560.128 1,473.210

Over Draft 50.000 22.580 Cr

Miss. Annika Senanayake Directorship/Officer/Trustee in other Entities:


IWS Holdings (Pvt) Ltd Director N/A

IWS Leisure (Pvt) Ltd Director N/A

Directors’ interest in Contracts with the CompanyRelated party disclosures as required by the Sri Lanka Accounting Standard No.30 on Related Party Disclosures (Revised 2005) is detailed in Note 37 on pages 367 to 369 to the Financial Statements. In addition, the Bank carries out transactions in the ordinary course of business in 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 Facility Current Limit(Rs. Mn)

Balance OutstandingAs at 31.12.2012

(Rs. Mn)

Balance Outstanding

As at 31.12.2011(Rs. Mn)

Mr. D Sooriyaarachchi

Pan Asia Power Ltd Director Lease 5.100 2.200 3.280

Prof. K A M K Ranasinghe

Access Engineering PLC Director Off Balance Sheet Accommodations

3,500.000 1,617.420 -

Mr. R Pathirana

Star Pack Investments (PVT) Ltd Director Over Draft 75.000 0.013 Cr 22.424

Star Packaging (PVT) Ltd Director Over Draft 100.000 0.106 Cr


200.000


USD 1.000

Loans & Advances 350.000

Loans & Advances USD 2.000


287Sampath Bank PLC

authorities and management, and evaluate the adequacy and effectiveness of the risk management and internal control systems. They also review the internal audit functions with particular emphasis on the scope of audits and quality of internal audits. The minutes of the Board Audit Committee meetings are forwarded to the Board of the Bank on a periodic basis. Further details of the activities undertaken by the Audit Committee of the Bank are set out in the Audit Committee Report on pages 142 to 147.

In assessing the internal control system over financial reporting, identified officers of the Bank collated all procedures and controls that are connected with significant accounts and disclosures of the financial statements of the Bank. These in turn were observed and checked by the internal audit department for suitability of design and effectiveness on an ongoing basis. As the current year was the first year of adopting new Sri Lanka Accounting Standards comprising LKAS and SLFRS, processes to comply with new requirements of recognition, measurement, classification and disclosure are being introduced, and as at balance sheet date were not fully completed. The assessment did not include subsidiaries of the Bank.

Comments made by the external auditors in connection with internal control system over financial reporting will be dealt with in the future.

ConfirmationBased on the above processes, the Board confirms that the financial reporting system of the Bank has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes and has been done in accordance with Sri Lanka Accounting Standards and regulatory requirements of the Central Bank of Sri Lanka.

Review of the Statement by External AuditorsThe external auditors have reviewed the above Directors Statement on Internal Control over financial reporting included in the annual report of the Bank for the year ended 31 December 2012 and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the design and effectiveness of the internal control over financial reporting of the Bank.

By order of the board

Ranil PathiranaChairman - Audit Committee

Dhammika Perera Channa Palansuriya Chairman Deputy Chairman

M Y A Perera S SudarshanManaging Director Company Secretary

22nd February 2013Colombo.

ResponsibilityIn line with the Banking Act Direction No. 11 of 2007, section 3 (8) (ii) (b), the Board of Directors present this report on Internal Control over Financial Reporting.

The Board of Directors (“Board”) is responsible for the adequacy and effectiveness of the internal control mechanism in place at Sampath Bank PLC, (“the Bank”). In considering such adequacy and effectiveness, the Board recognises that the business of banking requires reward to be balanced with risk on a managed basis and as such the internal control systems are primarily designed with a view to highlighting any deviations from the limits and indicators which comprise the risk appetite of the bank. In this light, the system of internal controls can only provide reasonable, but not absolute assurance, against material misstatement of financial information and records or against financial losses or fraud.

The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Bank and this process includes enhancing the system of internal control over financial reporting as and when there are changes to business environment or regulatory guidelines. The process is regularly reviewed by the Board and accords with the Guidance for Directors of Banks on the Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. The Board has assessed the internal control over financial reporting taking into account principles for the assessment of internal control system as given in that guidance.

The Board is of the view that the system of internal controls over financial reporting in place is sound and adequate to provide reasonable assurance regarding the reliability of financial reporting, and that the preparation of financial statements for external purposes is in accordance with relevant accounting principles and regulatory requirements.

The management assists the Board in the implementation of the Board’s policies and procedures on risk and control by identifying and assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks.

Key Features of the Process Adopted in Applying in Reviewing the Design and Effectiveness of the Internal Control System Over Financial ReportingThe key processes that have been established in reviewing the adequacy and integrity of the system of internal controls with respect to financial reporting include the following:

Various Committees are established by the Board to assist the Board in ensuring the effectiveness of Bank’s daily operations and that the Bank’s operations are in accordance with the corporate objectives, strategies and the annual budget as well as the policies and business directions that have been approved.

The Internal Audit Division of the Bank check for compliance with policies and procedures and the effectiveness of the internal control systems on an ongoing basis using samples and rotational procedures and highlight significant findings in respect of any non-compliance. Audits are carried out on all units and branches, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report. The annual audit plan is reviewed and approved by the Board Audit Committee. Findings of the Internal audit Department are submitted to the Board Audit Committee for review at their periodic meetings.

The Board Audit Committee of the Bank reviews internal control issues identified by the Internal Audit Department, regulatory

DIRECTORS STATEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


SLSAE 3050 does not require us to consider whether the Statement covers all risks and controls or to form an opinion on the effectiveness of the Bank’s risk and control procedures. SLSAE 3050 also does not require us to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

Our conclusionBased on the procedures performed, nothing has come to our attention that causes us to believe that the Statement included in the annual report is inconsistent with our understanding of the process the Board of Directors has adopted in the review of the design and effectiveness of internal control over financial reporting of the Bank.

Ernst & YoungChartered Accountants

26 February 2013Colombo

INDEPENDENT ASSURANCE REPORT TO THE BOARD OF DIRECTORS OF SAMPATH BANK PLC

Report on the Directors’ Statement on Internal Control over Financial Reporting

We were engaged by the Board of Directors of Sampath Bank PLC (“Bank”) to provide assurance on the Directors’ Statement on Internal Control over Financial Reporting (“Statement”) included in the annual report for the year ended 31 December 2012.

Management’s responsibilityManagement is responsible for the preparation and presentation of the Statement in accordance with the “Guidance for Directors of Banks on the Directors’ Statement on Internal Control” issued in compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007, by the Institute of Chartered Accountants of Sri Lanka.

Our responsibilities and compliance with SLSAE 3050Our responsibility is to issue a report to the board on the Statement based on the work performed. We conducted our engagement in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE) 3050 – Assurance Report for Banks on Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka.

Summary of work performedWe conducted our engagement to assess whether the Statement is supported by the documentation prepared by or for directors; and appropriately reflected the process the directors have adopted in reviewing the system of internal control over financial reporting of the Bank.

The procedures performed were limited primarily to inquiries of Bank personnel and the existence of documentation on a sample basis that supported the process adopted by the Board of Directors.

289Sampath Bank PLC

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 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 and section 3(8)(ii)(g) of the Banking Act Direction No. 11 of 2007 on Corporate Governance issued by the Central Bank of Sri Lanka and also comply with the formats prescribed by the Central Bank of Sri Lanka, which is also in compliance with the disclosure requirements of the Sri Lanka Accounting Standard No 23 - Revenue Recognition and Disclosures.

The Accounting Policies are consistently applied by the Group. The Significant accounting policies and estimates that involve a high degree of judgment 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 and material departures, if any, have been disclosed and explained in the notes to the Financial Statements. The Financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Bank, its cash flows and liquidity position. We have reasonable grounds to believe that the Bank has adequate resources to continue in operational existence for the foreseeable future. Accordingly, we continue to adopt the going concern basis in preparing the Financial Statements.

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 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 are 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.

We confirm, Compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance (Internal Control Over Financial Reporting (ICOFR)) issued by the Central Bank of Sri Lanka as of 31 December 2012 on the Bank’s Internal Controls over Financial Reporting is adequate and effective. The Annual Report of the Directors on pages 279 to 280 has briefly covered the Group’s Internal Control over Financial Reporting. In addition, Directors’ Statement on Internal Control Over Financial Reporting (ICOFR) is provided on page 287. The Bank’s auditors, M/s Ernst & Young, have audited the effectiveness of the Bank’s internal controls over financial reporting and have given an unqualified opinion on page 288 of this Annual Report.

MANAGING DIRECTOR’S AND GROUP CHIEF FINANCIAL OFFICER’S RESPONSIBILITY STATEMENT

The Financial Statements of the Group were audited by M/s. Ernst & Young, Chartered Accountants, and their report is given on page 291 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 the auditors are performing their responsibilities and to discuss issues relating to auditing, internal controls 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 report is given on pages 144 to 147.

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 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 non-compliances and litigations against the Group other than those disclosed in Note 36.3 on page 365 to 366 of the Financial Statements in this Annual Report.

Aravinda Perera R SamaranayakeManaging Director Director (Executive)/Group Chief Financial Officer



DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTINGThe 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, especially as the depositors’ funds are far in excess of the shareholders’ 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 Statement of Financial Position The Income Statement

The Financial Statements are prepared under the supervision of the Group Chief Financial Officer who is an Executive Director of the Bank. These documents present true and fair view of the Company and its subsidiaries, which have been certified by the Group Chief Financial Officer and signed by the Chairman, the Deputy Chairman, Managing Director, and the Company Secretary in conformity with the requirements of the Companies Act. 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 been disclosed and explained

(ii) Judgments and estimates have been made which are reasonable and prudent

(iii) All applicable Accounting standards, as relevant, have been followed(iv) The Internal Control over Financial Reporting is effective and(v) The financial statements are prepared on the going concern basis,

unless it is inappropriate to presume that the Bank and the Group will continue in business

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 Standards Act No.15 of 1995, Banking Act No.30 of 1988 and amendments thereto and the continuing Listing Rules of the Colombo Stock Exchange.

The Audit Committee of the Bank reviews the quarterly accounts and 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 instituted an effective and comprehensive system of internal control comprising internal audit, internal checks, 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.

Based on its assessment of Internal Control Over Financial Reporting (ICOFR) - Compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance, your Directors have concluded that, as of 31 December 2012, the Group’s Internal Controls over Financial Reporting is effective. Directors’ Statement on Internal Control Over Financial Reporting (ICOFR) and Annual Report of the Board of Directors are provided on page 287 and pages 274 to 281 respectively of the Annual Report. Auditor’s Report on the Bank’s Internal Control Over Financial Reporting is provided on page 288 of this Annual Report.

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 the regulatory directives of the Central Bank of Sri Lanka, Corporate Governance Codes issued by the Central Bank of Sri Lanka and the Colombo Stock Exchange.

As required by section 56(2) of the Companies Act No. 7 of 2007, your 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.

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 expressed their opinion as reported by them in the Report on page 291.

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 Staff Members and the Staff 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 also confirm that based on its assessment the accounting controls are adequate and nothing has come to the attention of the directors to indicate that any breakdown in the functioning of these controls, resulting in material loss to the Bank, and also the Bank will have adequate resources to continue in operational existence and as a going concern for the foreseeable future.

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 Secretary


291Sampath 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 statements of financial position as at 31 December 2012, and the income statements and statements of comprehensive income, 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 policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, so far as appears from our examination, the Bank maintained proper accounting records for the year ended 31 December 2012 and the financial statements give a true and fair view of the Bank’s financial position as at 31 December 2012 and its financial performance 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 financial position as at 31 December 2012 and its financial performance and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Bank and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Bank.

Report on Other Legal and Regulatory RequirementsThese 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 Accountants

26 February 2013Colombo

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF SAMPATH BANK PLC


(Rs’000)

Bank Group

For the year ended 31st December Note 2012 2011 2012 2011

Income 1 38,793,541 27,577,338 39,725,097 28,267,754

Interest income 1.1 31,881,948 21,111,216 32,712,018 21,565,323Less: Interest expenses 2 20,269,375 12,167,947 20,672,970 12,277,600Net interest income 11,612,573 8,943,269 12,039,049 9,287,724

Fee and commission income 1.2 2,803,755 2,648,034 2,876,724 2,795,958Less: Fee and commission expense 654,757 837,442 675,136 861,909Net fee & commission income 2,148,998 1,810,592 2,201,588 1,934,049

Net trading income 1.3 6,227 313,973 6,227 313,973Other operating income 1.4 4,101,611 3,504,114 4,130,128 3,592,499Total operating income 17,869,410 14,571,948 18,376,992 15,128,245

Impairment gain / ( loss) on loans and receivables 3 (136,906) (428,857) (152,167) (399,097)Impairment gain / ( loss) on financial investments 4 72,023 (189,165) 72,023 (189,165)Net operating income 17,804,527 13,953,926 18,296,847 14,539,984

Less: Operating expenses Personnel expenses 5 4,157,690 3,559,674 4,329,299 3,698,622Depreciation of property & equipment 535,656 503,383 588,247 550,516Amortisation of intangible assets 43,567 36,110 47,163 40,133Other operating expenses 6 4,659,872 3,959,639 4,653,851 3,957,485Total operating expenses 9,396,784 8,058,806 9,618,560 8,246,756

Operating profit / (loss) before Value Added Tax 8,407,742 5,895,120 8,678,287 6,293,228

Less: Value Added Tax on financial services 1,142,709 901,484 1,160,808 917,691Operating profit / (loss) after Value Added Tax 7,265,034 4,993,636 7,517,478 5,375,537

Less: Income tax expense 7 2,128,610 1,606,427 2,171,514 1,670,106Profit for the year 5,136,424 3,387,209 5,345,965 3,705,431

Attributable to:Equity holders of the parent 5,136,424 3,387,209 5,342,623 3,683,281Non controlling interest 3,342 22,150 5,136,424 3,387,209 5,345,965 3,705,431

Earnings per share - Basic (Rs.) 8.1 - - 32.98 23.00

Earnings per share - Diluted (Rs.) 8.2 - - 32.94 22.88

Dividend per share - Gross (Rs.) 9 12.00 9.00 - -

Dividend per share - Net (Rs.) 9 10.87 8.34 - -

The ‘Significant accounting policies’ on pages 298 to 317 and accompanying notes on pages 318 to 391 form an integral part of these financial statements.

INCOME STATEMENT

293Sampath Bank PLC

STATEMENT OF COMPREHENSIVE INCOME

(Rs’000)

Bank Group

For the year ended 31st December Note 2012 2011 2012 2011

Profit for the year 5,136,424 3,387,209 5,345,965 3,705,431

Other comprehensive income / (expenses)Available for sale financial assetsGain/(loss) arising during the year (348,817) (3,426,050) (348,817) (3,426,050)Exchange difference in translation 16,061 - 16,061 -Total other comprehensive income (332,757) (3,426,050) (332,757) (3,426,050)Income tax (charge) / credit relating to components of other comprehensive income - - - -Other comprehensive income net of tax (332,757) (3,426,050) (332,757) (3,426,050)

Total comprehensive income for the year net of tax 4,803,667 (38,842) 5,013,208 279,381

Attributable to:Equity holders of the parent 4,803,667 (38,842) 5,009,867 257,231Non controlling interest - - 3,342 22,150 4,803,667 (38,842) 5,013,208 279,381


STATEMENT OF FINANCIAL POSITION

(Rs’000) Bank Group

As at As at As at As at As at As at Note December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011

Assets 10Cash and cash equivalents 11 10,432,135 10,736,413 4,259,457 10,442,259 10,746,713 4,327,079 Balances with Central Bank of Sri Lanka 12 17,200,792 13,232,130 8,221,068 17,200,792 13,232,130 8,221,068 Placements with Banks 13 8,788,127 5,337,084 1,788,050 8,788,127 5,337,084 1,720,924 Reverse repurchase agreements 3,300,817 4,601,965 - 3,300,373 4,606,010 - Derivative financial instruments 14 279,022 203,732 91,878 279,022 203,732 91,878 Financial investments held -for- trading 15 35,181,084 23,052,987 26,701,547 35,181,084 23,052,987 26,701,547 Financial assets held-for-trading pledged as collaterals 16 2,856,321 4,002,777 4,485,329 2,856,321 4,002,777 4,485,329 Loans and receivables from banks 17 816,119 441,938 - 816,119 441,938 - Loans and receivables from other customers 18 208,184,369 169,681,372 124,067,319 212,480,041 171,976,938 124,894,976 Other loans & receivables 19 10,515,756 5,736,278 7,596,740 10,224,474 5,736,278 7,596,740 Financial investmentsavailable- for- sale 20 1,923,624 2,025,241 5,625,847 1,923,680 2,025,297 5,625,903 Financial investmentsheld - to- maturity 21 - 10,289 1,122,084 9,765 19,411 1,130,722 Investment in subsidiaries 22 1,059,921 1,054,921 991,626 - - - Property and equipment 23 4,559,806 4,527,784 4,277,501 6,764,372 6,691,153 6,436,029 Intangible assets 24 311,758 67,294 78,723 316,412 73,372 88,798 Deferred tax asset 25 - - - 12,328 2,359 3,714 Other assets 26 3,271,651 2,373,104 2,006,821 3,730,836 2,846,544 2,572,742 Total assets 308,681,301 247,085,307 191,313,991 314,326,004 250,994,723 193,897,448

Liabilities 10Due to banks 27 624,784 1,175,672 200,013 668,198 1,175,672 200,013 Securities sold under re-purchase agreements 2,757,119 4,100,862 4,411,354 2,751,334 4,100,862 4,411,354 Derivative financial instruments 14 381,838 310,966 74,506 381,838 310,966 74,506 Due to other customers 28 243,330,990 195,195,074 153,245,764 243,088,236 195,094,359 153,126,406 Debt issued and other borrowed funds 29 28,825,029 19,754,221 8,567,066 32,218,014 21,490,478 9,042,234 Unclaimed dividend 49,185 37,173 37,922 49,185 37,173 37,922 Current tax liabilities 30 3,003,885 1,851,834 891,011 3,035,868 1,881,142 958,817 Deferred tax liabilities 25 400,084 380,360 258,340 430,812 396,113 258,340 Provisions 31 167,470 124,477 89,223 180,192 137,515 97,279 Other liabilities 32 4,040,070 3,254,553 2,548,157 4,246,901 3,503,286 2,987,341 Total Liabilities 283,580,454 226,185,192 170,323,356 287,050,577 228,127,566 171,194,211

EquityStated capital 33 3,564,172 2,743,780 1,786,250 3,564,172 2,743,780 1,786,250 Reserves 34 Statutory / risk reserve funds 34.1 1,172,106 841,511 646,564 1,198,830 858,237 653,671 Revaluation reserve 34.2 1,456,708 1,459,349 1,519,041 2,876,185 2,878,825 2,938,518 Available-for-sale reserve 34.3 1,465,022 1,797,778 5,223,829 1,465,022 1,797,778 5,223,829 Revenue reserves 34.4 17,442,841 14,057,697 11,814,951 18,109,976 14,528,631 11,948,944 25,100,849 20,900,115 20,990,635 27,214,184 22,807,251 22,551,212

Non controlling interest 35 - - - 61,243 59,904 152,025 Total equity 25,100,849 20,900,115 20,990,635 27,275,427 22,867,155 22,703,237 Total liabilities and equity 308,681,301 247,085,307 191,313,991 314,326,004 250,994,723 193,897,448

Net asset value per share ( Rs) 154.24 130.19 131.18 167.60 142.44 141.89 Commitments and contingencies 36 115,925,743 120,946,802 68,628,122 116,129,398 120,946,802 68,628,122

The ‘Significant accounting policies’ on pages 298 to 317 and accompanying notes on pages 318 to 391 form an integral part of these financial statements.

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

R SamaranayakeExecutive Director / Group Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Dhammika Perera Channa Palansuriya Aravinda Perera S SudarshanChairman Deputy Chairman Managing Director Group Company Secretary


295Sampath Bank PLC

CASH FLOW & RECONCILIATION STATEMENT

(Rs’000) Bank Group

For the year ended 31st December 2012 2011 2012 2011

Cash flows from operating activitiesInterest & commission receipts 34,007,276 22,924,819 34,889,937 23,502,383Interest payments (20,196,719) (12,109,447) (20,600,314) (12,219,100)Receipts from other operating activities 3,974,818 3,039,466 4,082,176 3,140,287Cash payments to employees and suppliers (6,358,275) (5,578,342) (6,388,782) (5,590,780)Value Added Tax on Financial services (1,137,042) (970,514) (1,155,142) (986,721)Payments for other operating activities (2,339,412) (1,910,861) (2,474,880) (2,035,575)Operating profit before changes in operating assets & liabilities [note (a)] 7,950,646 5,395,121 8,352,995 5,810,495

(Increase)/Decrease in operating assetsBalance with Central Bank of Sri Lanka (3,968,662) (5,011,062) (3,968,662) (5,011,062)Loans and receivables from customers (38,782,036) (46,143,009) (40,789,709) (47,569,211)Loans and receivables from Banks (378,000) (450,617) (378,000) (450,617)Other loans & receivables (4,779,479) 1,860,463 (4,488,196) 1,860,463Other assets (849,266) (286,337) (850,010) (212,611) (48,757,442) (50,030,563) (50,474,578) (51,383,039)

Increase/(Decrease) in operating liabilitiesDue to customers 48,072,694 41,899,639 47,930,655 41,918,282Due to banks (460,783) 640,175 (460,783) 640,175Other liabilities 833,801 805,487 788,920 627,635 48,445,712 43,345,301 48,258,792 43,186,093

Net cash flow from operating activities before income tax 7,638,915 (1,290,141) 6,137,209 (2,386,451)Income tax paid (956,834) (523,585) (982,089) (608,653)Net cash flow from operating activities 6,682,081 (1,813,727) 5,155,120 (2,995,105)

Cash flow from investing activitiesDividend received from subsidiaries 79,155 15,102 - -Income from investments 10,949 457,846 10,949 457,846Investment in subsidiary companies (5,000) (63,295) - -Financial assets held-for-trading pledged as collaterals 1,146,121 483,767 1,146,121 482,956Financial investments held -for- trading (12,056,074) 3,458,991 (12,056,074) 3,458,991Cash collateral on securities borrowed & reverse repurchase agreements 1,301,148 (4,601,965) 1,305,637 (4,606,010)Securities sold under re-purchase agreements (1,343,743) (310,492) (1,349,528) (310,492)Sale/(Purchase) of other loans & receivables - - - -Sale/(Purchase) of financial investmentsheld to maturity 10,289 1,111,796 9,646 1,111,311Sale/(Purchase) of financial investmentsavailable- for- sale (211,766) 602,250 (211,766) 602,250Proceeds from disposal of property & equipment 23,692 103,676 25,579 108,429Purchase of property & equipment (864,198) (889,596) (961,345) (943,326)Net cash flow from investing activities (11,909,428) 368,080 (12,080,781) 361,955

Cash flow from financing activitiesIncrease in bonds 114,774 105,149 114,774 105,149Non controlling interest - - (2,002) (490)Acquisition of Non controlling Interest - - - (63,295)Proceeds from debentures / Redemption of debentures (261,618) (300,002) 75,519 (199,932)Increase/(Decrease) due to banks (90,105) 335,484 (46,690) 335,485Increase in Commercial papers 722,369 15,981Increase in borrowed funds 9,217,652 11,382,008 9,814,874 12,527,046Shares issued 176,035 41,994 176,035 41,994Dividend paid (782,627) (92,996) (782,627) (92,996)

Net cash flow from financing activities 8,374,111 11,471,637 10,072,253 12,668,942Net increase/(decrease) in cash & cash equivalents and Placement with Banks 3,146,765 10,025,990 3,146,589 10,035,792Cash & cash equivalents and Placements with Banks at the beginning of the year 16,073,497 6,047,507 16,083,796 6,048,004Cash & cash equivalents and Placements with Banks at the end of the year [note (b)] 19,220,262 16,073,497 19,230,388 16,083,796


CASH FLOW & RECONCILIATION STATEMENT

RECONCILIATION STATEMENT

(Rs’000)

Bank Group

For the year ended 31st December 2012 2011 2012 2011

Note (a)Reconciliation of operating profitProfit before provision for income tax 7,265,034 4,993,636 7,517,478 5,375,537

Loss/(Profit) on disposal of property & equipment (15,203) 7,574 (15,517) 4,907 Income from investments (42,021) (28,937) (42,021) (28,937) Diminution/(Appreciation) in value of investments (72,023) 189,165 (72,023) 189,165 Dividend received from subsidiaries (79,155) (15,102) - - Capital gains from sale of shares 31,072 (856,602) 31,072 (856,602) Staff cost adjustment 103,489 6,927 103,489 6,927 Income from available - for-sale financial investments (35,100) - (35,100) - Depreciation 535,656 503,383 588,247 550,516 Amortization cost 43,567 36,110 46,778 39,775 Loss/(Profit) on forward contract revaluation (4,419) 126,478 (4,419) 126,478 Exchange revaluation 16,061 - 16,061 - Other non-cash expenses 17,144 (58,515) 17,144 (58,515) Impairment provision 136,906 428,857 152,167 399,097 Interest income accrued on impaired financial assets (11,395) 15,538 (11,395) 15,538 Expenses due to other customers 73,308 59,137 73,308 59,137 Guarantee Income (fees ) (12,275) (12,527) (12,275) (12,527)Operating profit before changes in operating assets/liabilities 7,950,646 5,395,121 8,352,995 5,810,495

Note (b)Reconciliation of cash & cash equivalents and placements with banks Local currency in hand 4,483,580 3,862,785 4,483,791 3,862,968 Foreign currency in hand 1,089,882 759,346 1,089,882 759,346 Balances with local banks 71,025 32,757 80,937 42,873 Balances with foreign banks 1,774,914 979,003 1,774,914 979,003 Money at call and short notice 3,012,734 5,102,523 3,012,734 5,102,523 Cash & cash equivalents at the end of the year (Note No. 11) 10,432,135 10,736,413 10,442,259 10,746,713 Placements with banks (Note No. 13) 8,788,127 5,337,084 8,788,129 5,337,083Cash & cash equivalents and Placements with banks at the end of the year 19,220,262 16,073,497 19,230,388 16,083,796

297Sampath Bank PLC

STATEMENT OF CHANGES IN EQUITY

(Rs’000)Bank Stated Revaluation Statutory Risk Available for General Investment Retained Total Capital Reserve Reserve Reserve Sale Reserve Fund Profit Shareholders’ Fund Fund Reserve Funds

Balance as at January 1, 2011 1,786,250 1,519,041 614,834 31,730 5,223,829 10,058,522 - 1,756,429 20,990,635

Adjustments - - - (169) - (508) - - (677)

Final scrip dividend Paid 2010 915,536 - - - - - - (1,008,533) (92,995)

ESOP-2010 41,994 - - - - - - - 41,994

Net profit for the year - - - - - - - 3,387,209 3,387,209

Other comprehensive income net of tax - - - - (3,426,050) - - - (3,426,050)

Transfers to investment fund account - - - - - - 590,812 (590,812) -

Surplus/(reversals) on revaluation of property - (59,693) - - - - - 59,693 -

Transfers during the year - - 190,971 4,144 - 1,678,299 - (1,873,414) -

Balance as at 31st December 2011 2,743,780 1,459,349 805,805 35,706 1,797,778 11,736,312 590,812 1,730,572 20,900,115

Adjustments - - - 473 - (473) - 3,659 3,659

ESOP-2010 176,035 - - - - - - - 176,035

Final scrip dividend paid - 2011 644,357 - - - - - - (713,479) (69,122)

Final cash dividend paid - 2011 - - - - - - - (713,505) (713,505)

Net profit for the year - - - - - - - 5,136,424 5,136,424

Transfers to investment fund account - - - - - - 939,955 (939,955) -

Other comprehensive income net of tax - - - - (332,757) - - - (332,757)

Surplus/(reversals) on revaluation of property - (2,640) - - - - - 2,640 -

Transfers during the year - - 256,821 73,302 - 2,160,000 - (2,490,123) -

Balance as at 31st December 2012 3,564,172 1,456,708 1,062,626 109,480 1,465,022 13,895,839 1,530,767 2,016,233 25,100,849

(Rs’000)Group Stated Revaluation Statutory Risk Available for General Investment Retained Total Non Total Capital Reserve Reserve Reserve Sale Reserve Funds Profit Shareholders’ controlling equity Fund Fund Reserve Fund Interest

Balance as at January 1, 2011 1,786,250 2,938,517 621,941 31,730 5,223,829 10,058,522 - 1,890,423 22,551,212 152,025 22,703,237

Adjustments - - - (169) - (507) - - (676) - (676)

Final scrip dividend Paid 2010 915,536 - - - - - - (1,008,533) (92,996) - (92,996)

Final cash dividend Paid 2010 (490) (490)

ESOP-2010 41,994 - - - - - - - 41,994 - 41,994

Net profit for the year - - - - - - - 3,683,281 3,683,281 22,150 3,705,431

Other comprehensive income net of tax - - - - (3,426,050) - - - (3,426,050) (3,426,050)

Recognition of Bargaining Purchase on NCI Acquisition - - - - - - - 50,487 50,487 - 50,487

Transfers to investment fund account - - - - - - 603,653 (603,653) - - -

Surplus/(reversals) on revaluation of property - (59,693) - - - - 59,693 - - -

Transfers during the year - - 200,590 4,144 - 1,678,299 - (1,883,033) - - -

Acquisition of Non controlling interest - - - - - - - - - (113,782) (113,782)

Balance as at 31st December 2011 2,743,780 2,878,825 822,531 35,706 1,797,779 11,736,313 603,653 2,188,664 22,807,251 59,904 22,867,155

Adjustments - - - 473 - (473) - 3,659 3,659 - 3,659

ESOP-2010 176,035 - - - - - - - 176,035 - 176,035

Final scrip dividend paid - 2011 644,357 - - - - - - (713,479) (69,122) - (69,122)

Final cash dividend paid - 2011 - - - - - - - (713,505) (713,505) (2,002) (715,505)

Net profit for the year - - - - - - - 5,342,623 5,342,623 3,342 5,345,961

Other comprehensive income net of tax - - - - (332,757) - - - (332,757) - (332,757)

Transfers to investment fund account - - - - - - 957,118 (957,118) - - -

Surplus/(reversals) on revaluation of property - (2,640) - - - - - 2,640 - - -

Transfers during the year - - 266,818 73,302 - 2,160,000 - (2,500,120) - - -

Balance as at 31st December 2012 3,564,172 2,876,185 1,089,349 109,480 1,465,022 13,895,840 1,560,772 2,653,364 27,214,184 61,243 27,275,427


SIGNIFICANT ACCOUNTING POLICIES

1. Corporate Information1.1 GeneralSampath Bank PLC (‘The Bank’), was incorporated on 10 March 1986 under the Companies Act No. 17 of 1982 and re-registered under Companies Act No. 7 of 2007 is a licensed commercial bank under the Banking Act No.30 of 1988. It is a Public Company domiciled in Sri Lanka and the shares of the Bank have a primary listing in the Colombo Stock Exchange. 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 December 31, 2012 was 3,455 (3,230 as at December 31, 2011).

The Bank PLC does not have an identifiable parent on its own.

1.2 Consolidated Financial StatementsThe Consolidated Financial Statements of the Bank for the year ended 31st December 2012 comprise Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Cash Flow and Reconciliation Statement, Statement of Changes in Equity, Notes to the Financial Statements and Significant Accounting Policies of the Bank and its Subsidiaries i.e. Sampath Centre Ltd., S C Securities (Pvt) Ltd., Sampath Leasing and Factoring Ltd., and Sampath Information Technology Solutions Ltd. (together referred to as ‘Group’).

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 and debit cards, off shore banking, resident & non-resident foreign currency operations, electronic banking services such as telephone banking, internet banking, mobile banking, payment gateway money remittance facilities, pawning & leasing, dealing in government securities etc.

1.3.2 SubsidiariesSubsidiaries and their ownership as of December 31, 2012, December 31, 2011 and January 1, 2011 are as follows.

Ownership %

Subsidiary Principal activities December 31, 2012

December 31,2011

January 1, 2011

Sampath Centre Ltd

Renting of Commercial Property

97.14 97.14 97.14

S C Securities (Pvt) Ltd.

Share Brokering 100 100 51


Leasing & Factoring

100 100 100


Developing Software Solutions & Maintenance of Hardware

100 100 100

1.4 Date of Authorization for IssueThe Financial Statements of the Group for the year ended 31st December 2012 were authorized for issue in accordance with a resolution of the Board of Directors on 22nd February 2013.

2. Basis of Preparation2.1 Statement of ComplianceThe Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Cash Flow Statement, Statement of Changes in Equity, together with the Significant Accounting Policies and Notes, (‘Financial Statements’), i.e.: Consolidated Financial Statements and Separate Financial Statements of the Bank, as at 31st December 2012 and for the year then ended, have been prepared in accordance with Sri Lanka Accounting Standards comprising of Sri Lanka Financial Reporting Standards & Lanka Accounting Standards (hereafter referred as SLFRS), 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 presentation of the financial statements is also in compliance with the requirements of the Banking Act No. 30 of 1988.

For all periods up to and including the year ended 31 December 2011, the Bank and the Group prepared the financial statements in accordance with the Sri Lanka Accounting Standards which were effective prior to January 1, 2012. These financial statements for the year ended 31 December 2012 are the first set of statements the Bank and the Group has prepared in accordance with SLFRS.

These SLFRSs are in effective from January 1, 2012 and comparatives (year 2011 and 2010) too were reclassified and re-measured. Hence the date of transition to SLFRS is January 1, 2011 and beginning of the day, January 1, 2011, balances were considered.

2.2 Basis of measurementThe financial statements have been prepared on the historical cost basis, except for the following material items in the Statement of financial position, all of which are measured at fair value.

available for sale investments derivative financial instruments other financial assets and liabilities held for trading Financial assets and liabilities designated at fair value through profit

or loss

2.3 Functional and presentation currencyThe financial statements are presented in Sri Lanka Rupees Thousands (Rs 000), except when otherwise indicated.

2.4 Presentation of Financial StatementsThe items in Statement of Financial Position of the Bank and the Group are presented. Statement of Financial Position broadly in order of liquidity. An analysis regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting date (non–current) is presented in Note no 43.

2.5 Materiality & AggregationIn compliance with LKAS 01 on Presentation of Financial Statements, each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or functions too are presented separately, if they are material.

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and expenses are not offset in the income statement unless required or permitted by any accounting standard or interpretation, and as specifically disclosed in the accounting policies.

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2.6 Comparative InformationThe accounting policies have been consistently applied by the Bank and the Group with those of the previous financial year in accordance with LKAS 01 Presentation of Financial Statements, except those which had to be changed as a result of application of the new SLFRS. Further, comparative information is reclassified wherever necessary to comply with the current presentation.

2.7 Use of significant accounting judgments , estimates and assumptions

The preparation of financial statements requires the application of certain critical accounting and assumptions relating to the future. Further, it requires the management of the bank to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in future periods.

JudgementsIn the process of applying the Bank’s and Group’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the consolidated financial statements:

i TaxationThe Group is subject to income taxes and other taxes including VAT on financial services. Significant judgement was required to determine the total provision for current, deferred and other taxes pending the issue of tax guideline on the treatment of the adoption of SLFRS in the financial statements and the taxable profit for the purpose of imposition of taxes. Uncertainties exist, with respect to the interpretation of the applicability of tax laws, at the time of the preparation of these financial statements. The Group recognized assets and liabilities for current deferred and other taxes based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income, deferred tax amounts in the period in which the determination is made.

ii Useful life-time of the Property and equipmentThe Bank and the Group review the residual values, useful lives and methods of depreciation of assets as at each reporting date. Judgement of the management is exercised in the estimation of these values, rates, methods and hence they are subject to uncertainty.

Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Bank and the Group based these assumptions and estimates on parameters available at the time financial statements were prepared. Existing circumstances and assumptions about future developments, these may change due to market changes or circumstances arising beyond the control of the Bank and the Group. Such changes are taken into consideration in the assumptions when they occur.

i. Going ConcernThe Board have made an assessment of the Bank’s ability to continue as a going concern and are satisfied that it has the resources to continue in

business for the foreseeable future. Furthermore, the Board is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern and they do not intend either to liquidate or to cease operations of the Bank. Therefore, the financial statements continue to be prepared on the going concern basis.

ii. Impairment losses on loans and advancesThe Bank and the Group review their individually significant loans and advances at each statement-of-financial-position date to assess whether an impairment loss should be recorded in the income statement. In particular, Judgment of the management is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the impairment allowance.

Loans and advances that have been assessed individually and found to be not impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident. The collective assessment takes in to account data from the loan portfolio (such as levels of arrears, credit utilisation, loan-to-collateral ratios, etc.), and judgements on the effect of concentrations of risks and economic data (including levels of unemployment, inflation, interest rates, exchange rates).

iii. Impairment of available - for - sale investmentsThe Bank and the Group reviews its debt securities classified as available - for - sale investments at each reporting date to assess whether they are impaired. This requires similar judgment as applied on the individual assessment of loans and advances.The bank also records impairment charges on available for sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Bank evaluates, among other factors, historical share price movements, duration and extent up to which the fair value of an investment is less than its cost.

iv. Deferred tax assetsDeferred tax assets are recognised in respect of tax losses to the extent it is probable that future taxable profits will be available against which such tax losses can be set off. Judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits, together with the future tax-planning strategies.

v. Defined benefit plansThe cost of defined benefit pension plans and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and their long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

In determining the appropriate discount rate, the management considers the interest rates of Sri Lanka Government Bonds with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables. Future salary increases and pension increases are based on expected future inflation rates and expected future salary increase rate of the Bank.


vi. Fair value of Property and EquipmentThe Land and Buildings of the Bank and the Group are reflected at fair value. The Group engaged independent valuation specialist to determine fair value of land and building. When current market prices of similar assets are available, such evidences are considered in estimating fair values of these assets.

3 Significant Accounting PoliciesThe significant accounting policies applied by the Bank and the Group in preparation of its financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in theses financial statements and in preparing the opening SLFRS statement of financial position at January 1, 2011 for the purpose of transition to SLFRS, unless otherwise is indicated.

3.1 Basis of ConsolidationThe Bank Financial Statements comprise the Financial Statements of the Bank and its subsidiaries for the year ended 31st December 2012,in terms of LKAS 27 Consolidated & Separate Financial Statements.

3.1.1 SubsidiariesThe Bank 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 the Bank’s subsidiaries are prepared for the same reporting year as per the Bank, using consistent accounting policies. 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 profit for the year of the subsidiaries is included in the Consolidated Statement of Comprehensive Income . The total Assets and Liabilities as at the Balance sheet date of the subsidiaries are included in the Consolidated Statement of financial Position.

3.1.2 Non-controlling interestNon-controlling Interests represent the portion of Subsidiary’s profit or loss and net assets not owned, directly or indirectly, by the Bank. Non-controlling interests are presented separately in the Consolidated Statement of Comprehensive Income and within equity in the Consolidated Statement of Financial Position, but separate from Bank shareholders’ funds. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling interest holders, even in instances where the allocation is negative.

The cost of an acquisition is measured at fair value of the consideration, including contingent consideration, given on the date of transfer of title. The acquired identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition.

3.1.3 Intra-Group transactionsIntra-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 eliminated only up to the extent that there is no evidence of impairment in value.

3.2 Business Combinations3.2.1 Business combinationsBusiness combinations are accounted for using the Acquisition method as per the requirements of SLFRS 03 Business Combinations.

As of the acquisition date, the amount of non-controlling interest is measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition related cost are costs the acquirer incurs to effect a business combination. Those costs include finder’s fees; advisory, legal, accounting, valuation and other professional law consulting fees; general administrative costs, including the cost of maintaining an internal acquisition department; and cost of registering and issuing debt and equity securities. Acquisition related costs, other than those associated with the issue of debt or equity securities are expensed in the periods in which the costs are incurred and the services are received.

3.3 Foreign currency transactions and balancesAll foreign currency transactions are converted to Sri Lanka rupees which is the Bank’s and 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 spot foreign exchange rate as at the year end and all differences arising on non–trading activities are taken to ‘Other operating income’ in the Income Statement.

Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items in foreign currency measured at fair value 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 the Income statement.

3.4 Cash and cash equivalentsCash and cash equivalents comprise cash in hand, balances with banks, and money at call & short notice.

For the purpose of the Statement of Cash Flow, cash and cash equivalents consist of cash and short-term deposits as defined above, net of unfavourable nostro balances.

3.5 Financial Assets – initial recognition and subsequent measurement

3.5.1 Statement of Financial Asset categorization under first time adoption

Financial assets - Initial recognition and measurementFinancial assets within the scope of LKAS 39 are classified as Derivative financial instruments, Loans and Advances, Financial investments held-to-maturity, Financial investments available-for-sale, Financial investments held for trading or Financial assets held for trading pledged as collateral as appropriate. The Group determines the classification of its financial assets at initial recognition.


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3.5.2 Date of recognitionAll financial assets are initially recognized on the trade date, i.e., the date that the Bank becomes a party to the contractual provisions of the instrument. This includes ’regular way trades’: purchases or sales of financial assets that require delivery of assets within the time-frame generally established by regulation or convention in the market place.

3.5.3 Initial measurement of financial instrumentsThe classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss.

3.5.4 Non-derivative financial assetsThe Group recognizes non-derivative financial assets by the following four categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets.

i. Financial assets at fair value through profit or lossA financial asset is classified as fair value through profit or loss if it is held for trading or is designated at fair value through profit of loss.

Financial assets held for tradingFinancial assets held for trading are recorded in the statement of financial position at fair value. Changes in fair value are recognized in ‘Net trading income’. Dividend income or expense is recorded in ‘Net trading income’ according to the terms of the contract, or when the right to the payment has been established.

Financial assets designated at fair value through profit or loss (FVTPL)Financial assets may be designated by management upon initial recognition, if: such designation eliminates or significantly reduces the

inconsistent treatment that would otherwise arise from measuring the assets or recognizing gains or losses on them on a different basis.

the assets are part of a group of financial assets, financial liabilities or both, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

it contains one or more embedded derivatives, which significantly modify the cash flows that would otherwise be required by the contract.

Financial assets at fair value through profit or loss are recorded in the statement of Financial Position at Fair Value. Changes in fair value are recorded in ‘Net gain or loss on financial instrument designated at fair value through profit or loss. Interest earned or incurred is accrued in ‘Interest income’ or ‘Interest expense, respectively, using the effective interest rate (EIR), while dividend income is recorded in ‘Other operating income’ when the right to the payment has been established. Included in this classification are loans and advances to customers which are economically hedged by credit derivatives and do not qualify for hedge accounting, as well as notes issued which are managed on a fair value basis.

ii. Held-to-maturity financial investmentsHeld-to-maturity financial investments are non–derivative financial assets with fixed or determinable payments and fixed maturities, which the Bank has

the intention and ability to hold to maturity. Subsequent to initial recognition, held to maturity financial investments are measured at amortised cost using the Effective Interest Rate (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. The amortisation is included in ‘Interest income’ in the income statement. The losses arising from impairment of such investments are recognised in the income statement line ‘Impairment gain/(loss) on financial investment.

If the Bank and the Group were to sell or reclassify more than an insignificant amount of held to maturity investments before maturity (other than in certain specific circumstances), the entire category would be tainted and would have to be reclassified as available-for-sale. Furthermore, the bank would be prohibited from classifying any financial asset as held to maturity during the following two years.

iii. Due from banks and loans and receivables from customersDue from banks and Loans & receivables from customers include non–derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

Those that the Bank intends to sell immediately or in the near term and those that the Bank, upon initial recognition, designates as at fair value through profit or loss

Those that the Bank, upon initial recognition, designates as available for sale

Those for which the bank may not recover substantially all of its initial investment, other than because of credit deterioration

After initial measurement, amounts ‘Due from banks’ and ‘Loans and receivables from customers’ are subsequently measured at amortised cost using the EIR, less allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘Interest income’ in the income statement. The losses arising from impairment are recognised in the income statement in ‘impairment gain/(loss) on loans and receivables’. The Bank and the Group may enter into certain lending commitments where the loan, on drawdown, is expected to be classified as held-for-trading because the intent is to sell the loans in the short term. These commitments to lend are recorded as derivatives and measured at fair value through profit or loss. Where the loan, on drawdown, is expected to be retained by the Bank, and not sold in the short term, the commitment is recorded only when it is an onerous contract that is likely to give rise to a loss.

iv. Available-for-sale financial investmentsAvailable-for-sale investments include equity and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are intended to be held for an indefinite period of time and may be sold in response to needs for liquidity or in response to changes in the market conditions. The Bank has not designated any loans or receivables as available-for-sale. After initial measurement, available-for-sale financial investments are subsequently measured at fair value. Unrealised gains and losses are recognised directly in equity (Other comprehensive income) in the ‘Available-for-sale reserve. When the investment is disposed of, the cumulative gain or loss previously recognised in equity is recognised in the income statement in ‘Other operating income. Where the Bank and the Group hold more than one investment in the same security, they are deemed to be disposed of on a first–in first–out basis. Interest earned whilst holding available-for-sale financial investments is reported as interest income using the EIR. Dividend earned whilst holding


available for sale financial investments are recognised in the income statement as ‘Other operating income when the right of the payment has been established. The losses arising from impairment of such investments are recognised in the income statement in ‘Impairment losses on financial investments’ and removed from the ‘Available-for-sale reserve.

3.5.5 Derivatives recorded at fair value through profit or lossThe Bank uses derivatives such as currency swaps & forward contracts. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in ‘Net trading income’.

3.5.6 ‘Day 1’ profit or lossWhen the transaction price differs from the fair value of other observable current market transactions in the same instrument, or based on a valuation technique whose variables include only data from observable markets, the bank immediately recognises the difference between the transaction price and fair value (a ‘Day 1’ profit or loss) in ‘Net trading income’.

