THE POWER OF1… The Plurality of the Singular as implied when we consider One Nation… One People is clear. The Bank of Ceylon is Sri Lanka’s No. 1 Bank… we are 1 with the Nation…1 with the People…in fact 1 figures largely in our enterprise as we work to support the Government’s vision of uniting and prospering Sri Lanka as 1 Nation…1 People. BANK OF CEYLON ANNUAL REPORT 2010 1 Vision Bankers to the nation

Mission Customers - Foster mutually rewarding customer relationships with all our customers exceeding their expectations.

Staff - Give all our staff the recognition and rewards to be the best team of achievers in service excellence.

Owners - Be a profitable catalyst for equitable development covering urban and rural areas.

Society - Provide world-class banking services across the nation as a beacon for progress and growth. 1 Customer base… 9 million customers… 1 Bank…Bank of Ceylon 1 customer base…millions of people of every persuasion, every occupation, every race…1 Product Portfolio… 1 Customer Service regime…1 Bank…BoC Contents 5 Business Highlights 6 Historical Review 7 Financial Highlights 8 Chairman’s Message 11 General Manager’s Review 14 Board of Directors 17 Corporate Management Team 26 Executive Management Team 30 Management Discussion and Analysis 56 Corporate Governance 80 Board & Board Subcommittees 81 Report of Board Subcommittees 87 Risk Management & Compliance 95 Sustainability Report 126 G3 Standard Disclosures Index 132 Products & Services

135 Financial Reports 137 Annual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon 141 Directors’ Interests in Contracts 145 Directors’ Responsibility for Financial Reporting 146 Independent Assurance Report 147 Directors’ Statement on Internal Control 149 Report of the Auditor General 150 Income Statement 151 Balance Sheet 152 Statement of Changes in Equity 153 Cash Flow Statement 156 Significant Accounting Policies 167 Notes to the Financial Statements

237 Capital Adequacy 241 Investor Information 255 Group Structure 256 Subsidiaries & Associates 260 Corporate Offices & Overseas Branches 262 BoC Service Points 276 Correspondent Banks by Country 282 Exchange Companies by Country 283 Glossary of Financial/Banking Terms Inner Back Cover Corporate Information BUSINESS HIGHLIGHTS z Highest ranked Sri Lankan bank in the Bankers Almanac. z Wider customer base over 9 million accounts. z Leader in treasury operations with over 50% of local foreign exchange market. z Worldwide network reaching over 800 foreign correspondents. z Leader in inward foreign remittances with over 43% market share. z Nation’s first locally-owned bank, expanded its operations with an island-wide network of 875 service points; 854 connected on-line. z Representing largest off-shore banking operations with the highest market share of assets. z Bank of Ceylon‘s outlook has been revised by Fitch Ratings Lanka Limited to positive from stable, and affirmed its National Long-Term Rating at ‘AA (lka)’. z Bank achieved a remarkable breakthrough in trade finance by centralising its activities for customer convenience and recognised as the best Sri Lankan Trade Bank for 2010 for the second consecutive year with over 50% market share. z The first State Bank to commence 24 hour service point. z The London branch of the Bank was converted as an independent fully-owned Subsidiary, operating in United Kingdom. z Single borrower exposure capacity in excess of Rs. 10 billion. z BoC‘s new corporate plan branded ‘one 10 TWELVE’ (ie, Rs. 1 trillion assets, Rs. 10 billion profit before tax by year 2012) reached to Rs. 715 billion assets, Rs. 10 billion profit before tax in the year 2010. z Bank’s deposit mobilisation campaigns throughout the country achieved a remarkable deposit base of Rs. 524 billion. z Lending to private sector increased by Rs. 62 billion, 34% up. z Increased penetration in branchless banking by introduction of internet banking and mobile banking. z Bank successfully raised Rs. 5 billion for the second time by issuing subordinated 5 year debentures listed on the Colombo Stock Exchange. z Bank of Ceylon introduced new business lines by adding an investment arm and Islamic banking into its banking stream. HISTORICAL REVIEW

Bank of Ceylon has evolved continuously over 1978 Wide range of relief, rehabilitation and the years, undergoing changes in its business Non-Residents Foreign Currency (NRFC) reconstruction activities undertaken and operations, branch network, ownership, deposit scheme introduced. financed in the aftermath of the December people, products and services to emerge as 2004 tsunami. the largest financial service provider in Sri 1979 Lanka. Such progress is summarised below: Off-shore banking operations commenced 2006 with the establishment of the Foreign Wins IBM/FISERV prize for the fastest 1939 Currency Banking Unit. deployment of an online core banking system Bank of Ceylon established as the nation’s in Asia Pacific region. first modern, locally-owned bank. 1980 Ceremonially opened on 1 August by Computer Division established; automation 2007 Governor, Sir Andrew Caldecott, at the of business operations commences. Raises US$ 210 million, the largest present-day premises of the City Office. internationally syndicated debt by any Sri 1981 Lankan issuer; appointed Co-Manager of 1941 Branch opened in Malé, Republic of Maldives. historic US$ 500 million debut bond issued Operations commence in Kandy with opening by the Government of Sri Lanka; commences of a branch office. Other branches opened 1985 Village Development Programme focused on subsequently in other large outstation towns: Head Office moves to 32-storey BOC Tower engaging rural communities. Galle, Jaffna and Trincomalee. in Colombo. 2008 1946 1988 Raises Rs. 4.2 billion via a listed subordinated Foreign Department established. Operates Installation of the first BOC ATMs ushers in rupee debenture of 5 years; raises US$ 21.6 from offices at the Grand Oriental Hotel the electronic banking era. million via a private placement of a 5-year (GOH) Building, Colombo Fort. subordinated dollar debenture. 1989 1949 Ceybank Visa credit card introduced in 2009 First overseas branch opens in London shortly collaboration with Visa International. BoC completed online branch network by after Independence; it is the thirteenth bank bringing in Kilinochchi, Mankulam and branch to be opened. 1995 Mullaitivu branches into the network, the Overseas branch network augmented with operations of which were disrupted at the 1953 offices in Madras and Karachi. time of ending the war. BoC celebrated its C Loganathan becomes first Sri Lankan 70th Anniversary. General Manager. 1996 Joint venture with Nepal Bank establishes Bank launched an Islamic Banking Unit, 1954 Nepal Bank of Ceylon Limited. which operates through Island-wide network. Central Office moves from City Office to premises at GOH Building. 1998 2010 MoU with Government results in greater BoC diversified its operations in the United 1959 management autonomy and target-based Kingdom by upgrading its London branch Authorised capital enhanced to Rs. 50 million performance. to a Subsidiary of BoC that will be used as a by Act of Parliament. platform for global banking and to attract 2000 more foreign investment to the country. 1961 Authorised capital further enhanced to Nationalisation. The Government of Ceylon Rs. 50 billion by Act of Parliament. Bank has set up a specialised investment becomes sole owner of Bank of Ceylon. banking unit aiming to diversify its portfolio 2004 in non-core banking. Kachcheri branch network set up in Real estate subsidiary Mireka Capital Land alignment with the Government’s District (Private) Limited formed to invest in Havelock Bank successfully raised Rs. 5 billion in Administration System. City, the largest single condominium the second public issue of unsecured, development in Sri Lanka. subordinated redeemable five-year 1973 debentures. Agriculture Service Centre concept 2005 implemented. Operations commence at over Balance Sheet footings top Rs. 300 billion, BoC acted as the Bankers to the issue, 350 Agricultural Service Centre Branches. the largest asset base of any Sri Lankan bank. Managers, sponsors and registrars for the Comprehensive Rural Credit Scheme Urban Development Authority‘s Rs. 10 billion implemented. debenture issue.

6 BANK OF CEYLON ANNUAL REPORT 2010 FINANCIAL HIGHLIGHTS

Bank Group 2010 2009 Change 2010 2009 Change Key Financial Data Rs. million Rs. million % Rs. million Rs. million %

Results for the Year Total revenue 63,363 63,461 (0.2) 66,867 66,128 1.1 Net interest income 19,648 14,810 32.7 21,043 15,789 33.3 Profit before financial VAT and taxation 14,054 7,202 95.1 14,990 7,666 95.5 Profit before taxation 10,053 4,208 138.9 11,075 4,720 134.6 Provision for taxation 3,687 1,124 228.0 4,162 1,403 196.7 Profit after taxation 6,365 3,084 106.4 6,913 3,317 108.4 Value to the Government 10,784 5,465 97.3 11,385 5,826 95.4 Position at the Year End Total assets 714,954 538,241 32.8 730,065 547,421 33.4 Shareholders’ funds (Capital & Reserves) 28,132 24,899 13.0 31,261 27,534 13.5 Deposits from customers 524,233 408,607 28.3 529,319 411,460 28.6 Gross loans and advances 382,310 275,022 39.0 392,708 283,298 38.6 Non-performing assets 12,639 15,542 (18.7) 13,701 16,281 (15.8) Net non-performing assets 5,247 7,317 (28.3) 5,751 7,466 (23.0) Per Share Data (Rs.) Earnings per share 1,273 617 106.3 1,352 660 104.8 Net assets per share 5,626 4,980 13.0 6,039 5,317 13.6 Profitability Ratios (%) Return on average equity 24.0 12.9 11.1 23.8 12.8 11.0 Return on average assets 1.6 0.8 0.8 1.7 0.9 0.8 Interest margin 3.1 2.9 0.2 3.3 3.0 0.3 Cost to income 53.7 68.3 (14.6) 53.9 68.0 (14.1) Loans to deposits ratio 72.9 67.3 5.6 74.2 68.9 5.3 Year on Year Growth in Earnings (%) 106.4 (13.4) 119.8 108.4 (16.0) 124.4 Assets Quality Ratios (%) NPA ratio 3.3 5.7 (2.4) 3.5 5.8 (2.3) Net NPAs/Shareholders’ equity 18.7 29.4 (10.5) 19.0 28.1 (9.0) Statutory Ratios (%) Capital adequacy ratio: Tier I Capital (minimum required 5%) 10.3 11.2 (0.9) 11.4 12.0 (0.6) Tier I & II Capital (minimum required 10%) 13.7 14.2 (0.5) 15.2 15.1 0.1 Liquid assets ratio (Domestic) (minimum required 20%) 28.7 21.1 7.6 N/A N/A N/A

BANK OF CEYLON ANNUAL REPORT 2010 7 CHAIRMAN’S MESSAGE

The Bank consolidated its position as the premier public sector bank by posting a staggering Group profit before tax of Rs. 11.1 billion in 2010, the highest ever in the Bank’s history.

It is my pleasure to present to you the Annual the consensus opinion that our economy will In 2009, we set ourselves a challenging Report and Financial Statements of the Bank grow at the above trend levels over the next target as set out in our Corporate Plan, “one of Ceylon (BoC) for the year 2010. The Bank few years with the expectation of doubling of 10 TWELVE” to reach Rs. 1 trillion in assets celebrated 71 years as the Bankers to the GDP in the medium-term. Certain challenges and attain Rs. 10 billion in profits by the end Nation and was engaged in many initiatives are posed in this framework where local of year 2012. It is with pleasure that to become an integrated financial services economy is likely to maintain a growth rate I mention that we have achieved the profit provider. The Bank has positioned itself to unparalleled to global counterparts. Policy target through dedication and by adopting a benefit from considerable earnings growth makers are tested in this environment to well-focused approach, thus paving the way over the next few years, in tandem with the support the growth momentum in the to set new milestones. positive economic outlook of Sri Lanka. country whilst maintaining attractive interest rates, addressing supply side anomalies and LOCAL FRANCHISE ECONOMIC ENVIRONMENT maintaining inflation at a subdued level. In Through our network of over 300 branches, Having weathered a severe recession, the this context, BoC continues to be the leader 218 extension offices and 352 ATMs island- global economy is now showing signs of in several core banking sectors. At a time wide, we strive to expand banking facilities recovery. Although financial markets have when Sri Lanka is on the threshold of rapid across the country in an equitable manner. recovered from their lows in 2009, they economic growth with foreign investor are still characterised by tight economic confidence at unprecedented levels, BoC is The Bank commenced night and day banking conditions. International capital flows engaged in prudent and strategic banking and extending allied services to assist the to developing nations are projected to operations as encompassed in its corporate Government in its efforts of transforming the gather momentum. Modest demand plan. Its position of strength, stability and City of Colombo. A multi-purpose branch growth has been tempered by factors potential is affirmed by the national long- was established in the Head Office to play a including continued weakness in European term rating of AA (lka) and an upgrade to greater role in stimulating economic activities. Economy and slow adjustment of fiscal positive outlook by Fitch Ratings. It was the first time a State commercial bank policies in developing economies. Medium- embarked on such a venture in Sri Lanka. term prospects and development are FINANCIAL PERFORMANCE heavily dependent on recovery and fiscal The Bank consolidated its position as the The Bank initiated target savings schemes consolidation of developing economies. premier public sector bank by posting to foster the savings habit among citizens in a staggering Group profit before tax of the rural areas. The primary objective of the Sri Lanka’s economy was relatively unharmed Rs. 11.1 billion in 2010, the highest ever in Gam Udana programme is to promote all Sri by the global crisis and it is satisfying to note the Bank’s history. This is mainly attributed to Lankans to open and maintain bank accounts. that the optimism placed on economic growth the Bank’s fee-based income and investment due to the cessation of war was not merely an banking activities which rose by 58% Year on expectation but a reality. Year (YoY). The Group Balance Sheet reached Rs. 730 billion with loans and advances We are encouraged by signs of economic reaching Rs. 393 billion. Deposits increased recovery and solid performance in key sectors to Rs. 529 billion while the quality of the consequent to stoppage of war. I believe it is assets improved as reflected in the reduced NPA of 3.5%.

8 BANK OF CEYLON ANNUAL REPORT 2010 CHAIRMAN’S MESSAGE

GLOBAL BANKING East through the expansion of the Bank’s Whilst being in the forefront of national branch network in the two Provinces by more development, the Bank also made its than 100 service points and committing to presence felt in the global arena during extend advances in excess of Rs. 17 billion the year. The London Branch of the Bank, to the Northern and the Eastern Provinces. re-named as Bank of Ceylon (UK) Limited, Our involvement encompassed distribution operates as an independent wholly- owned of donor funding. The Bank’s timely activities subsidiary, regulated by the Financial Services in this regard were commended by bilateral Authority of the United Kingdom. This Bank donor agencies. is the springboard to other destinations of the world, especially to the European Union, The 24-hour call centre that was set up to United States, Canada, Australia and Japan. provide a multi-lingual service to displaced The subsidiary is currently engaged in lending customers in the North and the East. It was services and strategies to expand its reach the first time a State Bank extended such a and product-base over the coming years. service.

The Bank secured Rs. 200 billion worth of The Bank of Ceylon was instrumental in inward remittances during the year while bringing together the entrepreneurs of 50,997 new Non-Resident Foreign Currency the North and the South through a joint accounts were opened increasing the programme with the private sector, creating total accounts to 353,863. The Bank also markets for the produce of farmers in expanded correspondent relationships with Jaffna through programmes such as ‘Yal 60 new global banks and 6 exchange houses. Uthpaththi’ to assist the Poverty Alleviation Scheme of the Central Bank of Sri Lanka. Through several bilateral agreements and loan syndications amounting to approximately The Bank further aims to involve the US$ 300 million, BoC was able to establish Sri Lankan diaspora to actively contribute to long-term relationships to achieve growth the North and the East socioeconomic revival targets, trade finance and infrastructure and thereby facilitate benefits to permeate to development of Sri Lanka. the whole economy.

THE ROLE OF THE BANK AS A CATALYST The Bank, in partnership with the private FOR DEVELOPMENT sector, extended financial services to the At a time when Sri Lanka is entering a new corporate sector and institutions. The strategic era in its history with rapid changes in the transactions being the assistance given to socio economic and business sectors, the the Urban Development Authority to issue Bank of Ceylon is in the forefront of the a debenture worth Rs. 10 billion to address nation’s active development programmes the housing demand in Colombo. The newly as the premier in the Business and Finance set up Investment Banking Unit of the Bank, industry. managed the debenture of Rs. 5 billion to raise funds for the Bank in 2010. As the resurgence of the North and the East has been prioritised in the nation’s During the year, the Bank of Ceylon became development agenda, BoC entered the fully geared in implementing the Shariah- development process by aligning its compliant Islamic Banking operations, strategies with national development exemplifying the Bank’s corporate adage, goals. The Bank successfully brought the ‘Bankers to the Nation’. community in the North and the East to the formal commercial banking stream, The Bank will continue to play a crucial role through providing access to funding, by aligning its corporate strategy to partner safekeeping of valuables and facilitating the national development goals aimed at entry for entrepreneurship activities in the transforming Sri Lanka into a dynamic global SME sector. Further, the Bank dedicated hub for Naval, Aviation, Commercial, Energy itself to improve and empower the Internally and Knowledge. Displaced Persons (IDP) of the North and the

BANK OF CEYLON ANNUAL REPORT 2010 9 CHAIRMAN’S MESSAGE

The Bank of Ceylon in keeping with its I wish to thank my fellow Board members CONCLUSION traditional role as a socially responsible for their invaluable contribution in steering I strongly believe the economic sentiment bank, introduced several innovative products the Bank’s strategic direction and providing of Sri Lanka remains optimistic. In order to and services to uplift the quality of life of concentrated focus in achieving our grasp the opportunities, we will continue diverse customers across the entire social challenging goals. Their contribution in to formulate strategies on innovations, strata, targeting economic, rural and social driving the current corporate plan and their skills development, customer centricity and development which would benefit the country unwavering support and commitment during diversification whilst paying due attention and its people. Products and services were the year is invaluable. to managing risks and good governance. introduced to complement consumer needs Having taken the initial steps to re-invent and aspirations and also address economic I also extend my appreciation to the General ourselves as a financial powerhouse, the and infrastructure development. The Bank Manager for his contribution as helmsman Bank of Ceylon will continue to reach greater recognised the need for a retirement benefit of this institution in achieving commendable heights in the banking industry with the scheme in the light of demographic changes results in the operations of the Bank. The support and patronage of the Government of and an ageing population. The Bank assisted unstinting support and dedication to Sri Lanka, its stakeholders and well wishers. the agrarian sector in order to propel the work ethic by the Corporate, Executive nation to be self-sufficient and ensure food Management and the staff of the Bank of Targeting to become a truly integrated security. The Bank continued to be a leader Ceylon is much appreciated. financial services provider, the Bank of Ceylon in providing assistance to small and medium will inspire and continue to deliver value to enterprises through financing of debt and We are grateful for the sustained support the Government of Sri Lanka, its customers equity. and patronage of our customers and we and other stakeholders. In this regard, we recognise and continue to commit ourselves have declared 2011 to be the “Year of IT ACKNOWLEDGEMENTS to deliver exemplary banking services. enabled Customer Service Excellence”, with I wish to extend my sincere gratitude and the intention of taking advantage of the appreciation to my Board Colleagues The contribution made by the auditors, legal rapidly evolving technology to provide the namely, Dr. R H S Samaratunga, advisors, consultants, correspondents and highest quality service to our customer base Mr. G K A C K Kularatne, Mr. G Gallage external advisors is thankfully acknowledged. in a competitive manner. and Dr. B Kaluarachchi who resigned from The positive role played by the trade unions the Board in 2010. I really appreciate the in the Bank’s operations is also appreciated. significant contribution made by them to the Bank‘s affairs, during the period they served I thank His Excellency Mahinda Rajapaksa, on the Board. the President who is also the Minister of Finance and Planning, Honourable Deputy Dr. Gamini Wickramasinghe I also welcome Mr. S R Attygalle, Ms. Nalini Minister of Finance and Planning, the Chairman Abeywardene, Mr. Chandrasiri de Silva and Secretary to the Ministry of Finance and Mr. K L Hewage to the Board, who will bring Planning, the Governor of the Central Bank Colombo a wealth of experience in diverse business of Sri Lanka, the Auditor General and the 24 March 2011 sectors to our midst. Attorney General and respective officials for their guidance and support.

10 BANK OF CEYLON ANNUAL REPORT 2010 GENERAL MANAGER’S REVIEW

By any measure, 2010 was a year of The Bank continued to offer a complete Products to the retail market are frequently spectacular results. After three years of range of services over the largest reviewed to take into account changes in consistently high profits in 2007, 2008 and geographical area covered by any bank market behaviour. A great many products 2009 the Bank was able to achieve a record operating locally. We continued to provide were introduced to cater to changing profit, the highest in its history. The profit services in areas under served by other banks customer needs backed by focused marketing before tax of Rs. 10.0 billion it achieved is including areas undergoing post-conflict for maximum impact. Among them were more than double (139%), that of last year’s rehabilitation. In 2010 we continued to Smart Saver, BoC Infinity and Islamic Banking and 92% above the previous highest of build and broaden our range of professional products. Many steps were taken to improve Rs. 5.2 billion in 2008. expertise and to maintain and raise, skills and customer service quality, accessibility and capability levels, amongst staff. convenience like relocating service points Not only did the Bank achieve this record and packaging these new products with new profit but it also performed well across a Comprehensive coverage of all geographical features. range of performance measures. This also areas in our services and maintaining high follows three years of consistently good levels of expertise and high professional CORPORATE BANKING AND OFF-SHORE performance. standards in all areas of activity are long-term BANKING commitments that are an integral part of our In 2010, as in 2009 and before, our Bank At the end of 2010, its asset base stands mission. The spread of the branch network continued to dominate the corporate at Rs. 715 billion - a 33 % growth over the and our human resources development banking segment. The second part of this previous year. For three years in succession, activities reflect this commitment. year produced an increase in demand for from 2007 to 2009, it had achieved a growth credit and this division was able to make of over 48%. Our asset base is by far the In 1948, nine years after our Bank a significant contribution to the Bank’s largest for any bank operating locally. commenced business, we opened our branch profits. We recorded a growth exceeding in London. In 2010 it was converted into a 36% in our portfolio. Our close relationships In 2010, our deposits rose by 28% to reach fully-owned subsidiary Bank of Ceylon (UK) and deep understanding of the customers’ Rs. 524 billion. This is a very creditable Limited - a milestone in our presence requirements give us the edge over our achievement by the teams involved as this is overseas and a first-step in our plans to competitors. The IT facilities that we provide a fiercely competitive area in local banking. expand operations in Europe. are now well-utilised by our customers. Our vigilance on facilities to businesses vulnerable At the end of 2010, our capital adequacy In 2010, the Bank added a fully-fledged to the downturn in overseas markets was stood strong at 13.7%. Our Non-performing investment arm to its operations - another continued. advances stood at 3.3%. milestone. The plans were laid in 2009 and in 2010, it became fully operational. INTERNATIONAL In 2010, as in 2009, the Bank played a 2010 was a successful year for the clearly visible role in national economic RETAIL BANKING International Division. The most notable development. What makes the current 2010 was quite an innovative year for our achievement was the completion of performance levels spectacular is that retail operations. Our retail sector portfolio converting the London branch into a fully- this performance was achieved without recorded over 47% growth. owned subsidiary of the Bank called Bank sacrificing our commitment to being a of Ceylon (UK) Limited. This subsidiary is catalyst to national economic growth and Our online branch network - the largest on intended to be the gateway to enter Europe. our obligations to society at large as a good the island - is being used to increasingly Chennai and Male Branches reported corporate citizen. The range of activities and better effect in our retail operations and to improved performances in 2010. operations aimed at this was quite broad. maintain full geographic coverage as per our More product and service lines supported strategic objectives. It is mostly through our The Bank continued to lead in the inward micro level start-ups and businesses and also retail operations that we addressed the needs remittances market. This year remittances grew small and medium-sized enterprises (SMEs). of national economic development, providing by around 20% on average. Increased facilities were made available to services to support micro, small and medium support fisheries, animal husbandry and enterprises and also the distribution of To support its international activities the Bank agriculture-related activities. Bank of Ceylon assistance in partnership with UNHCR. Our continued to expand its network of foreign acted as a facilitator to the United Nations service excellence initiatives continued with correspondents in many countries. At the end High Commissioner for Refugees (UNHCR) to the number of branches implementing of 2010, this network stands at more than help distribute approximately Rs. 1.5 billion quality circles, 5S and other such initiatives 800 correspondents. We continued to work as assistance to nearly 75,000 families rated rising from 178 to 278. at maintaining and developing relationships as Internally Displaced Persons (IDPs). The with other banks and financial institutions Bank also supported many activities at a cost worldwide. of Rs. 29 million under its Corporate Social Responsibility initiatives.

BANK OF CEYLON ANNUAL REPORT 2010 11 GENERAL MANAGER’S REVIEW

In 2010 we continued to build and broaden our range of professional expertise and to maintain and raise, skills and capability levels, amongst staff.

TREASURY professional skills in Banking and to expand Among those focused on were the further 2010 was an exceptionally successful year its range of expertise through human strengthening of our disaster recovery for the treasury. Its contribution to the resource development. capabilities, enhancing security features Bank’s profits was quite significant. In 2009 and other features that increase accessibility it operated successfully managing liquidity To expand its range of expertise the Bank and convenience. The IT unit itself was though that year began amidst volatility in continued to deploy experts recruited from strengthened by recruiting extra personnel. financial markets. In 2010 it used the market outside in the areas of finance, auditing, conditions to its advantage. risk management, research, marketing, In 2010 too, as in 2009, we continued to investment banking, information technology upgrade facilities and continued our training Our treasury plays a vital role in helping key and human resources management. of personnel in more efficient and effective institutions with their funding and this year use of the IT resources now available. too our treasury succeeded in mobilising the To maintain, improve and expand required funding. The Bank acted as a co- professional skills many training opportunities THE WAY FORWARD arranger with HSBC to the issue of Sovereign were made available to staff to train both Primarily our target is to consolidate the Bonds of the Government of Sri Lanka and locally and overseas. More than 500 training present performance level so as to set this also played the role of Paying Agent for Sri programmes, both internal and external, as the springboard to reach more ambitious Lanka Development Bond issues. In 2010 were made available to the staff. More than performance levels in the future. the Bank was able to raise US$ 285 million 400 staff trained overseas. In 2010, the Bank from foreign sources demonstrating the trust recruited 1,274 personnel to its workforce. In our planning we have always stayed close placed by foreign sources in Bank of Ceylon. to our core values and our plans have been The Human Resources Division implemented built around them. Results we have obtained INVESTMENT BANKING many improvements. Many processes have further strengthened our belief that In 2010 as mentioned earlier the Bank underwent automation in various degrees. we are correct in adopting this approach. added a fully-fledged investment arm to As in the past few years we shall continue its operations. This newly-formed arm INFORMATION TECHNOLOGY to strengthen our ability to compete and successfully handled the debenture issue of In 2010 too, the Bank continued to enhance expand our scope of operations. Continuing a state institution - the largest issue made so its IT capabilities. It has now become routine in the manner we did in 2009, we shall far by such an entity. to report the position of our expanding continue to develop human resources, online network. At the end of 2010 it stands develop expertise in several areas, continue With this arm the Bank now has the capacity at 309 Branches and 218 extension offices. investments in IT and take necessary steps to to offer, under one roof, a complete range of This makes a total of 527 fully- automated enter into new areas. investment banking services such assisting in service points backed by 352 ATMs in 329 raising capital, underwriting issues, mergers locations. Services were extended to cover Human resources development is set to and acquisitions and other investment related relatively underserved parts of the country in continue. This development covers the services. the North and the East. strengthening of the Human Resources Division through development of Human HUMAN RESOURCES During 2010, with the main systems now Resources Development (HRD) related skills As mentioned earlier a part of the Bank’s completely operational and running, we and expertise, recruitment of personnel and mission is to maintain high levels of focused on the supporting systems that the improvements to policies and practices. would add value and provide backup. Our reviews of our policies and practices have

12 BANK OF CEYLON ANNUAL REPORT 2010 GENERAL MANAGER’S REVIEW

revealed areas that could be improved. One This was a year where we were able to such decision is that we intend to establish a demonstrate the practical effectiveness performance-based rewards culture in stages. of the strategies we are pursuing and the Training and skill development activities will soundness of the core principles and values be continued with areas such as treasury, around which we built our strategies. risk management, investments and customer service improvement receiving extra attention. These results are even more satisfying when we consider that all this was achieved whilst As in 2009 and 2010, the development fulfilling our obligations to national economic of new areas of expertise and obtaining development. expertise will continue. Specialists deployed in the areas of research, internal audit, I gratefully acknowledge the support marketing, finance, information technology, provided by the Secretary to the Treasury, investment banking, human resources the Governor of the Central Bank of development and risk management are Sri Lanka, the Auditor General, the Attorney expected to continue their work. General, the Chairman of the Strategic Enterprises Management Agency and the IT will continue as a main area of investment. other officials of these institutions. We will continue to enhance our disaster recovery capability, continue to strengthen Our staff, as in the years past, demonstrated the Risk Management Division and also we their loyalty to the Bank, their dedication intend to enhance the Asset and Liability to maintaining high professional standards Management Systems. The Human Resource and their commitment to duty. I wish to Division will also be strengthened with IT thank them for their continuing dedication, based processes. Other investments in IT loyalty and commitment and to thank their will be focused on adding value to existing representatives - our trade unions - for their products and services. IT Division is to be co-operation. expanded with extra personnel. I, very gratefully acknowledge the guidance With regard to our international operations, and support of the Chairman and other the Chennai and Male Branches, and Bank of members of the Board of Directors. In this Ceylon (UK) Limited are expected to expand regard, I also gratefully acknowledge the operations. contribution of the four subcommittees of the Board covering the areas of audit, The Bank intends to widen its scope of risk management, human resources and operations with substantial activity in corporate governance. the area of investment banking. With the development activity planned by the The years of investment to develop increased Government along with the special focus capability is now beginning to show its on the North and the East this investment effectiveness. Through the challenges of division is expected to play a very significant 2008 and 2009, we maintained steady role. As mentioned last year this is expected results consistently. Now with a wide to be a new chapter in the Bank’s history. range of opportunities opening up, I close this review of a spectacular 2010 looking ACKNOWLEDGEMENT forward, with great enthusiasm, to a very 2010 was a hugely successful year for the exciting and rewarding 2011. Bank of Ceylon. The Bank kept up its work through the challenges of 2008 and 2009 staying close to the strategies and plans worked out in the last few years to achieve a strong competitive edge. This year we B A C Fernando were able to give an indication of how this General Manager underlying strength would affect results. Colombo 24 March 2011

BANK OF CEYLON ANNUAL REPORT 2010 13 BOARD OF DIRECTORS

Dr. Gamini Wickramasinghe S R Attygalle Raju Sivaraman Chairman Ex officio Director Director Appointed as the Chairman of the Board of Appointed as a Director to the Board of Bank of Appointed as a Director to the Board of Bank of Ceylon in May 2007 and reappointed in Ceylon in June 2010 and serves as the Bank of Ceylon in January 2006 and May 2010. Serves as an Independent Non-Executive Ex officio Director. reappointed in June 2007 and May 2010. Non-Executive Director. Serves as an Independent Non-Executive Mr. Attygalle brings to the Board the Director. Dr. Wickramasinghe brings to the Board knowledge that bridges the Bank’s goals with business experience in both domestic and Government’s objectives and the experience in Counting over 30 years of experience in international markets with his extensive senior financial services sector. architecture and management, Mr. Sivaraman level experience obtained in the United Kingdom brings to the Board business experience in both He was a Senior Economist of the Central Bank and Belgium. He was the Chairman of the public and private sectors. He is the Associate of Sri Lanka for a number of years and has also Securities and Exchange Commission of Consultant of Plan 3 Architects in India and the served as a Director and Acting Chairman of Sri Lanka from 2006 to 2009 and the Insurance Managing Director of Arch-Triad Consultants National Savings Bank and a Director of Shell Board of Sri Lanka from 2006 to 2008. (Private) Limited, an architectural consultancy Gas Lanka Limited. firm since 1980. He is the Managing Director of Informatics He presently serves as the Director General of Group of Companies, one of the largest Mr. Sivaraman is the Chairman of Ceylease the Department of Public Enterprises of the software development houses in the country. Financial Services Limited and also serves as a Ministry of Finance & Planning. He is also a He is also the Chairman of Bank of Ceylon (UK) Director of Merchant Credit of Sri Lanka Limited Director of the Sri Lanka Ports Authority and the Limited, Property Development PLC, Ceybank and Milco (Private) Limited. He is the Managing Board of Investment of Sri Lanka. Holiday Homes (Private) Limited and Koladeniya Director of Ram Developers (Private) Limited. Hydropower (Private) Limited and a Director of Mr. Attygalle holds a Bachelor of Science (B.Sc) He served as a Director of Merchant Bank of Sri Mireka Capital Land (Private) Limited and The Degree in Mathematics from the University of Lanka PLC, Mireka Capital Land (Private) Limited Lanka Hospitals Corporation PLC. Colombo, Sri Lanka and a Master’s Degree in and Property Development PLC. He served as Economics from Warwick University, a Member of the National Police Commission Dr. Wickramasinghe holds a Master’s Degree United Kingdom. from 2006 to 2009 and as a Council Member in Systems Analysis from the University of and Treasurer of the Sri Lanka Institute of Aston, Birmingham, United Kingdom (UK) Architects over a period of six years. and a Doctorate in Business Administration (DBA) from the Manchester Metropolitan Mr. Sivaraman is a Chartered Architect holding University, UK. He is a Fellow of the Chartered a Master’s Degree in Architecture [M.Sc.(Arch)] Management Institute (FCMI), UK and also of and a Fellow Member of the Sri Lanka Institute the British Computer Society (FBCS). of Architects (F.I.A.).

14 BANK OF CEYLON ANNUAL REPORT 2010 BOARD OF DIRECTORS

Ms. Nalini Abeywardene Chandrasiri de Silva Director Director Appointed as a Director to the Board of Bank of Appointed as a Director to the Board of Bank of Ceylon in May 2010. Serves as a Non-Executive Ceylon in May 2010. Serves as a Non-Executive Director. Director.

Ms. Abeywardene brings to the Board her Being a practicing lawyer Mr. de Silva brings experience in the field of commercial law and to the Board his specialised experience in law, 25 years of management experience in the as well as business, insurance, etc. He was private sector tea industry. She was formerly a former Director of People’s Bank, People’s attached to a leading legal firm in the country. Merchant Bank PLC and People’s Insurance Company Limited and also a former Chairman She was a Commissioner of the Human Rights of People’s Travels Limited. Commission of Sri Lanka from 2006 to 2009. He is the Chairman of BOC Travels (Private) She is a Member of the Board of Management Limited and a Director of Hotels Colombo of the Galle Heritage Foundation of the Ministry (1963) Limited. of National Heritage and Cultural Affairs and a Director of Hotels Colombo (1963) Limited and Mr. de Silva is an Attorney-at-Law and holds a Mussendapotta Estates (Private) Limited. Master’s Degree in International Trade Law from the University of Wales, United Kingdom. Ms. Abeywardene is an Attorney-at-Law.

BANK OF CEYLON ANNUAL REPORT 2010 15 BOARD OF DIRECTORS

K L Hewage V. Kanagasabapathy Ms. Janaki Senanayake Siriwardane Director Alternate Director Secretary Bank of Ceylon/Secretary to the Board Appointed as a Director to the Board of Bank of Appointed as Alternate Director to Attorney-at-Law, LLB, MBA. Ceylon in June 2010. Serves as an Independent Mr. S R Attygalle, the Ex officio Director from Non-Executive Director. July 2010. Serves as a Non-Executive Alternate Director to the Ex officio Director on the Board. Mr. Hewage brings to the Board his experience He was serving as the Alternate Director to of over 40 years in the spheres of consultancy, former Ex officio Directors too since March 2006. management, training, project finance, marketing, agriculture development and Mr. Kanagasabapathy brings to the Board his extension, planting, etc. wide experience in the public sector of over 30 years in several senior capacities such as Mr. Hewage served as the Chairman of People’s Director/Additional Director General of Public Merchant Bank PLC, the Chairman/Chief Finance, Director General of Public Enterprises Executive Officer of Janatha Fertilizer Enterprises and Financial Management Reform, Limited, State Plantations Corporation, State Co-ordinator of the Ministry of Finance & Printing Corporation and Provincial Road Planning. He also served as a Director of Development Authority (Western Province). People’s Bank, State Mortgage & Investment He also served as a Member of the Board of Bank and Merchant Credit of Sri Lanka Limited. Directors of People’s Bank, Janatha Estates Development Board and as the General He is presently the Financial Consultant of Manager of Sri Lanka Institute of Co-operative the Academy for Financial Studies, which is Management. the training arm of the Ministry of Finance & Planning. He is a Director on the Boards of He is the Chairman of Ceybank Asset Merchant Bank of Sri Lanka PLC, Lanka Hydraulic Management (Private) Limited. He also serves Institute Limited, Hotel Developers Lanka PLC as a Member of the Governing Council of the and De La Rue Lanka Currency and Security Print University of Visual and Performing Arts. (Private) Limited. He is also the Chairman of the He holds a Bachelor of Science (B.Sc) Degree in Distance Learning Centre, Council Member of Bio Science from the University of Kelaniya, The Institute of Chartered Accountants of Sri Lanka and a Master's Degree in Science Sri Lanka, Member on the Board of (M.Sc) in Agricultural Extension from the Management of the Postgraduate Institute of University of Reading, United Kingdom. Management and Member of the National Salaries and Cadres Commission.

Mr. Kanagasabapathy is a Chartered Accountant and holds a Master’s Degree in Public Administration from Harvard University, U.S.A. He is a Fellow Member of The Institute of Chartered Accountants of Sri Lanka, The Institute of Public Finance and Development Accountancy, The Institute of Certified Management Accountants of Sri Lanka and The Association of Accounting Technicians of Sri Lanka.

16 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE MANAGEMENT TEAM

B A C Fernando Ms. W A Nalani General Manager Senior Deputy General Manager (Corporate & Offshore Banking) Appointed General Manager in February 2007, Ms. Nalani has been a Deputy General Manager She is a Non-Executive nominee Director on Mr. Fernando is a career banker with over for over 6 years and appointed as Senior the Boards of Regional Development Bank 40 years of diversified banking experience. Deputy General Manager (Corporate & Offshore and Merchant Bank of Sri Lanka PLC. She also He joined the Bank in early 1970. Prior to Banking) in December 2008. She joined the serves as an Alternate Director on the Boards of his appointment as General Manager, from Bank in April 1975. Credit Information Bureau, Institute of Bankers December 2002 to February 2007, he was of Sri Lanka and BoC Travels (Private) Limited. Ms. Nalani is a career banker with over 35 years’ Deputy General Manager in charge of the She represents Bank of Ceylon on the Board diversified banking experience. She has been Bank’s retail operations. He has also served of SriLankan Airlines. She is the Senior Vice- the Head of Corporate and Offshore Banking as the Assistant General Manager in charge President of the Association of Professional operations for nearly 5 years, contributing of Corporate Banking Operations and as the Bankers of Sri Lanka and Committee Member significantly for expansion of corporate banking Assistant General Manager in charge of the of the Alumni Organisation, University of activities including trade finance in the Bank. Southern Province. Colombo. She also serves as a Director on the Presently, she is steering the Project formed Committee of Rotary Club of Colombo Central. Mr. Fernando specialises in retail banking and for ‘5 S System’ implementation, which is credit-including both corporate and rural, integrated with the branch reorganisation under Ms. Nalani holds a Bachelor of Arts Degree and credit administration. His experience model branch concept. in Economics and Bachelor of Philosophy in ranges from operational level to managerial Economics from the University of Colombo, Prior to the present position, Ms. Nalani headed level. He has contributed immensely to the Sri Lanka. She is also a Fellow Member of the the dedicated Recovery Unit for over 3½ years improvement of credit knowledge and credit Institute of Bankers of Sri Lanka. until 2006 and played a dynamic role in skills among staff through training and has reducing the bank’s non-performing assets. provided leadership in restructuring initiatives. As an Assistant General Manager, she headed He is a Director of the Institute of Bankers important provincial business units including of Sri Lanka and a Trustee of Bank of Ceylon the Metropolitan Branch for 5 years, the largest Pension Trust Fund. He is also a Director of the middle market business unit and Sabaragamuwa Credit Information Bureau and many of the Province for 3 years covering economically subsidiary companies of Bank of Ceylon. important Districts of Kegalle and Ratnapura.

Mr. Fernando holds a Bachelor’s Degree in Arts Specialised in credit and recovery management from the University of Sri Lanka, Vidyodaya she has contributed significantly for human Campus and a Master’s Degree in Business resources development in those areas. She was Administration from the University of Colombo, also actively involved in the implementation of Sri Lanka. He is also a Fellow of the Institute of IT solutions for trade finance activities in the Bankers of Sri Lanka. Bank. She was a co-winner of the ‘Zonta Award for Excellence’ in banking category for the year 2009.

BANK OF CEYLON ANNUAL REPORT 2010 17 CORPORATE MANAGEMENT TEAM

K Dharmasiri Ms. Kumudiniy Kulathunga Deputy General Manager (Recovery) Deputy General Manager (Retail Banking)

Mr. Dharmasiri brings a rich and diversified Joining the Bank in 1975, Ms. Kulathunga took Having graduated from the University of banking experience both locally and abroad, on the new role of Deputy General Manager Colombo, Sri Lanka Ms. Kulathunga holds since joining the bank in 1975. He bears a First (Retail Banking) in April 2010. a Special Bachelor’s Degree in Arts in 1972 Class Honours Degree in Commerce in 1974 and and Bachelor of Philosophy Honours Degree Counting over 36 years’ experience in holds a Bachelor of Philosophy in Economics in in 1973. A Fellow Member of the Institute of banking and since her appointment to the 1976 from the University of Colombo, Sri Lanka. Bankers of Sri Lanka, she obtained a Diploma in grade of Deputy General Manager in 2004, Bank Management from the Institute of Bankers Since his appointment to the grade of Deputy Ms. Kulathunga has played a dynamic role of Sri Lanka in 1989, in addition to being a General Manager in 2002, he brings to bear in various positions in the Bank including Diploma Holder in Personnel Management from his extensive knowledge and expertise in branch operations, retail lending, supplies & the Institute of Personnel Management in 1997. monitoring and restructuring non-performing procurement and construction of new branches assets, strategic planning, corporate financial in addition to training and Human Resources. reporting and reorganisation of branches. She has wide knowledge and expertise in Mr. Dharmasiri has made an immense leading the teams in the Eastern, North Western contribution in maintaining the Bank’s NPA level and Western Provinces as Assistant General below the industry average. He has also held key Manager in charge prior to her appointment as positions in audit and Corporate and Offshore Head of Human Resources. She played a major Banking. He held overseas assignments as the role in implementing the present Performance Country Manager at BoC branch in Male from Potential Appraisal System, formulating the 1997 to 2000 and Managing Director of Nepal transfer policy and promotion policies in the Bank of Ceylon Limited in Nepal, in 2002. Bank, and initiating procedures for productivity improvements and cost reduction. A Non-Executive nominee Director on the Board of Lanka Securities (Private) Limited and BOC She is a Non-Executive nominee Director on Management and Support Services (Private) the Boards of Institute of Bankers of Sri Lanka Limited. He also served as a Non-Executive since 2002 and BOC Travels (Private) Limited nominee Director on the Boards of Janashakthi since 2010. She was a Non-Executive nominee Insurance Company Limited, Ceybank Holiday Director on the Boards of Hotels Colombo Homes (Private) Limited, Hotels Colombo (1963) (1963) Limited from 2006 to 2009, BOC Limited, BOC Property Development (Private) Property Development & Management Limited Limited, BOC Travels (Private) Limited, Mireka from 2004 to 2006 and also Alternate Director Capital Land (Private) Limited, BOC Property on the Boards of Property Development Limited Development & Management (Private) Limited from 2006 to 2008 and Mireka Capital Land and Sabaragamuwa Development Bank. (Private) Limited in 2007.

He is also an Associate Member of the Institute of Bankers of Sri Lanka.

18 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE MANAGEMENT TEAM

C Samarasinghe H M A B Weerasekara Ms. Deepa Wanniaratchi Deputy General Manager Deputy General Manager Deputy General Manager (Product & Development Banking) (International & Treasury) (Finance & Planning) Joining the Bank in 1975, Mr. Samarasinghe Appointed Deputy General Manager Ms. Deepa Wanniaratchi joined the Bank in was appointed to the post of Deputy General (International & Treasury) in July 2006, May 1975. She holds a Bachelor’s Degree in Manager (Product & Development Banking) in Mr. Weerasekara joined the Bank in May Commerce from the University of Peradeniya, May 2006. He holds a Bachelor's Degree in Arts 1975, having graduated from the University Sri Lanka obtained in 1974. In 2004, she (Special) with a 2nd Class from the University of Colombo, Sri Lanka in Economics in 1972. obtained a Postgraduate Diploma in Business of Colombo, Sri Lanka in 1975 and also holds a Additionally, he holds a Bachelor of Philosophy & Financial Administration from The Institute Bachelor of Philosophy in Economics from the in Industrial Management in 1974 from the of Chartered Accountants of Sri Lanka in University of Colombo, Sri Lanka in 1976. same University. association with the Cranfield University School of Management, UK. Appointed Deputy General In his current position he leads the Development His exposure to both the domestic and Manager (Finance & Planning) in April 2008. Banking activity, spearheading the card international arena has contributed significantly business, electronic delivery channels, to sustain BoCs leadership position in treasury She has wide experience in diverse fields such Microfinance, Project Finance, SME lending, BoC and international operations. He has extensive as managing large technology projects, bank Assurance and Islamic Banking arm. Prior to experience in trade finance, treasury operations, restructuring under financial sector reforms and the assignment to the grade of Deputy General offshore banking, international, retail banking Corporate & Retail Banking activities. Prior to Manager, Mr. Samarasinghe was instrumental in and investment banking. Mr. Weerasekara led the present assignment, she provided leadership establishing a large financial house based in the the Recovery Division of the Bank in 2006. in the restructuring project, designed to Middle East and played a key role in introducing Prior to the assignment to the grade of Deputy implement the core banking system island-wide. organisational and structural changes in the General Manager in 2006, he served in the She has imparted her knowledge by conducting face of the changing business environment. He London Branch and was successful in enhancing extensive training courses in corporate and sales has also served in Support Services, Recovery, inward remittances and treasury activities of the related areas. Sales & Channel Management and Credit Cards. Bank. He played a pivotal role in subsidiarisation She is a Non-Executive nominee Director on of the BoC Branch in London and expansion of He is the Non-Executive Chairman on the the Board of BOC Travels (Private) Limited since the correspondent banking network. Board of Transnational Lanka Record Solutions December 2008 and served as a Non-Executive (Private) Limited since 2006 and serves as a He is a Non-Executive nominee Director on the nominee Director on the Board of Property Non-Executive Director on the Board of Ceybank Board of Merchant Credit of Sri Lanka (Private) Development & Management Limited from Holiday Homes (Private) Limited since 2010. Limited (MCSL) since 2006 and serves as the 2006 to 2008. She is also a Trustee of the A member of the Bankers Technical Assistance Chairman of both the Audit & Risk Management Pension Trust Fund and the Humanitarian Trust Committee since 2007, he also served as a Committees of MCSL. Fund of the Bank. Director on the Board of Merchant Credit of She is an Associate Member of the Institute of Sri Lanka from 2006 to 2008. Bankers of Sri Lanka.

BANK OF CEYLON ANNUAL REPORT 2010 19 CORPORATE MANAGEMENT TEAM

M K Nandasiri H M Mudiyanse P A Lionel Deputy General Manager (Support Services) Deputy General Manager (Human Resource) Deputy General Manager (Investment Banking)

Having obtained a First Class Honours in Mr. Mudiyanse joined the Bank in August 1973 Appointed as Deputy General Manager Economics from the University of Colombo, and was appointed as Deputy General Manager (Investment Banking) in October 2010. Mr. Lionel Sri Lanka in 1974 together with a Bachelor of (Human Resource) in October 2010. joined the Bank in December 1983. Philosophy in Economics in 1975, Mr. Nandasiri His extensive experience in retail banking is held in Counting over 27 years’ experience in banking entered the Bank in 1975. He holds the position good stead for managing and developing human and financial services, Mr. Lionel has specialised of Deputy General Manager (Support Services) resources in his present position. Demonstrating in the areas of treasury, international operations since May 2009. a remarkable leadership role due to his expertise and investments. He has been involved in His experience in both domestic and in microfinance, retail banking and agriculture managing liquidity, assets and liabilities, fund- international banking operations has taken sectors, he was able to propel BoC to a higher raising activities, risk management in relation to through management and leadership roles in plane in the North Western Province. treasury and cross border funding. Additionally, the branch network. He has served in Corporate he has a flair for developing and marketing He has been a Non-Executive Director on the Branch in various positions of which the period treasury products. He held the position of CEO of Board of Ceybank Holiday Homes (Private) he served in Corporate Imports was more the Primary Dealer Unit of the Bank and headed Limited and an Alternate Director of The Institute important. He played a leading role to improve the Treasury and Investment Unit. He received of Bankers of Sri Lanka since October 2010. the department and was the team leader in broad exposure and extensive training in Treasury Mr. Mudiyanse also served as a Non-Executive implementation of new Computer Package. Management and Dealing Activities in London Director on the Boards of Wayamba Chamber Specialised in Trade Finance and Credit fields, from 1988 to 1989. He served as Head of of Commerce, Industrial Service Bureau and the he has contributed a lot in training staff in that Treasury at the BoC Branch in Karachi. Wayamba Development Bank from 2007 to 2010. area. He served as Country Manager of the BoC He is a Non-Executive Director on the Board of branch in Chennai from 2005 to 2008. He was Mr. Mudiyanse, an Associate Member of the Lanka Hospitals (Private) Limited since 2010, the Assistant General Manager (Pettah) prior to Institute of Bankers of Sri Lanka and obtained Property Development (Private) Limited since taking up the appointment of Deputy General a Postgraduate Diploma in Executive Bank 2009 and Primary Dealer Association since 2007. Manager (Support Services). Management from the same institute in 2001. He is also an Alternate Director of Ceybank A Non-Executive nominee Director on the Board Unit Trust since 2006 and the Vice-President of of Grand Oriental Hotel since September 2009, Sri Lanka Forex Association since 2008. Mr. Nandasiri is also the President of the Trade Mr. Lionel obtained his Bachelor of Arts Degree Finance Association of Bankers of Sri Lanka since from the University of Colombo, Sri Lanka in 1980. April 2010.

He is an Associate Member of the Institute of Bankers of Sri Lanka.

20 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE MANAGEMENT TEAM

D M Gunasekara M K Muthukumar Ms. Janaki Senanayake Siriwardane Deputy General Manager Chief Legal Officer Secretary to the Board/Secretary, Bank of Ceylon (Sales & Channel Management) Appointed as Deputy General Manager Attorney-at-Law, Mr. Muthukumar, a lawyer since Ms. Siriwardane, joined the Bank in January (Sales & Channel Management) in October July 1975, was appointed as Chief Legal Officer 1996 as its Assistant Secretary to the Board 2010. Mr. Gunasekara joined the Bank having in September 2010. He joined Bank of Ceylon in and was appointed as Secretary to the Board/ graduated from the University of Colombo, 1992. Secretary, Bank of Ceylon in December Sri Lanka with a Special Degree in Public Finance 2005. She also serves as Secretary to all the Counting over 19 years of experience in legal & Taxation in 1981. subcommittees of the Board. affairs at the Bank, Mr. Muthukumar, served as Commencing his career with retail banking, a Senior Legal Officer (Recovery) from January She is an Attorney-at-Law by profession and was Mr. Gunasekara has amassed a wealth of 1998 to October 2003 and as a Deputy Chief a practicing lawyer. She also holds a Bachelor’s knowledge and experience in all aspects of credit Legal Officer (Recovery) from November 2003 Degree in Law and a MBA from the University of management and administration. His recent to August 2010. He is a visiting lecturer on Colombo, Sri Lanka. stint in Corporate and Offshore Banking has Commercial and Banking Law at the Central Prior to joining the Bank, Ms. Siriwardane seen the growth and expansion of this segment Bank Training Institute, Chartered Institute of was employed in the private sector handling significantly. Serving at the BoC London Branch Management Accountants and Institute of company secretarial work. She was also a visiting from 1997 to 2000, he obtained comprehensive Bankers of Sri Lanka since 1996. He is also the lecturer, examiner and moderator on Commercial experience in international banking operations. Chief Examiner for Laws relating to Financial and Industrial Law at the Industrial Management As an Associate Faculty Member of the Banks' Services at the Institute of Bankers of Sri Lanka Department of the University of Kelaniya, Training Institute, Mr. Gunasekara has readily since 2000. Sri Lanka. She was a Non-Executive nominee responded to uplifting the knowledge of our staff. He is also a Non-Executive nominee Director on Director on the Board of Ceybank Holiday Homes He is a Non-Executive nominee Director on the the Board of BOC Travels (Private) Limited since (Private) Limited up to September 2010. Board of Ceybank Asset Management (Private) 2005 and serves as a Trustee of the Bank of She is also the Company Secretary for some of Limited since August 2010 and Ceybank Holiday Ceylon Provident Fund since September 2010. the Subsidiaries of the Bank. Homes (Private) Limited since June 2009. He served as a Non-Executive nominee Director on the Board of Merchant Credit of Sri Lanka from 2008 to 2009.

He is an Associate Member of the Institute of Bankers of Sri Lanka.

BANK OF CEYLON ANNUAL REPORT 2010 21 CORPORATE MANAGEMENT TEAM

W A Asoka Rupasinghe Trevine Fernandopulle Chief Financial Officer Chief Risk Officer

Appointed as Chief Financial Officer in October Graduated from Imperial College, London with 2009. Graduating from the University of a Bachelor of Science in 1977 in addition to a Sri Jayawardenapura, Sri Lanka, Mr. Rupasinghe Master’s degree in Statistics from the London holds a Special Degree in Business School of Economics in 1978, Mr. Fernandopulle Administration in 1991 and a MBA in Finance joined the Bank as the Chief Risk Officer in May from the University of Southern Queensland, 2009 after retirement from the services of HSBC Australia in 2007. as Deputy CEO Sri Lanka.

With over 24 years of experience in finance, In a Banking career spanning 30 years, he 14 of which is in the financial services industry, has specialised in Corporate Banking and Risk Mr. Rupasinghe has exposure in mergers and Management whilst acquiring wide experience acquisitions, cross border listing, cross border in all aspects of commercial banking including fund raising through Euro Medium Term Notes treasury, corporate, retail and international (EMTN) & Global Depository Receipts (GDRs) trade. He was seconded to the Saudi British programmes, in addition to specialisation in Bank an associate of HSBC Holdings PLC, group performance management. He had UK, as Manager Corporate Banking Eastern been a resource person in several educational Province Saudi Arabia and was responsible for institutions including The Institute of Chartered restructuring the Credit Control and Credit Risk Accountants of Sri Lanka and the University of Departments. Sri Jayawardenapura. He played a pivotal role in the successful issue of Prior to joining Bank of Ceylon, he worked the debut sovereign bond for US$ 500 million as Head of Corporate Financial Affairs at for the Government of Sri Lanka in 2007. Commercial Bank of Qatar and Head of Finance Mr. Fernandopulle is a Trustee of Joseph Fraser and Administration at Securities & Exchange Memorial Hospital since 2010, President of Commission of Sri Lanka. Sri Lanka Branch of the Chartered Institute of A Non-Executive nominee Director of Ceylease Bankers, London since 2009 and a Fellow of the Financial Services Limited since March 2010, Chartered Institute of Bankers, London. Mr. Rupasinghe is also a Fellow Member of The Institute of Chartered Accountants of Sri Lanka.

22 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE MANAGEMENT TEAM

Dr. W G Karunadasa Rohan Peiris Chief Internal Auditor Head of Information Technology

Appointed as the Chief Internal Auditor of the Joined the Bank of Ceylon in February 2009, as Bank of Ceylon in March 2009. the Head of Information Technology, from his previous position at DFCC Vardhana Bank. With over 30 years of experience in the Mr. Peiris holds a Master’s Degree in fields of accounting, auditing and financial Information Technology from Keele University, management, Dr. Karunadasa oversees the UK in 2002. internal audit function of the Bank. Counting over 28 years’ experience in the Prior to enlisting at BoC, he headed the Internal fields of Data Processing and Information and Audit Department of HDFC Bank and Veytex Communication Technology, he is specialised in (Private) Limited. He served on the Board software development and project management of Directors/Corporate Management of The and pioneering in facilities management. Finance Company PLC from 1988 to 2001. He also served at Pan Asia Bank and Merchant Dr. Karunadasa holds a Master’s Degree in Bank of Sri Lanka. He was appointed as the Business Administration from the University of National Consultant on IT Projects funded Sri Jayawardenapura, Sri Lanka in 1996 and by United Nations Industrial Development obtained a Doctorate in Business Administration Organisation (UNIDO) in 1990 and served in from the Irish International University (EU) many committees of national interest. He is also in 2005. Information Technology Infrastructure Library He is also a Fellow Member of The Institute of (ITIL) certified. Chartered Accountants of Sri Lanka and also a Additionally, he holds a Diploma in Systems Fellow Member of the Certified Management Analysis/Design. Mr. Peiris has membership Accountants of Sri Lanka. in the Computer Society of Sri Lanka, British Computer Society, Institute of Electrical & Electronic Engineers and Project Management Institute and is also a Chartered Information Technology Professional.

BANK OF CEYLON ANNUAL REPORT 2010 23 CORPORATE MANAGEMENT TEAM

Dr. Lionel Siriwardena M F Ghaffoor Head of Research & Development Head of Marketing

Appointed as Head of Research and Development Appointed as the Head of Marketing of the of the Bank of Ceylon in August 2009. Bank of Ceylon in January 2010.

Dr. Siriwardena has over 21 years’ experience In his current role he has responsibility for the in the banking sector handling macroeconomic Banks’ CSR programmes. research, financial performance analysis Mr. Ghaffoor joined the Bank of Ceylon having and forecasting. He has special exposure on previously been with British American Tobacco business process re-engineering, productivity in East Africa, Pakistan and Iran from 2001 management, organisational restructuring and to 2008, as Marketing Director in each of customer care. the Group’s subsidiaries. Prior to his overseas Prior to his appointment as Head of Research secondments, he served in many roles at and Development in Bank of Ceylon, he Ceylon Tobacco Company before heading up its served at the United Nations Development Marketing Division in 1997. Programme (UNDP) Regional Centre for Asia During his tenure at British American Tobacco, Pacific Region as a Senior Researcher from he acquired a thorough knowledge of Strategic 2005 to 2009 and Research Director at the Planning, Product Development, Brand Planning People’s Bank from 1991 to 2004. He was & Development, Supply Chain & Logistics and also a Research Consultant for UNDP Maldives, Consumer Touch Point Management. His flair Lao PDR and Sri Lanka from 2008 to 2009, for brand rejuvenation helped to secure market Regional Researcher for microfinance and rural leadership for British American Tobacco in development at the Asia Pacific Rural Agricultural Pakistan. Credit Association (APRACA) from 2001 to 2004, the editor of Economic Review from Additionally, Mr. Ghaffoor served as General 1991 to 2004, visiting lecturer at the University Manager of Whittals Insurance and Country of Colombo from 1995 to 1997 and Visiting Manager of DHL Sri Lanka from 1993 to 1996 Research Fellow at the University of Burgen, during his tenure with John Keells Holdings. Norway and the University of Wageningen, the Netherlands from 1979 to 1980.

Dr. Siriwardena holds a Master of Arts Degree in Economics from the University of Kelaniya, Sri Lanka in 1980 and obtained a Doctorate in Social Sciences from the University of Wageningen, the Netherlands in 1989.

24 BANK OF CEYLON ANNUAL REPORT 2010 1 Country…9 Provinces… 307 Branches… 1 Bank…Bank of Ceylon 1 Bank…on the ground in hundreds of towns, villages and hamlets across the country…1 Bank…BOC EXECUTIVE MANAGEMENT TEAM

01 02 03 04

09 10 11 12

17 18 19 20

01 Ms. B D C Wijekulasuriya 02 Ms. Y A M M P Karunadharma 03 Ms. S W S Fernando 04 Ms. K M Amarasuriya AGM - Product & Development Banking AGM - Metropolitan Branch AGM - Province Sales Management AGM - Recovery (Provinces)

09 Ms. Sriyani Anandagoda 10 D L C Atapattu 11 H K W Gunasinghe 12 Ms. K A D A Pemadasa AGM - Trade Finance AGM - Central Province AGM - Sabaragamuwa Province AGM - Administrative Services

17 W P R P H Fonseka 18 I G C Madadeniya 19 T Mutugala 20 M Wickramasinghe AGM - Budget & Strategic Planning AGM - Country Manager - London AGM - Information System Audit AGM - Human Resource Operations

26 BANK OF CEYLON ANNUAL REPORT 2010 EXECUTIVE MANAGEMENT TEAM

05 06 07 08

13 14 15 16

21 22 23 24

05 Ms. R G V S Gunatilake 06 Ms. W K I Kularatne 07 Ms. K A D Fernando 08 P J Jayasinghe AGM - Credit Audit AGM - Western Province North AGM - Offshore Banking AGM - Corporate Credit

13 Ms. P R Unawatuna 14 Ms. L W Wijesundara 15 K B S Bandara 16 D N J Costa AGM - Branch Credit Recovery Corporate AGM - Corporate Relations AGM - North Central Province

21 Ms. L S L de S Wijeyeratne 22 D N L Fernando 23 K T Karunaratne 24 D M L C Kumara AGM - Pettah Branch AGM - Western Province South AGM - Support Services AGM - Country Manager - Male

BANK OF CEYLON ANNUAL REPORT 2010 27 EXECUTIVE MANAGEMENT TEAM

25 26 27 28

33 34 35 36

41 42 43 44

25 T M Safa 26 S S S Senanayake 27 W G Ariyaratne 28 G H Chandrasiri AGM - Country Manager – Chennai AGM - Province & Branch Audit/ AGM - International AGM - Business Process Investigations Re-Engineering Project

33 C W Welagedera 34 D P K Gunasekera 35 K E D Sumanasiri 36 W M S Wanasinghe AGM - Eastern Province AGM - Overseas Branches AGM - Northern Province AGM - BoC Card Centre

41 Ms. H M Ratnayake 42 Ms. C K Jayarathne 43 T P G Ranaweera 44 K G Jinadasa AGM - Accounting & MIS AGM - Customer Relations AGM - Consumer Product Management Deputy Chief Legal Officer (Operations)

28 BANK OF CEYLON ANNUAL REPORT 2010 EXECUTIVE MANAGEMENT TEAM

29 30 31 32

37 38 39 40

45 46 47

29 M L J Fernando 30 G L P Jinasoma 31 S M S C Jayasuriya 32 G D Silva AGM - Risk Management & AGM - Uva Province AGM - Treasury AGM - Training & Development Compliance

37 D K N Piyasoma 38 E M U Bandara 39 H G Nihal 40 Ms. S S Ekanayake AGM - Southern Province AGM - North Western Province AGM - Superannuation Schemes AGM - Marketing

45 Ms. S H Ranawaka 46 H R F Fonseka 47 Jagath Kurundukumbura Deputy Chief Legal Officer Assistant Director IT Assistant Director IT (Recovery) (Operations/Tech. Support) (Operations/Tech. Support)

BANK OF CEYLON ANNUAL REPORT 2010 29 MANAGEMENT DISCUSSION AND ANALYSIS

ABOUT THE BANK BoC’s customer base spans over 9 million All sectors of the economy performed well The Bank of Ceylon (BoC) is the premier State customers island-wide. During the year the during the first three quarters of the year, owned commercial bank in Sri Lanka. Bank’s asset base reached Rs. 715 billion with the agriculture sector recording a while customers’ deposits increased to growth of 6.3%, industry sector 8.7% and It provides diversified fully-fledged banking Rs. 524 billion while the quality of the assets services sector 7.9%. Total gross investment services including Retail, Corporate, improved reducing the NPA to 3.3%. of the country was projected to increase to International, Treasury, Development/Investment 27.8% of GDP in 2010 from 23.9% in 2009 Banking Services, Credit Cards, Islamic Banking, BoC has number of subsidiaries and largely due to private sector investment Safe Deposit, Custodian and Pawn Broking associates under its Group umbrella operating during the year. Domestic savings in 2010 Services through a network of 307 local and in varied industries including financial were projected to remain unchanged at the 2 overseas branches (Male and Chennai). services, property development, travel and 2009 level of 18% of GDP mainly due to the leisure, unit trust, insurance, stock broking unexpected increase in import demand. The Bank is subject to examination and and renewable energy. regulation of the Central Bank of Sri Lanka Demand management policies and improved and subject to listing rules of the Colombo THE ECONOMIC ENVIRONMENT domestic supply conditions enabled to Stock Exchange by virtue of its listed THE GLOBAL ECONOMY maintain annual average inflation at subdued debenture. The overseas branches are subject The global economy recovered during the year levels, which stood at 5.9% in 2010. The to Banking Regulations prevalent in the from one of the deepest economic recessions low and the benign level of inflation enabled respective countries. and is projected to grow by 4.8% in 2010 and Central Bank of Sri Lanka to ease its monetary by approximately 4.2% in 2011. Advanced policy by reducing the reverse repurchase The stability and strength of the Bank is economies are expected to expand by 2.7% rate and repurchase rate to 9.0% and 7.3%, affirmed by the AA (lka) rating with a positive and 2.2% in 2010 and 2011, respectively. respectively by end of 2010. outlook bestowed by Fitch Ratings Lanka Emerging economies continue to be the Limited. engine of world economic growth, and are Supported by the recovery of exports and expected to grow by about 7.1% and 6.4% imports, increased remittances, higher The financial performance of 2010 is yet in 2010 and 2011, respectively. Inflation in foreign financial inflows, the external sector another testimony of the Bank’s ability to advanced economies is expected to move up remained buoyant during the year. Balance remain profitable in lower interest regime to 1.4% in 2010 from and 1.3% in 2011. of Payments (BOP) recorded a surplus, with and Rupee appreciating environment. By Inflation in emerging economies is expected the higher foreign financial inflows, including capitalising on the strengths in core businesses to remain relatively high, accelerating from disbursements under the IMF-Stand-By and seizing opportunities arising from the 5.2% in 2009 to around 6.2% in 2010, and Arrangement (SBA) facility and proceeds recovering economy, the Bank successfully decelerating back to 5.2% in 2011. from the third international sovereign bond captured the growth in the banking industry. issue in October 2010 which raised the In order to achieve the performance, the Bank SRI LANKAN ECONOMY external reserves to the highest-ever level expanded its service scope in various business Sri Lankan economy turned around in 2010 recorded. The exchange rate also remained areas including Investment Banking and with macroeconomic variables indicating at manageable level during the year Islamic Banking while the delivery channels, favourable developments. The economy consequent to the recovery of the external branch network and internet and mobile grew by an estimated higher rate of 8.0% trade and increase in export earnings which banking solutions gained ground. The Bank during the year compared to the growth of rose by 17.3% to US$ 8.3 billion in 2010, also continued to strengthen its financial 3.5% recorded in 2009. The restoration of while expenditure on imports increased position and risk management. peace, strong macroeconomic environment, by 32.4% to US$ 13.5 billion during this improved business confidence and the period. Sri Lanka was able to present itself BoC has a staff strength of 9,352 consisting recovery of the global economy buttressed strongly in international financial markets of 8,204 full time, and 1,148 of outsourced this growth. and international rating agencies, namely, and contracted employees. Moody’s Rating Services, Standard and Poor’s, and Fitch Ratings.

30 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

The deficit in the trade account widened declined to below 6.5% by end 2010. The by 66.7% to US$ 5.2 billion during 2010. Average Weighted Lending Rate (AWLR), Worker remittances that grew by 23.6% Year- which reflects the movement of interest rates on-Year to US$ 4.1 billion ably compensated pertaining to all lending by commercial banks the expanding trade deficit. With foreign to the private sector, also declined further. financial inflows to the Government, the overall BOP recorded a surplus of US$ 0.9 The overall soundness of financial institutions billion during the year. Gross official reserves improved during the year 2010 as reflected by without Asian Clearing Union (ACU) stood at capital, liquidity, asset quality and profitability, US$ 6.6 billion as of end 2010. consequent to the increase in capital inflows, domestic financial markets became more The exchange rate policy continued to focus liquid in 2010. Credit flows to the private on maintaining stability in the domestic sector picked up along with the improvement foreign exchange market in the face of in credit conditions, reversing the negative significant inflows. The rupee appreciated growth recorded in the previous year. against the US Dollar (3.0%), the Euro (10.0%) and Pound Sterling (7.3%), while The Sri Lankan economy is projected to grow depreciating against the Japanese Yen by around 8.0% in 2011 and with positive (10.7%) by end 2010. The Central Bank contributions from all the major sectors of intervened in the foreign exchange market the economy. Domestic inflation in 2011 is and mitigated the excessive volatility in the expected to remain subdued within single domestic foreign exchange market ensuring digits. Money supply would be maintained at that the export sector is insulated from a a level compatible with the expected growth sharp appreciation of the rupee. in the nominal GDP in 2011. Sri Lanka’s external sector is expected to improve further The fiscal policy in 2010 was to maintain in 2011 recording a surplus in the BOP, the budget deficit within the annual target thereby increasing the country’s external of 8.0% of GDP. A significant improvement reserves further. Exports are projected to in the overall fiscal situation is envisaged rise in 2011 with higher value addition, through the considerable recovery in diversification of products and markets, and Government revenue with the higher level of the gradual recovery of the world economy. economic activities, savings in Government Imports are projected to grow in 2011, expenditure, recovery of international trade, mainly due to the higher import demand while maintaining public investment at the from economic activities including those targeted level. Revenue deficit to GDP is expected in the North and the East, better expected to improve to 2.0% of GDP from performance in the tourism sector, and the 3.7% of GDP recorded in 2009. development of major roads, ports and power-generating projects. Market interest rates continued to adjust downwards in tandem with the policy rate changes by the Central Bank. Monthly Average Weighted Prime Lending Rate (AWPR), which serves as a benchmark for selected lending rates, declined to below 9.5% and the monthly Average Weighted Deposit Rate (AWDR), which reflects the movement of interest rates of all interest- bearing deposits held by commercial banks,

BANK OF CEYLON ANNUAL REPORT 2010 31 MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW NET INTEREST INCOME MARGINS AND SPREADS Net interest margin increased by 0.27 % to In the backdrop of the macro and micro Despite the loan growth of 40.2% YoY, the 3.54% while the net interest spread increased economic conditions stated above, the Bank interest income reduced by 4.0% YoY to by 0.21%%. Average interest-bearing assets achieved commendable results. Rs. 50,853 million in 2010, consequent to grew by Rs. 103 billion, 22.7% YoY, to the Bank’s commitment to create low interest Rs. 555.7 billion in 2010. The Bank recorded a Profit Before Tax (PBT) rate regime to induce economic revival of the of Rs. 10,053 million in 2010 an Year on Year country. The table below highlights the Net Interest (YoY) increase of 138.9% compared to Income & Margin. Rs. 4,208 million the previous year. The The Bank’s net interest income increase of increase in profits was mainly driven by the Rs. 14,810 million YoY to Rs. 19,648 million Except percentage terms 2010 2,009 rise in net interest income and non-interest in 2010 is mainly attributed to the Bank’s Rs. million Rs. million income which rose YoY by 32.7% and ability to source funds at competitive Interest income 50,853 53,077 28.0%, respectively. prices. The favourable market conditions Interest expense (31,205) (38,267) enabled the Bank to attract funds at lower Net interest income 19,648 14,810 Total operating income continued to rise rates, thereby reducing the average cost on Net interest spread 3.78% 3.57% in the year supported by the non-interest interest-bearing liabilities by 2.7% YoY to Net interest margin 3.54% 3.27% income. 5.4% from 8.1% in 2009, while the average yield on interest-bearing assets declined by The table below highlights the average 2.5% to 9.2% from 11.7% in 2009. This balances and average interest rates of broadened the interest spread of the Bank individual categories of assets and liabilities. making a significant contribution towards the current year’s profit.

Year ended 31 December 2010 Year ended 31 December 2009 Average Average Average Average Assets balance Yield balance Yield Rs. million % Rs. million %

Loans & advances to customers 318,893 11.1 268,085 13.9 Investment securities 74,132 4.0 70,594 5.1 Other interest earning assets 162,709 7.8 114,083 10.8 Total Interest earning assets 555,734 9.2 452,762 11.7 Non-interest earning assets 70,864 – 58,545 –

Year ended 31 December 2010 Year ended 31 December 2009 Average Average Average Average Liabilities balance Rate balance Rate Rs. million % Rs. million %

Deposits from customers 466,420 4.7 362,339 7.3 Borrowed funds 42,772 4.4 47,198 3.6 Debentures 28,375 10.4 18,017 17.3 Repo borrowing 43,863 9.8 42,003 16.8 Total Interest bearing liabilities* 581,430 5.4 469,556 8.1 Non-interest bearing liabilities 45,167 – 41,753 –

* This Includes Demand Deposits

32 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the improved net interest TRADING INCOME FOREIGN EXCHANGE INCOME income, the Bank’s revenue diversification The boom in the Colombo Stock Exchange During the year, the Bank concentrated on strategy which aims to reduce the Bank’s enabled BoC to register substantial capital mitigating exchange losses arising from the dependence on net interest income reaped gains from securities. The table below appreciation of Sri Lankan Rupee against commendable results. The table below highlights the performance of the Bank’s the US Dollar. The chart below indicates the indicates the key areas in fee income. trading both in equity and in other fixed rate exchange rate trend for the year 2010. instruments. FEE INCOME The Sri Lankan Rupee appreciated against 2010 2009 Variance the US Dollar on a monthly basis and Rs. million Rs. million % dropped from Rs. 114.55 in December 2009 Trade services 3,690 2,270 62.6 to Rs. 111.25 in December 2010. Other major currencies (Euro & GBP) also remained Personal banking & account services 1,201 1129 6.4 low against the Sri Lankan Rupee compared Credit cards 473 380 24.5 to the previous year. Travel & remittances 412 313 31.6 Brokering services 117 66 77.3 Credit facilities 43 40 7.5 Custodial services 17 18 (5.6) Others 61 41 48.8 Total 6,014 4,255 41.3

The increase in net fees and commission 2010 2009 Variance income by Rs. 1,759 million, 41.3% YoY, to Rs. million Rs. million % Rs. 6,014 million during the year is attributable to the strong growth in trade Equity instruments services income which rose by 62.6% YoY to Mark to market valuation 80 164 (51.2) Rs. 3,690 million, followed by brokering Sale of securities 1,857 652 184.8 services and credit cards which registered a Fixed rate instruments decent growth. The increase in trade services Mark to market valuation 132 364 (63.7) commission is mainly due to expansion in Sale of securities 1,037 782 32.6 external trade activities during the year in Trading income 3,106 1,962 58.3 which the Bank enjoys a dominant market share. BoC therefore recorded Rs. 1,857 million in realised gains, an increase of Rs. 1,205 As a result of our continued commitment to million (184.8% YoY). The Bank achieved service to our overseas working population these results from an average trading and the diaspora, the fee income earned from portfolio of Rs. 2.5 billion. foreign remittances grew by 31.6% YoY to Rs. 412 million. The Bank will continue to On the other hand, capital gains from sale of service this market segment with innovative fixed rate instruments recorded a growth of financial solutions and technology-based 32.6% YoY to Rs. 1,037 million in 2010 due delivery channels by offering an efficient to reducing interest rates, while mark-to- service to these customers. Cards operation of market gains reduced by Rs. 231.6 million the Bank comprising of debit and credit cards to Rs. 132 million. was revitalised during the year which resulted in 24.5% YoY increase in the card fee income which rose to Rs. 473 million from Rs. 380 million last year. The Bank will continue to enhance this segment with technology-based customer delivery solutions.

BANK OF CEYLON ANNUAL REPORT 2010 33 MANAGEMENT DISCUSSION AND ANALYSIS

The Bank’s total operating expenses rose by 2.8% YoY to Rs. 16,077 million in 2010 mainly due to the increase in other operating expenses and depreciation of assets. The increase in other operating expenses and depreciation is attributable to expansion of the branch network and ATM coverage mainly in the North and the East. Additionally, the Bank wrote-off Rs. 134 million against lost articles and records in few branches in the Northern Province in order to expedite the restoration of normal banking functions in the peninsula which is also included in the other operating expenses. Marketing and advertising expenses increased marginally by Rs. 53 million, 8.5% YoY due to the expenses incurred to promote new products and services launched during the year.

The increase in revenue while containing the cost, coupled with the increase in Bank’s improved productivity resulted in the improvement of the Cost-to-Income ratio as shown in the graph which improved by 68.33% to 53.73%.

PROVISIONS 2010 2,009 Consequent to the appreciation of the Rs. million Rs. million Rupee, the Bank’s exchange income was Specific provisions limited to trading gains. The mark-to-market Charge for the year (1,072) (1,803) revaluation recorded only marginal gain. The Reversed/recovered trading gains for the year amounted to Rs. during the year 1,297 1,398 131 million recording a decline of OPERATING EXPENSES General provisions Rs. 34 million. This amount is related to fund 2010 2,009 Charge for the year (488) – transfers for imports and exports and both Rs. million Rs. million inward and outward overseas remittances. Reversed/recovered Staff costs 10,310 10,517 during the year – 1 The overall exchange income reduced by Premises and 73.9% YoY to Rs. 409 million in 2010. Recovery of equipment expenses written-off 71 102 Further, the Bank having the largest foreign (excluding Net charge to exchange operations successfully managed depreciation) 2,073 1,992 income statement (192) (302) the exchange risk posed by appreciating Depreciation on Sri Lanka Rupee against US Dollars. As shown owned fixed assets 785 686 The charge for credit losses for the year in the graph above, the long open position of Other operating 2010 reduced by Rs. 110 million to US Dollars was reduced substantially thereby expenses 2,909 2,451 Rs. 192 million, consequent to the credit avoiding volatilities of the income statement Total operating recovery management and remedial process arising from mark-to-market revaluation. expenses 16,077 15,646 adopted by the Bank which mitigated the Cost-to-income increase in non-performing loans during the ratio (%) 53.73 68.33 year. Additionally, the Bank also adopted customer reinstatement programmes and innovative management of distressed loans portfolios to reduce the bad loan content.

34 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL POSITION As at 31 December 2010 2,009 Rs. million Rs. million

Cash and balances with banks and other financial institutions 39,998 29,772 Placements with banks and other financial institutions 42,680 45,867 Investments 195,222 165,903 Securities purchased under re-sale agreements 40,840 6,615 Loans & advances 372,722 265,065 Fixed assets and investment properties 5,786 5,835 Other assets 17,706 19,184 Total assets 714,954 538,241 Deposits from customers 524,233 408,607 Borrowed funds 52,445 33,098 Securities sold under re-purchase agreements 53,522 34,204 Tax payable & differed tax liability 2,657 599 Debentures 38,706 18,045 Other liabilities 15,259 18,790 Total liabilities 686,822 513,343 Capital and reserves attributable to the equity holders of the Bank 28,132 24,899 Total liabilities and equity 714,954 538,241 Loan-to-deposit ratio (%) 72.93 67.31

Total assets of the Bank stood at Rs. 21,920 million, while external trade- Rs. 714,954 million as at 31 December related loans rose by Rs. 2,758 million and 2010, up by Rs. 176,713 million or 32.8% loans to Hotels, Travels and Services Sector YoY. The overall assets structure of the Bank were up by Rs. 2,274 million to improved during the year with the growth Rs. 19,089 million. Loans to the housing and in higher-yielding assets such as advances to property development sector rose by customers as well as investment in securities. Rs. 7,554 million. The lending to the State- Cash and balances with banks and other owned enterprises increased by financial institutions increased by 34.3% YoY Rs. 44,925 million during the year inclusive to Rs. 39,998 million. Placements with banks of the Rs. 3,555 million granted to stabilise and other financial institutions decreased the paddy prices after the harvest of Maha by Rs. 3,187 million, 6.9% YoY, due to Kanna in 2010. redeployment of Bank’s funds to advances to customers and debt securities. The Bank’s credit exposure to the Government of Sri Lanka increased during The Bank’s loan portfolio exceeded the 2010 due to lending to State-Owned Rs. 300 billion mark during the year to reach Enterprises (SOEs). Rs. 372,722 million, recording a YoY growth of 40.6%. Consumption loans increased by The graph indicates the industry exposure Rs. 16,853 million, pawning (mostly during 2009 and 2010. agricultural based) increased by

BANK OF CEYLON ANNUAL REPORT 2010 35 MANAGEMENT DISCUSSION AND ANALYSIS

The chart highlights the composition of assets. It is evident that the loans component has taken ground compared to 49.2% of last year to 52.1%.

FUNDING Significant portion of the Bank’s funding 73.3% came from customer deposits in 2010. Consequent to the Bank’s continued efforts on deposit mobilisation, a substantial portion of the deposits was raised during the year while additional funds were sourced from issue of debentures to diversify the funding base. Apart from Rs. 5,000 million raised through a debenture listed on the Colombo Stock Exchange in June, additional Rs. 16,679 million was raised through privately placed debentures to bridge the funding gap and liquidity mismatch of the Bank.