3.5.7 Reclassification of financial assetsThe Bank and Group may reclassify non-derivative financial assets (other than those designated at FVTPL upon initial recognition, in certain circumstances:

out of the ‘held-for-trading’ category and into the ‘available for sale’, ‘loans and receivables’, or ’held-to-maturity’ categories.

out of the ‘available-for-sale’ category and into the ’loans and receivables’ , ‘held for trading category’ or ‘held-to-maturity’. Reclassifications are recorded at fair value at the date of reclassification, which becomes the new amortised cost. For a financial asset reclassified out of the ’available-for-sale’ category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recycled to the income statement.

out of the ‘held-for-trading’ category and into the ‘loans and receivables’ category if it meets the definition of loans and receivables and the Bank has the intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset is reclassified, and if the Bank subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the EIR from the date of the change in estimate.

Reclassification is at the election of the management, and is determined on an instrument by instrument basis.

3.5.8 De-recognition of financial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired. The Bank has transferred its rights to receive cash flows from the

asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass–through’ arrangement and either:

The Bank has transferred substantially all the risks and rewards of the asset.

Or The Bank has neither transferred nor retained substantially all the

risks and rewards of the asset, but has transferred control of the asset.

When the Bank has transferred its rights to receive cash flows from an asset or has entered into a pass–through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Bank’s continuing involvement in the asset. In that case, the bank also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the bank could be required to repay.

3.5.9 Impairment of Financial AssetsThe Bank assesses at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an ‘incurred loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

i. Loans and receivablesLosses for impaired loans are recognised promptly when there is objective evidence that impairment of a loan or portfolio of loans has occurred. Impairment allowances are calculated on individual loans and for groups of loans, this is done collectively. Impairment losses are recorded as charges to the income statement. The carrying amount of impaired loans on the balance sheet is reduced through the use of impairment allowance accounts. Losses expected from future events are not recognised.

Individually assessed loans and receivablesFor all loans that are considered individually significant, the Bank assesses on a case-by-case basis at each balance sheet date whether there is any objective evidence that a loan is impaired. The criteria used to determine that there is such objective evidence include:

known cash flow difficulties experienced by the borrower; past due contractual payments of either principal or interest; breach of loan covenants or conditions; the probability that the borrower will enter bankruptcy or other

financial realisation; and a significant downgrading in credit rating by an external credit rating

agency.

For those loans where objective evidence of impairment exists, impairment losses are determined considering the following factors:

Bank’s aggregate exposure to the customer; the viability of the customer’s business model and their capacity to

trade successfully out of financial difficulties and generate sufficient cash flow to service debt obligations;

the amount and timing of expected receipts and recoveries; the extent of other creditors’ commitments ranking ahead of, or pari-

passu with, the Bank and the likelihood of other creditors continuing to support the company;


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the complexity of determining the aggregate amount and ranking of all creditor claims and the extent to which legal and insurance uncertainties are evident;

the realisable value of security (or other credit mitigants) and likelihood of successful repossession;

the likely deduction of any costs involved in recovery of amounts outstanding;

the ability of the borrower to obtain, and make payments in, the currency of the loan if not denominated in local currency; and

the likely dividend available on liquidation or bankruptcy;

Impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. The impairment allowances on individually significant accounts are reviewed more regularly when circumstances require. This normally encompasses re-assessment of the enforceability of any collateral held and the timing and amount of actual and anticipated receipts. Individually assessed impairment allowances are only released when there is reasonable and objective evidence of a reduction in the established loss estimate.

Collectively assessed loans and advancesImpairment is assessed on a collective basis in two circumstances:

to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment; and

for homogeneous groups of loans that are not considered individually significant.

Incurred but not yet identified impairmentIndividually assessed loans for which no evidence of loss has been specifically identified on an individual basis are grouped together according to their credit risk characteristics for the purpose of calculating an estimated collective loss. This reflects impairment losses that the Bank has incurred as a result of events occurring before the balance sheet date, which the Bank and the Group are not able to identify on an individual loan basis, and that can be reliably estimated. These losses will only be individually identified in the future. As soon as information becomes available which identifies losses on individual loans within the group, those loans are removed from the group and assessed on an individual basis for impairment.

The collective impairment allowance is determined after taking into account: historical loss experience in portfolios of similar credit risk; and management’s experienced judgment as to whether current economic

and credit conditions are such that the actual level of inherent losses at the balance sheet date is likely to be greater or less than that suggested by historical experience.

Homogeneous groups of loans and advancesStatistical methods are used to determine impairment losses on a collective basis for homogeneous groups of loans. Losses in these groups of loans are recorded on an individual basis when individual loans are written off, at which point they are removed from the group.

Two alternative methods are used to calculate historical loss experience on a collective basis:

When the group of loan by nature long term, the Bank use Probability of default method

Under this methodology the movement in number of customers in to bad categories over the periods are used to estimate the amount of loans that

will eventually be written off as a result of the events occurring before the balance sheet date which the Group is not able to identify on an individual loan basis, and that can be reliably estimated.

When the group of loans by nature short term, the Bank use Net flow Rate method

Under this methodology the movement in the outstanding balance of customers in to bad categories over the periods are used to estimate the amount of loans that will eventually be written off as a result of the events occurring before the balance sheet date which the Group is not able to identify on an individual loan basis, and that can be reliably estimated.

Under both methodologies, loans are grouped into ranges according to the number of days in arrears and statistical analysis is used to estimate the likelihood that loans in each range will progress through the various stages of delinquency, and ultimately prove irrecoverable.

Current economic conditions and portfolio risk factors are also evaluated when calculating the appropriate level of allowance required to cover the inherent loss.

These additional macro and portfolio risk factors may include: recent loan portfolio growth and product mix, unemployment rates, Gross Domestic Production (GDP) growth,

inflation Exchange rates, interest rates Changes in laws and regulations

Write-off of loans and advancesLoans (and the related impairment allowance accounts) are normally written off, either partially or in full, when there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds from the realisation of security.

Reversals of impairmentIf the amount of an impairment loss decreases in a subsequent period, and the decrease can be related objectively to an event occurring after the impairment was recognised, the excess is written back by reducing the loan impairment allowance account accordingly. The write-back is recognised in the income statement.

ii. Available-for-sale financial investmentsFor available for sale financial investments, the Bank assesses at each reporting date whether there is objective evidence that an investment is impaired. In the case of debt instruments classified as available for sale, the bank assesses individually whether there is objective evidence of impairment.

However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of ‘Interest and similar income’. If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to a credit event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.


In the case of equity investments classified as available for sale, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement is removed from equity and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in the fair value after impairment are recognised in other comprehensive income.

iii. Held-to-maturity financial assetsAn impairment loss in respect of held-to-maturity financial assets measured at amortised cost is calculated as the difference between its carrying amount and the present value of estimated future cash flows discounted at the asset’s original EIR and is recognized in profit or loss. Interest on impaired assets continue to be recognized through the unwinding of discount. When a subsequent event caused the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Renegotiated loansWhere possible, the Bank seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. Once the terms have been renegotiated, any impairment is measured using the original EIR as calculated before the modification of terms and the loan is no longer considered past due. Management continually reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original EIR.

3.5.10 Collateral valuationThe bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral is generally assessed, at a minimum, at inception and based on the guidelines issued by the Central Bank of Sri Lanka.

Non-financial collateral, such as real estate, is valued based on data provided by third parties such as independent valuers and audited financial statements.

3.5.11 Collateral repossessedThe Bank’s policy is to determine whether a repossessed asset is best used for its internal operations or should be sold. Assets determined to be useful for the internal operations are transferred to their relevant asset category at the lower of their repossessed value or the carrying value of the original secured asset.

3.5.12 Repurchase and reverse repurchase agreementsSecurities sold under agreements to repurchase at a specified future date are not derecognised from the statement of financial position as the bank retains substantially all of the risks and rewards of ownership. The corresponding cash received is recognised in the consolidated statement of financial position as an asset with a corresponding obligation to return it,

including accrued interest as a liability within ‘Cash collateral on securities lent and repurchase agreements’, reflecting the transaction’s economic substance as a loan to the Bank. The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of agreement using the EIR. When the counterparty has the right to sell or re-pledge the securities, the Bank reclassifies those securities in its Statement of Financial Position to ‘Financial assets held-for-trading pledged as collateral’ or to ‘Financial investments available-for-sale pledged as collateral’, as appropriate.

Conversely, securities purchased under agreements to resell at a specified future date are not recognised in the Statement of Financial Position. The consideration paid, including accrued interest, is recorded in the Statement of Financial Position, within ‘Cash collateral on securities borrowed and reverse repurchase agreements’, reflecting the transaction’s economic substance as a loan by the Bank. The difference between the purchase and resale prices is recorded in ‘Net interest income’ and is accrued over the life of the agreement using the EIR.

If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities is recorded as a short sale within ‘Financial liabilities held-for-trading’ and measured at fair value with any gains or losses included in ‘Net trading income’.

3.5.13 Securities lending and borrowingSecurities lending and borrowing transactions are usually collateralised by securities or cash. The transfer of the Securities to counterparties is only reflected on the statement of financial position if the risks and rewards of ownership are also transferred. Cash advanced or received as collateral is recorded as an asset or liability. Securities borrowed are not recognised on the Statement of Financial Position, unless they are then sold to third parties, in which case the obligation to return the securities is recorded as a trading liability and measured at fair value with any gains or losses included in ‘Net trading income’.

3.6 Non–Financial Assets3.6.1 Property and equipmentRecognition and measurementProperty & Equipment are recognised 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 LKAS 16 on Property, Plant & Equipment. Initially property and equipment are measured at cost.

Cost ModelProperty and equipment is stated at cost excluding the costs of day–to–day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the equipment when that cost is incurred, if the recognition criteria 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 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 Statement of Financial Position, except to the extent that it reverses a revaluation decrease of the same asset previously recognised


305Sampath Bank PLC

in Income Statement, in which case the increases is recognised in Income Statement. A revaluation deficit is recognised 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.

Subsequent CostThese are costs that are recognised in the carrying amount of an item, if it is probable that the future economic benefits embodied within that part will flow to the Group and it can be reliably measured.

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 (per annum)

Freehold Buildings 2.0% - 2.5 %

Motor Vehicles 12.5%

Computer Equipment 5% - 20%

Furniture, Office & Household Equipment

5.0% - 20.0 %

Building Integrals 10% - 25 %

The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end.

De-recognitionProperty and equipment is de-recognised on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in ‘Other operating income’ in the income statement in the year the asset is de-recognised. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings

3.6.2 Intangible assetsThe intangible assets include the value of computer software cost of purchased licenses.

An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it will flow to the Bank.

AmortizationAmortisation is calculated using the straight–line method to write-down the cost of intangible assets to their residual values over their estimated useful lives as follows;

Asset Category Useful life

Computer software 4 – 6 years

Licenses 20 years

The residual value of the intangible asset is zero.

3.6.2 Impairment of non–financial assets

3.6.3The Bank assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Bank estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or the fair value of the Cash Generating unit’s (CGU) fair value less costs to sell and its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.In assessing value in use, the estimated future cash flows are discounted to their present value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

3.7 Finance and operating leasesThe determination of whether an arrangement is a lease, or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leasesAgreements which transfer to counterparties substantially all the risks and rewards incidental to the ownership of assets, but not necessarily legal title, are classified as finance leases. When the Bank is a lessor under finance leases the amounts due under the leases, after deduction of unearned charges, are included in ‘Loans and advances to banks’ or ‘Loans and advances to customers’, as appropriate. The finance income receivable is recognised in ‘Net interest income’ over the periods of the leases so as to give a constant rate of return on the net investment in the leases.When the Bank is a lessee under finance leases, the leased assets are capitalised and included in ‘Property, plant and equipment’ and the corresponding liability to the lessor is included in ‘Debt issued and other borrowed funds’. A finance lease and its corresponding liability are recognised initially at the fair value of the asset or, if lower, the present value of the minimum lease payments. Finance charges payable are recognised in ‘Net interest income’ over the period of the lease based on the interest rate implicit in the lease so as to give a constant rate of interest on the remaining balance of the liability.

Operating leasesAll other leases are classified as operating leases. When acting as lessor, the Bank includes the assets subject to operating leases in ‘Property, plant and equipment’ and accounts for them accordingly. Impairment losses are recognised to the extent that residual values are not fully recoverable and the carrying value of the assets is thereby impaired. When the Bank is the lessee, leased assets are not recognised on the balance sheet. Rentals payable and receivable under operating leases are accounted for on a straight-line basis over the periods of the leases and are included in ‘General and administrative expenses’ and ‘Other operating income’, respectively.

3.8 Fiduciary assetsThe Bank provides fiduciary services that result in the holding of the assets on behalf of its customers. Assets held in fiduciary capacity are not reported in the financial statements, as they are not assets of the Bank.


3.9 Financial liabilitiesInitial recognition and measurementFinancial liabilities within the scope of LKAS 39 are classified as Due to banks, Securities sold under re-purchase agreements, Derivative financial instruments, Due to customers (Deposits), Debt issued and other borrowed funds as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

The Bank & the Group classifies financial liabilities in to financial liabilities at FVTPL or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.

The Group recognizes financial liabilities in the Statement of Financial Position when the Group becomes a party to the contractual provisions of the financial liability.

I Financial liability at FVTPLFinancial liabilities at FVTPL includes financial liabilities held-for-trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at FVTPL are measured at fair value, and changes there in recognized in profit or loss.Upon initial recognition, transaction cost are directly attributable to the acquisition are recognized in profit or loss as incurred.The criteria for designation of financial liabilities at FVTPL upon initial recognition are the same as those of financial assets at FVTPL.

Ii Other Financial liabilitiesOther financial liabilities including deposits, debt issued by the Bank and the other borrowed funds are initially measured at fair value less transaction cost that are directly attributable to the acquisition and subsequently measured at amortised cost using the EIR method.Amortised cost is calculated by taking into account any discount or premium on the issue and costs that are an integral part of the EIR.

De-recognisition of financial liabilitiesA financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in profit or loss.

3.10 Retirement Benefit Obligations3.10.1 Defined Benefit Plani. 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 its 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.

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 2012 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.

Recognition of Actuarial Losses / GainsActurial losses / gains to be recognized in this year’s retirement expense is calculated according to the 10% corridor method. Actuarial experience gains or losses occur when the actual plan experience differ from the assumed. This Actuarial Gain will be considered for recognition in the next year’s Retirement Benefit Expense.

Expected Return on AssetsExpected return on assets is zero as the plan is not pre funded.

Funding ArrangementsThe Gratuity liability is not externally funded.

i. 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 provided they have completed 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. 19, Employee Benefits (LKAS 19).

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 2012 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.

Recognition of Actuarial Losses / (Gains)Actuarial experience gains or losses occur when the actual plan experience differ from the assumed. This Actuarial Gain 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.

Funding ArrangementsThe assets of the fund are held separately from those of the Bank assets, which is administered independently.

3.10.2 Defined Contribution PlansThe contribution payable to a defined contribution plan is in proportion to the services rendered to the Bank by the employees and is recorded as an expense under ‘Personnel expenses’. Unpaid contributions are recorded as a liability.i. Employees’ Provident FundThe Bank and Employees contribute to the approved private Provident Fund at 12% and 8% respectively.

ii. Employees’ Trust FundThe Bank contributes to the Employees’ Trust Fund at 3%.

3.11 ProvisionsProvisions are recognised when the Bank or Group has a present obligation (legal or constructive) as a result of a past event, and 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. The expense relating to any provision is presented in the income statement net of any reimbursement.


307Sampath Bank PLC

3.12 Financial guaranteesIn the ordinary course of business, the Bank gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the financial statements (within ‘Other liabilities’) at fair value, being the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially recognised less cumulative amortization recognised in the income statement, and the best estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.

Any increase in the liability relating to financial guarantees is recorded in the income statement in ‘Interest expense’. The premium received is recognised in the income statement in ‘Net fees and commission income’ on a straight line basis over the life of the guarantee.

3.13 TaxationIncome Tax expense comprises of current and deferred tax. Income tax expense is recognised in the statement of comprehensive Income.

3.13.1 Current taxCurrent 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.

3.13.2 Deferred taxDeferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable 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 profit nor taxable profit or loss

In respect of taxable temporary differences associated with investments in subsidiaries, 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 temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

In respect of deductible temporary differences associated with investments in subsidiaries, 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 profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset

to be utilised. Un-recognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting 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 deferred tax liabilities are offset 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

3.13.3 VAT on Financial ServicesVAT on Financial Services is calculated in accordance with VAT Act No. 14 of 2002 and subsequent amendment thereto.

3.14 Recognition of income and expensesRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Bank or Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

3.14.1 Interest Income and Interest expenseFor all financial instruments measured at amortised cost, interest bearing financial assets classified as available-for-sale and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the EIR. EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.

The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as ’Interest income’ for financial assets and ’Interest and similar expense’ for financial liabilities. However, for a reclassified financial asset for which the bank subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the EIR from the date of the change in estimate.

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

3.14.2 Fee and commission incomeThe Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories:


i. Fee income earned from services that are provided over a certain period of time

Fees earned for the provision of services over a period of time are accrued over that period. These fees include Professional fees, Trade Services fees, commission income and asset management fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment to the EIR on the loan. When it is unlikely that a loan will be drawn down, the loan commitment fees are recognised over the commitment period on a straight line basis.

ii. Fee income from providing transaction servicesFees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognised after fulfilling the corresponding criteria.

3.14.3 Dividend incomeDividend income is recognised when the right to receive the payment is established.

3.14.4 Net trading incomeNet trading income includes all gains and losses from changes in fair value and related Dividend for financial assets and financial liabilities ‘held-for-trading’ other than interest income.

3.15 Customer loyalty programmesAward credits under customer loyalty programmes are accounted for as a separately identifiable component of the transaction in which they are granted. The fair value of the consideration received in respect of the initial sale is allocated between the award credits and the other components of the sale. Expense incurred from customer loyalty programmes is charged to ‘Other operating expenses’.

3.16 Dividend on ordinary sharesDividend on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Bank’s shareholders. Interim Dividend are deducted from equity when they are declared and no longer at the discretion of the Bank. Dividend for the year that are approved after the reporting date are disclosed as an event after the reporting date.

3.17 Segment ReportingFor management purposes, the Bank is organised into four operating segments based on products and services, as follows:

Banking Leasing Dealing/Investment Others

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profits or losses which, in certain respects, are measured differently from operating profits or losses in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as a performancemeasure, not the gross income and expense. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the bank’s total revenue in 2012 or 2011.

3.18 Cash Flow StatementThe cash flow statement has been prepared using ‘The Direct Method’, whereby gross cash receipts and gross cash payments of operating activities, finance activities and investing activities have been recognised.

3.19 Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the financial statements are set out below. The Bank and the Group will adopt these standards when they become effective. Pending a detailed review the financial impact is not reasonably estimable as at the date of publication of these financial statements.

(i) SLFRS 9 -Financial Instruments: Classification and MeasurementSLFRS 9, as issued reflects the first phase of work on replacement of LKAS 39 and applies to classification and measurement of financial assets and liabilities.

(ii) SLFRS 13 -Fair Value MeasurementSLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 provides guidance on all fair value measurements under SLFRS.

SLFRS 9 will be effective for financial periods beginning on or after 01 January 2015 whilst SLFRS 13 will be effective for financial periods beginning on or after 01 January 2014.

In addition to the above, following standards have also been issued and will be effective from 01 January 2014.

SLFRS 10 - Consolidated Financial StatementsSLFRS 11 - Joint ArrangementsSLFRS 12 - Disclosure of Interests in Other Entities

4 First time adoption of SLFRSAs stated in Note 2.1, these are the Bank’s and Group’s first financial statements prepared in accordance with SLFRS.

The accounting policies set out in Note 3 have been applied in preparing the Financial Statements for the year ended December 31, 2012 , the comparative information presented for the year ended December 31, 2011 and in the preparation of an opening SLFRS based Statement of Financial Position at January 1, 2011 (the date of transition).

4.1 ExemptionsSLFRS 1 First- time adoption of Sri Lanka Accounting Standards allows first time adopters certain exemptions from the retrospective application of certain SLFRS.

The Bank and the Group has taken the following exemptions.


309Sampath Bank PLC

i SLFRS 3 Business Combinations

Not applied for subsidiaries, which are considered business for SLFRS, or in interest in associates and joint ventures that occurred before January 1, 2011.

Use of this exemption means that the SLAS carrying amounts of assets and liabilities, which are required to be recognised under SLFRS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with SLFRS. Assets and liabilities that do not qualify for recognition under SLFRS are excluded from the opening SLFRS statement of financial position. The Group did not recognise or exclude any previously recognised amounts as a result of SLFRS recognition requirements. SLFRS 1 also requires that the local SLAS carrying amount of goodwill must be used in the opening SLFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). In accordance with SLFRS 1, the Group has tested goodwill for impairment at the date of transition to SLFRS. No Goodwill impairment was deemed necessary at January 1, 2011.

ii The Group has elected to disclose the following amounts prospectively from the date of transition (i) the present value of the defined benefit obligation, the fair value of the plan assets and the surplus or deficit in the plan; and (ii) the experience adjustments arising on the plan liabilities and the plan assets.

iii SLFRS 2 Share-based Payment has not been applied to equity instruments in share-based payment transactions that were granted on or before January 1, 2011, and the issues after that date but vesting conditions were satisfied before January 1, 2012.

iv The Group has designated unquoted equity instruments held at 1 January 2011 as available-for-sale investments.

4.2 Significant Differences Between SLAS and SLFRS

Description SLFRS SLAS

Impairment Allowances for loan losses

Impairment allowances for loan losses that has been incurred but not yet identified are estimated at a specific asset and collective level using the historical experience.

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’, Specific provisions were made based on the arrears time period. In compliance with the Banking Act Direction No. 3 of 2010 together with the above directions, General provisions were made on performing loans and advances at the rate of 0.5%

Interest expense Interest expense on the deposits are charged over the contractual period using the EIR method.

Interest expense on the deposits are charged over the contractual period using the straight-line method.



(Rs’000)Bank

SLAS Reclassification Remeasurement SLFRS

AssetsCash and Cash Equivalents 6,046,830 (1,787,373) - 4,259,457 Cash and Cash EquivalentsBalance with Central Bank of Sri Lanka 8,221,068 - - 8,221,068 Balances with Central Bank of Sri Lanka - 1,788,050 - 1,788,050 Placements with Banks - 91,878 - 91,878 Derivative financial instrumentsGovernment of Sri Lanka Treasury Bills & Bonds 31,394,278 (4,692,730) - 26,701,547 Financial investments held -for- trading - 4,485,329 - 4,485,329 Financial assets held-for-trading pledged as collateralsDealing Securities 899,106 (899,106) - -Investment Securities 7,647,737 (7,647,737) - -Loans and Advances A, B 122,626,504 1,867,102 (426,288) 124,067,319 Loans and receivables from customers - 7,596,741 - 7,596,741 Other loans & receivables C - 126,066 5,499,781 5,625,847 Financial investmentsavailable- for- sale - 1,122,084 - 1,122,084 Financial investmentsheld - to- maturityInvestment in Subsidiary Companies 991,626 - - 991,626 Investment in subsidiary companiesInterest and Fees Receivable 1,959,236 (1,959,236) - - Property and Equipment 4,277,501 - - 4,277,501 Property and equipmentGoodwill and Other Intangible Assets 78,723 - - 78,723 Intangible assetsOther Assets 937,952 (16,562) 1,085,432 2,006,821 Other assetsTotal Assets 185,080,560 74,506 6,158,925 191,313,991 Total Assets

Liabilities - 200,013 - 200,013 Due to banksSecurities Sold under Re-purchase Agreements 4,361,363 49,990 - 4,411,354 Securities sold under re-purchase agreements - 74,506 - 74,506 Derivative financial instrumentsDeposits D 150,508,801 2,928,195 (191,232) 153,245,764 Due to other customersUnclaimed Dividend 37,922 - - 37,922 Unclaimed DividendTaxation F 911,509 - (20,498) 891,011 Current taxationDeferred Taxation E 196,440 - 61,900 258,340 Deferred taxationRefinance Borrowings 4,442,929 (4,442,929) - -Other Borrowings 1,013,070 7,553,996 - 8,567,066 Debt issued and other borrowed funds - 89,223 - 89,223 ProvisionsOther Liabilities G 5,390,706 (3,179,688) 337,139 2,548,157 Other LiabilitiesOther Liabilities Evidenced by Paper 3,198,800 (3,198,800) - -Total Liabilities 170,061,540 74,506 187,309 170,323,356 Total Liabilities

Shareholders’ Funds EquityStated Capital 1,786,250 - - 1,786,250 Stated capitalReserves Reserves Statutory / Risk Reserve Funds 646,564 - - 646,564 Statutory / risk reserve funds Other Capital Reserves 1,519,041 - - 1,519,041 Revaluation reserve C - - 5,223,829 5,223,829 Available-for-sale reserveRevenue Reserves 11,067,164 - 747,787 11,814,951 Revenue reservesTotal Equity 15,019,019 - 5,971,616 20,990,635 Total Equity Total Liabilities and Shareholders’ Funds 185,080,560 74,506 6,158,925 191,313,991 Total liabilities and equity

Reconciliation of Equity as at January 1, 2011 (Beginning of the day balances)

311Sampath Bank PLC

(Rs’000)Bank


AssetsCash and Cash Equivalents 16,057,361 (5,320,948) - 10,736,413 Cash and Cash EquivalentsBalance with Central Bank of Sri Lanka 13,232,130 - - 13,232,130 Balances with Central Bank of Sri Lanka - 5,337,084 - 5,337,084 Placements with BanksSecurities Purchased under Re-sale Agreements 4,600,000 1,965 - 4,601,965 Reverse repurchase agreements - 203,732 - 203,732 Derivative financial instrumentsGovernment of Sri Lanka Treasury Bills & Bonds 25,894,165 (2,841,178) - 23,052,987 Financial investments held -for- trading - 4,002,777 - 4,002,777 Financial assets held-for-trading pledged as collateralsDealing Securities 1,283,380 (1,283,380) - -Investment Securities 5,803,967 (5,803,967) - -Loans and Advances A, B 168,703,395 1,965,546 (987,569) 169,681,371 Loans and receivables from customers - 450,617 (8,679) 441,938 Loans and receivables from banks - 5,736,278 - 5,736,278 Other loans & advances C - 227,059 1,798,183 2,025,242 Financial investmentsavailable- for- sale - 10,289 - 10,289 Financial investmentsheld - to- maturityInvestment in Subsidiary Companies 1,054,921 - - 1,054,921 Investment in subsidiary companiesInterest and Fees Receivable 2,482,140 (2,482,140) - -Property and Equipment 4,527,784 - - 4,527,784 Property and equipmentGoodwill and Other Intangible Assets 67,294 - - 67,294 Intangible assetsOther Assets 1,043,868 - 1,329,236 2,373,104 Other assetsTotal Assets 244,750,405 203,732 2,131,170 247,085,307 Total Assets

Liabilities - 1,175,672 - 1,175,672 Due to banksSecurities Sold under Re-purchase Agreements 4,074,718 26,144 - 4,100,862 Securities Sold under Re-purchase - Agreements - 310,966 - 310,966 Derivative financial instrumentsDeposits D 191,587,958 3,748,676 (141,561) 195,195,074 Due to other customersUnclaimed Dividend 37,173 - 37,173 Unclaimed DividendRefinance Borrowings 4,850,371 (4,850,371) - -Other Borrowings 12,235,904 7,518,317 - 19,754,221 Debt issued and other borrowed fundsOther Liabilities G 7,828,843 (4,846,200) 271,910 3,254,553 Other LiabilitiesTaxation F 1,946,052 - (94,218) 1,851,834 Current taxationDeferred Taxation E 398,671 - (18,311) 380,360 Deferred taxation - 124,477 - 124,477 ProvisionsOther Liabilities Evidenced by Paper 3,003,949 (3,003,949) - -Total Liabilities 225,963,640 203,732 17,820 226,185,192 Total Liabilities

Shareholders’ Funds EquityStated Capital 2,743,780 - - 2,743,780 Stated capitalReserves Reserves Statutory / Risk Reserve Funds 841,511 - - 841,511 Statutory / risk reserve funds Other Capital Reserves 1,459,349 - - 1,459,349 Revaluation reserve C - - 1,797,778 1,797,778 Available-for-sale reserveRevenue Reserves 13,742,125 - 315,571 14,057,697 Revenue reserves 18,786,765 - 2,113,350 20,900,115 Total equityTotal Liabilities and Shareholders’ Funds 244,750,405 203,732 2,131,170 247,085,307 Total liabilities and equity

Reconciliation of Equity as at December 31, 2011


Reconciliation to the profit 2011

(Rs’000)

Bank


Income 26,742,906 26,739,895 Income

Interest Income H 21,126,754 - (15,538) 21,111,216 Interest incomeLess : Interest Expenses I 12,108,810 - 59,137 12,167,947 Less : Interest expenseNet Interest Income 9,017,944 - - 8,943,269 Net interest income

Net trading income - 313,973 - 313,973 Net trading incomeForeign Exchange Profit 837,369 (837,369) - -Fees & Commission Income J 1,798,065 - 12,527 1,810,592 Net fee & commission incomeOther Income 2,980,718 523,396 - 3,504,114 Other operating incomeOperating Income 14,634,096 14,571,948 Total operating income

Provision/(Reversal) for Credit Losses - Specific B 319,761 - (319,761) - - General B (190,942) - 190,942 - B - - (428,856) (428,856) Impairment gain / ( loss) on loans and receivablesProvision for Diminution/(Appreciation) in Value of Investments K (86,384) - 275,549 (189,165) Impairment gain / ( loss) on financial investments - - - 13,953,926 Net operating incomeOperating ExpensesPersonnel Cost L 3,223,651 329,097 6,927 3,559,674 Personnel expensesPremises, Equipment & Establishment Expenses 2,565,725 (2,565,725) - - - 503,383 - 503,383 Depreciation of property & equipment - 36,110 - 36,110 Amortisation of intangible assetsProvision for Retirement Benefits 344,132 (344,132) -Other Overhead Expenses G 2,878,371 1,070,753 10,515 3,959,639 Other operating expensesOperating Expenses 9,054,314 8,058,806 Total operating expenses

- - - 5,895,120 Operating profit / (loss) before value Added Tax G - 970,514 (69,030) 901,484 Less: Value Added TaxOperating Profit before Tax 5,579,782 4,993,636 Operating Profit / (loss) after value Added TaxLess : Provision for Taxation E, F 1,760,359 - (153,932) 1,606,427 Less : Income tax expenseProfit after Tax 3,819,423 3,387,209 Profit for the year


313Sampath Bank PLC

(Rs’000)

Group


AssetsCash and Cash Equivalents 6,052,551 (1,725,471) - 4,327,079 Cash and Cash EquivalentsBalance with Central Bank of Sri Lanka 8,221,068 - - 8,221,068 Balances with Central Bank of Sri Lanka - 1,720,924 - 1,720,924 Placements with Banks - 91,878 - 91,878 Derivative financial instrumentsGovernment of Sri Lanka TreasuryBills & Bonds 31,402,915 (4,701,368) - 26,701,547 Financial investments held -for- trading 4,485,329 - 4,485,329 Financial assets held-for-trading pledged as collateralsDealing Securities 899,106 (899,106) - - Investment Securities 7,803,788 (7,647,737) (156,051) - Loans and Advances A, B 123,194,106 2,190,252 (489,383) 124,894,975 Loans and receivables from customers - 7,596,740 - 7,596,740 Other loans & receivables - 1,130,722 - 1,130,722 Financial investmentsheld - to- maturity C - 126,123 5,499,780 5,625,903 Financial investmentsavailable- for- saleInterest and Fees Receivable 1,959,236 (1,959,236) - - Property and Equipment 6,436,694 - (665) 6,436,029 Property and equipmentGoodwill and Other Intangible Assets 95,065 - (6,267) 88,798 Intangible assets 3,714 - 3,714 Deferred tax assetsOther Assets 1,821,852 (334,544) 1,085,432 2,572,740 Other assets Total Assets 187,886,380 78,220 5,932,846 193,897,448 Total Assets

Liabilities - 200,012 - 200,012 Due to banksSecurities Sold under Re-purchase Agreements 4,361,363 49,990 - 4,411,353 Securities sold under re-purchase agreements - 74,506 - 74,506 Derivative financial instrumentsDeposits D 150,375,194 2,942,444 (191,232) 153,126,406 Due to other customersUnclaimed Dividend 37,922 - - 37,922 Unclaimed DividendTaxation F 950,630 - 8,187 958,817 Current tax liabilitiesDeferred Taxation E 183,859 78,195 (3,714) 258,340 Deferred tax liabilitiesRefinance Borrowings 4,442,929 (4,442,929) - - Other Borrowings 1,443,927 7,598,307 - 9,042,234 Debt issued and other borrowed funds - 97,279 - 97,279 ProvisionsOther Liabilities G 5,974,014 (3,320,784) 334,110 2,987,342 Other LiabilitiesOther Liabilities Evidenced by Paper 3,198,800 (3,198,800) - - Total Liabilities 170,968,638 78,220 147,350 171,194,211 Total Liabilities Shareholders’ Funds Equity Stated Capital 1,786,250 - - 1,786,250 Stated capitalReserves Reserves Statutory / Risk Reserve Funds 653,736 - (65) 653,671 Statutory / risk reserve funds Other Capital Reserves 2,938,517 - - 2,938,517 Revaluation Reserve C 5,223,829 5,223,829 Available-for-sale ReserveRevenue Reserves 11,387,342 - 561,602 11,948,945 Revenue reservesTotal Equity 16,765,845 - 5,785,366 22,551,212 Total Equity Minority Interest 151,896 129 152,025 Non controlling interestTotal Liabilities and Shareholders’ Funds 187,886,380 78,220 5,932,846 193,897,448 Total liabilities and equity

Reconciliation of Equity as at January 1, 2011 (Beginning of the day balances)



(Rs’000)

Group


AssetsCash and Cash Equivalents 16,065,762 (5,319,049) - 10,746,713 Cash and Cash EquivalentsBalance with Central Bank of Sri Lanka 13,232,130 - - 13,232,130 Balances with Central Bank of Sri Lanka - 5,337,084 - 5,337,084 Placements with BanksSecurities Purchased under Re-sale Agreements 4,604,045 1,965 - 4,606,010 Reverse repurchase agreements - 203,732 - 203,732 Derivative financial instrumentsGovernment of Sri Lanka TreasuryBills & Bonds 25,903,287 (2,850,301) - 23,052,987 Financial investments held -for- trading - 4,002,777 - 4,002,777 Financial assets held-for-trading pledged as collateralsCommercial Papers - - - - Dealing Securities 1,283,380 (1,283,380) - - Investment Securities 5,934,877 (5,803,967) (130,910) - Loans and Advances A,B 170,436,802 2,848,060 (1,307,925) 171,976,938 Loans and receivables from customers - 450,617 (8,679) 441,938 Loans and receivables from bank - 5,736,278 - 5,736,278 Other loans & receivables - 19,411 - 19,411 Financial investmentsheld - to- maturity C - 227,114 1,798,183 2,025,297 Financial investmentsavailable- for- saleInterest and Fees Receivable 2,482,140 (2,482,140) - - Property and Equipment 6,690,915 - 238 6,691,153 Property and equipmentGoodwill and Other Intangible Assets 78,626 - (5,255) 73,372 Intangible assets - 2,359 - 2,359 Deferred tax assetsOther Assets 2,401,777 (884,469) 1,329,235 2,846,543 Other assetsTotal Assets 249,113,742 206,092 1,674,887 250,994,722 Total Assets

Liabilities - 1,175,672 - 1,175,672 Due to banksSecurities Sold under Re-purchase Agreements 4,074,718 26,144 - 4,100,862 Securities Sold under Re-purchase Agreements - 310,966 - 310,966 Derivative financial instrumentsDeposits D 191,487,242 3,748,677 (141,561) 195,094,359 Due to other customersUnclaimed Dividend 37,173 - - 37,173 Unclaimed DividendRefinance Borrowings 4,850,371 (4,850,371) - - Other Borrowings 13,905,427 7,585,051 - 21,490,478 Debt issued and other borrowed fundsOther Liabilities G 8,492,979 (4,925,973) (63,720) 3,503,286 Other LiabilitiesTaxation F 1,956,571 - (75,430) 1,881,142 Current tax liabilitiesDeferred Taxation E 410,873 2,359 (17,119) 396,113 Deferred tax liabilities - 137,515 - 137,515 ProvisionsOther Liabilities Evidenced by Paper 3,003,949 (3,003,949) - - Total Liabilities 228,219,305 206,092 (297,830) 228,127,566 Total Liabilities

Shareholders’ Funds EquityStated Capital 2,743,780 - - 2,743,780 Stated capitalReserves Reserves Statutory / Risk Reserve Funds 858,877 - (640) 858,237 Statutory / risk reserve funds Other Capital Reserves 2,878,825 2,878,825 Revaluation Reserve C - - 1,797,778 1,797,778 Available-for-sale ReserveInvestment Fund A/C 603,435 - (603,435) - Revenue Reserves 13,749,614 - 779,017 14,528,631 Revenue reservesTotal Equity 20,834,531 - 1,972,720 22,807,252 Total Equity Minority Interest 59,907 - (3) 59,904 Non controlling interestTotal Liabilities and Shareholders’ Funds 249,113,742 206,092 1,674,887 250,994,722 Total liabilities and equity

Reconciliation of Equity as at December 31, 2011

315Sampath Bank PLC

Reconciliation to the profit 2011

(Rs’000)

Group


Income 27,469,272 - - 27,405,845 Income Interest Income H 21,494,368 86,493 (15,538) 21,565,323 Interest income Less : Interest Expenses I 12,225,814 (7,351) 59,137 12,277,600 Less : Interest expense Net Interest Income 9,268,554 9,287,723 Net interest income Net trading income - 313,973 - 313,973 Net trading income Foreign Exchange Profit 837,369 (837,369) - - Fees & Commission Income J 1,798,065 123,457 12,527 1,934,049 Net fee & commission income Other Income 3,339,470 253,029 - 3,592,499 Other operating income Operating Income 15,243,458 15,128,244 Total operating income Provision/(Reversal) for Credit Losses - Specific B 298,870 - (298,870) - - General B (190,942) - 190,942 - B - - (399,096) (399,096) Impairment gain / ( loss) on loans and receivablesProvision for Diminution / (Appreciation) in Value of Investments K (86,384) - 275,549 (189,165) Impairment gain / ( loss) on financial investments 14,539,983 Net operating incomeOperating Expenses Personnel Costs L 3,353,278 338,418 6,927 3,698,622 Personnel expenses Premises, Equipment & Establishment Expenses 2,574,106 (2,574,106) - - - 550,516 - 550,516 Depreciation of property & equipment - 39,775 - 39,775 Amortisation of intangible assets Provision for Retirement Benefits 348,137 (348,137) - - Other Overhead Expenses G 2,962,876 984,451 10,515 3,957,842 Other operating expenses Operating Expenses 9,259,940 8,246,755 Total operating expenses 6,293,228 Operating profit / (loss) before Value Added Tax G - 987,517 (69,826) 917,691 Value Added Tax Operating Profit before Tax 5,983,518 5,375,537 Operating profit / (loss) after Value Added Tax Less : Provision for Taxation E, F 1,810,618 - (140,513) 1,670,105 Less : Income tax expense Profit after Tax 4,172,900 3,705,431 Profit for the year


A Staff Loans measured at fair value

Under previous SLAS, staff loans were recorded at cost less repayments net of loan loss provision, if any. Under SLFRS , the Bank has to measure the staff loans granted below the market interest rate at their fair value, calculate based on the market interest rate of similar products. The fair value of such loans as at January 1, 2011 was Rs. 1,853.5 Mn and their previous SLAS carrying amount was Rs.2,778.8 Mn. The difference between the fair value and SLAS carrying amount has been netted off from staff loans & recognized as pre-paid staff cost in other assets.

As at 31st December 2011 the fair value of staff loan was Rs.2,289.3 Mn and their previous SLAS carrying amount was Rs.3,375.9 Mn .The difference between the fair value and SLAS carrying amount was Rs. 1,086.5 Mn has been netted off against staff loans & recognized as pre-paid staff cost in other assets. The same adjustment was applied to the Group as well.

B Adjustment on loan impairment

Under previous SLAS, the provision for loan losses consists of both Specific provision for incurred losses and General provision for expected future losses. In compliance with the Direction No. 3 of 2008 and subsequent amendment there to, specific loan loss provision were made based on the arrears time period after considering the collateral values and General provision were made at a specified rate given by CBSL time to time.

The previously recognised loan loss provision amounting to Rs. 5,299.64 Mn and Interest in suspense of Rs. 3,427.4 Mn were reversed and impairment provision of Rs. 8,214.9 Mn was recognised as at January 1, 2011, the date of transition after making necessary adjustments to retained earnings..

As at 31st December 2011 the impairment provision of Rs.7,540.3 Mn was recognized against sum total of loan loss provision and IIS amounting to 7,643.7 Mn which was previously recognised in SLAS based accounts. The movement between the impairment balances of two years was recognised in the Income Statement as an impairment charge.

The Group impairment provision as at January 1, 2011 and December 31, 2011 were Rs. 8,443 Mn and Rs. 7,643 Mn respectively.

C Financial investments- Available- For- Sale

Under previous SLAS, the Bank recognised its investment portfolios which are not held for trading activities at their cost. Under SLFRS, the Bank has designated such investments as available-for-sale investments and measured at fair value. Such investments includes equity investments and investment in treasury bills against Investment Fund Account.

At the date of transition to SLFRS, the fair value of these assets was Rs. 5,625.8 Mn and their previous SLAS carrying amount was Rs. 371.3 Mn. The difference of Rs.5,223.8 Mn between the fair value of the instrument and previous SLAS carrying amount has been recognized as a separate component of equity, in the available-for-sale reserve.

As at December 31, 2011 the fair value of the investment was Rs.2,025.2 Mn and SLAS carrying amount was Rs.227.5 Mn. The difference between the instruments fair value and SLAS carrying amount was Rs.1,797.8 Mn has been recognized in the available-for-sale reserve and movement was charged to Other Comprehensive Income .

There is no difference between the Group and the Bank figures since only Bank is holding Available - For - Sale assets.

D Fair Value of amounts due to Banks and other customers

Under previous SLAS, deposits are shown at their original deposit value and interest was charged on straight-line basis. Under SLFRS, interest should be recognised on EIR method and amortised cost should be shown in the accounts. At the date of transition, the difference between the interest already provided under SLAS and requirement under SLFRS was Rs. 191.2 Mn. It was added to the retained earnings and netted off against the amount due to Banks and other customers.

As at December 31, 2011, the difference between the interest provision under EIR method and under straight-line method was Rs. 141.6 Mn and the net movement of Rs. 49.67 Mn was charged to Income Statement.

Since only the Bank carries balances due to Banks and due to other customers, there is no difference between Bank and Group figures.

E Deferred Taxation

The deferred tax asset previously identified under SLAS accounts were reversed and relevant assets were recognised where necessary. The net impact was Rs. 61.9 Mn and it was charged to the retained earnings of the Bank as at the date of transition.

F Current tax liabilities

Based on the SLFRS transition impact, an over provision of Rs. 20.5 Mn was recognised.

In 2011, further over provision of Rs. 73.7 Mn was recognised against the provisions made based on previous SLAS financial Statements.


317Sampath Bank PLC

G Other liabilities

As per SLFRS, financial guarantees were initially recognised at fair value under other liabilities and under previous SLAS there was no such requirement. At the date of transition Rs. 84.9 Mn was recognised and subsequently in next year, Rs. 78.2 Mn was recognised as a liability after charging relevant income and expenses to the Income Statement.

At the date of the transition, based on the SLFRS adjustment, Finance VAT payable of Rs. 197.3 Mn was recognised and subsequently Rs. 69 Mn was reversed after making SLFRS adjustments in 2011.

An additional provision of Rs. 54.8 Mn was made against expenses to be incurred and in 2011 further Rs. 10.5 Mn was recognised.

H Interest income

Net reversal of income amounting to Rs. 15.5 Mn was made after netting off the staff loan fair value adjustment and impact on interest unwinding.

I Interest expense

An additional expense of Rs. 59.1 Mn was recognised as a result of EIR adjustment on balances due to other customers (depositors), expenses on the guarantee due to increase in liability and fair value adjustment on non - interest earning refundable deposit.

J Net fee & commission income

The premium received on the guarantee amounting to Rs. 12.5 Mn was identified as an fee income in both Bank and Group Income Statement for the year 2011.

K Impairment gain / ( loss) on financial investments

The effect of the reversal made in SLAS financial statements was removed from both Bank and Group Financial Statements since such provision was not made in SLFRS based Financial statements.

L Personnel cost

A charge on staff loan fair value adjustment, amortization of pre-paid staff cost of Rs. 92.7 Mn was netted off against the over provision of Rs. 85.8 Mn recognised on retirement benefit expense.


NOTES TO THE FINANCIAL STATEMENTS

1 Income

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Interest income (Note No 1.1) 31,881,948 21,111,216 32,712,018 21,565,323Fee & commission Income (Note No 1.2) 2,803,755 2,648,034 2,876,724 2,795,958Net trading income(Note No 1.3) 6,227 313,973 6,227 313,973Other income (Note No 1.4) 4,101,611 3,504,114 4,130,128 3,592,499 38,793,541 27,577,338 39,725,097 28,267,754

1.1 Interest income Placements with other banks 367,212 100,630 387,484 100,630Financial investments held -for- trading 3,051,101 2,311,432 3,051,101 2,311,432Loans & receivables from other customers 27,639,099 18,211,925 28,447,444 18,664,382Other loans & Receivables 494,010 317,872 494,298 318,247Interest income accrued on impaired financial assets 78,717 58,728 78,717 58,728Securities borrowed and reverse repurchase agreements 127,655 103,515 127,945 104,042Financial investments - held-to-maturity 124,154 7,115 125,029 7,862 31,881,948 21,111,216 32,712,018 21,565,323

Net Interest income from Sri Lanka Government securities Interest income 3,593,567 2,671,586 3,594,729 2,672,861Less: Interest expense 281,031 410,142 281,031 410,142Net interest income 3,312,536 2,261,444 3,313,698 2,262,719

A Notional tax credit on secondary market transactions According to section 137 of the Inland Revenue Act No. 10 of 2006, Net interest income of the Bank derived from the secondary market transactions in treasury bills & treasury bonds (Interest income accrued or received on outright or reverse repurchase 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 2012 to 31 st December 2012 has been grossed up by Rs. 21.433 Mn (2011 - Rs. 20.876 Mn and 2010 - Rs 122.940 Mn) for the notional tax credit, consequent to the interest income on above instruments being subjected to withholding tax.