DEPOSITS FROM CUSTOMERS Deposits from customers increased YoY by Rs. 115,625 million, 28.3%, to Rs. 524,233 million. The deposit mix of the Bank improved in 2010 with the increase in low-cost funds. This composition of demand deposits increased to 17.1% while time deposits reduced to 46.1% from 46.4% in 2009 thus exerting a reduction in the Bank’s average cost of funds.

36 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

The analysis of the deposit interest cost is given in the table below: INDUSTRY-WISE NON-PERFORMING EXPOSURE Average balances 2010 2009 Net exposure of the non-performing loans was Volume Interest Cost Volume Interest Cost brought down resulting in the improvement Rs. million Rs. million Rs. million Rs. million of the NPA coverage to 75.9% including Current deposits 72,277 – 51,468 – general provision which is above the industry standard. The balance 24.1% is substantially Savings deposits 176,145 7,559 145,752 8,359 covered with high quality collaterals Time deposits 215,600 14,514 162,102 17,963 decimating further provision requirements. Other deposits 2,398 15 3,016 85 Total 466,420 22,088 362,338 26,407

The lowering interest rates in the market supported by policy rates reduction, the Bank was able to source funding at competitive prices, thereby lowering total interest cost compared to last year.

The Bank’s loan-to-deposit ratio was up by 5.6% to 72.9% at the end of 2010 as total loan growth outpaced deposit growth.

CREDIT QUALITY A well-coordinated effort of credit risk management and recovery initiatives during the year including innovative management of bad loans, early warning signals and proactive follow up of likely distressed credits reduced non-performing loans (NPLs) to Rs. 12,639 million from Rs. 15,542 million in 2009.

Non-performing loan (NPL) ratio improved from 5.6% in 2009 to 3.3% in 2010. The NPL excluding lending to the Government and State-Owned Enterprises was 5.2% which is still within the comparable industry level.

BANK OF CEYLON ANNUAL REPORT 2010 37 MANAGEMENT DISCUSSION AND ANALYSIS

CAPITAL & LIQUIDITY RATIOS OUR ACHIEVEMENT AGAINST FORECAST The following table highlights the As at 31 December 2010 2009 achievement of target key performance Rs. million Rs. million indicators which were set out in the Bank’s Core capital 28,007 24,773 Annual Report in 2009. Deductions (2,673) (1,581) Core capital after Deductions 25,333 23,192 2010 target 2010 actual Rs. million Rs. million Supplementary capital 10,952 7,561 Deductions (2,509) (1,471) Total assets 625,376 714,954 Supplementary capital after deductions 8,443 6,090 Net Loans & Advances 354,044 372,722 Customer deposits 499,545 524,233 Total capital base after deductions 33,776 29,282 Shareholders’ Equity 28,315 28,132 Risk-weighted assets Net Interest Income 18,736 19,648 Credit risk 198,284 168,378 Non-interest income* 11,815 12,042 Market risk 12,779 8,228 Operating Expense** 19,906 17,637 Operational risk 34,900 30,174 Profit before tax 7,140 10,053 Total risk-weighted assets 245,963 206,780 Profit after tax 4,641 6,365 Capital adequacy ratios ROAE (%) 17.60 24.01 Core capital ratio (%) 10.3 11.2 ROAA (%) 1.20 1.60 Capital adequacy ratio (%) 13.7 14.2 Book Value (Rs.) 5,663 5,626 EPS (Rs.) 928.2 1,273.0 Capital adequacy ratio decreased marginally Cost to income by 0.5% to 13.7% as a result of the increase ratio (%) 62.0 53.7 in risk-weighted assets primarily due to the enhancement of loan book during the year * Including recovery of NPA ** Including provision for loan losses 2010. The sound liquidity position of the Bank was highlighted by the liquid asset ratio REGULATORY DEVELOPMENTS which was up by 7.5% to 28.6% from 21.1% CENTRAL BANK DIRECTIONS in 2009. z General provision on performing loans DIVIDEND AND VALUE TO THE GOVERNMENT and advances

2010 2009 2010/09 z As per the regulations of Central Bank of Rs. million RS. million % Sri Lanka (CBSL) the general provision on Value Added Tax 4,001.2 2,994.8 33.6 non-performing loans, advances and credit facilities is to be reduced from the current Income Tax 3,687.3 1,123.6 228.2 1% to 0.5% by December 2011 allowing Dividends 3,096.4 1,346.4 130.0 a phased out reduction in provision at a Total 10,784.9 5,464.8 97.3 rate of 0.1% per quarter, over five quarters Profit Before VAT & Tax 14,053.8 7,202.5 95.1 commencing with the quarter ending Total Value to Government (%) 76.7 75.9 – 31 December 2010. The reduction in the general provision due to this change during the year was Rs. 266.2 million and accordingly the current year's profit would have been reduced by the same amount if not for this change.

38 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

z Sri Lanka Deposit Insurance Scheme BUSINESS PERFORMANCE z Supported the infrastructure development (SLDIS) CORPORATE BANKING projects, related to ICC Cricket World Cup. Our Corporate Banking Division caters to z A provision of Rs. 96.0 million was z Introduced the “5S” concept and Quality made in respect of the Sri Lanka Deposit corporate clients whose annual turnover of Circle to the corporate environment, Insurance Scheme (SLDIS) introduced by above Rs. 250 million and has continued through trade services, with the assistance the CBSL. The Bank was committed to pay to finance all sectors of the economy. The from the National Productivity Centre. All a quarterly premium at 0.1% per annum restoration of peace and the recovery of the the actions have been initiated to obtain on the eligible deposit balance with effect global economy stimulated development the ISO 9001 : 2008 certification, for from 1 October 2010. activities which were favourable to the Trade Services Unit in 2011. Corporate Banking business. The Corporate z Reduction of Interest Rates Banking activities were accelerated during the z Provided financial support to expand the In view of the reduced policy rates since year to harness the economic development wholesale market in Pettah to Dambulla early this year, the CBSL has requested all initiatives which emerged in the economy. and Northern parts of the island. banks to take appropriate measures to Integration of the North and the East with z Revamped one of our main branches reduce lending rates. In support of this, the rest of the county, spurred business in Pettah to create a customer-friendly the Bank proactively reduced interest rates mobility, infrastructure development and ambience. on all lending. transportation in the country and opened Off-shore Banking IFRS READINESS up many business opportunities. The Bank The Off-shore Banking unit recorded a The two new Sri Lanka Accounting Standards concentrated on improving service quality, commendable achievement amidst the namely SLAS 44 & SLAS 45 will be effective reviewing business processes, identifying slow global recovery. The unit continued for the Financial Statements commencing business drivers which trigger growth and to support the apparel sector by providing from January 2012. These two standards expanding lending operations to the private capital investment and working capital will substantially alter the manner in sector through the implementation of funding despite the recent withdrawal of which revenue is recognised from financial market- based strategies in the low interest GSP+ concessions by the European Union. instruments and disclosures. The initial rate regime whilst maintaining a healthy Revolving working capital granted to the impact assessment was completed and advances portfolio. It is pertinent to mention sector exceeded US$ 350 million during the substantial training was given to staff across that the Bank won the award the “Best Sri year. The Unit also continued to fund the business units. The Bank is optimistic towards Lankan Trade Bank” in 2010 by The Trade domestic and overseas leisure sector which conversion to the new accounting standards Finance Global Magazine for Export and continued to perform well. in the year 2012. Commodity Finance.

RETAIL BANKING COMPLIANCE WITH THE LISTING RULES The key highlights of the Corporate Banking ISSUED BY COLOMBO STOCK EXCHANGE (CSE) Unit during 2010 are given below: As a part of the cost effective expansion The Unsecured, Subordinated, Redeemable z The Bank acted as financial facilitator of strategy, the Bank established 26 extension Debentures of November 2008/November major development projects of the country offices island- wide and increased the 2013 series and June 2010/June 2015 series, such as rural electrification, construction/ number of branches linked online to 307, both fixed and floating interest rates are reconstruction of 5 bridges in the Eastern thus making Bank of Ceylon the largest listed on the Colombo Stock Exchange. The Province and major water supply projects online banking operator in Sri Lanka with total amount is Rs. 9,367 million. The above in Colombo city, funded by international 879 service points. To enhance the service debt instruments listed in the CSE, require agencies. delivering capabilities of the Bank, 23 ATMs regular uploading of the quarterly and yearly were linked, increasing the ATM network to z Undertook project financing of over 352 during the year. Financial Statements in the website of the Rs. 38.0 billion in the areas of: CSE and submission of same to the CSE as per the listing rules. During the year 2010, a. Port development and expansion The following initiatives were taken to the Bank has complied with the requirements b. Telecommunication expand our provincial reach: of the listing rules and submitted the c. Renewable energy with special Central Province Financial Statements on quarterly basis duly reference to wind power projects z Opened extension offices in Wilgamuwa certified by the Chairman, Director, General d. Road development projects and Hataraliyadde to provide extended Manager and Chief Financial Officer. Further, z Financed the infrastructure development banking facilities. the Bank submitted the listing undertaking projects undertaken for ‘IFFA’ International signed by the Chairman and General z Relocation of the Dambulla Branch to event in Sri Lanka and was the official Manager of the Bank under the common seal increase banking convenience. banker to the event. to CSE on 11.03.2010.

BANK OF CEYLON ANNUAL REPORT 2010 39 MANAGEMENT DISCUSSION AND ANALYSIS

z A workshop with the assistance of SEEDS Northern Province PRODUCTS AND SERVICES

(Sarvodaya Movement) was conducted on z Reopened the Kilinochchi branch in March A structured approach was adopted to Remittance Literacy/Opening of NRFC/RFC 2010 with online banking connectivity. develop innovative products to cater to accounts for relatives of migrant workers. all sectors and communities. Some of the z Initiated a rapid lending and financing products launched during the year are: z Establishment of a fully-computerised programme to fast track the development mobile banking unit at the Deyata Kirula of the economic activities in the area. z BoC Infinity and BoC Vishrama - These Exhibition held in February 2010. were introduced to contribute towards z Credit facilities were extended to re- Government’s long-term objective of Sabaragamuwa Province construct dwellings and recommence ‘pension for all citizens’. z Establishment of an extension office in income-generating activities of the Weligepola to extend banking facilities to resettled population. z Smart Saver saving scheme villages. This product was also introduced to z Wrote off Rs. 134 million in respect of lost create a long-term fund base to meet the z Relocation of branches in Ratnapura and articles and records to assist the affected growing funding needs of the country. Eheliyagoda and the extension offices business community. in Godakawela and Kotiyakumbura to z Islamic banking arm launched Mudarabah z Assisted the distribution of funds from customer- convenient locations. (savings), Atfal (children savings), Al UNHCR, World Vision, SLRC financial Noor (current account), Diminishing z Opened 182 School Savings Units in the assistance, ENRep funds (emergency Musharakah (housing) and Wakala province. Northern Recovery Project) etc. (advances) products. Uva Province z The credit facilities extended by our z Opened an extension office named branches in the Northern Province DEPOSIT MOBILISATION ‘Badulla City Branch’. amounted to Rs. 2,303 million reflecting Several deposit promotional campaigns were an increase of 46.5%. In recognition of conducted island-wide to improve financial z A seminar on leadership skills was this achievement, our branches were literacy and to popularise banking habits organised in school banking units of awarded appreciations by the Central among the rural community. The launch of Bandarawela, Mahiyangana, Moneragala Bank of Sri Lanka as appearing in ‘Gam Udana’ and ‘Door to Door‘ campaigns and Badulla Districts. Sustainability Report. were a resounding success as the Bank z Branch modernisation was extended to achieved the target of one million savings z BoC opened extension offices in Meegahakivula, Koslanda, Passara and accounts which has now reached Anandakulam and Mallavi and mobile Ballaketuwa branches. Rs. 8.5 million. The deposit promotion service centres in Urumpirai, Kudathanai, campaign launched with the participation of z Plans are under way to fund water bottling Mulankavil and Atchuvely during 2010. plants, large scale vegetable cultivation the Bank staff enabled to raise and hotel projects in Hambantota. CREDIT CARD OPERATIONS Rs. 2.2 billion deposits. In order to inculcate banking habits among children the Bank Despite intense competition, the Bank Eastern Province established 210 units of ‘School Sansadaya’ continued to perform well in the credit card z Opened offices in Morawewa, in schools island-wide. market. The credit card total outstanding Mamanagam, Kallar, Uppuveli, Polwatte increased by Rs. 319 million to Rs. 1,223 and Karaitivu SME AND DEVELOPMENT BANKING million, while merchant turnover rose by z Relocated Akkaraipattu Branch to a Rs. 2.4 billion to Rs. 11.6 billion. The number In order to uplift the quality of life of the customer convenient location. of cards also rose by 36,061 to 98,000 SME sector which forms the backbone of while the number of merchants increased by our economy, BoC extended several financial z Shifted the Eastern provincial office which assistance schemes. Our development was stationed in Colombo to Trincomalee. 900 to 3,900 in the year under review. As a consolidation strategy the Card Centre was banking activities are detailed in the shifted to the World Trade Centre while a Sustainability Report. 24-hour credit card issuing service point was established in the same location, a first in Sri Lanka in its kind. A new product named ‘Master Debit Card’ was introduced and the call centre was revamped during the year.

40 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS

INTERNATIONAL AND TREASURY OPERATIONS Overseas Branches With the network of 718 correspondents Chennai Branch around the globe, the Bank is well-poised Rs. million to meet the ever-increasing demand CCY 2010 2009 Increase (%) for International Banking Services from Total assets INR 1,040 940 10.6 our clients. The International Division Gross loans INR 743 498 49.2 concentrates on canvassing inward Deposits INR 935 751 24.5 remittances and foreign currency deposits from overseas working population. During Profit before tax INR 94 104 (9.6) the year, Rs. 187 billion worth of inward Profit after tax INR 59 62 (4.8) remittances were channelled through the INR - Indian Rupees Bank recording an YoY increase of 12% compared to Rs. 167 billion the previous year. Chennai branch has recorded a good Male Branch This was achieved by increasing our presence performance with a significant rise in asset Despite the adverse economic conditions in in markets we source higher remittances deposits and loans. Total assets increased Male and the stringent regulatory framework and joining new remittances schemes such by 10.6% YoY, from INR 940 million to introduced by the Maldives Monetary as Shift Financial Jordan and Merchant INR 1,040 million in 2010. The loans and Authority (MMA), total assets rose to Trading Malaysia. The number of overseas advances increased by INR 245 million to MRF 1,351 million from MRF 838 million last representatives was increased to 25 from 21 INR 743 million while deposits base rose by year, while total advances increased by 52% the previous year. INR 184 million to INR 935 million recording YoY to MRF 661 million. Customer deposits a growth 24.5% YoY. The profit for the year is also grew by 48.7% to MRF 894 million. The foreign currency deposit base also rose slightly decreased to INR 94 million from Profit for the year amounted to MRF 54 million; by 30.2% YoY to Rs. 166.4 billion from INR 104 million last year, since profit reported the highest profit recorded in the history of Rs. 127.7 billion in 2009. Several strategies in 2009 included a special recovery of INR 20 the branch. were adopted to grow the NRFC deposit million. base including introduction of raffle draws NPA ratio was brought down to the lowest and conducting educational programmes An advanced Core Banking System integrated level of 3.18% during the year. Non-interest in association with Sri Lanka Bureau of with treasury operations was implemented income contributed to 38% of the gross Foreign Employment on the importance of during the year. The branch is moving income of the branch. inward remittances and savings habits to towards electronic banking with the proposed prospective Sri Lankan migrant employees. installation of Automated Teller Machines UK OPERATION A pre-departure loan scheme was introduced (ATMs) linked to the common ATM network The Bank of Ceylon London branch was to prospective migrant employees apart of commercial banks in India. Plans are under converted to a fully-owned subsidiary of BoC, from the several awareness programmes way to introduce internet and SMS banking namely Bank of Ceylon (UK) Limited creating conducted during the year. to improve delivery channels. BOC Chennai is immense international business opportunities the only Sri Lankan bank on Indian soil. for BoC in Europe. The number of correspondents increased from 658 in 2009 to 718 in 2010, while Male Branch the number of Relationship Management Rs. million Arrangements (RMA) increased to 2,242 CCY 2010 2009 Increase (%) from 2,100 in 2009. Total assets MRF 1,351 838 61.2 Gross loans MRF 661 435 51.9 Deposits MRF 894 601 48.7 Profit before tax MRF 54 32 68.8 Profit after tax MRF 42 22 90.9 MRF - Male Rufiyaa

BANK OF CEYLON ANNUAL REPORT 2010 41 MANAGEMENT DISCUSSION AND ANALYSIS

Treasury Operation In this context the Bank undertook the 2005, thus providing adequate flexibility Treasury Division consists of four sub-sections management of the debenture issue of for conventional banks to establish Islamic namely the Front Office (Dealing Room), the Urban Development Authority which banking windows and launch Islamic Treasury Back Office, Primary Dealer Unit and raised Rs. 10 billion to aid development financial products. the Asset & Liability Management Unit (ALM). activities of the Colombo city. This was the largest debenture issue undertaken by a SUBSIDIARY PERFORMANCE Treasury Division performed exceptionally State institution and first of its kind. As the There are 12 subsidiaries and 6 associate well during the year, making a significant financial advisor to the Government, BoC companies in BoC’s Group structure with contribution to the overall profitability of assisted the Government in the processes a total investment of Rs. 6,123.8 million. the Bank. Income from treasury operations of taking over the balance 51% stake of the A Subsidiary Management Charter was includes capital gains of Rs. 1.2 billion during Shell Gas company from foreign ownership. formulated setting out the rules, guidelines, the year. The Unit also acquired a strategic stake of risk management practices and code of SriLankan Airlines during the year. Going conduct to be adhered to by the Directors The Bank acted as co-arranger with the forward BoC intends to develop capital appointed by the Bank to these subsidiaries. HSBC to the issue of sovereign bonds of market instruments in support of the capital A separate unit within the Bank under the the Government of Sri Lanka and continued market development. purview of the Chief Financial Officer was to maintain the leadership position in the established to continuously monitor and security market of the Government, managing ISLAMIC BANKING review the progress of these entities. The customer and Bank portfolios exceeding The Islamic Banking Unit (IBU) set up in 2009 Bank’s major subsidiary Merchant Bank of Rs. 150 billion and 85 billion respectively. The has very well progressed with a professional Sri Lanka (MBSL) initiated a merger of MBSL, Bank is in the process of procuring the new team of bankers to steer the strategically Merchant Credit of Sri Lanka (MCSL) and Treasury Asset and Liability Software which important business segment. As at end Ceylease Financial Services Limited (CFSL) would enhance the functional capabilities of 2010, the total assets of IBU stood at over which process is expected to conclude early the ALM Unit. Plans are also under way to Rs. 700 million while a rate of return of second quarter of 2011 upon receipt of obtain an advanced treasury management 4.33% was granted to investors in the last regulatory approval. system to strengthen the back office functions quarter of 2010. of the Bank. INFORMATION TECHNOLOGY The main strength of IBU is its team of BoC is the pioneer in introducing information On the human resources front a substantial dedicated staff members who have been technology to the banking sector in Sri local and overseas training was offered to staff comprehensively trained on Islamic banking Lanka and has continued to remain in the on latest treasury management techniques, by Islamic Bank Bangladesh (IBBL). The forefront serving a customer base of over products and services to staff across the Shari’ah Board is headed by the honourable 9 million with 99.9% speed and reliability. branches, especially in the Jaffna District. members of the All Ceylon Jamiathul Ulema - A total cost of Rs. 140 million was invested the highest Muslim religious body of during the year to upgrade the core network Some of the key achievements of the Treasury Sri Lanka. Shari’ah compatible products infrastructure, strengthen the network Division during the year are given below: are offered throughout the network of 307 security, enhance availability and introduce branches, while Islamic Banking operations z Raised a syndicated loan of US$ 165 million new redundancy features. are handled by the head office under the in July arranged by HSBC. supervision by a Shari’ah Board. AN-NOOR The off-site data centre was redesigned to z Obtained US$ 50 million, five-year loan current accounts, ordinary savings, children's accommodate proper equipment settings from China Development Bank in December. savings (Athfal), leasing (‘Ijara’) finance for and secure data mirrors of live systems to vehicles, and machinery, trade finance and z Raised a short-term syndicated loan of ensure business continuity. The IT systems US$ 70 million arranged by HSBC term loan (‘Murabaha’), working capital, used in Trade Finance operations namely, in December. fund management (Wakala) are the products Bank Trade, Client Trade and BoC Trade Info offered by the IBU. The Bank intends to Wizard were upgraded to enhance customer z Facilitated a US$ 152 million loan to the introduce AN-NOOR's NRFC and Rupee service. Further, a Call Centre was set up at Government of Sri Lanka from China Mudaraba fixed deposits, agri business the head office with ICT Solutions to support Development Bank through ESCROW finance, manufacturing finance and bonds the global customer base of the Bank. accounting arrangement. in the near future. The Bank strategises to expand Islamic Banking operations to In order to support the Government INVESTMENT BANKING overseas branches by introducing Shari’ah initiatives, the credit worthiness of customers BoC being the premier banking institution in compliant operations in Male and in the is assessed via the Credit Information the nation catering to diverse segments and other overseas branches. Sri Lanka is one Bureau web site while functionalities were sectors of the economy, set up the Investment of the few countries with legislation for implemented to provide Trade Finance data Banking Unit to harvest the opportunities Islamic banking following amendments to in foreign currency to Sri Lanka Customs emerged after the restoration of peace. the Banking Act No. 30 of 1988 in March and the CBSL. The Bank is also involved

42 BANK OF CEYLON ANNUAL REPORT 2010 MANAGEMENT DISCUSSION AND ANALYSIS in submitting data to Maldives Monetary comprehensive service to customers day and Staff Assistants joined the BoC family to serve Authorisation (MMA). night. Payment of bills, fund transfers and in the provinces. balance inquiries can be facilitated via the BoC is the pioneer in introducing Automated mobile phone of the customer. BoC is an equal opportunity employer and Teller Machine (ATM) and the ATM our HR processes are governed by a technology to Sri Lanka. Since then, the Bank Being the pioneers in practicing Electronic Fund comprehensive regulatory framework has installed more than 350 ATMs island- Transfers since 1980 using the Telebox software, including Recruitment and Promotion wide and has the widest ATM network in the BoC has diversified the instant electronic fund Policy/Code of Conduct of Employees country, with an additional 200 ATMs made transfer in multiple ways using high tech and Disciplinary Code. The Bank set up available through the linkage with Sampath software. BoC e-cash solution has enabled Sri a Performance-Based Rewards System Bank. The Bank upgraded the hardware Lankan diaspora to transfer funds electronically Committee with the intention of introducing and the software of the ATM server at an through BoC’s network of exchange houses in a Performance-Based Reward Scheme (PBRS). investment of Rs. 230 million during the year many countries. and decentralised the issuing of credit/debit The Bank offers a wide range of benefits and cards while extending the ATM card usage As mentioned above, BoC embarked on welfare activities to the employees and also facilities to the branch in Maldives. several IT initiatives during the year which facilitated social, cultural and extracurricular will be implemented during 2010 and 2011. activities. Being the pioneer in credit card operations in Some of the initiates include Asset Liability Sri Lanka, the Bank upgraded its Mastercard Management, Anti-Money Laundering, Further details on employee relations are Global Clearing Management Software at an RISK, Leasing, Islamic Banking, IT Service provided in the Sustainability Report on investment of Rs. 1 million to be in par with Management, Call Centre, Credit Card Loyalty page 114. international practices while the software Programme to name a few. The Bank has also used for information exchange on non-BoC envisaged to expand the ATM and the POS BUSINESS PROCESS RE-ENGINEERING (BPR) credit cards was also upgraded. Further, a network. Further, the Bank plans to enhance This is a continuous process which is being ‘Visa Platinum- Black Card’ was introduced to the trade application and enhance customer carried out from year 2008 by the BPR serve the high net worth clients. convenience by incorporating imaging and Division. All branches of the Bank are being workflow modules which would enable reorganised and repositioned to comply with In order to enable acceptance of chip customers to provide scanned documents the present day market requirement. The cards from any Point of Sale, initial step of without visiting the Bank. Bank has developed a few modelling concepts Network Interface Validation (NIV) for MChip suitable for the urban/suburban and grass- acquisition was taken at a cost of Rs. 1 million. CENTRALISATION OF NETWORK AFTER root level banking after studying the customer This would enable foreigners to transact via INTRODUCING THE NEW COMPUTER SYSTEM behaviour as well as their requirements. IN THE YEAR 2006 chip cards in a secure manner. The Bank has also facilitated the use of Master Cards on the Most of the monotonous functions of the The liberalisation of the North and the East had Bank’s ATMs and tripled the capacity of branches have now been centralised to the a significant impact on the domestic market 40 high usage ATMs of the Bank. Central Back Office located in the BoC Head with the opening of new marketing areas and Office, easing the work of the branches. trading of more goods and services within the The Bank’s web site was upgraded and was In the process of centralising mundane North, South, East and West of the country. the only banking institution to receive an functions, the Bank introduced a Cheque These also led to the progress of the Bank’s award at a contest carried out by the LK Image Clearing System to clear cheques branch network with the Bank expaning its domain registry of the University of Moratuwa. credited to customer accounts the following services in the new markets and serving the day in 2010. Developments are under way to clients by connecting them to a single network. The intranet system of the Bank ’BoCiNET’ improve the clearing the same day. was extended to all local and overseas BoC has 309 branches opened so far excluding branches and extension offices while internet The issue of cheque books was centralised 218 extension offices so far established. Out banking was enhanced to accommodate through the network system. This service is of the above branch network, the Bank has cross currency transactions. Customers being enhanced to enable customers to obtain modernised 225 branches to improve our are able to transact in any designated cheque books printed with their names or the customer convenience. currency through the web and B2B and B2C Company name. transactions have also been enabled. ‘Kiosk’ DISASTER RECOVERY SITE (DR) type personal computers were made available HUMAN RESOURCES A fully-equipped DR site has been set up in at branches for customer use. The Bank’s staff strength consists of 8,204 the Maharagama branch with facilities for full-time permanent cadre, 1,058 outsourced Core-Banking, Bank Trade, Inward & Outward The mobile banking solution ‘PayMate’ was and 86 contracted employees. 76% of the Remittances and Swift Operations. The DR also upgraded to handle micro payments. staff is in the branch network while 50 site was further developed incorporating the PayMate was fully- integrated to the core- Management Trainees recruited for the North suggestions of the Bank Supervision team banking solution and enhanced to provide a and the East, while another 1,200 Trainee of the Central Bank. The latest testing was

BANK OF CEYLON ANNUAL REPORT 2010 43 MANAGEMENT DISCUSSION AND ANALYSIS effected on 08 October 2010. The Bank is BOC’S CONTRIBUTION TO THE ‘EMERGING In the area of Corporate Banking, the Bank now fully-equipped with a comprehensive WONDER OF ASIA’ FOR THE NEXT 3 YEARS will strengthen its relationship with corporate DR Site and geared to face any man made or Going forward, BoC intends to support the customers to create more cross-selling natural disaster which may arise. Government in the national food security opportunities while fortifying its leadership programmes by providing financial assistance position in the local corporate loans market. NEW BUILDINGS ADDED TO OUR ASSETS for safety foods storage projects and achieve The Bank will strive to grow its corporate PORTFOLIO DURING THE YEAR: self-sufficiency by boosting locally-produced lending in the local and off-shore sector. Construction of food items including dairy production. BoC The Bank will further strengthen the ‘Trade buildings Value plans to assist the Government to save Finance’ platform and maintain its market completed 4 Rs. 106 million Rs. 30 billion currently incurred to import leadership in the export and import business Buildings under Value dairy products and support development by consolidating its strategic position as the construction 2 Rs. 70 million of family entrepreneurships through premier trade finance bank in the country. microfinancing and supporting deep-sea Simultaneously, the Bank will develop a KEY ACTIVITIES PERFORMED DURING THE fishing and long-line fish production projects customer-oriented model in developing YEARS WHICH HAVE MADE A SIGNIFICANT and thereby enable the fish export market to products to cater to specific customer CONTRIBUTION TO THE OVERALL ECONOMIC achieve the target of US$ 100 million. needs and thereby extend its business DEVELOPMENT DURING THE YEAR 2010 island-wide. With respect to the insurance The Bank of Ceylon being the Number One BoC would assist the Government in business, the Bank intends to capitalise on State Bank and the pioneer institution in developing the coal mining and port the Bancassurance model and improve the contributing to the economic development sectors, e-Government projects and support product mix to meet the needs of customers. in Sri Lanka, extended financial support infrastructure development in the tourist and advisory services to uplift the Small and sector by being a partner in the construction The Bank will also continue to expand its Medium Enterprises (SMEs) of the economy. of 2,500 tourist rooms across the country. corporate banking business by acquiring deposits and advances and continue In the field of agriculture, the Bank extended Further, BoC intends to facilitate private to accelerate its retail banking business funds to the tune of Rs. 292 million for crop sector hospitals outside Colombo, finance by focusing on cross-border and local production recording a YoY growth of 87% higher education promotion projects for customers. It will actively promote wealth in credit disbursements during the year. the development of knowledge economy, management business and reinforce its The Bank also partnered with the National develop and upgrade investment banking marketing efforts in major cities. BoC will Chamber of Commerce and made available make extensive use of IT to offer improved to promote the capital market, facilitate credit for working capital requirements to a customer service unparalleled to any other distribution of United Nations High wide area of SME businesses. bank. Initial steps have already been taken Commissioner for Refugees (UNHCR) to create a strong IT platform to facilitate resettlement grant to 140,000 families, In tandem with the Government policy 24-hour banking service, 365 days of the expand credit to rural sector with a view to initiatives to encourage the entrepreneurs, year. BoC hopes to shift from a paper base creating self-employment and self sufficiency the rates of interest of all existing and new banking to virtual banking environment with and expanding microfinancing facilities to facilities were reduced with effect from the technological reforms. SME sector to foster GDP growth. October 2009 and on several occasions during the year 2010 to pull down the 2011 BUSINESS FOCUSES market rates. The Bank will continue to safeguard its financial strength and upgrade its core BoC also financed the working capital competences in key business segments. In requirements of ‘Sri Lankan Airlines’ and the Retail Banking segment, the bank will acted as guarantor to the acquisition/ continue to capitalise the on line services lease of an aircraft. To facilitate the tourism network across the country and provide a industry finance was extended to budget wider range of retail products to solidify airline ‘Mihin Lanka’. BoC assisted the CBSL its market leadership through innovative in its initiatives to revive Seylan Bank and technology-based customer service also supported import export trading. In excellence. In line with increase of per capita recognition of the Bank’s contribution to the income and positive change of individual tax nation BoC was awarded ‘Best Sri Lankan saving, attractive consumer loan facilities and Trade Bank - Asia Award for Excellence 2010.’ retail lease facilities will be introduced with fast services methodologies.

44 BANK OF CEYLON ANNUAL REPORT 2010 Loan Portfolio… Rs. 382 billion disbursed… 1 Bank…Bank of Ceylon 1 Source…assisting millions of farmers, fishermen, traders, entrepreneurs, corporates, families…in 1 country…1 Bank…BoC Aviation Hub From a regional perspective, Sri Lanka’s only international airport at Katunayake, through its sustained development over a period of years, has gained recognition and acceptance as one of the better and more well-appointed airports in South Asia. However, given the development goals of Sri Lanka into the future, it would not suffice to cater to propelling economic activities. Supporting and enhancing the tourism industry and as well as the demands of achieving hub status in other economic activities will require increased capacity from the aviation sector. In addition, the aviation sector and our airport infrastructure will have to factor in the further development of domestic air travel as a highly desirable alternative means of travel to the country’s already-congested road and rail systems. In this regard, the country will require more airports, more terminals, more aircraft assets and related infrastructure involving colossal investments. Bank of Ceylon will be more than happy to provide assistance for ventures in this vital sector. Commercial Hub The commercial hub that Sri Lanka aspires to be, goes far beyond a mere financial centre. State-of-the-art commercial districts; modern cosmopolitan city centres; enhanced quality of life for its people, through improved shopping, recreation, health and education facilities are the components envisioned in the commercial hub. It is expected to attract substantial foreign participation in addition to domestic resources to provide cross-border commercial services. In this endeavour, we will face tough competition from already established financial centres particularly in South East Asia. We will need to make sure that the country builds the necessary skills and aptitudes within its people, possesses a robust regulatory and business infrastructure, provides access to international financial markets and enhances the quality of life of its citizens. In this endeavour, Bank of Ceylon will facilitate commercial development initiatives across all sectors. Our role will not just be confined to financing; we will strive to offer an all inclusive financial services proposition entailing debt, equity, corporate advisory and investment management at all stages of the project life cycle. Energy Hub Simply stated, becoming an energy hub would inevitably involve our energy production and resources achieving and even exceeding self-sufficiency levels. We would ideally need to be an energy-surplus country. At present, Sri Lanka is a net importer of energy. Thus, our economic progress is vulnerable to fluctuations in world energy production and consumption as well as to disruptions to supply from energy producing countries due to any number of reasons, both natural and man made. In making the country an energy hub, we need to explore various pools of resource, specialise in the most feasible ones, meet energy requirement and possibly export the excess production. In this regard, Bank of Ceylon will proactively involve itself in the energy sector, financing various power projects in the spheres of hydro, wind, thermal, gas and fuel. Knowledge Hub Going forward, it is knowledge that will drive development and knowledge that will be the key to generating employment, increasing exports and boosting the national economy. The country’s knowledge hub has progressed very well so far. Becoming a fully-fledged knowledge hub requires the country to tap into and harness the vast resources of global knowledge and apply such knowledge in the development of the country. Production of knowledge requires creative people. They must be attracted from all over the world and local experts should be encouraged and facilitated to become creative knowledge workers. Bank of Ceylon will take every endeavour to bridge the ‘digital divide’ in Sri Lanka with focus on upgrading linguistic skills and technical know-how. We will seek opportunities to assist entrepreneurs to build world class knowledge facilities ranging from universities to Business Process Outsourcing (BPO) operations. Maritime Hub Because of its location along the path of major sea routes, Sri Lanka is known as a strategic naval link between West Asia and South-East Asia. Proximity to the major shipping routes to and from the Far East has already made the country an important transshipment hub for the region. To make the maritime hub a reality, the country needs to develop and uplift its sea port assets to global standards. Sri Lanka at the moment is moving in the right direction with a number of port facilities being built/expanded. In our bid to support the maritime hub, Bank of Ceylon has been offering strong financial support to the sector which includes facilities for purchasing of vessels, and boat building activities. CORPORATE GOVERNANCE

Bank of Ceylon pursues a strategy of Banking Act Direction No. 11 of 2007, The Board approves the organisation’s being in line with best practices in the Colombo Stock Exchange exempted the strategic aims, and ensures that the necessary respect of Corporate Governance and it Bank from complying with its requirements financial, technical and human resources are is a vital element in enhancing the Bank’s stipulated in Section 7.10 under the in place for the Bank to achieve its objectives. financial growth, competitiveness and Continuing Listing Requirements on It reviews management performance against implementing its sustainability framework. Corporate Governance. set goals and targets on a continuous basis. The Bank believes that complying with laws, regulations, policies, processes and The governance in the Bank covers many The Board is committed to following very procedures affecting the way that Bank stakeholders, the relationships between high ethical standards. This enables the of Ceylon is controlled and managed is them and the strategic vision of the Bank. Board to set values and standards for the the critical success factor of sound control The stakeholders comprise the single Bank and its staff on par with best practices, environment, which will improve operational shareholder, depositors, customers, the while creating trust and transparency efficiency and enhance the brand image. Board of Directors, management, employees, and ensuring that its obligations to all its international banks, suppliers, regulators, stakeholders are understood and met. A sound system of governance is also investors (in debentures issued by the Bank) fundamental in attracting and maintaining and society at large. All parties mentioned In its search for continuous improvement public confidence in the Bank. have either a direct or an indirect interest in good governance, the Bank embraces in Corporate Governance as it helps in the best practices in Corporate Governance on Pivotal and dominant role the Bank plays in effective performance of the Bank. The its own. It follows an incremental approach the Sri Lanka economy carrying substantial Bank has adopted a Communication Policy in embedding governance into its value influence and leadership over many matters covering all its stakeholders. addition process and is making conscious of policy and practice are the many reasons efforts to continually improve the governance for the importance of good governance and The Board is responsible to stakeholders for framework and the processes beyond the for it to be a guiding framework for the creating and delivering sustainable value applicable rules and regulations. future. through the management of the Bank’s businesses. The Board is the policy-making As one such measure, in the year 2010, Conscious of the many roles of the body for all matters of such importance Bank of Ceylon formulated a Subsidiaries Government in the life of the Bank as as to be of significance to the Bank as a Management Charter, which was introduced owner, customer, regulator and auditor, whole because of their strategic, financial to all the Subsidiaries and Associates of the Nomination and Corporate Governance or reputation implications or consequences. the Bank as a guideline for the Bank’s Committee, which is a subcommittee The governance by the Board also includes representatives on those Boards. This Charter, of the Board primarily focuses on the continuous review of internal structures through the guidelines incorporated in it, implementation of the applicable governance to ensure that there are clear lines of strengthens the Bank of Ceylon’s oversight rules and best practices and continuously accountability for management throughout over its Subsidiaries through the Directors monitors the progress. the Bank. The Board also oversees the risk appointed to them while facilitating the management and remuneration system of Subsidiaries to fall in line with the Bank of The Bank is bound by the Banking Act the Bank. Ceylon’s governance structure. Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks In conformance with the principles of The disclosures below demonstrate the issued by the Central Bank of Sri Lanka. Corporate Governance and the above said Bank’s adherence to disclosure requirements The Bank has taken steps to the best of its Banking Act Direction, the positions of the of the aforesaid Banking Act Direction ability to comply with the said Direction to Chairman and the Chief Executive Officer/ No. 11 of 2007, and subsequent the extent that they are not inconsistent General Manager have been segregated with amendments thereto and the level of with the Bank of Ceylon Ordinance No. 53 a clear division of duties and responsibilities conformance to the Code of Best Practice of 1938 and its amendments, the statute of the latter, incorporated in the Board on Corporate Governance, issued jointly by governing the Bank, as provided for in the Charter adopted. The Securities and Exchange Commission said Direction. of Sri Lanka and The Institute of Chartered The overall governance of the Board is the Accountants of Sri Lanka in 2008. The Bank also follows the Code of Best responsibility of the Chairman, while the Practice on Corporate Governance issued General Manager is primarily responsible for Aforesaid Direction No. 11 of 2007 consists jointly by The Securities and Exchange achievement of Board approved objectives, of Direction 2 and 3. Direction 2 consists Commission of Sri Lanka and The Institute of directions, corporate values and leading of principles explaining the rationale for Chartered Accountants of Sri Lanka, which is the executive team in the day-to-day mandatory rules set out in Direction 3. The not mandatory. Since the Bank is complying management of the Bank and its business. table starting from page 57 gives the degree with the Directions laid down in the aforesaid of compliance with Direction 3. Table starting from page 77 gives the status of compliance with the aforesaid joint code. 56 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE GOVERNANCE

Level of Compliance with Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka.

PRINCIPLES LEVEL OF COMPLIANCE

3 (1) The Responsibilities of the Board

3 (1) (i) The Board shall strengthen the safety and soundness of the Bank by ensuring the implementation of the following:

(a) Approve and oversee the Bank’s strategic objectives and corporate Complied with. values and ensure that these are communicated throughout the Bank; The Bank’s objectives and values are incorporated in the rolling Corporate Plan and they are communicated with the launch of the Corporate Plan and by way of meetings held with provincial teams.

(b) Approve the overall business strategy of the bank, including the Complied with. overall risk policy and risk management procedures and mechanisms with Overall business strategy of the Bank was incorporated measurable goals, for at least the next three years; into the rolling Corporate Plan prepared for the years 2010 to 2012 which was adopted by the Board. Action Plan based on the said Corporate Plan which was also approved by the Board indicated the measurable goals. This is an annual process. In addition, the Bank has adopted a risk policy which includes risk management procedures and mechanisms.

(c) Identify the principal risks and ensure implementation of appropriate Complied with. systems to manage the risks prudently; Identification of the principal risks relating to credit, market, operation and strategic and the availability of the appropriate systems to manage the risks are ensured through the Integrated Risk Management Committee which reports to the Board.

(d) Approve implementation of a policy of communication with all Complied with. stakeholders, including depositors, creditors, shareholders and borrowers; Adopted a new Communication Policy in the year 2010 and reviewed it at the end of the year. The Bank adhered to the policy guidelines.

(e) Review the adequacy and the integrity of the Bank’s internal control Complied with. systems and management information systems; Reviewed the adequacy and the integrity of the Bank’s internal control systems and management information systems through the Audit Committee.

(f) Identify and designate Key Management Personnel, as defined in the Complied with. International Accounting Standards, who are in a position to: Organisation Structure of the Bank identifies the (i) significantly influence policy; designations of the Deputy General Managers and (ii) direct activities; and Assistant General Managers. They are considered as the (iii) exercise control over business activities, operations and risk Key Management Personnel of the Bank. management;

(g) Define the areas of authority and key responsibilities for the Board Complied with. Directors themselves and for the Key Management Personnel; A Board Charter is in place which is reviewed periodically whereby the authority and responsibilities of the Board are clearly identified. The tasks of the Key Management Personnel are identified in their job profiles and job descriptions.

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(h) Ensure that there is appropriate oversight of the affairs of the Bank by Complied with. Key Management Personnel, that is consistent with Board policy; The Board carries out this task by reviewing the progress towards the achievement of the Corporate Plan objectives based on the Action Plan made available to all Key Management Personnel. Key Management Personnel are called to the Board meetings as and when needed to obtain clarifications relating to their respective areas of operation.

(i) Periodically assess the effectiveness of the Board Directors’ own Complied with. governance practices, including: Implementation of governance practices is reviewed periodically by the Nomination and Corporate Governance Committee and reported to the Board through its minutes.

i. The selection, nomination and election of Directors and Bank of Ceylon being wholly-owned by the Government of Key Management Personnel; Sri Lanka, the Directors are appointed by the Minister in charge of the subject of Finance in terms of the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments which is the enactment by which the Bank of Ceylon was established. All Key Management Personnel are appointed by the Board and they are selected on a Board approved scheme and established practices.

ii. The management of conflicts of interests; and Complied with. Any conflicts of interests are reported to the Board.

(iii) The determination of weaknesses and implementation of changes Complied with. where necessary; Any weakness in the governance practices is monitored by the above mentioned Nomination and Corporate Governance Committee in its overall evaluation of the compliance with the applicable governance practices and reported to the Board.

(j) Ensure that the Bank has an appropriate succession plan for Complied with. Key Management Personnel; A succession plan is in place in the Bank for Key Management Personnel.

(k) Meet regularly, on a needs basis, with the Key Management Personnel Complied with. to review policies, establish communication lines and monitor progress The Board meets the Key Management Personnel on a towards corporate objectives; needs basis in reviewing policies etc. This is in addition to the weekly review meeting the Chairman has with the Corporate Management of the Bank. In the year 2010, half yearly review meetings were held in an off-site location with the participation of all the senior staff of the Bank to review the progress towards the corporate objectives and financial targets. This is an ongoing process.

(l) Understand the regulatory environment and ensure that the Bank Complied with. maintains an effective relationship with regulators; On appointment as Directors they are exposed to all the regulatory requirements. Any fresh directions, circulars issued are made available to the Directors.

(m) Exercise due diligence in the hiring and oversight of External Auditors. The Auditor General is the External Auditor of the Bank as provided for in the Constitution of the country.

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3 (1) (ii) The Board shall appoint the Chairman and the Chief Executive Officer and The Board appoints the Chief Executive Officer referred to define and approve the functions and responsibilities of the Chairman and as the General Manager in the Bank of Ceylon with the the Chief Executive Officer in line with Direction 3 (5) of these Directions. prior approval of the Minister in charge of the subject of Finance.

However, the Chairman is appointed by the Minister in charge of the subject of Finance in terms of the Bank of Ceylon Ordinance and he is a Non-Executive Director.

A Board Charter is in place defining the responsibilities of the Chief Executive Officer and the Board. Steps are being taken to improve the Charter by specifically including the Chairman’s responsibilities.

3 (1) (iii) The Board shall meet regularly and Board meetings shall be held at least Complied with. twelve times a year at approximately monthly intervals. Such regular Board Number of meetings held and the attendance of Directors meetings shall normally involve active participation in person of a majority during the year 2010 are given on page 86 of this Annual of Directors entitled to be present. Obtaining the Board’s consent through Report. Passing circular resolutions have been minimal. the circulation of written resolutions/papers shall be avoided as far as During the year under review, only one circular resolution possible. was passed.

3 (1) (iv) The Board shall ensure that arrangements are in place to enable all Complied with. Directors to include matters and proposals in the agenda for regular Board Directors are allowed to include any item to the agenda meetings where such matters and proposals relate to the promotion of where such matters and proposals relate to the promotion business and the management of risks of the Bank. of business and the management of risks of the Bank. This practice would be documented for reference.

3 (1) (v) The Board procedures shall ensure that notice of at least 7 days is given of Complied with. a regular Board meeting to provide all Directors an opportunity to attend. Annual calendar of Board meetings is made and circulated For all other Board meetings, reasonable notice may be given. to the Board of Directors before the beginning of the year. Reasonable notice is given before any special meeting.

3 (1) (vi) The Board procedures shall ensure that a Director, who has not attended This situation has not arisen in the year under review. at least two-thirds of the meetings in the period of 12 months immediately The Secretary to the Board monitors the attendance and preceding or has not attended the immediately preceding three consecutive ensures compliance with this direction. meetings held, shall cease to be a Director. Participation at the Directors’ meetings through an alternate Director shall, however, be acceptable as attendance.

3 (1) (vii) The Board shall appoint a Company Secretary who satisfies the provisions Complied with. of Section 43 of the Banking Act No. 30 of 1988, whose primary An Attorney-at-Law is the Secretary to the Board. She responsibilities shall be to handle the Secretariat Services to the Board and satisfies the provisions of Section 43 of the Banking Act shareholder meetings and to carry out other functions specified in the No. 30 of 1988. statutes and other regulations.

3 (1) (viii) All Directors shall have access to advice and services of the Company Complied with. Secretary with a view to ensuring that Board procedures and all applicable rules and regulations are followed.

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3 (1) (ix) The Company Secretary shall maintain the minutes of Board meetings Complied with. and such minutes shall be open for inspection at any reasonable time, on reasonable notice by any Director.

3 (1) (x) Minutes of Board meetings shall be recorded in sufficient detail so that it Complied with. is possible to gather from the minutes, as to whether the Board acted with Detailed minutes are kept covering the given criteria. due care and prudence in performing its duties. The minutes shall also serve as a reference for regulatory and supervisory authorities to assess the depth of deliberations at the Board meetings. Therefore, the minutes of a Board meeting shall clearly contain or refer to the following:

(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 which may illustrate whether the Board was carrying out its duties with due care and prudence;

(d) the testimonies and confirmations of relevant executives which indicate compliance with the Board’s strategies and policies and adherence to relevant laws and regulations;

(e) the Board’s knowledge and understanding of the risks to which the Bank is exposed and an overview of the risk management measures adopted; and

(f) the decisions and Board resolutions.

3 (1) (xi) There shall be a procedure agreed by the Board to enable Directors, upon Complied with. reasonable request, to seek independent professional advice in appropriate Bank has adopted a Policy for Directors’ Access to circumstances, at the Bank’s expense. The Board shall resolve to provide Independent Professional Advice and the Board resorts to separate independent professional advice to Directors to assist the relevant such advice when deemed necessary. Director or Directors to discharge his/her/their duties to the Bank.

3 (1) (xii) Directors shall avoid conflicts of interests, or the appearance of conflicts of Complied with. interests, in their activities with, and commitments to, other organisations Any interests are disclosed to the Board and the interested or related parties. If a director has a conflict of interest in a matter to be Directors do not participate in the decision making on considered by the Board, which the Board has determined to be material, matters in which they have an interest. Such Director is not the matter should be dealt with at a Board meeting, where Independent counted in the quorum. Additionally, on the appointment Non-Executive Directors [refer to Direction 3 (2) (iv) of these Directions] of a Director a statement informing the companies, etc. who have no material interest in the transaction, are present. Further, in which he/she is a Director/partner/shareholder, etc., a Director shall abstain from voting on any Board resolution in relation is tabled before the Board. This statement is taken on a to which he/she or any of his/her close relation or a concern, in which yearly basis and tabled before the Board. a Director has substantial interest, is interested and he/she shall not be counted in the quorum for the relevant agenda item at the Board meeting.

3 (1) (xiii) The Board shall have a formal schedule of matters specifically reserved to Complied with. it for decision to ensure that the direction and control of the Bank is firmly The Board Charter in place addresses this direction under under its authority. the Powers Reserved to the Board. This section of the Charter addresses the schedule of matters specifically reserved to the Board for decision ensuring that direction and control of the Bank is firmly under its authority.

3 (1) (xiv) The Board shall, if it considers that the Bank is, or is likely to be, unable to The situation has not arisen. meet its obligations or is about to become insolvent or is about to suspend payments due to depositors and other creditors, forthwith inform the Director of Bank Supervision of the situation of the Bank prior to taking any decision or action.

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3 (1) (xv) The Board shall ensure that the Bank is capitalised at levels as required by The Bank is fully compliant with capital adequacy the Monetary Board in terms of the capital adequacy ratio and other requirements of the Monetary Board. The Board ensures prudential grounds. this through the monthly financial information submitted to the Board. Please refer page 240 for the Capital Adequacy Ratios.

3 (1) (xvi) The Board shall publish in the Bank’s Annual Report, an annual corporate Complied with by including this report in the Annual governance report setting out the compliance with Direction 3 of these Report of the Bank. Directions.

3 (1) (xvii) The Board shall adopt a scheme of self-assessment to be undertaken by Complied with. each Director annually, and maintain records of such assessments. The self-assessment of the Board is carried out annually and the evaluation records are maintained. The evaluation exercise is facilitated by the Nomination and Corporate Governance Committee of the Board.

3 (2) The Board’s Composition

3 (2) (i) The number of Directors on the Board shall not be less than 7 and not more According to the Bank of Ceylon Ordinance No. 53 of than 13. 1938, the number of Directors permitted on the Board of Bank of Ceylon is 6 and the present Board consists of 6 Directors.

3 (2) (ii) (a) The total period of service of a Director other than a Director who holds Presently no Director of Bank of Ceylon has been in the position of Chief Executive Officer shall not exceed nine years, and such office for a period exceeding 9 years. Year and month of period in office shall be inclusive of the total period of service served by appointment of the present Directors are given on pages such Director up to 01 January 2008. 14 to 16 of this Annual Report under the profiles of the Directors.

(b) In this context, the following general exemption shall apply: Not applicable A Director who has completed nine years as at 01 January 2008, or who completes such term at any time prior to 31 December 2008, may continue for a further maximum period of 3 years commencing 01 January 2009.

3 (2) (iii) An employee of a bank may be appointed, elected or nominated as a No employee of Bank of Ceylon has been appointed as a Director of the Bank (hereinafter referred to as an ‘Executive Director’) Director of it and therefore there are no Executive Directors provided that the number of Executive Directors shall not exceed one-third on the Board of Bank of Ceylon. of the number of Directors of the Board. In such an event, one of the Executive Directors shall be the Chief Executive Officer of the Bank.

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3 (2) (iv) The Board shall have at least three Independent Non-Executive Directors or Complied with. one- third of the total number of Directors, whichever is higher. This sub- The entire Board of the Bank of Ceylon consists of direction shall be applicable from 01 January 2010 onwards. Non-Executive Directors. Out of them three Directors are identified as Independent Directors based on the criteria A Non-Executive Director shall not be considered independent if he/she - specified in this Direction. They are identified on pages (a) has direct and indirect shareholdings of more than 1% of the Bank; 14 to 16 with the Profiles of the Directors and also under Direction No. 3 (2) (viii) below. (b) currently has or had during the period of two years immediately preceding his/her appointment as Director, any business transactions with the Bank as described in Direction 3 (7) hereof, exceeding 10% of the regulatory capital of the Bank;

(c) has been employed by the Bank during the two year period immediately preceding the appointment as Director;

(d) has a close relation who is a Director or Chief Executive Officer or a member of Key Management Personnel or a material shareholder of the Bank or another bank. For this purpose, a ‘close relation’ shall mean the spouse or a financially dependant child;

(e) represents a specific stakeholder of the Bank;

(f) is an employee or a Director or a material shareholder in a Company or business organisation -

I. which currently has a transaction with the Bank as defined in Direction 3 (7) of these Directions, exceeding 10% of the regulatory capital of the Bank; or II. in which any of the other Directors of the Bank are employed or are Directors or are material shareholders; or III. in which any of the other Directors of the Bank have a transaction as defined in Direction 3 (7) of these Directions, exceeding 10% of regulatory capital in the Bank.

3 (2) (v) In the event an alternate Director is appointed to represent an Independent No Alternate Directors were appointed for Independent Director, the person so appointed shall also meet the criteria that applies to Directors. the Independent Director.

3 (2) (vi) Non-Executive Directors shall be persons with credible track records and/or Complied with. have necessary skills and experience to bring an independent judgment to bear on issues of strategy, performance and resources.

3 (2) (vii) A meeting of the Board shall not be duly constituted, although the number Complied with. of Directors required to constitute the quorum at such meeting is present, All the Board members of Bank of Ceylon are unless more than one-half of the number of Directors present at such Non-Executive. meeting are Non-Executive Directors. This Sub-Direction shall be applicable from 01 January 2010 onwards.

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3 (2) (viii) The Independent Non-Executive Directors shall be expressly identified as Complied with. such in all corporate communications that disclose the names of Directors of The composition of the present Board of Directors is as the Bank. The Bank shall disclose the composition of the Board, by category given below: of Directors, including the names of the Chairman, Executive Directors, Non- z Dr. Gamini Wickramasinghe - Independent Executive Directors and Independent Non-Executive Directors in the annual Non-Executive Director Corporate Governance Report. z Mr. S R Attygalle - Non-Executive Ex officio Director or in his absence Mr. V. Kanagasabapathy (Alternate Director) z Mr. R Sivaraman - Independent Non-Executive Director z Ms. Nalini Abeywardene - Non-Executive Director z Mr. Chandrasiri de Silva - Non-Executive Director z Mr. K L Hewage - Independent Non-Executive Director

Directors during the year are given on page 80 of this Report.

3 (2) (ix) There shall be a formal, considered and transparent procedure for the Not applicable since the appointments are made by the appointment of new Directors to the Board. There shall also be procedures Minister-in-charge of the subject of finance in terms of the in place for the orderly succession of appointments to the Board. enabling enactment.

3 (2) (x) All Directors appointed to fill a casual vacancy shall be subject to election Not applicable. by shareholders at the first general meeting after their appointment.

3 (2) (xi) If a Director resigns or is removed from office, the Board shall: Minister-in-charge of the subject of finance does the (a) announce the Director’s resignation or removal and the reasons for such appointments as well as the removals on behalf of the removal or resignation including but not limited to information relating to Government of Sri Lanka, the sole shareholder of the Bank. the relevant Director’s disagreement with the Bank, if any; and Any resignation is also referred to the same Minister.

(b) issue a statement confirming whether or not there are any matters that need to be brought to the attention of shareholders.

3 (2) (xii) A Director or an employee of a bank shall not be appointed, elected or Neither Directors nor employees of the Bank of Ceylon nominated as a Director of another bank except where such bank is a are Directors of another bank which is not a Subsidiary, Subsidiary Company or an Associate Company of the first mentioned bank. other than for the appointment of the Senior Deputy General Manager (Corporate and Off-shore Banking) to the Pradeshiya Sanwardana Bank under the Pradeshiya Sanwardana Bank Act No. 41 of 2008, which requires that a Deputy General Manager of Bank of Ceylon nominated by the Board of Directors of the Bank of Ceylon shall hold office as an Ex officio Director.

3 (3) Criteria to assess the fitness and propriety of Directors

3 (3) (i) The age of a person who serves as Director shall not exceed 70 years. Complied with. In this context, the following general exemption shall apply: All the present Board members of the Bank of Ceylon are below 70 years of age and accordingly the Bank is in A Director who has reached the age of 70 years as at 01 January 2008 compliance with this rule. or who would reach the age of 70 years prior to 31 December 2008 may continue in office for a further maximum period of 3 years commencing 01 January 2009.

3 (3) (ii) A person shall not hold office as a Director of more than 20 companies/ Complied with. entities/institutions inclusive of subsidiaries or Associate Companies of Directors of the Bank of Ceylon are in compliance the Bank. Of such 20 companies/entities/institutions, not more than 10 with this rule. companies shall be those classified as Specified Business Entities in terms of the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995.

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3 (3) (ii) (a) In this context, the following general exemption shall apply: Not applicable.

If any person holds posts in excess of the limitation as above, such person shall within a maximum period of three years from 01 January 2009 comply with the above mentioned limitation and notify the Monetary Board accordingly.

3 (4) Management functions delegated by the Board

3 (4) (i) The Directors shall carefully study and clearly understand the delegation Complied with. arrangements in place. Bank of Ceylon Ordinance No. 53 of 1938 and its amendments provides for delegation of functions of the Board. The Board may delegate any of its powers other than the power to appoint the General Manager and such delegation is subject to conforming to all regulations prescribed by the Board. The Board has the power to revoke such delegation. Delegation is done by the Board in a way that it does not hinder the ability of the Board.

3 (4) (ii) The Board shall not delegate any matters to a Board Committee, Chief Executive Officer, Executive Directors or Key Management Personnel, to an extent that such delegation would significantly hinder or reduce the ability of the Board as a whole to discharge its functions.

3 (4) (iii) The Board shall review the delegation processes in place on a periodic basis Complied with. to ensure that they remain relevant to the needs of the Bank. Delegated powers are reviewed periodically to ensure that they remain relevant to the needs of the Bank.

3 (5) The Chairman and Chief Executive Officer

3 (5) (i) The Roles of Chairman and Chief Executive Officer shall be separate and Complied with. shall not be performed by the same individual. Positions of the Chairman and the Chief Executive Officer referred to as the General Manager in the Bank of Ceylon are held by two different individuals.

3 (5) (ii) The Chairman shall be a Non-Executive Director and preferably an Complied with. independent Director as well. In the case where the Chairman is not an Chairman of Bank of Ceylon is an Independent Non- Independent Director, the Board shall designate an Independent Director as Executive Director. the Senior Director with suitably documented terms of reference to ensure a greater independent element. The designation of the Senior Director shall be disclosed in the Bank’s Annual Report.

3 (5) (iii) The Board shall disclose in its Corporate Governance Report, which shall Complied with. be an integral part of its Annual Report, the identity of the Chairman and Chairman - Dr. Gamini Wickramasinghe the Chief Executive Officer and the nature of any relationship [including Chief Executive Officer (referred to as General Manager in financial, business, family or other material/relevant relationship(s)], if any, Bank of Ceylon) - Mr. B A C Fernando. between the Chairman and the Chief Executive Officer and the relationships Declarations have been obtained from the Chairman and among members of the Board. General Manager stating that they have no relationship as described in this Direction. Directors also have submitted declarations stating that they also have no such relationships amongst them.

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3 (5) (iv) The Chairman shall - (a) provide leadership to the Board; (b) ensure that the Complied with. Board works effectively and discharges its responsibilities; and (c) ensure The Chairman provides leadership to the Board and that all key and appropriate issues are discussed by the Board in a timely ensures that the Board functions effectively in discharging manner. its responsibilities. The Board in a timely manner deliberates all key issues.

3 (5) (v) The Chairman shall be primarily responsible for drawing up and Complied with. approving the agenda for each Board meeting, taking into account where The Secretary to the Board draws up the agenda under appropriate, any matters proposed by the other Directors for inclusion in the authority delegated by the Chairman. The agenda is the agenda. The Chairman may delegate the drawing up of the agenda to drawn up based on the memoranda submitted through the Company Secretary. the General Manager and any other relevant items wished to be included by any Board member.

3 (5) (vi) The Chairman shall ensure that all Directors are properly briefed on issues Complied with. arising at Board meetings and also ensure that Directors receive adequate Adequate information is provided in a timely manner information in a timely manner. through the Board memoranda submitted to the Board. Generally, Board memoranda are circulated 6 to 7 days before the Board meeting. Any late memoranda are also submitted as soon as possible prior to the date of the Board meeting. However, in the event of any urgent issues in addition to the memoranda, detailed explanations are provided to the Board on the contents of the memoranda giving them adequate information to take decisions. Chairman ensures the implementation of this process.

3 (5) (vii) The Chairman shall encourage all Directors to make a full and active Complied with. contribution to the Board’s affairs and take the lead to ensure that the Board acts in the best interests of the Bank.

3 (5) (viii) The Chairman shall facilitate the effective contribution of Non-Executive Complied with. Directors in particular and ensure constructive relations between Executive The full Board consists of Non-Executive Directors. and Non-Executive Directors.

3 (5) (ix) The Chairman shall not engage in activities involving direct supervision of Complied with. Key Management Personnel or any other executive duties whatsoever.

3 (5) (x) The Chairman shall ensure that appropriate steps are taken to maintain Effective communication is maintained with the effective communication with shareholders and that the views of Government of Sri Lanka who is the sole shareholder. shareholders are communicated to the Board. A representative of the Ministry-in-charge of the subject of finance is always appointed as the Ex officio Director and views of the shareholder are thus communicated.

3 (5) (xi) Chief Executive Officer shall function as the apex executive-in-charge of the Complied with. day-to-day management of the Bank’s operations and business.

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3 (6) Board appointed Committees

3 (6) (i) Each bank shall have at least four Board Committees as set out in Directions Complied with. 3 (6) (ii), 3 (6) (iii), 3 (6) (iv) and 3 (6) (v) of these Directions. Each Four subcommittees of the Board (viz. Audit, Human committee shall report directly to the Board. All committees shall appoint Resources & Remuneration, Nomination & Corporate a Secretary to arrange the meetings and maintain minutes, records, etc., Governance and Integrated Risk Management) have under the supervision of the Chairman of the Committee. The Board shall been established as required under this Direction which present a report of the performance on each committee, on their duties are reporting directly to the Board by submitting the and roles at the Annual General Meeting. minutes together with the recommendations. Secretary to the Board has been appointed as the Secretary to all the Committees and maintains minutes, etc., under the supervision of the Chairmen of the Committees. Reports on the performance of each committee are included in this Annual Report on pages 81 to 86.

3 (6) (ii) The following rules shall apply in relation to the Audit Committee:

(a) The Chairman of the Committee shall be an Independent Non-Executive Alternate Director to the Ex officio Director, who is a Director who possesses qualifications and experience in accountancy Non-Executive Director and who possesses qualifications and/or audit. and experience in accountancy and audit, functions as the Chairman of Audit Committee with the permission of the Central Bank of Sri Lanka.

(b) All members of the committee shall be Non-Executive Directors. Complied with.

(c) The Committee shall make recommendations on matters in connection with:

i. The appointment of the External Auditor for audit services to be provided Not applicable since the Bank’s External Auditor is the in compliance with the relevant statutes; Auditor General in terms of the Constitution of Sri Lanka.

ii. The implementation of the Central Bank guidelines issued to auditors Complied with. from time to time;

iii. The application of the relevant accounting standards; and The significant accounting policies that have been developed based on the Sri Lanka Accounting Standards are reviewed by the Committee with the Annual Financial Statements and the Committee makes the necessary recommendations on the application of such policies.

iv. The service period, audit fee and any resignation or dismissal of the Not applicable in view of Auditor General being the Auditor; provided that the engagement of the audit partner shall not External Auditor of the Bank. 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) The Committee shall review and monitor the external auditor’s Independence of the Auditor General is guaranteed under independence and objectivity and the effectiveness of the audit processes the Constitution of Sri Lanka. in accordance with applicable standards and best practices.

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(e) The Committee shall develop and implement a policy on the engagement of an External Auditor to provide non-audit services that are permitted under the relevant statutes, regulations, requirements and guidelines. In doing so, the committee shall ensure that the provision by an External Auditor of non-audit services does not impair the External Auditor’s independence or objectivity. When assessing the External Auditor’s independence or objectivity in relation to the provision of non-audit services, the Committee shall consider -

I. whether the skills and experience of the audit firm make it a suitable Not applicable since the Auditor General is the External provider of the non-audit services; Auditor of the Bank.

II. whether there are safeguards in place to ensure that there is no threat to the objectivity and/or independence in the conduct of the audit resulting from the provision of such services by the External Auditor; and

III. Whether the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the audit firm, pose any threat to the objectivity and/or independence of the External Auditor.

(f) The Committee shall, before the audit commences, discuss and finalise with the External Auditors the nature and scope of the audit, including:

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; The Auditor General is the External Auditor of the Bank.

ii. The preparation of Financial Statements for external purposes in accordance with relevant accounting principles and reporting obligations; and

iii. The co-ordination between firms where more than one audit firm is involved.

(g) The Committee shall review the financial information of the Bank, in Complied with. order to monitor the integrity of the Financial Statements of the Bank, its This is a continuing process carried out in reviewing Annual Report, accounts and quarterly reports prepared for disclosure, monthly, quarterly and annual financials. and the significant financial reporting judgments contained therein. In reviewing the Bank’s Annual Report and accounts and quarterly reports before submission to the Board, the Committee shall focus particularly on:

i. Major judgmental areas; ii. Any changes in accounting policies and practices; iii. Significant adjustments arising from the audit; iv. The going concern assumption; and v. The Compliance with relevant Accounting Standards and other legal requirements.

(h) The Committee shall discuss issues, problems and reservations arising The Committee discusses issues, problems and reservations from the interim and final audits, and any matters the Auditor may wish arising from the interim and final audits. The Auditor to discuss including those matters that may need to be discussed in the General is the External Auditor of the Bank and his absence of key management personnel, if necessary. representative is present at all Audit Committee Meetings and no request was made in the year under review to discuss any matter in the absence of the management.

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(i) The Committee shall review the External Auditor’s management letter Complied with. and the management’s response thereto. Follow up action is taken accordingly.

(j) The Committee shall take the following steps with regard to the internal audit function of the Bank:

I. Review the adequacy of the scope, functions and resources of the Complied with. internal audit department, and satisfy itself that the department has the necessary authority to carry out its work;

II. Review the internal audit programme and results of the internal audit Complied with. process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit department;

III. Review any appraisal or assessment of the performance of the head and Complied with. senior staff members of the internal audit department; Appraisal of the Chief Internal Auditor is carried out by the Audit Committee. Performance evaluation of senior staff is carried out according to the Board approved evaluation process by the Chief Internal Auditor and is tabled before the Audit Committee.

IV. Recommend any appointment or termination of the head, senior staff Complied with. members and outsourced service providers to the internal audit function; Appointment/termination of Chief Internal Auditor is recommended by the Audit Committee to the Board. Other senior positions are filled as per the Board approved promotion scheme of the Bank. Bank did not outsource any internal audit function in year 2010.

V. Ensure that the Committee is appraised of resignations of senior Complied with. staff members of the internal audit department including the chief internal auditor and any outsourced service providers, and to provide an opportunity to the resigning senior staff members and outsourced service providers to submit reasons for resigning;

VI. Ensure that the internal audit function is independent of the activities Complied with. it audits and that it is performed with impartiality, proficiency and due professional care;

(k) The Committee shall consider the major findings of internal Complied with. investigations and management’s responses thereto.

(l) The Chief Finance Officer, the Chief Internal Auditor and a representative Complied with. of the External Auditors may normally attend meetings. Other Board Chief Financial Officer, Chief Internal Auditor, General Members and the Chief Executive Officer may also attend meetings Manager and the representatives of the Auditor General upon the invitation of the Committee. However, at least twice a year, the participate at all Committee meetings. Committee shall meet with the External Auditors without the Executive There are no Executive Directors on the Board of Directors being present. Bank of Ceylon.

(m) The Committee shall have - Complied with. 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.

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(n) The Committee shall meet regularly, with due notice of issues to be Complied with. discussed and shall record its conclusions in discharging its duties and The Committee meets regularly and gives due notice of responsibilities. the issues to be discussed. The minutes are made and maintained of these Committee meetings.

(o) The Board shall disclose in an informative way, Complied with. i. Details of the activities of the Audit Committee; Activities of the Committee are reported in Audit ii. The number of Audit Committee Meetings held in the year; and Committee Report on pages 81 and 82. iii. Details of attendance of each individual Director at such meetings. The Committee met seven times during the year 2010 and details of attendance are given on page 86.

(p) The Secretary of the Committee (who may be the Company Secretary Complied with. or the head of the internal audit function) shall record and keep detailed minutes of the Committee Meetings.

(q) The Committee shall review arrangements by which employees of Complied with. the Bank may, in confidence, raise concerns about possible improprieties Bank has adopted a Whistle-Blower Policy and significant in financial reporting, internal control or other matters. Accordingly, the findings are reported to the Committee. Committee shall ensure that proper arrangements are in place for the fair and independent investigation of such matters and for appropriate follow- up action and to act as the key representative body for overseeing the Bank’s relations with the external auditor.

3 (6) (iii) The following rules shall apply in relation to the Human Resources and Remuneration Committee:

(a) The Committee shall determine the remuneration policy (salaries, Directors’ remuneration is based on the circulars issued allowances and other financial payments) relating to Directors, Chief by the Ministry in charge of the subject of finance. Executive Officer (CEO) and Key Management Personnel of the Bank. A Remuneration Policy is in place encompassing the applicable laws and regulations. Remunerations of Bank Officials are reviewed once in three years with the approval of the Minster in charge of the subject of finance. The Committee makes recommendations on the remuneration of CEO (General Manager in the case of Bank of Ceylon) and Key Management Personnel.

(b) The Committee shall set goals and targets for the Directors, CEO and No targets for the Directors are set since all of them are the Key Management Personnel. Non-Executive Directors. Goals and targets for the Key Management Personnel are documented and detailed in (c) The Committee shall evaluate the performance of the CEO and Key the Action Plan prepared based on the Corporate Plan of Management Personnel against the set targets and goals periodically and the Bank. CEO is responsible for the implementation of the determine the basis for revising remuneration, benefits and other payments Corporate Plan through the Key Management Personnel. of performance-based incentives. Performance on same is reviewed by the full Board on a periodic basis. A separate evaluation of the performance of the CEO is also carried out on an annual basis by the full Board. Please refer the Human Resources and Remuneration Committee Report on pages 82 and 83 for further details.

(d) The CEO shall be present at all meetings of the Committee, except Complied with. when matters relating to the CEO are being discussed. Matters relating to CEO were not discussed during the year.

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3 (6) (iv) The following rules shall apply in relation to the Nomination Committee: Bank of Ceylon has established a Nomination and Corporate Governance Committee. In addition to the duties of the Nomination Committee given under this Direction, certain other duties pertaining to upholding the applicable Corporate Governance principles are included under the Terms of Reference of this Committee.

(a) The Committee shall implement a procedure to select/appoint new Directors are appointed by the Minister-in-charge of the Directors, CEO and Key Management Personnel. subject of finance and hence the Committee plays no role in that regard. There is a Board approved procedure/ scheme for the selection/appointment of the staff of Bank of Ceylon. Changes to such approved schemes are recommended by this Committee. Please refer the Report of the Committee given on pages 83 and 84 of this Annual Report in this regard.

(b) The Committee shall consider and recommend (or not recommend) the Not applicable in view of the reasons given above. 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) The Committee shall set the criteria such as qualifications, experience The General Manager is appointed based on the Bank’s and key attributes required for eligibility to be considered for appointment accepted procedure with the approval of the Board of or promotion to the post of CEO and the Key Management Positions. Directors and the approval of the Minister in charge of the subject of finance as specified in the Bank of Ceylon Ordinance No. 53 of 1938. Board approved promotion schemes stipulate the attributes required to be eligible to be selected or promoted to the Key Management Positions.

(d) The Committee shall ensure that Directors, CEO and Key Management The Bank has complied with the request made by the Personnel are fit and proper persons to hold office as specified in the Central Bank of Sri Lanka to submit declarations and criteria given in Direction 3(3) and as set out in the Statutes. affidavits complying with this requirement.

(e) The Committee shall consider and recommend from time to time, the Directors are appointed by the Minister in charge of requirements of additional/new expertise and the succession arrangements the subject of finance and as such this Committee plays for retiring Directors and Key Management Personnel. no role in that regard. Please refer the Report of the Committee given on pages 83 and 84 of this Annual Report for other information.

(f) The Committee shall be chaired by an Independent Director and Complied with. preferably be constituted with a majority of Independent Directors. The Please refer the Report of the Committee given on pages CEO may be present at meetings by invitation. 83 and 84 of this Annual Report for details in this regard.

3 (6) (v) The following rules shall apply in relation to the Integrated Risk Management Committee:

(a) The Committee shall consist of at least three Non-Executive Directors, Complied with. Chief Executive Officer and Key Management Personnel supervising broad This Committee being a Board’s subcommittee, consists of risk categories, i.e., credit, market, liquidity, operational and strategic risks. three Non-Executive Directors. The Chief Executive Officer The Committee shall work with Key Management Personnel very closely and the Chief Risk Officer participates mandatorily at the and make decisions on behalf of the Board within the framework of the meetings to assist the Committee. authority and responsibility assigned to the Committee.

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(b) The Committee shall assess all risks, i.e., credit, market, liquidity, Independent Integrated Risk management Division of the operational and strategic risks to the Bank on a monthly basis through Bank assesses the risks of the Bank. They are reported to appropriate risk indicators and management information. In the case of the Committee on a quarterly basis. Subsidiary Companies and Associate Companies, risk management shall be In the case of subsidiaries and associates, the Bank done, both on a bank basis and group basis. conducts workshops on risk management and impact studies are done as and when the need arises. In addition, the Bank has introduced a Subsidiaries Management Charter to be implemented by all the nominee Directors of the Bank on the Boards of its Subsidiaries (as well as Associates to the extent possible) which indicates among other things how risks should be managed in the Subsidiaries.

(c) The Committee shall review the adequacy and effectiveness of all The Chief Risk Officer who reports to the Integrated management level committees such as the credit committee and the Risk Management Committee is a member of the asset-liability committee to address specific risks and to manage those risks committees such as Credit Committee and the Asset and within quantitative and qualitative risk limits as specified by the committee. Liability Committee etc., and reviews their adequacy and effectiveness and reports to the Committee.

(d) The Committee shall take prompt corrective action to mitigate the The Committee recommends such corrective action effects of specific risks in the case such risks are at levels beyond the to the Board. prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements.

(e) The Committee shall meet at least quarterly to assess all aspects of risk Number of Committee meetings held is disclosed on management including updated business continuity plans. page 86 of this Annual Report. In view of the change of Directors during the year, only 3 meetings were held.

(f) The Committee shall take appropriate actions against the officers Complied with, when such situations arise. Appropriate responsible for failure to identify specific risks and take prompt corrective action would be taken by following the Board approved actions as recommended by the Committee, and/or as directed by the Disciplinary Code of the Bank. Director of Bank Supervision.

(g) The Committee shall submit a risk assessment report within a week of Minutes of the Committee meetings are submitted to the each meeting to the Board seeking the Board’s views, concurrence and/or next immediate Board meeting. Risk assessment reports specific directions. are also now being submitted to the Board in addition to the minutes.

(h) The Committee shall establish a compliance function to assess the Bank’s Complied with. compliance with laws, regulations, regulatory guidelines, internal controls Please see details under Risk and Compliance Report on and approved policies on all areas of business operations. A dedicated page 87 Monthly compliance reports are submitted to the compliance officer selected from Key Management Personnel shall carry out Board directly. the compliance function and report to the Committee periodically.

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3 (7) Related Party Transactions

3 (7) (i) The Board shall take the necessary steps to avoid any conflicts of interest Complied with. that may arise from any transaction of the Bank with any person, and The Bank is considering an automated process to particularly with the following categories of persons who shall be strengthen the procedure in existence. considered as ‘related parties’ for the purposes of this Direction: Transactions carried out with related parties in the normal (a) Any of the Bank’s Subsidiary Companies; course of business are disclosed in Note 47 on ‘Related (b) Any of the Bank’s Associate Companies; Party Disclosures’ on page 226 of this Annual Report. (c) Any of the Directors of the Bank; (d) Any of the Bank’s Key Management Personnel; (e) A close relation of any of the Bank’s Directors or Key Management Personnel; (f) A shareholder owning a material interest in the Bank; (g) A concern in which any of the Bank’s Directors or a close relation of any of the Bank’s Directors or any of its material shareholders has a substantial interest.

3 (7) (ii) The type of transactions with related parties that shall be covered by this Direction shall include the following:

(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 Bank 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.

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3 (7) (iii) The Board shall ensure that the Bank does not engage in transactions with Complied with. related parties as defined in Direction 3 (7) (i) above, in a manner that The Board takes necessary steps to avoid any conflicts of would grant such parties ‘more favourable treatment’ than that accorded interest that may arise from any transaction of the Bank to other constituents of the Bank carrying on the same business. In this with its related parties. Procedure in practice in this regard context, ‘more favourable treatment’ shall mean and include treatment, would be documented. including the:

(a) Granting of ‘total net accommodation’ to related parties, exceeding a prudent percentage of the Bank’s regulatory capital, as determined by the Board. For purposes of this Sub-Direction:

I. ‘Accommodation’ shall mean accommodation as defined in the Banking Act Directions, No. 07 of 2007 on Maximum Amount of Accommodation.

II. The ‘total net accommodation’ shall be computed by deducting from the total accommodation, the cash collateral and investments made by such related parties in the Bank’s share capital and debt instruments with a maturity of 5 years or more.

(b) Charging of a lower rate of interest than the Bank’s best lending rate or paying more than the Bank’s deposit rate for a comparable transaction with an unrelated comparable counterparty;

(c) Providing of preferential treatment, such as favourable terms, covering trade losses and/or waiving fees/commissions, that extend beyond the terms granted in the normal course of business undertaken with unrelated parties;

(d) Providing services to or receiving services from a related-party without an evaluation procedure;

(e) Maintaining reporting lines and information flows that may lead to sharing potentially proprietary, confidential or otherwise sensitive information with related parties, except as required for the performance of legitimate duties and functions.

3 (7) (iv) A bank shall not grant any accommodation to any of its Directors or to a Complied with. close relation of such Director unless such accommodation is sanctioned at a meeting of its Board of Directors, with not less than two-thirds of the number of Directors other than the Director concerned, voting in favour of such accommodation. This accommodation shall be secured by such security as may from time to time be determined by the Monetary Board as well.

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3 (7) (v) (a) Where any accommodation has been granted by a bank to a person or a close relation of a person or to any concern in which the person has a substantial interest, and such person is subsequently appointed as a Director of the Bank, steps shall be taken by the Bank to obtain the necessary security as may be approved for that purpose by the Monetary Board, within one year from the date of appointment of the person as a Director.

(b) Where such security is not provided by the period as provided in Direction 3 (7) (v) (a) above, the Bank shall take steps to recover any amount due on account of any accommodation, together with interest, if any, within the period specified at the time of the grant of accommodation No such situation has arisen during the year or at the expiry of a period of eighteen months from the date of under review. appointment of such Director, whichever is earlier.

(c) Any Director who fails to comply with the above Sub-Directions shall be deemed to have vacated the office of Director and the Bank shall disclose such fact to the public.

(d) This Sub-Direction, however, shall not apply to a Director who at the time of the grant of the accommodation was an employee of the Bank and the accommodation was granted under a scheme applicable to all employees of such bank.

3 (7) (vi) A bank shall not grant any accommodation or ‘more favourable treatment’ Complied with. relating to the waiver of fees and/or commissions to any employee or a No accommodation has been granted to any employee of close relation of such employee or to any concern in which the employee or the Bank on more favourable terms unless under general close relation has a substantial interest other than on the basis of a scheme staff loan schemes applicable to all employees of the Bank. applicable to the employees of such bank or when secured by security as may Procedure in practice in this regard would be documented. be approved by the Monetary Board in respect of accommodation granted as per Direction 3 (7) (v) above.

3 (7) (vii) No accommodation granted by a bank under Direction 3 (7) (v) and 3 (7) (vi) Complied with. above, nor any part of such accommodation, nor any interest due thereon No such event took place during the year under review. shall be remitted without the prior approval of the Monetary Board and any remission without such approval shall be void and of no effect.

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3 (8) Disclosures

3 (8) (i) The Board shall ensure that - Complied with.

(a) 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; and that,

(b) Such statements are published in the newspapers in an abridged form, in Sinhala, Tamil and English.

3 (8) (ii) The Board shall ensure that the following minimum disclosures are made in the Annual Report: (a) A statement to the effect that the annual Audited Financial Statements Complied with. have been prepared in line with applicable Accounting Standards and regulatory requirements, inclusive of specific disclosures.

(b) A report by the Board on the Bank’s internal control mechanism that Complied with. confirms that the financial reporting system has been designed to provide Refer page 147. 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.