2 Interest expenses

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Due to other customers 18,217,669 10,762,076 18,210,896 10,758,461Term borrowings 1,112,733 380,511 1,464,022 490,701Refinance borrowings 333,269 271,806 333,269 271,806Securities sold under repurchase agreements 281,031 410,142 281,031 410,142Due to banks 114,774 105,149 129,385 108,156Debentures 209,899 238,264 254,368 238,334 20,269,375 12,167,947 20,672,970 12,277,600

1.2 Fee & commission income Professional services 783,005 677,362 855,974 825,286Trade related services 592,618 835,574 592,618 835,574Foreign remittance related services 123,259 105,212 123,259 105,212Credit & debit card services 1,043,133 752,436 1,043,133 752,436Other banking services 261,741 277,450 261,741 277,450 2,803,755 2,648,034 2,876,724 2,795,958

319Sampath Bank PLC

1.3 Net trading incomeNet income/(expense) from financial instruments held for trading and derivative financial instruments

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Net income / (expense) arising on:Forward exchange contract revaluation gain/(loss) (Note A) 4,419 (126,478) 4,419 (126,478)Capital gain on sale of MASTER / VISA shares (Note B) - 376,808 - 376,808Capital gain/(loss) from dealing securities & unit trusts (Note C) (31,072) 52,100 (31,072) 52,100Income from dealing securities 32,880 11,543 32,880 11,543 6,227 313,973 6,227 313,973

Note A - Forward exchange contract revaluation gain/(loss) includes profit or loss arising from forward rate fluctuations.Note B - During the year 2011 the Bank disposed 6,793 and 13,055 shares received at no cost from Master Card International and VISA Incorporation

respectively and total amount was recognized as a capital gain.Note C - ‘Capital gain/(loss) from dealing securities & unit trusts’ includes the income arising from buying and selling, and changes in the fair value of equity

securities. ‘Income from Dealing Securities’ includes the dividend received from the dealing securities.

1.4 Other operating income

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Capital gain on sale of available - for-sale financial investments (Note A) - 427,693 - 427,693Income from available - for-sale financial investments 35,100 - 35,100 -Income from investment securities 9,141 17,395 9,141 17,395Income from investment in subsidiaries 79,155 15,102 - -Exchange income - currency notes 345,204 267,642 345,204 267,642Exchange income - revaluation 1,804,189 696,205 1,804,189 696,205Bad debt recoveries 782,731 1,123,632 789,855 1,125,680Profit/(loss) on disposal of property & equipment 19,458 4,458 19,772 7,124Rental and other income 6,166 5,170 74,708 76,133Charges recovered 654,897 649,405 654,897 649,405Others 365,570 297,412 397,262 325,222 4,101,611 3,504,114 4,130,128 3,592,499

Note A - Capital gain on sale of available - for-sale financial investments includes capital gain on sale of LankaBangla Finance Ltd equity shares.

3 Impairment gain / (loss) on loans and receivables

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Due from banks (Note 17.1) (3,819) (8,679) (3,819) (8,679)Due from other customers (Note 18.1) (133,087) (420,178) (133,348) (370,856)Due from other Debtors (Note 26.1) - - (15,000) (19,562) (136,906) (428,857) (152,167) (399,097)



4 Impairment gain / (loss) on financial investments

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Securities held for trading purposes - Shares (quoted) (Note No. 15.2) (159,574) (34,710) (159,574) (34,710) - Treasury Bills (Note No. 15.1 & 16) 231,597 (154,454) 231,597 (154,454) 72,023 (189,165) 72,023 (189,165)

5 Personnel expensesSalaries and bonus 3,153,418 2,703,660 3,302,432 2,820,045Employer’s contribution to EPF 266,150 228,674 278,533 237,719Employer’s contribution to ETF 66,545 57,168 67,166 57,674Other allowances & staff related expenses 394,976 311,807 405,226 319,730Defined benefit plans 276,601 258,365 275,942 263,454 4,157,690 3,559,674 4,329,299 3,698,622

6 Other operating expensesDirectors’ Emoluments 37,985 14,585 51,179 16,538 Auditors’ Remuneration Audit Fees and Expenses 10,333 7,574 12,547 9,185 Non - Audit Services 3,592 4,032 4,981 4,607 Professional & Legal Expenses 66,135 48,022 75,145 53,351 Advertising & Business Promotion Expenses 644,740 600,574 663,179 606,815 Deposit Insurance Premium 260,021 210,048 260,021 210,048 Donations 3,922 4,980 3,924 5,009 Office administration and establishment 2,127,578 1,895,847 2,127,578 1,895,847 Banking services 969,801 683,239 969,801 683,239 Computer maintenance 339,306 280,148 339,306 280,148 Others 196,458 210,590 146,190 192,698 4,659,872 3,959,639 4,653,851 3,957,485

Donations in excess of Rs. 50,000/= include the following Wildlife & Nature Protection Society of Sri Lanka 1,109 Nana Guna Thilina Presidential Project 1,000 Buddha Rashmi Fund 1,100 All Ceylon Buddhist Congress 500 Sri Jinaratana Bhikkhu Abhyasa Vidyalaya 150

7 Income tax expensesCorporate tax - Taxation based on profits for the year ( Note No 7.1) 2,152,486 1,484,408 2,197,276 1,525,888 - (Over)/under provision in respect of previous years ( Note No 7.1) (43,601) - (50,493) 5,091 2,108,885 1,484,408 2,146,783 1,530,979Deferred taxation - Transfers to/(from) deferred taxation ( Note No 7.2) 19,725 122,020 24,731 139,127 2,128,610 1,606,427 2,171,514 1,670,106

321Sampath Bank PLC

7.1 Reconciliation of the accounting profit to income tax expenseA reconciliation between the tax expense and the accounting profit multiplied by Income tax rate for the years ended 31 December 2012 and 2011 is as follows:

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Profit before tax 7,265,034 4,993,636 7,517,478 5,375,537Add: Disallowable expenses 3,820,844 4,082,759 3,865,950 4,135,854Less: Tax deductible expenses (2,675,741) (2,380,863) (2,792,097) (2,533,019)Exempt income (722,687) (1,392,575) (637,342) (1,388,879)Adjusted profit/(loss) for tax purposes 7,687,450 5,302,957 7,953,989 5,589,493Income from other sources - - 1,326 1,694Assessable income 7,687,450 5,302,957 7,955,315 5,591,187Less: Qualifying payments - (1,500) (50,417) (47,723)Tax losses - - - (1,434)Taxable income 7,687,450 5,301,457 7,904,898 5,542,030

Turnover liable for income tax - - 189,823 189,784

Income tax @ 28% 2,152,486 1,484,407 2,193,480 1,522,092Income tax @ 2% on liable turnover - - 3,796 3,796Income tax on current year’s profit 2,152,486 1,484,407 2,197,276 1,525,888(Over)/under provision in respect of previous years (43,601) - (50,493) 5,091Increase/(decrease) in current year provision 2,108,885 1,484,408 2,146,783 1,530,979Deferred tax charge/(credit ) 19,725 122,020 24,731 139,127Income tax expense 2,128,610 1,606,427 2,171,514 1,670,106Effective tax rate 29.3% 32.2% 28.9% 31.1%Effective tax rate (excluding deferred tax ) 29.0% 29.7% 28.6% 28.5%

7.1.1 Applicable rates of taxIncome tax on Sampath Bank(a) Domestic operation of the bank 28% 28%(b) Foreign currency banking unit of the bank On-shore operation 28% 28% Off-shore operation 28% 28%

Income tax on S C Securities (Pvt) Ltd. 28% 10%Income tax on Sampath Leasing & Factoring Ltd. 28% 28%Income tax on Sampath Information Technology Solutions Ltd. 28% 28%

7.1.2 Income tax on Sampath Centre Ltd.Sampath Centre Ltd. 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.

7.1.3 A Notional tax credit on secondary market transactionsAny 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 01st January 2012 to 31st December 2012 and the notional tax credit amounts to Rs. 21.433 Mn.


7 Provision for taxation Contd. 7.2 Deferred tax expense/(income )The following table shows deferred tax expense recorded in the income statements due to changes in the deferred tax assets and liabilities.

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000Deferred tax liabilityProperty and equipment 1,657 25,828 6,377 27,044Lease rentals 33,320 (25,042) 36,783 4,388 34,977 786 43,160 31,432Deferred tax assetUnclaimed Bad debt provision - Specific - (134,066) - (134,066)Unclaimed Bad debt provision - Investment - - (7,329) 12,884Brought forward tax losses - - 10,794 (2,985)Defined benefit obligation 12,038 9,888 11,750 13,527Others 3,214 2,944 3,214 2,944 15,252 (121,234) 18,429 (107,695)Deferred tax expense for the year 19,725 122,020 24,731 139,127

8 Earnings per ordinary Share8.1 Earnings per share - Basic (Rs.)Basic earnings per share is calculated by dividing the net profit for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year, as per the LKAS 33 - Earnings per Share.

Group 2012 2011Amount used as the numerator Profit attributable to ordinary shareholders (Rs’000) 5,342,623 3,683,281Amount used as the denominator Weighted average number of ordinary shares (Note No 8.1.1) 161,996,778 160,142,536Basic Earnings per ordinary share (Rs.) 32.98 23.00

Weighted average number of ordinary sharesWeighted average Number of shares held as at December 31, 2011 was 156,854,190. However, it was restated as 160,142,536 in the comparative column as a result of the change in number of Ordinary shares outstanding without a corresponding change in resources , due to final scrip dividend 2011.

2012 2011

Outstanding Weighted Outstanding Weighted Average Average

8.1.1 Weighted average number of ordinary shares for Basic EPSNumber of shares held as at 1st January 156,854,190 152,807,972Add - Number of shares in issue due to final scrip dividend 2010 - 3,521,294 - Number of shares in issue due to final scrip dividend 2011 3,682,039 3,682,039 160,536,229 160,536,229 160,011,305 160,011,305

Add : Number of shares in issue due to ESOP 2010 (Note No 33.1) 2,200,436 1,460,549 524,924 131,231Number of shares held as at 31st December 162,736,665 161,996,778 160,536,229 160,142,536


323Sampath Bank PLC

8.2 Earnings per share - Diluted (Rs.)The calculation of Diluted Earnings Per Share as at reporting date was based on the profit attributable to equity holders of the Bank by the weighted average number of ordinary shares outstanding during the year, after adjustment for the effects of all potentially dilutive weighted average number of ordinary shares under ESOP 2010 as follows:

Group 2012 2011Amount used as the numeratorProfit attributable to equity holders of the parent company. (Rs’000) 5,342,623 3,683,281

Amount used as the denominatorWeighted average number of ordinary shares used for Basic EPS 161,996,778 160,142,536Weighted average number of potential ordinary shares outstanding under ESOP 2010 effective from 30 June 2011 330,799 1,265,618Weighted average number of potential ordinary shares that would have been issued at average market price (146,940) (458,142)Weighted average number of potential ordinary shares that would have been issued for no consideration under ESOP 2010 183,859 807,475Weighted average number of ordinary shares used for Diluted EPS 162,180,637 160,950,011Diluted Earnings per Ordinary Share (Rs.) 32.94 22.88

9 Dividend paid & proposed

2012 2011

Gross Dividend Dividend Tax Net Dividend Gross Dividend Dividend Tax Net Dividend Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Final dividend paid for the years 2011 & 2010 respectively.Out of dividend received - free of tax 44,039 - 44,039 78,572 - 78,572Out of normal profits 1,382,945 138,294 1,244,651 929,961 92,996 836,965Scrip/cash dividend paid 1,426,984 138,294 1,288,690 1,008,533 92,996 915,537

Final dividend proposed - 2012 & 2011 respectively.Out of dividend received - free of tax 120,554 - 120,554 44,039 - 44,039Out of current year’s profits 1,832,286 183,229 1,649,057 1,367,648 136,765 1,230,884Scrip/cash dividend payable/paid 1,952,840 183,229 1,769,611 1,411,688 136,765 1,274,923Dividend per Ordinary Share (Rs.) 12.00 10.87 9.00 8.34

The Board of Directors of the Bank has recommended the payment of a final dividend of Rs.12.00 Per share to be paid 50% in the form of cash dividend and balance 50 % in the form of scrip dividend for the year ended 31st December 2012 ,a distribution of approximately Rs. 1,952.8 Mn.

The total proposed dividend amount is subject to changes in number of shares in issue due to changes in ESOP 2010.

In accordance with LKAS 10 on Events After the Reporting Period, above proposed final dividend has not been recognized as a liability as at the year end.


10 Analysis of Financial instruments by Measurement Basis10.1 Analysis of financial instruments by measurement basis - Bank as at 31.12.2012

Financial instruments are measured on an ongoing basis either at fair value or at amortised cost. The summary of significant accounting policies describes how the classes of financial instruments are measured, and how income and expenses, including fair value gains and losses, are recognized. The following table analyses the carrying amounts of the financial instruments by category as defined in LKAS 39 and by headings of the Statement of Financial Position.

Bank December 31, 2012

(Rs’ 000) Held For Amortised Held to Available Trading Cost maturity -for sale Total Financial AssetsCash & cash equivalent - 10,432,135 - - 10,432,135 Balances with Central Bank of Sri Lanka - 17,200,792 - - 17,200,792 Placements with Banks - 8,788,127 - - 8,788,127 Reverse repurchase agreements - 3,300,817 - - 3,300,817 Derivative financial instruments 279,022 - - - 279,022 Financial investments held -for- trading 35,181,084 - - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - 2,856,321 Loans and receivables from banks - 816,119 - - 816,119 Loans and receivables from other customers - 208,184,369 - - 208,184,369 Other loans & receivables - 10,515,756 - - 10,515,756 Financial investmentsavailable- for- sale - - - 1,923,624 1,923,624 Other assets - 1,399,091 - - 1,399,091 Total Financial Assets 38,316,427 260,637,205 - 1,923,624 300,877,256

Held For Amortised Trading Cost Total Financial LiabilitiesDue to banks - 624,784 624,784 Securities sold under re-purchase agreements - 2,757,119 2,757,119 Derivative financial instruments 381,838 - 381,838 Due to other customers - 243,330,990 243,330,990 Debt issued and other borrowed funds - 28,825,029 28,825,029 Unclaimed Dividend - 49,185 49,185Other liabilities - 71,448 71,448 Total Financial Liabilities 381,838 275,658,555 276,040,392


325Sampath Bank PLC

10.2 Analysis of financial instruments by measurement basis - Bank as at 31.12.2011

Bank December 31, 2011

(Rs’ 000) Held For Amortised Held to Available Trading Cost maturity -for sale Total

Financial AssetsCash & cash equivalent - 10,736,413 - - 10,736,413 Balances with Central Bank of Sri Lanka - 13,232,130 - - 13,232,130 Placements with Banks - 5,337,084 - - 5,337,084 Reverse repurchase agreements - 4,601,965 - - 4,601,965 Derivative financial instruments 203,732 - - - 203,732 Financial investments held -for- trading 23,052,987 - - - 23,052,987 Financial assets held-for-trading pledged as collaterals 4,002,777 - - - 4,002,777 Loans and receivables from banks 441,938 441,938 Loans and receivables from other customers - 169,681,372 - - 169,681,372 Other loans & receivables - 5,736,278 - - 5,736,278 Financial investmentsavailable- for- sale - - - 2,025,241 2,025,241 Financial investmentsheld - to- maturity - - 10,289 - 10,289 Other assets - 1,038,607 - - 1,038,607 Total Financial Assets 27,259,496 210,805,787 10,289 2,025,241 240,100,812

Held For Amortised Trading Cost TotalFinancial LiabilitiesDue to banks - 1,175,672 1,175,672 Securities sold under re-purchase agreements - 4,100,862 4,100,862 Derivative financial instruments 310,966 - 310,966 Due to other customers - 195,195,074 195,195,074 Debt issued and other borrowed funds - 19,754,221 19,754,221 Unclaimed Dividend - 37,173 37,173 Other liabilities - 78,214 78,214 Total Financial Liabilities 310,966 220,341,216 220,652,173


10 Analysis of Financial instruments by Measurement Basis Contd.10.3 Analysis of financial instruments by measurement basis - Bank as at 01.01.2011 (Begining of the day balances).

Bank

January 1, 2011(Rs’ 000)

Held For Amortised Held to Available Trading Cost maturity -for sale Total Financial AssetsCash & cash equivalent - 4,259,457 - - 4,259,457 Balances with Central Bank of Sri Lanka - 8,221,068 - - 8,221,068 Placements with Banks - 1,788,050 - - 1,788,050 Reverse repurchase agreements - - - - - Derivative financial instruments 91,878 - - - 91,878 Financial investments held -for- trading 26,701,547 - - - 26,701,547 Financial assets held-for-trading pledged as collaterals 4,485,329 - - - 4,485,329 Loans and receivables from banks - - Loans and receivables from other customers - 124,067,319 - - 124,067,319 Other loans & receivables - 7,596,740 - - 7,596,740 Financial investmentsavailable- for- sale - - - 5,625,847 5,625,847 Financial investmentsheld - to- maturity - - 1,122,084 - 1,122,084 Other assets - 847,460 - - 847,460 Total Financial Assets 31,278,754 146,780,094 1,122,084 5,625,847 184,806,780

Held For Amortised Trading Cost Total

Financial LiabilitiesDue to banks - 200,013 200,013 Securities sold under re-purchase agreements - 4,411,354 4,411,354 Derivative financial instruments 74,506 - 74,506 Due to other customers - 153,245,764 153,245,764 Debt issued and other borrowed funds - 8,567,066 8,567,066 Unclamed Dividend - 37,922 37,922Other liabilities - 84,961 84,961 Total Financial Liabilities 74,506 166,547,080 166,621,586


327Sampath Bank PLC

10.4 Analysis of financial instruments by measurement basis - Group as at 31.12.2012

GroupDecember 31, 2012

(Rs’ 000) Held For Amortised Held to Available Trading Cost maturity -for sale Total Financial AssetsCash & cash equivalent - 10,442,259 - - 10,442,259 Balances with Central Bank of Sri Lanka - 17,200,792 - - 17,200,792 Placements with Banks - 8,788,127 - - 8,788,127 Reverse repurchase agreements - 3,300,373 - - 3,300,373 Derivative financial instruments 279,022 - - - 279,022 Financial investments held -for- trading 35,181,084 - - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - 2,856,321 Loans and receivables from banks - 816,119 - - 816,119 Loans and receivables from other customers - 212,480,041 - - 212,480,041 Other loans & receivables - 10,224,474 - - 10,224,474 Financial investmentsavailable- for- sale - - - 1,923,680 1,923,680 Financial investmentsheld - to- maturity - - 9,765 - 9,765 Other assets - 1,858,276 - - 1,858,276 Total Financial Assets 38,316,427 265,110,460 9,765 1,923,680 305,360,332

Held For Amortised Trading Cost Total

Financial Liabilities Due to banks - 668,198 668,198 Securities sold under re-purchase agreements - 2,751,334 2,751,334 Derivative financial instruments 381,838 - 381,838 Due to other customers - 243,088,236 243,088,236 Debt issued and other borrowed funds - 32,218,014 32,218,014 Unclaimed Dividend - 49,185 49,185Other liabilities - 71,448 71,448 Total Financial Liabilities 381,838 278,846,415 279,228,252


10 Analysis of Financial instruments by Measurement Basis Contd.10.5 Analysis of financial instruments by measurement basis - Group as at 31.12.2011

GroupDecember 31, 2011


Financial Assets Cash & cash equivalent - 10,746,713 - - 10,746,713 Balances with Central Bank of Sri Lanka - 13,232,130 - - 13,232,130 Placements with Banks - 5,337,084 - - 5,337,084 Reverse repurchase agreements - 4,606,010 - - 4,606,010 Derivative financial instruments 203,732 - - - 203,732 Financial investments held -for- trading 23,052,987 - - - 23,052,987 Financial assets held-for-trading pledged as collaterals 4,002,777 - - - 4,002,777 Loans and receivables to other customers - 171,976,938 - - 171,976,938 Loans and receivables to banks - 441,938 - - 441,938 Other loans and receivables - 5,736,278 - - 5,736,278 Financial investmentsavailable- for- sale - - - 2,025,297 2,025,297 Financial investmentsheld - to- maturity - - 19,411 - 19,411 Other assets - 1,512,048 - - 1,512,048 Total Financial Assets 27,259,496 213,589,138 19,411 2,025,297 242,893,343

Held For Amortised Trading Cost Total Financial Liabilities Due to banks - 1,175,672 1,175,672 Securities sold under re-purchase agreements - 4,100,862 4,100,862 Derivative financial instruments 310,966 - 310,966 Due to other customers - 195,094,359 195,094,359 Debt issued and other borrowed funds - 21,490,478 21,490,478 Unclaimed Dividend - 37,173 37,173Other liabilities - 78,214 78,214 Total Financial Liabilities 310,966 221,976,758 222,287,724


329Sampath Bank PLC

10.6 Analysis of financial instruments by measurement basis - Group as at 01.01.2011 (Begining of the day balances).

GroupJanuary 1, 2011


Financial Assets Cash & cash equivalent - 4,327,079 - - 4,327,079 Balances with Central Bank of Sri Lanka - 8,221,068 - - 8,221,068 Placements with Banks - 1,720,924 - - 1,720,924 Reverse repurchase agreements - - - - - Derivative financial instruments 91,878 - - - 91,878 Financial investments held -for- trading 26,701,547 - - - 26,701,547 Financial assets held-for-trading pledged as collaterals 4,485,329 - - - 4,485,329 Loans and receivables to other customers 124,894,976 124,894,976Loans and receivables to banks - - - - -Other loans & receivables - 7,596,740 - - 7,596,740 Financial investmentsavailable- for- sale - - - 5,625,903 5,625,903 Financial investmentsheld - to- maturity - - 1,130,722 - 1,130,722 Other assets - 1,413,379 - - 1,413,379 Total Financial Assets 31,278,754 148,174,166 1,130,722 5,625,903 186,209,545

Held For Amortised Trading Cost Total Financial Liabilities Due to banks - 200,012 200,012 Securities sold under re-purchase agreements - 4,411,354 4,411,354 Derivative financial instruments 74,506 - 74,506 Due to other customers - 153,126,406 153,126,406 Debt issued and other borrowed funds - 9,042,234 9,042,234 Unclaimed Dividend - 37,922 37,922Other liabilities - 84,961 84,961 Total Financial Liabilities 74,506 166,902,888 166,977,394

11 Cash and Cash Equivalents

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Local currency in hand 4,483,580 3,862,785 3,185,353 4,483,791 3,862,968 3,185,785Foreign currency in hand 1,089,882 759,346 543,588 1,089,882 759,346 543,588Balances with local banks 71,025 32,757 77,374 80,937 42,873 77,439Balances with foreign banks 1,774,914 979,003 403,142 1,774,914 979,003 403,142Money at call and short notice 3,012,734 5,102,523 50,000 3,012,734 5,102,523 117,126 10,432,135 10,736,413 4,259,457 10,442,259 10,746,713 4,327,079


12 Balances with Central Bank of Sri Lanka

Bank Group


Balance with CBSL 17,200,792 13,232,130 8,221,068 17,200,792 13,232,130 8,221,068

This represents the Statutory Reserve Requirement 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 8.0% of the Rupee Deposit Liabilities. There is no reserve requirement on deposit liabilities of the foreign currency banking unit (FCBU) and foreign currency deposit liabilities of the domestic banking unit (DBU).

13 Placements with Banks

Bank Group


Placements with banks 8,788,127 5,337,084 1,788,050 8,788,127 5,337,084 1,720,924

14 Derivative Financial InstrumentsThe table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amounts indicate the volume of transactions outstanding at the year end and are indicative of neither the market risk nor the credit risk.

December 31, 2012 December 31, 2011 January 1, 2011

Assets Liabilities Notional Assets Liabilities Notional Assets Liabilities Notional Amount Amount Amount Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Bank & Group

Derivative held for trading

Forward foreign exchange contracts 51,210 65,537 28,684,448 203,732 310,966 60,238,075 91,878 74,506 20,851,936Currency Swaps 227,812 316,301 19,806,940 - - - - - -

279,022 381,838 48,491,387 203,732 310,966 60,238,075 91,878 74,506 20,851,936


331Sampath Bank PLC

15 Financial Investments Held -For- Trading

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Government debt securitiesTreasury Bills (Note 15.1) 34,182,709 21,769,607 25,802,442 34,182,709 21,769,607 25,802,442

Quoted equities (Note 15.2) 998,375 1,283,380 899,106 998,375 1,283,380 899,106 35,181,084 23,052,987 26,701,547 35,181,084 23,052,987 26,701,547

15.1 Treasury BillsThis represents the financial assets (Treasury Bills) at fair value through profit or loss which are held for dealing purposes. The cumulative change in fair value of the assets attributed to changes in market risk amounts to a gain of Rs.46.6Mn (2011- loss of Rs.141.4 Mn and 2010- loss of Rs.87.4 Mn) and change for the current year is a gain of Rs 94.8 Mn (2011- loss of Rs.54.0 Mn and 2010- loss of Rs.87.4 Mn)

The change in fair value of the Treasury Bills- Trading attributable to changes in market risk have been calculated by determining the changes in interest rate spread implicit in the fair value of the Treasury Bills.

December 31, December 31, January 1, 2012 2011 2011 Cost Market Value Cost Market Value Cost Market Value Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Bank & GroupAmortised cost 34,229,364 34,182,709 21,911,063 21,769,607 25,889,855 25,802,442Add/(less):Provision for appreciation/(diminution) in marke value b/f (141,457) - (87,413) - - -Provision for diminution in market value write back/(made) during the year 94,801 - (54,044) - (87,413) - 34,182,709 34,182,709 21,769,607 21,769,607 25,802,442 25,802,442


15 Financial Investments Held -For- Trading Contd.15.2 Quoted equities


No of Cost of Market No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Ordinary Investment Value Shares Shares Shares Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Bank & Group

Name of companyBank & GroupBanks, finance & insuranceNations Trust Bank PLC 110,000 4,175 6,160 170,000 6,453 9,690 170,000 6,453 14,178Commercial Bank of Ceylon PLC 795,857 78,426 81,973 781,976 78,426 78,197 293,350 55,463 76,242Pan Asia Banking Corporation PLC 1,380,532 10,932 26,230 1,380,532 10,932 35,066 690,266 10,932 35,894Merchant Bank of Sri Lanka PLC 207,600 3,354 4,131 207,600 3,354 8,221 207,600 3,354 9,508Hatton National Bank PLC 175,646 35,822 25,996 172,500 35,822 26,099 115,000 35,822 45,989NDB Bank PLC 600,000 107,943 82,740 600,000 107,943 82,860 300,000 107,943 104,850DFCC Bank PLC 39,000 7,559 4,403 39,000 7,559 4,403 4,000 354 801Union Bank of Colombo PLC * 26,347,027 276,176 363,589 26,347,027 276,176 500,594 - - -Peoples Leasing & Finance PLC 5,901,600 106,228 77,901 5,901,600 106 229 94,426 - - - 630,615 673,123 632,893 839,556 220,320 287,461

Diversified holdingsHayley’s PLC - - - - - - 354,740 58,731 122,385Hemas Holdings PLC 647,000 16,252 17,469 647,000 16,252 21,351 647,000 16,252 28,792Aitken Spence PLC 270,000 54,512 32,400 270,000 54,512 32,508 270,000 54,512 45,873JKH PLC 587,335 101,344 129,155 587,335 101,344 99,964 440,501 101,344 131,445Softlogic Holdings PLC 3,594,000 104,226 39,175 3,594,000 104,226 64,692 - - -Vallibel One PLC 245,600 6,140 4,445 245,600 6,140 5,845 - - - 282,474 222,644 282,474 224,361 230,839 328,495

Hotel & travelAsian Hotels & Properties PLC 618,000 14,291 46,906 1,237,800 33,110 94,568 618,900 33,110 120,067Fortress Resort PLC - - - 233,400 4,587 4,808 14,291 46,906 33,110 94,568 37,697 124,875

ManufacturingRoyal Ceramics PLC 483,200 10,237 47,837 483,200 10,237 68,373 266,600 11,200 81,286 10,237 47,837 10,237 68,373 11,200 81,286

Land & propertyC T Land Development PLC 325,000 4,853 7,865 325,000 4,853 9,393 325,000 4,853 9,100 4,853 7,865 4,853 9,393 4,853 9,100

Power & energyLanka IOC PLC - - - 2,547,600 104,333 47,131 3,307,100 133,652 62,504 - - 104,333 47,131 133,652 62,504

TelecommunicationDialog Axiata PLC - - - - - - 456,290 10,354 5,384 - - - - - - 10,354 5,384Total 942,469 998,375 1,067,900 1,283,380 648,915 899,106

Less:Provision for appreciation/ (diminution) in market value b/f 215,480 - - 250,190 - - (45,468)Provision for diminution in market value written back/(made) during the year (Note No 4) (159,574) - - (34,710) - - 295,658 998,375 1,283,380 899,106

* The investment in Union Bank of Colombo was transferred from ‘financial investment available-for-sale’ to ‘securities held for trading’ category during the year 2011.

Investment as at January 1, 2011 was given in Note No 20.


333Sampath Bank PLC

16 Financial Assets Held-for-trading Pledged as Collaterals

Bank Group


Government debt securities 2,856,321 4,002,777 4,485,329 2,856,321 4,002,777 4,485,329

December 31, December 31, January 1, 2012 2011 2011 Cost Market Value Cost Market Value Cost Market Value Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Bank & GroupAmortised cost 2,695,970 2,856,321 3,979,222 4,002,777 4,361,363 4,485,329Add/(less):Provision for appreciation/(diminution) in market value b/f 23,555 - 123,965 - - -

Provision for diminution in market value write back/(made) during the year 136,796 - (100,410) - 123,965 - 2,856,321 2,856,321 4,002,777 4,002,777 4,485,329 4,485,329

17 Loans and Receivables from Banks

Bank Group


Loans and Receivables 828,617 450,617 - 828,617 450,617 - 828,617 450,617 - 828,617 450,617 -Less: Allowance for impairment losses (Note 17.1) (12,498) (8,679) - (12,498) (8,679) - 816,119 441,938 - 816,119 441,938 -


17.1 Impairment allowance on due from banksA reconciliation of the allowance for impairment losses due from banks, by class is as follows:

Bank Group

Loans and Placements Total Loans and Placements receivables and other receivables and other balances balances Total Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 At January 1, 2011Charge for the year (Note No 3) (8,679) - (8,679) (8,679) - (8,679)Recoveries - - - - - -Amounts written off - - - - - -Interest accrued - - - - - -At December 31, 2011 (8,679) - (8,679) (8,679) - (8,679)

At January 1, 2012 (8,679) - (8,679) (8,679) - (8,679)Charge for the year (Note No 3) (3,819) - (3,819) (3,819) - (3,819)Recoveries - - - - - -Amounts written off - - - - - -Interest accrued - - - - - -At December 31, 2012 (12,498) - (12,498) (12,498) - (12,498)

18 Loans and Receivables from Other Customers

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000At Amortised cost:

Bills of exchange 2,687,435 2,611,109 2,271,949 2,687,435 2,611,109 2,271,949Leasing 5,548,059 4,475,619 3,380,007 11,059,921 8,400,392 5,027,920Housing 10,351,619 9,014,063 8,160,370 10,351,619 9,014,063 8,160,370Export loans 8,239,867 8,163,780 7,191,579 8,239,867 8,163,780 7,191,579Import loans 23,347,064 16,553,428 15,125,755 23,347,064 16,553,428 15,125,755Refinance 5,106,974 5,085,600 4,293,156 5,106,974 5,085,600 4,293,156Term loans 61,698,407 55,385,540 36,227,929 60,670,827 53,907,980 35,762,630IFA loans 1,360,762 477,828 - 1,360,762 477,828 -Overdraft 34,871,166 28,853,232 22,113,719 34,794,291 28,812,637 21,987,009Staff loans 4,076,050 3,375,869 2,778,846 4,076,050 3,375,869 2,778,846Pawning 54,946,225 41,175,686 29,345,498 54,946,225 41,175,686 29,345,498Credit card 4,246,627 3,009,515 2,140,245 4,246,627 3,009,515 2,140,245Others 106,600 118,238 178,509 106,600 118,238 178,509 216,586,855 178,299,506 133,207,563 220,994,262 180,706,125 134,263,467Less: Staff loan fair value adjustment (Note No 26.2) (1,403,533) (1,086,527) (925,351) (1,403,533) (1,086,527) (925,351) 215,183,322 177,212,979 132,282,212 219,590,729 179,619,598 133,338,116Less: Provision for impairment losses (Note No 18.1) (6,998,953) (7,531,607) (8,214,893) (7,110,688) (7,642,660) (8,443,140) 208,184,369 169,681,372 124,067,319 212,480,041 171,976,938 124,894,976


335Sampath Bank PLC

18.1 Movement in provision for impairment losses18.1.1 Bank as at December 31, 2011

Balance As at Provision for Amounts Provision Other Interest accrued Balance 01.01.2011 the Year Written-off reversals adjustment on Impaired As at loans and 31.12.2011 receivables Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Leasing 164,080 19,086 -- - - - 183,166Loans and receivables 8,050,813 400,179 (91,642) (1,123,632) 171,451 (58,728) 7,348,441Pawning - 913 (913) - - - - 8,214,893 420,178 (92,555) (1,123,632) 171,451 (58,728) 7,531,607

Individually significant customer loan impairment 2,832,409 2,764,531Collective impairment 5,382,484 4,767,076Provision for Impairment Losses (Note No 18) 8,214,893 7,531,607

Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 3,600,367 3,589,468

18.1.2 Bank as at December 31, 2012

Balance As at Provision for Amounts Provision Other Interest accrued Balance 01.01.2012 the Year Written-off reversals adjustment on Impaired As at loans and 31.12.2012 receivables Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Leasing 183,166 (56,603) - - - - 126,563Loans and receivables 7,348,441 189,689 (104,814) (782,731) 300,521 (78,717) 6,872,390Pawning - - - - - - - 7,531,607 133,087 (104,814) (782,731) 300,521 (78,717) 6,998,953

Individually significant customer loan impairment 2,764,531 2,827,992Collective impairment 4,767,076 4,170,961Provision for Impairment Losses ( Note No 18) 7,531,607 6,998,953



18 Loans and Receivables from Other Customers18.1.3 Group as at December 31, 2011


Leasing 392,327 (30,237) (68,438) - 567 - 294,219Loans and receivables 8,050,813 400,179 (91,642) (1,123,632) 171,451 (58,727) 7,348,441Pawning - 913 (913) - - - - 8,443,140 370,856 (160,993) (1,123,632) 172,018 (58,727) 7,642,660

Individually significant customer loan impairment 2,884,147 2,831,229Collective impairment 5,558,993 4,811,431 8,443,140 7,642,660


18.1.4 Group as at December 31, 2012


Leasing 294,219 (56,342) - 564 (143) - 238,298Loans and receivables 7,348,441 189,690 (104,814) (782,731) 300,520 (78,717) 6,872,390Pawning - - - - - - - 7,642,660 133,348 (104,814) (782,164) 300,377 (78,717) 7,110,688

Individually significant customer loan impairment 2,831,229 2,910,042Collective impairment 4,811,431 4,200,646 7,642,660 7,110,688



337Sampath Bank PLC

18.2 Loans and receivables from other customersCurrency-wise

Bank Group

Balance As at Balance As at Balance As at Balance As at Balance As at Balance As at 31.12.2012 31.12.2011 01.01.2011 31.12.2012 31.12.2011 01.01.2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Sri Lanka Rupee 193,515,273 156,385,591 113,050,513 197,922,680 158,792,209 114,106,417United States Dollar 22,082,724 21,112,743 19,338,044 22,082,724 21,112,743 19,338,044United Arab Emirates Dirham - - 83,996 - - 83,996Euro 377,301 324,695 278,612 377,301 324,695 278,612Great Britain Pounds 609,367 470,473 449,860 609,367 470,473 449,860Japanese Yen 297 294 699 297 294 699Australian Dollar 1,829 5,699 5,727 1,829 5,699 5,727Canadian Dollar 64 11 111 64 11 111 216,586,855 178,299,506 133,207,563 220,994,262 180,706,124 134,263,466

18.3 Credit Quality18.3.1 Individually significant customer loan Impairment

Bank Group 2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000Individually Significant Customer Impairment Opening Balance as at 01st January 2,764,531 2,832,409 2,831,229 2,884,147 Charge/(write back) to income statement 320,775 10,903 336,760 31,860 Write-off during the year (221,296) (67,320) (221,296) (67,320) Interest accrued on Impaired loans and receivables (78,717) (58,728) (78,717) (58,728) Other movements 42,698 47,267 42,065 41,270Closing balance as at 31st December 2,827,992 2,764,531 2,910,042 2,831,229

18.3.2 Credit quality ratios

Bank As a % of Bank As a % of Group As a % of Group As a % of 2012 total 2011 total 2012 total 2011 total Rs.’000 Loans Rs.’000 Loans Rs.’000 Loans Rs.’000 Loans Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment allowance 4,153,004 1.9% 3,589,468 2.0% 4,506,738 2.0% 3,995,701 2.2%Less: Individually significant customer loan Impairment (Note No. 18.1.2) (2,827,992) (2,764,531) (2,910,042) (2,831,229)Net Exposure 1,325,012 0.6% 824,937 0.5% 1,596,696 0.7% 1,164,472 0.6%

Impairment Cover * 100 2,827,992 2,764,531 2,910,042 2,831,229(Individually impairment provision to Gross individually impaired loans 4,153,004 3,589,468 4,506,738 3,995,701Impairment Cover ratio 68.1% 77.0% 64.6% 70.9%


19 Other Loans & Receivables

Bank Group


Quoted ( Note No 19.1) 443,358 443,130 443,130 443,358 443,130 443,130Unquoted ( Note No 19.2) - 10,477 10,243 - 10,477 10,243 Preference shares (Note No 19.3) - 120,139 240,076 - 120,139 240,076Sri Lanka Development Bonds (SLDBs) (Note No 19.4) 6,714,291 5,162,532 6,797,025 6,714,291 5,162,532 6,797,025Leased backed Trust Certificates (Note No 19.5) 324,947 - 106,267 324,947 - 106,267Commercial papers (Note No 19.6) 3,033,159 - - 2,741,876 - - 10,515,756 5,736,278 7,596,740 10,224,474 5,736,278 7,596,740

19.1 Quoted - Debentures


Amortised Cost Market Amortised Cost Market Amortised Cost Market of Investment Value of Investment Value of Investment Value Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Bank & GroupVanik Incorporation Ltd 750 - 750 - 750 -(17% redeemable un-secured debentures Rs 100/- each)(Redeemable on or before 31st August 2003)Urban Development Authority 217,870 217,870 223,648 223,648 219,482 219,482(10% fully secured redeemable debentures Rs 100/- each)(Redeemable on 5th October 2015)Urban Development Authority 225,488 225,488 219,482 219,482 223,648 223,648(11% fully secured redeemable debentures Rs 100/- each)(Redeemable on 5th October 2015) 444,108 443,358 443,880 443,130 443,880 443,130

Less: Provision for diminution in market value write back/(made) b/f (750) (750) (750) 443,358 443,358 443,130 443,130 443,130 443,130


339Sampath Bank PLC

19 Other Loans & Receivables Contd.19.2 Un-Quoted - Debentures


Amortised Cost Market Amortised Cost Market Amortised Cost Market of Investment Value of Investment Value of Investment Value Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Bank & GroupSeylan Bank PLC - - 10,477 10,477 10,243 10,243(Unsecured subordinated redeemable debentures 2007/2012.Redeemable on 9 th December 2012)) (Floating Interest rate equal to the 3 months weighted average TBill rate + 2.5%) - - 10,477 10,477 10,243 10,243

19.3 Un-quoted - Preference SharesBank & GroupTexpro Industries Ltd(Non cumulative redeemable preference shares Rs 10/- each @ 15% interest. Redeemable over the period of 6 years Commencing from 30/06/2003.) 12,604 - 12,604 - 12,604 -

Dialog Axiata PLC(Rated cumulative redeemable preference shares Rs 1/- each @ AWPLR minus 0.9% interest. Redemption Dates 31st May 2008, 31st May 2009,31st May 2010, 31st May 2011 & 31st May 2012 and Redemption per preference share 10%, 15%, 25%, 25% & 25% respectively) - - 120,139 120,139 240,076 240,076 12,604 - 132,742 120,139 252,680 240,076

Less: Provision for diminution in market value write back/(made) b/f (12,604) - (12,604) - (12,604) - - - 120,139 120,139 240,076 240,076


19 Other Loans & Receivables Contd.19.4 Sri Lanka Development Bonds (SLDBs)


Amortised Cost Market Amortised Cost Market Amortised Cost Market of Investment Value of Investment Value of Investment Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)Bank & Group Sri Lanka Development Bonds 6,714,291 6,714,291 5,162,532 5,162,532 6,797,025 6,799,821 6,714,291 6,714,291 5,162,532 5,162,532 6,797,025 6,799,821

19.5 Leased backed Trust CertificatesBank & GroupIssued by Deutsche Bank o/a People’s Leasing PLC - - - - 104,167 104,167Issued by Deutsche Bank o/a Orient Financial Services Corporation Ltd. - - - - 2,100 2,100Issued by Citizens Development Bank PLC 324,947 324,947 - - - - 324,947 324,947 - - 106,267 106,267

19.6 Commercial papers - BankPeople’s Leasing and Finance PLC 1,557,701 1,557,701 - - - -Hayleys Agriculture Holdings Ltd 458,159 458,159 - - - -Sampath Leasing and Factoring Ltd 291,283 291,283 - - - -House of Fashion Garment (Pvt) Ltd 726,016 726,016 - - - - 3,033,159 3,033,159 - - - -

Commercial papers - GroupPeople’s Leasing and Finance PLC 1,557,701 1,557,701 - - - -Hayleys Agriculture Holdings Ltd 458,159 458,159 - - - -House of Fashion Garment (Pvt) Ltd 726,016 726,016 - - - - 2,741,876 2,741,876 - - - -Total Bank 10,515,756 10,515,756 5,736,278 5,736,278 7,596,740 7,599,537Total Group 10,224,472 10,224,472 5,736,278 5,736,278 7,596,740 7,599,537

20 Financial Investments- Available- for- Sale

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Quoted investmentsGovernment debt securities (Note No 20.1) 179,175 111,830 - 179,175 111,830 -Equities (Note No 20.2) 1,686,021 1,858,787 4,900,320 1,686,021 1,858,787 4,900,320

Unquoted investmentsEquities (Note No 20.3) 58,428 54,623 725,527 58,484 54,679 725,583 1,923,624 2,025,241 5,625,847 1,923,680 2,025,297 5,625,903


341Sampath Bank PLC

20 Financial Investments- Available- for- Sale Contd.20.1 Government debt securitiesAs per the ‘Guidelines to Licensed Commercial Banks and Licensed specialised banks on the operation of the Investment Fund Account’ dated April 29,2011 issued by the Central Bank of Sri Lanka, the funds available in Investment Fund Account (IFA) can be invested in Government Treasury Bills for a maximum period of three months from the date of transfer to the fund until loans are granted.

December 31, 2012 December 31, 2011

Cost Market Value Cost Market Value Rs’000 Rs’000 Rs’000 Rs’000

Bank & GroupBalance as at December 31 179,106 179,175 111,425 111,830Add/(less):Provision for appreciation/(diminution) in market value b/f 405 - - -

Provision for diminution in market value write back/(made) during the year (335) - 405 -Balance as at December 31 179,175 179,175 111,830 111,830

Operation of the Investment Fund Account was commenced during the Year 2011.

20.2 Quoted equity securities


Bank & Group No of Cost of Market No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Ordinary Investment Value Shares Shares Shares Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Name of the company

LankaBangla Finance Ltd 17,940,000 236,320 1,686,021 7,800,000 60,604 1,858,787 6,000,000 72,259 4,900,320 236,320 1,686,021 60,604 1,858,787 72,259 4,900,320

20.3 Un-quoted equity securities


Bank No of Cost of Market No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Ordinary Investment Value Shares Shares Shares Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Name of the company

Union Bank of Colombo - - - - - - 26,338,127 275,953 671,720LankaBangla Securities Limited 210,000 35,318 35,318 60,000 31,513 31,513 60,000 30,697 30,697Credit Information Bureau 1,700 170 170 1,700 170 170 1,700 170 170S.W.I.F.T - 65 65 - 65 65 - 65 65Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 62,500 625 625Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 2,000,000 20,000 20,000Lanka Financial Services Bureau Ltd - 2,250 2,250 - 2,250 2,250 - 2,250 2,250 58,428 58,428 54,623 54,623 329,760 725,527


20 Financial Investments- Available- for- Sale Contd.


Group No of Cost of Market No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Ordinary Investment Value Shares Shares Shares Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Name of the company

Union Bank of Colombo Plc - - - - - 26,338,127 275,953 671,720LankaBangla Securities Limited 210,000 35,318 35,318 60,000 31,513 31,513 60,000 30,697 30,697Credit Information Bureau 1,700 226 226 1,700 226 226 1,700 226 226S.W.I.F.T 65 65 - 65 65 - 65 65Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 62,500 625 625Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 2,000,000 20,000 20,000Lanka Financial Services Bureau Ltd 2,250 2,250 - 2,250 2,250 - 2,250 2,250 58,484 58,484 54,679 54,679 329,816 725,583

All unquoted Available- for- sale equity investments are recorded at cost except for investment in Union Bank of Colombo , since the fair value of these investments can not be reliably measured. There is no market for these investments and Bank intends to hold for them in the long term.

As at January 1, 2011, the equity investment in Union Bank Colombo was fair valued based on the market value of shares of quoted companies with similar risk characteristics.

During the year 2011, that investment was transferred from ‘Investment Available-for-sale’ to ‘Financial investment held for trading category’

21 Financial Investments- Held - to- Maturity

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Government securitiesTreasury bills - - 547,805 9,765 9,122 556,443Treasury bonds (Note No 21.1) - 10,289 574,279 - 10,289 574,279 - 10,289 1,122,084 9,765 19,411 1,130,722


343Sampath Bank PLC

21 Financial Investments- Held - to- Maturity21.1 Treasury bonds

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Amortised cost

Year of maturity 2011 - - 563,956 - - 563,956 2012 - 10,289 10,323 - 10,289 10,323 - 10,289 574,279 - 10,289 574,279

22 Investment in subsidiaries

Bank


Unquoted Principal Activity Cost Directors’ Cost Directors’ Cost Directors’ Valuation Valuation Valuation Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Sampath Centre Ltd Renting of Commercial Property 447,000 2,142,526 447,000 2,036,813 447,000 1,951,447S C Securities (Pvt) Ltd Share Brokering 78,921 184,595 78,921 78,921 15,626 15,626Sampath Leasing & Factoring Ltd Leasing & Factoring 525,000 882,682 525,000 525,000 525,000 525,000Sampath Information Technology Solutions Ltd. Developing Software Solutions & Maintenance of Hardware 9,000 19,150 4,000 4,000 4,000 4,000 1,059,921 3,228,953 1,054,921 2,644,734 991,626 2,496,073


23 Property and Equipment23.1 Bank

As at Additions / Disposals Transfers / As at As at Additions / Disposals Transfers / As at 01.01.2011 Revaluation during the Adjustments 31.12.2011 01.01.2012 Revaluation during the Adjustments 31.12.2012 during the year during the year year year Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

At Cost/valuationLand & Building 2,614,298 121,977 (89,340) - 2,646,936 2,646,936 77,174 (4,343) (567) 2,719,200Leasehold properties & improvements 729,428 190,127 (5,817) (10,873) 902,865 902,865 108,721 (10,443) (6,553) 994,591Computer equipment 2,024,253 242,046 (5,894) - 2,260,404 2,260,404 178,051 (22,607) (796) 2,415,052Motor Vehicles 183,988 47,892 (51,126) 10,874 191,628 191,628 48,600 (30,250) 2,742 212,722Office equipment 1,182,931 297,980 (6,882) - 1,474,028 1,474,028 171,430 (22,622) 2,405 1,625,242Work in progress 96,555 54,941 - (80,474) 71,023 71,023 46,927 - (49,336) 68,614 6,831,453 954,963 (159,059) (80,473) 7,546,884 7,546,884 630,904 (90,264) (52,104) 8,035,421

Finance leasesMotor vehicles 13,617 (10,874) 2,743 2,743 - - (2,743) - 13,617 - - (10,874) 2,743 2,743 - - (2,743) -Total 6,845,069 954,963 (159,059) (91,346) 7,549,627 7,549,627 630,904 (90,264) (54,847) 8,035,421

Accumulated depreciationOn Cost/valuationBuilding 65,704 15,807 - - 81,511 81,511 17,875 (52) 454 99,788Leasehold properties & improvements 409,207 107,334 (5,095) (1,299) 510,153 510,153 128,820 (8,327) (4,411) 626,235Computer equipment 1,391,214 204,821 (5,153) - 1,590,876 1,590,876 211,966 (21,870) (143) 1,780,829Motor vehicles 102,174 40,101 (31,546) 10,873 121,602 121,602 22,926 (30,051) 2,415 116,892Office equipment 588,976 132,733 (6,016) - 715,693 715,693 153,658 (21,474) 3,995 851,872 2,557,274 500,796 (47,810) 9,574 3,019,835 3,019,835 535,244 (81,775) 2,310 3,475,615

Finance leasesMotor vehicles 10,295 2,587 - (10,873) 2,009 2,009 411 (2,420) - 10,295 2,587 - (10,873) 2,009 2,009 411 - (2,420) -Total 2,567,569 503,383 (47,810) (1,298) 3,021,843 3,021,843 535,656 (81,775) (110) 3,475,615Written down value 4,277,501 4,527,784 4,527,784 4,559,806

Freehold land & buildings of the Bank were revalued by professionally qualified independent valuers during the year ended 31 st December 2010. The revaluation surplus, amounting to Rs. 415.331 million was credited to the ‘Revaluation Reserve’ account in that year.

The carrying amount of Bank’s revalued land and buildings, if they were carried at cost less depreciation, would be as follows:


Cost Accumulated Carrying Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value Depreciation Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Land 700,195 - 700,195 704,441 - 704,441 732,938 - 732,938Freehold Buildings 589,897 90,040 499,856 512,723 75,293 437,430 390,746 62,475 328,271Total 1,290,092 90,040 1,200,051 1,217,164 75,293 1,141,871 1,123,684 62,475 1,061,209


345Sampath Bank PLC

23 Property and Equipment Contd.23.2 Group

As at Additions / Disposals Transfers / As at As at Additions / Disposals Transfers / As at 01.01.2011 Revaluation during the Adjustments 31.12.2011 01.01.2012 Revaluation during the Adjustments 31.12.2012 during the year during the year year year Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

At Cost/valuationLand & Building 4,822,937 152,791 (89,340) - 4,886,389 4,886,389 87,007 (4,343) (567) 4,968,486Leasehold properties & improvements 729,428 190,127 (5,817) (10,873) 902,865 902,865 108,721 (10,443) (6,553) 994,591Computer equipment 2,048,876 245,512 (5,894) - 2,288,494 2,288,494 255,519 (22,607) (821) 2,520,584Motor vehicles 276,139 59,733 (67,525) 10,874 279,221 279,221 52,795 (45,671) 2,742 289,088Office equipment 1,209,917 305,797 (7,094) - 1,508,619 1,508,619 174,933 (22,622) 2,405 1,663,336Work in progress 96,555 54,941 - (80,474) 71,023 71,023 46,927 - (49,336) 68,614 9,183,852 1,008,901 (175,670) (80,473) 9,936,611 9,936,611 725,904 (105,685) (52,130) 10,504,700

Finance leasesMotor vehicles 20,442 - (6,825) (10,874) 2,743 2,743 - - (2,743) - 20,442 - (6,825) (10,874) 2,743 2,743 - - (2,743) -Total 9,204,293 1,008,901 (182,495) (91,346) 9,939,354 9,939,354 725,904 (105,685) (54,873) 10,504,700

Accumulated depreciationOn Cost/valuationBuilding 203,343 42,658 - - 246,001 246,001 45,998 (52) 454 292,401Leasehold properties & improvements 409,207 107,689 (5,095) (1,654) 510,147 510,147 128,820 (8,327) (4,411) 626,234Computer equipment 1,410,039 207,775 (5,153) - 1,612,661 1,612,661 222,129 (21,870) (143) 1,812,771Motor vehicles 128,403 52,908 (45,988) 10,873 146,196 146,196 33,231 (43,898) 2,027 137,556Office equipment 601,661 135,891 (6,366) - 731,187 731,187 157,658 (21,474) 3,995 871,365 2,752,653 546,921 (62,602) 9,219 3,246,191 3,246,191 587,836 (95,622) 1,922 3,740,327

Finance leasesMotor vehicles 15,612 3,595 (6,325) (10,873) 2,010 2,010 411 - (2,420) - 15,612 3,595 (6,325) (10,873) 2,010 2,010 411 - (2,420) -Total 2,768,265 550,516 (68,927) (1,654) 3,248,201 3,248,201 588,247 (95,622) (498) 3,740,327Written down value 6,436,029 6,691,153 6,691,153 6,764,372

Freehold land & buildings of the Group were revalued by professionally qualified independent valuers during the year ended 31 st December 2010. The revaluation surplus, amounted to Rs. 1,182.818 million was credited to the ‘Revaluation Reserve’ account in that year.

The carrying amount of Group’s revalued land and buildings, if they were carried at cost less depreciation, would be as follows:


Cost Accumulated Carrying Cost Accumulated Carrying Cost Accumulated Carrying Depreciation Value Depreciation Value Depreciation Value (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)

Land 835,195 - 835,195 839,441 - 839,441 867,938 - 867,938Freehold Buildings 1,276,621 216,168 1,060,453 1,189,614 201,175 988,439 1,036,824 187,586 849,238Total 2,111,816 216,168 1,895,648 2,029,055 201,175 1,827,880 1,904,762 187,586 1,717,176


23 Property and Equipment Contd.23.3 Details of Group land and buildings stated at valuation are given below.

2010 2007 Date of Method of Cost Revaluation Revaluation Location Valuation Valuation (Rs. Mn ) (Rs. Mn ) (Rs. Mn )BankValuer - Mr. P B KalugalagedaraNo.180 (part), People’s Park, Bodhiraja Mawatha, Pettah 12.11.2010 Open Market Value 21.4 55.0 48.0No.261, Galle Road, Ratmalana 01.11.2010 Open Market / Fair Value Basis 25.5 41.0 36.0No.61 & 61A, Moratuwa Road, Piliyandala 01.11.2010 Open Market / Fair Value Basis 38.1 76.0 65.0No.591, Galle Road, Wellawatte 10.11.2010 Open Market / Fair Value Basis 112.3 107.5 -No.475, Elvitigala Mawatha, Narahenpita 12.11.2010 Open Market / Fair Value Basis 81.9 77.7 -No.103, Dharmapala Mawatha, Hunupitiya, Colombo 07 08.11.2010 Open Market / Fair Value Basis 26.2 597.0 597.0

Valuer - Mr. E M WimalasenaNo.268, Main Street, Anuradhapura 12.12.2010 Open Market / Fair Value Basis 10.9 92.8 45.0

Valuer - Mr. C WellappiliNo.81 & 81A, High Level Road, Maharagama 09.11.2010 Income Basis / Contractor’s Principle 34.4 59.4 55.7No.371 &371 1/1, Old Moor Street, Colombo 12 10.11.2010 Contractor’s Principle 38.3 126.0 112.2No.1022, Maradana Road, Borella 29.11.2010 Income Basis / Contractor’s Principle 70.2 192.6 190.7No.5, Wakwella Road, Galle 28.12.2010 Income Basis / Contractor’s Principle 26.8 71.4 52.0No.280 & 280/1, Negombo Road, Wattala 30.12.2010 Comparison Method 44.2 53.9 -No.150, Colombo Road, Gampaha 04.12.2010 Comparison Method 20.0 29.9 -No.312 (part), Galle Road, Kalutara 15.11.2010 Comparison Method 62.4 60.0 -No.373, Galle Road, Panadura 30.12.2010 Income Basis / Contractor’s Principle 42.0 55.3 -No.167, Anguruwatota Road, Horana 28.12.2010 Comparison Method 18.5 20.8 -No.7/5, Giriulla Road, Alawwa 16.11.2010 Income Basis / Contractor’s Principle 6.5 25.4 -

Valuer - Mr. S G FernandoNo.29, Cross Street, Kandy 25.10.2010 Income Method / Comparative Method 102.2 300.0 180.0No.187, Madawela Road, Katugastota 05.11.2010 Income Method / Comparative Method 14.4 43.4 -No.31 & 33, Negombo Road, Kurunegala 04.11.2010 Income Method / Comparative Method 77.0 145.0 128.9

Valuer - Mr. H J A NisadNo.25-27, Main Street, Tissamaharama 29.10.2010 Contractor’s Method/Income Method 34.3 37.0 -No.3, Hakmana Road, Matara 29.10.2010 Contractor’s Method 39.2 161.0 80.0No.117, Ihalagama Road, Deniyaya 29.10.2010 Contractor’s Method 3.9 4.2 4.0No.69, Main Street, Deniyaya 27.10.2010 Contractor’s Method 15.0 11.8 -

Sampath Centre Ltd.Valuer - Mr. P B KalugalagedaraNo.110, Sir James Peiris Mawatha, Colombo 02 31.12.2010 Income Method 597.6 2,071.0 1,300.0


347Sampath Bank PLC

23 Property and Equipment Contd.23.4 Freehold Land & Buildings- Bank

Cost or Cost or

Revaluation Revaluation Total Accumulated Net Book

Buildings of Buildings Extent of Land Value Depreciation Value

Sq.ft (Rs.’000) Perches (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) %

LocationPettah 5,246 63,077 - - 63,070 11,134 51,943 1.9%No.180 (part), People’s Park, Bodhiraja Mawatha, PettahBorella 9,100 79,868 25.5 127,500 207,368 14,060 193,308 7.2%No.1022, Maradana Road, BorellaKurunegala 12,027 78,667 37.4 74,760 153,427 11,935 141,492 5.3%No.31 & 33, Negombo Road, KurunegalaWattala Under 18,215 43.1 53,900 72,115 - 72,115 2.7%No.280 & 280/1, Negombo Road, Wattala ConstructionMatara 8,413 40,158 45.3 131,170 171,328 10,281 161,047 6.0%No.3, Hakmana Road, MataraMaharagama 5,400 31,288 13.55 29,744 61,032 6,505 54,527 2.0%No.81 & 81A, High Level Road, MaharagamaDeniyaya Under 11,689 40.0 4,200 15,889 - 15,889 0.6%No.117, Ihalagama Road, Deniyaya ConstructionDeniyaya Bare Land - 16.9 11,800 11,800 - 11,800 0.4%No.69, Main Street, DeniyayaGampaha Under 9,814 25.0 29,880 39,694 - 39,694 1.5%No.150, Colombo Road, Gampaha ConstructionRatmalana 5,480 29,007 10.9 19,075 48,082 5,728 42,354 1.6%No.261, Galle Road, RatmalanaPiliyandala 8,200 36,958 37.5 46,875 83,833 8,306 75,527 2.8%No.61 & 61A, Moratuwa Road, PiliyandalaAnuradhapura Under 6,214 41.3 92,800 99,014 - 99,014 3.7%No.268, Main Street, Anuradhapura ConstructionPanadura 5,550 14,970 27.3 43,800 81,310 2,078 79,232 2.9%No.373, Galle Road, Panadura Under Construction 22,683 - - - - - -Old Moor Street 8,248 5,565 24.0 122,000 127,565 1,242 126,323 4.7%No.371 & 371 1/1, Old Moor Street, Colombo 12Tissamaharama 4,000 36,912 22.2 9,990 46,902 3,262 43,640 1.6%No.25-27, Main Street, TissamaharamaKatugastota 8,700 67,985 24.1 43,380 111,222 3,170 108,052 4.0%No.187, Madawela Road, KatugastotaGalle 6,197 23,263 17.5 52,440 75,703 4,764 70,939 2.6%No.5, Wakwella Road, GalleWellawatte 6,514 55,076 21.5 107,500 162,576 1,423 161,153 6.0%No.591, Galle Road, WellawatteNarahenpita Bare Land - 18.5 77,700 77,700 - 77,700 2.9%No.475, Elvitigala Mawatha, NarahenpitaKalutara Bare Land - 30.0 60,000 60,000 - 60,000 2.2%No.312 (part), Galle Road, KalutaraAlawwa 8,245 18,675 20.7 8,260 26,935 2,418 24,517 0.9%No.7/5, Giriulla Road, AlawwaHorana Bare Land - 20.8 20,750 20,750 - 20,750 0.8%No.167, Anguruwathota, HoranaKandy Corporate 15,026 90,023 25.4 216,155 306,178 10,060 296,118 11.0%No.29, Cross Street, KandyDharmapala Mawatha 5,000 51,233 119.4 597,000 648,233 2,332 645,901 24.0%No.103, Dharmapala Mawatha, Hunupitiya, Colombo 07Victoria Range 2,035 15,938 - - 15,938 1,088 14,850 0.6%1/87,Victoria Range,Digana,KandyTotal 807,135 - 1,980,679 2,787,814 99,788 2,687,885 100.0%



23 Property and Equipment Contd.The cost of fully depreciated assets of the Bank amounts to Rs. 2,587.0 Mn. ( 2011 - Rs. 2,218.0 Mn )

Details of cost of fully depreciated assets class-wise are given below.

December 31, December 31, January 1, 2012 2011 2011 Rs’000 Rs’000 Rs’000Asset class

Leasehold properties & improvements 341,235 301,288 259,113Computer equipment 1,777,921 1,526,034 1,290,311Motor vehicles 73,715 49,021 52,711Office equipment 394,166 341,665 300,125Total 2,587,037 2,218,008 1,902,260

24 Intangible assets

Bank Group


Computer Software (Note No 24.1) 115,366 67,294 78,723 120,020 73,372 88,798Licenses (Note No 24.2) 196,392 - - 196,392 - - 311,758 67,294 78,723 316,412 73,372 88,798

24.1 Computer software

Bank Group

Cost Amortisation Net Book value Cost Amortisation Net Book value Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Balance as at January 1, 2011 676,204 597,481 78,723 694,281 605,483 88,798Additions 24,681 36,110 (11,429) 24,706 40,133 (15,426)Disposal - - - - - -Balance as at December 31, 2011 700,885 633,591 67,294 718,987 645,615 73,372

Balance as at January 1, 2012 700,885 633,591 67,294 718,987 645,615 73,372Additions 89,353 41,280 48,073 91,526 44,877 46,649Disposal - - - - - -Balance as at December 31, 2012 790,238 674,872 115,366 810,513 690,492 120,020

24.2 LicensesLicensesBalance as at January 1, 2012 - - - - - -Additions 198,678 2,286 196,392 198,678 2,286 196,392Disposal - - - - - -Balance as at December 31, 2012 198,678 2,286 196,392 198,678 2,286 196,392

349Sampath Bank PLC

25 Deferred Tax Assets & Liabilities25.1 Net Deferred Tax Assets

Group December 31, December 31, 2012 2011 Rs’000 Rs’000Balance as at 1st January 2,359 3,714Decrease/(Increase) in provision 9,968 (1,355)Balance as at 31st December 12,328 2,359

25.2 Net Deferred Tax Liabilities

Bank Group

December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Balance as at 1st January 380,360 258,340 396,113 258,340Increase/(decrease) in provision 19,725 122,020 34,699 137,773Balance as at 31st December 400,084 380,360 430,812 396,113

Analysis of deferred tax assets and liabilitiesThe following table shows, deferred tax liabilities recorded in the Statement of Financial Position due to taxable temporary differences in assets & liabilities and charges to the income tax expense.


Temporary Tax effect Temporary Tax effect Temporary Tax effect difference difference difference Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Bank Deferred tax liabilityProperty and equipment 624,784 174,940 618,867 173,283 526,623 147,454Lease rentals 873,775 244,657 754,775 211,337 844,212 236,379Revaluation on buildings 174,657 48,904 174,657 48,904 174,657 48,904 1,673,216 468,500 1,548,299 433,524 1,545,493 432,738

Deferred tax assetUnclaimed bad debt provision - Specific - - - - 478,806 134,066Defined benefit obligation 167,470 46,892 124,477 34,853 89,163 24,966Others 76,873 21,524 65,396 18,310 54,881 15,367 244,343 68,416 189,873 53,164 622,850 174,398Net deferred tax (asset) / liability 1,428,873 400,084 1,358,427 380,360 922,643 258,340

GroupDeferred tax liabilityProperty and equipment 661,523 185,226 638,204 178,697 526,623 147,455Lease rentals 1,137,686 318,552 1,006,317 281,769 844,212 236,379Revaluation on buildings 174,657 48,904 174,657 48,904 174,657 48,904 1,973,866 552,682 1,819,178 509,370 1,545,493 432,738

Deferred tax assetUnclaimed bad debt provision - Specific - - - - 478,806 134,066Unclaimed bad debt provision - Investment 185,549 51,954 211,723 59,282 - -Defined benefit obligation 172,831 48,393 127,372 35,664 89,163 24,965Others 76,873 21,524 65,396 18,311 54,881 15,367 435,253 121,871 404,491 113,257 622,849 174,398Net deferred tax (asset) / liability 1,538,613 430,812 1,414,688 396,113 922,643 258,340


25 Deferred Tax Assets & Liabilities Contd.


Temporary Tax effect Temporary Tax effect Temporary Tax effect difference difference difference Group Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Net deferred tax assetDeferred tax liabilityProperty and equipment 1,127 316 1,673 469 16,667 4,667Lease rentals - - - - 146,436 41,002 1,127 316 1,673 461 163,103 45,669

Deferred tax assetUnclaimed bad debt provision - Investment - - - - 165,707 46,398Brought forward tax losses 38,549 10,794 - 10,661 2,985Defined benefit obligation 6,607 1,850 10,100 2,828 - - 45,156 12,644 10,100 2,828 176,368 49,383Net deferred tax (asset) / liability (44,029) (12,328) (8,427) (2,359) (13,265) (3,714)

26 Other assets

Bank Group


Pre-paid expenses 467,434 246,036 232,525 467,434 246,036 232,525Other debtors ( Note No 26.1 ) 1,184,199 819,047 613,974 1,706,138 1,355,241 1,242,347Pre-paid staff cost ( Note No 26.2 ) 1,403,533 1,086,527 925,351 1,403,533 1,086,527 925,351Refundable deposit at fair value 72,328 73,071 83,947 9,574 10,317 21,493Pre-paid cost on refundable deposit 1,593 1,933 1,486 1,593 1,933 1,486Financial guarantee ( Note No 26.3 ) 142,565 146,489 149,538 142,565 146,489 149,538 3,271,651 2,373,104 2,006,821 3,730,836 2,846,544 2,572,740

26.1 Other debtors

Bank Group


Cost 1,184,199 819,047 613,974 1,751,515 1,385,618 1,253,162Less:Balance as at the beginning of the year - - - (30,377) (10,815) -Charge / (reversal) for the year - - - (15,000) (19,562) (10,815)Balance end of the year - - - (45,377) (30,377) (10,815)Net other debtors 1,184,199 819,047 613,974 1,706,138 1,355,241 1,242,347


351Sampath Bank PLC

26 Other assets Contd.26.2 The movement in the pre-paid staff cost

Bank Group Rs’000 Rs’000

At January 1, 2011 925,351 925,351(The ‘day 1’ effect on the transition date)Add / (Less): Adjustment for new grants and settlements 253,869 253,869Less: charge to Personnel cost (92,693) (92,693)At December 31,2011 (Note No 18) 1,086,527 1,086,527

At January 1, 2012 1,086,527 1,086,527Add / (Less): Adjustment for new grants and settlements 473,594 473,594Less: charge to Personnel cost (156,588) (156,588)At December 31,2012 (Note No 18) 1,403,533 1,403,533

26.3 Financial Guarantee The movement during the year is a follows:

Bank Group Rs’000 Rs’000 At January 1, 2011 149,538 149,538Interest income 12,527 12,527Income received (15,576) (15,576)At December 31,2011 146,489 146,489

At January 1, 2012 146,489 146,489Interest income 12,275 12,275Income received (16,199) (16,199)At December 31,2012 142,565 142,565

27 Due to banks

Bank Group


Deposit from other Banks 244,038 704,821 64,646 244,038 704,821 64,646Borrowings 380,746 470,851 135,367 424,161 470,851 135,367 624,784 1,175,672 200,013 668,198 1,175,672 200,013

The maturity analysis of due to banks is given in Note No 43


28 Due to other customers

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Local currency depositsDemand 13,667,506 11,353,997 11,200,598 13,644,907 11,330,769 11,148,366Savings 60,785,509 60,656,644 54,728,380 60,652,599 60,579,156 54,728,380Call deposits 845,834 860,547 1,013,153 845,834 860,547 946,027Fixed deposits 137,446,329 97,707,704 63,298,388 137,359,083 97,707,704 63,298,388Certificates of deposits 9,520,143 8,032,068 5,828,276 9,520,143 8,032,068 5,828,276Margin deposits 511,598 868,644 555,871 511,598 868,644 555,871 222,776,921 179,479,604 136,624,667 222,534,165 179,378,888 136,505,308

Foreign currency depositsDemand 1,405,312 835,789 2,421,525 1,405,312 835,789 2,421,525Savings 6,462,657 5,093,553 4,696,960 6,462,657 5,093,553 4,696,960Call deposits 5,953 241,847 6,438 5,953 241,847 6,438Fixed deposits 12,655,641 9,517,002 9,447,109 12,655,641 9,517,002 9,447,109Margin deposits 24,506 27,280 49,066 24,506 27,280 49,066 20,554,069 15,715,470 16,621,098 20,554,069 15,715,470 16,621,098Total 243,330,990 195,195,074 153,245,764 243,088,236 195,094,358 153,126,406

‘Margin Deposits’ are deposits held as collateral for irrevocable commitments.

The maturity analysis of borrowings is given in Note No 43

28.1 Product-wise analysis of balance due to other customers.

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000Local currency depositsDemand 5.62% 5.82% 7.31% 5.61% 5.81% 7.28%Savings 24.98% 31.07% 35.71% 24.95% 31.05% 35.74%Call deposits 0.35% 0.44% 0.66% 0.35% 0.44% 0.62%Fixed deposits 56.49% 50.06% 41.31% 56.51% 50.08% 41.34%Certificates of deposits 3.91% 4.11% 3.80% 3.92% 4.12% 3.81%Margin deposits 0.21% 0.45% 0.36% 0.21% 0.45% 0.36% 91.55% 91.95% 89.15% 91.54% 91.9% 89.15%

Foreign currency depositsDemand 0.58% 0.43% 1.58% 0.58% 0.43% 1.58%Savings 2.66% 2.61% 3.06% 2.66% 2.61% 3.07%Call deposits 0.00% 0.12% 0.00% 0.00% 0.12% 0.00%Fixed deposits 5.20% 4.88% 6.16% 5.21% 4.88% 6.17%Margin deposits 0.01% 0.01% 0.03% 0.01% 0.01% 0.03% 8.45% 8.05% 10.85% 8.46% 8.06% 10.85%Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%


353Sampath Bank PLC

29 Debt issued and other borrowed funds

Bank Group


Commercial papers - - - 828,991 106,622 90,641Redeemable debentures ( Note No 29.1 ) 1,500,000 1,761,618 2,061,620 1,937,207 1,861,688 2,061,620Long term bond ( Note No 29.2 ) 1,368,723 1,253,949 1,148,800 1,368,723 1,253,949 1,148,800Call borrowings - - 875,259 - - 875,259Term borrowings 3,033,650 5,584,729 - 5,160,437 7,114,294 384,527Foreign currency borrowings 18,084,125 6,264,500 - 18,084,125 6,264,500 -Finance leases ( Note No 29.3 ) - 553 3,671 - 553 3,671Refinance borrowings 4,838,531 4,888,872 4,477,716 4,838,531 4,888,872 4,477,716 28,825,029 19,754,221 8,567,066 32,218,014 21,490,478 9,042,234

29.1 Redeemable debentures

Bank Group


Balance as at 1 st January 1,761,618 2,061,620 1,861,688 2,061,620 Debentures issued 1,500,000 - 1,800,000 100,000 Interest payable - 11,618 37,207 11,688 Debentures redeemed (1,750,000) (311,620) (1,750,000) (311,620) Interest paid (11,618) - (11,618) - Balance as at 31 st December 1,500,000 1,761,618 1,937,207 1,861,688

(Note No. 29.1.1, 29.1.2, 29.1.3 & 29.1.4)

29.1.1 The debentures consist of 15,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2012.The debentures are quoted on the Colombo Stock Exchange.

No of Face Value Amortised cost (Rs.’000)

Debentures (Rs.’000) December 31, December 31, January 1, Allotment Maturity Rate of 2012 2011 2011 Date Date Interest

10,776,800 1,077,680 1,077,680 - - Oct 12, 2012 Oct 31, 2017 Fixed - 16.5 % per annum payable annually 2,477,900 247,790 247,790 - - Oct 12, 2012 Oct 31, 2017 Fixed - 15.0 % per annum payable monthly 1,745,300 174,530 174,530 - - Oct 12, 2012 Oct 31, 2017 Floating rate is equivalent to the six months Treasury Bill rate (gross) plus 2.0 % 15,000,000 1,500,000 1,500,000 - -



29 Debt issued and other borrowed funds29.1.2 The debentures consist of 15,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.The debentures are quoted on the Colombo Stock Exchange.

No of Amortised cost (Rs.’000)

Debentures December 31, December 31, January 1, Allotment Maturity Rate of 2012 2011 2011 Date Date Interest

5,206,725 - 520,673 520,673 Aug 30, 2007 Aug 29, 2012 Fixed - 17.5 % per annum payable annually 222,650 - 22,265 22,265 Aug 30, 2007 Aug 29, 2012 Fixed - 15.5 % per annum payable monthly 9,570,625 - 968,681 968,683 Aug 30, 2007 Aug 29, 2012 Floating rate is equivalent to the three months Treasury Bill rate (gross) plus 1.5% 15,000,000 - 1,511,618 1,511,620

These debentures were redeemed on August 29, 2012.

29.1.3 The debentures consist of 2,500,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.

No of Amortised cost (Rs.’000)

Debentures December 31, December 31, January 1, Allotment Maturity Rate of 2012 2011 2011 Date Date Interest

2,500,000 - 250,000 250,000 June 30, 2007 June 28, 2012 Floating rate is equivalent to the six months weighted avg. Treasury Bill rate (gross) plus 1.75% p.a., payable semi annually. 2,500,000 - 250,000 250,000

These debentures were redeemed on June 28, 2012.

29.1.4 The debentures consist of 3,000,000 unsecured subordinated redeemable 5 year debentures of Rs. 100/-

Amortised cost Rs.’000

No of December 31, December 31, January 1, Debentures 2012 2011 2011

3,000,000 - - 300,000

These debentures were redeemed on December 28, 2011.

29.2 Long Term Bond

Bank Group


Balance as at 1st January 1,253,949 1,148,800 1,052,468 1,253,949 1,148,800 1,052,468Interest accrued 114,774 105,149 96,332 114,774 105,149 96,332 1,368,723 1,253,949 1,148,800 1,368,723 1,253,949 1,148,800

355Sampath Bank PLC

29 Debt issued and other borrowed funds29.3 Finance Leases

Bank Group


Gross liability - 564 3,754 - 564 3,754Less: Finance charges allocated to future periods - (11) (83) - (11) (83)Net liability - 553 3,671 - 553 3,671

Repayable with in one yearGross liability - 564 3,190 564 3,190Less: Finance charges allocated to future periods - (11) (72) (11) (72)Net liability 553 3,118 553 3,118

Repayable after one year before five yearsGross liability - - 564 - 564Less: Finance charges allocated to future periods - - (11) - (11)Net liability - - 553 - 553

Finance lease liability was fully settled during the year 2012.

30 Current tax liabilities

Bank Group


Balance as at 1st January 1,851,834 891,011 1,881,142 958,817 Current year provision 2,108,885 1,484,407 2,146,783 1,530,979 Less: Payment of tax (956,835) (523,585) (992,057) (608,654) Balance as at 31st December 3,003,885 1,851,834 3,035,868 1,881,142

31 Provisions

Bank Group


Provision for retiring gratuity (Note No 31.1) 167,470 124,477 89,223 180,192 137,515 97,279 167,470 124,477 89,223 180,192 137,515 97,279


31 Provisions Contd.31.1 Provision for retiring gratuity

Bank Group

December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000 Balance as at 1st January 124,477 89,223 137,515 97,279 Provision made during the year 55,710 49,175 55,049 54,264 180,186 138,398 192,564 151,543 Benefits paid by the plan (12,716) (13,921) (12,372) (14,028) Balance as at 31st December 167,470 124,477 180,192 137,515

An actuarial valuation of the gratuity fund was carried out as at 31st December 2012 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 LKAS 19 Employee Benefits.

December 31, December 31, January 1, 2012 2011 2011

Actuarial assumptionsDiscount rate 11% 10% 9%Salary increment 10% 9% 9%

Mortality GA 1983 GA 1983 GA 1983 Mortality Table Mortality Table Mortality TableRetirement age 55 years 55 years 55 years

Sensitivity of assumptions employed in actuarial valuationThe following table demonstrates the sensitivity to a reasonably 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.


357Sampath Bank PLC

31 Provisions Contd.Bank

Increase / (decrease) in discount rate

Increase / (Decrease) in Salary Increment

2012 2011 January 1, 2011

Sensitivity Effect on Income Statement Increase/(Reduction) in results for the year (Rs. Mn.)

Sensitivity Effect on Employment Benefit obligation Increase/(Decrease) in the Liability (Rs. Mn.)





1% 17.5 (17.5) 13.1 (13.1) 5.7 (5.7)

(1%) (21.0) 21.0 (15.7) 15.7 (13.9) 13.9

1% (20.7) 20.7 (15.5) 15.5 (13.6) 13.6

(1%) 17.6 (17.6) 13.2 (13.2) 11.6 (11.6)

31.2 Pension Fund The amounts recognized in the Statement of Financial Position are as follows:

Bank Group


Present value of funded obligations as at 31 st December 3,227,914 2,882,369 2,885,617 3,227,914 2,882,369 2,885,617Fair value of plan assets as at 31st December (4,136,468) (3,551,235) (3,406,801) (4,136,468) (3,551,235) (3,406,801) (908,554) (668,866) (521,184) (908,554) (668,866) (521,184)Present value of unfunded obligations - (137,655) (275,310) - (137,655) (275,310)Unrecognized actuarial gains/losses 759,146 710,212 785,951 759,146 710,212 785,951 (149,408) (96,309) (10,543) (149,408) (96,309) (10,543)

Balance as at 1st January (96,309) (10,543) 160,619 (96,309) (10,543) 160,619Provision made during the year 220,892 209,191 303,298 220,892 209,191 303,298Less: Payments/investments made during the year (273,991) (294,957) (474,460) (273,991) (294,957) (474,460)Balance as at 31st December - (Over)/under Provision (149,408) (96,309) (10,543) (149,408) (96,309) (10,543)

This over payment is recognised under pre-paid expenses in other assets.

An actuarial valuation of the gratuity fund was carried out as at 31st December 2012 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 LKAS 19 - Employee Benefits.

December 31, December 31, January 1, 2012 2011 2011Actuarial assumptionsDiscount rate 11% 10% 9%Salary increment 10% 9% 9%Annual return on assets 10% 9% 9%Mortality GA 1983 GA 1983 GA 1983 Mortality Table Mortality Table Mortality Table

Retirement age Normal Normal Normal retirement age retirement age retirement age or age on or age on or age on valuation date, valuation date, valuation date, if greater if greater if greater


31 Provisions Contd.31.2 Pension Fund Contd.Sensitivity of assumptions employed in actuarial valuation

The following table demonstrates the sensitivity to a reasonably 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 Statement of Financial Position 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.

Bank

Increase / (decrease) in discount rate

Increase / (Decrease) in Salary Increment

2012 2011 January 1, 2011







1% 400.3 (400.3) 380.5 (380.5) 415.0 (415.0)

(1%) (487.3) 487.3 (468.9) 468.9 (518.9) 518.9

1% (258.20) 258.20 (247.5) 247.5 (209.4) 209.4

(1%) 232.0 (232.0) 220.9 (220.9) 242.0 (242.0)

31.3 Retirement benefit

Bank Group

2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000

Contribution made to Pension Fund 220,892 209,191 220,893 209,191Contribution made to Gratuity Fund 55,710 49,175 55,049 54,264 276,601 258,366 275,942 263,455

Contribution made to Pension FundCurrent service & interest cost 438,356 418,627 438,356 418,627Expected return on assets & recognition of actuarial loss/(gain ) (319,611) (306,612) (319,611) (306,612)Recognition of actuarial gain / (loss) (35,509) (40,479) (35,509) (40,479)Recognition of transitional liability/(asset ) 137,655 137,655 137,655 137,655 220,892 209,190 220,892 209,190

Contribution made to Gratuity FundCurrent service & interest cost 40,806 34,096 40,145 39,185Expected return on assets & recognition of actuarial loss/(gain ) - 1,107 - 1,107Recognition of actuarial gain / (loss) 932 - 932 -Recognition of transitional liability/(asset ) 13,972 13,972 13,972 13,972 55,710 49,175 55,049 54,264


359Sampath Bank PLC

32 Other liabilities

Bank Group


Cheques sent on clearing - 12,422 2,533 - 12,422 2,533Provision for deposit insurance scheme 69,941 57,310 44,000 69,941 57,310 44,000Financial guarantee liability 71,448 78,214 84,961 71,448 78,214 84,961Other payable 3,898,681 3,106,607 2,416,662 4,105,512 3,355,341 2,855,845 4,040,070 3,254,552 2,548,157 4,246,901 3,503,286 2,987,341

33 Stated capital

Bank Group


Ordinary shares 3,564,172 2,743,780 1,786,250 3,564,172 2,743,780 1,786,250 3,564,172 2,743,780 1,786,250 3,564,172 2,743,780 1,786,250

Number of shares as at 31st December 2012 increased to 162,736,665 from 156,854,190 as at 31st December 2011 (152,807,972 as at 31st December 2010), due to effect of the scrip dividend and ESOP 2010.

Share information are given on Pages 400 and 405.

Rights preferences & restrictions of classes of capitalThe holders of ordinary shares confer their right to receive Dividend as declared from time to time and are entitled to one vote per share at the Annual General meeting of the Bank.

33.1 Employee share option planESOP - 2010

December 31, December 31, 2012 2011 ESOP position as atNumber of options available (shares) 3,056,159 3,056,159Number of options exercised (shares) 2,725,360 524,924Number of remaining options (shares) 330,799 2,531,235Option price (Rs.) 80.00 80.00Weighted average Market price (Rs.) 180.10 221.00

The option exercisable period would be 3 years, from the entitlement date of 30.06.2011. In the event of options being fully exercised by the eligible staff, the stated capital of the Bank would rise by Rs. 244.5 Mn, as a result of the consideration to be paid by the staff under the ESOP.

No financial assistance will be provided by the Bank to the staff to purchase the share options. The remaining period to exercise the share options is 1 year and 6 months from 31.12.2012.


34 Reserves34.1 Statutory / Risk reserve funds

Bank Group


Statutory Reserve Fund (Note No 34.1.1) 1,062,626 805,805 614,834 1,089,350 822,531 621,941Risk reserve fund (Note No 34.1.2) 109,480 35,706 31,730 109,480 35,706 31,730 1,172,106 841,511 646,564 1,198,830 858,237 653,671

34.1.1 Statutory Reserve FundBalance as at 1st January 805,805 614,834 822,531 621,941AdjustmentsTransfer to reserve fund (Note No 34.1.1 & 34.1.2) 256,821 190,971 266,819 200,590Balance as at 31st December 1,062,626 805,805 1,089,350 822,531

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, should be transferred to above reserve until the reserve is equal to 50% of the paid-up capital of the Bank 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. 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.

However, the paid-up capital concept was abolished by the Companies Act No. 7 of 2007. Therefore, Bank considered the ‘Stated capital’ as equivalent of ‘paid-up’ capital and transferred 5% of profit after tax to the Statutory Reserve Fund. The Bank’s stated capital increased to Rs.3,564.172 Mn (2011 - 2,743.78 Mn. & 2010 - 1,786.25 Mn.) during the year due to scrip Dividend being declared to the shareholders & ESOP 2010.

Bank Group


34.1.2 Risk Reserve fundBalance as at 1st January 35,706 31,730 35,706 31,730

Adjustment 473 (169) 473 (169) Transfer to reserve fund 73,302 4,144 73,302 4,144 Balance as at 31st December 109,480 35,706 109,480 35,706

In terms of section 12 of the Regulations issued by the Minister of Finance under the Registered Stocks and Securities Ordinance and the Local Treasury Bills Ordinance, a sum equivalent to 25% of the profit after tax of the Primary Dealer Unit was transferred to a special risk reserve as per direction issued by the Central Bank.


361Sampath Bank PLC

34 Reserves34.2 Revaluation Reserve

Bank Group


Balance as at 1st January 1,459,349 1,519,041 2,878,825 2,938,518 Additions - - - - Disposals (2,640) (59,693) (2,640) (59,693) Deferred tax liability attributable to revaluation surplus - - - - Balance as at 31st December 1,456,708 1,459,349 2,876,185 2,878,825

Revaluation reserve relates to the revaluation of property & equipment as described in Note No. 23.2

34.3 Available-For-Sale reserve

Bank Group


Balance as at 1st January 1,797,778 5,223,829 1,797,778 5,223,829 Net loss on available-for-sale financial assets (348,817) (3,426,050) (348,817) (3,426,050) Exchange differences on translation of available- for-sale financial assets recorded in foreign currency 16,061 - 16,061 -Income tax (charge)/credit relating to components of other comprehensive income - - - -Balance as at 31st December 1,465,022 1,797,778 1,465,022 1,797,778



34 Reserves Contd.34.4 Revenue reserves34.4.1 Bank & Group - January 1, 2011 to December 31, 2011

Bank Subsidiary Subsidiary Group Investment Total Investment Retained Total General Fund Retained Revenue Fund Profits Revenue Reserve Account Profits Reserves Account Reserves Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Revenue reservesBalance as at 1st January 10,058,522 - 1,756,429 11,814,951 - 133,994 11,948,945

Adjustments (507) - - (507) - - (507)Net profit for the year - - 3,387,209 3,387,209 - 318,223 3,705,431AppropriationsFinal scrip dividend paid - 2010 (Note No. 9) - - (1,008,533) (1,008,533) - - (1,008,533)Non controlling Income (Note No. 35) - - - - - (22,150) (22,150)Surplus/(Reversal) on revaluation of property - - 59,693 59,693 - - 59,693Recognition of bargaining purchase on acquisition of non controlling interest - - - - - 50,487 50,487Transfer to statutory reserve fund (Note No.34.1.1) - - (190,971) (190,971) - (9,620) (200,591)Transfer to risk reserve fund (Note No. 34.1.2) - - (4,144) (4,144) - - (4,144)Transfer to general reserve 1,678,299 - (1,678,299) - - - -Transfer to investment fund account - 590,812 (590,812) - 12,841 (12,841) -Balance as at 31st December 11,736,313 590,812 1,730,572 14,057,697 12,841 458,092 14,528,631

363Sampath Bank PLC

34 Reserves Contd.34.4.2 Bank & Group - January 1, 2012 to December 31, 2012

Bank Subsidiary Subsidiary Group Investment Total Investment Retained Total General Fund Retained Revenue Fund Profits Revenue Reserve Account Profits Reserves Account Reserves Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Revenue reservesBalance as at 1st January 11,736,313 590,812 1,730,572 14,057,697 12,841 458,092 14,528,631

Adjustments (473) - 3,659 3,186 - - 3,186Net profit for the year - - 5,136,424 5,136,424 - 209,540 5,345,966AppropriationsFinal cash dividend paid - 2011 (Note No. 9) - - (713,479) (713,479) - - (713,479)Final scrip dividend Paid - 2011 (Note No.9) - - (713,505) (713,505) - - (713,505)Non controlling intrest (Note No. 35) - - - - - (3,342) (3,342)Surplus/(reversal) on revaluation of property - - 2,640 2,640 - - 2,640Transfer to statutory reserve fund (Note No.34.1.1) - - (256,821) (256,821) - (9,997) (266,818)Transfer to risk reserve fund (Note No. 34.1.2) - - (73,302) (73,302) - - (73,302)Transfer to general reserve 2,160,000 - (2,160,000) - - - -Transfer to investment fund account - 939,955 (939,955) - 17,163 (17,163) -Balance as at 31st December 13,895,840 1,530,768 2,016,232 17,442,841 30,004 637,131 18,109,976

34.4.3 Investment Fund AccountAs proposed in the Budget 2011, as and when taxes are paid after 1 January 2011, licensed banks shall make transfers to the Investment Fund Account to build up a permanent fund with in the bank as follows.

i) 8% of the profits calculated for the payment of Value Added tax (VAT) on financial services on dates as specified in the VAT Act for payment of VAT.ii) 5% of the profit before tax calculated for payment of income tax purposes on dates specified in section 113 of the Inland Revenue Act for the self

assessment payment of tax.

December 31 2012 December 31 2011 Bank Subsidiary Group Bank Subsidiary Group Total Investment Total Total Investment Total Amount Fund Amount Amount Fund Amount Account Account Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Utilization of Investment Fund Account (IFA)Balance available for utilization 1,530,768 30,004 1,560,772 590,812 12,841 603,653Loans granted (Capital outstanding) (1,355,696) (23,334) (1,379,030) (476,513) (7,790) (484,303)Total investments in Government Securities (Note No. 34.4.3) (175,072) (5,121) (180,193) (113,390) (4,011) (117,401)Balance available for utilization as at 31st December - 1,549 1,549 909 1,040 1,949


34 Reserves Contd.34.4 Revenue reserves Contd.34.4.3 Investment Fund Account

Interest Tenure Number of December Interest Number of Tenure Subsidiary Number of December rates Years Loans 31, 2012 rates Loans Years Amount Loans 31, 2012 % Granted Bank % Granted Outstanding Granted Group Total Total Amount Amount Outstanding Outstanding Rs’000 Rs’000 Rs’000

Total loans granted Sector(a) Cultivation of agriculture / plantation crops 14 - 14.45 5 - 6 6 68,853 11.55 - 17.22 9 5 23,334 15 92,187(b) Factory/mills modernisation 14 - 14.45 5 - 7 62 441,175 - - - - 62 441,175(c) Small and medium enterprises 14 - 14.45 5 - 7 73 455,128 - - - - 73 455,128(d) Information technology and BPO 14 - 14.45 5 1 725 - - - - 1 725(e) Infrastructure development 14 - 14.45 5 - 8 10 126,344 - - - - 10 126,344(f) Education 14 - 14.45 5 - 7 2 42,000 - - - - 2 42,000(g) Housing - - - - - - - -(h) Construction of hotels and related purposes 14 - 14.45 5 - 7 23 221,471 - - - - 23 221,471

(i) Restructuring of loans extended for above purposes - - - - - - - - 177 1,355,696 23,334 186 1,379,030

Face Year of Cost of December 31, Year of Cost of Subsidiaries December 31,

Value Maturity Investment 2012 Maturity Investment Carrying 2012

Bank value / Group

Carrying value / Amortised Carrying value /

Amortised cost Amortised

cost cost Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Investments in government securities(a) Treasury bonds over 5 years - - - - -(b) Treasury bills 180,000 2013 175,072 179,106 2013 5,121 5,341 180,193

The carrying value of the Treasury bills invested using IFA balance was classified as Available - for-sale asset

35 Non controlling interest

Group

December 31, December 31, 2012 2011

Balance as at 1st January 59,904 152,025Profit/(loss) applicable for the year 3,342 22,150Add :- Revaluation surplus - -Less :- Dividend paid (2,002) (490)Change in holding of share - (113,782)Balance as at 31st December 61,243 59,904


365Sampath Bank PLC

36 Commitments and contingenciesTo meet the financial needs of customers in the ordinary course of the business, the Bank enters into various irrevocable commitments and contingent liabilities. These consist of financial guarantees, letters of credit and other undrawn commitments to lend.