(c) The External Auditor’s certification on the effectiveness of the internal Complied with. control mechanism referred to in Direction 3 (8) (ii) (b) above, in respect of Refer page 146. any statements prepared or published after 31 December 2008.

(d) Details of Directors, including names, fitness and propriety, transactions Complied with. with the Bank and the total of fees/remuneration paid by the Bank. Refer pages 14 to 16 for details of Directors, pages 226 and 227 on Related Party Disclosures for transactions and fees and page 172 for specific amount on Directors’ fees.

(e) Total net accommodation as defined in 3 (7) (iii) is granted to each Complied with. category of related parties. The net accommodation granted to each Please refer Note 47 on pages 226 to 230. category of related parties shall also be disclosed as a percentage of the Bank’s regulatory capital.

(f) The aggregate values of remuneration paid by the Bank to its Key Complied with. Management Personnel and the aggregate values of the transactions of the Please refer pages 226 and 227 under ‘Related Party Bank with its Key Management Personnel, set out by the Broad categories Disclosures’. such as remuneration paid, accommodation granted and deposits or investments made in the Bank.

(g) The External Auditor’s certification of the compliance with these The Auditor General has given a report on the status Directions in the annual Corporate Governance reports published after of compliance/factual findings on the compliance 01 January 2010. requirements under Direction No. 11 of 2007, based on the auditing framework issued by ICASL for this engagement. The recommendations made by the Auditor General will be dealt within 2011. Also refer page 79 in this regard.

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(h) A report setting out details of the compliance with prudential Complied with. requirements, regulations, laws and internal controls and measures taken Please refer page 93 of this Annual Report under the to rectify any material non-compliances. report on Risk Management and Compliance.

(i) A statement of the regulatory and supervisory concerns on lapses in No such situation has arisen. the Bank’s risk management, or non-compliance with these Directions that have been pointed out by the Director of Bank Supervision, if so directed by the Monetary Board to be disclosed to the public, together with the measures taken by the Bank to address such concerns.

3 (9) Transitional and Other General Provisions

3 (9) (i) Compliance with this Direction shall commence from 01 January 2008 Complied with. onwards and all licensed commercial banks shall fully comply with the provisions of this Direction by or before 01 January 2009 except where extended compliance dates have been specifically provided for in this Direction.

3 (9) (ii) In respect of the banks that have been incorporated by specific statutes in Bank of Ceylon has taken all possible measures to comply Sri Lanka, the boards as specified in such statutes shall continue to with all applicable provisions of this Direction that are not function in terms of the provisions of the respective statutes, provided inconsistent with the provisions of the statute governing it, they take steps to comply with all provisions of this Direction that are not viz. Bank of Ceylon Ordinance No. 53 of 1938. inconsistent with the provisions of the respective statutes. Any non-compliances and where Bank of Ceylon has continued to function in terms of the provisions of the statutes applicable to it have been specifically mentioned above against the relevant directions.

3 (9) (iii) This Direction shall apply to the branches of the foreign banks operating in Not applicable. Sri Lanka to the extent that it is not inconsistent with the regulations and laws applicable in such bank’s country of incorporation. The branch of a foreign bank shall also publish its Parent Bank’s annual Corporate Governance report together with its Annual Report and Accounts of the branch operations in Sri Lanka.

3 (9) (iv) In the event of a conflict between any of the provisions of this Direction Not applicable. and the Articles of Association (or Internal Rules) pertaining to any bank, the provisions of this Direction shall prevail. However, if the Articles of Association of an individual bank set a more stringent standard than that specified in this Direction, such provisions in the Articles of Association may be followed.

3 (9) (v) If for any reason such as ill health or any incapacity as provided in the Not applicable. Banking Act, the Monetary Board considers that exemptions referred to in Directions 3 (2) (ii) B, 3 (3) (i) A and 3 (3) (ii) A should not be availed of, such ground may be notified to the person by the Monetary Board, and after a hearing, the Monetary Board may limit the period of exemption.

76 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE GOVERNANCE

Level of Compliance with 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.

SUBJECT DISCLOSURE RESPONSE

Chairman and CEO If Chairman and CEO is one and the same person, disclose The posts of Chairman and CEO are held the Name of the Chairman/CEO and Senior Independent by two individuals. Director appointed and justification of the decision to combine the positions.

Board Balance z Should identify the Independent Non-Executive Directors. Independent Directors are identified as per the Banking Act Direction No. 11 of 2007 z If a Non-Executive Director is identified as ‘Independent’, on Corporate Governance for Licensed notwithstanding the existence of any of the following Commercial Banks in Sri Lanka issued by factors, the reason for such determination should be the Central Bank of Sri Lanka. disclosed. Appointment of New When new Directors are appointed, the following details The sole shareholder, the Government of Directors should be disclosed: Sri Lanka appoints the Directors.

z A brief resume of each such Director;

z The nature of his expertise in relevant functional areas;

z The names of companies in which the Director holds directorships or memberships in board committees; and

z whether such Director can be considered independent. Nomination Committee The Chairman and members of the Nomination Committee Complied with. should be identified. Please refer page 83 of this Annual Report for details of the Nomination & Corporate Governance Committee. Appraisal of Board Should disclose how performance evaluations have been Formats with identified criteria were used performance conducted. for this purpose, which were completed by each Director. A final report was prepared and tabled before the Board through the Nomination and Corporate Governance Committee comparing with the previous year’s performance. Board Related Disclosures The following details pertaining to each Director should be Complied with. Please refer following disclosed: pages of this Annual Report -

z Name, qualification and brief profile; Pages 14 to 16.

z The nature of his/her expertise in relevant functional areas; Pages 14 to 16.

z Immediate family and/or material business relationships Directors have confirmed that they have with other Directors of the Company; no such relationships.

z Names of other listed companies in Sri Lanka in which the Pages 14 to 16. Director concerned serves as a Director;

z Names of companies in which the Director concerned Pages 14 to 16. serves as a Director and/or the fact that he/she holds other Directorships in the Group Companies;

z Number/percentage of Board meetings of the Company Page 86. attended during the year;

z Names of the committees in which the Director serves as Pages 86. the Chairman or a member; and

z Number/percentage of committee meetings attended Pages 86. during the year.

BANK OF CEYLON ANNUAL REPORT 2010 77 CORPORATE GOVERNANCE

SUBJECT DISCLOSURE RESPONSE

Disclosure of Remuneration z A statement of Remuneration Policy and details of Please refer page 172 for Remuneration of remuneration of the Board as a whole. the Board for the year 2010. Please refer page 82 for information on Remuneration Policy. Major Transactions All major transactions entered into by the Company should Complied with. be disclosed.

Audit Committee zNames of the members of the Audit Committee should Names of members of the Audit be disclosed. Committee are given in the Audit Committee Report on page 81.

zBasis for determining the independence of auditors. The External Auditor of the Bank is the Auditor General as enshrined in the Constitution of Sri Lanka. The independence of the Auditor General is ensured by the Constitution.

Code of Business Conduct zShould disclose whether the Company has a Code of Bank has a Code of Ethics for Directors. and Ethics Business Conduct & Ethics for Directors and members of There is a separate Code of Ethics for the senior management team. employees.

zShould also disclose an affirmative declaration that they Compliance certificates are obtained have abided by such Code. annually.

zThe Chairman must certify that he/she is not aware of any Complied with. violation of any of the provisions of this Code. Going Concern Should report that the Company is a going concern, with Complied with. supporting assumptions and qualifications as necessary . Members of Remuneration The names of members of the Remuneration Committee Complied with. Committee should be disclosed in the Remuneration Committee Report Names of the members of Remuneration Committee are given in the Human Resources and Remuneration Committee Report on page 82 of this Annual Report Directors’ Report Should contain the following declarations made by the Complied with. Directors: Bank has only one shareholder, the

zThe Company has not engaged in any activities, which Government of Sri Lanka. contravenes laws and regulations;

zThe Directors have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested;

zThe Company has made all endeavours to ensure the equitable treatment of shareholders;

zThe business is a going concern with supporting assumptions or qualifications as necessary; and

zThey have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and successful adherence herewith.

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SUBJECT DISCLOSURE RESPONSE

Financial Statements zThe Board of Directors should include a Statement of Complied with. Responsibility for the preparation and presentation of Please refer pages 145 and 149. Financial Statements.

zAuditors should also have a statement about their reporting responsibility. Management Report Should include a ‘Management Discussion and Analysis Complied with. Report’ discussing at least the following issues: Please refer pages 30 to 44.

zIndustry structure and developments;

zOpportunities and threats;

zRisks and concerns;

zInternal control systems and their adequacy;

zsocial and environmental protection activities carried out by the Company;

zfinancial performance;

zmaterial developments in human resources/industrial relations; and

zprospects for the future.

Corporate Governance Should disclose the manner and extent to which the Complied with by this exercise Report Company has complied with the principles and provisions of the Code. Audit Committee Report Should set out the work carried out by the Committee. Complied with. Please refer pages 81 and 82.

REPORT FROM THE AUDITOR GENERAL ON THE COMPLIANCE REQUIREMENT OF THE CORPORATE GOVERNANCE DIRECTION NO. 11 OF 2007 The Auditor General has performed procedures in accordance with the principles set out in Sri Lanka Standards on Related Services 4400 applicable to agreed-upon procedures engagements issued by The Institute of Chartered Accountants of Sri Lanka, to meet the compliance requirement of the Direction No. 11 of 2007 on Corporate Governance issued by the Central Bank of Sri Lanka. His findings given in his report, were not materially different to the matters disclosed above and did not identify any significant inconsistencies to those reported above by the Board.

Ms. Janaki Senanayake Siriwardane Dr. Gamini Wickramasinghe Secretary, Bank of Ceylon/ Chairman Secretary to the Board

Colombo 24 March 2011

BANK OF CEYLON ANNUAL REPORT 2010 79 BOARD & BOARD SUBCOMMITTEES

From January to May 2010 Board of Directors From May/June 2010

Dr. Gamini Wickramasinghe Dr. Gamini Wickramasinghe (Chairman) (Chairman) Independent Non-Executive Director Independent Non-Executive Director Dr. R H S Samaratunga Mr. S R Attygalle Non-Executive Ex officio Director Non-Executive Ex officio Director Mr. Raju Sivaraman Mr. Raju Sivaraman Independent Non-Executive Director Independent Non-Executive Director Mr. G K A Chaminda K Kularatne Ms. Nalini Abeywardene Non-Executive Director Non-Executive Director Mr. G Gallage Mr. Chandrasiri de Silva Independent Non-Executive Director Non-Executive Director Dr. B Kaluarachchi Mr. K L Hewage Non-Executive Director Independent Non-Executive Director Mr. V Kanagasabapathy Mr. V Kanagasabapathy Non-Executive Alternate Director to Non-Executive Alternate Director to Dr. R H S Samaratunga Mr. S R Attygalle

Audit Committee Human Resources & Nomination & Corporate Integrated Risk Remuneration Committee Governance Committee Management Committee

Chairman Chairman Chairman Chairman Mr. V Kanagasabapathy Dr. B Kaluarchchi Mr. R Sivaraman Mr. V Kanagasabapathy (Altrenate Director to (Resigned w.e.f. May 2010) As Altrenate Director to Dr. R H S Samaratunga and then Members Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Chairperson Dr. R H S Samaratunga or his to Mr. S R Attygalle, both Ex officio Directors) Ms Nalini Abeywardene alternate Mr. V Kanagasabapathy Ex officio Directors (Appointed w.e.f. June 2010) (Resigned w.e.f. May 2010) Members Members Mr. G K A Chaminda K Kularatne Mr. G K A Chaminda K Kularatne Members (Resigned w.e.f. May 2010) Mr. R Sivaraman (Resigned w.e.f. May 2010 ) Mr. G K A Chaminda K Kularatne Mr. S R Attygalle Mr. R Sivaraman Mr. R Sivaraman (Resigned w.e.f. May 2010) Mr. G K A Chaminda K Kularatne (Appointed w.e.f. June 2010) or his Mr. G Gallage (Resigned w.e.f. May 2010) alternate Mr. V Kanagasabapathy Mr. G Gallage (Resigned w.e.f. May 2010 ) (Resigned w.e.f. May 2010 ) Dr. B Kaluarchchi Mr. G Gallage Mr. K L Hewage (Resigned w.e.f. May 2010) (Appointed w.e.f. June 2010) Dr. B Kaluarchchi (Resigned w.e.f. May 2010 ) (Resigned w.e.f. May 2010 ) Mr. Chandrasiri de Silva Mr. K L Hewage Mr. K L Hewage (Appointed w.e.f. June 2010 ) (Appointed w.e.f. June 2010) (Appointed w.e.f. June 2010 ) Mr. K L Hewage (Appointed w.e.f. June 2010)

Mr. S R Attygalle was appointed to the Board in June 2010 in place of Dr. R H S Samaratunga, both Ex officio Directors.

80 BANK OF CEYLON ANNUAL REPORT 2010 REPORT OF BOARD SUBCOMMITTEES

AUDIT COMMITTEE REPORT Central Bank of Sri Lanka, the Chairman of The Committee carried out the following ROLE OF THE COMMITTEE the Audit Committee should be independent activities during the year under review: and hold qualifications and experience in The main role and responsibilities, which are Internal Audit clearly identified in the Charter of the Audit accountancy and/or audit. Bank of Ceylon z Effectiveness of the implementation of Committee, include inter alia; the following: is using the services of the undersigned, a the Internal Audit Plan for year 2010 was Chartered Accountant with experience in the z Reviewing the financial information of the monitored by way of regular reports. fields required, who is the Alternate Director Bank in order to monitor the integrity of Appropriate follow up action were taken to Mr. S R Attygalle, Ex officio Director, to the Bank’s Financial Statements, its Annual where necessary. chair the meetings of the Audit Committee, Report, accounts etc. even though he cannot be considered z Reviewed significant internal audit z Monitoring, reviewing and evaluating the independent in terms of the definition given findings/and management’s responses adequacy and effectiveness of the Bank’s for an Independent Director in the said thereto with a view to taking timely internal audit function. Direction No. 11 of 2007 as he represents corrective action to avoid recurrence in the Government of Sri Lanka, the sole future. The correction certificates obtained z Reviewing the internal audit reports, external audit management letters and shareholder of the Bank. The Central Bank of in this process were reviewed subsequent follow up audits together with Sri Lanka was informed and its concurrence and revised. obtained for such arrangement. management’s responses to them. z Reviewed the cadre position and the succession plan of the Internal Audit z Evaluating the adequacy and effectiveness The wide range of experience brought to Division. of internal controls. the Committee from positions held by the z Audit Committee Charter was revisited z Ensuring that the Board is made aware of members can be seen from the Directors’ matters which may significantly impact biographical details appearing on pages 14 and revised. to 16. the financial condition or affairs of the z Approved the Internal Audit Plan for business, in a timely manner. year 2011. The quorum of the Committee is two z Regularly update the Board about members. z Reviewed the application controls and Committee activities and make appropriate security review carried out of the existing recommendations. A representative of the Auditor General IT system of the Bank and made the (External Auditor of the Bank), the Chief necessary recommendations for corrective COMPOSITION AND QUORUM Internal Auditor and the Chief Financial measures. The Audit Committee comprises three Officer of the Bank are present at the z Recommended to formulate a system Non-Executive Directors of the Board. The meetings in addition to the opportunity to monitor and control the functional following Directors served as the members of given to the External Auditor to meet the responsibilities of Internal Control Officers the Committee during the year under review: Committee without the Management’s (ICOs) and performance of ICOs. Mr. V Kanagasabapathy - Chairman presence where necessary. (Alternate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors) External Audit There are no members of the management z Reviewed the report of the Auditor General Mr. R Sivaraman - Member on the Committee. The General Manager to the Parliament of Sri Lanka on the Mr. G K A Chaminda K Kularatne - Member attends the meetings by invitation. The other accounts of the Bank for the year ended (From January to May 2010) members of the management and other staff 31 December 2009, Management Letter, Mr. G Gallage - Member members of the Bank are invited to attend (From January to May 2010) management’s responses thereto and the meetings when the Committee requires followed up on the corrective measures Dr. B Kaluarachchi - Member their presence. The Secretary, Bank of Ceylon/ taken by the Bank to avoid recurrence of (From January to May 2010) Secretary to the Board functions as the the issues highlighted. Mr. K L Hewage - Member Secretary to the Committee. (From June 2010) z Reviewed the Reports on the Statutory MEETINGS AND ACTIVITIES Examinations carried out by the Some members of the Board of Directors of The Committee met 7 times during Central Bank of Sri Lanka with a view the Bank were changed from May/June 2010. the year under review. The attendance to taking corrective action and the Accordingly, the Committee members were of Committee members at meetings is recommendations were followed up. also changed with effect from 17 June 2010. given in the table on page 86. For all these meetings due notice together with details/ According to Banking Act Direction No. 11 memoranda for discussion were given. of 2007 on Corporate Governance for Licensed Commercial Banks issued by the

BANK OF CEYLON ANNUAL REPORT 2010 81 REPORT OF BOARD SUBCOMMITTEES

Financial Reporting Minutes/Reporting to the Board HUMAN RESOURCES AND REMUNERATION COMMITTEE REPORT z Assisted the Board in ensuring that annual Adequate minutes of the Committee audited Financial Statements and quarterly proceedings are maintained at the Board ROLE OF THE COMMITTEE Financial Statements are prepared Secretariat. All minutes of the Committee The main responsibilities of the Committee, and published in accordance with the meetings are tabled and ratified at meetings which are mainly based on the Banking requirements prescribed by the supervisory of the Board and approval of the Board Act Direction No. 11 of 2007 on Corporate and regulatory authorities and applicable thus is obtained for implementation of the Governance for Licensed Commercial Banks accounting standards. recommendations made by the Committee. issued by the Central Bank of Sri Lanka are as Follow up action is taken on outstanding follows: z Reviewed the monthly Financial Statements. matters on a regular basis. z Determining the remuneration policy z Reviewed the arrangements made for (salaries, allowances and other financial the implementation of International PROCEDURE FOR COMPLAINTS payments) relating to the General Accounting Standards 32, 39 and The procedure for the receipt, retention and Manager and Key Management Personnel International Financial Reporting treatment of complaints received by the Bank (KMPs) of the Bank. Standard 07. regarding accounting, internal control and z Setting goals and targets for the General audit matters etc., referred to as the Whistle - Manager and KMPs. Awareness Programmes Blower Policy, was in operation during the z Arranged and held a discussion with year under review. During the period, 167 z Evaluating the performance of the General Mr. M Jayasinghe, Technical Partner, complaints were received, out of which 151 Manager and KMPs against the set targets Messrs Ernst and Young, Chartered were investigated and resolved. and goals periodically and determining the Accountants, mainly in relation to the basis for revising remuneration, benefits role of the Audit Committee in financial CONCLUSION and other payments of performance-based reporting, role of the Directors in financial A self-evaluation of the performance of the incentives. reporting and the integrity of Financial Committee was carried out. It also evaluated z Reviewing staff matters referred to it Statements and Banking Act requirements the internal audit function for the year 2010 by the Board. with regard to audit and financial and the performance of the Chief Internal reporting, which was attended by the Auditor. The Committee is confident that z Determining the Human Resource Policy members of the Board and the Senior the internal audit function of the Bank and Organisational Structure of the Bank. Management of the Bank. Roles of the is independent of the activities it audits Internal Audit Division, Risk Management and that it is performed with impartiality, COMPOSITION AND QUORUM Committee were also discussed. proficiency and due professional care. The The Committee comprises four members of Audit Committee regularly reviews the the Board. The Chairman/Chairperson of the z Awareness programmes for Branch adequacy of the internal controls in the Committee is a Non-Executive Director. Managers and Internal Control Officers Bank. Statement on Internal Control by the on effective internal control function and Directors and the Auditor General’s Report The following Directors served as members of managing risks through proper audit on it, is given elsewhere in this Annual the Committee during the year under review: function were conducted by the Internal Report. Accordingly, the Committee is of the Dr. B Kaluarachchi - Chairman Audit Division. view that necessary ‘checks and balances’ (From January to May 2010) Supervision and Audit of Subsidiaries and are in place to provide reasonable assurance Ms. Nalini Abeywardene - Chairperson (From June 2010) Associates of Bank of Ceylon that the Bank’s assets are safeguarded and Mr. R Sivaraman - Member z Initiated the formulation of a Subsidiaries that the financial position and the results Management Charter and on approval disclosed in the audited accounts are free Mr. G K A Chaminda K Kularatne - Member received from the Board for same on from any material misstatements. (From January to May 2010) the recommendation of the Committee, Mr. G Gallage - Member organised a workshop to introduce it to (From January to May 2010) the subsidiaries and associate companies. Mr. Chandrasiri de Silva - Member Dr. Harsha Cabral, President’s Counsel, (From June 2010) was invited and he made a presentation V Kanagasabapathy Mr. K L Hewage - Member (From June 2010) on the salient features of the Companies Chairman, Act No. 07 of 2007 in order to enhance Audit Committee their knowledge on duties and responsibilities under the new Companies Colombo Act under which the Subsidiaries and 24 March 2011 Associates are governed.

82 BANK OF CEYLON ANNUAL REPORT 2010 REPORT OF BOARD SUBCOMMITTEES

Some members of the Board of Directors of deliberates on the proposals and makes NOMINATION AND CORPORATE the Bank were changed from May/June 2010. its recommendation. There was no salary GOVERNANCE COMMITTEE REPORT Accordingly, the Committee members were revision in year 2010. The next salary revision ROLE OF THE COMMITTEE also changed with effect from 17 June 2010. is due in 2012. The Committee is mainly responsible for the following:

The quorum of the Committee is two Goals and targets for General Manager and z Implementing procedures to select/ members. KMPs are embodied in the rolling Corporate appoint the General Manager (GM) and Plan and the related Action Plan. They were Key Management Personnel (KMPs). The General Manager presents himself at all reviewed by the full Board as decided by it. z Setting the criteria such as qualifications, meetings except when matters relating to experience and key attributes for eligibility him are discussed. The other members of Further, the General Manager evaluates to be considered for appointment or the staff are invited to attend the meetings the performance of the Deputy General promotion to the post of GM and the key when the Committee requires their presence. Managers and reports directly to the Board. management positions. The Secretary, Bank of Ceylon/Secretary Targets for Directors are not given since all to the Board functions as Secretary to the the Directors are non-executive. z Ensuring that GM and KMPs are fit and Committee. proper persons to hold office as specified In this year, the Committee deliberated on a in the criteria given in Direction No. 3 MEETINGS AND ACTIVITIES Performance Based Reward System (PBRS) for (3) of the Banking Act Direction No. 11 The Committee has met 4 times during the employees and recommended a system of 2007 on Corporate Governance for the year under review. The attendance of in principle, to the Board. This system is to be Licensed Commercial Banks issued by the members at meetings is given on page 86. implemented in year 2011. The Committee Central Bank of Sri Lanka and as set out in The proceedings of the meetings are reported also recommended the revised cadre position the statutes. to the Board with the recommendations for of the Bank based on the cadre requirement z Considering and recommending from ratification and approval. for 2010/11. HR Strategic Plan of the Bank time to time, the requirements of for 2010 - 2012 was considered. It also additional/new expertise and succession According to the aforesaid Banking Act ensured that fresh position descriptions are arrangements for KMPs. Direction No. 11 of 2007, this Committee available for KMPs. has to determine the Remuneration Policy z Determining the methods and execution of relating to Directors. However, in the case The Board refers to the Committee any staff the annual evaluations of the Board’s and of Bank of Ceylon, the remuneration of matter that it is of the opinion needs the each Board subcommittees' effectiveness Directors is determined in accordance with Committee’s attention. Accordingly, the and supporting the annual performance the circulars and instructions issued by the Committee deliberated and recommended evaluation process. Ministry of Finance & Planning on behalf the proposed Medical Assistance Scheme for z Reviewing periodically the Bank’s of the Government of Sri Lanka, the sole Bank’s Pensioners and Widows’/Widowers’ & Code of Ethics. shareholder. The provisions in the Bank of Orphans’ Pensioners’. Ceylon Ordinance No. 53 of 1938 and its THE COMPOSITION OF THE COMMITTEE amendments, the Act of Parliament which A self-evaluation of the performance of the The Committee comprises three members of established Bank of Ceylon are also taken into Committee during the year under review was the Board. The Chairman of the Committee is consideration with regard to the Directors’ carried out. a Non-Executive Independent Director. remuneration and benefits given to them. A Remuneration Policy for Directors has been CONCLUSION The following Directors served as members of adopted by the Board in keeping with the The Committee would continue to assist the Committee during the year under review: above rules and instructions. The details of the Board in its oversight responsibilities in Mr. R Sivaraman - Chairman the remuneration given to Directors are fully regard to human resource and remuneration disclosed in the Annual Report on a yearly matters. Dr. R H S Samaratunga - Member (from January to May 2010) basis. Mr. G K A Chaminda K Kularatne - Member (from January to May 2010) The remuneration of employees including the General Manager and KMPs is revised Mr. S R Attygalle - Member (from June 2010) once in 3 years with the approval of Ms. Nalini Abeywardene the Minister in charge of the subject of Chairperson, Mr. K L Hewage - Member (from June 2010) finance in accordance with the provisions Human Resources and Remuneration Mr. V Kanagasabapathy - Member as an of Bank of Ceylon Ordinance. Prior to Committee Alternate to Dr. R H S Samaratunga and then to finalising the salary revision, the Committee Mr. S R Attygalle both Ex officio Directors Colombo 24 March 2011

BANK OF CEYLON ANNUAL REPORT 2010 83 REPORT OF BOARD SUBCOMMITTEES

Some members of the Board of Directors of z Recommended the preparation of a talent z Reviewed and recommended the Board the Bank were changed from May/June 2010. inventory with a view to identifying future Charter that has been adopted, whereby Accordingly, the Committee members were leaders of the Bank. the duties of the Board and the General also changed with effect from 17 June 2010. Manager have been separated. z Mooted preparation of an objective oriented training policy for the staff. z Recommended a new Communication The General Manager presents himself at the Policy for the Bank and required circulation z Recommended re-looking at the meetings by invitation. Other members of of same among staff. Reviewed it at the Organisation Structure of the Bank with staff are invited to attend the meetings when end of the year. the Committee requires their presence. The special attention to the top layer. Secretary, Bank of the Ceylon/Secretary to z Reviewed the Charter of the Committee. z Ensured that there is a system for the Board functions as the Secretary to the evaluation of employees on compliance Affidavits and declarations obtained from the Committee. with the Code of Ethics and Guidelines for GM and KMPs in compliance with Direction Employees. MEETINGS AND ACTIVITIES No. 3 (3) of the aforesaid Banking Act The Committee met 4 times during the year z Recommended identifying relevant Direction on their fitness and propriety to under review. The attendance of Committee exposure programmes to Directors. hold their offices were submitted directly to the Central Bank of Sri Lanka. Members at meetings is given on page 86. z With a view to ensuring that there is an The proceedings of the meetings are reported oversight of affairs of the Bank by KMPs, CONCLUSION to the Board with the recommendations for that is consistent with Board policy and An evaluation was carried out to determine ratification and approval. to monitor progress towards corporate the effectiveness of the Committee and it objectives, recommended reviewing the will endeavour to enhance the Corporate According to the aforesaid Banking Act progress of the Bank on the Corporate Plan Governance practices of the Bank. Direction No. 11 of 2007, the Nomination on a quarterly basis. Committee has to implement a procedure Additionally, arranged for the compilation to select/appoint new Directors. However, in of a document indicating the work carried the case of Bank of Ceylon, which is wholly out by all the management committees of owned by the Government of Sri Lanka, the Bank. the appointment of Directors is carried out by the Minister in charge of the subject z Facilitated the Board in carrying out its R Sivaraman Chairman of finance, as provided for in the Bank of self evaluation exercise including that of Ceylon Ordinance No. 53 of 1938 and its the performance of subcommittees by Nomination and Corporate Governance amendments. As such the Nomination and recommending the evaluation process Committee Corporate Governance Committee does not to be carried out and also by preparing have any role to play in connection with the the report on the self-assessment of the Colombo appointment of Directors. Board. Also recommended the format for 24 March 2011 evaluation of the General Manager. and During the year under review the Committee prepared the final report relating to his carried out the following activities: evaluation. z Reviewed the Succession Plan of the Bank. z Gauged the level of compliance with the aforesaid Banking Act Direction z Recommended a new performance evaluation method for KMPs (viz. Assistant No. 11 of 2007, and the level of General Managers and Deputy General compliance with the Committee Charter.

Managers). z Took the initiative to invite from the Corporate Management, action to z Ensured that approved promotion improve the best practices in Corporate schemes, procedures and practices are Governance of the Bank. available to select KMPs and the General Manager of the Bank. Review of the existing promotion schemes was also recommended.

84 BANK OF CEYLON ANNUAL REPORT 2010 REPORT OF BOARD SUBCOMMITTEES

INTEGRATED RISK MANAGEMENT z Appropriate actions against the officers MEETINGS AND ACTIVITIES COMMITTEE REPORT responsible for failure to identify specific The Committee met 3 times during the year ROLE OF THE COMMITTEE risks and prompt corrective action under review. The attendance of Committee The main role and responsibilities of the as directed by the Director of Bank members at meetings is given in the table on Committee are to assist the Board in fulfilling Supervision or otherwise. page 86. its oversight responsibilities for all aspects z Adequacy and effectiveness of risk The Committee is conscious, when carrying of risk management. In this connection the identification, measurement, monitoring out its responsibilities, that banks are in Committee focuses on and reviews risks and mitigation relating to credit, market, the business of taking risk. The aim of the such as credit, market, liquidity, operational liquidity, operational and compliance risks. Bank and the Committee is therefore not to and strategic risks through appropriate risk minimise risks but to optimise it by ensuring indicators and management information. COMPOSITION AND QUORUM that risks being taken are; properly identified In addition to the above, the Committee The following Directors served as the and understood; appropriate; relative to is responsible for reviewing and/or members of the Committee during the year the scale and type of business; affordable; recommending the following which are under review: properly controlled and managed; and identified in the Charter of the Integrated Mr. V Kanagasabapathy - Chairman earning an appropriate return. Risk Management Committee: As Alternate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors Activities carried out by the Committee z Policies, programmes and management during the year under review are summarised committee charters relating to risk Mr. R Sivaraman - Member below: management and compliance. Mr. G K A Chaminda K Kularatne - Member (From January to May 2010) z Reviewed the following reports and z Risk limits and policies that establish Mr. G Gallage - Member assessed the risk profile of the Bank: appetite for credit, market, liquidity and (From January to May 2010) - Credit Risk Management operational risks, as recommended by the Dr. B Kaluarachchi - Member - Operational Risk Management Chief Risk Officer. (From January to May 2010) - Market Risk Management z Adequacy and effectiveness of all Mr. K L Hewage - Member - Compliance Risk Management management level committees such as the (From June 2010)

Credit Committee and Assets & Liability z Arrangements are at an advanced Management Committee to address The General Manager and Chief Risk stage to purchase a state-of-the-art risk specific risks and to manage those risks Officer participate at all meetings and their management system for managing credit, within quantitative and qualitative risk participation is mandatory. operational and market risks. limits as specified by the Committee. Some members of the Board of Directors of z Steps were taken to raise awareness and z Risk management reports on the risk the Bank were changed from May/June 2010. implement the Business Contingency profile of the Bank, as well as emerging Accordingly, the Committee members were Plan across all departments as part of market and regulatory risks and actions also changed with effect from 17 June 2010. Operational Risk Management. Test runs undertaken to identify, measure, monitor are carried out in this regard. and control such risks. The quorum of the Committee is two z Reviewed the Terms of Reference of z Corrective action to mitigate the effects members. Investment Committee. of specific risks in case such risks are z Adopted a Compliance Policy for the Bank. beyond the prudent levels decided by the The Secretary, Bank of Ceylon/Secretary to

Committee on the basis of the Bank’s the Board functions as the Secretary to the z Introduced a Risk Management Policy for policies and regulatory and supervisory Committee. The other members of the staff the Subsidiaries and Associates of the Bank requirements. are invited to attend the meetings when the through the Subsidiaries Management Committee requires their presence. Charter introduced to the Subsidiaries and Associates of the Bank.

BANK OF CEYLON ANNUAL REPORT 2010 85 REPORT OF BOARD SUBCOMMITTEES

z Awareness programmes on policies on The Committee works closely with the Audit with international standards. In view of Anti-Money Laundering (AML), Combating Committee and reviewed the Whistle-Blower accomplishing this task the abovementioned Terrorist Financing and Know Your Policy of the Bank and also initiated an Risk Management Unit assesses the Customer (KYC) were conducted across impact study on compliance with Sri Lanka credit, market, liquidity, operational and all sections of the staff and to the Accounting Standards 44 and 45. strategic risks on monthly basis through Board of Directors through workshops appropriate risk indicators and management and presentations by the Independent The Committee reported to the Board by information. The relevant Risk Assessment Integrated Risk Management Unit. way of minutes giving the recommendations. Reports are submitted to the Board on the All minutes of the Committee meetings are recommendation of the Integrated Risk z Adopted a Fraud Risk Management Policy tabled and ratified at meetings of the Board Management Committee. and the Terms of Reference for the Fraud and follow up action is taken on outstanding Risk Management Committee. matters. z Reviewed the Write off Policy for Credit Cards. CONCLUSION A self-evaluation of the performance of the V Kanagasabapathy z Reviewed and revised the Charter of Committee was carried out. The Committee As Alternate Director to Mr. S R Attygalle Integrated Risk Management Committee. is of the view that the Bank has made good Chairman progress towards meeting the challenges of Integrated Risk Management Committee risk management and compliance, complying Colombo 24 March 2011

ATTENDANCE OF DIRECTORS AT BOARD & SUBCOMMITTEE MEETINGS

Main Board Audit Committee Human Resources Nomination and Integrated and Remuneration Corporate Governance Risk Management Committee Committee Committee

Total No. of Meetings held during the year 2010 197443

From Jan. From June From Jan. From June From Jan. From June From Jan. From June From Jan. From June to May to Dec. to May to Dec. to May to Dec. to May to Dec. to May to Dec. 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010

No. of Meetings held during the period 5 14 2 5 0 4 2 2 1 2 Names of Directors No. Attended No. Attended No. Attended No. Attended No. Attended

Dr. Gamini Wickramasinghe 5 14 ††††††††

Dr. R H S Samaratunga (Resigned w.e.f. June 2010) 5x„ x † x2 x„ x Mr. G K A Chaminda K Kularatne (Resigned w.e.f. June 2010) 3x2xz x1 x1 x

Mr. G Gallage (Resigned w.e.f. June 2010) 5x2xz x † x1 x

Mr. R Sivaraman 4 12 2 4 z 42212

Dr. B Kaluarachchi (Resigned w.e.f. June 2010) 4x2xz x † x1 x

Mr. S R Attygalle x 11 x „ x † x1 x„

Ms. Nalini Abeywardene x 10 x † x4 x† x †

Mr. Chandrasiri de Silva x 11 x † x3 x† x † Mr. K L Hewage x 13 x 5 x 4 x 2 x 2 Mr. V Kanagasabapathy (Alternate Director to Dr. Samaratunga & then to Mr. Attygalle) 25 12

† Not a member of the Committee. „ Mr. V Kanagasabapathy, Alternate Director, attended the Audit & Integrated Risk Management Committee meetings on behalf of Dr. Samaratunga & Mr. Attygalle. He did not attend any Board meeting as the Alternate Director for the Ex officio Directors during the year under review.

z No meetings were held during the period. x Was not a Director during this period.

86 BANK OF CEYLON ANNUAL REPORT 2010 RISK MANAGEMENT & COMPLIANCE

RISK MANAGEMENT Integrated Risk Management Committee Management Committees Bank of Ceylon Risk Strategy (IRMC) There are several executive committees Risk to varying degrees is present in all aspects Primary purpose of the IRMC is to assist such as Credit Committee, Asset & Liability of business activities; therefore effective risk the Board in fulfilling its oversight Committee (ALCO), Operational Risk management is fundamental to the success of responsibilities with respect to the operation Management Executive Committee (ORMEC), the Bank. The primary goal is to ensure that and effectiveness of risk management and IT Steering Committee, Business Continuity there is an appropriate balance between risk compliance function of the Bank. Members Planning Committee, Investment Committee, and reward in order to maximise shareholder to this committee are appointed by the Board Forged Cheques and Frauds Committee, returns both in monetary and non-monetary of Directors and include Board members with Foreclosed Property and the Non-Performing terms bearing in mind the socioeconomic role the participation of the General Manager and Advances (NPA) Recovery Committee are the Bank plays in Sri Lanka’s development. the Chief Risk Officer (CRO). involved in managing the various risks that Given the ever changing and challenging risk the Bank is exposed to. landscape both internationally and locally the Independent Integrated Risk Management Division (IIRMD) Bank established an Independent Integrated As an oversight of the risk management Risk Management Division over two years ago function of the Bank, IIRMD functions to evaluate the varied impacts and manage as a separate division, independent the complex risk interactions across all units from the revenue generating Strategic and divisions to meet these challenges. Risk Business Units (SBUs). Considering the Management in the Bank is continuously strong interdependent nature of Credit, evolving and the awareness is being Operational, Market and Liquidity risks, developed enterprise-wide so that it forms they are managed in an integrated manner part of the corporate DNA. through the IIRMD. The Division is headed Risk Governance by the CRO who reports to the IRMC and ultimately to the Board of Directors. New Risk Management Governance Structure of standards for financial institutions introduced the Bank begins with oversight by the Board by Basel II are integrated into the risk of Directors, through the Integrated Risk management strategy and framework and it Management Committee (IRMC) to which is implemented through IIRMD. reports the Independent Integrated Risk Management Division (IIRMD).

Board Of Directors

IRMC

ALCO ORMEC Credit Committee

IIRMD

Credit Risk Market Risk Operational Risk Compliance

IRMC - Integrated Risk Management Committee ALCO - Asset & Liability Committee ORMEC - Operational Risk Management Executive Committee IIRMD - Independent Integrated Risk Management Division

BANK OF CEYLON ANNUAL REPORT 2010 87 RISK MANAGEMENT & COMPLIANCE

Three Lines of Defence interplay for Risk Management Function in BoC

Board & Executive Oversight ‡(VWDEOLVKHVULVNDSSHWLWHDQGVWUDWHJ\ ‡$SSURYHVIUDPHZRUNVPHWKRGRORJLHVSROLFLHVUROHVDQGUHVSRQVLELOLWLHV

rd 3 Internal Audit ‡ Provide assurance that risk management process is functioning as designed. Line of Defence ‡ Independent testing and verification of efficacy of corporate standard and business line compliance.

nd 2 IIRMD ‡Risk Management Line of Defence ‡ Design, interpret and develop overall risk management framework and monitor business/operational units adherence to framework.

Enabling Risk Culture ‡ Overview & reporting of key risks.

‡Compliance - Monitor and report on ‡ Regulatory issues. ‡ Anti-money laundering/combating terrorist financing issues. Risk management Framework and Process Alignment Risk management Framework st Business/ ‡ ’Owner‘ of the risk management process. 1Line of Defence Operational Units ‡ Identifies, manages, mitigates and reports on risks.

Risk Management Framework CREDIT RISK Credit Risk Management In order to effectively and efficiently Credit risk is the possibility of losses The Board approved credit risk management deliver its core purposes the Bank has a associated with changes in the credit profile policy and manual governing all credit risk comprehensive risk management framework of borrowers or counterparties. These losses, related activities of the Bank. These policies to identify, measure, monitor and control associated with changes in portfolio value, and procedures are communicated through the principal risks assumed in conducting could arise due to default or deterioration in awareness programmes and workshops both its activities. These risk exposures include: credit quality. at top level and at operational levels. Strategic, Credit, Market, Operational, Compliance and Liquidity. The major drivers of credit risk are default The highest authority in credit approval is risk (obligor fails to service debt obligations), vested with the Board of Directors, which Staff Awareness concentration risk (over exposure to an has been delegated to the Credit Committee To ensure that all staff are aware of the individual obligor, group or industry) and to exercise within its delegated limit or inherent risks in their areas of responsibility correlation risk (concentration based on make appropriate recommendations to the and their role in managing and mitigating common risk factors between different Board. The Committee regularly reviews the risk, the Bank facilitates ongoing training at borrowers, industries or sectors which may exposure limits with a view to maintain the all levels and maintains effective dialogue lead to simultaneous default). credit quality. across functional units. In addition, the IIRMD issues a quarterly newsletter to the In order to strengthen the asset quality and The Bank has a structured and standardised staff on Risk Management and Compliance. optimise the capital charge, Bank undertakes credit approval process, and a borrower comprehensive credit risk management evaluation model developed by a world- As per the Basel II regulations the Bank has practices. Effective credit risk management is renowned external consultancy firm and it to allocate capital charge for credit, market a critical component of risk management and is being used to assess risk associated with and operational risk. In quantitative terms, essential to the long-term success of the Bank. credit proposals. In addition, for corporate credit risk is the most significant risk in the credit proposals an internal rating model is in banking book. use for assessing the credit risk.