Even though these obligations may not be recognized on the Statement of Financial Position, they do contain credit risk and are therefore part of the overall risk of the Bank (Note 36.1)

Letters of credit and guarantees (including standby letters of credit) commit the bank to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Guarantees and standby letters of credit carry a similar credit risk to loans.

No material losses are anticipated as a result of these transactions.

36.1 Commitments

Bank Group


Commitment for unutilised facilities (direct advances) 27,340,066 25,295,333 22,968,058 27,543,721 25,295,333 22,968,058 27,340,066 25,295,333 22,968,058 27,543,721 25,295,333 22,968,058

36.2 Contingent liabilitiesAcceptances 6,308,188 5,126,187 3,133,328 6,308,188, 5,126,187 3,133,328Documentary credit 11,310,366 11,633,728 8,115,432 11,310,366 11,633,728 8,115,432Guarantees 21,993,951 18,171,501 13,069,829 21,993,951 18,171,501 13,069,829Bills sent for collection 129,388 70,410 154,878 129,388 70,410 154,878Stock on travelers’ cheques 352,396 411,568 334,661 352,396 411,568 334,661 40,094,289 35,413,394 24,808,129 40,094,289 35,413,394 24,808,129Forward exchange contracts 28,684,448 60,238,075 20,851,936 28,684,448 60,238,075 20,851,936Currency Swaps 19,806,940 - - 19,806,940 - - 88,585,677 95,651,469 45,660,065 88,585,677 95,651,469 45,660,065

Commitment and contingencies 115,925,743 120,946,802 68,628,122 116,129,398 120,946,802 68,628,122

36.3 Contingent liabilitiesLitigation against the BankLitigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing. At the year end, the Bank had several unresolved legal claims.

I. Before the Labour Tribunal :(a) Three LT applications are pending in Case No. LT1/ADD/20/2012, LT application now in High Court case No. HC ALT 14/2012, and LT application No.

1/31/2008 now pending in High Court Case No. LT (HC) 131/2008.

Il. Commercial High Court Case No. 11/2004 (1)/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 272,232,259.16 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.

The Judgement was delivered in favour of Sampath Bank on 20 January 2011 dismissing the Plaint of the Plaintiff with costs. Claremont Capital subsequently filed a notice of Appeal, and despite the motion filed by the Bank objecting for same on various grounds, the Appeal was allowed . The same is yet to be listed.


36 Commitments and contingencies Contd.lll. Following cases are filed against the Bank in order to recover damages(a) Case No - DMR 5787/10The plaintiff has instituted action against the Bank claiming a sum of Rs. 210,000/- for auctioning pawned articles by the Bank. Also the Plaintiff is seeking Legal interest from June 2010 until the payment of damages, legal interest from the date of Judgement until the payment of total amount.

(b) Case No -250/12/DSPThe Plaintiff has filed this action against the Bank claiming Rs. 1.0 Mn on the basis that he has tendered Omanian Rial 400/- for encashment. The relevant amount has been credited to his account. Subsequently the Bank realized the said currencies are not actual Omanian Rial but they are Omanina Baisa, where the value is very much lower than Omanian Rial. Accordingly Bank has reversed the said amount and credited only the value of the Baisa’s tendered by the customer. Bank has filed necessary papers to defend the case and it is hopeful that the Bank will succeed in this case since Bank has the currencies tendered by the customer for the encashment.

(c ) Case No -DMR 1904/2012The Plaintiff has allegedly instituted this action against the bank claiming a sum of Rs. 2,500,000/- as damages on the basis that the Bank has illegally handed over the Certificate of Registration pertaining to the Vehicle leased under the Lease Agreement No.L/0/16/SBL/Kuli, to the spouse and the consent letter given by the spouse is challenging in Courts.

(d) Case No -7058/DMRThe Plaintiff has allegedly instituted this action against the bank claiming a sum of Rs. 20,000,000/- on the basis that the Bank has increased the rate of interest in respect of the Housing Loan obtained by him and he suffered damages as a result of that. However the Letter of Offer confirms that the Bank has the right to increase the rate of interest.

(e) Case No -CHC 320/2011Plaintiff has instituted legal action against the bank (1st Defendant of the case) in order to obtain an order from the Commercial High Court of Western Province for the cancellation of resale of the property described in the plaint.

(f) Case No -58032/MRThe Plaintiff has filed this action against the Bank as well as the CRIB, claiming Rs. 100,000,000/- as damages, on the basis that his Company namely Jagath Robotics (Pvt) Ltd has been reported to the CRIB, under an irrelevant reference. Further plaintiff is claiming that it is due to our negligence. Bank is defending the above action and chances for the Plaintiff to succeed in this case are very remote.

(g) Case No -11938/M - Embilipitiya.Paintiff has instituted this action against the Bank claiming damages of Rs. 1,000,000/- for the payment of Rs. 100,000/- from a Savings Account, to a person who has forged the Plaintiff’s signature.

Iv. To prevent the Bank from enforcing the mortgages to recover its dues:(a) Nine actions have been filed in Supreme Court in Case Nos. SC/CHC 43/10, SC 19/10, SC 57/12, SC 94/12, SC 11/09, SC 196/11, SC 5/10, SC

14/11 & 24/2008SC.

(b) Four actions have been filed in Court of Appeal in Case Nos. CA/REV/690/2005, CALA/320/2001, CALA/48/2006 & CA/12/97(CA)

(c ) Eight actions have been filed in Civil Appeal in Case Nos. 53/11 CALA, 106/11 CALA, 172/12 LA, 43/2012 Rev, 12/06 (F), 218/05 (F), 20/04 (F) & 153/08(F)

(d) Five cases have been filed against the Bank in the Commercial High Court Case Nos. HC/CIVIL/124/2009, 463/11 MR, 225/12 MR, 41/12 MR & 11/12 MR

(e) Fourteen actions have been filed in District Court , Colombo by constituents in Case Nos. 21508/L, 101/11 DLM, 112/11 DSP, 231/09 DSP, 03/10DLM, 270/10 DSP, 89/11 DSP, 102/11 DSP, 39/12 DSP, 173/2012 DSP, 253/12 DSP, 05/10 DLM, 298/12/SPL & 212/12/DLM

(f) Three in DC Marawila in Case Nos. 1613/L, 1070/S,1747/L, one in DC Kurunegala in Case Nos. 7587/L, Two in DC Kandy in Case Nos. 228/10 DPA, 36599/MR, Two in DC Monaragala in Case Nos. 1655/SPL, 1691/SPL, one in DC Minuwangoda in Case No. 12/SPL, one in DC Chilaw in Case No. 4127/11/L, one in DC Kalutara in Case Nos. 4369/SPL, Two in DC Rathnapura in Case Nos. 26242/P,24208/P, Two in DC Avissawella in Case Nos. 26350/L, 25293/L, Two in DC Matale in Case Nos. 6257/L, 6048/L, one in DC Galle in Case No. 16381/L, Four in DC Gampaha in Case Nos. 1885/L, 127 MB, 4392/12/M, 2313/L, one in DC Batticaloa in Case No. 5487/L/11, one in DC Elpitiya in Case No. 298/12/SPL, one in DC Bandarawela in Case No. 302/SPL, one in DC Mt. Lavinia in Case No. 7171/12/M, one in DC Polonnaruwa in Case No. 14916/12/SPL & one in DC Moratuwa in Case No. 259/12/DSP.


367Sampath Bank PLC

36 Commitments and contingencies Contd.36.4 Capital expenditure approved by the Board of Directors, for which provisions have not been made in these accounts, amounted to approximately;

Bank Group

December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Approved and contracted for 156,210 254,682 166,338 156,210 254,682 166,338Approved but not contracted for 66,080 202,035 271,509 66,080 202,035 271,509 222,290 456,717 437,847 222,290 456,717 437,847

37 Related party disclosuresThe bank Carries out transactions in the ordinary course of business on an arm’s length basis at commercial rates with the parties who are defined as Lanka accounting standard No.24 Related party Disclosure , Except for the transactions that key management personal (KMPs) have availed under schemes uniformly applicable to all the staff at concessionary rate.

37.1 Parent and Ultimate Controlling PartyThe bank does not have an identifiable parent of its own.

37.2 Transactions with key Management Personal (KMPs)Related party includes KMPs defined as those persons having authority and responsibility for planning directing and controlling the activities for the Bank and its subsidiaries. Such KPMs include the board of directors of the bank (include executive and non executive directors ), Key employee who are holding directorship in subsidiary companies of the bank,executives who directly report to Board sub committees and other key executives who meet the criteria described above

37.2.1 Transactions with KMPs

2012 2011 Rs.’000 Rs.’000Short term Employee benefits 95,431 22,076 Termination benefits 22,006 - Post- employee benefits 11,822 24,884 Directors Fees & Expenses 37,985 14,585Total 167,244 61,545

In addition to the above, the bank has also paid non cash benefits such as vehicles and fuel to key management personnel in line with the approved benefit plan of the bank. In the year 2012, in addition to the board of directors of the bank, All the members of the staff in the grade of Deputy General Manager and above of the bank and all the members of the Senior and the Corporate Management who report direct to the Board of Directors or to board Sub Committees were included to the key Management Personnel. However 2011 Bank only included the Board of Directors as Key Management Personnel and hence the comparatives does not carried their figures.

37.2.2 Vehicles Transferred During the year following vehicles which were used by Key Management personnel were transferred to them.

Cost of vehiclespurchased

Net Book Value Market value as at transferred date

Transferred value

Rs’000 Rs’000 Rs’000 Rs’000

10,485 - 9,100 2,357



37.3 Transactions, Arrangements and Agreements involving KMPs, their Close Family Members (CFMs)CFMs of a KMPs are those family members who may be expected to influence,or be influenced by, that KMP in their dealing with the entity. They may include KMPs domestic partner and children, children of the KMPs domestic partner and dependents of the KMP or the KMPs domestic partner.

37 Related party disclosures37.3.1 Loans & receivables to key managerial personnel and their close family members are detailed below.


Limit Balances Limit Balances as at as at Rs’000 Rs’000 Rs’000 Rs’000

Loans & receivables 60,044 46,107 4,023 338

37.3.2 Credit card facilities to key managerial personnel and their close family members are detailed below.


Limit Balances Limit Balances as at as at Rs’000 Rs’000 Rs’000 Rs’000

Credit Card 13,775 2,553 8,375 808

37.3.3 Deposits and investments from key managerial personnel and their close family members are detailed below.

December 31 2012 December 31, 2011 Rs’000 Rs’000

Deposits and Investments 252,710 194,708

37.3.4 Share Based payments to KMPs


Share Based payments 9,624 -

37.4 Transactions, Arrangements, and Agreements involving Entities which are controlled, and /or jointly controlled by the KMPs or their CFMs


Loans & receivables 1,331,610 1,119,592Documentary Credits 453,720 236,883Bills of acceptance 447,730 121,760Guarantees 25,500 34,390Commercial Papers 451,000 -Total 2,709,560 1,512,625

369Sampath Bank PLC

37.4.1 Goods and Service purchased During the Year, the Bank purchased the goods and service from the entities where key managerial personnel have either control and/or jointly control. December 31 2012 December 31 2011

Rs’000 Rs’000

Goods and Service purchased 32,301 26,200

37 Related party disclosures Contd.37.5 Transactions with subsidiariesThe Bank had the following financial dealings during the year with related parties.

December 31, December 31, 2012 2011 Nature of Balance Balance Facility / Outstanding Outstanding Subsidiary company Transaction Rs’000 Rs’000

Sampath Centre Ltd. Deposits 132,910 81,372 Loans & receivables 1,043 - Income & fees received 61,200 2,768 Expenses & fees paid 228,031 217,632 Other assets 62,754 64,824 Other liabilities 5,964 4,893

S C Securities (Pvt) Ltd. Loans & receivables 47,675 35,062 Off - balance sheet accommodations 1,750 1,750 Deposits 17 16 Repo Borrowings 9,765 9,122 Income & fees received 15,918 13,202 Expenses & fees paid 325 2,368

Sampath Leasing & Factoring Ltd. Loans & receivables 993,633 1,509,991 Income & fees received 216,539 109,356 Expenses & fees paid 20,562 - Other Liabilities 92,588 - Commercial Papers 291,283 -

Sampath Information Technology Solutions Ltd. Loans & receivables 65,978 7,639 Expenses & fees received 6,358 1,440 Expenses & fees paid 55,827 27,491 Other Liabilities 6,758 2,226

37.6 Transactions with post employment benefits of the Bank

December 31, December 31, Nature of Transaction 2012 2011 Rs’000 Rs’000 Sampath Bank Employees Provident Fund Treasury Bills - 197,391 Reverse Repo - 37,555 Deposits 5,111,488 2,703,559 Debentures 147,750 72,035 Investment in Sampath Bank Shares - Market Value - 1,524,179

Sampath Bank Employees Pension Fund Deposits 1,739,604 1,265,244 Treasury Bills 518,768 967,811 Reverse Repo 1,136,000 657,000 Debentures 21,282 - Investment in Sampath Bank Shares - Market Value 532,326 505,974


38 Segment informationFor management purposes, the group is organised into four operating segments based on services offered to customers as follows .

The following table presents income and profit and certain asset and liability information regarding the bank’s operating segments.

Banking Leasing Dealing / Investment

2012 2011 2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Interest 31,111,476 20,510,128 - - 1,164 1,493Leasing - - 1,804,029 1,156,417 - -Dividend 156,276 44,039 - - - -Commissions 2,803,755 2,648,034 39,695 23,570 33,274 124,354Exchange 2,153,812 837,369 - - - -Others 1,797,750 2,936,679 38,826 29,929 162 2,347Total revenue from external customers 38,023,069 26,976,249 1,882,550 1,209,916 34,600 128,195Inter segment revenue (125,204) (96,139) 125,204 96,139Total revenue 37,897,865 26,880,110 1,882,550 1,209,916 159,803 224,334

Segment result 8,345,195 5,869,937 323,634 285,673 (37,669) 39,638Finance VAT - - - - - -Profit from operationsIncome tax expenseProfit for the year - - - - - -Minority InterestProfit attributable to equity holders - - - - - -

Segment assets 303,133,242 242,609,688 11,358,580 8,599,434 289,527 325,573Unallocated assetsTotal assets 303,133,242 242,609,688 11,358,580 8,599,434 289,527 325,573

Segment liabilities 278,032,394 221,709,572 10,482,057 7,903,192 87,713 103,658Unallocated liabilitiesTotal liabilities 278,032,394 221,709,572 10,482,057 7,903,192 87,713 103,658

Cash flows from operating activities 6,682,081 (1,813,727) (1,430,975) (2,181,022) (11,870) (58,573)Cash flows from investing activities (11,909,428) 368,080 (97,411) (8,399) (630) (8,132)Cash flows from financing activities 8,374,111 11,471,637 1,470,633 2,249,995 - -Capital expenditure 864,198 889,596 12,052 11,519 630 10,322


371Sampath Bank PLC

Other Eliminations Total

2012 2011 2012 2011 2012 2011 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000 Rs’000

Interest 6,773 3,615 (211,423) (106,330) 30,907,990 20,408,906Leasing - - - - 1,804,029 1,156,417Dividend - - (79,155) (15,102) 77,121 28,937Commissions - - - - 2,876,724 2,795,959Exchange - - - - 2,153,812 837,369Others 244,158 236,401 (175,474) (165,189) 1,905,422 3,040,166Total revenue from external customers 250,931 240,016 (466,052) (286,621) 39,725,096 28,267,755Inter segment revenue - - - - - -Total revenue 250,931 240,016 (466,052) (286,621) 39,725,096 28,267,755

Segment result 126,077 114,762 (87,950) (16,780) 8,678,287 6,293,230Finance VAT - - - - (1,160,808) (917,691)Profit from operations - - - - - -Income tax expense - - - - (2,171,514) (1,670,106)Profit for the year - - - - 5,345,964 3,705,433Minority Interest - - - - (3,342) (22,150)Profit attributable to equity holders - - - - 5,342,623 3,683,282

Segment assets 2,317,462 2,203,532 (2,772,810) (2,743,508) 314,326,004 250,994,723Unallocated assetsTotal assets 2,317,462 2,203,532 (2,772,810) (2,743,508) 314,326,004 250,994,723

Segment liabilities 161,297 99,731 (1,712,889) (1,688,588) 287,050,577 228,127,566Unallocated liabilities Total liabilities 161,297 99,731 (1,712,889) (1,688,588) 287,050,577 228,127,566Cash flows from operating activities 140,911 137,264 (225,027) 920,954 5,155,120 (2,995,105)Cash flows from investing activities (83,746) (32,466) 10,434 42,852 (12,080,781) 361,955Cash flows from financing activities (10,042) (91,289) 237,549 (961,401) 10,072,251 12,668,942Capital expenditure 83,746 32,446 718 835,309 961,345 943,326

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects is measured differently from operating profit or loss in the consolidated financial statements. Income taxes are managed on a group basis and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

No revenue from transactions with a single external customer or counterparty amounted to 10% or more of the bank’s total revenue in 2012 , 2011 or 2010.


39 Trust activitiesEmployees’ 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 was 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 TrustTrustees SSP Corporate Services (Pvt) Ltd Varners International (Pvt) Ltd Corporate Services Ltd

December 31, December 31, January 1, December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 2012 2011 2011(Rs ‘000)Loan amount - - 173,620 - - 169,689 - - 175,119Balance at beginning of the year - - 93,059 - - 100,304 - - 106,796Additions - - 2,220 - - 840 - - 671Repayments during the year - - (95,279) - - (101,144) - - (107,467)Balance at end of the year - - - - - - - - -Number of shares (‘000) 5,336 5,215 5,721 5,725 5,595 5,469 5,989 5,853 5,097Market price as at 31st December (Rs.) 200.50 195.00 271.90 200.50 195.00 271.90 200.50 195.00 271.90Market value of the shares held (Rs.’000) 1,069,805 1,016,844 1,555,540 1,147,866 1,091,041 1,487,021 1,200,825 1,141,378 1,385,874

Under the restructuring of ESOP 2000, part of the shares held by the ESOP was sold and the loans were settled with the proceeds. The remaining shares were reallocated to the eligible staff. Further, rules were amended to transfer the absolute ownership of shares to the staff at the point of leaving

40 Events After the Reporting PeriodNo circumstances have arisen since the reporting date which would require adjustments to, or disclosure in the financial statements, other than the following.

Final dividend of Rs.12.00 per share , less 10.0% withholding tax will be paid, if the proposal is approved by the shareholders at the annual general meeting to be held on April 04, 2013. This will be paid by 50% in the form of cash dividend and balance 50% in the form of scrip dividend which will be declared at the annual general meeting.

However, in accordance with LKAS 10 on Events after the reporting period, proposed final Dividend have not been recognised as a liability as at 31st December 2012. As required by section 56(2) of the Companies Act No. 7 of 2007, the Board of Directors has confirmed that the Bank has satisfied the ‘Solvency Test’ in accordance with section 57 of the Companies Act No. 7 of 2007, having obtained a certificate from the auditors, prior to recommending the final dividend for the year.

41 Fair value of Financial InstrumentsFinancial instruments recorded at fair valueThe following is a description of how fair values are determined for financial instruments that are recorded at fair value using valuation techniques. These incorporate the bank’s estimate of assumptions that a market participant would make when valuing the instruments.

Derivatives - assets and liabilitiesDerivative products are foreign exchange contract swaps and forward foreign exchange contracts, valued using a valuation technique with market-observable inputs . The most frequently applied valuation techniques include forward foreign exchange spot and forward premiums.

Financial investments – Available- For- SaleAvailable - for - sale financial assets, primarily consist of quoted equities and Government debt securities are valued using valuation techniques or pricing models. These assets are valued using models that use observable data. Government debt securities are valued using yield curves published by the Central Bank of Sri Lanka and quoted equities are valued using quoted market prices in the active markets as at the reporting date.

Trading assets and other assets measured at fair valueTrading assets and other assets measured at fair value are the government debt securities ,asset–backed securities and quoted equities. Government debt securities and asset-back securities are valued using yield curves published by the Central Bank of Sri Lanka . For quoted equities bank uses quoted market price in active markets as at the reporting date.


373Sampath Bank PLC

41 Fair value of Financial Instruments Contd.Determination of fair value and fair value hierarchyFor all financial instruments where fair values are determined by referring to externally quoted prices or observable pricing inputs to models, independent price determination or validation is obtained. In an inactive market, direct observation of a traded price may not be possible. In these circumstances, the Bank uses alternative market information to validate the financial instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable.

Fair values are determined according to the following hierarchy:

Level 1 – quoted market price (unadjusted): financial instruments with quoted prices in active markets.

Level 2 – valuation technique using observable inputs: financial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments are valued using models where all significant inputs are observable.

Level 3 – valuation technique with significant unobservable inputs: financial instruments are valued using valuation techniques where one or more significant inputs are unobservable.

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

December 31, 2012 Bank Group

Rs’000 Rs’000

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assetsDerivative financial instruments Foreign exchange contracts swaps - 227,812 - 227,812 - 227,812 - 227,812 Forward foreign exchange contracts - 51,210 - 51,210 - 51,210 - 51,210 - 279,022 - 279,022 - 279,022 - 279,022

Financial assets held for trading Government debt securities 34,182,709 - - 34,182,709 34,182,709 - - 34,182,709 Quoted equities 998,375 - - 998,375 998,375 - - 998,375 Financial assets held-for-trading pledged as collaterals 2,856,321 - - 2,856,321 2,856,321 - - 2,856,321 38,037,405 - - 38,037,405 38,037,405 - - 38,037,405

Financial investments available for sale Quoted investments 1,721,339 - - 1,721,339 1,721,339 - - 1,721,339 Government debt securities 179,175 - - 179,175 179,175 - - 179,175 1,900,515 - - 1,900,515 1,900,515 - - 1,900,515 39,937,920 279,022 - 40,216,941 39,937,920 279,022 - 40,216,941

Financial liabilitiesDerivative financial instruments Foreign exchange contracts swaps - 316,301 - 316,301 - 316,301 - 316,301 Forward foreign exchange contracts - 65,537 - 65,537 - 65,537 - 65,537 - 381,838 - 381,838 - 381,838 - 381,838


41 Fair value of Financial Instruments Contd.


Rs’000 Rs’000

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assetsDerivative financial instruments Forward foreign exchange contracts 203,732 203,732 203,732 203,732 - 203,732 - 203,732 - 203,732 - 203,732

Financial assets held for trading Government debt securities 21,769,607 - - 21,769,607 21,769,607 - - 21,769,607 Quoted equities 1,283,380 - - 1,283,380 1,283,380 - - 1,283,380 Financial assets held-for-trading pledged as collaterals 4,002,777 - - 4,002,777 4,002,777 - - 4,002,777 27,055,764 - - 27,055,764 27,055,764 - - 27,055,764

Financial investments available for sale Quoted investments 1,890,301 - - 1,890,301 1,890,301 - - 1,890,301 Government debt securities 111,830 - - 111,830 111,830 - - 111,830 2,002,131 - - 2,002,131 2,002,131 - - 2,002,131 29,057,895 203,732 - 29,261,626 29,057,895 203,732 - 29,261,626

Financial liabilitiesDerivative financial instruments Forward foreign exchange contracts - 310,966 - 310,966 - 310,966 - 310,966 - 310,966 - 310,966 - 310,966 - 310,966

There were no transfers between Level 1 and Level 2 during 2011 & 2012.

Set out below is a comparison of the carrying amounts and fair values of the bank’s financial instruments by classes, that are not carried at fair value in the financial statements. This table does not include the fair values of non–financial assets and non–financial liabilities.

December 31, 2012 Bank Group Carrying Fair Carrying Fair Amount value Amount value Rs’000 Rs’000 Rs’000 Rs’000

Financial assetsCash and cash equivalents 10,432,135 10,432,135 10,442,259 10,442,259Balances with Central Bank of Sri Lanka 17,200,792 17,200,792 17,200,792 17,200,792Placements with Banks 8,788,127 8,788,127 8,788,127 8,788,127Reverse repurchase agreements 3,300,817 3,300,817 3,300,373 3,300,373Loans and receivables from banks 816,119 816,119 816,119 816,119Loans and receivables from other customers 208,184,369 207,886,978 212,480,040 211,958,144Other loans & receivables 10,515,756 10,515,756 10,224,474 10,224,474Financial investmentsheld - to- maturity - - 9,765 9,765Other assets 1,399,091 1,399,091 1,858,276 1,858,276 260,637,206 260,339,815 265,120,224 264,598,329

Financial LiabilitiesDue to banks 624,784 624,784 668,198 668,198Securities sold under re-purchase agreements 2,757,119 2,757,119 2,751,334 2,751,334Due to other customers 243,330,990 242,738,246 243,088,234 242,495,493Debt issued and other borrowed funds 28,825,029 28,825,029 32,218,014 32,218,014Unclaimed Dividend 49,185 49,185 49,185 49,185Other liabilities 71,448 71,448 71,448 71,448 275,658,555 275,065,811 278,846,413 278,253,672


375Sampath Bank PLC

41 Fair value of Financial Instruments Contd.


Carrying Fair Carrying Fair Amount value Amount value Rs’000 Rs’000 Rs’000 Rs’000Financial assetsCash and cash equivalents 10,736,413 10,736,413 10,746,713 10,746,713Balances with Central Bank of Sri Lanka 13,232,130 13,232,130 13,232,130 13,232,130Due from Banks 5,337,084 5,337,084 5,337,084 5,337,084Reverse repurchase agreements 4,601,965 4,601,965 4,606,010 4,606,010Loans and receivables from banks 441,938 441,938 441,938 441,938Loans and receivables to other customers 169,681,372 169,534,164 171,976,936 171,783,274Other loans & receivables 5,736,278 5,736,278 5,736,278 5,736,278Financial investmentsheld - to- maturity 10,289 10,289 19,411 19,411Other assets 1,038,607 1,038,607 1,512,048 1,512,048 210,816,076 210,668,868 213,608,548 213,414,886

Financial Liabilities Due to banks 1,175,672 1,175,672 1,175,672 1,175,672Securities sold under re-purchase agreements 4,100,862 4,100,862 4,100,862 4,100,862Due to other customers 195,195,074 193,690,687 195,094,358 193,589,971Debt issued and other borrowed funds 19,754,221 19,754,221 21,490,478 21,490,478Unclaimed Dividend 37,173 37,173 37,173 37,173Other liabilities 78,214 78,214 78,214 78,214 220,341,216 218,836,829 221,976,757 220,472,370

Fair value of financial assets and liabilities not carried at fair valueThe following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the financial statements:

Assets for which fair value approximates carrying valueFor financial assets and financial liabilities that have a short term maturity it is assumed that the carrying amounts approximate their fair value. This assumption is also applied to demand deposits, and savings accounts which do not have a specific maturity.

Fixed rate financial instrumentsThe fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money–market interest rates for debts with similar credit risk and maturity. For quoted debt issued the fair values are determined based on quoted market prices. For notes issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity and credit spreads. For other variable rate instruments, an adjustment is also made to reflect the change in required credit spread since the instrument was first recognised.

Reclassification of financial assetsThere have been no reclassifications during 2011 & 2012.

42 Risk Management42.1 Introduction Risk is inherent in the Bank’s activities but is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Bank’s continuing profitability and each individual within the Bank is accountable for the risk exposures relating to his or her responsibilities. The Bank is mainly exposed to;

Credit Risk Liquidity risk Market risk Operational risk


42 Risk Management Contd.Risk Management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has delegated its authority to Board Risk Management Committee(BRMC) which is responsible for developing and monitoring Bank’s risk management policies. The Committee comprises of executive and non-executive directors . Meetings of BRMC are held regularly, and the Board of Directors are duly updated of its activities. In 2012, the Board instituted an additional committee (Treasury Committee) to increase the focus on Treasury-related operations and risks. The Committee comprises of executive and non-executive directors and concentrates mainly on liquidity management, Balance Sheet optimization and new products/services. The Treasury Committee’s deliberations are informed to the BRMC and the Board of Directors. The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor adherence to established limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank , through its training and management standards and procedures, continuously updates and maintains a disciplined and constructive control environment, in which all employees are assigned and made to understand their respective roles and responsibilities.

Integrated Risk Management UnitThe Business units(i.e. Credit Departments, Branches & Regional Offices, Treasury etc.) have primary responsibility for Risk Management. The Integrated Risk Management Unit, which has no responsibility for profit or volume targets, acts as the 2nd line of defence and reports to the Group Chief Risk Officer (GCRO) who, in turn, directly reports to the Board Risk Management Committee (BRMC).

ALCO Committee ALCO is chaired by the Managing Director and has representatives from Treasury Department, Credit Departments, Finance Department, the Group Chief Financial Officer & the Group Chief Risk Officer. The Committee meets regularly to monitor and manage the assets & liabilities of the Bank and also overall liquidity position to keep the Bank’s liquidity at healthy levels, whilst satisfying regulatory requirements.

Risk Measurement & ReportingThe Bank’s Risks are measured using appropriate techniques based on the type of risk, and industry best practices. The bank also carries out Stress Testing to identify the effect of extreme events/worst case scenarios in most of the major type of risks and the results are reported to Board Risk Management Committee on a periodic basis. Monitoring and controlling risks is primarily performed based on policies, limits & thresholds established by the Bank. These limits reflect the business strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept (Risk Appetite).

Risk MitigationAs part of its overall risk management, the bank obtains various types of collaterals to mitigate the risk. Details such as nature of the collateral that could be accepted, required security margin etc are clearly defined in the Credit Policy of the Bank and any deviations require specific approval. However, respective approving authorities would take into account the availability of security only as the secondary source of repayment.

42.2 Credit risk Credit risk is the risk of financial loss to the Bank if a borrower or counterparty to a financial instrument, fails to meet its contractual obligations, and arises principally from the Bank’s loans and advances to customers/other banks and investments in debt securities. In addition to the credit risk from direct funding exposure, the bank would also be exposed to indirect liabilities such as Letters of Credit, guarantees etc, which would carry credit risk.

The Bank considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector concentration risks) to ensure stringent Credit Risk Management.

42.2.1 Impairment assessment The methodology of the impairment assessment has explained in the Note no 3.5.9 under Accounting Policies.

Derivative financial instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded on the Statement of Financial Position. With gross–settled derivatives, the Bank is also exposed to a settlement risk, being the risk that the Bank honors its obligation, but the counterparty fails to deliver the counter value

42.2.2 Credit–related commitments risks The Bank makes available to its customers guarantees that may require that the Bank makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of credit and guarantees (including standby letters of credit) commit the Bank to make payments on behalf of customers in the event of a specific act, generally related to the import or export of goods. Such commitments expose the Bank to risks similar to loans and are mitigated by the same control processes and policies.


377Sampath Bank PLC

42.2.3 Collateral and other credit enhancements The amount and type of collateral required depends on an assessment of the credit risk of the counterparty.Guidelines are in place covering the acceptability and valuation of each type of collateral.

The main types of collateral obtained are, as follows:> For commercial lending, charges over real estate properties, inventory and trade receivables> For retail lending, mortgages over residential properties

The Bank also obtains guarantees from parent companies for loans to their subsidiaries.Management monitors the market value of collateral and will request additional collateral in accordance with the underlying agreement.It is the Bank’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Bank does not occupy repossessed properties for Business use.

42.2.4 Credit quality by class of financial assets The Bank manages the credit quality of financial assets using internal credit ratings. The table below shows thecredit quality by class of asset for all financial assets exposed to credit risk, based on the Bank’s internal creditrating system. The amounts presented are gross of impairment allowances.

Definition of Past Due Bank consider that any amounts uncollected one day or more beyond their contractual due date are ‘past due’.

42.2.5 Credit Risk - Credit Quality by class of Financial Assets.

December 31, 2012

Bank Rs.’000 Neither past due nor impaired

High Standard Sub-standard Un Rated Past due but Individually grade grade grade not impaired impaired Total Cash and cash equivalents 10,398,140 33,995 - - - - 10,432,135 Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792 Placements with Banks 7,624,375 1,163,751 - - - - 8,788,127 Reverse repurchase agreements 3,300,817 - - - - - 3,300,817 Derivative Financial Instruments 279,022 - - - - - 279,022 Financial assets held -for- trading 34,786,299 287,108 107,677 - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans and receivables from banks - 826,674 - - 1,943 - 828,617 Loans and receivables from other customers 85,167,320 36,007,948 7,666,737 9,802,683 72,385,632 4,153,004 215,183,322 Other loans & advances 9,006,633 - - 1,509,123 - - 10,515,756 Financial investments available for sale - Quoted - Government debt securities 179,175 - - - - - 179,175 Quoted - Other equity securities - - 1,686,021 - - 1,686,021 Unquoted - equity securities - - 58,428 - - 58,428 Other assets - - - 1,399,091 - - 1,399,091 Total 170,798,894 38,319,476 7,666,737 14,563,022 72,387,575 4,153,004 307,888,707


42 Risk Management Contd.42.2.6 Aging Analysis of past due(i.e. facilities in arrears of 1 day and above) but not impaired loans by class of Financial Assets

Bank Past due but not impaired

Less than 31 to 60 61 to 90 More than 30 days days days 91 days Total

Loans and receivables from banks 1,943 - - - 1,943Loans and receivables from other customers 48,059,685 8,205,755 12,667,203 3,452,989 72,385,632 TOTAL 48,061,628 8,205,755 12,667,203 3,452,989 72,387,575

42.2.7 Credit Risk - Credit Quality by class of Financial Assets

December 31, 2012

Group Rs.’000 Neither past due nor impaired

High Standard Sub-standard Un Rated Past due but Individually grade grade grade not impaired impaired Total Cash and cash equivalents 10,398,351 43,908 - - - - 10,442,259 Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792 Placements with Banks 7,624,375 1,163,751 - - - - 8,788,127 Reverse repurchase agreements 3,300,373 - - - - - 3,300,373 Derivative Financial Instruments 279,022 - - - - - 279,022 Financial assets held -for- trading 34,786,299 287,108 - 107,677 - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans and receivables from banks - 826,674 - - 1,943 - 828,617 Loans and receivables from other customers 84,194,141 36,007,948 7,666,734 14,233,476 73,281,865 4,206,565 219,590,729 Other loans & advances 8,715,351 1,509,123 10,224,474

Financial investments available for sale Quoted - Government debt securities 179,175 - - - - 179,175 Quoted - Other equity securities - - 1,686,021 - - 1,686,021 Unquoted - equity securities - - 58,484 - - 58,484

Financial investments held to maturity - Quoted - Government debt securities 9,765 - - - - 9,765 Other assets 1,558,102 300,174 1,858,276 Total 169,543,966 38,329,388 7,666,734 19,152,882 73,283,808 4,506,739 312,483,517

42.2.8 Aging Analysis of Past due but not impaired loans by class of Financial Assets

past due but not impaired

Group Less than 31 to 60 61 to 90 More than 30 days days days 91 days Total

Loans and receivables from banks 1,943 - - - 1,943Loans and receivables from other customers 48,543,126 8,450,802 12,705,415 3,582,523 73,281,865 TOTAL 48,545,068 8,450,802 12,705,415 3,582,523 73,283,808

42.2.9 Credit Risk exposure for each internal credit risk rating It is the Bank’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of qualitative as well as quantitative variables for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the bank’s Rating Policy. The risk ratings of the business borrowers are updated at least annually or earlier if required. The table below shows the Bank internal credit rating of the Loans and advances to banks and Loans and advances to other customers.


379Sampath Bank PLC

Credit Risk exposure for each internal credit risk ratingDecember 31, 2012

Rs.’000

Bank's internal Credit rating Bank Rating Fitch Rating equivalent grade Historical Default Rate 2012

Total

High Grade

Risk Rating Class 1 A+ AAA - AA+ 0.31 5,729,576

Risk Rating Class 2 A AA - AA- 0.46 8,158,629

Risk Rating Class 3 A- A+ - A 0.59 20,107,485

Risk Rating Class 4 B+ A- - BBB+ 1.95 13,549,461

Pawning (Secured Against Gold) 54,946,225

Standard Grade

Risk Rating Class 5 B BBB - BBB- 0.84 33,538,712

Risk Rating Class 6 B- BB+ - BB 1.95 15,609,176

Risk Rating Class 7 C+ BB- - B+ 1.60 25,162,285

Sub- Standard grade

Risk Rating Class 8 C B - B- 1.71 12,096,134

Risk Rating Class 9 C- CCC - CC 1.73 3,646,729

Unrated 1.08 19,554,764

Impaired

Risk Rating Class 10 D C - D 1.37 3,912,763

Total 216,011,939

42.2.10 Analysis of Risk Concentration Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other credit enhancements . The Concentration risk is monitored/managed through borrower/group, Sector , product etc. Maximum exposure to a Company and group as at the reporting date was Rs. 3,937Mn (funded & non-funded) & Rs. 5,915Mn(funded & non-funded) respectively. The following table shows the maximum exposure to credit risk for the components of the Statement of Financial Position, including geography of counterparty, and sector.


42.2.10.1 Country Risk - Geographical Analysis

December 31, 2012

Bank Rs.’000

Middle Sri Lanka Europe Americas Asia Pacific East & Africa Total Financial Assets Cash and cash equivalents 8,157,221 1,187,296 178,341 903,195 6,083 10,432,135 Balances with Central Bank of Sri Lanka 17,200,792 17,200,792 Placements with Banks 25 924,034 2,142,763 5,721,305 8,788,127 Reverse repurchase agreements 3,300,817 3,300,817 Derivative financial instruments 200,731 253 77,511 526 279,021 Other financial investments held for trading 35,181,084 - - - - 35,181,084 Held for trading pledging as collateral 2,856,321 - - - - 2,856,321 Loans and receivables from banks 816,119 816,119 Loans and receivables from other customers** 205,650,774 77,722 12,744 697,368 1,745,761 208,184,369 Other loans & advances 10,515,756 10,515,756 Other financial investments available for sale 202,285 - - 1,721,339 - 1,923,624 Other financial investments held to maturity - - - - - - Other assets 1,399,091 1,399,091 285,481,016 2,189,305 2,411,359 9,043,733 1,751,844 300,877,256

**Provincial breakdown for Loans and receivables from other customers within Sri Lanka

Province TotalCentral 9,719,171 Eastern 5,775,007 North Central 5,777,983 North Western 9,677,606 Northern 6,473,367 Sabaragamuwa 5,380,717 Southern 11,262,684 Uva 3,273,863 Western 148,310,375 Total 205,650,774


381Sampath Bank PLC

42. Risk Management Contd .....42.2.10.2 Country Risk - Geographical Analysis Contd ....

December 31, 2012

Group Rs.’000

Middle Sri Lanka Europe Americas Asia Pacific East & Africa Total Financial Assets Cash and cash equivalents 8,167,344 1,187,296 178,341 903,195 6,083 10,442,259 Balances with Central Bank of Sri Lanka 17,200,792 17,200,792 Placements with Banks 25 924,034 2,142,763 5,721,305 8,788,127 Reverse repurchase agreements 3,300,373 3,300,373 Derivative financial instruments 200,731 253 77,511 526 279,022 Other financial investments held for trading 35,181,084 - - - - 35,181,084 Held for trading pledging as collateral 2,856,321 - - - - 2,856,321 Loans and receivables from banks 816,119 816,119 Loans and receivables from other customers** 209,946,446 77,722 12,744 697,367 1,745,761 212,480,040 Other loans & advances 10,224,474 10,224,474 Other financial investments available for sale 202,341 - - 1,721,339 - 1,923,680 Other financial investments held to maturity 9,765 - - - - 9,765Other assets 1,858,276 1,858,276 289,964,090 2,189,305 2,411,359 9,043,732 1,751,844 305,360,330

**Provincial breakdown for Loans and receivables from other customers within Sri Lanka

Province TotalCentral 11,159,908 Eastern 7,116,714 North Central 5,987,911 North Western 10,723,463 Northern 6,526,017 Sabaragamuwa 5,583,497 Southern 11,827,562 Uva 3,273,863 Western 147,747,512 Total 209,946,446


42.2.10.3 Industry Analysis The following table shows the risk concentration by industry for the components of the Statement of Financial Position.

December 31, 2012

Bank Rs.’000

Agriculture & Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Fishing Financial and Services Business Services Financial Assets Cash and cash equivalents - - - - - - 10,432,135 - - - 10,432,135 Balances with Central Bank of Sri Lanka - 17,200,792 17,200,792 Placements with Banks - - - - - - 8,788,127 - - - 8,788,127 Reverse repurchase agreements - - - - - - 3,300,817 - - - 3,300,817 Derivative Financial instruments 279,022 279,022 Financial assets held for trading Government debt securities - - - - - - 34,182,709 - - - 34,182,709 Quoted equities - 10,237 14,291 - 4,853 282,474 686,522 - - - 998,375 Financial assets held-for-trading pledged as collaterals 2,856,321 2,856,321 Loans and receivables from banks 1,943 814,176 816,119 Loans and receivables from other customers 23,211,855 28,146,897 7,132,717 2,617,179 20,710,856 40,352,210 11,271,224 47,061 6,613,877 6,474,852 61,605,642 208,184,369 Other loans & advances 458,159 726,016 2,173,931 7,157,650 10,515,756 Financial investments available for sale Government debt securities - - - - - - - 179,175 - - - 179,175 Other equity securities - - - - - - 1,744,448 - - - - 1,744,448 Other assets 1,399,091 - 1,399,091 Total 23,670,014 28,157,133 7,147,008 2,617,179 20,715,709 41,360,700 42,933,580 59,581,563 6,613,877 6,474,852 61,605,642 300,877,256

42.2.10.4 Industry Analysis The following table shows the risk concentration by industry for the components of the Statement of Financial Position.

December 31, 2012

Group Rs.’000

Agriculture & Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Fishing Financial and Services Business Services

Financial Assets Cash and cash equivalents - - - - - - 10,442,259 - - - - 10,442,259 Balances with Central Bank of Sri Lanka - 17,200,792 17,200,792 Placements with Banks - - - - - - 8,788,127 - - - - 8,788,127 Reverse repurchase agreements - - - - - 3,300,373 - - - - 3,300,373 Derivative Financial instruments - - - - - - 279,022 - - - - 279,022 Financial assets held for trading Government debt securities - - - - - - 34,182,709 - - - 34,182,709 Quoted equities - 10,237 14,291 - 4,853 282,474 686,522 - - - 998,375 Financial assets held-for-trading pledged as collaterals 2,856,321 2,856,321 Loans and receivables from banks 1,943 814,176 816,119 Loans and receivables from other customers 23,756,524 28,146,897 7,132,718 2,752,208 20,888,013 42,325,045 11,271,224 47,061 6,613,877 9,045,289 60,501,186 212,480,041 Other loans & advances 458,159 - - - - 726,016 1,882,648 7,157,650 - - - 10,224,474 Financial investments available for sale Government debt securities - - - - - - - 179,175 - - - 179,175 Other equity securities - - - - - - 1,744,504 - - - - 1,744,504 Financial investments held to maturity - - - - - - 9,765 - - - - 9,765 Other assets 1,858,276 1,858,276 Total 24,214,683 28,157,133 7,147,008 2,752,208 20,892,866 43,333,535 43,120,984 59,581,563 6,613,877 9,045,289 60,501,186 305,360,332


383Sampath Bank PLC

42.2.11 Commitments and ContingenciesTo meet the financial needs of customers, the Bank enters into various commitments and contingent liabilities. Even though these obligations may not be recognised on the Statement of Financial Position, they do contain credit risk and are, therefore, part of the overall risk of the Bank.

The table below shows the Bank’s maximum credit risk exposure for commitments and contingencies. The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Bank could have to pay if the guarantee is called upon. The maximum exposure to credit risk relating to a loan commitment is the full amount of the commitment. In both cases, the maximum risk exposure is significantly greater than theamount recognised as a liability in the Statement of Financial Position.

December 31, 2012 Rs.’000

Commitments Bank GroupCommitment for unutilised facilities (direct advances) 27,340,066 27,543,721 27,340,066 27,543,721 Contingent liabilities Acceptances 6,308,188 6,308,188 Documentary credit 11,310,366 11,310,366 Guarantees 21,993,951 21,993,951 Bills sent for collection 129,388 129,388 Stock on travelers’ cheques 352,396 352,396 40,094,289 40,094,289 Forward exchange contracts 28,684,448 28,684,448 Currency Swaps 19,806,940 19,806,940 48,491,387 48,491,387 Total Commitments and contingencies 115,925,742 116,129,397

42.3 LIQUIDITY RISK AND FUNDING MANAGEMENT Liquidity risk is the risk that the Bank will encounter difficulties in meeting its financial commitments that are settled by delivering cash or another financial asset. Hence the bank may be unable to meet its payment obligations when they fall due under both normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted a policy of continuously managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The bank has developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required. The Bank maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseen interruption of expected cash flow. The Bank also has committed lines of credit that could be utilized to meet liquidity needs. Further, the Bank maintains a statutory deposit with the Central Bank of Sri Lanka equal to 8% of customer deposits. In accordance with the bank’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both the market in general and specific to the Bank. The most important of these is to maintain the required ratio of liquid assets to liabilities, to meet the regulatory requirement . Liquid assets consist of cash, short–term bank deposits and liquid debt securities available for immediate sale. Further the Statutory Liquid Assets Ratio of the Bank for the month of December 2012 is as follows.