88 BANK OF CEYLON ANNUAL REPORT 2010 RISK MANAGEMENT & COMPLIANCE

IIRMD developed an internal credit rating Asset Quality model adding more parameters to the (I) Loans and Advances existing model to be in line with industry best 2010 2009 practices and Basel II guidelines. The rating Amount Amount parameters are both quantitative as well as % Rs. million % Rs. million qualitative with credit enhancement features Performing Loans 96.69 369,671 94.35 259,480 specific to the transaction. The rating serves Non-performing Loans 3.31 12,639 5.65 15,542 as a key input in the approval as well as post- Total Exposure 100.00 382,310 100.00 275,022 approval credit processes. The rating for every borrower is reviewed at least annually. A risk Less: based asset review framework is in place Specific provision for loans and wherein the frequency of asset review would advances (7,192) (8,043) be higher for cases with higher exposure and/ General provision for loans and or lower credit rating. Industry knowledge is advances (2,396) (1,914) constantly updated through field visits and Net loans and advances 372,722 265,065 interactions with clients, regulatory bodies Provision cover and industry experts. (Excluding general provision) 57% 52%

A risk based pricing approach was introduced The Bank continuously emphasises on to achieve an appropriate balance between good asset quality. Effectiveness of the risk and reward while continuing to enhance Bank’s systems and controls for identifying, the risk management capabilities to assist in monitoring and addressing asset quality achieving corporate objectives. in a timely manner is evident from the Portfolio Management improvement in NPA position over the year 2010. The need for credit portfolio management arises from the potentially adverse impact Provisioning Policies of concentration of exposures and necessity Provision for non-performing loans to optimise the benefits associated with and advances is made on the basis of a diversification. The Bank has developed continuous review of all loans and advances systems for identification of credit in accordance with the applicable Accounting weaknesses well in advance. Bank’s credit Standards and the regulations imposed portfolio is effectively managed through by the Central Bank of Sri Lanka. The periodic monitoring, evaluating the portfolio provisioning policy of the Bank is given under quality by tracking the migration of the Accounting Policies on page 159. borrowers from one rating scale to another and keeping close track of deteriorating Concentration Risk credit-quality. Further, portfolio reviews, Concentration of exposures in credit stress tests and scenario analysis are portfolios is an important aspect of undertaken at least annually or when there credit risk. It may arise from two types of are changes to the external environment. MARKET RISK imperfect diversification. The first type, Market risk is the risk that arises due to Segmentation name concentration, relates to imperfect diversification of idiosyncratic risk in the adverse changes in market variables such as Loan portfolio of the Bank consists of credit portfolio because of large exposures to interest rates, foreign exchange rates, equity originating from Corporate and Off-shore specific individual obligors. The second type, and commodity prices. Mismatches carried in Banking Division, Branches Division, Product sector concentration, relates to imperfect interest rates, currency and equity products, and Development Banking Division and diversification across sectors. which are exposed to general and specific International Division (overseas branches). market movements and changes in the level The Bank is in the process of refining the Name Concentration of volatility of interest rates, foreign exchange segmentation of the loan book, which would rates and equity prices generate market risk Name concentration is monitored and facilitate and improve the assessment of to the Bank. managed by stipulating prudential risk limits the portfolio credit risk in a more proactive on various risk parameters such as single/ manner and help develop strategies for related party borrower limits. mitigating risk more effectively.

BANK OF CEYLON ANNUAL REPORT 2010 89 RISK MANAGEMENT & COMPLIANCE

Market risk arises from both trading and Assets and Liability Management Unit (ALM Accordingly, the Bank manages liquidity risk non-trading activities of the Bank. Bank Unit) of the Bank prepares various reports through positive cash flow management, engages in trading activities to support client to monitor the adherence to the prudential maintaining a highly liquid asset portfolio in sales business, as well as to profit in the limits as per the ALM Policy. Based on the accordance with prudential regulations and short-term from volatalities in market prices. information provided by the ALM Unit, ALCO with a prudent funding strategy. Treasury periodically gives direction for management ensures maintenance of a portfolio of highly Market Risk Management of interest rate risk on the basis of its marketable assets that can easily be liquidated The IIRMD manages market risk with the expectations of future trends. ALCO may as protection against any unforeseen broad objectives of: suggest necessary corrective actions in order interruption to cash flow. Liquidity ratios are z Managing interest rate risk, currency risk to realign the exposure with the current continuously monitored to adhere to internal and equity risk arising from the day-to- assessment of the markets. and external regulatory requirements. day commercial baking operations and in its investment portfolios with proper Bank’s Net Interest Margin (NIM) is monitored The Bank has diverse sources of liquidity classification, valuation, accounting and for variances and appropriate remedial action to allow for flexibility in meeting funding reporting of the same. is taken. This initiative resulted in maintaining requirements. For the domestic operations, NIM at an acceptable level, which ensured current accounts and savings deposits form z Effective control over the operation and that the projected earnings of the Bank were a significant part of the Bank’s funding and execution of market related transactions well within the expected levels. Bank uses the Bank continues to work on its concerted while facilitating business growth in a gap analysis to measure the repricing risk of strategy to sustain and grow this segment transparent risk management framework. Bank’s assets and liabilities in order to assess of deposits along with term deposits. These z Ensure that overall market risk exposure the impact from interest rate changes and deposits are augmented by wholesale is maintained at prudent levels and thereby on the profitability of the Bank. Based deposits, inter-bank borrowings and through consistent with the available capital. on the outcome, the Bank takes measures to issuance of bonds and subordinated debt mitigate any possible adverse impact. from time to time. Loan maturities and sale z Compliance with regulatory requirements. of investments also provide liquidity. The Liquidity Risk Bank holds unencumbered, high quality Interest Rate Risk Liquidity risk is the risk that the Bank will liquid assets to protect against stress Interest rate risk is the risk where changes encounter difficulty in meeting obligations conditions. For domestic operations, the Bank in market interest rates may adversely affect associated with financial liabilities as and also has the option of managing liquidity a bank’s financial condition. The impact of when they fall due. Liquidity risk arises by borrowing in the inter-bank market on a changes in interest rates affects the Bank’s from the possibility that market conditions short-term basis through committed lines. earnings in the near term. The long-term prevailing at some point in the future will impact would be on the Bank’s net worth require the Bank to sell positions at a value as the economic value of its assets, liabilities which is below their underlying worth, or and off-Balance Sheet items linked to may result in the inability to exit from the different benchmark rates get affected by the positions. movements in market interest rates.

The Bank manages liquidity risk in accordance ALCO involves in planning, directing and with its ALM Policy. This policy is framed as controlling the flow, level, mix of rates on per the extant regulatory guidelines and is the Bank’s assets and liabilities and therefore approved by the Board of Directors. The ALM ALCO responsibilities are fully aligned to the Policy is reviewed periodically to incorporate overall objectives of the Bank. changes as required by regulatory stipulations or to realign with changes in the economic landscape. The ALCO of the Bank formulates and reviews strategies and provides guidance for management of liquidity risk.

90 BANK OF CEYLON ANNUAL REPORT 2010 RISK MANAGEMENT & COMPLIANCE

Overall, the Bank follows a conservative approach in its management of liquidity and has in OPERATIONAL RISK place a healthy governance structure, policy framework and review mechanism to ensure Operational risk is the risk of direct or availability of adequate liquidity even under stressed market conditions. indirect loss resulting from inadequate or failed internal processes, people, systems and external events. The Bank recognises the significance of operational risk, which is inherent in all areas of business. IT security, internal and external frauds, outsourcing of operations, customer service quality, operational process reliability, recruitment and training related issues, social and environmental impacts and regulatory compliance have been identified as the major sources of Bank’s operational risk.

The Bank seeks to minimise exposure to operational risk, through implementing improved management and measurement Foreign Exchange Risk measures and portfolio nominal limits. This is approaches. Foreign exchange risk is the risk that a bank supplemented with stress testing which takes may suffer losses as a result of adverse account of more extreme scenarios. Operational Risk Management Framework exchange rate movements during a period The Board approved Operational Risk in which it carries mismatches, either spot Sector wise exposure of the equity-trading Management (ORM) policy and manual or forward, or a combination of the two, in portfolio: governs the enterprise wide management foreign currencies. Even in cases where spot of operational risk. This policy aims at not and forward positions in individual currencies only ensuring consistent application of are balanced, the maturity pattern of forward risk policies, procedures and systems for transactions may produce mismatches, which identifying, measuring, monitoring, reporting would result in Bank incurring losses due and controlling operational risk but also to changes in premiums/discounts of the ensures that any new or changed activity, concerned currencies. such as new products or system conversions, will be evaluated for operational risk prior to Bank uses many tools to monitor and implementation. manage foreign exchange risk through position limits, stop loss limits and dealer The Board of Directors has established limits. Foreign exchange risk is mainly tolerance levels and set strategic direction in mitigated through fixing of appropriate relation to operational risk. limits on open positions and gaps (individual and aggregate gaps). IIRMD monitors both The Bank has established an organisational diversified and undiversified VaR in foreign culture that places a high priority on effective exchange exposures. BoC traditionally ORM and adherence to sound operational maintains its open positions well below controls. Ownership, management and Central Bank stipulated limits. Stress Testing accountability of operational risk lies with In order to ascertain the impact and the business and functional units, while it is co- Equity Risk Bank’s ability to withstand extreme volatilities ordinated centrally through IIRMD. Equity risk represents exposures to securities in market variables, we use stress testing that represent an ownership interest for and scenario analysis. This acts as an early- Operational Risk Management Executive the Bank in the form of common stock or warning indicator in monitoring the Bank’s Committee (ORMEC) other equity linked securities. The Bank has regulatory capital ratios. Stress tests are ORMEC has the authority of addressing established an Investment Committee (IC) applied for foreign exchange, equity and cross-functional risk issues with a view to comprising members from departments who treasury bond portfolios of the Bank. implementing and maintaining the highest are independent to investment activities. IC Periodic reports with results of stress tests operational standards for the Bank. The governs the decision to buy and sell common are submitted to management to enable Committee also provides the means to ensure stock in the investment portfolio. Trading pre-emptive decision making. that the risk management programme is portfolio, is closely monitored using VaR truly enterprise-wide. Operational risk issues methodologies complemented by sensitivity

BANK OF CEYLON ANNUAL REPORT 2010 91 RISK MANAGEMENT & COMPLIANCE are brought to the notice of ORMEC by the actions within a specified timeframe IIRMD Certification. The pilot project was launched business units and the Committee reviews the implemented RCSA successfully at selected at Trade Services Department and presently, matters and develops controls to mitigate/ operational units of strategic importance. both 5S implementation and ISO Certification prevent the operational risks in the future. Programmes are at their last stages. Parallel The RCSA exercise will be conducted to the above, 5S concepts are being Chief Risk Officer and the Deputy General on a periodic basis in all business units implemented at fifty selected branches in Manager (Support Services) are the ex- and departments with the intention of collaboration with the National Productivity officio Co-Chairmen of the Committee. strengthening the control environment of Secretariat of Sri Lanka. The Committee submits quarterly reports the Bank and to use in Basel II Advance covering its findings and recommendations Measurement Approach (AMA). Information System Security to the IRMC. A well defined IT Security Policy is in place Loss Data Management which ensures that all critical systems are Managing Operational Risk The Bank has identified the importance of validated and tested before implementation. Consistent techniques are used Bank wide establishing a complete ‘Operational Loss Information System Security Policies and to systematically identify the operational Event Database’. With this in mind the Procedures (ISSPP) Unit continues to risk profiles, to prioritise and to define risk- IIRMD has implemented a mechanism for implement policies and procedures to mitigating measures. ‘Tracking of Operational Loss Event Data’ and enhance and maintain information security a process to collate information on ‘Events controls and systems. Operational Risk Management (ORM) Culture Disrupting Business Continuity in the Bank’. General awareness programmes were Operational loss event database, which The Bank’s IT Steering Committee provides conducted within the Head Office and captures information on operational losses, a consultative forum that can effectively Provinces, by IIRMD to enhance staff is centrally managed and maintained by the address the strategic needs of the Bank in awareness on ORM practices to ensure that IIRMD. relation to Information Technology. The each staff member understands the inherent forum is a mechanism to track the progress risks in their area of responsibility and their The Bank’s internal loss event data of IT initiatives, identify risks and strategies to role in managing and mitigating operational management process captures all operational mitigate the same. risk. Further, liaison officers were appointed risk loss events above a set threshold. This from the business units and departments process is used to enhance the adequacy Business Continuity Plan to establish formal mechanism to maintain and effectiveness of controls, identify A key function of risk management is to relationship with the IIRMD in the process of opportunities to prevent or reduce the impact manage crisis situations and to ensure the introducing sound risk management practices of reoccurrence, identify emerging trends continuity of business across the Bank. on an enterprise wide basis. and enable formal loss event reporting. The scope of the Bank’s operational loss event The Bank’s Business Continuity Plan (BCP) is Operational Risk Management Tools data capturing process continues to be a comprehensive plan of actions that spell Risk and Control Self-Assessment (RCSA) enhanced within the centralised database. out the processes, procedures and systems, The Bank’s RCSA programme assesses which are essential to continue or restore the and reviews its operations and activities Key Risk Indicators (KRIs) operations of the Bank in the event of various against a menu of potential operational risk Business units and departments monitor KRIs categories of disasters based on several levels vulnerabilities and control gaps. This process against their material risks. These indicators of severity. is driven internally and often incorporates are used to monitor the operational risk checklists and/or workshops to identify the profile and exposure to losses against Business Continuity Coordinating Unit is strengths and weaknesses of the operational thresholds, which trigger risk management responsible for governance and oversight environment. actions. KRIs are being developed for of the Bank’s business continuity, which each business unit based on the results of monitors and ensures compliance with ‘RCSA matrix’ provides a means of translating RCSA and reviewed at monthly managers’ documented policies. It ensures that unit qualitative assessments into quantitative meetings. business continuity plans are developed for form giving a relative ranking for different their respective functions, which are tested types of operational risk exposures. Scores Implementation of 5S and ISO 9001:2008 from time to time. address inherent risks, as well as the controls Having recognised the importance of to arrive at the residual risk. In the process of bringing productivity improvement RCSA the control assessment is performed to techniques to the Bank’s business processes, identify the control gaps and consequently IIRMD initiated a programme to implement to implement appropriate corrective 5S concepts and obtain ISO 9001:2008

92 BANK OF CEYLON ANNUAL REPORT 2010 RISK MANAGEMENT & COMPLIANCE

As a key requirement of the Bank’s BCP, a are decentralised across all business units keeping, monitoring and the establishment comprehensive disaster recovery centre is and coordinated through the Compliance and maintenance of an AML/CTF programme. in place outside city limits with alternate Department and operates under the IIRMD. In this regard regular training and awareness arrangements to facilitate continuing key programmes are conducted for the relevant operations in the event of various pre-defined Compliance risk is managed through internal employees of the Bank. During this year, the scenarios. IIRMD oversees the functioning of policies and procedures, which include legal, Bank's policies and procedures were reviewed BCP reporting to the ORMEC. regulatory and other technical requirements and updated in line with the International relevant to the business. The Compliance Standards and best practices. Insurance Department provides regular training and The Bank’s risk mitigation programmes use advice to ensure that all employees are CAPITAL ADEQUACY RATIO (CAR) insurance policies to transfer the risk of familiar with regulatory obligations. The This gives a sense of the financial stability of high severity losses arising from frauds and Compliance Department independently the Bank. The Bank of Ceylon complies with external events that are beyond the control monitors adherence to policies, procedures the Basel II regulatory requirements for of the Bank such as natural disasters, thefts, and other technical requirements of all calculation of CAR as required by the Central burglaries where feasible and appropriate. business units. Bank and apply the standardised approach for Credit Risk, standardised measurement COMPLIANCE New Products method for Market Risk and basic indicator Compliance describes the way we do The Compliance Department ensures that approach for Operational Risk. On the business, the way we make decisions and new products and services offered to above basis our CAR is at a strong position, the way we act in order to uphold integrity customers are aligned with the necessary which is above the minimum required by throughout the Bank. compliance requirements. the Regulator providing a healthy ‘cushion’ against any potential losses. Adherence to the law and internal Regulatory Compliance regulations is the foundation of all our The Bank considers compliance with the The detailed Capital Adequacy Computation business activities. Compliance risk is the regulatory requirements and guidelines as as at 31 December 2010 is given on page 237 risk that the Bank fails to comply with the core to its business and good governance. of this Annual Report. letter and spirit of all statutes, regulations, The Compliance Department is responsible for supervisory requirements and industry regulatory compliance and also dissemination codes of conduct, which apply to the Bank’s of regulatory instructions across the Bank. As business. The Bank seeks to bring the highest per the Corporate Governance Directives, the standard of compliance best practices to all Board ensures compliance with all prudential jurisdictions in which we operate. In keeping requirements, regulations, laws and internal with our core values, the Bank endeavours controls affecting the Bank. to comply with the highest professional standards of integrity and behaviour, which During the period under review, there were builds trust. The Bank is subject to extensive no material non-compliance with prudential supervisory and regulatory governance in the requirements, regulations, laws and internal countries in which we operate. The CBSL is controls pertaining to the Bank. the lead Regulator and significant business developments in any of the operations Anti-Money Laundering (AML)/ Combating Terrorist Financing (CTF) must be approved by the CBSL as well as the Overseas Regulatory Authority where There has been considerable focus on applicable. implementing the new directives and legislative requirements related to anti- BoC’s Compliance Department is headed money laundering and financial crime across by the Chief Risk Officer, who reports to the globe. In response to international best the Board of Directors through the IRMC, practices and global standards of AML and operates independently from the strategic CTF, the Government of Sri Lanka has enacted business units and operational departments. laws during 2005-2006. Accordingly, CBSL The Compliance Officer who is a Key issued Know Your Customer (KYC)/Customer Management Personnel, is responsible for Due Diligence (CDD) Rules in 2007 and ensuring management of compliance risk thereafter the Bank implemented policies within the Bank. Compliance functions which include obligations such as customer identification and verification, record-

BANK OF CEYLON ANNUAL REPORT 2010 93 1 Nation… 20 million people… Rs. 29 million CSR spend… 1 Bank…Bank of Ceylon 1 Country…hundreds of projects advancing sustainable living… affecting millions of people…1 Bank…BoC SUSTAINABILITY REPORT

STRATEGY AND ANALYSIS As Sri Lanka’s largest financial institution, the Bank is conscious of the fact that our actions should have a meaningful impact on wealth creation to the nation, to our environment in which we operate and the communities to whom we are responsible for. The Bank accordingly was involved in numerous projects on education, culture and social causes in addition to providing comprehensive banking services to the nation.

Business with comprehensive responsibility towards sustainability is presented in this Report.

ORGANISATIONAL PROFILE LEGAL FORM AND STRUCTURE Bank of Ceylon is a State-owned licenced CHAIRMAN’S MESSAGE The business of banking was carried commercial bank domiciled in Sri Lanka. Details appear under Corporate Information The concepts of sustainability and out to touch and improve the lives of on the inner back cover and Information sustainable development are increasingly people across the whole social strata by on the Bank’s Subsidiaries and Associates gaining popularity globally as it is well making financial services accessible to all. appears on page 255. understood that focusing solely on short I would like to reiterate facts presented term economic gains, impacts negatively in the Chairman’s Message that the Bank The Location in the socio-economic order. But I am recognised and catered to the needs of a Location of the Bank’s Headquarters is at happy to state that the Bank of Ceylon diverse society with the sole consideration No. 4, Bank of Ceylon Mawatha, Colombo 1, has always created products and services of uplifting and improving all sections of Sri Lanka. A detailed description about the aligned with the evolving needs of society the society of Sri Lanka. Bank is given in the Management Discussion during its 71 years of history, thereby & Analysis on page 30. contributing to a sustainable As I am certain that these facts illustrate our socio-economic environment. commitment to empower the community and improve the socio-economic The chart given on page 96 provides a In keeping with this trend, the Bank in environment at large, I take pleasure in summary of the Bank’s core businesses and 2010 worked with a clear vision and presenting the Sustainability Report for related functions. emphasis on sustainable development that 2010 of the Bank of Ceylon to you. continued to earn the trust and loyalty of its stakeholders. In such an endeavour the We believe that working towards a Bank supported many economic and social sustainable future for Sri Lanka is a development programmes of the country continuing process, especially at a time including nurturing youth talents, sports, when the financial sector has a greater environmental and cultural initiatives. Not responsibility to stimulate wider economic only financial support was provided but and social development activity in the also the integration of corporate social country. Hence, we will continue to responsibility projects into the core activities align our corporate goals focused on saw the involvement of our own human sustainable growth and to create a value resources voluntarily serving the needs of to the society to build a sustainable future. the Sri Lankan communities ensuring the right balance between business growth and the impact on the society. Dr. Gamini Wickramasinghe Chairman 24 March 2011

BANK OF CEYLON ANNUAL REPORT 2010 95 SUSTAINABILITY REPORT

OPERATIONAL STRUCTURE OF THE BANK

Senior DGM Corporate & Corporate Banking Offshore Banking Offshore Banking

Treasury Operations DGM International & Treasury International Banking Overseas Branch Operations

Major Areas of Business DGM Retail Banking Retail Banking Personal Banking Leasing Operations DGM Sales & Channel Management

Development Banking DGM Product & Islamic Banking/Card Centre Development Product Development

DGM Investment Banking Investment Banking

DGM Recovery NPA Monitoring & Recovery

Chief Finance Officer Strategic Planning & Financial Strategy, Supervision of Subsidiaries Board of General Directors Manager DGM Finance & Planning Financial Controls and Reporting, Performance Management Control & Compliance

Chief Risk Officer Risk Management & Compliance

Chief Internal Auditor Internal Audit Through the Audit Committee

Head of Information Information Technology Technology

DGM Human Resources HR Operations Training

Chief Legal Officer Legal

Procurement, Premises, DGM Support Services Core Banking System Operations, Security & Transport

Head of Marketing Marketing Support Services

Head of Research Research & Development

96 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

MARKETS SERVED - A GEOGRAPHIC OUTSOURCING OF ACTIVITIES SCALE OF OPERATIONS PERSPECTIVE The Bank sources a number of non-core Scale of the Bank of Ceylon Our Local Footprint activities and staff from external service The scale of the Bank is best highlighted by The Bank expanded its network within providers. These include; the following factors reported as at the end Sri Lanka by increasing the number of service of 2010. z Printing and despatching of account points from 831 to 879 as at 31 December statements/balance confirmations/ renewal 2010. Further details of the BoC Network, notices/letters and other print matter which covers all districts and provinces of the The Bank employs Total revenue country, appear on page 262. a total of 8,204 Rs. 63 billion z Couriering functions as permanent employees Our Global Footprint z Sourcing of support staff such as secretarial assistants, messengers, data entry The Bank operates in Sri Lanka and two operators, drivers and security personnel. overseas locations, namely, Maldives and India. In addition, the Bank has appointed z IT support services, tax consultancy representatives at exchange houses in the services, janitorial services, etc. Middle East, namely, Qatar, the United z Maintenance of the Bank’s Debenture Arab Emirates, Kuwait, Bahrain, Oman, the Capitalisation Holders’ Register Kingdom of Saudi Arabia, Israel and Jordan; consists of debt of Rs. 45 billion The Bank’s z Bank’s promotional activities while Business Promotion Assistants function and equity of total assets in Italy and Japan, South Korea and France. Rs. 28 billion Rs. 715 billion The Bank’s branch in London was converted to a subsidiary in May 2010.

MARKETS SERVED - SECTOR-WISE The Bank’s sectoral exposure is given on page 191.

PRODUCTS AND SERVICES The products and services provided by the Bank in its capacity as Sri Lanka’s pioneer State-owned commercial bank appear on pages 132 - 134.

BEYOND BANKING In addition to direct financial services, the Bank expands its services to a wide range beyond banking to meet the needs of its diverse customers as follows. LCBs - Other Licenced Commercial Banks. Beyond Banking... Primary dealing Forex & Fund Management Cash/Working Capital Management Services Fund Transfer Services Travel Services Gold Sales Safe Custody Vault Services Insurance Services Investment Banking Activities Equity Portfolio Management IPOs Equity Participation Debt Issuance Mergers, acquisitions and related services E-channelling

BANK OF CEYLON ANNUAL REPORT 2010 97 SUSTAINABILITY REPORT

Significant Changes in Terms of Size, Structure and/or Ownership The table below shows the significant changes during the year brought about by the Bank’s continuing growth and expansion of services.

No. of Year No. of Branches Extension Offices No. of ATMs Total Service Points

2009 310 192 329 831 2010 309 218 352 879 Additions (01)* 26 23 48

* BoC London Branch was converted to a Subsidiary with effect from 01 May 2010.

There were no changes in share capital structure and other capital formation of the Bank during the year under review.

AWARDS The Bank was felicitated for several achievements during the year 2010, as noted below:

Award for Excellence in Trade Vision Awards 2009 Best Presented Accounts Awards Annual Report Awards Finance Organised by League of Competition 2009 Competition 2010 Best Sri Lankan Trade Bank for American Communications Organised by South Asian Organised by The Institute of 2010 in a competition organised Professionals (LACP). Federation of Accountants (SAFA) Chartered Accountants of by Trade Finance, the Global Overall Silver Award for Annual Award: Gold Sri Lanka Magazine for exports and Report (Commercial Banks, Annual Public Sector Entities - Co-Winner Award: Certificate of Compliance commodity finance. Revenue up to US$ 10 billion).

ARC Awards for the Annual Report 2009 International ARC Awards 2010, organised by Mercomm, Inc. USA z Interior Design in the Banks: National Commercial category - Gold z Illustrations: National Commercial category - Silver z Financial Data - Honours z Photography - Honours

98 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

REPORT PARAMETERS Further, we declare that this Report is limited STAKEHOLDER ENGAGEMENT REPORT PROFILE AND FREQUENCY to the local operations of Bank of Ceylon, This Report covers activities and performance Continuing with our initial effort to comply and does not include any of its Subsidiaries/ indicators that reflect the Bank’s most with the Global Reporting Initiative (G3) Associate companies or Overseas operations. significant economic, environmental and guidelines in the previous year, we have social impacts and/or those which would prepared this Sustainability Report against GRI CONTENT INDEX substantively influence the assessment and the GRI (G3) guidelines. Unless otherwise GRI Index is given on pages 126. decisions of our stakeholders. Given the stated, the period covered by this Report for large scale of operations of the Bank, it the information provided is from 01 January GOVERNANCE, COMMITMENTS AND is therefore necessary to first identify the to 31 December 2010, which coincides with ENGAGEMENT principal stakeholder groups, determine our financial year. The previous Sustainability GOVERNANCE materiality, and then target its engagement Report of the Bank, dated 18 March 2010, Corporate governance is discussed in detail and reporting accordingly. This is an ongoing covered year 2009 and was included in in a separate Corporate Governance Report process. The Bank has identified its principal our Annual Report of that year. The Bank beginning on page 56, which is an integral stakeholders as customers, employees and produces Sustainability Report annually. part of the Bank’s Annual Report. their trade unions, the Government as sole shareholder, regulators, suppliers, the For any information or clarification on this community, fund providers such as multi- Sustainability Report may be directed to lateral lending agencies, correspondent banks Finance and Planning Division of the Bank on and rating agencies. telephone number +94 112471615 or fax number +94 112445798 or email address [email protected]

REPORT SCOPE AND BOUNDARY This Sustainability Report provides an overview of how the Bank contributes to the improvement of the nation’s wealth, environment in which we operate and social conditions of its key stakeholders and how it manages such impacts.

All financial information stated in the Report has been extracted from Audited Financial Statements of the Bank. Other financial data that are not available in the Audited Financial Statements, have been extracted from the source documents of the departments/units and information processed through formal Management Information System for the use of internal management purposes.

Estimates have been used to report consumption volumes of materials/units based on the data available at major consumer units/divisions of the Bank, whose consumption covers approximately 70% of the reported amount. These estimates have been consistently applied during the years 2009/10. There were no significant changes for previous reporting period in the scope, boundary or measurement method applied in the report except for a few restatement of figures where applicable.

BANK OF CEYLON ANNUAL REPORT 2010 99 SUSTAINABILITY REPORT

The table that follows provides information on how such activities were carried out during the year under review.

STAKEHOLDER GROUP OBJECTIVE/ENGAGEMENT/RESPONSE

Customers Objective Providing excellent services to all strata of society across the country exceeding their expectations to build a loyal client base whilst maintaining the highest level of trust and confidentiality

Engagement/ z Delighting customers through value added services Response z Enhancing customer service points and channels , with emphasis on less-developed areas

z Constantly plan and introduce innovative new products and services

z Recognising special needs of senior citizens and present products and services accordingly

z Listening to customer suggestions

z Making day-to-day banking convenient and enjoyable by continuous enhancement of our electronic banking propositions

z Streamlining procedures, upgrading branch facilities and internal layouts including provision of special facilities to differently abled customers

Employees and Objective Creating job satisfaction through career development and job rotation, performance based reward schemes Trade Unions whilst maintaining excellent industrial harmony

Engagement/ z Training and development programmes for all levels of staff both local and international Response z Regular assessment and feedback on performance against agreed goals

z Opportunities to continuously engage in team work through extra-curricular activities/sports, leisure, multi-cultural and religious and other social activities

z Cordial and effective negotiations with Trade Unions to provide win- win solutions to all stakeholders

z Constantly reviewing and upgrading staff health and safety policies

Government Objective Actively participate and facilitate the socio-economic development programmes of the country

Engagement/ z Align the Bank’s strategic plan in line with national priorities, whilst being competitive Response z Actively participate in national development activities, including making strategic investments.

Regulators Objective To be a model financial institution that complies with all statutory regulations and other requirements without exception both in spirit and to the letter

Engagement/ z Compliance with all the regulations imposed by the Central Bank of Sri Lanka, Ministry of Finance Response and Planning, Basel II guidelines, Colombo Stock Exchange, and other regulatory bodies

z Compliance with all the relevant accounting standards issued by the Institute of Chartered Accountants, Sri Lanka

z Constant improvement in the good governance practices to meet international standards

z Board and Management commitment through participation in periodic review sessions conducted by regulatory bodies

100 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

STAKEHOLDER GROUP OBJECTIVE/ENGAGEMENT/RESPONSE

Suppliers Objective To build and maintain a strong mutual relationship with the Bank’s supply chain

Engagement/ z Maintenance of transparency in all procurement processes Response z Registration of suppliers and review of their capacity and strengths

z Conduct of on-site visits

z Seek expert opinion on matters of high-tech nature

z Regular meetings with the suppliers to make sure that the required high quality of products and services are offered

Community Objective To be a concerned corporate citizen that relates closely with the community it serves

Engagement/ z Assisting youth through training, scholarships, etc to come up in their life Response z Bringing the unbanked into the banking sector through effective engagement programmes

z Provide sponsorships to various social, cultural, religious, sports, educational, environmental and social events

z Volunteer participation of staff of the Bank in health and social events organised and conducted at provincial level

z Provide training opportunities on banking activities for school leavers and undergraduates

Fund providers Objective Ensuring safe custody and commensurate return on invested funds & multilateral lending agencies

Engagement/ z Disclosure of relevant information as well as terms and conditions that apply in a transparent manner Response z Disclose financial position of the Bank by publishing Interim and Annual results

z Submitting compliance certificates to fulfil contractual obligations

z Periodic review meetings conducted with lending agencies in order to ensure the compliance covenants that are associated with the agreements

z Customer education on choice of investment products available to suit individual needs through several channels such as brochures, posters, website, etc.

Rating agencies Objective To have an independent assurance on our stability and the strength

Engagement/ z Proactive disclosure of rating sensitive information to rating agencies Response z Periodic review meetings

z Submission of quarterly financial and non-financial information that are relevant

z Annual review

BANK OF CEYLON ANNUAL REPORT 2010 101 SUSTAINABILITY REPORT

STAKEHOLDER GROUP OBJECTIVE/ENGAGEMENT/RESPONSE

Correspondent Objective Maintain close and cordial relationship with Overseas Correspondent Banks, Exchange Companies and Banks Financial Institutions to facilitate Trade Service Activities, Bank Guarantees, Fund Transfers and Foreign Remittances.

Engagement/ z Establish Relationship Management Authorisation (RMA) and correspondent relationships with Response overseas banks

z Evaluate performance and capabilities of all correspondent banks annually to comply with Anti- Money Laundering (AML) and other international companies

z Set up credit limits for correspondent banks and respective country limits for trade service activities, guarantees and Treasury operations to facilitate their business activities

z Assist all business units of our Bank to handle their business activities on trade services, guarantees, money market operations and forex transactions through the correspondent banks.

z Initiate the opening of Nostro and Vostro accounts and deploying Bank of Ceylon representatives to exchange companies overseas.

z Make aware of the branches and business units of the Bank with the latest developments in the worldwide countries and financial markets and sanctions/embargoes imposed etc.

Rating Agencies Correspondent Banks

Fund Providers & Multilateral Customers Lending Agencies Working hard to keep our stakeholders Employees & Suppliers delighted... Trade Unions

Community Government

Regulators

102 BANK OF CEYLON ANNUAL REPORT 2010 In 2010, economic value addition has increased 200% over the last year reflecting the Bank’s capacity of contributing to the growth of wealth of the nation.

ECONOMIC PERFORMANCE The execution of the plan is done through The Bank’s social responsibility does not only MANAGEMENT APPROACH number of committees which will review in confine to the benefits, that are provided different responsibility areas such as Risk, through direct value generation and The economic policy of the Bank is to Asset and Liability Management, Marketing, distribution to the community it serves, but drive its strategies to enhance sustainable Human Resource and Procurement, etc. also going beyond adopting many strategies performance and growth of the Bank while continuing with the well-being of the people creating wealth to the nation. In addition to the quarterly review, the to whom we serve. Moreover, it is a broad- Corporate Management discusses summary term of community investment. The Bank’s growth is a continuous process of achievement on weekly basis against the set planned approach to management of its day- plan. The Bank also has laid down procedures The Bank’s strategies include substantial to-day activities which are laid down within a where the Bank is always benchmarked allocation of funds to the most needed broad framework of well-set corporate vision, against the peers in order to challenge its sectors whilst giving priority to the less mission and strategy. The Bank has laid down own plans and achievements. developed areas, enhancing accessibility a process whereby a 3-year corporate plan is of banking facilities across the society, developed on a rolling basis which sets out Eventually, the Bank ensures that the Balance empowering the lower layer of the the entity wide strategies of the Bank in Sheet is managed with economic asset community through education, consultancy short and medium term. allocation. and financial assistance, suitably designed financial solutions to cater to the need of Plan comprehensively covers detailed The asset allocations are done in order to different segments of the community, are identified economic activities and tasks achieve set corporate objectives within a among them. setting out clear responsibilities to the broad economic and social responsibility respective business/process owners. framework.

The performance against the plan is reviewed on a quarterly basis and the Board of Directors is enlightened on the achievement as well as suitability of current strategy adopted.

BANK OF CEYLON ANNUAL REPORT 2010 103 SUSTAINABILITY REPORT

CONTINUING WITH OUR INITIATIVES ON now expanded to Galenbindunuwewa to fishermen. The range of products the Bank CONVERTING THE ‘UNBANKABLES’ TO Kavatikudah (Trincomalee), Sammanthurai has offered includes loans for housing, THRIFT-CONSCIOUS ‘BANKABLES’ to Mahaulpotha (Bandarawela), educational assistance, poverty alleviation, A considerable portion of rural population, Pansalgodella (Hingurakgoda) to employment generation, transportation including some urban, yet have no access Bulathsinghala and Devinuwara to and sustainable livelihood development. to the banking sector. Horowpotana. They represent the geographical and demographical diversity A substantial number of Micro and SME The Bank of Ceylon has taken strides in this challenging task undertaken enterprises identified and nurtured by the to reach out to this group, by socially by the Bank. Bank have now come of age and firmly mobilising them into Self-help Groups established in their chosen fields. Some and empowering them to be a bankable The Bank’s caring attitude towards the have today become household names, segment that can negotiate with finance needy and under-developed sectors in steadily reaching the top. We take pride in providers on an equal footing. Over 13,000 society is amply evident by the low-interest their achievements. As a testament to their such groups have been formed, comprising funding with thin margins extended to grit and determination, the Bank produced about 75,500 Self-help Group members, micro enterprises, cottage industries, a video documentary on 14 success stories a majority of them being women. Initially, craftsmen and small-time farmers and and that was telecasted over the National the Bank focused on the North, the East Rupavahini channel.

CREATING WEALTH TO THE NATION

2010 2009 Rs. million % Rs. million %

Economic Value Addition Average invested capital 26,515 24,000 Revaluation reserves (125) (126) Bonus shares issued in 2006 (1,400) (1,400) 24,990 100.0 22,474 100.0

Return on Invested Capital Profit after taxation 6,365 3,084 Depreciation attributable to the revaluation surplus 18 18 Impact on reduction of lending rates 1,303 Total return on invested capital 6,383 25.5 4,405 19.6 In 2010, economic value addition has Opportunity cost of invested Capital (2,232) 8.9 (3,023) 13.4 increased 200% over the last year reflecting Economic Value Added 4,151 16.6 1,382 6.1 the Bank’s capacity of contributing to the Weighted average 12 months TB rate 8.93% 13.45% growth of wealth of the nation.

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VALUE ADDITION The above statement shows that the value The following table illustrates that the value generated during the period was allocated among addition during the year 2010 was enhanced the key stakeholders of the Bank. by Rs. 3.8 billion, an increase of 13% compared to 2009. 2010 2009 Rs. million % Rs. million % In comparison to 2009, there has been a substantial increase in value absorbed by the VALUE ADDED Government. This was mainly due to high Income earned by providing banking services 59,788 61,152 pay out of dividends & taxes which has been Cost of services (27,466) (31,207) increased to 31% from 18% in 2009. Value added by banking services 32,322 29,945 Non-banking income 3,575 2,309 Provision for bad debts (1,560) (1,802) Value addition 34,337 30,452

VALUE ALLOCATION To employees Salaries, wages & other benefits 10,310 30.0 10,516 34.5

To Government Income tax 3,639 1,221 Value added tax 4,001 2,995 7,640 22.3 4,216 13..8 Dividends declared to the Government of Sri Lanka 3,096 9.0 1,346 4.4 10,736 31.3 5,562 18.2 To providers of external funds Interest on refinance & borrowings 6,178 8,747 Interest on debentures 2,954 3,113 9,132 26.6 11,860 39.0 To expansion & growth Retained profit 3,269 1,738 Depreciation 842 873 Deferred taxation 48 (97) 4,159 12.1 2,514 8.3 34,337 100.0 30,452 100.0

BANK OF CEYLON ANNUAL REPORT 2010 105 SUSTAINABILITY REPORT

SOURCES AND DISTRIBUTION OF INCOME CLIMATE CHANGE

For the year ended 31 December 2010 2009 2008 2007 2006 Risk and opportunities Rs. million Rs. million Rs. million Rs. million Rs. million Climate changes have not significantly affected the Bank’s operational activities or Sources of Income operational results during the year, except Interest income 50,853 53,077 49,684 42,286 26,823 minor or insignificant losses due to floods Foreign exchange profit 409 1,567 2,886 1,179 2,261 and damages to Bank property by lightning. Fee & commission income 6,014 4,255 4,084 3,099 2,196 The total value of the loss has been estimated Investment income 3,575 2,309 981 1,624 1,370 at Rs. 1.6 million. Other income 1,144 753 946 687 755 61, 995 61,961 58,581 48,875 33,405 DEVELOPMENT OF EMERGING PROVINCES The five IDP mini Banking units which were Distribution of Income operated during the year 2009 continued to To Depositors & other lenders 31,205 38,267 35,989 29,453 15,743 function until June 2010. Two units i.e., To Suppliers and service providers 5,393 4,799 4,487 3,578 2,881 Zone 4 and Ananda Coomaraswamy, still To Employees 10,310 10,517 9,273 8,769 8,599 continue to function. People in these To Government resettled areas have been granted more - As dividends 3,096 1,346 846 846 1,173 credit facilities to reconstruct their dwellings - As taxation (Including income and re-commence their income-generating tax, VAT on financial services) 7,640 4,216 3,612 3,370 2,810 activities. Credit facilities amounting to about Rs. 2,303 million were granted for agriculture, Retained by the Bank fishery, animal husbandry and dairy farming - Reserves 3,269 1,738 2,715 1,997 1,454 aiming to revitalise business activities - Depreciation/amortisation 842 873 754 760 694 which had been affected due to the war. - Provision for loan loss (Net) 192 302 775 (75) (416) Credit facilities granted by branches in the - Deferred tax 48 (97) 130 177 467 Northern Province increased by 46.5%, and in 61,995 61,961 58,581 48,875 33,405 recognition of this achievement, five Bank of Ceylon branches listed below were recognised by the Central Bank of Sri Lanka for their good work in granting development loans.

1. Thirunelvely Branch - 1st Place for highest loan granted under ‘Vadakin Sasanatham’ Development Loan Scheme

2. Chunnakam Branch - 2nd Place for the highest loans granted under ‘Vadakin Sasanatham’ Development Scheme

3. Atchuvely Branch - 1st Place for the highest loans granted under New Comprehensive Rural Credit Scheme (NCRCS)

4. Chavakachcheri Branch - 1st Place for the highest loans granted under Agro Livestock Development Loans Scheme (ALDLS)

5. Nelliaddy Branch - 1st Place for highest loans granted under Krushi Navodaya Credit Scheme

106 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

Atchuvely Branch opened ‘Kalaioli BoC z Establishment of 15 new extension Branch commenced banking business in Village’, which is a milestone in the Bank’s offices in Mannar, Kilinochchi, Mullaitivu September 2010. For the benefit of the Corporate Responsibility Project. It aims to Districts to cater to the immediate banking resettled people in the areas of Mulankavil, increase household incomes of the people in requirements of re-settled communities at Jayapuram and Poonary, mobile banking the area and to eradicate poverty. Considering their villages. service was commenced at Mulangavil in the importance of developing the rural October 2010. z Reconstruction of lost transactions of economy and to reduce regional disparities in Kilinochchi, Mankulam and Mullaitivu the country, credit facilities have been granted In the Eastern Province, the Bank branches absorbing the entire losses to the people of Kalaiolii Village who are opened extension offices in Morawewa, incurred due to loss of records and assets. engaged in several economic activities. Mamanagam, Kallar, Uppuveli, Polwatte, The customers of the three branches are and Karaitivu areas and relocated the now able to continue transactions through Progress under the Poverty Alleviation Akkaraipattu Branch to a more convenient their accounts maintained with the above Microfinance Project (PAMP) is given below: location for customers. The Eastern Province branches without incurring any losses Office, so far operated from Colombo, too Northern Province due to misplacement of their records or was shifted to Trincomalee in the latter part No. of groups formed 2,500 documents. of the year with the same objective. No. of members 13,000 Resettlement and Reconstruction of Lives in No. of facilities granted 4,230 Facilities amounting to Rs. 64.5 million Affected Areas Amount granted Rs. 220 million and Rs. 38 million were granted to dairy farm project at Chenkalady and Rice Mill at The Bank of Ceylon also demonstrated Trincomalee, respectively. its strongest commitment by way of implementing a variety of strategies to Progress so far against set-targets in Group bringing in lives of communities with the formation and credit delivery is indicated in objective of contributing towards economic the following chart: development and prosperity of the Northern Province. The following are some examples: Eastern Province No. of groups formed 3,700 z Writing off all advances amounting to No. of members 20,000 approximately Rs. 85 million granted by To expedite the resettlement of Internally No. of facilities granted 7,160 Kilinochchi, Mankulam and Mullaitivu Displaced Persons, the Bank continued Amount granted Rs. 296 million branches for housing, agricultural, its facilities in the Wanni area. Mankulam industry and SME sectors to customers Branch was the first branch which who fell into distressed condition. commenced its banking activities, followed z Waiving off total interest receivable by another mobile service at Mallavi. amounting to approximate Rs. 49 million Thereafter, the Kilinochchi Branch was from advances outstanding at Kilinochchi, re-opened in March at its earlier building Mankulam and Mullaitivu branches. with online facilities. z Defaulters of credit facilities at Kilinochchi, The Bank played a major role in disbursing Mankulam and Mullaitivu branches will be relief funds to the resettled families, treated as fresh applicants, for any new particularly those from UNHCR, World credit facilities, irrespective of whether Vision, SLRC and ENRep (Emergency they figure as defaulters or not. Northern Recovery Project). Due to the poor z Disbursing of Rs. 2 billion of advances for transport facilities in the area, Mullaitivu fisheries, agriculture, small and medium Branch conducted special mobile services industries, self-employment projects, in Oddusuddan area. After re-opening etc., at very low interest rates to create Mullaitivu branch, the Mullaitivu Kachcheri employment and self-sufficiency in the Northern Province.

BANK OF CEYLON ANNUAL REPORT 2010 107 SUSTAINABILITY REPORT

The table below details the credit facilities extended to the people of the Northern and the Eastern This strategy has enabled the Bank of Ceylon Provinces as at 31 December 2010. to extend timely and adequate finance to the farmers with comprehensive package Northern Province Eastern Province consisting of production, processing, Scheme No. of Loans Amount No. of Loans Amount packaging, transportation, storage, Rs. million Rs. million marketing and insurance. The market linkage introduced under the Forward Sales Contract New Comprehensive Rural Credit Scheme (NCRCS) 8,927 614 2,475 143 Agreement has so far benefited tens of Agro Livestock Development Loan Scheme (ALDL) 377 40 180 83 thousands of farmers and buyers. Credit Poverty Alleviation Microfinance Project (PAMP) facilities amounting to Rs. 4,900 million * Agriculture 2,060 80 2,050 76 were granted during the year 2010 for crop * Animal husbandry 730 30 1,960 85 production to farmers and purchase of * Fisheries & related activities 145 65 1,510 56 Paddy, Maize, Sugar cane, Gherkin, Potatoes, Big onions. Ginger, etc., to Paddy Millers, * Industry 510 20 740 35 Companies and Individual buyers. * Other 785 25 900 44

Pibidena Uthura/Eastern Development Storage Facilities for Agricultural Produce * Agriculture 1,400 175 1,000 122 Normally, the commodity price falls down * Livestock Development 1,500 170 90 09 during the peak and reaching a high during * Fisheries 475 50 15 02 the lean season. Short-term storage credit offers a workable solution in this context. * Micro & Small Entrepreneurs 300 47 – – * Trade & other self-employment 1,900 300 640 75 The Government of Sri Lanka (GOSL) has intervened time and again to have in place LENDING A HAND TO RURAL COMMUNITIES Short-term crop production loans (Maximum a reasonable price mutually beneficial to Agriculture and Agro-Based Industries 270 days) under NCRCS adequately the farmers and the buyer, particularly in supported cultivation cost of paddy and 35 regard to paddy and maize which together other subsidiary crops under both rain-fed constitute 83% of crop production loans and irrigated cultivation practices. These disbursed by the Bank at any given time. crops include chillies, onions, pulses, oil These facilities have been granted in the seeds, roots and fibres including potatoes, form of pledge loans and local trust receipt 15 categories of low-country and up-county facilities, while the quantum of advance is vegetables and 4 other crops (sugar cane, determined by the value of stock available at ginger, betel and pineapple). the stores.

The crop production loan programme has been extended to cover seed production and Increasing agriculture productivity and planting materials benefiting seed farmers promoting agro-processing enterprises are and planting material production. critical for rural upliftment and eradication of poverty. The common criteria for credit are The Bank lending portfolios on borrower the economic viability of the loan proposal group have been expanding over the years and the repayment capacity of the farmer. as shown below by comparative data for the Such criteria would leave out most of the past 5 cultivation seasons: small farmers who constitute the bulk of the farming community in the country. Hence, Season No. of Borrowers Loan Volume Acreage in Hectares small farmer credit has been re-oriented Rs. million in such a way that potentially viable loan 2007/08 Maha 14,525 508 33,581 proposals by small farmers are also included 2008 Yala 8,014 310 20,600 in it. It means that a farmer whose credit 2008/09 Maha 15,867 767 51,100 proposal is not economically viable at present 2009 Yala 6,540 380 25,400 but has a possibility to become viable as a consequence of credit assistance has been 2009/10 Maha 18,400 940 62,600 given priority by the Bank.

108 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

The following table illustrates the volume of PROVINCIAL DEVELOPMENT CREDIT SCHEME credit extended over the past 5 cultivation The Bank of Ceylon is participating in seasons towards storage facilities for this Credit Scheme implemented by the agricultural produce: Central Bank of Sri Lanka with the objective of providing capital to Small & Medium Disbursed Loan Volume Projects in all provinces to improve and Seasons No. of farmers Rs. million originate income-generating activities. BoC 2007/08 Maha 9,700 1,640 has allocated Rs. 1.4 billion for 640 projects 2008 Yala 7,600 1,173 identified by branches. So far 300 loans amounting to Rs. 475 million have been 2008/09 Maha 11,700 1,900 financed under the scheme. 2009 Yala 8,900 1,430 2009/10 Maha 21,400 2,680

As a special programme, the Bank has Once the groups perform continuously for financed Rs. 2,500 million to Paddy 3 months, group members become eligible Marketing Board to purchase Paddy from for Micro Credit to set up/expand income- the farmers during the Yala 2010. Further, generating activities. the Bank introduced a new credit scheme for small-scale paddy collection at the village The bank has initially selected 3000 villages level to purchase paddy up to Rs. 50,000/- throughout the island to form Self-Help per person. Groups, and there will be a minimum of 150,000 small groups with more than POVERTY ALLEVIATION MICRO FINANCE 750,000 members. A typical Self-Help Group CREDIT SCHEME will comprise like-minded individuals who The Bank of Ceylon is participating in volunteer to save a minimum of Rs. 100/- per this Credit Scheme implemented by the week in a common pool. The group members Central Bank of Sri Lanka to strengthening should preferably have a homogeneous the economic conditions and social background and with more than 50% empowerment of low income families living women participation. in most vulnerable poverty-stricken areas identified by the Department of Census Progress so far in Group formation and Credit and Statistics, linking this low income delivery is indicated in the chart below: communities with formal financial system for establishment of efficient and sustainable No. of Groups formed 14,000 financial delivery system for them. Self- Members involved 74,600 help groups are formed in these villages No. of facilities granted 17,263 to improve the habit of savings and thrift, professional and entrepreneurial skills, Amount Granted Rs. 763 million financial capabilities, self-confidence and AGRO-LIVESTOCK DEVELOPMENT LOAN making them free from dependent mentality. SCHEME Village groups are generally formed and with This programme is one of the major goals in a regime of strong discipline. Village group 2009 Government Budget and it is expected lending offer group responsibility in the to set up scientifically managed Dairy units repayment of credit while enhancing their across the country. BoC has been allocated group savings. a target of financing 5,000 such units. As of 31 December 2010, the Bank has financed The Programme is a group-based one. 1,610 units with a loan volume of over Where the Bank’s animation mobilise the low rupees half a billion. income segment in the target area into small solidarity groups of 5-8 members, who meet This programme also envisages the setting and save an agreed amount on weekly basis up of milk processing plants that are linked and has an elected leadership. The focus will with dairy farmers. BoC has funded one such be on poverty-ridden villages in the periphery project at Pelwatte, Buttala, linking around as well as urban slums and tenements. 2500 dairy farmers with the processing plant.

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FARM MECHANISATION ASSISTANCE TOWARDS COCONUT Self-Employment Programme for Fishermen Funding for Agriculture can be classified CULTIVATION - KAPRUKA Fisheries self-employment loan scheme under several levels. Starting with the base, Coconut Cultivation loan programme commenced in 1989, and has funded at crop production it branches out to (a) (Kapruka Ayojana) which came into traditional fishing crafts as well as day-boats storage (b) post-harvest technology (c) operation in 1998 with the operational and fishing gear. The Bank had funded market linkage (d) processing and (e) farm assistance of Coconut Cultivation Board was 3,000 projects for a total loan volume of mechanisation. In the present context, concerned to give an impetus to coconut Rs. 650 million. Dheewara Shakthi Loan where agriculture is gradually transforming sector production which had seen a declining Programme, with emphasis on fish into a technology-driven activity, farm trend. The programme has an exposure of processing and fisher-folk women engaged mechanisation plays a vital role in process Rs. 126 million for 610 ventures. in land-based activities (self-employment modernisation and crop production. ventures outside fishery) has funded 600 FISHERIES SECTOR projects amounting to Rs. 220 million. Farm mechanisation has gained popularity Deep Sea Fishing over the years across the country; particularly Deep sea fishing is entirely carried out by Fish Processing and Transportation in the dry zone. Demand for farming multi-day boats. The Bank has funded a The Bank, using its own funds, implemented implements (Power sprayers, Water Pumps) series of multi-day boats under a special loan a credit scheme for purchasing insulated land vehicles (Two-wheel and Four-wheel programme designed for this purpose and trucks for transportation of fish. The total loan tractors, Weeders, Seeders). Process other available credit programmes such as exposure was Rs. 96 million as at end-2010. machinery (Harvesters, Harvester combines) SMI, SMAP, SMILE, DASUNA where fisheries Irrigation equipment (Sprinkler system/Drip is an eligible sector. Total funding by the Bank Mid Level Fishery Projects irrigation) has steadily grown. reached Rs. 410 million by the end of the Another Credit Programme styled Fisheries year under review. Loan Scheme without subsidy, targets mid-level fishermen for purchase of crafts Mechanised Day-Boats and Traditional Crafts (traditional and mechanised), fishing gear, Facilities were considered under SMI, SMAP, communication and navigation equipment. SMILE and DASUNA programmes as well as 410 projects with a loan volume of the Dheewara Shakthi Credit and Savings Rs. 250 million have been financed. Scheme. A unique feature under Dheewara Shakthi Scheme is the combination of credit COMMODITY PURCHASE with savings. The focus is to inculcate the Market linkages are arranged between savings habit among the fishing community, crop producers and processors. They would where this practice is almost non-existent. be brought together under Forward Sales Funding was provided for fishing craft, out- Contracts (FSCs) with the Bank playing the The Bank has financed this demand through board motors, fishing gear and repairs. role of facilitator funding at both ends. This specially-designed Credit Schemes, namely product, now successfully practiced in the Govi Shakthi Programme, Krushi Navodaya North-Central Province in particular, will and Refinance SME Credit Lines. Funding be promoted in the North-East primarily running into Rs. 900 million has centred focusing on Paddy and Maize. The Bank around major agricultural areas such as targets a total disbursement of Rs. 1 billion North-Central Province, Hambantota and per annum covering both provinces. Ampara Districts and Uda Walawe area in the Ratnapura District.

110 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

We are all elevated, working towards achieving our objectives utilising minimum level of resources specially in the areas of paper, fuel, electricity and water.

ENVIRONMENTAL PERFORMANCE MANAGEMENT APPROACH Being a service organisation, the Bank's activities have minimum impact on the environment we operate. However, the Bank, being a large organisation, consumes substantial resources of the living planet. We are all elevated, working towards achieving our objectives utilising minimum level of resources specially in the areas of paper, fuel, electricity and water.

Apart from internal attempts and arrangements, the Bank pays more emphasis SOWING…AND HARVESTING TEAM SPIRIT paddy field and so on. But it also had its on working with its customers to manage The marsh net to the Bank’s Wellawaya lighter moments. the environmental risks and opportunities Branch was an eyesore and an environmental through environmental finance solutions hazard. A spark of initiative gave way to a The monetary value of the yield was like e-friend loan schemes and also joint action by the Branch staff in an attempt marginal. Nevertheless, the project through sponsorships for the programmes at converting this waste land into a paddy stimulated team spirit right across all levels that encourage the protection of the (rice) field…in the heart of Wellawaya town. of the Branch, and generated a sense of environment. The required approvals were obtained, and dedication and hard work sprinkled with an intrepid in-house team set forth on a fun and excitement. Above all, it caught spirit of adventure, but with a purpose. the eye of the community…on how a Many drawbacks were perceived and, bunch of literally ‘barefoot’ bankers could in fact, encountered - time constraints do something positive to transform the while meeting the customer requirements, environment for the better. Leading by protecting the crop, maintaining the example, the Bank of Ceylon way…

BANK OF CEYLON ANNUAL REPORT 2010 111 SUSTAINABILITY REPORT

MATERIALS AND RESOURCE UTILISATION The chart below compares the Bank’s consumption of resources during the years 2009 and 2010:

Resource Consumption in Consumption in value Consumption in volume volume Rs. '000 per average assets 2010 2009 2010 2009 2010 2009

Electricity 16,208 MWh 13,823 MWh 320,576 278,267 2.6% 2.7% Paper – – 244,816 165,121 – – Water 271,430 m3 253,818 m3 18,960 17,343 43.3% 49.6% Fuel 799,837 Ltr 721,288 Ltr 67,633 60,991 127.6% 141.1%

The increased volume for year 2010 z Solid waste management compensates with the business volume of z Gardens containing medicinal plant the Bank. However, efficiency of the resource varieties are being developed in schools utilisation is reflected in the ratios. ENCOURAGING ENVIRONMENTAL CLEAN UP BIODIVERSITY Loans for Environmental Clean-up The Bank is the main sponsor of ‘Rividina The Bank reviews the potential indirect Arunella’, which is an environmentally impact on the environment when approving friendly programme to promote organic financial services to customers. Diligence farming. The Bank also works with the is applied during project appraisal Green Forest Association and entered into through a review of the customer’s own a sponsorship agreement to select the environmental policies, processes and 'Wasere Adarshawath Parisarika Pasala in licencing requirements. The Bank granted the years of 2009 & 2010' at a national several credit facilities via the e-friends II level. The Green Forest Association, a scheme, which is a loan fund set up by the joint-venture between the Government and Government to assist industrial enterprises to NGOs, was established in 1999 to promote control pollution, conserve energy, minimise environmental conservation. Under this waste, etc. The Bank granted credit facilities programme, participation of school children amounting to Rs. 137 million under this was encouraged to: scheme during the year. z Modelling classrooms according to the ‘5 S’ system z Landscaping of school gardens and the growing of ornamental and medicinal plants

112 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

Funds provided under e-friends 11 scheme is CONCERNED WITH ENVIRONMENT IMPACT very much lower to commercial lending Some schemes of recruitments are done rates at 6.5%. on provincial basis in order to minimise the No. Nature of the project Benefits to the society Loan value transport/movement of employees. During Rs. ’000 the year, 1,200 new recruits that were 01. Funding for manufacture of plastic Project reduces industrial pollution 45,000 recruited were from 10 provinces and they resins & monofilament yarn by were assigned to the branches in the same using industrial waste provinces. 02. Constructions of waste water Project reduces water pollution 32,860 treatment unit Selected training programmes were conducted at branch and provincial level, 03. Funding for replacement of To modernise high pressure steam 21,500 for which the resource persons travelled conventional paddy processing generator with smoke elimination to the location concerned. This was done system with modernised system system and steam distribution concerning the amount of resources that system could be saved by avoiding the large number 04. To establish a Bio-gas production The project helps to reduce 18,750 of staff attending Colombo Head Office. unit environmental pollution During the year, 101 such programmes 05. Installation of machinery for The project helps to reduce 7,000 were conducted by Risk Management eco-friendly polythene products environmental pollution Division, Internal Audit Division, Business 06. To establish an integrated system Fruit waste converted to compost 5,327 Process Re-Engineering Division and also of fruit & milk processing with reduce environment pollution by Training Department of the Bank. Total waste management staff participants of these programmes were 07. To modernise the rice processing The project reduces environmental 4,000 around 10,055 employees. using parboiled systems, which pollution which can be caused due are heated by paddy husk without to waste of rice mills using electricity 08. To improve plant productivity 2,750

Great Bequest for the eco-friendliness and sustainability compatible crop mixtures, Consumption Sphere from the to agriculture. It facilitates to eco-friendly pest management ‘Bankers to the Nation’ develop a sustainable agriculture techniques, and rehabilitation of Rividina Arunella system for guaranteed adequate fruit trees through proper pruning. Rividina Arunella which was food production in the foreseeable inaugurated three years ago, as future, to develop a self-sufficient Considering the unique and a national commitment, telecasts agriculture system which would eco-friendly features and the weekly over the National TV plays rely as much as possible upon contribution towards the a vital role in boosting productivity resources from within its own upliftment of home-based among home gardeners. It helps resources and to develop an agriculture of this programme, to make the public aware of how alternative strategy over chemical three prizes have been awarded they can use land, space, sunlight, farming, which would be a by the Department of Agriculture, rain water and other freely guideline for the working of Peradeniya, Ministry of Mass available resources to maximise biological processes in natural Communication and the State their gardens’ productivity in eco-systems. Award from the Government. an economically viable and environmentally friendly manner. It also offers information on It envisages our active participation The use of chemical fertilisers is a cultivation methods which for the well-being of our country cause for concern for the safety of maximise urban garden perceiving and developing our food and sustainable production. productivity such as potted home-based agriculture in an It is believed that organic farming cultivation, hanging gardens, and environmentally-friendly manner. by reverting to the use of manures, growing leafy vegetable ‘towers’. green manures, urban waste, Other topics include affordable rural wastes, etc., can bring nursery techniques, identifying

BANK OF CEYLON ANNUAL REPORT 2010 113 SUSTAINABILITY REPORT

As a responsible institution to the society at large, the BoC has aligned its HR practices to discharge its responsibilities to establishing decent labour practices setting out clear HR policies, monitoring and follow up.

SOCIAL PERFORMANCE policies to develop and nurture the innate LABOUR PRACTICES AND DECENT WORK skills of individual members of the BoC MANAGEMENT APPROACH family. Our mission is further segregated As a responsible institution to the society at into HR objectives, the attainments of which large, the BoC has aligned its HR practices to are measured through applicable KPIs in discharge its responsibilities to establishing respective areas of engagement. decent labour practices setting out clear HR policies, monitoring and follow up. Our HR OBJECTIVES commitment includes training and awareness Objective Selected KPI of our staff members establishing transparent Develop business leaders and functional specialists z No. of successors developed labour practices and disciplinary procedures, who could face business challenges in competitive z Backup ratio cordial atmosphere for employee trade union environment affairs, empowering them for collective Establish performance-based and accountable work z Achieve agreed business goals bargaining. The Bank also has constructed culture over the years a HR culture that promotes multi-ethnic diversity, cultural and religious To be a partner in knowledge transformation process z Skill Gaps rights and employee security. through creating and fostering a learning culture z Training Evaluations z Customer Satisfaction Surveys True to our Mission statement, the Bank To create automated/manual HR process in order to z Service Level Agreement (SLA) of Ceylon always strive to ‘give all our staff speedy and accurate decision-making to reach their full potential and give the To develop self-motivated workforce to drive the z Employee Satisfaction Index (ESI) recognition and rewards to be the best business team of achievers in service excellence’. Make healthy work environment and infrastructure for z Employee Turnover Percentage Stemming down from our Mission statement sustainable work life balance we have formulated our strategies and

114 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

HR STRATEGIES

Strategic Option HR Strategy

Strategic Partner z Ensure availability of the required talents at the right place and at the right time

Strategic Partner z Revisit PDs (Position Descriptions) and align them with business realities

z Study the current performance management system and make amendments if required in line with modern business requirements/techniques

z Introduce PBRS (Performance Based Rewards System)

Learning Culture z Develop and enhance the knowledge, skills and attitudes of employees for continuous improvement

z Establish entrepreneur skills for functional heads

Admin Expert z Enhance operational efficiency and effectiveness of key HR deliverables

Change Agent z Enhance organisational flexibility and develop proactive workforce

Employee Championship z Create a friendly environment which fulfills mental and physical needs of the employees

Training & High Potential Development Culture

Industry Harmony Staff benefits

LABOUR PRACTICES & Balance Gender DECENT WORK Recruitment Distribution

Occupational Turnover Health & Safety

Motivation

BANK OF CEYLON ANNUAL REPORT 2010 115 SUSTAINABILITY REPORT

Careful attention is paid to the well-being of the employees, and systems and procedures that are in place to ensure adoption of sound labour practices when achieving our HR objectives.

Workforce by Nature of Employment

No. of Employees Full-time, Year permanent Part-time Outsourced On contract Total

2010 8,204 None 1,058 86 9,348 2009 7,538 None 1,198 88 8,824

Net increase of the full time, employees is the difference between the recruitment and retirement.

Workforce by employment category and age group

No. of Employees Br. Mgr. Bkg./ Office Corp. Exec. Chief Senior & Other Mgmt. Staff Assts & Total for Total for Category/Years Mgmt Mgmt Mgr. Mgr. Officers Trainees Asst. Allied 2010 2009

55 to 60 15 33 49 78 1,408 – 366 98 2,047 1,344 45 to 54 3 14 44 61 1,475 – 670 228 2,495 3,650

35 to 44 1 – 2 3 387 2 152 110 657 730 25 to 34 – – – – 224 263 1,297 47 1,831 1,264 18 to 24 – – – – – – 1,180 – 1,180 550 Total 19 47 95 142 3,494 265 3,665 483 8,210 7,538

Total Corporate Management members Distribution by province (Permanent includes 6 contracted employees filled Employees) through local recruitment. As shown in the table below, more than 80% of the total staff population is employed in In 2010, Corporate Management and the branch network. Executive Management comprise less than 1% of the total staff. Executive No. of Employees Officers including Chief Managers, Senior Corp Managers and other officer grades are Year H/O Bkg. CP EP NP NCP NWP Sab. P SP UP WP Total 3,731 in number, 45% of total workforce. 2010 1,436 625 759 392 418 490 672 454 734 373 1,851 8,204 Management Trainees plus clerical and allied 2009 1,385 604 710 348 335 432 598 399 661 338 1,728 7,538 grades consist of 54% in total.

116 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

The number of employees in all provinces increased due to recruitments made on provincial basis.

New Recruitments Recruitments are made in a transparent Entry Level Wage Structure

No. of Employees manner in accordance with Government The Bank’s entry level monthly remuneration, regulations, with due consideration to Grade 2010 2009 applicable to all job positions, is as follows: safeguard social equity and fairness. The z Management Trainee - Rs. 25,000.00 Management Trainees 50 200 general recruitments therefore are based on Trainee Staff Assistants 1,200 8 open examination, independently conducted z Trainee Staff Assistant - Rs. 12,500.00 by the Department of Examinations. Legal Assistant /Officer 1 8 z Trainee Secretarial Assistant - Rs. 10,000.00 Multi-duty Assistants – 22 Gender Distribution Trainee Secretarial Assistants – 44 No. of Employees System Analyst/ Category Male Female Total Programmer 20 – Corporate Investment Banking Management 15 4 19 Specialist 1 – Executive Management 31 16 47 Senior Executive in Chief Manager 70 25 95 capital market 1 – Specialist in corporate Senior Manager 102 40 142 advisory 1 – Br. Mgr. & Other Officer grades 1,982 1,641 3,623 Total 1,274 282 Banking/Management Trainees 107 156 263 The Bank continues to be a catalyst for the Staff Assistants & development of young talent, providing allied grades 1,465 2,073 3,538 opportunities for educated youth from all Office Assistants & parts of the country. To cater to the surge Allied Grades 467 16 483 in business opportunities in the North and Total 4,239 3,971 8,210 the East, a total of 50 Management Trainees was recruited during the year. Further, a total The Bank has maintained and balanced the of 1,200 Trainee Staff Assistants joined the gender distribution. Bank, who have been deployed in all regions.

BANK OF CEYLON ANNUAL REPORT 2010 117 SUSTAINABILITY REPORT

Staff Turnover Recognition in Service No. of Employees In order to recognise their immense Age group Number on Payroll Number Leaving During 2010 contribution, the Bank offered five hundred Male Female Total Male Female Total and thirty seven awards in the 21st long service award ceremony for the employees 55 and over 1,433 610 2,043 ––– who had successfully completed 25 years of 45 to 54 1,470 1,023 2,493 ––– service. 35 to 44 302 355 657 –22 25 to 34 599 1,232 1,831 –77 Medical Assistance Scheme 18 to 24 429 751 1,180 –11 The Bank maintains a medical assistance scheme for its employees. It provides Terminal Benefits reimbursement/payment of bills on account The Bank maintains an Employees’ Provident of medical expenses incurred routinely as Fund and an Employees’ Pension Fund for its well as for special cases such as surgical employees. The Bank regards its pensioners treatment. as its brethren and revises their pensions from time to time taking into account Staff Loans increases in the cost of living. The Bank operates its own staff loan schemes at concessionary rates for employees. Health Fitness & Sports Activities of Staff The members of the staff in all branches Interest Rate, have formed sports/welfare Clubs. The Bank Type of Loan p.a. (%) grants financial assistance to all these clubs in proportion to the membership. The aim Housing Loan 2.25 to 5.0 of the promotion of sports activities is, inter Distress One Month Salary Loan 0 alia, maintaining health, relationships among Distress Three months salary staff and enhancing productivity. Loan 6.0 Computer Loan 6.5 Gymnasiums Unified General Loan 5.5 Staff Benefits The Bank maintains well-equipped PF Loan 5.0 2010 2009 gymnasiums for employees at the Head Employees' Benefit Plan Rs. million Rs. million Investment Loan 5.0 Office. Further, it has arranged gymnasiums Car Loan 6.5 Bank’s Contribution in its Metropolitan, Pettah and Bambalapitiya to Pension Fund 1,730 1,883 Branches. Labour/Management Relations Bank’s Contribution The Bank respects the right of its employees to W & OP Fund 456 456 Resorts for Holidaying to join unions. 98.4 % of the total work- Bank’s Contribution The Bank also renovated and upgraded the force was covered by Collective Agreement to EPF 526 513 service of the Resorts/Bungalows located signed during the year with the Trade Unions Bank’s Contribution in various parts of the country during the representing the staff. to ETF 130 128 year. A total of 3,367 employees availed Gratuity 79 70 themselves of these facilities with their Compensation Staff Welfare 57 55 families, with 1,142 being assisted with Salaries Medical Assistance transport facilities. The Bank has established harmonious Scheme (on-line relationships with the Trade Unions. branches) 369 312 Catering Services Accordingly, it has been the practice for several The Bank provides meals at the Head Office decades to negotiate salary structures and and York Street Buildings in Colombo at increases every three years culminating with subsidised prices. a Collective Agreement between the two parties. Thus, the Bank entered into a Collective Agreement with the Ceylon Bank Employees’ Union (CBEU) with a pay hike of 10-17% for the employees in the grade of Senior Manager and below and 20% for Chief Manager and above effective from year 2009 to 2011.

118 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

Incentive Payments Number of Work-Related Fatalities by Region The Bank made an incentive payment from No work-related fatalities have been reported the profit earned during the year 2009, within the year 2010. considering the group contribution towards overall profits of the Bank. The Bank is Programmes to Assist Workforce Members - moving towards Performance-Based Reward Serious Diseases System (PBRS). A medical practitioner is employed at Head Office to assist employees with health Industrial Harmony problems. Awareness programmes were During the year, no man hours were lost due conducted with the participation of Specialist to trade union activities. Medical Practitioners to make employees aware of the serious diseases like Dengue Minimum Notice of Employee Regarding and Swine Flue. Operational Changes Operational changes, if any, are discussed at Training & Development corporate and executive management levels, Cultivating talented professionals is one of and the outcome is communicated to the our top priorities. We offer our employees relevant parties through established lines continuous training and development of authority by way of meetings, circulars opportunities to enhance their technical and through other established corporate and management skills in order to meet the communication tools. needs of business. Programmes are targeted, based on regular assessments of needs. Occupational Health and Safety Formal Health & Safety Committees that Training No. of Training Programmes help to monitor and advise on occupational Expenses Year Rs. million In-house Overseas Local safety programmes jointly with management and labour are in existence. The Bank 2010 146 276 137 170 has assigned a specially trained officer to 2009 152 361 117 317 overlook matters pertaining to fire-related 2008 65 283 94 213 risks. In the Head Office building two wardens have been appointed to each floor No. of participants: to co-ordinate the staff in the event of a In-house training 15,502 fire under the guidance of Fire and Safety Local training 666 Security Personnel. The wardens have been Overseas training 405 instructed to organise and convene meetings of the inmates periodically and give necessary instructions to them. Personnel were trained on firefighting practices through the Fire Brigade of the Municipal Council of Colombo. Evacuation drills are also carried out on both spontaneous and pre-informed basis. All required alarm and firefighting systems are in place at all high rise buildings of the Bank.

BANK OF CEYLON ANNUAL REPORT 2010 119 SUSTAINABILITY REPORT

Training Hours

Average hours of training No. of training hours No. of employees per year per employee Employee category 2010 2009 2010 2009 2010 2009

Corporate Management 2,496 328 72 17 35 19 Senior Management 4,368 6,525 156 261 28 25 Executive Officers 122,409 79,534 4,221 3,059 29 26 Executive Assistants 114,282 51,727 5,442 2,249 21 23 Banking Trainees 220,096 18,200 6,878 700 32 26

Building-up of High Potential Culture Technological Advancement in HR In order to increase employee loyalty and The payments of salaries, bonuses, incentives, boost staff morale, the Bank organises various arrears, medical reimbursements, etc. have team building activities. The provincial Area been automated. Further, the Bank was able Managers and Assistant General Manager to implement the new attendance recording frequently conduct meetings and visit system at the Head Office. The process of branches to show that the management cares. advancement in IT is being rolled out to outstation branches with the aim of completing All promotions, gradings, confirmations, the whole automation in the near future. extension of services, overseas training and annual increments are based on Performance Cultural Activities and Potential Appraisal (PPA) System. The 71st Anniversary celebration of the Bank The appraisal of an employee is based on was held in a grand manner, with three mega three factors, viz. an achievement of goals, programmes: behaviour and knowledge. The goals which z Quiz competition was held with the are challenging, measurable and realistic are participation of all provinces & divisions set collectively by the appraiser and appraisee z Cultural Show - ‘Wasanthaya Awith’ also before the beginning of the year. The results for the celebration of Sinhala and Tamil connected to the goals are measured and New Year festival. rated against the measurement devices and reviewed quarterly. Fifty percent of the z Launching of the Second Volume of final appraisal score is based on the results ‘Expanding Horizons’, the chronicle of the achieved by the employee (Appraisee) during Bank the relevant year.

At the time of the final appraisal, the appraiser evaluates the areas where the employee’s skill and/or behaviour/knowledge have to be improved by proper training or development. Thus, the existing PPA has paved the way to build-up a high potential culture through identification of the areas where the employee needs training and development.

Energising others to Perform The Bank has the tradition of recognising staff for their achievements, usually through established communication channels as well as the quarterly journal, ‘Cey-bank News’. The journal is also a forum for staff to present their ideas and messages.

120 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT

HUMAN RIGHTS CORRUPTION z Internal Operational Instruction Circulars INCIDENTS OF DISCRIMINATION AND Our Policy ACTION TAKEN z Personnel Policy Committee z It is the policy of BoC to observe high The Bank advocates equal opportunity and standards of integrity and fair dealing in z Disciplinary Code adopts the principle of justice and fairness in the conduct of its business and to act with z Regular training of staff involved in our human resource management. The Bank due skill, care and diligence. operations, contracts and compliance is committed to maintaining a harmonious workplace which is free from physical or verbal z To comply with both the letter and spirit Further, Internal Audit Department carries harassment or discrimination on gender, of all relevant laws, codes, rules and out regular checks, controls and monitoring, race, religion, age, nationality, and view their regulations and standards of good market with a view to ensure that operational different backgrounds as a success factor. practice in each area we conduct business. activities are carried out in accordance with Accordingly, the Bank maintained maximum established rules, regulations, policies and CHILD LABOUR transparency and corruption-free practices procedures. The Bank does not recruit children for in all its activities. This has been ensured employment. The process relating to the through recruitment and selection is done by verifying z Delegation of authority level for approval the age with reference to the birth certificate. of credit and procurements The Bank does not also promote businesses z Credit/Procurements approvals by or entrepreneurship of its customers that Committees engage in employment of child labour. At the same time, all our outsourced and service z Well-defined procurements policy which providing parties are not accepted if they entails transparent tender procedures indicate to have employed child labour. z System and procedure manuals

BANK OF CEYLON ANNUAL REPORT 2010 121 SUSTAINABILITY REPORT

During the year 2010, Internal Audit Division These visits have tremendously increased, has carried out such evaluations, covering and during the period concerned, there were substantial areas as appearing in the table. around 160 schools that have visited with nearly 14,000 participants including children, Internal Audit Carried Out teachers and parents. No. of branch No. of credit No. of information No. of training conducted No. of audits audits system audits and number of staff (approx.) investigations ON-THE-JOB TRAINING FOR carried out carried out carried out covered in the training carried out UNDERGRADUATES AND SCHOOL LEAVERS

236 53 110 35 training programmes 114 The Bank provides on-the job training and and 2,500 staff members business exposure to school leavers and covered in the training undergraduates by employing them in branches and departments at an appropriate allowance. The school leavers are given The Risk Management Division of the Bank Likewise, we continued with special minimum of six months training focusing too, continuously contributing to achieve the schemes like providing discount vouchers in on general banking. The undergraduates objective of elimination of corruption. The collaboration with D. Samson Industries for are given six months‘ training in selected division has conducted several awareness Ran Kekulu account holders. Students with areas like Accounting System, Management programmes to the staff involved in RKG accounts who obtained top grades in Information System, Treasury activities and operational activities. 20 such programmes the Year 5 Scholarship Examination were Human Resources, etc. The total number of were conducted during the year, with a granted cash awards to help them move school leavers trained for the period under participation of around 900 staff members. forward with their studies. review was 3,146 with a total investment of Rs. 75 million. A total of 458 undergraduates AS BANKERS TO THE NATION, WE TOOK Students who had excelled in G.C.E. was trained during 2010 at an investment of SOCIAL RESPONSIBILITY IN OUR STRIDE (Advanced Level) Examination were awarded THROUGH Rs. 25 million. The Bank considers this effort with 20 scholarships, based on their merits. as an investment in the community, since NURTURING YOUTH TALENTS Further, 71 scholarships of Rs. 30,000/- it is the future generations that are being each to students from all over the country moulded to be a better class of business on the basis of lucky draw were given in leaders. commemoration of the 71st Anniversary of the Bank. SPORTS Cricket Seminars for school children covering all School Banking Units of Bandarawela, Mahiyangana, Moneragala and Badulla branches were conducted with a view to enhancing the leadership qualities of students.

Emotional Serving for School Children History reveals that screening BoC in the heart of Colombo was an attractive mind- end by many school children up to date. In the year 2010, many local schools (specially schools in the Northern & Eastern Provinces) The Inter-Provincial Cricket Tournament, the have organised their educational excursions premier in our domestic cricket calendar, The Bank places great attention on the to Colombo. Amid those visits to Colombo, under the aegis of Sri Lanka Cricket was younger generation of Sri Lanka as we Bank of Ceylon Head Office premises was sponsored by BoC. Targeted at selecting the strongly believe that the seeds of thrift their main aspire and it was, on the other crème de la crème for the National squad, sown in the minds of children will be the hand, an education visit since they are this 3-month fiesta saw individuals and foundation on which nations are built. allowed to access and to gain knowledge on teams displaying a great deal of prowess in Accordingly, we embarked on an aggressive places including Cheque Clearing Centre, the the 3 aspects of the tourney, viz. T20 games, campaign throughout the year and Giant Mural in the lobby, only one of such the 50-Over matches and latterly, the 4-day established 210 units of ‘School Sansadaya’ a kind in Sri Lanka and Cash Museum of encounters for the Bank of Ceylon Trophy in in schools countrywide. the Bank where antique currency coins and notes are kept, and the picturesque City of Colombo from the topmost floor of the Bank.

122 BANK OF CEYLON ANNUAL REPORT 2010 SUSTAINABILITY REPORT each category. Cricket fans got more than a Maritime Adventure Soccer glimpse of the stars in Pallekelle, Kurunegala, The 60th jubilee of the Sri Lanka Navy At the request of the Football Team of the Galle, Moratuwa and a host of venues in which enveloped a host of events centred University of Colombo in collaboration with Colombo. on maritime adventure, exhibits, music, their Department of Physical Education, entertainment and a ceremonial flotilla we readily responded through sponsorship Motor Sports & Super Cross received our sponsorship support in of the inaugural Inter-University Football For the second successive year, the Carlton December. Tournament. The Tournament was Super event at Hambantota proved to be conducted under the watchful eyes of the an exciting sports extravaganza where Swimming Football Federation of Sri Lanka. Teams Bicycle Races, Water Sports, Motor racing, The Open Age Group National Swimming from the Universities in Jaffna, Moratuwa, Motor Cross and off-road 4x4 events drew Championship Meet organised by the Old Jayawardenapura, Kotelawala Defence participation from outside the district much Anandians Sports Club and conducted by the Academy, SLIIT, APIIT and, of course, to the satisfaction of this rural constituency Aquatic Association of Sri Lanka in August Colombo University, participated. in their rapidly changing environment. The had wide participation from schools and carnival closed with musical shows, every individuals. The Central Province Sports festival was evening, in which young artistes had an successfully held at the Bernard Aluvihare opportunity to display their talents. The Bank Tennis Stadium in Matale, with the participation of associated itself as the principal sponsor. a special team of fellow staff members from the Northern Province.