42.3.1 Statutory Liquid Assets Ratio

For the month of December 2012 22.40%

42.3.2 Due to banks & Due to other customers (Deposits) to Loans and receivables from banks & other customers (Advances) Ratio The Bank is aware of the importance of due to banks & other customers as a source of funds for its lending operations.This is monitored using the following ratio, which compares loans and receivables to customers as a percentage of due to banks & Due to other customers (Deposits). Due to banks & due to other customers to Loans and receivables from banks & other customers Ratio

as at 31 December 2012 88.68%


42.3.3 Analysis of financial assets and liabilities by remaining contractual maturitiesThe table below summarises the maturity profile of the undiscounted cash flows of the Bank’s financial assets and liabilities as at 31 December 2012. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Bank expects that many customers will not request repayment on the earliest date it could be required to pay and the table does not reflect the expected cash flows indicated by its deposit retention history.

Contractual maturities of undiscounted cash flows of financial assets and liabilities.

December 31, 2012

Bank Rs.’000

Up to 03 months 03 - 12 months 1 - 3 years 3 - 5 years over 05 years TotalFinancial AssetsCash and cash equivalents 10,504,835 - - - - 10,504,835 Balances with Central Bank of Sri Lanka 12,805,702 4,205,300 121,924 67,030 837 17,200,792 Placements with Banks 7,624,456 1,177,646 - - - 8,802,102 Reverse repurchase agreements 3,300,817 - - - - 3,300,817 Derivative financial instruments 154,690 124,332 - - - 279,022 Financial investments held -for- trading 35,181,084 - - - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,858,321 - - - - 2,858,321 Loans and receivables from banks 73,872 235,811 540,622 253,211 - 1,103,516 Loans and receivables from customers 126,100,984 54,887,118 40,384,278 17,043,168 16,041,516 254,457,065 Other loans & advances 2,329,352 3,598,266 5,598,952 - - 11,526,570 Financial investmentsavailable- for- sale 1,900,514 - - - 23,110 1,923,624 Other assets - - - - 1,399,091 1,399,091 Total Financial Assets 202,834,627 64,228,473 46,645,775 17,363,409 17,464,553 348,536,838 Financial Liabilities Cash and cash equivalents 625,051 - - - - 625,051 Derivative financial instruments 360,834 21,003 - - - 381,838 Securities sold under re-purchase agreements 2,164,530 642,856 - - - 2,807,386 Due to other customers 184,844,334 66,808,610 2,586,230 1,490,651 310,693 256,040,518 Debt issued and other borrowed funds 9,336,177 7,406,830 1,621,902 9,754,206 5,695,072 33,814,186 Unclaimed Dividend 49,185 - - - - 49,185 Total Financial Liabilities 197,380,110 74,879,299 4,208,131 11,244,858 6,005,765 293,718,164

Total net Financial Assets/(Liabilities) 5,454,517 (10,650,827) 42,437,644 6,118,551 11,458,788 54,818,674


385Sampath Bank PLC

42.3.4 Analysis of financial assets and liabilities by remaining contractual maturities

December 31, 2012

Group Rs.’000

Up to 03 months 03 - 12 months 1 - 3 years 3 - 5 years over 05 years TotalFinancial AssetsCash and Cash equivalents 10,514,958 - - - - 10,514,958 Balances with Central Bank of Sri Lanka 12,805,702 4,205,300 121,924 67,030 837 17,200,792 Placements with Banks 7,624,456 1,177,646 - - - 8,802,102 Reverse repurchase agreements 3,300,373 - - - - 3,300,373 Derivative financial instruments 154,690 124,332 - - - 279,022 Financial investments held -for- trading 35,181,084 - - - - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,858,321 - - - - 2,858,321 Loans and receivables from banks 73,872 235,811 540,622 253,211 - 1,103,516 Loans and receivables from customers 127,288,537 55,024,254 42,834,308 17,878,723 16,050,410 259,076,233 Other loans & advances 2,038,069 3,598,266 5,598,952 - - 11,235,287 Financial investmentsavailable- for- sale 1,900,514 - - - 23,166 1,923,680 Financial investmentsheld - to- maturity 2,400 7,365 - - - 9,765 Other assets - - - - 1,858,276 1,858,276 Total Financial Assets 203,742,976 64,372,974 49,095,805 18,198,964 17,932,689 353,343,409 Financial Liabilities Due to banks 668,466 - - - - 668,466Derivative financial instruments 360,834 21,003 - - - 381,838 Securities sold under re-purchase agreements 2,158,745 642,856 - - - 2,801,601 Due to other customers 184,601,578 66,808,610 2,586,230 1,490,651 310,693 255,797,762 Debt issued and other borrowed funds 10,409,607 8,299,300 2,897,110 9,906,081 5,695,072 37,207,171Unclaimed Dividend 49,185 - - - - 49,185 - Total Financial Liabilities 198,248,415 75,771,770 5,483,340 11,396,733 6,005,765 296,906,023

Total net financial assets/(liabilities) 5,494,561 (11,398,796) 43,612,465 6,802,231 11,926,924 56,437,386


42.3.5 Contractual maturities of Commitments & ContingenciesThe table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and commitments. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

December 31, 2012

Rs.’000

Bank On Demand Less than 3 Months

3 to 12 months

1 to 5 years over 5 years Total

Contingencies

Financial Guarantees 1,070,979 6,651,724 7,627,450 4,360,012 2,283,785 21,993,951

Acceptance 4,802,347 1,160,280 345,561 - - 6,308,188

Bills Sent 129,388 - - - - 129,388

Forward Contracts - 44,553,202 3,938,185 - - 48,491,387

Travellers Cheques 352,396 - - - - 352,396

Documentary Credit 1,147,619 6,940,144 3,222,603 - - 11,310,366

7,502,729 59,305,350 15,133,799 4,360,012 2,283,785 88,585,676

Commitments

Undrawn OD 18,034,987 - - - - 18,034,987

Undrawn Loans 1,489,301 - - - - 1,489,301

Undisbursed Cash Loans 3,981 - - - - 3,981

Undrawn Credit Card Limits 7,811,797 - - - - 7,811,797

27,340,066 - - - - 27,340,066

Total Commitments and Contingencies 34,842,795 59,305,350 15,133,799 4,360,012 2,283,785 115,925,741

December 31, 2012

Rs.’000

Group On Demand Less than 3 Months

3 to 12 months

1 to 5 years over 5 years Total

Contingencies

Financial Guarantees 1,070,979 6,651,724 7,627,450 4,360,012 2,283,785 21,993,951

Acceptance 4,802,347 1,160,280 345,561 - - 6,308,188

Bills Sent 129,388 - - - - 129,388

Forward Contracts - 44,553,202 3,938,185 - - 48,491,387

Travellers Cheques 352,396 - - - - 352,396

Documentary Credit 1,147,619 6,940,144 3,222,603 - - 11,310,366

7,502,729 59,305,350 15,133,799 4,360,012 2,283,785 88,585,676

Commitments

Undrawn OD 18,034,987 - - - - 18,034,987

Undrawn Loans 1,489,301 - - - - 1,489,301

Undisbursed Cash Loans 3,981 - - - - 3,981

Undrawn Credit Card Limits 7,811,797 7,811,797

Undrawn Commitments Factoring 203,655 - - - - 203,655

27,543,721 - - - - 27,543,721

Total Commitments and Contingencies 35,046,450 59,305,350 15,133,799 4,360,012 2,283,785 116,129,396


387Sampath Bank PLC

42.4 Market Risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, commodity prices and equity prices. The bank classifies exposures to market risk into either trading or non–trading portfolios and manages each of those portfolios separately.

42.4.1 Interest Rate Risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The bank’s policy is to continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintained within prudential levels. The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the bank’s income statement. December 31, 2012

Rs.’000

If Market rates up by 1 % the effect of the same to the Interest Income/(Expense)

If Market rates drop by 1 % the effect of the same to the Interest Income/(Expense)

Effect on Rate sensitive Assets 2,721,151 (2,721,151)

Effect on Rate sensitive Liabilities (2,598,732) 2,598,732

Sensitivity of profit or loss 122,419 (122,419)

42.4.2 Interest Rate Sensitivity AnalysisThe table below analyses the Bank’s interest rate risk exposure on financial assets and liabilities. The Bank’s assets and liabilities are included at carrying amount and categorised by the earlier of contractual re–pricing or maturity dates.

December 31, 2012

Bank Rs.’000

Up to 03 over Non months 03 - 12 months 1 - 3 years 3 - 5 years 05 years Interest bearing Total

Financial AssetsCash and cash equivalents 3,012,734 - - - - 7,419,401 10,432,135 Balances with Central Bank of Sri Lanka - - - - - 17,200,792 17,200,792 Placements with Banks 7,624,375 1,163,751 - - - - 8,788,127 Reverse repurchase agreements 3,300,817 - - - - - 3,300,817 Derivative financial instruments 154,690 124,332 - - - - 279,022 Financial investments held -for- trading 34,182,709 - - - - 998,375 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans and receivables from banks 41,299 150,120 400,320 224,380 - - 816,119 Loans and receivables from customers 133,645,410 38,282,470 19,193,251 8,294,387 8,768,851 - 208,184,369 Other loans & advances 2,225,879 7,657,631 632,247 - - - 10,515,757 Financial investmentsavailable- for- sale 179,175 - - - - 1,744,449 1,923,624 Other assets - - - - - 1,399,091 1,399,091Total Financial Assets 187,223,408 47,378,304 20,225,818 8,518,767 8,768,851 28,762,108 300,877,256

Financial LiabilitiesDue to banks 244,038 - - - - 380,746 624,784 Derivative financial instruments 360,834 21,003 - - - 381,838 Securities sold under re-purchaseagreements 2,146,527 610,592 - - - - 2,757,119 Due to other customers 165,203,292 59,582,186 1,905,895 880,847 149,847 15,608,923 243,330,989 Debt issued and other borrowed funds 9,223,957 6,925,955 1,138,035 7,931,551 3,605,530 - 28,825,029 Unclaimed Dividend - - - - - 49,185 49,185

Total Financial Liabilities 177,178,648 67,139,736 3,043,930 8,812,398 3,755,377 16,038,854 275,968,944 Interest Rate Sensitivity Gap 10,044,760 (19,761,432) 17,181,889 (293,631) 5,013,473 12,723,255 24,908,313


42.4.3 Interest Rate Sensitivity Analysis

December 31, 2012

Group Rs.’000

Up to 03 over Non months 03 - 12 months 1 - 3 years 3 - 5 years 05 years Interest bearing Total

Financial AssetsCash and cash equivalents 3,045,164 - - - - 7,397,094 10,442,258 Balances with Central Bank of Sri Lanka - - - - - 17,200,792 17,200,792 Placements with Banks 7,624,375 1,163,751 - - - - 8,788,127 Reverse repurchase agreements 3,300,373 - - - - - 3,300,373 Derivative financial instruments 154,690 124,332 - - - - 279,022 Financial investments held -for- trading 34,182,709 - - - - 998,375 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - - - - - 2,856,321 Loans and receivables from banks 41,299 150,120 400,320 224,380 - - 816,119 Loans and receivables from customers 134,278,466 39,284,010 21,500,687 8,753,830 8,663,050 - 212,480,042 Other loans & advances 1,934,596 7,657,631 632,247 - - - 10,224,474 Financial investmentsavailable- for- sale 179,175 - - - - 1,744,505 1,923,680 Financial investmentsheld - to- maturity - 2,400 7,365 - - - 9,765 Other assets - - - - - 1,858,276 1,858,276 Total Financial Assets 187,597,167 48,382,244 22,540,620 8,978,210 8,663,050 29,199,042 305,360,332 Financial Liabilities Due to banks 287,452 - - - - 380,747 668,199 Derivative financial instruments 360,834 21,003 - - - - 381,838 Securities sold under re-purchase agreements 2,140,742 610,592 - - - - 2,751,334 Due to other customers 165,116,046 59,582,186 1,905,895 880,847 149,847 15,453,413 243,088,233 Debt issued and other borrowed funds 11,395,367 7,469,415 2,040,388 7,707,314 3,605,530 - 32,218,014 Unclaimed Dividend - - - - - 49,185 49,185 Total Financial Liabilities 179,300,441 67,683,197 3,946,282 8,588,161 3,755,377 15,883,345 279,156,802 Interest Rate Sensitivity Gap 8,296,726 (19,300,953) 18,594,338 390,049 4,907,672 13,315,697 26,203,530


389Sampath Bank PLC

42.5 Currency Risk Currency risk arises as a result of fluctuations in the value of a financial instruments due to changes in foreign exchange rates. The Bank’s Board has set limits on positions by currency. In accordance with the bank’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits. The table below indicates the currencies to which the bank had significant exposures as at 31 December 2012 and the effect to the Gain/Loss in case of a market exchange rates up/drop by 5 %. The analysis calculates the effect of a reasonably possible movement of the currency rate against the LKR, with all other variables held constant, on the income statement (due to the fair value of currency sensitive non–trading monetary assets and liabilities) and equity (due to the change in fair value of currency swaps and forward foreign exchange contracts used as cash flow hedges). A negative amount in the table reflects a potential net reduction in income statement or equity, while a positive amount reflects a net potential increase. An equivalent decrease in each of the below currencies against LKR would have resulted in an equivalent but opposite impact.

Rs.’000

Currency CodeIf Market rates up by 5%, the effect of the same to the exchange gain/(loss)

If Market rates dropped by 5%, the effect of the same to the exchange gain/(loss)

USD (9,216) 9,216

GBP 1,404 (1,404)

JPY 376 (376)

CAD 391 (391)

CHF 1,388 (1,388)

AUD 2,365 (2,365)

SGD 292 (292)

HKD 264 (264)

EUR 8,649 (8,649)

Other Currencies 6,364 (6,364)

42.6 Equity Price Risk Equity price risk is the risk that the fair value of equities decreases as a result of changes in the level of equity indices and individual stocks. Investment Committee reviews and approves all equity investment decisions. Further the market value of the banks equity portfolio as of 31 December 2012 is Rs. 998,375 (Rs.‘000).

42.7 Operational Risk Operational risk is the risk of losses arising from failed internal processes, systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. Strategic and Reputational Risks are not covered in Operational Risk. Operational Risks of the Bank are mitigated and managed through a Board approved Operational Risk Management Policy control framework which consists of monitoring and responding to potential risks such as segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, Business Continuity Planning etc. Operational Risk Management Unit reports to Group Chief Risk Officer, and the Board Risk Management Committee maintains a high level overall supervision of managing Operational Risks of the Bank.



43 Maturity Analysis43.1 Maturity Gap Analysis as at 31.12.2012

Rs.000 Bank Group

Within 12 After 12 Total Within 12 After 12 Total months months months monthsAssets Cash and cash equivalents 10,432,135 - 10,432,135 10,442,259 - 10,442,259 Balances with Central Bank of Sri Lanka 17,011,002 189,790 17,200,792 17,011,002 189,790 17,200,792 Placements with Banks 8,788,127 - 8,788,127 8,788,127 - 8,788,127 Reverse repurchase agreements 3,300,817 - 3,300,817 3,300,373 - 3,300,373 Derivative financial instruments 279,022 - 279,022 279,022 - 279,022 Financial investments held -for- trading 35,181,084 - 35,181,084 35,181,084 - 35,181,084 Financial assets held-for-trading pledged as collaterals 2,856,321 - 2,856,321 2,856,321 - 2,856,321 Loans and receivables from banks 191,419 624,700 816,119 191,419 624,700 816,119 Loans and receivables from customers 154,179,332 54,005,037 208,184,369 155,643,797 56,836,244 212,480,041 Other loans & advances 5,415,759 5,099,997 10,515,757 5,124,476 5,099,997 10,224,474 Financial investmentsavailable-for-sale 1,900,513 23,111 1,923,624 1,900,513 23,167 1,923,680 Financial investmentsheld -to-maturity - - - 9,765 - 9,765 Investment in subsidiary companies - 1,059,921 1,059,921 - - - Property and equipment - 4,559,806 4,559,806 3,551 6,760,821 6,764,372 Goodwill and other intangible assets - 311,758 311,758 - 316,412 316,412 Deferred Tax Assets - - - 3,778 8,550 12,328 Other assets 2,066,629 1,205,023 3,271,652 2,532,210 1,198,626 3,730,836 Total Assets 241,602,159 67,079,143 308,681,302 243,267,696 71,058,307 314,326,003 Liabilities Due to banks 624,784 - 624,784 668,198 - 668,198 Securities sold under re-purchase agreements 2,757,119 - 2,757,119 2,751,334 - 2,751,334 Derivative financial instruments 381,838 - 381,838 381,838 - 381,838 Due to other customers 240,394,401 2,936,588 243,330,990 240,151,645 2,936,590 243,088,236 Debt issued and other borrowed funds 16,149,912 12,675,117 28,825,029 18,115,813 14,102,200 32,218,014 Unclaimed dividends 49,185 - 49,185 49,185 - 49,185 Current tax liabilities 936,000 2,067,885 3,003,885 967,984 2,067,884 3,035,868 Deferred tax liabilities - 400,084 400,084 - 430,812 430,812 Provisions - 167,470 167,470 - 180,192 180,192 Other liabilities 273,756 3,766,313 4,040,070 487,247 3,759,654 4,246,901 Total Liabilities 261,566,995 22,013,457 283,580,453 263,573,243 23,477,333 287,050,577 Maturity Gap (19,964,836) 45,065,686 25,100,849 (20,305,547) 47,580,974 27,275,428Cumulative Gap (19,964,836) 25,100,849 - (20,305,547) 27,275,428 -

391Sampath Bank PLC

43 Maturity Analysis Contd.43.2 Maturity Gap Analysis as at 31.12.2011

Rs.000 Bank Group

Within 12 After 12 Total Within 12 After 12 Total months months months monthsAssets Cash and cash equivalents 10,736,413 - 10,736,413 10,746,713 - 10,746,713 Balance with central bank of Sri Lanka 13,056,886 175,244 13,232,130 13,056,886 175,244 13,232,130 Due from Banks 5,337,084 - 5,337,084 5,337,084 - 5,337,084 Cash collateral on securities borrowed & reverse repurchase agreements 4,601,965 - 4,601,965 4,606,010 - 4,606,010 Derivative financial instruments 203,732 - 203,732 203,732 - 203,732 Financial investments held -for- trading 23,052,987 - 23,052,987 23,052,987 - 23,052,987 Financial assets held-for-trading pledged as collaterals 4,002,777 - 4,002,777 4,002,777 - 4,002,777 Loans and receivables from banks - 441,938 441,938 441,938 - 441,938 Loans and receivables from customers 109,611,466 60,069,907 169,681,373 111,066,947 60,909,991 171,976,938 Other loans & advances 3,344,244 2,392,033 5,736,277 3,344,244 2,392,034 5,736,278 Financial investmentsavailable- for- sale 2,002,131 23,110 2,025,241 2,002,131 23,166 2,025,297 Financial investmentsheld - to- maturity 10,289 - 10,289 - 19,411 19,411 Investment in subsidiary companies - 1,054,921 1,054,921 - - - Property and equipment - 4,527,784 4,527,784 - 6,691,153 6,691,153 Goodwill and other intangible assets - 67,294 67,294 - 73,372 73,372 Deferred Tax Assets - - - - 2,359 2,359 Other assets 98,401 2,274,702 2,373,103 420,071 2,426,473 2,846,544 Total Assets 176,058,374 71,026,933 247,085,307 178,281,520 72,713,202 250,994,723 LiabilitiesDue to banks 1,175,672 - 1,175,672 1,175,672 - 1,175,672 Securities sold under re-purchase agreements 4,100,862 - 4,100,862 4,100,862 - 4,100,862 Derivative financial instruments 310,966 - 310,966 310,966 - 310,966 Due to other customers 192,091,031 3,104,043 195,195,074 192,795,852 2,298,507 195,094,359 Debt issued and other borrowed funds 12,442,553 7,311,667 19,754,221 12,442,553 9,047,925 21,490,478 Unclaimed dividends 37,173 - 37,173 - 37,173 37,173 Current tax liabilities 1,262,697 589,137 1,851,834 1,267,687 613,455 1,881,142 Deferred tax liabilities - 380,360 380,360 2,612 393,501 396,113 Provisions - 124,477 124,477 - 137,515 137,515 Other liabilities 436,036 2,818,518 3,254,554 512,787 2,990,500 3,503,287 Total Liabilities 211,856,991 14,328,202 226,185,193 212,608,991 15,518,576 228,127,567 Maturity Gap (35,798,617) 56,698,731 20,900,114 (34,327,471) 57,194,626 22,867,156Cumulative Gap (35,798,617) 20,900,114 - (34,327,471) 22,867,156 -


INCOME STATEMENT IN US$

Bank Group

For the year ended 31st December 2012 2011 2012 2011 (US$’ 000) (US$’ 000) (US$’ 000) (US$’ 000) Income 303,906 242,119 311,203 248,180 Interest income 249,761 185,349 256,263 189,336Less : Interest expense 158,789 106,830 161,950 107,793Net interest income 90,972 78,519 94,313 81,543 Fee and commission income 21,964 23,249 22,536 24,547Less : Fee and commission expense 5,129 7,352 5,289 7,567Net fee & commission income 16,835 15,896 17,247 16,980 Net trading income 49 2,757 49 2,757

Other operating income 32,132 30,765 32,355 31,541Total operating income 139,988 127,936 143,964 132,820 Impairment gain / ( loss) on loans and advances (1,073) (3,765) (1,192) (3,504)Impairment gain / ( loss) on financial investments 564 (1,661) 564 (1,661)Net operating income 139,479 122,510 143,336 127,656 Less: Operating expenses Personnel expenses 32,571 31,253 33,915 32,473Depreciation of property plant & equipment 4,196 4,420 4,608 4,833Amortisation of intangible assets 341 317 366 349Other operating expenses 36,505 34,764 36,461 34,748Total operating expenses 73,614 70,753 75,351 72,403 Operating profit / (loss) before Value Added Tax 65,866 51,757 67,985 55,252 Less : Value Added Tax on Financial services 8,952 7,915 9,094 8,057Operating profit / (loss) after Value Added Tax 56,914 43,842 58,891 47,195 Less : Income tax expense 16,675 14,104 17,011 14,663Profit for the year 40,238 29,738 41,880 32,532 Attributable to: Equity holders of the parent 40,238 29,738 47,143 39,905Non controlling interest 26 194 40,238 29,738 47,169 40,100 Earnings per share - Basic (US$) 0.26 0.20Earnings per share - Diluted (US$) 0.26 0.20 Dividend per share - Gross (US$) 0.09 0.08 Dividend per share - Net (US$) 0.09 0.07

Exchange rate of US$ was Rs. 127.65 as at 31st December 2012. (Rs. 113.90 as at 31st December 2011)

393Sampath Bank PLC

STATEMENT OF FINANCIAL POSITION IN US$

Bank Group December December January December December January 31, 2012 31, 2011 1, 2011 31, 2012 31, 2011 1, 2011 (US$’ 000) (US$’ 000) (US$’ 000) (US$’ 000) (US$’ 000) (US$’ 000)Assets Cash and cash equivalents 81,725 94,262 38,391 81,804 94,352 39,000 Balances with Central Bank of Sri Lanka 134,750 116,173 74,097 134,750 116,173 74,097 Placements with Banks 68,845 46,858 16,116 68,845 46,858 15,511 Reverse repurchase agreements 25,858 40,404 - 25,855 40,439 - Derivative financial instruments 2,186 1,789 828 2,186 1,789 828 Financial assets held -for- trading 275,606 202,397 240,663 275,606 202,397 240,663 Financial assets held-for-trading pledged as collaterals 22,376 35,143 40,427 22,376 35,143 40,427 Loans and receivables from banks 6,393 3,880 - 6,393 3,880 - Loans and receivables from other customers 1,630,900 1,489,740 1,118,227 1,664,552 1,509,894 1,125,687 Other loans & advances 82,380 50,362 68,470 80,098 50,362 68,470 Financial investmentsavailable- for- sale 15,070 17,781 50,706 15,070 17,781 50,707 Financial investmentsheld - to- maturity - 90 10,113 76 170 10,191 Investment in subsidiaries 8,303 9,262 8,938 - - - Property and equipment 35,721 39,752 38,553 52,992 58,746 58,008 Intangible assets 2,442 591 710 2,479 644 800 Deferred tax asset - - - 97 21 33 Other assets 25,630 20,835 18,088 29,227 24,992 23,188 Total assets 2,418,185 2,169,318 1,724,326 2,462,405 2,203,641 1,747,611 Liabilities Due to banks 4,895 10,322 1,803 5,235 10,322 1,803 Derivative financial instruments 2,991 2,730 672 2,991 2,730 672 Securities sold under re-purchase agreements 21,599 36,004 39,760 21,554 36,004 39,760 Due to other customers 1,906,236 1,713,741 1,381,215 1,904,334 1,712,857 1,380,139 Debt issued and other borrowed funds 225,813 173,435 77,216 252,393 188,678 81,498 Unclaimed dividends 385 326 342 385 326 342 Current tax liabilities 23,532 16,258 8,031 23,783 16,516 8,642 Deferred tax liabilities 3,134 3,339 2,328 3,375 3,478 2,328 Provisions 1,312 1,093 804 1,412 1,207 877 Other liabilities 31,650 28,574 22,967 33,270 30,758 26,925 Total Liabilities 2,221,547 1,985,823 1,535,136 2,248,732 2,002,876 1,542,985 Equity Stated capital 27,921 24,089 16,100 27,921 24,089 16,100 Reserves Statutory / risk reserve funds 9,182 7,388 5,828 9,392 7,535 5,892 Revaluation Reserve 11,412 12,813 13,691 22,532 25,275 26,485 Available-for-sale reserve 11,479 15,784 47,083 11,477 15,784 47,083 Investment fund A/c - - - - - - Revenue reserves 136,646 123,421 106,489 141,872 127,556 107,697 Total equity of the owners of the parent 196,638 183,495 189,190 213,194 200,239 203,256 Non controlling interest - - - 480 526 1,370 Total equity 196,638 183,495 189,190 213,674 200,765 204,626 Total liability and equity 2,418,185 2,169,318 1,724,326 2,462,405 2,203,641 1,747,611 Net asset value per share (US$) 1.21 1.14 1.18 1.31 1.25 1.28Commitments and contingencies 908,153 1,061,868 618,550 909,749 1,061,868 618,550

Exchange rate of US$ was Rs. 127.65 as at 31st December 2012. (Rs. 113.90 as at 31st December 2011 and Rs. 110.95 as at 31st December 2010)


TEN YEARS AT A GLANCE

Rs. Mn SLAS SLFRS

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Profit PerformanceIncome 6,044 6,953 8,704 12,340 17,400 22,243 25,213 24,333 27,577 38,794Interest income 4,948 5,412 7,227 9,997 14,950 19,451 20,970 18,477 21,111 31,882Interest expenses 2,602 2,859 3,913 5,890 9,947 12,801 13,165 9,953 12,168 20,269Net interest income 2,346 2,553 3,314 4,107 5,003 6,650 7,805 8,525 8,943 11,613Exchange income 288 617 192 646 505 647 774 498 964 2,149Other income 808 924 1,284 1,697 1,944 2,144 3,469 5,357 4,351 4,101Total Operating Income 3,442 4,094 4,790 6,450 7,452 9,441 12,048 14,380 14,572 17,869Operating expenses, impairment losses & VAT on Financial Services 2,094 2,308 3,493 4,183 5,234 6,877 8,072 9,878 9,578 10,604Profit before tax 740 965 1,297 2,268 2,218 2,564 3,976 4,502 4,994 7,265Income tax expense 179 344 476 1,240 1,167 1,150 1,878 1,199 1,606 2,129Profit after tax 561 621 821 1,028 1,052 1,414 2,098 3,303 3,387 5,136

SLAS SLFRSAssetsCash & cash equivalents including placements 3,449 4,813 5,848 8,814 9,108 6,923 5,868 6,048 16,073 19,220Bills of exchange 2,262 2,424 2,748 2,572 2,947 2,827 2,985 - - -Loans and advances 34,723 43,548 54,043 67,061 83,695 87,380 92,189 - - -Lease rentals receivable 677 1,972 3,304 6,337 6,788 5,448 3,511 - - -Loans and receivables from banks - - - - - - - - 442 816Loans and receivables from other customers - - - - - - - 124,067 169,681 208,184Investment in associates & subsidiaries 452 452 862 1,096 970 970 992 992 1,055 1,060Fixed assets 1,131 1,183 1,435 1,823 3,080 3,289 3,420 4,278 4,528 4,560Total assets 54,054 67,483 84,811 109,550 133,196 138,539 156,162 191,314 247,085 308,681

LiabilitiesDue to banks & other customers (Deposits Only) 42,386 53,305 65,900 81,432 99,419 107,380 126,091 153,310 195,900 243,575Refinance borrowings 1,123 1,564 1,900 2,774 4,157 4,592 4,819 - - -Other liabilities evidenced by paper 1,128 2,196 2,491 2,734 4,433 4,514 3,102 - - -Borrowings from banks & debt issued and other borrowed funds - - - - - - - 8,702 20,225 29,206Other liabilities including income & deferred tax liabilities 6,035 6,501 8,889 15,984 16,618 12,276 10,304 8,311 10,060 10,800Total liabilities 50,672 63,566 79,180 102,924 124,627 128,762 144,316 170,323 226,185 283,580

Shareholders’ FundStated capital 443 517 689 1,582 1,582 1,582 1,582 1,786 2,744 3,564Reserves 2,940 3,401 4,943 5,044 6,987 8,195 10,265 19,204 18,156 21,537

Investor InformationDividend paid/proposed 66.4 88.6 137.8 172.2 206.7 275.6 473.6 1,235.8 1,427.0 1,952.8Dividend cover (times) 8.4 7.0 6.0 6.0 5.1 5.1 4.4 2.7 2.4 2.6Net assets per share (Rs) 65.48 75.82 81.75 96.17 124.39 141.92 77.52 131.18* 130.19* 154.24*Market price per share (Rs)-Max 133.00 105.00 114.00 117.25 135.00 120.00 205.00 550.00 307.00 216.00Market price per share (Rs)-Min 65.00 60.25 61.00 75.25 100.00 65.00 65.00 201.00 191.00 148.50Market price as at 31 December (Rs) 83.50 62.75 90.00 109.75 120.00 68.00 204.25 271.90 195.00 200.50

Other InformationExchange rate 96.72 104.60 102.10 107.52 108.65 113.00 114.47 110.95 113.90 127.65Number of staff as at 31 December 1,579 1,702 1,875 2,039 2,213 2,364 2,388 2,688 3,230 3,455Number of branches as at 31 December 63 71 83 96 105 112 131 171 206 209

RatiosGrowth of income (%) 11.3 15.0 25.2 41.8 41.0 27.8 13.4 (3.5) 9.9 40.6*Cost to income ratio (%) 60.8 60.1 60.0 58.0 56.8 59.6 57.0 55.8 61.5* 59.0*Growth of deposits (%) 24.4 25.9 23.6 23.5 22.4 8.1 17.5 19.4 27.8* 24.3*Growth of advances (%) 18.7 27.3 25.3 26.4 23.0 2.4 3.2 30.3 37.1* 22.9*Dividend per share 2.00 2.00 2.00 2.50 3.00 4.00 6.25 8.09 9.00 12.00Return on assets (after tax) (%) 1.19 1.02 1.08 1.06 0.87 1.04 1.42 1.94 1.55* 1.85*Return on equity (after tax) (%) 17.89 17.02 17.20 16.78 13.84 15.41 19.41 24.59 16.17* 22.33*Fixed assets to shareholders’ fund (%) 33.4 30.2 25.5 28.9 35.9 33.6 28.9 20.4 21.7 18.2Total assets to shareholders’ fund (Times) 16.0 17.2 15.1 17.4 15.5 14.2 13.2 9.1 11.8 12.3

(As specified in Banking Act No. 30 of 1988)Liquid Assets Ratio (%) 27.4 23.6 25.3 31.3 29.0 29.5 30.5 26.3 25.0 22.4

Capital Adequacy Ratios (%)- TIER I 9.59 9.14 10.14 8.38 7.58 8.10 10.40 10.71 10.24 11.80*- TIER I+II 11.02 13.30 13.53 10.82 11.58 11.95 13.45 12.91 11.45 13.61*

* Under SLFRS

395Sampath Bank PLC

VALUE ADDITION

Economic Value Addition

Year 2012 2011 (Rs Mn) (Rs Mn)

Shareholders’ funds 23,000.5 20,945.4Provision for Impairment Losses 7,011.5 7,540.3 30,012.0 28,485.7Profit attributable to shareholders 5,136.4 3,387.2Impairment loss/(gain) 64.9 618.0Actual Credit Losses written off (104.8) (92.6) 5,096,5 3,912.6Economic cost %( 12 monthsaverage Treasury Bill rateplus 2% risk premium) 14.0 9.5Economic cost 4,201.7 2,706.1Economic value addition 894.8 1,206.5

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

Financial Value Addition

2012 % 2011 % (Rs.’000) (Rs.’000)

Value AddedIncome earned by providingbanking services 38,648,879 26,672,239Cost of services 24,974,355 17,545,032Value added by banking services 13,804,290 10,363,251Non-banking income 144,662 905,099Provision for Impairment Losses (64,883) (618,022) 13,884,069 10,650,328

Value allocatedTo employees 4,157,690 29.95 3,559,674 33.42Salaries, wages and other benefits 4,157,690 29.95 3,559,674 33.42

To providers of capital 2,162,739 15.58 1,665,248 15.64Dividend to shareholders 1,952,840 14.07 1,426,984 13.40Interest to Debenture holders 209,899 1.51 238,264 2.24

To government 3,251,594 23.42 2,385,892 22.40Income tax 2,108,885 15.19 1,484,408 13.94Value Added Tax 1,142,709 8.23 901,484 8.46

To expansion and growth 4,312,046 31.06 3,039,514 28.54Retained income 3,713,098 26.74 2,378,001 22.33Depreciation 579,223 4.17 539,493 5.07Deferred taxation 19,725 0.14 122,020 1.15 13,884,069 100.00 10,650,328 100.00


SOURCES & DISTRIBUTION OF INCOME

2012 2011 For the year ended 31st December (Rs Mn) (Rs Mn)

Sources of IncomeInterest Income 31,882 21,111Net Fee & Commission Income 2,804 2,648Net Trading Income 6 314Other Operating Income 4,102 3,504 38,794 27,577

Distribution of IncomeTo Depositors/ Borrowers/Debenture HoldersInterest Paid 20,269 12,168Fee & Commission Paid 655 837

To EmployeesPersonnel Expenses 4,158 3,560

To Suppliers / Depreciation set asideProvision for Credit Losses 5,304 5,117Depreciation & Amortisation 579 539Impairment Provision 65 618Other Expenses 4,660 3,960

To Government 3,271 2,508Value Added Tax on Financial Services 1,143 901Income Tax Expense 2,129 1,606

To Shareholders 5,136 3,387Dividend 1,427 1,009Retained Profit 3,709 2,379 38,794 27,577

397Sampath Bank PLC

COMPLIANCE WITH THE DISCLOSURE REQUIREMENTS SPECIFIED BY THE CENTRAL BANK OF SRI LANKA As per the Guidelines issued by Central Bank of Sri Lanka on Annual Financial Statements, the Bank has complied with the specified requirements as given

below.

1 Information about the significance of financial instruments for financial position and performance

1.1 Statement of Financial Position

1.1.1 Disclosures on categories of financial assets and financial liabilities Note No 10 of the Financial Statements

1.1.2 Other disclosures

(i) Special disclosures about the financial assets and financial liabilities designated to be measured

at fair value through profit or loss, including disclosures about credit risk and market risk,

changes in fair values attributable to these risks and the methods of measurement.

Note No 41 - Fair value of financial

instruments

(ii) Reclassifications of financial instruments from one category to another. Not Applicable

(iii) Information about financial assets pledged as collateral and about financial or non-financial

assets held as collateral.

Note No 16 to the Financial Statements

(iv) Reconciliation of the allowance account for credit losses by class of financial assets. Note No 18 to the Financial Statements

(v) Information about compound financial instruments with multiple embedded derivatives. Not Applicable

(vi) Breaches of terms of loan agreements. Not Applicable

1.2 Statement of Comprehensive Income

1.2.1 Disclosures on items of income, expense, gains and losses Note No to 1 to 7 of the Financial

Statements

1.2.2 Other disclosures:

(i) Total interest income and total interest expense for those financial instruments that are not

measured at fair value through profit and loss.

Note 1.1 and 2 of the Financial Statements

(ii) Fee income and expense. Note No to 1.2 of the Financial Statements

(iii) Amount of impairment losses by class of financial assets. Note No to 3 of the Financial Statements

(iv) Interest income on impaired financial assets. Note No to 18.1 of the Financial

Statements

1.3 Other disclosures

1.3.1 Accounting policies for financial instruments Accounting Policies No to 3.5 & 3.9 of the

Financial Statements

1.3.2 Information on hedge accounting Not Applicable

1.3.3 Information about the fair values of each class of financial asset and financial liability, along with:

(i) Comparable carrying amounts. Note No 41 - Fair value of financial

instruments

(ii) Description of how fair value was determined. Note No 41 - Fair value of financial

instruments

(iii) The level of inputs used in determining fair value. Note No 41 - Fair value of financial

instruments

(iv) Reconciliations of movements between levels of fair value measurement hierarchy, additional

disclosures for financial instruments that fair value is determined using level 3 inputs.

Not Applicable

(v) Information if fair value cannot be reliably measured. Not Applicable


2 Information about the nature and extent of risks arising from financial instruments

2.1 Qualitative disclosures

2.1.1 Risk exposures for each type of financial instrument Note 42 - Risk Management of the


2.1.2 Management's objectives, policies, and processes for managing those risks Note 42 - Risk Management of the


2.1.3 Changes from the prior period Not Applicable

2.2 Quantitative disclosures

2.2.1 Summary of quantitative data about exposure to each risk at the reporting date. Note 42 - Risk Management of the


2.2.2 Disclosures about credit risk, liquidity risk, market risk, operational risk, interest rate risk and how

these risks are managed.

Note 42 - Risk Management of the


(i) Credit Risk

(a) Maximum amount of exposure (before deducting the value of collateral), description of

collateral, information about credit quality of financial assets that are neither past due nor

impaired and information about credit quality of financial assets.

Note 42.2 - Risk Management of the


(b) For financial assets that are past due or impaired, disclosures on age, factors considered in

determining as impaired and the description of collateral on each class of financial asset.

(c) Information about collateral or other credit enhancements obtained or called.

(d) For other disclosures, refer Banking Act Direction No. 7 of 2011 on Integrated Risk

Management Framework for Licensed Banks (Section H).

(ii) Liquidity Risk

(a) A maturity analysis of financial liabilities.Note 42.3 - Liquidity Risk and

funding management of the Financial

Statements

(b) Description of approach to risk management.

(c) For other disclosures, refer Banking Act Direction No. 7 of 2011 on Integrated Risk


(iii) Market Risk

(a) A sensitivity analysis of each type of market risk to which the entity is exposed.

Note 42.4 - Market Risk of the


(b) Additional information, if the sensitivity analysis is not representative of the entity's risk

exposure.

(c) For other disclosures, refer Banking Act Direction No. 7 of 2011 on Integrated Risk


(iv) Operational Risk

Refer Banking Act Direction No. 7 of 2011 on Integrated Risk Management Framework for

Licensed Banks (Section H).

Note 42.7 - Operational Risk of the


(v) Equity risk in the banking book

(a) Qualitative disclosures

Note 42.6 - Equity Price Risk of the


- Differentiation between holdings on which capital gains are expected and those taken

under other objectives including for relationship and strategic reasons.

- Discussion of important policies covering the valuation and accounting of equity holdings in

the banking book.

COMPLIANCE WITH THE DISCLOSURE REQUIREMENTS SPECIFIED BY THE CENTRAL BANK OF SRI LANKA

399Sampath Bank PLC

(b) Quantitative disclosures

Note 42.6 - Equity Price Risk of the


- Value disclosed in the statement of financial position of investments, as well as the fair

value of those investments; for quoted securities, a comparison to publicly quoted share

values where the share price is materially different from fair value.

- The types and nature of investments

- The cumulative realised gains/(losses) arising from sales and liquidations in the reporting

period.

(vi) Interest rate risk in the banking book

(a) Qualitative disclosures

- Nature of interest rate risk in the banking book (IRRBB) and key assumptions Note 42.4.1 - Interest Rate Risk of the


(b) Quantitative disclosures

- The increase/(decline) in earnings or economic value (or relevant measure used by

management) for upward and downward rate shocks according to management’s method for

measuring IRRBB, broken down by currency (as relevant).

Note 42.4.1 - Interest Rate Risk of the


2.2.3 Information on concentration of risk Note 42 - Risk Management of the


3 Other disclosures

3.1 Capital

3.1.1 Capital structure

(i) Qualitative disclosures

Summary information on the terms and conditions of the main features of all capital instruments,

especially in the case of innovative, complex or hybrid capital instruments.

(ii) Quantitative disclosures

(a) The amount of Tier 1 capital, with separate disclosure of:

Capital Adequacy

- Paid-up share capital/common stock

- Reserves

- Non-controlling interests in the equity of subsidiaries

- Innovative instruments

- Other capital instruments

- Deductions from Tier 1 capital

(b) The total amount of Tier 2 and Tier 3 capital

(c) Other deductions from capital

(d) Total eligible capital

3.1.2 Capital adequacy

(i) Qualitative disclosures

A summary discussion of the bank’s approach to assessing the adequacy of its capital to support

current and future activities.

(ii) Quantitative disclosures

(a) Capital requirements for credit risk, market risk and operational riskCapital Adequacy

(b) Total and Tier 1 capital ratio


Gross Dividend

0

500

1000

1500

2000

Gross Dividend

08 09 10 11 12

Rs. Mn.

Sampath Market Capitalisation Rank Y on Y

10

15

20

25

Sampath Market Capitalisation Rank Y on Y

08 09 10 11 12

No.

SHARE INFORMATION

2012 2011 Change %

Net Assets Per Share (Rs.) 154.24 130.190 18.5

Earnings Per Share - Group (Rs.) 32.98 23.00 43.4

Dividend Per Share (Rs.) 12.00 9.00 33.3

Market Price Per Share - Year End (Rs.) 200.50 195.00 2.8

Return On Equity - After Tax (%) 22.33 16.17 38.1

Value Creation for Shareholders

2012 2011 2010 2009 2008

Sampath Bank Market Capitalisation (Rs.Mn) 32,628 30,587 41,548 14,070 4,684

Increase/Decrease % in Market Capitalisation (Y on Y) 7% (26%) 195% 200% (43%)

CSE Market Capitalisation (Rs.Mn) 2,167,581 2,213,873 2,210,452 1,092,137 488,812

As a % of CSE Market Capitalisation 1.5 1.38 1.88 1.29 0.96

Market Capitalisation Rank 13 16 15 19 25

Bank’s Market Capitalisation in Comparison to CSE - As at December

Shareholders' Funds

0

5,000

10,000

15,000

20,000

25,000

30,000

Shareholders' Funds

08 09 10 11 12

(Rs.Mn.)

Dividend Per Share

0

3

6

9

12

08

Dividend Per Share

09 10 11 12

Rs.

Sampath Market Capitalisation

0

10,000

20,000

30,000

40,000

50,000

Sampath Market Capitalisation

08 09 10 11 12

Rs. Mn.

Earnings and Highest Market Price per Share

0

5

10

15

20

25

30

35

Earnings Per Share (EPS) - Group

08

Highest Market Price Per Share (HMPPS)

09 10 11 12100

200

300

400

500

600Rs.

EPS

HM

PPS

Rs.

401Sampath Bank PLC

Composition of Share Ownership - 2012 (No of Sharesholders)

Shares 500 & Less - 50.31%

Shares 501 - 5,000 - 42.01%

Shares 5,001 - 10,000 - 3.74%

More than 10,000 Shares - 3.94%

Composition of Share Ownership - 2012 (No of Shares)

Shares 500 & Less - 1.05%

Shares 501 - 5,000 - 6.77%

Shares 5,001 - 10,000 - 2.75%

More than 10,000 Shares - 89.43%

Analysis of Shareholders

31.12.2012 31.12.2011

No of Shareholders

No ofShares

%

No of Shareholders

No ofShares

%

Resident Shareholders 17,216 153,613,404 94.39 17,181 149,306,088 95.19

Non-Resident Shareholders 302 9,123,261 5.61 334 7,548,102 4.81

Total 17,518 162,736,665 100.00 17,515 156,854,190 100.00

Resident / Non - Resident

31.12.2012 31.12.2011

No of Shareholders

No ofShares

%

No of Shareholders

No ofShares

%

Individuals / Public 9,081 11,728,136 7.21 9,868 14,450,927 9.21

Institutions 8,437 151,008,529 92.79 7,647 142,403,263 90.79

Total 17,518 162,736,665 100.00 17,515 156,854,190 100.00

Individuals / Institutions

Composition of Share Ownership (No. of Shareholders)

31.12.2012 31.12.2011

No of Shareholders

%

No ofShares

%

No of Shareholders

%

No ofShares

%

Shares 500 & Less 8,813 50.31 1,711,831 1.05 8,709 49.72 1,786,425 1.14

Shares 501 - 5,000 7,359 42.01 11,020,135 6.77 7,416 42.34 11,087,948 7.07

Shares 5,001 - 10,000 656 3.74 4,467,234 2.75 679 3.88 4,586,386 2.92

More than 10,000 Shares 690 3.94 145,537,465 89.43 711 4.06 139,393,431 88.87

17,518 100.00 162,736,665 100.00 17,515 100.00 156,854,190 100.00

Shareholding of Individuals & Institutions as at 31st December

0

20

40

60

80

100

Individuals/Public

Institutions

08 09 10 11 12

%


SHARE INFORMATION

Share TradingMarket

Sampath Share Price Fluctuation

Bank

2012 2011 2010 2009 2008

No of Transactions 1,857,384 4,579,352 3,355,126 1,266,299 776,244

Number of Shares Traded 9,691,236,634 24,543,700,782 18,489,195,424 4,928,999,666 3,189,135,408

Value of Shares Traded (Rs.Mn) 213,827 546,255 570,326 142,463 110,454

2012 2011 2010 2009 2008

No of Transactions 13,473 15,335 20,154 8,578 1,280

Number of Shares Traded 28,871,254 26,951,903 67,672,164 19,077,355 5,356,600

As a % of total shares in issue 17.74 17.18 44.20 27.69 7.77

Average Daily Turnover (Rs.Mn) 22.55 30.23 90.78 10.41 2.41

Value of Shares Traded (Rs.Mn) 5,457.94 7,225.70 20,427.00 2,457.52 574.74

2012 2011 2010 2009 2008

Minimum Market Price (Rs.) 148.50 191.00 201.00 65.00 65.00

Maximum Market Price (Rs.) 216.00 307.00 550.00 205.00 120.00

Price as at 31st December Closing (Rs.) 200.50 195.00 271.90 204.25 68.00

Sampath Return on Equity & Market Interest Rates

0

5

10

15

20

25

30

Average 12 Mts. Treasury Bill RateAWFDR

08

Sampath ROE

09 10 11 120

5

10

15

20

25

30

%

Share Trading - Sampath Bank PLC

0

10

20

30

40

50

60

70

80

08

Share Trading - Sampath Bank PLC

09 10 11 12

Shares Mn.

403Sampath Bank PLC

Sampath Bank PLC - Ordinary Shares Frequency Distribution of Shareholders as at 31 December 2012

Share Range

Resident Non-Resident Total

No. of Shareholders

% No of Shares %No of

Shareholders%

No of Shares

%No of

Shareholders% No of Shares %

1 - 250 4,336 24.75 341,780 0.21 55 0.31 4,390 0.00 4,391 25.07 346,170 0.21

251 - 500 4,378 24.99 1,350,957 0.83 44 0.25 14,704 0.01 4,422 25.24 1,365,661 0.84

501 - 1000 3,070 17.52 2,020,429 1.24 41 0.23 26,619 0.02 3,111 17.76 2,047,048 1.26

1001 - 2000 2,350 13.41 3,251,872 2.00 54 0.31 73,258 0.05 2,404 13.72 3,325,130 2.04

2001 - 5000 1,796 10.25 5,492,255 3.37 48 0.27 155,702 0.10 1,844 10.53 5,647,957 3.47

5001 - 10000 639 3.65 4,359,985 2.68 17 0.10 107,249 0.07 656 3.74 4,467,234 2.75

10001 - 20000 315 1.80 4,303,745 2.64 18 0.10 228,085 0.14 333 1.90 4,531,830 2.78

20001 - 30000 108 0.62 2,625,747 1.61 3 0.02 71,051 0.04 111 0.63 2,696,798 1.66

30001 - 40000 57 0.33 1,921,212 1.18 3 0.02 104,167 0.06 60 0.34 2,025,379 1.24

40001 - 50000 32 0.18 1,406,778 0.86 1 0.01 41,871 0.03 33 0.19 1,448,649 0.89

50001 - 100000 60 0.34 4,118,370 2.53 3 0.02 204,220 0.13 63 0.36 4,322,590 2.66

100001 - 1000000 60 0.34 16,073,790 9.88 12 0.07 3,418,728 2.10 72 0.41 19,492,518 11.98

1000001 - Over 15 0.09 106,346,484 65.35 3 0.02 4,673,217 2.87 18 0.10 111,019,701 68.22

Total 17,216 98.28 153,613,404 94.39 302 1.72 9,123,261 5.61 17,518 100.00 162,736,665 100.00

Sampath Share Price Fluctuation

0

100

200

300

400

500

600

08 09 10 11 12Price as at 31st December

Maximum Market Price

Minimum Market Price

Rs.

Share Trading

0

6,000

12,000

18,000

24,000

30,000

Volume Traded (No '000)Turnover (Rs.'000)

08 09 10 11 12

Nos.’000 Rs’000

Volu

me

Trad

ed

Turn

over

0

2000000

4000000

6000,000

8,000,000

10,000,000


Sampath Bank PLC - Ordinary Shares Top 20 Shareholders as at 31st December 2012

Name of Shareholder Shareholding %

VALLIBEL ONE PLC 24,371,697 14.98

MR.Y.S.H.I.SILVA 16,197,706 9.95

EMPLOYEES PROVIDENT FUND 15,963,102 9.81

ROSEWOOD (PVT) LIMITED-ACCOUNT NO.3 11,159,450 6.86

MS.L.A.CAPTAIN 6,201,050 3.81

CORPORATE SERVICES LIMITED A/C NO 02 5,989,152 3.68

MR.S.E.CAPTAIN 5,777,183 3.55

VARNERS INTERNATIONAL (PRIVATE) LIMITED 5,725,019 3.52

SSP CORPORATE SERVICES (PRIVATE) LIMITED A/C NO 01 5,335,685 3.28

SAMPATH BANK PLC ACCOUNT NO 04 (SAMPATH BANK PENSION FUND) 2,654,994 1.63

GOLDMAN SACHS & CO S/A ARTHA MASTER FUND LTD. 1,884,400 1.16

EMPLOYEES TRUST FUND BOARD 1,713,327 1.05

MR.S.V.SOMASUNDERAM 1,617,204 0.99

MR.B.A.MAHIPALA 1,614,848 0.99

NORTHERN TRUST CO S/A-NORTHERN TRUST FIDUCIARY SERVICES (IRELAND) LTD AS TRUSTEE TO BARING ASEAN FRONTIERS FUND

1,468,817 0.90

KEYSTONE (PRIVATE) LIMITED 1,347,336 0.83

MELLON BANK N.A.-UPS GROUP TRUST 1,320,000 0.81

CEYLON GUARDIAN INVESTMENT TRUST PLC A/C # 01 1,027,570 0.63

SRI LANKA INSURANCE CORPORATION LTD-LIFE FUND 968,536 0.60

AVIVA NDB INSURANCE PLC A/C NO.07 818,349 0.50

113,155,425 69.53

Total No. of Shares Registered 162,736,665 100.00

Total No. of Shares Unregistered 0 0.00

Total No. of Shares Issued 162,736,665 100.00

Shares held by Directors * 45,650 0.03

Shares held by Institutions 151,008,529 92.79

Balance held by Public 11,682,486 7.18

Total No. of Shares Issued 162,736,665 100.00

% of Shares held by Public 84.99%

% of Shares held by Directors and Related Parties 15.01%

* Mr. Dhammika Perera is the Chairman of Vallibel One PLC as well as Sampath Bank PLC, total shares held by Vallibel One PLC is categorised under institutions.

SHARE INFORMATION

405Sampath Bank PLC

Dividend Payment Details

Year Total Dividend PaidRs.Mn

Dividend Per Share Net Profit after Tax Rs.Mn

Dividend Pay Out Ratio

2000/2001 58.70 Rs 1.75 402.00 14.60%

2001/2002 52.14 Rs 1.75 322.00 16.19%

2002/2003 88.57 Rs 2.00 441.00 20.08%

2003 (Interim) 59.78 Rs 2.00 561.00 14.58%

2003 (Final) 21.99

2004 (Interim) 65.98 Rs 2.00 621.00 16.15%

2004 (Final) 34.30

2005 (Interim) 87.14 Rs 2.00 821.00 14.54%

2005 (Final) 32.21

2006/2007 155.47 Rs 2.50 1,028.00 15.12%

2007/2008 206.66 Rs 3.00 1,052.00 19.64%

2008/2009 256.65 Rs 4.00 1,414.00 18.15%

2009/2010 436.19 Rs 6.25 2,098.00 20.79%

2010/2011 1,235.86 Rs.8.09 3,303.00 37.42%

2011/2012 1,426.98 Rs.9.00 3,819.00 37.37%

2012/2013 (Proposed) 1,952,84 Rs.12.00 5,136.13 38.02%

Record of Subdivisions

Record of Scrip Issues

Employee Share Option Plan - 2010

Year Issue Basis New No. of Shares Stated Capital P- (Rs.Mn) Reason For Issue

2010 Scrip Dividend 1 for 120.7 627,596 1,786.25 Increase Stated Capital

2011 Scrip Dividend 1 for 43.39 3,521,294 2,701.79 Increase Stated Capital

2012 Scrip Dividend 1 for 33.12 4,915,986 3,564.17 Increase Stated Capital


2010 Consolidation and Subdivision 11 for 10 6,888,762 1,581.65 Increase in Liquidity

2010 Subdivision 1 for 1 76,403,986 1,786.25 Gift benefit to Shareholders


2011 ESOP 2% of issued Shares 524,924 2,743.78 Motivate Staff Members

2012 ESOP 2% of issued Shares 2,200,436 3,564.17 Motivate Staff Members


DEBENTURE INFORMATION

(a) Market Values

(b) Interest Rates

Highest Lowest Period End

2012 2011 2012 2011 2012 2011

Debentures - 2007/2012*

Fixed - 17.5% Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded

Fixed - 15.5% Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded

Floating rate Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded

* These Debentures were redeemed on 29th August 2012

Highest Lowest Period End

2012 2011 2012 2011 2012 2011

Debentures - 2012/2017

Fixed - 16.5% 100.00 N/A 100.00 N/A 100.00 N/A

Fixed - 15.0% 100.00 N/A 100.00 N/A 100.00 N/A

Floating rate Not Traded N/A Not Traded N/A Not Traded N/A

2012 2011

Coupon Rate

EffectiveRate

Coupon Rate

EffectiveRate


Fixed - 17.5% 17.50% 17.50% 17.50% 17.50%

Fixed - 15.5% 15.50% 16.65% 15.50% 16.65%

Floating rate - - - -

2012 2011

Coupon Rate

EffectiveRate

Coupon Rate

EffectiveRate

Debentures - 2012 / 2017

Fixed - 16.5% 16.50% 16.50% N/A N/A

Fixed - 15.0% 15.00% 16.08% N/A N/A

Floating rate - - - -

Debentures - 2007/2012 Floating rate is equivalent to the three month Treasury Bill rate (gross) plus 1.5% p.a., payable quarterly. These debentures were redeemed on 29th August 2012.

Debentures - 2012/2017 Floating rate is equivalent to the six month Treasury Bill rate (gross) plus 2.0 % p.a., payable half yearly.

407Sampath Bank PLC

(c) Interest Rate of Comparable Government Securities - Gross Rates

(d) Current Yield & Yield to maturity

(e) Ratios

2012 2011

3 Month Treasury Bill 11.11% 9.64%

6 Month Treasury Bill 12.58% 9.68%

Fixed Fixed Floating

17.50% 15.50%

2012 2011 2012 2011 2012 2011


Current yield Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded

Yield to maturity of last trade Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded

Fixed Fixed Floating

17.50% 15.50%

2012 2011 2012 2011 2012 2011

Debentures - 2012 / 2017

Current yield 16.50% N/A 16.08% N/A Not Traded N/A

Yield to maturity of last trade 16.50% N/A 16.08% N/A Not Traded N/A

2012 2011

Debt to Equity Ratio (%) 12.4% 16.0%

Interest Cover ( Times) 34.9 24.4

Quick Asset Ratio (%) 104.7% 80.4%


BRANCH NETWORK

Financial information / Branch Network

Central ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Dambulla No.622, Anuradhapura Road, Dambulla (066) 2283085/87 (066) 2283067 [email protected] 90

Digana No. 42, Mahiyangana Road, Digana, Rajawella (081) 2376765 (081) 2376765 [email protected] 85

Galewela No. 31C, Kurunegala Road, Galewela (066) 2287725/6 (066) 2287727 [email protected] 190

Gampola No.06, Panabokke Mawatha, Gampola (081) 2350564/5 (081) 2350571 [email protected] 101

Hatton No. 173, Dimbula Road, Hatton (051) 2225403/5 (051) 2225405 [email protected] 80

Kandy - DaladaVeediya

No. 19, Dalada Veediya, Kandy(081) 2232778 - 2233838

(081) 2232779 [email protected] 7

Kandy City CentreShop No.L 1-6 Level One, Kandy City Centre Building, Dalada Veediya, Kandy

(081) 2205825/6 (081) 2205827 [email protected] 123

Kandy - Metro No. 29, Cross Street, Kandy (081) 2200096/8 (081) 2200098 [email protected] 100

Katugastota No:187, Madawala Road, Katugastota (081) 2498932/4 (081) 2499123 [email protected] 32

Kundasale No. 232, Digana Road, Kundasale (081) 2421763/4 (081) 2421767 [email protected] 133

Matale No.184 - 186, Trincomalee Street, Matale (066) 2223861/2 (066) 2224094 [email protected] 25

Menikhinna No.54A, Madawala Road, Menikhinna (081) 2376547/8 (081) 2376549 [email protected] 184

Nawalapitiya No. 92, Gampola Road, Nawalapitiya (054) 2223277/700 (054) 2223920 [email protected] 195

Nuwara Eliya No. 01, Lawson Street, Nuwara Eliya (052) 2222946/7 (052) 2222948 [email protected] 84

Peradeniya No. 676 A, Peradeniya Road, Kandy (081) 2387876/7 (081) 2384054 [email protected] 51

Pussellawa No:551, Nuwara Eliya Road, Pusselllawa (081) 2478034/5 (081) 2478036 [email protected] 152

Pilimatalawa No.246, Colombo Road, Pilimatalawa (081) 2577341, 336 (081) 2577396 [email protected] 150

Rikillagaskada No:120, Kandy Road, Rikillagaskada (081) 2365021/2 (081) 2365023 [email protected] 163

Wattegama No.134/A/1, Kandy Road, Wattegama (081) 2476876/7 (081) 2470600 [email protected] 105

Eastern ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

AkkaraipattuNo. 61, Sulaiman Shopping Complex, Main

Street, Akkaraipattu(067) 2279197/8 (067) 2279199 [email protected] 111

Ampara No. 9, D S Senanayake Road, Ampara (063) 2223840/1 (063) 2223444 [email protected] 62

Batticaloa No.32, Thamaraikeny Road, Batticaloa (065) 2227581/2 (065) 2227583 [email protected] 107

Batticaloa 02 No:395, Trinco Road, Batticaloa (065) 2228240/1 (065) 2228242 [email protected] 139

Chenkalady‘Sellam Building’, Boundary Road Junction, Main

Road, Chenkalady(065) 2241348/9 (065) 2241350 [email protected] 121

Dehiattakandiya No. F 79, New Town, Dehiattakandiya (027) 2250418/9 (027) 2250420 [email protected] 167

Kalmunai No. 18, Police Station Road, Kalmunai (067) 2220448/9 (067) 2222020 [email protected] 112

Kaluwanchikudy Hospital Road, Kaluwanchikudy(065) 2251177,

2250807(065) 2250208 [email protected] 125

Kantale No:70/1, Agrabodhi Road, Kantale (026) 2234490/1 (026) 2234492 [email protected] 172

Kattankudy No.57,59, Main Street, Kattankudy 03 (065) 2247930/2 (065) 2247932 [email protected] 115

KinniyaNo:106, 108 ,110 Main Road [Right Side],

Kinniya 03(026) 2236348/9 (026) 2236350 [email protected] 177

Muttur No:67, Main Street, Muttur (026) 2238181/2 (026) 2238183 [email protected] 208

Ninthavur No. 45/4A, Main Street, Ninthavur (067) 2251388/9 (067) 2251390 [email protected] 185

Oddamavady Colombo Road, Mavadichenai, Oddamavady(065) 2257372,

2258210(065) 2258211 [email protected] 124

Pottuvil Cassim Moulavi Building, Main Street, Pottuvil (063) 2248190/4 (063) 2248196 [email protected] 130

Sainthamaruthu Main Street, Sainthamaruthu - 16 (067) 2225310/320 (067) 2225330 [email protected] 126

Trincomalee No. 262, Central Road, Trincomalee (026) 2225387/9 (026) 2225389 [email protected] 66

Northern ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Chankanai Main Street, Chankanai (021) 2250072/3 (021) 2250072 [email protected] 164

Chavakachcheri Kandy Road, Chavakachcheri (021) 2270091/2 (021) 2270093 [email protected] 169

Chunnakam No.160, K K S Road, Chunnakam (021) 2240721/2 (021) 2240723 [email protected] 128

Jaffna No.56/16, Link Road, Off Stanley Road, Jaffna (021) 2221025/6 (021) 2221027 [email protected] 120

Kayts Suruvil Road, Kayts (021) 3215432/4 (021) 3215428 [email protected] 171

Kilinochchi Unit 1-4, Antonipillai Building, Kilinochchi (021) 2285340/1 (021) 2285342 [email protected] 148

Manipay No.103, Jaffna Road, Manipay (021) 2255041/2 (021) 2255043 [email protected] 147

Mallavi No. 06, Thunnukai Road, Mallavi (021) 3734802/3 (021) 3734804 [email protected] 174

Mannar No. 28, Field Street, Ward No.06, Mannar (023) 2251320/1 (023) 2251322 [email protected] 119

Kandy District

Matale District

13Branches

03Branches

03Branches

07Branches

06Branches

04Branches

Matale District

BatticaloaDistrict

Ampara District

Nuwara Eliya District

409Sampath Bank PLC

Northern Province Contd.Branch name Address Telephone No. Fax No. E-mail

Branch Code

Nelliady No. 169, Jaffna Road, Nelliady(021) 2262474, 2264950


Thirunelveli Palaly Road, Thirunelveli North, Jaffna (021) 2224801/3 (021) 2224802 [email protected] 186

Vavuniya No. 25, Station Road, Vavuniya (024) 2222959 (024) 4589500 [email protected] 55

Vavuniya Super No:7A, Horowpatana Road, Vavuniya (024) 2226227/8 (024) 2226229 [email protected] 170

North Central ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Anuradhapura No.38, Rex Building, Main Street, Anuradhapura (025) 2235026/7 (025) 2235028 [email protected] 21

Anuradhapura New Town

No. 521/19, Maithripala Senanayake Mawatha, New Town, Anuradhapura

(025) 2226190/1 (025) [email protected]

168

Aralaganwila No.113, New Town, Aralaganwila (027) 2257204/5 (027) 2257206 [email protected] 154

Hingurakgoda No.88, D S Senanayake Veediya, Hingurakgoda (027) 2245300/1 (027) 2245302 [email protected] 110

KaduruwelaNo.626B, Dharmasiri Building, Main Street, Kaduruwela

(027) 2225567/8 (027) 2225569 [email protected] 38

Kahatagasdigiliya No:67, Anuradhapura Road, Kahatagasdigiliya (025) 2247087/70 (025) [email protected]

203

Kekirawa No.56, Main Street, Kekirawa (025) 2265266/7 (025) 2265268 [email protected] 149

Nochchiyagama No:62, Puttalam Road, Nochchiyagama (025) 2257332/3 (025) 2257334 [email protected] 138

Thambuththegama No.255 C, Anuradhapura Road, Thambuttegama(025) 2276836, 2275072

(025) [email protected]

48

North Western ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Alawwa No. 9, 9/1 Giriulla Road, Alawwa(037) 2279209, 2279463


Anamaduwa No:69, Galgamuwa Road, Anamaduwa (032) 2263042/3 (032) 2263044 [email protected] 143

Chilaw No. 64, Colombo Road, Chilaw (032) 2222677/8 (032) 2222777 [email protected] 108

Dankotuwa No:63, Nattandiya Road, Dankotuwa (031) 2261361/2 (031) 2261360 [email protected] 196

Giriulla No. 103/A, Negombo Road, Giriulla (037) 2289482 (037) 2289482 [email protected] 95

Hettipola Kurunegala Road, Hettipola (037) 2291082/3 (037) 2291084 [email protected] 187

Kuliyapitiya No. 259, Madampe Road, Kuliyapitiya(037) 2281860/1, 2281866


Kurunegala No. 31, Negombo Road, Kurunegala (037) 2223500/2 (037) 2223509 [email protected] 6

Madampe No. 16, New Town, Medagama Road, Madampe (032) 2249222/444 (032) 2249555 [email protected] 189

Maho No. 112-114, Moragollagama Road, Maho (037) 2275170/1 (037) 2275172 [email protected] 197

Marawila No. 87, Chilaw Road, Marawila (032) 2250862/3 (032) 2250861 [email protected] 194

Mawathagama No. 95, Kurunegala Road, Mawathagama(037) 2296088/2296288


Narammala No.77 & 89 1/1, Kuliyapitiya Road, Narammala (037) 2248945/6 (037) 2248947 [email protected] 99

Nattandiya No.149, Kuliyapitiya Road, Nattandiya (032) 2250263/4 (032) 2250265 [email protected] 132

Nikaweratiya No. 136, Kurunegala Road, Nikaweratiya (037) 2260918/9 (037) 2260920 [email protected] 102

Pannala No. 100, Negombo Road, Pannala(037) 2246250, 2245270


Puttalam No.114 A, Kurunegala Road,Puttalam (032) 2266312/3 (032) 2266314 [email protected] 156

WariyapolaNawinna Office & Shopping Complex, Kalugamuwa Road, Wariyapola

(037) 2268707/8 (037) 2268144 [email protected] 44

Wennappuwa No. 191/A, Colombo Road, Wennappuwa (031) 2256925/7 (031) 2256926 [email protected] 30

Sabaragamuwa ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Balangoda No.117, Barnes Ratwatta Mawatha, Balangoda (045) 2288793/5 (045) 2288795 [email protected] 97

Deraniyagala No. 63, Noori Road, Deraniyagala. (036) 2249500 (036) 2249500 [email protected] 49

Eheliyagoda No. 02, Ratnapura Road, Eheliyagoda (036) 2258031/2 (036) 2258031 [email protected] 20

Embilipitiya No. 62, Main Street, Embilipitiya (047) 2261203/4 (047) 2261205 [email protected] 43

Kalawana No. 54/B, 54/C, Manana, Kalawana (045) 2255793/4 (045) 2255795 [email protected] 41

Kegalle No.142, 142A, Kandy Road, Kegalle (035) 2230597/ 8 (035) 2230519 [email protected] 64

Mawanella No:209, New Kandy Road, Mawanella (035) 2246961/2 (035) 2246963 [email protected] 160

06Branches

Polonnaruwa District

Anuradhapura District

03Branches

Jaffna District

Kilinochchi District

Mannar District

01Branches

01Branches

02Branches

08Branches

Mullathivu District

Vavuniya District

01Branches

08Branches

11Branches

Puttalam District

Kurunegala District

06Branches

06Branches

Kegalla District

Ratnapura District


Sabaragamuwa Province Contd.Branch name Address Telephone No. Fax No. E-mail

Branch Code

Pelmadulla No. 77B, Main Street, Pelmadulla (045) 2275920 - 2 (045) 2275922 [email protected] 103

Rambukkana New Pradeshiya Sabha Building, Rambukkana(035) 2265641, 2266466


Ratnapura No. 180 – 82, Main Street, Ratnapura (045) 2232261/2 (045) 2224361 [email protected] 33

Ruwanwella No:4, Veyangoda Road, Ruwanwella (036) 2266971/2 (036) 2266973 [email protected] 201

Warakapola No. 95, Kandy Road, Warakapola (035) 2267981/2 (035) 2267983 [email protected] 205

Southern ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Ahangama No. 71A, Matara Road, Ahangama (091) 2282902/3 (091) 2282904 [email protected] 182

Akuressa No.14/16, Pitabeddara Road, Akuressa (041) 2284650/1 (041) 2284652 [email protected] 179

Ambalangoda No. 118 A, New Road, Ambalangoda (091) 2255571/3 (091) 2255573 [email protected] 72

Ambalantota No. 138 D, Tissa Road, Ambalantota (047) 2225506 - 8 (047) 2225508 [email protected] 104

Baddegama No. 112, Diyawagura, Kumme, Baddegama (091) 2293230/1 (091) 2293232 [email protected] 118

Beliatta No. 53/1, Dickwella Road, Beliatta (047) 2251551/2 (047) 2251553 [email protected] 180

Deniyaya No. 28-30, Main Street, Deniyaya(041) 2273225, 2273255


ElpitiyaNo.10, Royal Building, Ambalangoda Road, Elpitiya

(091) 2291961/2 (091) 2291963 [email protected] 204

Galle No. 5, Wackwella Road, Galle (091) 2245646/7 (091) 2245645 [email protected] 35

Galle Bazaar‘Krishna Building ‘, No:69, Old Matara Road, Pettigalawatte, Galle

(091) 2248582/3 (091) 2248584 [email protected] 159

HabaraduwaNo. 1270, ‘Lanerolle’ Super Centre, Matara Road, Habaraduwa

(091) 2282772/3 (091) 2282774 [email protected] 181

Kamburupitiya No. 48, Mulatiyana Road, Kamburupitiya (041) 2294701/2 (041) 2294703 [email protected] 206

Karapitiya No:598F, Hirimbura Road, Karapitiya (091) 2248456/7 (091) 2248458 [email protected] 141

Matara No. 3, Hakmana Road, Matara (041) 2223260/1 (041) 2223268 [email protected] 10

Matara Bazaar No:37, New Tangalle Road, Kotuwegoda, Matara (041) 2234055/6 (041) 2234057 [email protected] 153

Middeniya‘Abeysinghe Building’, Walasmulla Road, Middeniya

(047) 2248231/2 (047) 2248233 [email protected] 158

Morawaka‘Ranaweera Building’, Akuressa, Deniyaya Road, Morawaka

(041) 2282310/11 (041) 2282312 [email protected] 15

Neluwa Dellawa Road, Main Street, Neluwa (091) 3783010/11 - [email protected] 54

Sooriyawewa No:6719, Ambalantota Road, Sooriyawewa (047) 2288155/6 (047) 2288157 [email protected] 157

Tangalle No.61, Muhudu Mawatha, Tangalle (047) 2241865/6 (047) 2241870 [email protected] 116

Tissamaharama No. 25 – 27, Main Street, Tissamaharamaya(047) 2237056, 2237058


Weligama No:253, Matara Road, Weligama(041) 2253003, 2254002


Uva ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Badulla No. 14, Dharmadutha Road, Badulla (055) 2225450/1 (055) 2225452 [email protected] 93

Bandarawela No.253, 255, Main Street, Bandarawela (057) 2223720/1 (057) 2223722 [email protected] 46

Bibile No.31, Mahiyangana Road, Bibile (055) 2265398/9 (055) 2265400 [email protected] 161

Buttala‘Madurapperuma Building’, Kataragama Road, Buttala

(055) 2273530/4 (055) 2273537 [email protected] 145

Mahiyangana No. 28, 29, New Town, Mahiyangana (055) 2258180 (055) 2258181 [email protected] 56

Monaragala No. 75, Pothuwil Road, Monaragala(055) 2277222/290/1


Passara No:187/1, Badulla Road, Passara (055) 2288311/2 (055) 2288313 [email protected] 146

Welimada No. 54, Nuwara Eliya Road, Welimada (057) 2244466/7 (057) 2244468 [email protected] 81

Wellawaya No. 70/D, Kumaradasa Mawatha, Wellawaya(055) 2274445/419/ 470


Western ProvinceBranch name Address Telephone No. Fax No. E-mail

Branch Code

Aluthgama No. 405, Galle Road, Aluthgama (034) 2290861/2 (034) 2290863 [email protected] 79

Athurugiriya No. 106, Borella Road, Athurugiriya(011) 2563612, 2156081


Attidiya No. 202, Main Road, Attidiya (011) 2725668 - [email protected] 89

Badulla District

Monaragala District

05Branches

04Branches

BRANCH NETWORK

Financial information / Branch Network

Galle District

09Branches

07Branches

06Branches

Matara District

Hambantota District

411Sampath Bank PLC

Western Province

Branch name Address Telephone No. Fax No. E-mail Branch Code

Avissawella No. 64, Yatiyanthota Road, Avissawella (036) 2222011/2 (036) 2222010 [email protected] 22

BambalapitiyaNo.1-01, Majestic City, Station Road, Bambalapitiya, Colombo 04

(011) 2502686, 2501829


Bandaragama No.61/A, Kalutara Road, Bandaragama (038) 2289898/9 (038) 2293056 [email protected] 59

Battaramulla No. 157, Main Street, Battaramulla (011) 2861805/6 (011) 2861807 [email protected] 61

Boralesgamuwa No:192, Kesbewa Road, Boralesgamuwa (011) 2545245/6 (011) 2545248 [email protected] 142

Borella No. 1022, Maradana Road, Borella, Colombo 08(011) 2691121-3,2687222


City No. 55, D.R.Wijewardena Mawatha, Colombo 10(011) 2328569, 2434431


Colombo Super No:103, Dharmapala Mawatha, Colombo 07 (011) 2336112/3 (011) 2336115 [email protected] 175

Dehiwala No. 155, Galle Road, Dehiwala(011) 2738481, 2738422


Delgoda No:351/1, New Kandy Road, Delgoda (011) 2403383/4 (011) 2403385 [email protected] 202

Divulapitiya No. 69, Kurunegala Road, Divulapitiya (031) 2243431/13 (031) 2243423 [email protected] 198

EmbuldeniyaNo.282, Old Kottawa Road, Embuldeniya, Nugegoda

(011) 2836410/1 (011) 2836412 [email protected] 114

Fort No. 98, Chatham Street, Colombo 01(011) 2447231/2, 2327379, 2436889


Gampaha No. 8, Mangala Road, Gampaha(033) 2226640/1, 2222396


Ganemulla No. 367/E, Kadawatha Road, Ganemulla (033) 2264630 (011) 5336558 [email protected] 78

GangodawilaNo.374, High Level Road, Gangodawila, Nugegoda

(011) 2814147/8 (011) 2814149 [email protected] 135

Gothatuwa New Town

No. 55/4, Kotikawatta Road, Gothatuwa New Town

(011) 2411609/10 (011) 2411612 [email protected] 173

Grandpass No. 64, Jethawana Road, Colombo 14 (011) 2472390/1 (011) 2472392 [email protected] 127

Gregory’s Road No. 106, Wijerama Mawatha, Colombo 07 (011) 2681144 (011) 2681145 [email protected] 70

Harbour ViewNo. 256, Srimath Ramanathan Mawatha, Colombo 15

(011) 2393017 (011) 2393017 [email protected] 58

Hanwella No. 148/A, Pahala Hanwella, Hanwella (036) 2254445/6 (036) 2254447 [email protected] 137

Head Quarters No. 110, Sir James Peiris Mw, Colombo 02(011) 4730305/7, 2358358


Hendala No:210, Hendala Road, Hendala, Wattala(011) 2933098, 2931021


Homagama No. 46, 1st Lane, Station Road, Homagama (011) 2855975/6 (011) 2855985 [email protected] 69

Horana No. 114, Sri Somananda Mawatha, Horana (034) 2260345/6 (034) 2260377 [email protected] 57

Ingiriya No. 68D, Panadura Road, Ingiriya (034) 2268288/488 (034) 2268588 [email protected] 140

Ja-ela No.165, Realty Plaza, Negombo Road, Ja-ela (011) 2245896/7 (011) 2245895 [email protected] 98

Kadawatha No. 174/3, Ragama Road, Kadawatha (011) 2921001/2/5 (011) 2921001 [email protected] 60

Kalutara No. 314, Main Street, Kalutara South, Kalutara (034) 2235600/1 (034) 2235602 [email protected] 50

Kandana No. 72, Colombo Road, Kandana (011) 2229218/9 (011) 2229249 [email protected] 76

KaduwelaNo:510/1 & 510/2, Avissawella Road, Kaduwela

(011) 2537539/40 (011) 2537541 [email protected] 162

Keselwatta No:41A, Galle Road, Keselwatta, Panadura(038) 2299633, 2299566


Kiribathgoda No. 259, Kandy Road, Dalugama, Kelaniya(011) 2910457, 2910514


Kiribathgoda Super No:139, Kandy Road, Kiribathgoda (011) 2910368/9 (011) [email protected]

200

Kirindiwela No. 91, Gampaha Road, Kirindiwela (033) 2247150 (033) 2247150 [email protected] 83

KirulaponeNo. 136,138 & 140, High Level Road, Kirulapone

(011) 2513828/9 (011) 2513830 [email protected] 117

Kochchikade No. 163, Chilaw Road, Kochchikade (031) 2279647/8 (031) 2279522 [email protected] 165

Kohuwala No. 81, S De S Jayasinghe Mawatha, Kohuwala (011) 2814480/455 (011) 2814480 [email protected] 94

KollupitiyaGround Floor, Platinum Residencies Building, No. 01, Bagatale Road, Colombo 03

(011) 2590682/3 (011) 2590684 [email protected] 134

Kotahena No. 165, George R De Silva Mw, Colombo 13 (011) 2384010/1 (011) 2384012 [email protected] 37

Kottawa No. 124/8, High Level Road, Kottawa(011) 2782684/6, 2782690

(011)2782684 [email protected] 52

Kottawa Laugfs Sun Up

No. 364/10, High Level Road, Kottawa (011) 2783100 (011) 2783100 [email protected] 87

Maharagama No. 81, High Level Road, Maharagama(011) 2840950/1/2/3


Maharagama Singer Mega

No. 272, High Level Road, Maharagama (011) 2842442 (011) [email protected]

92

Main Street No. 110,114, Main Street, Colombo 11 (011) 2386732/3 (011) 2386734 [email protected] 42

Gampaha District

24Branches

Colombo District

Kalutara District

55Branches

10Branches


Western Province Contd.Branch name Address Telephone No. Fax No. E-mail

Branch Code

Makola No:94/3A, Makola South, Makola (011) 2964978/9 (011) 2964980 [email protected] 207

Malabe No. 895, Athurugiriya Road, Malabe (011) 2762222/3 (011) 2762224 [email protected] 39

Maligawatte No. 65, Maligawatte Road, Colombo 10 (011) 2672507/8 (011) 2672509 [email protected] 191

MaradanaNo.657, Kularathne Mawatha, Maradana Road, Colombo 10

(011) 2678541/2 (011) 2678543 [email protected] 144

Marandagahamula No. 86/A, Mirigama Road, Marandagahamula (031) 2243515/517 (031) 2243518 [email protected] 183

Mattegoda No:102/40, Salgas Junction, Mattegoda (011) 2178444/5 (011) 2178446 [email protected] 176

Matugama No. 214 A, Aluthgama Road, Matugama (034) 2247233/4 (034) 2247235 [email protected] 106

Minuwangoda No. 31/1, Negombo Road, Minuwangoda (011) 2299131/2 (011) 2299133 [email protected] 65

Mirigama No. 54, Giriulla Road, Mirigama (033) 2276901/3 (033) 2276903 [email protected] 86

Moratumulla No.38, Sri Premarathne Mawatha,Moratumulla (011) 2654040/075 (011) 2654048 [email protected] 155

Moratuwa No. 653, Galle Road, Rawatawatta, Moratuwa (011) 2644737/8 (011) 2644739 [email protected] 31

Mount Lavinia No. 294, Galle Road, Mount Lavinia (011) 2719581/7 (011) 2719582 [email protected] 199

Mutwal No. 811, Aluthmawatha Road, Colombo 15 (011) 2540575/6 (011) 2540577 [email protected] 193

Narahenpita No. 193, Kirula Road, Narahenpita, Colombo 05 (011) 2552820/1 (011) 2552822 [email protected] 40

Nawala No:143, Nawala Road, Nugegoda (011) 2812331/2 (011) 2812333 [email protected] 82

Nawam Mawatha No. 46/38, Nawam Mawatha, Colombo 02 (011) 2305025/7 (011) 2305028 [email protected] 9

Negombo No. 293, Main Street, Negombo (031) 2224345 -7 (031) 2224347 [email protected] 24

Negombo 02No. 203D, Telwatte Junction, Colombo Road, Negombo

(031) 2221930/1 (031) 2227282 [email protected] 88

Nittambuwa ‘Sri Ramya Building’, Kandy Road, Nittambuwa (033) 2295905/6 (033) 2295907 [email protected] 71

Nugegoda No. 79 A, Stanley Thillekeratne Mw, Nugegoda(011) 2856907 - 9, 2816288


Old Moor Street No. 371, Old Moor Street, Colombo 12(011) 2452490/2, 2424075


Padukka No. 15, Horana Road, Padukka (011) 2757731/2 (011) 2757733 [email protected] 192

Panadura No. 373, Galle Road, Panadura (038) 2235100, (038) 2235101 [email protected] 26

Panadura - WekadaNo. 111B & 111C, Horana Road, Wekada, Panadura

(038) 2244545, 2244534

(038) [email protected]

47

PelawatteNo. 424, Pannipitiya Road, Thalangama South, Pelawatte , Battaramulla

(011) 2787209, 2786119


Peliyagoda No. 304, Negombo Road, Peliyagoda(011) 2940279, 2938797


PettahNo. 999, People’s Park, Bodhiraja Mw, Colombo 11

(011) 2432324, 262, 2394596


Piliyandala No. 61, Moratuwa Road, Piliyandala (011) 2614664/65 (011) 2614664 [email protected] 19

Pitakotte No. 463, Kotte Road, Pitakotte (011) 2874574/577 (011) 2874574 [email protected] 91

Platinum Plus No.18, Cambridge Place, Colombo 07 (011) 2695073/237 (011) 2695196 [email protected] 131

RagamaNo. 26/05, 26/06, UDA Premises, Kadawatha Road, Ragama

(011) 2960659/629 (011) 2960659 [email protected] 73

Rajagiriya No. 620, Kotte Road, Rajagiriya (011) 2864922/944 (011) 2864988 [email protected] 122

Ratmalana No. 261, Galle Road, Ratmalana (011) 2730820/1 (011) 2730819 [email protected] 18

Thalawathugoda No. 244/4, Pannipitiya Road, Thalawathugoda (011) 2796670/1 (011) 2796672 [email protected] 178

Thimbirigasyaya No. 154, Havelock Road, Colombo 05 (011) 2505001/2 (011) 2505003 [email protected] 34

Veyangoda No. 121, Negombo Road, Veyangoda (033) 2296330 (033) 2296330 [email protected] 77

Wadduwa No. 555, Galle Road, Wadduwa(038) 2284960, 2285132


Wattala No. 165, Negombo Road, Wattala(011) 2931569/70, 2941526/7


Wellampitiya No. 268, Kolonnawa Road, Wellampitiya (011) 2533498 (011) 2533498 [email protected] 45

Wellawatta Super No. 591A, Galle Road, Colombo 06 (011) 2507607/8 (011) 2507609 [email protected] 36

Yakkala No. 88, Kandy Road, Yakkala(033) 2232670, 2234230


BRANCH NETWORK

413Sampath Bank PLC

NOSTRO ACCOUNTS MAINTAINED IN SPECIFIC CURRENCIESCountry / Name of the Bank & Address Swift Code CCY

AUSTRALIA

NATIONAL AUSTRALIA BANK - MELBOURNE500, Bourke Street, Melbourne, Victoria 3000, Australia

NATAAU33 AUD

BANGLADESH

STANDARD CHARTERED BANK – DHAKA2, Dilkusha Commercial Area, Dhaka 1000, Bangladesh

SCBLBDDXACU-DOLLAR

CANADA

BANK OF MONTREAL - TORONTOCorrespondent Bank Services250, Yonge Street ,17th floor, Toronto, Ontario, M5B 2M8 Canada,

BOFMCAT2 CAD

CHINA

CITY BANK (CHINA) CO LTD SHANGHAI BRANCH, 34F Citigroup Tower No 33 Hua Yuan Shi Qiao Road, Lu Jia Zui Finance and Trade AreaShanghai 200120, PRC

CITICNSX CNY

DENMARK

DANSKE BANK A/S – COPENHAGENHolmens Kanal 2-12,DK-1092 Copenhagen K, Denmark

DABADKKK DKK

GERMANY

DEUTSCHE BANK AGTheodor-Heuss Allee 7060486, Frankfurt am Main, Germany

DEUTDEFF EUR

COMMERZ BANK AGFinancial InstitutionsKaiserplatz, 60261 Frankfurt am Main,Germany

COBADEFF EUR

UNICREDIT BANK AG - MUNICH(HYPOVEREINSBANK)Am Tucherpark 1 D-80538 Munich , Germany

HYVEDEMM EUR

HONGKONG

STANDARD CHARTERED BANK (HONG KONG) LTD4-4a, Des Voeux Rd, Central Hong Kong, Hong Kong

SCBLHKHH HKD

INDIA

No 20/21 CASA MAJOR ROADNO 2( OLD NO 11) ZERALD GARDEN SECOND LANEEGMORE CHENNAI - 600 008

BCEYIN5MACU-DOLLAR

Country / Name of the Bank & Address Swift Code CCY

No 20/21 CASA MAJOR ROADNO 2( OLD NO 11) ZERALD GARDEN SECOND LANEEGMORE CHENNAI - 600 008

BCEYIN5MACU-EURO

STANDARD CHARTERED BANK - MUMBAI90, Mahatma Gandhi Road,Mumbai 400 001, India

SCBLINBBACU-DOLLAR

ITALY

UNICREDIT SPA - MILANOTransactional Sales &Trade Services,Global Transaction BankingViale U .Tupini n 18000144 Roma –EUR District Italy

UNCRITMM EUR

BANCA.POPOLARE SOC COOP VERONA2 Piazza Nogara, 37121 Verona, Italy

BAPPIT22 EUR

BANCA NAZIONALE DEL LAVORO SPA-ROMECIB –correspondent Banking, BNL SpA Via Lombardia 31-00187 Roma, Italy

BNLIITRR EUR

JAPAN

BANK OF TOKYO MITSUBISHI UFJ LTD – TOKYO7-1, Marunouchi 2-Chome , Chiyoda -Ku, Tokyo 100-0005, Japan

BOTKJPJT JPY

STANDARD CHARTERED BK – TOKYO21st Floor, Sanno Park Tower,2-11-1 Nagatacho, Chiyoda-ku,Tokyo 100-6155, Japan

SCBLJPJT JPY

SUMITOMO MITSUI BANKING CORPORATIONGlobal Institutional Banking Deparment,1-2 , Marunouchi 1-Chome , Chiyoda -Ku, Tokyo 100-0005, Japan

SMBCJPJT JPY

NEW ZEALAND

BANK OF NEW ZEALAND-WELLINGTONBank Sector – Institutional banking, Level 5 Pier 1, Harbour Quays, 60 Waterloo QuayWellington, New Zealand

BKNZNZ22 NZD

NORWAY

DNB NOR BANK ASA- OSLO 0021, Oslo, Norway

DNBANOKK NOK

PAKISTAN

STANDARD CHARTERED BANK - KARACHCHIPO Box 5556, 11, Chundrigar Road,Karachi 74000, Pakistan

SCBLPKKXACU-DOLLAR


NOSTRO ACCOUNTS MAINTAINED IN SPECIFIC CURRENCIES


SOUTH AFRICA

FIRSTRAND BANK LTDP O BOX 786273,Sandton 2146, South Africa

FIRNZAJJ ZAR

SINGAPORE

UNITED OVERSEAS BANK LTD80 Raffles Place, UOB PlazaSingapore 048624, Singapore

UOVBSGSGSGD

OVERSEA CHINESE BANKING CORP LTD65 Chulia Street, OCBC Centre, Singapore 049513, Singapore

OCBCSGSG SGD

SWEDEN

SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) - STOCKHOLMKungsträdgårdsgatan 8,10640 Stockholm, Sweden

ESSESESS SEK

SWITZERLAND

UBS AG- ZURICHThe Bank for Banks,P.O.BOX, CH-8098, Zürich, Switzerland

UBSWCHZH80A CHF

UNITED ARAB EMIRATES

MASHREQ BANK PSC - DUBAI3rd Floor Mashreqbank Head Office, Omer Bin Al Khattab Road, PO Box 1250,Deira, Dubai, UAE

BOMLAEAD AED

Emirates NBD Bank PJSC 6 th Floor, Head Office Building Baniyas Road , DeiraPO Box 777, Dubai

EBILAEAD AED

UNITED KINGDOM

BANK OF CEYLON (UK)LTD1 Devonshire Square, London, EC2M 4WD, UK

BCEYGB2L GBP

BARCLAYS BANK PLC Barclays Corporate,London Service centre Po Box 69961 , 1 Churchill PlaceLondon, E14 1NP, United Kingdom

BARCGB22 GBP

UNITED STATES OF AMERICA

DEUTSCHE BANK TRUST COMPANY AMERICAS NY60, Wall Street, New York, NY, USA

BKTRUS33 USD

CITI BANK NA399, Park Avenue, New York, NY 10022, USA

CITIUS33 USD

HSBC BANK USA NA452, Fifth Avenue, New York, NY 10018, USA

MRMDUS33 USD


JP MORGAN CHASE BANK NA270, Park Avenue, New York, NY 10017-2014, USA

CHASUS33 USD

MASHREQ BANK PSC50, Broadway,15 th floor,Suite 1500, Mashreq Bank, New York, USA

MSHQUS33 USD

WELLS FARGO BANK NA375, Park Avenue, NY 4080New York, NY 101152, USA

PNBPUS3NNYC USD

415Sampath Bank PLC

CORRESPONDENT BANKS AND EXCHANGE COMPANIES

Country SWIFT Code

1. AustraliaAustralia and New Zealand Banking Group Ltd

ANZBAU2S

Citibank NA CITIAU2XHongkong & Shanghai Banking Corporation Ltd

HSBCAU2S

JP Morgan Chase Bank NA CHASAU2XNational Australia Bank Ltd NATAAU332. AustriaRaiffeisenlandesbank RWGAT2BUnicredit Bank Austria AG BKAUATWW3. BahrainHSBC Bank Middle East Ltd BBMEBHBX4. BangladeshDhaka Bank Ltd DHBLBDDHStandard Chartered Bank SCBLBDDX5. BelgiumCommerzbank AG COBABEBXING Belgium SA/NV BBRUBEBB

Country SWIFT Code

KBC Bank NV KREDBEBB6. BrazilDeutsche Bank SA DEUTBRSP7. BulgariaUnicredit Bulbank AD UNCRBGSF8. CanadaBank of Montreal BOFMCAT2HSBC Bank Canada HKBCCATTRoyal Bank of Canada ROYCCAT2Bank of Nova Scotia NOSCCATT9. ChileBanco del Estado de Chile BECHCLRMCitibank NA CITICLRS10. ChinaBank of China BKCHCNBJCitibank (China) Co. Ltd CITICNSXCommerzbank AG COBACNSXDeutsche Bank (China) Co. Ltd

DEUTCNSH

Country SWIFT Code

HSBC Bank (China) Co. Ltd HSBCCNSHJP Morgan Chase Bank (China) Co. Ltd

CHASCNSH

Standard Chartered Bank (China) Ltd

SCBLCNSX

Wells Fargo Bank NA PNBPCNSH11. CyprusSociete Generale Cyprus Ltd SOGECY2N12. Czech RepublicCommerzbank AG COBACZPXUnicredit Bank Czech Republic AS

BACXCZPP

13. DenmarkDanske Bank AS DABADKKKDnB NOR Bank ASA DNBADKKXNordea Bank Denmark AS NDEADKKK14. EgyptArab International Bank ARIBEGCX

Mashreq Bank MSHQEGCA



Country SWIFT Code

15. FinlandNordea Bank Finland PLC NDEAFIHHDanske Bank DABAFIHXDnB NOR Bank ASA DNBAFIHXSkandinevinska Enskilda Banken

ESSIFIHX

16. FranceBNP Paribas SA BNPAFRPPUnion de Banques Arabes et Francaises (UBAF)

UBAFFRPP

Deutsche Bank AG DEUTFRPPCommerze Bank AG COBAFRPX17. GermanyUnicredit Bank AG (Hypovereinsbank)

HYVEDEMM

Commerzbank AG COBADEFFDeutsche Bank AG DEUTDEMMDnB Nor Bank ASA DNBADEHX18. GreeceNational Bank of Greece SA ETHNGRAA19. Hong KongBNP Paribas BNPAHKHHCitibank NA CITIHKHXCommerzbank AG COBAHKHXDeutsche Bank AG DEUTTHBKHongkong & Shanghai Banking Corporation Ltd

HSBCHKHH

JP Morgan Chase Bank NA CHASHKHHStandard Chartered Bank (Hong Kong) Ltd

SCBLHKHH

UBAF (Hong Kong) Ltd UBAFHKHXWells Fargo Bank NA PNBPHKHH20. HungaryCIB Bank Ltd CIBHHUHBCommerzbank AG COBAHUHX21. IndiaBank of Ceylon BCEYIN5MCitibank NA CITIINBXDeutsche Bank AG DEUTINBBThe Hongkong & Shanghai Banking Corporation Ltd

HSBCINBB

ICICI Bank Ltd ICICINBBCTSMashreq Bank MSHQINBBStandard Chartered Bank SCBLINBBState Bank of India SBININBB22. IndonesiaCitibank NA CITIIDJXDeutsche Bank AG DEUTIDJAThe Hongkong and Shanghai Banking Corporation Ltd

HSBCIDJA

PT Bank Mandiri (Persero) BMRIIDJA

Standard Chartered Bank SCBLIDJX

Country SWIFT Code

23. IrelandBank of Ireland BOFIIE2DCitibank Europe PLC CITIIE2X24. IsraelBank Leumi le – Israel BM LUMIILIT25. ItalyBanca Intesa SpA BCITIT22Banca Nazionale del Lavoro SpA

BNLIITRR

Banca UBAE SPA UBAIITRRCommerzbank AG COBAITMMHSBC Bank PLC MIDLITMXUnicredit SpA UNCRITMMBanca Popolare Soc Coop BAPPIT2226. JapanAustralia and New Zealand Banking Group Ltd

ANZBJPJX

Citibank Japan Ltd CITIJPJTCommerzbank AG, Tokyo COBAJPJXDeutsche Bank AG DEUTJPJTThe Hongkong and Shanghai Banking Corporation Ltd

HSBCJPJT

Mizuho Bank Ltd MHBKJPJTStandard Chartered Bank SCBLJPJTSumitomo Mitsui Banking Corporation

SMBCJPJT

The Bank of Tokyo – Mitsubishi UFJ Ltd

BOTKJPJT

JP Morgan Chase Bank NA CHASJPJTWells Fargo Bank NA PNBPJPJX27. JordanHSBC Bank Middle East Ltd BBMEJOAXStandard Chartered Bank SCBLJOAX28. KuwaitCitibank NA CITIKWKWNational Bank of Kuwait NBOKKWKW29. MalaysiaCitibank Berhad CITIMYKLDeutsche Bank (Malaysia) Bhd

DEUTMYKL

HSBC Bank Malaysia Berhad HBMBMYKLStandard Chartered Bank Malaysia Bhd

SCBLMYKX

30. MaldivesBank of Ceylon BCEYMVMVBank of Maldives PLC MALBMVMVThe Hongkong & Shanghai Banking Corporation Ltd

HSBCMVMV

31. Nepal

Standard Chartered Bank Nepal Ltd

SCBLNPKA

Country SWIFT Code

32. NetherlandsCommerzbank AG COBANL2XDeutsche Bank AG DEUTNL2AING Bank NV INGBNL2A33. New ZealandANZ National Bank Ltd ANZBNZ22Bank of New Zealand BKNZNZ22Citibank NA CITINZ2XThe Hongkong & Shanghai Banking Corporation Ltd

HSBCNZ2A

34. NorwayDnB Nor Bank ASA DNBANOKKNordea Bank Norge ASA NDEANOKKScandinevinska Enskilda Banken

ESSENOKX

35. OmanHSBC Bank Middle East Ltd BBMEOMRX36. PakistanThe Hongkong & Shanghai Banking Corporation Ltd

HSBCPKKX

Standard Chartered Bank (Pakistan) Ltd

SCBLPKKX

37. PhilippinesCitibank NA CITIPHMXDeutsche Bank AG DEUTPHMMThe Hongkong & Shanghai Banking Corporation Ltd

HSBCPHMM

38. PolandBank Handlowy w Warszawie SA

CITIPLPX

Nordea Bank Polska SA NDEAPLP239. PortugalBNP Paribas Portugal BNPAPTPL40. QatarHSBC Bank Middle East Ltd BBMEQAQXMashreq Bank MSHQQAQA41. RomaniaRomanian Commercial Bank RNCBROBU42. Saudi ArabiaSaudi Hollandi Bank AAALSARIThe National Commercial Bank

NCBKSAJE

The Saudi British Bank SABBSARIAl Rajhi Bank RJHISARI43. SingaporeThe Bank of Tokyo-Mitsubishi UFJ Ltd

BOTKSGSX

Citibank NA CITISGSGCommerzbank AG COBASGSXDBS Bank Ltd DBSSSGSGDeutsche Bank AG DEUTSGSGThe Hongkong & Shanghai Banking Corporation Ltd

HSBCSGSG

417Sampath Bank PLC

Country SWIFT Code

JP Morgan Chase Bank NA CHASSGSGMizuho Corporate Bank Ltd MHCBSGSGOversea-Chinese Banking Corporation Ltd

OCBCSGSG

Standard Chartered Bank SCBLSGSGUnion de Banques Arabes et Francaises (UBAF)

UBAFSGSX

United Overseas Bank Ltd UOVBSGSG44. South AfricaABSA Bank Ltd ABSAZAJJFirstRand Bank Ltd FIRNZAJJNed Bank Ltd NEDSZAJJStandard Chartered Bank SCBLZAJJ45. South KoreaCitibank Korea Inc CITIKRSXDeutsche Bank AG DEUTKRSEThe Hongkong & Shanghai Banking Corporation Ltd

HSBCKRSE

JP Morgan Chase Bank NA CHASKRSXStandard Chartered First Bank Korea Ltd.

SCBLKRSE

Union de Banques Arabes et Francaises (UBAF)

UBAFKRSX

Wells Fargo Bank NA PNBPKRSX46. SpainBanco Bilbao Vizcaya Argentaria SA

BBVAESMM

Banco Santander SA BSCHESMMCommerzbank AG COBAESMX47. SwedenDanske Bank A/S DABASESXSkandinaviska Enskilda Banken

ESSESESG

Svenska Handelsbanken HANDSESG48. SwitzerlandCredit Suisse CRESCHZZUBS AG UBSWCHZH49. TaiwanCitibank NA CITITWTXDeutsche Bank AG DEUTTWTPThe Hongkong & Shanghai Banking Corporation Ltd

HSBCTWTP

JP Morgan Chase Bank NA CHASTWTXMizuho Corporate Bank Ltd MHCBTWTPStandard Chartered Bank (Taiwan) Ltd

SCBLTWTP

Wells Fargo Bank NA PNBPTWTP50. ThailandCiti Bank NA CITITHBXDeutsche Bank AG DEUTTHBKThe Hongkong & Shanghai Banking Corporation Ltd

HSBCTHBK

Kasikornbank Public company Ltd

KASITHBK

Country SWIFT Code

Standard Chartered Bank (Thai) PCL

SCBLTHBX

51. TurkeyHSBC Bank AS HSBCTRIXTurk Ekonomi Bankasi AS TEBUTRISING BANK INGBTRIS52. United Arab EmiratesCitibank NA CITIAEADHSBC Bank Middle East Ltd BBMEAEADMashreqBank PSC BOMLAEADStandard Chartered Bank SCBLAEADHabib Bank AG Zurich HBZUAEAD53. United KingdomBank of Ceylon(UK) Ltd BCEYGB2LBarclays Bank PLC BARCGB22Citibank International PLC CITIGB2LThe Hongkong & Shanghai Banking Corporation Ltd

MIDLGB22

JP Morgan Europe Ltd CHASGB2LStandard Chartered Bank SCBLGB2LWells Fargo Bank NA PNBPGB2L54. United States of AmericaCitibank NA CITIUS33Deutsche Bank AG DEUTUS33Deutsche Bank Trust Company Americas

BKTRUS33

HSBC Bank USA NA MRMDUS33JP Morgan Chase Bank NA CHASUS33MashreqBank PSC MSHQUS33Standard Chartered Bank SCBLUS33Wells Fargo Bank NA PNBPUS3NNYC


Country Name of Exchange Company

AustraliaKapruka Pvt Ltd Remittance Plus Pty LtdColombo Money Transfer Services Pty Ltd

BahrainBahrain Financing Company National Finance & Exchange Co. W.L.LZenj Exchange Co. W.L.L

ItalyNational Exchange Company S.R.L.

JordanAlawne Exchange

KuwaitAlmulla International Exchange Co. K.S.C.C.

Malaysia IME (M) SDN BHD

New ZealandKapruka New Zealand Ltd

OmanOman & UAE Exchange Centre & Co. L.L.CPurshottam Kanji Exchange

Qatar

Doha BankAlFardan Exchange Company Co. L.L.CCity Exchange Co., W.L.LIslamic Exchange Co., W.L.L Al Zaman Exchange W.L.LLari Exchange CoAl Dar Exchange Works Gulf Exchange Co.,

SpainMoney Exchange NEC Money Transfer SA Spain

Saudi ArabiaAl Rajhi Banking Corporation

UAE

UAE Exchange Centre L.L.CHabib Exchange Company L.L.C Wall Street Exchange Centre L.L.CAlfalah Exchange Company L.L.CLeela Megh Exchange Co. L.L.CAl Ahalia Money Exchange BureauAl Ansari Exchange Est.Emirates India International ExchangeAl Rostamani Int’l Ex. Co. Lulu Exchange

Sampath Bank PLC also acts as an agent of following Global Companies;

Money Gram International Coinstar Xpress Money Services Ltd EzRemit ARY Speedremit Instant Cash Global Money Transfer Ria Financial Services Probu Group INC


419Sampath Bank PLC

CAPITAL ADEQUACY

Capital of the Bank is a decisive indicator which illustrates financial soundness of the Bank. It also acts as a limiting factor in risk asset expansion of a bank and a cushion in absorbing unforeseen losses arising from various risk factors associated with banking operations to safe guard the stakeholders.

The Basel Committee on banking supervision (BCBS) published risk measurement framework and minimum capital levels to be maintained by banks. Based on the above measurements, the Central Bank of Sri Lanka (CBSL) has specified the minimum capital requirement over the risk weighted assets of banks to promote soundness and the stability of the banking system.

Capital Adequacy Ratio is calculated by dividing the Capital (Tier I+TierII) by the Risk Weighted Assets as follows.

Basel II is an advanced version of Basel I issued by the ‘The Basel Committee on banking supervision (BCBS)’. Basel II comprises three mutually reinforcing pillars,

Bank’s Capital

Bank’s Risk Weighted Assets

Capital Adequacy Ratio (CAR) x 100=

Pillar 1 – Minimum Capital RequirementPillar 1 relates to the computation of the capital ratio for credit, market and operational risk. Credit risk can be defined as the risk to earnings and capital arising from an obligor’s failure to meet the terms of any contract with the bank or its failure to perform as agreed. Market risk can be defined as the risk to earnings and capital arising from adverse movements in prices in the trading book. Operational risk can be defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The Bank has currently adopted the Standardized Approach for calculating credit and market risk as well as Basic Indicator Approach for calculating operational risk.

Pillar 2 – Supervisory Review Process (SRP)Under the Pillar 2, banks should have their own internal capital assessment processes to capture risks that remain uncovered under the first pillar and thus maintain capital in line with the banks’ risk profile and risk management environment. The supervisors are expected to validate the internal capital adequacy assessment process of banks to ensure that banks have captured all the risks in their business. Where the supervisor assesses that the bank’s capital assessment process does not capture all its risks, the supervisor is expected to intervene and recommend early corrective action. Pillar 2 is also expected to encourage banks to develop and use better risk management techniques including the setting up of a separate risk management function in banks for prudent management of all material risks.

Basel II Capital Framework

Pillar 2 Pillar 3Pillar 1

Minimum Capital Requirement

Supervisory reviewProcess

Market Disciplines

Credit Risk Market Risk Operational Risk

Credit Concentration Risk Interest rate risk in the

banking book Liquidity Risk Strategic and Reputation

Risk

Regular disclosure to the market covering both quantitative and qualitative aspects of Capital requirement


CAPITAL ADEQUACY

Pillar 3 – Market DisciplinePillar 3 seeks to enhance disclosure and transparency by strengthening banks’ financial reporting system by encouraging market discipline, and allowing the key stakeholders to assess key pieces of information on the scope of application, risk exposures, risk assessment processes and capital adequacy of the institution. Pillar 3 complements and reinforces the first two pillars and infuses market pressure on banks to bring in better risk management techniques, maintain adequate levels of capital to enable prudent and more informed decision making.

As per the regulation of Central Bank of Sri Lanka (CBSL), Core Capital Adequacy Ratio currently in force for banks is 5 per cent and Total Capital Adequacy Ratio is 10 per cent. In 2012, Capital Adequacy calculation was done, having taken into account the profit & retained earning derived from financial statements which have been prepared in compliance with New Sri Lanka Financial Reporting Standards (SLFRS). According to these computations, Sampath Bank’s Core Capital Adequacy Ratio (Tier I) -11.80% and Total Capital Adequacy Ratio - 13.61 % were well above the stipulated levels by Central Bank of Sri Lanka (CBSL).

Migration to Advanced Approach of Basel IIThe Bank has already put in place necessary measures to ensure the smooth migration to Advanced Approach of Basel II within the time frame set by the Central Bank of Sri Lanka. This would facilitate more room for the Bank to better manage its capital, whilst fulfilling the regulatory requirements.

The Internal Capital Adequacy Assessment Process (ICAAP)The Internal Capital Adequacy Assessment Process (ICAAP) is part of Pillar II and is a process not only to ensure that banks have adequate capital to support all the risks in their business but also to encourage banks to develop and use both risk management techniques in monitoring and managing their risks. According to the Central Bank of Sri Lanka guidelines, banks are required to submit the ICAAP document and their approach to Capital Management to the regulators by end of January 2013. In order to comply with the above requirement, Sampath bank has obtained assistance from an international consultancy firm for the ICAAP assessment, planning / and documentation process.

Migration to Basel IIIThe latest implication of Basel III, which was published by the Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlement at the end of 2010, mainly includes new standards for capital, leverage and liquidity to strengthen the regulations, supervision and risk management of the banking sector. Sampath Bank has already focused attention for proper implementation of Basel III at the right time.

421Sampath Bank PLC

Computation of Capital Adequacy Ratios - Basel II

(Rs. Mn) Bank Group

2012 2011 2012 2011Risk-weighted Assets for Credit Risk Assets Risk Assets Risk Assets Risk Assets Risk weighted weighted weighted weighted Assets Assets Assets Assets

Claims on Central Government and Central Bank of Sri Lanka 27,215.1 - 20,005.0 - 27,224.8 - 20,009.0 -Claims on Public Sector Entities 544.4 108.6 511.7 76.0 544.4 108.6 511.7 76.0Claims on Banks Exposures 14,456.7 3,948.6 14,898.2 4,085.5 14,457.0 3,948.7 14,906.4 4,087.2Claims on Financial Institutions 8,029.6 5,610.4 9,180.5 6,180.9 7,058.6 4,639.4 7,669.4 4,669.8Claims on Corporates 102,803.2 101,067.3 103,463.1 101,799.6 107,103.3 105,367.4 106,301.4 104,637.9Retail claims 39,227.8 29,420.8 17,932.5 13,449.4 39,227.8 29,420.8 17,932.5 13,449.4Claims Secured by Residential Property 9,354.1 6,572.4 8,085.6 5,880.8 9,354.1 6,572.4 8,085.6 5,880.8Past Due Loans 952.5 1,322.1 825.2 1,165.3 972.9 1,342.5 832.4 1,172.5Past Due Residential Mortgage Loans 222.1 206.7 231.4 213.1 222.1 206.7 231.4 213.1Cash / Gold against Loans 80,184.2 33.8 52,527.2 20.4 80,184.4 33.8 52,527.4 20.4Other Assets 6,072.7 6,072.7 7,866.3 7,866.3 9,336.0 9,336.0 11,387.3 11,387.3 289,062.3 154,363.3 235,526.9 140,737.3 295,685.5 160,976.3 240,394.8 145,594.4

(Rs. Mn) Bank Group

2012 2011 2012 2011

Off-balance sheet Items Credit Principal Credit Principal Credit Principal Credit Principal Credit

Conversion amount equivalent amount equivalent amount equivalent amount equivalent

Factor (%) of Off- of Off- of Off- of Off- of Off- of Off- of Off- of Off-

balance balance balance balance balance balance balance balance

sheet items sheet items sheet items sheet items sheet items sheet items sheet items sheet items

Direct Credit Substitutes 11,818.1 11,818.1 8,803.4 8,803.4 11,818.1 11,818.1 8,803.4 8,803.4 General Guarantees of Indebtedness 100.0 11,818.1 11,818.1 8,803.4 8,803.4 11,818.1 11,818.1 8,803.4 8,803.4 Transaction-related Contingencies 7,169.0 4,089.9 5,294.6 3,079.3 7,169.0 4,089.9 5,294.6 3,079.3 Performance Bonds, Bid Bonds & Warranties 50.0 4,922.7 2,461.3 3,134.6 1,567.3 4,922.7 2,461.3 3,134.6 1,567.3 Others 72.5/70 2,246.3 1,628.6 2,159.9 1,511.9 2,246.3 1,628.6 2,159.9 1,511.9 Short-Term Self-Liquidating Trade-Related

Contingencies 18,620.8 3,724.2 18,117.8 3,623.6 18,620.8 3,724.2 18,117.8 3,623.6 Shipping Guarantees 20.0 1,002.3 200.5 1,357.8 271.6 1,002.3 200.5 1,357.8 271.6 Documentary Letters of Credit 20.0 11,310.4 2,262.1 11,633.7 2,326.7 11,310.4 2,262.1 11,633.7 2,326.7 Trade related acceptances 20.0 6,308.2 1,261.6 5,126.2 1,025.2 6,308.2 1,261.6 5,126.2 1,025.2 Other Commitments with an Original

maturity of up to one year or which

can be unconditionally cancelled at

any time 25,846.8 - 21,649.4 - 25,846.8 - 21,649.4 - Undrawn Overdraft Facilities/Unused Credit Card Lines - 25,846.8 - 21,649.4 - 25,846.8 - 21,649.4 - Other Commitments with an Original

Maturity of over one year 1,493.3 746.6 3,646.0 1,823.0 1,696.9 848.5 3,646.0 1,823.0 Undrawn Term Loans 50.0 1,493.3 746.6 3,646.0 1,823.0 1,696.9 848.5 3,646.0 1,823.0 Foreign Exchange Contracts 47,786.0 955.7 60,238.1 1,204.8 47,786.0 955.7 60,238.1 1,204.8 Original Maturity-less than one year 2.0 47,786.0 955.7 60,238.1 1,204.8 47,786.0 955.7 60,238.1 1,204.8 112,734.0 21,334.6 117,749.1 18,534.0 112,937.7 21,436.4 117,749.1 18,534.0


CAPITAL ADEQUACY

(Rs. Mn) Bank Group

Risk-weighted amounts for Market Risk 2012 2011 2012 2011

Interest Rate Risk 194.95 184.03 194.95 184.03General risk 194.95 184.03 194.95 184.03Specific risk - - - -Equity Risk 56.41 95.96 56.41 95.96General risk 32.53 53.83 32.53 53.83Specific risk 23.89 42.13 23.89 42.13Foreign Exchange & Gold Risk 43.05 22.22 43.05 22.22Total Capital Charge for Market Risk 294.41 302.21 294.41 302.21Total Risk-weighted amount for Market Risk (Total Capital Charge X 10 ) 2,944.13 3,022.05 2,944.13 3,022.05

(Rs. Mn) Bank Group

Risk-weighted Assets for Operational Risk 2012 2011 2012 2011

Average Net Income for last three financial years 15,607.1 13,687.5 16.095.0 14,037.0Deductions : Realised profits from the sale of securities (average of last three financial years) 937.3 1,502.6 926.8 1,424.3Extraordinary / irregular item of income (average of last three financial years) 10.0 6.3 19.9 24.8Gross Income 14,659.9 12,178.5 15,148.2 12,587.9Total Capital Charge for Operational Risk 2,199.0 1,826.8 2,272.2 1,888.2(Gross Income X 15%)Total Risk-weighted amount for Operational risk 21,989.8 18,267.8 22,722.3 18,881.9(Total Capital Charge for Operational Risk X 10)

Risk-weighted assets for credit risk 154,363.3 140,737.3 160,976.3 145,594.4Risk-weighted amounts for market risk 2,944.1 3,022.1 2,944.1 3,022.1Risk-weighted amounts for operational risk 21,989.8 18,267.8 22,722.3 18,881.9Total Risk-weighted Assets 179.297.3 162,027.2 186,642.8 167,498.4

423Sampath Bank PLC

(Rs. Mn) Bank Group

Calculation of Total Capital Base 2012 2,011 2012 2011

Core Capital (Tier I)Stated Capital 3,564.2 2,743.8 3,564.2 2,743.8Statutory Reserve Fund 2,702.9 1,432.3 2,759.6 1,462.3Published Retained Profits/(Accumulated Losses) 2,016.2 1,415.0 2,653.4 2,268.7General and Other Reserves 13,895.8 11,736.3 13,895.8 11,481.0Minority Interests (consistent with the above capital constituents) - - 61.2 59.9

Deductions/Adjustments (Tier I)Goodwill - - 5.3 5.3Other intangible assets 311.0 67.3 315.6 73.450% of investments in unconsolidated banking and financial subsidiary companies. 262.5 262.5 - -50% investments in the capital of other banks and financial institutions 454.7 407.9 454.7 407.9

Total Core Capital 21,150.9 16,589.8 22,158.6 17,529.1Supplementary Capital (Tier II)Revaluation Reserves (as approved by CBSL) 405.1 405.1 405.1 405.1General Provisions 694.0 619.6 694.0 619.6Approved Subordinated Term Debt 2,868.7 1,603.9 2,868.7 1,603.9Actual amount of Approved Subordinated Term Debt 2,868.7 3,003.9 2,868.7 3,003.9

Deductions (Tier II)50% of investments in unconsolidated banking and financial subsidiary companies. 262.5 262.5 - -50% investments in the capital of other banks and financial institutions 454.7 407.9 454.7 407.9

Eligible Tier II Capital 3,250.5 1,958.3 3,513.0 2,220.8Base Capital ( Tier I + Tier II ) 24,401.5 18,548.0 25,671.6 19,749.9

LIMITS :(i) Approved subordinated Term Debt is limited to 50% of Total Tier I Capital.(ii) The total of Tier II Supplementary Elements should not exceed a maximum of 100% of Tier I Elements.(iii) General Provision should not exceed 1.25% of Risk Weighted Assets.

(Rs. Mn) Bank Group

2012 2,011 2012 2011

Core Capital Ratio ( Minimum Ratio - 5% )

Core Capital (Tier I) x 100 21,150.9 x 100 16,589.8 x 100 22,158.6 x 100 17,529.1 x 100

Total Risk-weighted Assets 179,297.3 162,027.2 186,642.8 167,498.4

Total Capital Ratio ( Minimum Ratio - 10% )

Capital Base x 100 24,401.5 x 100 18,548.0 x 100 25,671.6 x 100 19,749.9 x 100

Total Risk-weighted Assets 179,297.3 162,027.2 186,642.8 167,498.4

Core Capital (Tier I) Ratio ( % ) 11.80 10.24 11.87 10.47

Total Capital Ratio ( % ) 13.61 11.45 13.75 11.79


AAcceptancesThe 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 entity in which the investor has significant influence and which is neither a subsidiary nor an interest in a joint venture.

Amortised CostThe amount at which the financial asset of financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Available –For –Sale financial AssetsNon derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.

BBills 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.

BIS SurplusThe total Capital Adequacy in excess of the minimum stipulated by Basel International Standards and as modified to suit local requirements by the Central Bank of Sri Lanka.

CCapital AdequacyThe percentage of risk-adjusted assets supported by capital as defined under the framework of risk-based capital standards developed by the Bank for International Settlement (BIS) and as modified to suit local requirements by the Central Bank of Sri Lanka.

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 ReservesCapital Reserves consist of revaluation reserves arising from revaluation of properties owned by the Bank and Reserve Fund 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.

GLOSSARY OF FINANCIAL AND BANKING TERMS

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.

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.

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 investeearising subsequent to the date of acquisition.

Cost-Push InflationA continuous increase in average price levels due to an increase in production costs.

Credit RiskCredit risk is the risk of financial loss to the Bank if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the loans and advances to customers and other banks and investment debt securities.

currency risk The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

Credit Risk Mitigation A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection.

Credit RatingsAn evaluation of a corporate ability to repay its obligations or likelihood of not defaulting carried out by an independent rating agency.

425Sampath Bank PLC

Collectively Assessed ImpairmentImpairment assessment on a collective basis for homogeneous groups of loans that are not considered individually significant and to cover losses which have been incurred but have not yet been identified on loans subject to individual assessment.

Commercial Paper (‘CP’) An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities. The debt is usually issued at a discount, reflecting prevailing market interest rates.

Customer Deposits Money deposited by account holders. Such funds are recorded as liabilities.

DDealing SecuritiesThese are marketable securities acquired and held with the intention to resale over a short period of time.

Deferred TaxSum set aside in the Financial Statements that may become payable/ receivable in a financial year other than the current financial year. It arises because of temporary differences between tax rules and accounting conventions.

DerivativesA derivative is a financial instrument or other contract, the value of which changes in response to some underlying variable (e.g., an interest rate), that has an initial net investment smaller than would be required for other instruments that have a similar response to the variable, and that will be settled at a future date.

Dividend CoverProfit after tax divided by gross Dividend. This ratio measures the number of times dividend is covered by the current year’s distributable profits.

Dividend YieldDividend earned per share as a percentage of its market value.

Documentary Letters Of Credit (L/C’s)Written undertakings by a bank on behalf of its customers, authorising a third party to draw on the Bank up to a stipulated amount under specific terms and conditions. Such undertakings are established for the purpose of facilitating international trade.

Derecognition is the removal of a previously recognized financial asset or financial liability from an entity’s statement of financial position.

EEarning 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 Dividend.

Economic Value Added (EVA)A measure of productivity which takes into consideration cost of total invested equity.

Effective Tax RateProvision for taxation excluding deferred tax divided by the profit before taxation.

Equity MethodThe equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition changes in the investor’s share of net assets of the investee. The profit or loss of the investor includes the investor’s share of the profit or loss of the investee.

ESOP (Employee Share Ownership Plan)A method of giving employees shares in the business for which they work.

Equity instrumentis any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Equity Risk The risk arising from positions, either long or short, in equities or equity-based instruments, which create exposure to a change in the market price of the equities or equity instruments.

Expected Loss (‘EL’) A regulatory calculation of the amount expected to be lost on an exposure using a 12 month time horizon and downturn loss estimates. EL is calculated by multiplying the Probability of Default (a percentage) by the Exposure at Default (an amount) and Loss Given Default (a percentage).

Exposure A claim, contingent claim or position which carries a risk of financial loss.

Effective Interest Rate (EIR)

The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

FFair ValueFair Value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction.

Fair Value Adjustment An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model.


Finance LeaseA lease in which the lessee acquires all the financial benefits and risks attaching to ownership of whatever in being leased.

Foreign Exchange ContractAgreement between two parties to exchange one currency for another at a future date at a rate agreed upon today.

Foreign Exchange IncomeThe realised gain recorded when assets or liabilities denominated in foreign currencies are translated into Sri Lankan Rupees on the balance sheet date at prevailing rates which differ from those rates in force at inception or on the previous balance sheet date. Foreign exchange income also arises from trading in foreign currencies.

Financial asset is any asset that is cash, an equity instrument ofanother entity or a contractual right to receive cash or another financial asset from another entity.

Financial liability is a contractual obligation to deliver cash or another financial asset to another entity

Financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

firm commitment is a binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates.

GGeneral ProvisionsGeneral provisions are established for loans and advances for anticipated losses on aggregate exposures where credit losses cannot yet be determined on an individual facility basis.

Gross DividendThe portion of profits distributed to the shareholders including the tax withheld.

GroupA group is a parent and all its subsidiaries.

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 fulfil the contractual obligations.

HHedgingA strategy under which transactions are effected with the aim of providing cover against the risk of unfavourable price movements (Interest Rate, Foreign exchange rate, commodity prices, etc)

HTM (Held to Maturity) InvestmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed maturity that an entity has the positive intention and ability to hold to maturity.

IImpairmentThis occurs when recoverable amount of an asset is less than its carrying amount.

Impaired Loans Loans where the Group does not expect to collect all the contractual cash flows or expects to collect them later than they are contractually due.

Impairment Allowances Management’s best estimate of losses incurred in the loan portfolios at the balance sheet date.

Individually Assessed ImpairmentExposure to loss is assessed on all individually significant accounts and all other accounts that do not qualify for collective assessment.

Interest rate riskThe risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Intangible AssetAn identifiable non-monetary asset without physical substance held for use in the production / supply of goods / services or for rental to others or for administrative purposes.

Interest MarginNet interest income expressed as a percentage of interest earning assets.

Interest SpreadThis represents the difference between the average interest rate earned and the average interest rate paid on funds.

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.


427Sampath Bank PLC

Investment PropertiesInvestment property is property (land or a building - or part of a building – or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for use or sale.

Investment SecuritiesSecurities acquired and held for yield or capital growth purposes and are usually held to maturity.

JJoint ControlJoint control is the contractually agreed sharing of the control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.

Joint VentureA joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

K Key Management PersonnelKey Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.

LLetter of Credit (L/C’s)Written undertakings by a bank on behalf of its customer (typically an importer), authorising 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.

Liquid AssetsAssets that are held in cash or in a form that can be converted to cash readily, such as deposits with other banks, Bills of Exchange and Treasury Bills and Bonds.

Loan Losses and ProvisionsAmounts set aside against possible losses on loans, advances and other credit facilities as a result of such facilities becoming partly or wholly uncollectible.

Level 1 – Quoted Market Price Financial instruments with quoted prices for identical instruments in active markets.

Level 2 – Valuation Technique Using Observable InputsFinancial instruments with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable.

Level 3 –Valuation Technique With Significant Unobservable InputsFinancial instruments valued using valuation techniques where one or more significant inputs are unobservable.

Liquidity Risk The risk that an entity will encounter difficulty inmeeting obligations associated with financial liabilities

Loans payable Loans payable are financial liabilities, other than short term trade payables on normal credit terms.

Loss Given Default (‘LGD’) The estimated ratio (percentage) of the loss on an exposure to the amount outstanding at default (EAD) upon default of counterparty.

MMarket CapitalisationThe value of a company obtained by multiplying the number of issued shares by its market value as at a date.

Market RisksMarket risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s credit standing) will affect the Bank’s income or the value of its holdings of financial instruments.

MaterialityThe relative significance of a transaction or an event, the omission or misstatement of which could influence the decisions of users of Financial Statements.

Minority interestThe interest of individual shareholders, if more than 50% of which is owned by a holding company.

NNet Asset Value Per ShareShareholders’ Funds divided by the number of ordinary shares in issue.

Net-Interest Income (NII)The difference between what a bank earns on assets such as loans and securities and what it pays on liabilities such as deposits refinance funds and inter-bank borrowings.

Non-Performing Advances (NPA)All loans are classified as nonperforming when a payment is 90 days in arrears.

Non-Performing Advances Cover (NPA Cover)Cumulative loan loss provision as a percentage of total Non-Performing Advances (net of Interest in Suspense).


NPA RatioTotal non-performing advances (net of Interest in Suspense) divided by total advances portfolio (net of Interest in Suspense).

Net Interest Income The amount of interest received or receivable on assets net of interest paid or payable on liabilities.

OOff Balance Sheet TransactionsTransactions that are not recognised as assets or liabilities in the Balance Sheet, but which give rise to contingencies and commitments.

Open Credit Exposure RatioTotal net non-performing loans and advances expressed as a percentage of regulatory capital base.

Operational RiskOperational risk refers to the losses arising from fraud, negligence, oversight,human error, process errors, system failures, external events, etc.

Other price riskThe risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

PParentA parent is an entity that has one or more subsidiaries.

Price-earnings ration (P/E ratio)The current market price of the share is divided by the earnings per share of the Bank.

Provision for Bad and Doubtful DebtsA charge to income statement which is added to the allowance for loan losses. Specific provisions are established to reduce the book value of specific assets (primarily loans) to estimated realisable values.

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.

Past due A financial asset is past due when a counterparty has failed to make a payment when contractually due.

Probability of Default (‘PD’) The probability that an obligor will default within a one-year time horizon.

R Related PartiesParties where one party has ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, directly or indirectly.

Return On Average Assets (ROA)Net income expressed as a percentage of average total assets, used along with ROE, as a measure of profitability and as a basis of intra-industry performance comparison.

Return On Equity (ROE)Net income, less preferred share Dividend if any, expressed as a percentage of average ordinary shareholders’ equity.

Revenue ReservesReserves set aside for future distribution and investment.

Rights IssueIssue of shares to the existing shareholders at an agreed price, generally lower than market price.

Risk Weighted AssetsUsed in the calculation of risk-based capital ratios. The face amount of lower risk assets is discounted using risk weighting factors in order to reflect a comparable risk per rupee among all types of assets. The risk inherent in offbalance sheet instruments is also recognised, first by adjusting notional values to balance sheet (or credit) equivalents and then by applying appropriate risk weighting factors.

S Securities Sold Under Repurchase Agreement (REPO)This relates to Treasury Bills and Bonds sold subject to a commitment to repurchase them at a predetermined price on a specified future date.

Securities Purchased Under Resale Agreement (Reverse REPO)These are loans collateralised by the purchase of Treasury Bills and/or guaranteed commercial papers from the counterparty to which the loans are granted. The sale by the counterparty is subject to a commitment by the Bank to sell back the underlying debt securities to the borrower at a predetermined price on a specific 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.

Statutory Reserve FundA capital reserve created as per the provisions of the Banking Act No. 30 of 1988.


429Sampath Bank PLC

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).

SWAPS (Currency)The simultaneous purchase of an amount of a currency for spot settlement and the sale of the same amount of the same currency for forward settlement. Alternatively a simultaneous spot sale and forward purchase of a currency.

TTier 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 andlong-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 CapitalCapital base is summation of the core capital (Tier I) and the supplementary capital (Tier II).

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability

UUnit TrustAn undertaking formed to invest in securities under the terms of a trust deed.

VValue AddedWealth created by providing banking and other services less the cost of providing such services. The value added is allocated among the employees, the providers of capital, to government by way of taxes and retained for expansion and growth.

YYield to MaturityDiscount rate at which the present value of future payments would equal the security’s current price.


NOTICE OF ANNUAL GENERAL MEETINGNotice is hereby given that the 27th Annual General Meeting of Sampath Bank PLC will be held at the “Balmoral” Hall, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, on 4th April 2013 at 9.30 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 2012 with the Report of the Auditors thereon.

2. To declare a dividend of Rs. 12/= per share for the financial year 2012 be declared payable as follows:

a. a Cash Dividend Rs. 6/= per share; and b. a Scrip Dividend of Rs.6/= per share

and therefore to consider and if thought fit, to pass the following Resolution by way of an Ordinary Resolution.

“It is hereby resolved that a dividend of Rs. 12/= per share for the financial year 2012 payable as follows;

Rs. 6/= be distributed in the form of Cash amounting to a total payment of a sum of Rupees Nine Hundred and Seventy Seven Million Forty Five Thousand and Nine Hundred and Fifty Two (Rs.977,045,952/=). Rupees Nine Hundred and Sixteen Million Seven Hundred Sixty Eight Thousand Seven Hundred and Fifty Nine (Rs.916,768,759/=) of the cash Dividend shall be subject to dividend tax at the rate of 10% whilst the remainder is exempt from dividend tax; and

Rs. 6/= be distributed in the form of scrip amounting to total sum of Rupees Nine Hundred and Seventy Seven Million Forty Five Thousand and Nine Hundred and Fifty Two (Rs.977,045,952/=). Rupees Nine Hundred and Sixteen Million Seven Hundred and Sixty Eight Thousand Seven Hundred and Fifty Nine (Rs.916,768,759/=) of the scrip dividend shall be subject to dividend tax at the rate of 10% whilst the remainder is exempt from dividend tax. The shares issued in the scrip dividend shall be valued at Rs.180.10 per share which result in one (01) share being issued for each existing thirty three point one two four Seven Eight Seven Six Seven Two Four Two Five Two (33.1247876724252) shares held by the shareholders at the end of trading on the Colombo stock exchange on the date of the Annual General Meeting. Consequently the total number of shares to be issued under the scrip dividend shall be Four Million Nine Hundred and Fifteen Thousand Nine Hundred and Eighty Six (4,915,986) Ordinary shares (The number of shares to which the dividend applies may change if the employees exercise their ESOP options prior to “XD” date and accordingly total number of issued shares also change) upon which the total number of shares issued by the company shall be One Hundred and Sixty Seven Million Seven Hundred and Fifty Six Thousand Nine Hundred and Seventy Eight (167,756,978) ordinary shares.”

“It is further resolved that the shares issued for the Scrip Dividend be listed on the Colombo Stock Exchange”

“It is further resolved that the shares arising from the aggregation of the residual fractions consequent to the Scrip Dividend be disposed of in the market by a trustee to be nominated by the Board of Directors and the proceeds to be distributed amongst those shareholders entitled to the fraction of such shares.”

3. To re-elect Mr.Dhammika Perera 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 Prof.Malik Ranasinghe 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 Mrs.Dharani Wijayatilake who retires at the Annual General Meeting as a Director in terms of Article No. 87 of the Articles of Association of the Company.

6. To re-elect Mr.Sanjiva Senanayake who retires at the Annual General Meeting as a Director in terms of Article No. 87 of the Articles of Association of the Company.

7. To re-elect Mrs.Saumya Amarasekera at the Annual General Meeting as a Director in terms of Article No. 93 of the Articles of Association of the Company.

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. SudarshanGroup Company Secretary22nd February 2013

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)

431Sampath Bank PLC

FORM OF PROXYTwenty Seventh Annual General Meeting

Sampath Bank PLC

110, Sir James Peiris Mawatha

Colombo – 02

I/We ............................................................................................................ of .................................................................................................................

being a member/members of Sampath Bank PLC hereby appoint Mr/Mrs/Miss/Ven/Rev ........................................................................................................

of……………………………………………………………………...................................……………………………………………………………………………………...

Failing him/her Mr. Dhammika Perera of 27th Floor, East Tower, World Trade Centre, Echelon Square, Colombo 01, failing him Mr. Channa Palansuriya of 20/38,

Fairfield Gardens, Colombo 08, failing him Mr. Sanjiva Senanayake of 164/16, Nawala Road, Nugegoda failing him Mr. Aravinda Perera of 370 F/2, Lake Road,

Averihena, Hokandara (South), failing him Mr. Ranjith Samaranayake of 51A, Weera Puranappu Mawatha, Lakshapathiya, Moratuwa, failing him Mr. Deepal

Sooriyaarachchi of 28/10 Birnamwood, Wijesekera Mawatha, Mirihana, Nugegoda, failing him Prof. Malik Ranasinghe of 18, Layards Road, Colombo 05, failing

him Mrs. Dharani Wijayatilake of 78/1, Old Road, Nawala, failing her Mr. Deshal De Mel of 103/1, Rosemead Place, Colombo 07, failing him Mr. Ranil Pathirana

of 243/5, Lake Gardens, Sri Jayawardenapura Mawatha, Rajagiriya, failing him Miss. Annika Senanayake of 18/1, Alfred Place, Colombo 03, failing her Mrs.

Saumya Amarasekera of 03, Sravasti Place,Colombo 07. as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty Seventh Annual General

Meeting of the Company to be held on “Balmoral” Hall, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, on 4th April 2013 at 9.30 a.m. 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 2012

2. To declare the recommended Cash Dividend Rs. of 6/= per share and the Scrip Dividend of Rs.6/= per share for the Financial Year 2012 along with the Ordinary Resolutions set out in the Notice convening the meeting.

3. To re-elect Mr.Dhammika Perera as a Director under Article No.87 of The Articles of Association of the Company.

4. To re-elect Prof. Malik Ranasinghe as a Director under Article No.87 of The Articles of Association of the Company.

5. To re-elect Mrs.Dharani Wijayatilake as a Director under Article No.87 of The Articles of Association of the Company.

6. To re-elect Mr.Sanjiva Senanayake as a Director under Article No.87 of The Articles of Association of the Company.

7. To re-elect Mrs.Saumya Amarasekera as a Director under Article No.93 of The Articles of Association of the Company.

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 authorise the Directors to determine their remuneration.

Mark your preference with “X”

Signed on this ………………………Day of …………………. 2013

Signature ……………………………………………

Note: 1. Proxy need not be a member of the Company 2. Instructions regarding completion of Proxy are given in next page


FORM OF PROXY

Instructions as to Completion1. 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 [above names of the Board of Directors] on the Proxy Form.

4. Article No. 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, authorise 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 authorised 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 an ‘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 ……………................……………………………………

CORPORATE INFORMATION

Name of Company Sampath 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. 07 of 2007.

Registration NumberPQ 144

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

Telephone+94(011)2300260+94(011)2358358+94(011)4730630+94(011)5331441+94(011)5600600

Fax+94(011)2303085

SWIFT CodeBSAMLKLX

[email protected]

Web Pagewww.sampath.lk

AuditorsErnst & YoungChartered Accountants

LawyersNithya PartnersAttorneys - at - Law

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

Stock Exchange Listings162,736,665 Ordinary Shares 15,000,000 Unsecured Subordinated Debentures of Rs. 100/- each - 2012/2017

VAT Registration Number134001194 - 7000

Credit RatingRAM Rating AA (Stable)Fitch Rating AA-(lka) (Stable)

Board of Directors (As at 25/10/2012)Mr. Dhammika Perera - ChairmanMr. Channa Palansuriya - Deputy ChairmanMr. Sanjiva Senanayake - Senior DirectorMr. Deepal Sooriyaarachchi - Non-Executive DirectorProf. Malik Kumar Ranasinghe - Non-Executive DirectorMrs. Dhara Wijayatilake - Non-Executive DirectorMiss. Annika Wickremasinghe Senanayake - Non-Executive DirectorMr. Deshal De Mel - Non-Executive DirectorMr. Ranil Pathirana - Non-Executive DirectorMrs. Saumya Amarasekera - Non-Executive DirectorMr. Aravinda Perera - Managing DirectorMr. Ranjith Samaranayake - Group Chief Financial Officer/ Executive Director

Subsidiary Companies

Name of the Company Holding % Nature of Business

Sampath Centre Ltd 97.14Renting of Commercial Property

S C Securities (Pvt) Ltd 100.00 Stock Broking


100.00 Leasing & Factoring


100.00Developing Software Solutions and Maintenance of Hardware

For investor relations and clarifications on the report, Please contact;Group Company SecretarySampath Bank PLCNo. 110, Sir James Peiris Mawatha, Colombo 2, Sri LankaE-mail : [email protected]. : +94(011) 4730418/420/548

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