RELIGIOUS, CULTURAL & LITERARY SPONSORSHIPS BoCs ties with the venerated Sri Dalada Maligawa and its activities have continued to strengthen for a number of years. We gave generous financial grants for the conduct of the annual Esala Pageant, the regular monthly bulletins on TV and print, in addition to the support for computer education. A first of its kind, the Bank considered it our bounden duty to sponsor the International The Bank lent a generous hand to the Sri ‘Dalada Waruna’ monthly publication Wheel Chair Tennis Championship for Lanka Army in support of their efforts to and ‘Dalada Sevana’ TV programme was the disabled conducted by the SLTA and create awareness and raise funds for the sponsored by the Bank throughout the year. organised by the SSC which was held in welfare of the disabled soldiers and their Colombo in August. Sri Lanka took the families through a host of events. The larger The annual Perahera at Kataragama Devalaya, Championship at this skill. of these events, conducted in association Poson activities at Tissamaharama and the with SLADAR was the Annual Fox Hill Super Mirisavetiya in Anuradhapura were some Track & Field Cross at Diyatalawa, Motor Cross events at of the major involvements with the Bank At the Annual Schools Track & Field Boyagane, Minneriya. through sponsorships. Championship organised by the Ministry of Education, generous denominations of The Katukurunda Motor races organised by For the second successive year, the Poson Savings Certificates were presented to the the Sri Lanka Air Force under the supervision illumination at the Somawathi Chaithiya in 6 categories in recognition of their prowess of SLARDAR were sponsored by BoC for the Seruwila received the Bank’s sponsorship. 5th year. and also to inculcate the savings mindset in the young achievers. Colombo’s Navam Perahera and Vesak activity in the city conducted by the Gangaramaya and the All Ceylon Buddhist Congress saw active participation through financial support and involvement by the Bank’s Buddhist Society.

BANK OF CEYLON ANNUAL REPORT 2010 123 SUSTAINABILITY REPORT

The epic construction of the tallest sculpture The Annual Athletic Meet of the Southern of Lord Buddha in Rambodagalla continues Province conducted by the Department of to receive generous support of the Bank and Education and held at Matara was sponsored our employees. by the Bank.

The Bank also sponsored the construction The student who obtained Island‘s 1st place of three dwellings in the greater Madhu in Year 5 Scholarship examination was a RKG Development Zone. account holder of BoC Maharagama Branch. In addition to the ‘Nenapahana’, a special IFTHAR programmes were conducted at all scholarship awarded until his graduation, a branches in predominantly Muslim areas with special cash award of Rs. 100,000/- was also the view to cultivating religious harmony. granted to the student.

‘Ruhune Aluth Sahal Mangalya Ceremony’ Also, out of the three students who obtained organised by the Tissamaharama branch for 2nd places in the above examination, one the 15th time was held at Tissa Raja Maha student who was a RKG account holder at Viharaya. Matugama Branch, and the student who ranked island‘s 3rd was given a special cash The Bank continued to sponsor and support award too. He holds a RKG account at our the activities of National Business Chambers Kottawa Branch. in Industry and Commerce, too numerous to mention herein, at their annual awards in Under the Bank’s CSR project, the province Under CSR projects, the Sabaragamuwa particular and welfare activities in general. has taken action to clean and paint the Province has conducted blood donation Female Ward No. 1B of the Kalutara-Nagoda campaigns at Ratnapura SG, Mawanella, At the Deyata Kirula exhibition, we featured Hospital. Also cleaned and painted the Ward Yatiyantota and Ruwanwella branches. a well-designed stall which caught the eye of No. 1B of Nagoda Base Hospital renovating many visitors. all toilets and fully repaired the ward at a Seminars for school children covering all cost of Rs. 750,000/-. School Banking Units of Bandarawela, The Bank lent a hand in sponsoring a coffee Mahiyangana, Moneragala and Badulla table photo extravaganza authored by Vajira Under the Bank’s CSR Project, Uva Province branches were conducted with a view to Wijegunawardena on the Majesty of the has renovated the Mahiyangana Government enhancing the leadership qualities of the Sri Lanka Elephant as part of our focus on Hospital, re-wired two wards in Bibile students. biodiversity. Hospital. An Awareness Programme for the Matara Already arrangements are under way to District self-employed persons was held with complete construction of a Waiting Room for 800 participants. patients in Dambagalla Hospital at a cost of Rs. 0.4 million. Has undertaken to complete 8. G3 STANDARD DISCLOSURES AND REPORT construction of an Emergency Treatment Unit APPLICATION LEVEL in Wellawaya Hospital at a cost of REPORT APPLICATION LEVEL Rs. 2.0 million. This Sustainability Report is prepared in accordance with the Global Reporting Initiative (G3) indicator protocols. The Bank of Ceylon self-declares a ‘C+’ level rating against the G3 Application Levels, and sought external assurance for its Sustainability Report which is appearing on page 125.

124 BANK OF CEYLON ANNUAL REPORT 2010 7HO  &KDUWHUHG$FFRXQWDQWV    ´&KDUWHU+RXVHµ )D[  6LU&KLWWDPSDODP$*DUGLQHU0DZDWKD (PDLO EGRSDUWQHUV#EGRON &RORPER :HEVLWH ZZZEGRON Sri Lanka

INDEPENDENT ASSURANCE REPORT TO THE A limited assurance engagement is substantially Other Information STAKEHOLDERS OF BANK OF CEYLON ON less in scope than a reasonable assurance We planned and performed following assurance THE SUSTAINABILITY REPORT - 2010 engagement and consequently does not procedures on other information presented in enable to obtain assurance that we would the Report: INTRODUCTION AND SCOPE OF THE ENGAGEMENT become aware of all significant matters that z Inquiring relevant Bank‘s personnel to might be identified in a reasonable assurance The management of Bank of Ceylon (‘Bank‘) understand the process for collection, engagement. engaged us to provide an independent analysis, aggregation and presentation of assurance on the following elements of the information in the Report. This Report is made solely to the Bank in Sustainability Report 2010 (‘the Report‘). z Reviewing the system used to generate, accordance with our engagement letter dated aggregate and report the information in z Reasonable assurance on the information March 07, 2011. We disclaim any assumption the Report on financial performance as specified on of responsibility for any reliance on this Report pages 104, 105 and 106 of the Report. to any person other than the Bank or for any z Interviewing the senior management z Limited assurance on key performance purpose other than that for which it was and relevant staff at corporate level and indicators and other information presented prepared. In conducting our engagement, selected business unit level and obtained in the Report. we have complied with the independence the evidence concerning sustainability requirements of the Code of Ethics for strategy and policies for material issues and RESPONSIBILITY OF THE MANAGEMENT professional Accountants issued by the ICASL. implementation of those across operation ON THE REPORT of the Bank.

The management of the Bank is responsible ASSURANCE PROCEDURES CARRIED OUT z Reviewing and validating the information for the preparation and presentation of Financial Information contained in the Report. the Report in accordance with the Bank's We reconciled the information on financial z Reading the information presented in sustainability practices and policies which performance as reported on pages 104, 105, the Report to determine whether that are derived from Global Reporting Initiatives and 106 of the Report with the Audited information is in line with our overall (GRI-G3) Sustainability Reporting Guidelines. Financial Statements of the Bank for the years knowledge of, and experience with, These responsibilities include among other ended December 31, 2009 and 2010. sustainbalility performance of the Bank. things, identification of stakeholders and material issues, determining the sustainable Key Performance Indicators CONCLUSION performance criteria for reporting and We reviewed the reliability of the data/ Based on the procedures performed, as establishing appropriate processes and information on Key Performance Indicators for described above, we conclude that: internal control systems to measure and report the year ended December 31, 2010 based on the sustainability performance criteria. reviews of: z The information on financial performance as specified on pages 104, 105 and 106 of the z the systems used to generate, aggregate OUR RESPONSIBILITY and report these information; Report is properly derived from the Audited Our responsibility is to perform a reasonable Financial Statements of the Bank for the z the information reported by the relevant and limited assurance engagement and years ended December 31, 2009 and 2010. business units to corporate level; express conclusions based on the work z Nothing has come to our attention that performed in accordance with Sri Lanka z the information validation processes at causes us to believe that key performance Standard on Assurance Engagements corporate and business level; indicators and other information presented (SLSAE 3000): ‘Assurance Engagements other z the information trends in discussions with in the Report are not presented, in all than Audits or Reviews of Historical Financial management; and material respects, in accordance with Information‘, issued by The Institute of the Bank's sustainability practices and z the calculation performed by the Bank on a Chartered Accountants of Sri Lanka (‘ICASL’). policies which are derived from GRI (G3) sample basis through recalculation. Sustainability Reporting Guidelines. Reasonable assurance is a high level of assurance. However, reasonable assurance is not an absolute level of assurance because there are inherent limitations of assurance engagement. CHARTERED ACCOUNTANTS

March 21, 2011 Colombo

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BANK OF CEYLON ANNUAL REPORT 2010 125 G3 STANDARD DISCLOSURES INDEX

The table given below provides a cross reference to the G3 standard disclosures to the key sections of the Annual Report (which includes a Management Report, Risk Management Report, Corporate Governance Report, Sustainability Report (SR), Financial Report and Report of the Board of Directors) where applicable. The rest are indicated in the table itself, or are reported as Not Applicable (NA), Not Material (NM), or Not required as per ‘C’ level of reporting (NR) as the case may be.

No. Description Location/Reference Page No.

1 Strategy and Analysis 1.1 Statement from the most senior decision maker of the organisation (e.g., CEO, chair or Sustainability Report (SR) 95 equivalent senior position) about the relevance of sustainability to the organisation and its strategy 1.2 Description of key impacts, risks and opportunities Risk Management Report 87

2 Organisational Profile 2.1 Name of the organisation Bank of Ceylon 2.2 Primary brands, products, and/or services Product & Services 132 SR 97 2.3 Operational structure of the organisation, including main divisions, operating companies, SR 96 subsidiaries and joint ventures 2.4 Location of organisation’s headquarters 4, Bank of Ceylon Mawatha, Colombo 1 2.5 Number of countries where the organisation operates and names of countries with SR covers the domestic 97 either major operations or that are specifically relevant to the sustainability issues operations of the Bank covered in the Report 2.6 Nature of ownership and legal form SR 95 Corporate information Inner Back Cover 2.7 Markets served (including geographic breakdown, sectors served and types of customers/ SR 97 beneficiaries) Notes to the Financial Statements 191 BoC service points 262 2.8 Scale of the reporting organisation SR 97 2.9 Significant changes during the reporting period regarding size, structure or ownership SR 98 2.10 Awards received in the reporting period SR 98

3 Report Parameters 3.1 Reporting period (e.g., fiscal/calendar year) for information provided 1 January 2010 to 31 December 2010 3.2 Date of most recent previous Report December 2009 3.3 Reporting cycle (annual, biennial, etc.) Annual 3.4 Contact point for questions regarding the Report or its contents SR 99 3.5 Defining Report content SR 99 3.6 Boundary of the Report SR 99 3.7 State any specific limitations on the scope or boundary of the Report Relating to local operations of the Bank 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, N/A and other entities that can significantly affect comparability from period to period and/or between organisations 3.9 Data measurement techniques and the bases of calculations, including assumptions and SR 99 techniques underlying estimations applied to the compilation of the indicators and other information in the Report 3.10 Explanation of the effect of any restatement of information provided in earlier Report, NA and the reasons for such restatement 3.11 Significant changes from previous reporting periods in the scope, boundary or SR 99 measurement methods applied in the Report 3.12 Table identifying the location of the standard disclosures in the Report SR 126 3.13 Policy and current practice with regard to seeking external assurance for the Report SR 124

126 BANK OF CEYLON ANNUAL REPORT 2010 G3 STANDARD DISCLOSURES INDEX

No. Description Location/Reference Page No.

4 Governance, Commitments and Engagement 4.1 Governance structure of the organisation, including committees under the highest Corporate Governance 56 governance body responsible for specific tasks, such as setting strategy or Report (CGR) organisational oversight 4.2 Indicate whether the chair of the highest governance body is also an executive officer CGR 56 4.3 For organisations that have a unitary board structure, state the number of members of CGR and Report of the Board 63 & 139 the highest governance body that are independent and/or non-executive members of Directors on the State of affairs of the Bank 4.4 Mechanisms for shareholders and employees to provide recommendations or directions CGR 56 - 86 to the highest governance body 4.5 Linkage between compensation for members of the highest governance body, senior CGR 56 - 86 managers and executives, and the organisation’s performance 4.6 Processes in place for the highest governance body to ensure conflicts of interest are CGR 56 - 86 avoided 4.7 Process for determining the qualifications and expertise of the members of the highest CGR 56 - 86 governance body for guiding the organisation’s strategy on economic, environmental and social topics 4.8 Internally-developed statements of mission or values, codes of conduct and principles CGR 56 - 86 relevant to economic, environmental and social performance and the status of their implementation 4.9 Procedures of the highest governance body for overseeing the organisation’s CGR 56 - 86 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 CGR 56 - 86 with respect to economic, environmental and social performance 4.11 Explanation of whether and how the precautionary approach or principle is addressed CGR 56 - 86 by the organisation 4.12 Externally developed economic, environmental and social charters, principles or other NA initiatives to which the organisation subscribes or endorses 4.13 Memberships in associations (such as industry associations) and/or national/international Ceylon Chamber of advocacy organisations in which the organisation Commerce Sri Lanka Bank’s Association (Guarantee) Limited 4.14 List of stakeholder groups engaged by the organisation SR 100 - 102 4.15 Basis for identification and selection of stakeholders with whom to engage SR 100 - 102 4.16 Approaches to stakeholder engagement, including frequency of engagement by type SR 100 - 102 and by stakeholder group 4.17 Key topics and concerns that have been raised through stakeholder engagement, and SR 100 - 102 how the organisation has responded to those key topics and concerns, including through its reporting

BANK OF CEYLON ANNUAL REPORT 2010 127 G3 STANDARD DISCLOSURES INDEX

No. Description Location/Reference Page No.

5 Management Approach and Performance Indicators Economic 5.1 Disclosure on management approach to economic aspects Management Discussion and 30 Analysis EC1 Direct Economic value generated and distributed, including revenues, operating costs, SR 104 employee compensation, donations and other community investments, retained earnings and payments to capital providers and Governments EC2 Financial implications and other risks and opportunities for the organisation’s activities SR 106 due to climate change EC3 Coverage of the organisation’s defined benefit plan obligations SR 118

EC4 Significant financial assistance received from Government The Bank does not receive significant financial assistance from the Government EC5 Range of ratios of standards entry level wage compared to local minimum wage at SR 117 significant locations of operation EC6 Policy, practices and promotions of spending on-locally-based suppliers at significant Supply procedure locations of operation is governed by the procurement policy manual EC7 Procedures for local hiring and proportion of senior management hired from the local SR 117 community at locations of significant operation EC8 Development and impact of infrastructure investments and services provided primarily for NR public benefit through commercial, in-kind or pro bono engagement EC9 Understanding and describing significant indirect economic impact, including the extent Management Discussion 30 of impacts and Analysis Environmental 5.2 Disclosure on management approach to environmental aspects SR 111 Materials EN1 Materials used by weight or volume SR 112 EN2 Percentage of materials used that are recycled input materials NA Energy EN3 Direct energy consumption by primary energy source None EN4 Indirect energy consumption by primary source None EN5 Energy saved due to conservation and efficiency improvements NR EN6 Initiatives to provide energy-efficient or renewable energy-based products and services NR and reductions in energy requirements as a result of these initiatives EN7 Initiatives to reduce indirect energy consumption and reductions achieved NR Water EN8 Total water withdrawal by source Insignificant EN9 Water sources significantly affected by withdrawal of water Insignificant EN10 Percentage and total volume of water recycled and reused NR

128 BANK OF CEYLON ANNUAL REPORT 2010 G3 STANDARD DISCLOSURES INDEX

No. Description Location/Reference Page No.

Biodiversity EN11 Locations of size of land owned, leased, managed in or adjacent to, protected areas and Bank’s operational units are areas of high biodiversity value outside protected area located within the protected areas or high biodiversity valued areas EN12 Description of significant impacts of activities, products and services on biodiversity in Bank activities product or protected areas and areas of high biodiversity value outside protected areas services do not affect on the biodiversity EN13 Habitats protected or restored NA EN14 Strategies, current actions and future plans for managing impacts on biodiversity NA EN15 Number of IUCN Red list species and national conservation list species with habitats in Bank‘s operations do not areas affected by operations, by level of extinction risk affect the Red list species Emissions, Effluents and Waste NR EN16 Total direct and indirect greenhouse gas emissions by weight NR EN17 Other relevant indirect greenhouse gas emissions by weight NR EN18 Initiatives to reduce greenhouse gas emissions and reduction achieved NR EN19 Emissions of ozone-depleting substances by weight NA EN20 No, SO, and other significant air emissions by weight NA EN21 Total water discharged by quality and destination NR

EN22 Total weight of waste by type and disposal method NR EN23 Total number of volumes of significant spills NR EN24 Weight of transported, imported, exported or treated waste deemed hazardous under NR the terms of Basel Convention Annex I, II, III and VIII and percentage of transported waste shipped internationally EN25 Identify size, protected status and biodiversity value of water bodies and related habitats NR significantly affected by the reporting organisation’s discharges of water and run-off Products and Services EN26 Initiative to mitigate environmental impacts of products and services, and extent of Bank‘s products being service impact mitigation nature, do not have an impact on environment EN27 Percentage of products sold and their packaging materials that are reclaimed by category NR Compliance EN28 Monetary value of significant fines and total number of non-monetary sanctions for No fines have been imposed non-compliance with environmental laws and regulations for non-compliance with environmental laws Transport EN29 Significant environmental impacts of transporting products and other goods and materials SR 113 used for the organisation’s operations and transporting member of the workforce Overall EN30 Total environmental protection expenditure and investments by type SR 111 - 113

N/A - not applicable NR - Not required as per C level of reporting

BANK OF CEYLON ANNUAL REPORT 2010 129 G3 STANDARD DISCLOSURES INDEX

No. Description Location/Reference Page No.

Social 5.3 Disclosure on management approach to social aspects SR 114 Labour Practices and Decent Work LA1 Total workforce by employment type, employment contract and region SR 116 - 117 LA2 Total number and rate of employee turnover by age group, gender region SR 118 LA3 Benefits provided to full-time employees that are not provided to temporary or SR 117 - 118 part-time employees, by major operations LA4 Percentage of employees covered by collective bargaining agreements SR 118 LA5 Minimum notice period(s) regarding operational changes, including whether it is SR 118 specified in collective agreements LA6 Percentage of total workforce represented in formal joint management-worker health and SR 119 safety committees that help monitor and advice on occupational health and safety programmes LA7 Rates of injury, occupational diseases, lost days and absenteeism and of work-related SR 119 fatalities by region LA8 Education, training, counselling, prevention and risk-control programmes in place 121 to assist workforce members, their families or community members regarding serious diseases LA9 Health and safety topics covered in formal agreements with trade unions 121 LA10 Average hours of training per year per employee by employee category SR 120 LA11 Programmes for skills management and lifelong learning that support the continued SR 120 employability of employees and assist them in managing career endings LA12 Percentage of employees receiving regular performance and career development reviews SR 120 LA13 Composition of governance bodies and breakdown of employees per category according SR 116 - 117 to gender, age, group, minority group membership and other indicators of diversity LA14 Ratio of basic salary of men to women by employee category Maintains equal ratio

Human Rights HR1 Percentage and total number of significant investment agreements that include human NR rights clauses or that have undergone human rights screening HR2 Percentage of significant suppliers and contractors that have undergone screening on NR human rights and actions taken HR3 Total hours of employee training on policies and procedures concerning aspects of human NR rights that are relevant to operations, including the percentage of employees trained HR4 Total number of incidents of discrimination actions taken SR 121 HR5 Operations identified in which the right to exercise freedom of association and collective SR 118 bargaining may be at significant risk, and actions taken to support these rights HR6 Operations identified as having significant risk or incidents of child labour, and measures SR 121 taken to contribute to the elimination of child labour HR7 Operations identified as having significant risk for incidents of forced or SR 121 compulsory labour, and measures taken to contribute to the elimination of forced or compulsory labour HR8 Percentage of security personnel trained in the organisation’s policies or procedures NR concerning aspects of human rights that are relevant to operations HR9 Total number of incidents of violations involving rights of indigenous people and No incidents of violation of actions taken rights of indigenous people

130 BANK OF CEYLON ANNUAL REPORT 2010 G3 STANDARD DISCLOSURES INDEX

No. Description Location/Reference Page No.

Society SO1 Nature, scope and effectiveness of any programmes and practices that asses and manage SR 114 the impacts of operations on communities, including entering, operating and exiting SO2 Percentage and total number of business units analysed for risks related to corruption SR 87, 122 SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures SR 122 SO4 Actions taken in response to incidents of corruption None SO5 Public policy positions and participation in public policy development and lobbying None SO6 Total value of financial and in-kind contributions to political parties, politicians and None related institutions by country SO7 Total number of legal actions taken for anti-competitive behaviour, anti-trust and None monopoly practices and their outcomes SO8 Monitory value of significant fines and total number of non-monetary sanctions for None non-compliance with laws and regulations Product Responsibility 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 PR2 Total number of incidents of non-compliance with regulations and voluntary codes None concerning health and safety impacts of products and services during their life cycle, by type of outcomes PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements PR4 Total number of incidents of non-compliance with regulations and voluntary codes None concerning product and service information and labelling, by type of outcomes. PR5 Practices related to customer satisfaction, including results of surveys measuring customer SR 100 satisfaction PR6 Programmes for adherence to laws, standards and voluntary codes related to marketing NR communications, including advertising, promotion and sponsorship PR7 Total number of incidents of non-compliance with regulations and voluntary codes None concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes PR8 Total number of substantiated complaints regarding breaches of customer privacy and None losses of customer data PR9 Monetary value of significant fines for non-compliance with laws and regulations NR concerning the provision and use of products and services

BANK OF CEYLON ANNUAL REPORT 2010 131 PRODUCTS AND SERVICES

DEPOSITS Prestige+Current Account - Personalised Foreign Currency Savings Account for LOCAL CURRENCY DEPOSIT ACCOUNTS cheque book, free Visa Electron debit card Professional Service Providers Normal Savings - General purpose savings with a withdrawal limit of Rs. 100,000, Foreign Currency Fixed Deposit for Professional Service Providers account for anyone above 18 years of age. free BoC credit card, Internet banking, SMS banking facilities. Foreign Currency Current Account for Ran Kekulu - Higher interest, scholarships for Professional Service Providers grade 5 scholarship winners, free insurance BoC Infinity - Ability to choose the retirement policies for both, the child and account benefits in multiplies of Rs. 10,000. RFC Accounts holder and many more benefits. RFC Savings and Fixed Deposits BoC Vishrama - Flexible investment Transactions in 9 currencies, attractive 14+ Teen Savings - Unique savings scheme opportunity for cash in hand. interest rates, loan facilities, credit card and ideal for teenagers which could be operated Maturity Deposits VISA Electron debit card. Tax exemptions for by themselves, free VISA Electron Card. 7-day Call Deposits interest earnings. 18+ Youth Savings - Life insurance cover to a Savings Certificates - Ideal short-term Children’s Savings maximum of Rs. 500,000 and special insurance investment, instant loans and overdrafts, cover for partial disability and illness, a gold interest paid upfront, no stamp duty/ Ran Kekulu Foreign Currency - Transactions in coin for the wedding and Ran Kekulu for first withholding tax, encashment at any branch. 9 currencies, bonus interest. born, scholarships for higher education, special facilities and many more benefits. Fixed Deposits - General purpose fixed Other Accounts deposits for anyone over 18 years of age. Ethera Thilina Savings Sisu Saviya Savings - To encourage savings Moving Rate Fixed Deposits - Ability to receive Resident Non-National Foreign Currency among school children. Savings (RNNFC) different interest rates depending on the period. Kantha Ran Ginum - Higher interest, Free Export Foreign Currency Accounts (EFC) insurance policy cover up to Rs. 500,000 (Life Senior Citizens Fixed Deposits - Deposit with & Accident cover), loan facilities at special special interest rates for senior citizens. Special Foreign Investment Deposit Accounts (SFIDA)* - Deposit account for interest rate, Apsara Visa Credit Card. BoC Smart Saver - Protection against interest Non-Sri Lankans/Non-resident investors with Senior Citizens Savings - Assured monthly rate fluctuations. high interest rates, tax exemptions. payments during the retirement as per Securities Investment Account (SIA) - agreed plan. To invest in treasury bills/treasury bonds Senior Foreign Investment Deposit Account Senior Citizens Fixed Deposits - Monthly issued by Government of Sri Lanka/equity (SENIOR FIDA)* - Facilitate investment with interest payment at a higher rate. capital of companies incorporated in a view to obtaining Sri Lankan Permanent Sri Lanka/units of unit trusts in Sri Lanka. Resident Visa for Senior Foreign Nationals Special Purpose Accounts under 'Sri Lanka My Dream Home' Programme. Ran Govi Thenpathu - To promote savings FOREIGN CURRENCY DEPOSIT ACCOUNTS habit among farmer community. NRFC Accounts * These accounts can be opened with any NRFC Savings and Fixed Deposits Ranaviru Ran Ginum - Specially designed designated foreign currencies or Sri Lankan Transactions in 9 currencies, free life savings account for staff in the armed forces. rupees. insurance cover, 'BoC Sarani' housing loan Samurdhi Savings - To encourage savings and other loan facilities, no commission among lower income groups. Specially charges for foreign currency inward designed with higher interest rate. remittances, e-banking facilities, international and local Visa debit/credit cards, tax Dheevara Thenpathu - Specially designed for exemptions for interest earnings. the fishing community.

132 BANK OF CEYLON ANNUAL REPORT 2010 PRODUCTS AND SERVICES

TREASURY Micro Enterprises Education Primary Dealer Unit Estate Sector Self-Employment BoC comprehensive educational loan scheme Treasury Bills Kantha Ran Diriya BoC personal computer loan scheme Treasury Bonds Small Enterprise Development Sookshama Other Credit Facilities REPOs Poverty Alleviation Microfinance Project Pledge Loans Reverse REPOs Hypothecation Loans Fisheries Trust Receipt Loans Forex & Fund Management Deewara Shakthi Credit Scheme Series of Loans Forwards Fisheries Credit Scheme without subsidy Foreign Currency Loans SWAPS Aquatic Resources Development Quality Bridging Loans Import/Export Financing Improvement Project Credit Scheme (ARDQIP) Export Packing Credit Loans Custodian Services Agribusiness Letters of Guarantee Money Market Lending & Borrowing Kapruka Credit Purchase Guarantee Interest Rate Swap Improvement of locally produced rice Tender Guarantee Krushi Navodaya Credit Scheme Bid Guarantee (Bid Bond) ADVANCES Performance Guarantee (Performance Bond) Personal Lending Housing Advance Payment Guarantee (Advance Bond) Overdraft Facilities: Government Employees Housing Loan Retention Guarantee (Retention Money Bond) Permanent Overdrafts BoC housing loan scheme Customs Duty Guarantee for Imports Export Packing Credit Overdrafts (Custom Duty Bond) Ran Surekum Overdrafts Transportation Shipping Guarantee Temporary Overdrafts Three wheel auto rickshaws Motor cycles for employees of Government Lease Financing Home Loans: Purchase of bicycle BoC Leasing Scheme - Flexible services, Rannivasa Motor vehicle loan scheme ability to obtain leasing facilities even Housing Loan for NRFC customers Importation of motor vehicles under permits without a guarantor. Motor vehicles for provincial council members Special Leasing Scheme with DIMO Other Loan Schemes Bus purchase loan for private bus owners Other Services Development Lending Small & Medium Enterprises Letters of Credit Microfinance Technical Transfer Assistance Scheme (TTAS) Negotiation of Bills (DP/DA Terms, deferred New Comprehensive Rural Credit under SMILE III payment terms) Scheme (NCRCS) TTAS under E-Friends II Purchase of Export Bills (DA/DP) Govishakthi Credit Scheme Gamata Naya Purchasing of Cheques Encashment Facilities Consumption BoC personal loan

BANK OF CEYLON ANNUAL REPORT 2010 133 PRODUCTS AND SERVICES

Credit Cards Visa Credit Card - Local z Range of cards to suit different needs Visa Credit Card - International z Lowest interest rates Visa Platinum Smart Card z Additional limit for emergency (BoC Black Card) hospitalisation Master Credit Card z Free life insurance cover, permanent total Apsara Ladies Credit Card disability cover and lost baggage cover Visa/Master Card Acquiring z ‘Spend more-have more’ loyalty scheme Services z Interest free easy payment scheme Visa Electron Debit Card

SPECIAL SERVICES Value-Added Services Cash Services Gold Shop ATM Services Safe Custody Vault Cheque Encashment Insurance Desk SLT Direct Debit Left Handers’ Cheque Book Foreign Currency Ran Kekulu Gift Vouchers RTGS Fund Transfer Money & Banking Museum Funds Transfer Small Entrepreneur Consultancy Inter-Branch Money Transfers Trade Information and Help Desk SWIFT e-Channelling SLIPS Ran Kekulu Sansada (School Savings Units) Telegraphic Transfers SMS Banking Mail Transfers BoC Paymate - paying utility bills and other e-Cash Inward Remittance Service services via SMS (Moneygram, Ez remit, Coin Star, Phone Banking Telemoney) BoC Internet Banking Xpress Inward Remittance Service

Issuing and Encashing Foreign Drafts ISLAMIC BANKING PRODUCTS Deposits Travel Services BoC An-noor Current Account Bureau de Exchange An-noor Ordinary Savings Traveller’s Cheques An-noor Children’s Savings (‘Afthal’) BoC products for Muslim community - Loans Shari’ah compliant An-noor Leasing (‘Ijarah’) banking An-noor Trade Finance and Term Loan (‘Murabaha’) An-noor ‘Wakala’

134 BANK OF CEYLON ANNUAL REPORT 2010 FINANCIAL REPORTS

Annual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon 137 Directors’ Interests in Contracts 141 Directors’ Responsibility for Financial Reporting 145 Independent Assurance Report 146 Directors’ Statement on Internal Control 147 Report of the Auditor General 149 Income Statement 150 Balance Sheet 151 Statement of Changes in Equity 152 Cash Flow Statement 153 Significant Accounting Policies 156 Notes to the Financial Statements 167

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE BANK OF CEYLON

The Board of Directors of the Bank of Ceylon CHANGES TO THE GROUP STRUCTURE ATMs to 352. This number does not include peer has pleasure in presenting their report on the During the year, Property Development PLC, a bank’s ATMs through which customers of Bank affairs of the Bank together with the Audited Subsidiary of the Bank of Ceylon, has acquired of Ceylon can transact. Consolidated Financial Statements for the 94.59% of the stake in Koladeniya Hydropower year ended 31 December 2010, of the Bank (Private) Limited (hydropower generating FUTURE DEVELOPMENTS and the Group and the Auditors’ Report on project) by investing Rs. 23,625,000/-, making it An overview of the future plans and those Financial Statements, conforming to the an indirect Subsidiary of the Bank. development of the Bank is presented in the requirements of the Bank of Ceylon Ordinance Chairman’s Message on pages 8 to 10 and No. 53 of 1938, Banking Act No. 30 of 1988 The Financial Services Authority (FSA), the Management Discussion and Analysis on pages and amendments thereto. The report also regulator of the financial service industry 30 to 44 of this Annual Report. includes certain disclosures laid down by the in the United Kingdom, required that the Colombo Stock Exchange Listing Rules and London branch of the Bank be converted into a RISK MANAGEMENT certain disclosures required to be made under Subsidiary of Bank of Ceylon with its own capital The Board of Directors assumes overall the Banking Act Direction No. 11 of 2007 on base, management and Board of Directors. responsibility for managing risks. The specific Corporate Governance for Licensed Commercial As it is in the corporate agenda of the Bank measures taken by the Bank in mitigating with Banks issued by the Central Bank of Sri Lanka. to gradually enter the Global Financial Service the risks are detailed on pages 87 to 93 of The Directors approved the Financial Statements Industry and enhance the aggregate value of this Annual Report. on 16 March 2011. the Bank of Ceylon brand, the opportunity offered was ideally used. As a result, Bank of INTERNAL CONTROL The Bank of Ceylon is a licensed commercial Ceylon (UK) Limited was established in May The Board of Directors has ensured the bank established under the Banking Act 2010 as a fully-owned Subsidiary of Bank of implementation of an effective and No. 30 of 1988 and was duly incorporated Ceylon with an investment amounting to comprehensive system of internal controls in the on 01 August 1939 under the Bank of Ceylon GBP 12 million (Rs. 2,087 million). Ordinance No. 53 of 1938. Bank is wholly Bank through the Audit Committee. owned by the Government of Sri Lanka. The VISION, MISSION AND CORPORATE CONDUCT unsecured subordinated redeemable debentures The Audit Committee helps the Board The Bank’s Vision and Mission are given issued by the Bank are listed on the Colombo of Directors to discharge their fiduciary on page 2 of this Annual Report. The Bank Stock Exchange. responsibilities. The report of the Chairman of maintains high ethical standards in its activities the Audit Committee is contained on pages 81 whilst pursuing the objectives stated under PRINCIPAL ACTIVITIES and 82 of this Annual Report. The Directors are ‘Vision’ and ‘Mission’. satisfied with the effectiveness of the system of BANK internal control during the year under review The principal activities of the Bank during REVIEW OF THE YEAR’S PERFORMANCE and up to the date of the Annual Report and the year were commercial banking, personal The Chairman’s Message on pages 8 to 10 deals the Financial Statements. The Board has issued banking, development financing, mortgage with the year’s performance of the Bank/Group a statement on the internal control mechanism financing, lease financing, investment banking, and on the Sri Lanka economy. The General of the Bank as per Direction No. 3 (8) (ii) (b) Islamic banking, corporate financing, dealing Manager’s Review on pages 11 to 13 provides of Banking Act Direction No. 11 of 2007 on in Government Securities, pawn broking, credit a detailed description of the operations of the Corporate Governance for Licensed Commercial card facilities, internet and e-banking, off-shore Bank during the year under review. Banks. The above report is given on pages 147 banking, foreign currency operations and other and 148 of this Annual Report. The Board has financial services. Management Discussion and Analysis on confirmed that financial reporting system has pages 30 to 44 provide a detailed analysis of been designed to provide reasonable assurance SUBSIDIARIES AND ASSOCIATES business operations of the Bank. These reports regarding the reliability of financial reporting and The principal activities of Subsidiaries and that provide a fair review of Bank’s affairs form that the preparation of Financial Statements for Associates are given in Significant Accounting an integral part of this Report. external purposes has been done in accordance Policies to the Financial Statements on page 156. with relevant accounting principles and BRANCH EXPANSION OF THE YEAR regulatory requirements. There were no significant changes in the nature The Bank extended its services through the of the principal activities of the Bank and the addition of 26 new extension offices during the The Board has obtained an Assurance Report Group during the year under review other period under review. The number of branches from the Auditor General on Directors’ than for engaging in hydropower generating that existed was reduced by one with the closure Statement on Internal Control and it is given on business through acquisition of a hydropower of London branch that has been converted into page 146 of this Annual Report. project to the Group. a Subsidiary of the Bank. The ATM network was further expanded enhancing customer CORPORATE GOVERNANCE During the year, Bank introduced a Subsidiaries convenience. The Bank installed 23 ATMs during Management Charter to its Group companies The Board of Directors is committed towards the year across the island bringing out the total with a view to rationalising the management maintaining an effective Corporate Governance of Subsidiaries. structure and process. The financial, operational and compliance functions of the Bank are

BANK OF CEYLON ANNUAL REPORT 2010 137 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE BANK OF CEYLON directed and controlled effectively within Details of profit relating to the Bank and the Group are given in table 1: Corporate Governance practices. These Table 1 Bank Group procedures and practices that are in conformity 2010 2009 2010 2009 with Corporate Governance directions issued by Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 the Central Bank of Sri Lanka, the regulator for Profit for the year after payment of all commercial banks, under Banking Act Direction expenses and providing for No. 11 of 2007 and the Code of Best Practices depreciation, possible loan losses and on Corporate Governance issued jointly by The contingencies before VAT and Tax 14,053,822 7,202,472 14,989,548 7,665,619 Securities and Exchange Commission of Sri Lanka VAT on financial services (4,001,253) (2,994,825) (4,126,961) (3,076,362) and The Institute of Chartered Accountants of Sri Lanka are described in the Corporate Share of profit of Associate Companies Governance Report appearing on pages 56 to 86 before tax – – 212,898 130,653 of this Annual Report. Profit before income tax 10,052,569 4,207,647 11,075,485 4,719,910 Provision for taxation (3,687,257) (1,123,641) (4,162,289) (1,402,987) The Board has obtained a report from the Net profit after taxation 6,365,312 3,084,006 6,913,196 3,316,923 Auditor General on the compliance with the Appropriations provisions of the above mentioned Direction Transfers to permanent reserve fund 127,500 65,000 127,500 65,000 No. 11 of 2007. Transfers to primary dealer special risk reserve 248,213 187,571 248,213 187,571 HUMAN RESOURCES Dividends 3,096,410 1,346,410 3,096,410 1,346,410 One of the most valuable assets of the Bank is Unappropriated profit carried forward 2,893,189 1,485,025 3,441,073 1,717,942 its employees and it is important for the Bank to develop them. Several measures were taken to strengthen the much-valued human capital in The pre-tax profit of the Group also increased RESERVES order to optimise their contribution towards the from Rs. 4,720 million to Rs. 11,075 million, The total reserves of the Group stood at achievement of corporate objectives. The Bank’s an increase of 135% in comparison to the Rs. 25,196 million as at 31 December 2010 Human Resource Management policies and previous year. After deducting Rs. 4,162 million (2009 - Rs. 21,583 million). The Group reserves practices are detailed in the Sustainability Report for income tax (Rs. 1,403 million in 2009), the consist of the following: on pages 114 to 122 of this Report. profit after tax for the year of the Group increased to Rs. 6,913 million in 2010 from the profit after 2010 2009 Rs. ’000 Rs. ’000 tax of Rs. 3,317 million reported in 2009. ACCOUNTING POLICIES Permanent reserve fund 2,777,500 2,650,000 The accounting policies adopted in the STATED CAPITAL Revaluation reserve 178,692 178,692 preparation of Financial Statements are given on Special risk reserve of pages 156 to 166 There have been no changes The total issued and fully-paid up capital of the Bank primary dealer unit 776,683 528,470 in the accounting policies adopted by the Bank as at 31 December 2010 was Rs. 5,000 million Foreign currency during the year under review. consisting of 5,000,000 ordinary shares. translation 565,745 606,163 Other reserves 504,437 504,437 GROSS INCOME SHAREHOLDING Retained profits 20,393,029 17,115,523 The main income of the Group is interest The Government of Sri Lanka is the sole Total 25,196,086 20,583,285 income, which comprises 80% of the total shareholder of the Bank. income. The gross income of the Group for the ISSUE OF DEBENTURES year 2010 was Rs. 66,867 million as against SHARE INFORMATION Rs. 66,128 million in comparison to the previous The earnings per share and net assets per share The Group had issued debentures (both year. The Bank’s total income accounted for of the Group were Rs. 1,352.06 and Rs. 6,039.22 listed and unlisted), amounting to 95% (2009 - 96%) of total income of the Group. respectively, for the period under review. Rs. 39,435 million as at 31 December 2010 (2009 - Rs. 19,113 million). The proceeds of these debentures were utilised to bridge PROFIT DIVIDENDS the maturity gaps and to strengthen the The Bank recorded a pre-tax profit of All profits after deduction of tax, loan loss supplementary capital base of the Bank. Rs. 10,053 million in 2010 reflecting an increase provision and any such portion for reserves, The details of debentures outstanding as at the of 139%, compared to Rs. 4,208 million if any, as the Government shall determine in date of Balance Sheet are given in Note 38 to recorded for the previous year. After deducting consultation with the Board, will be declared the Financial Statements on page 215. Rs. 3,687 million (Rs. 1,124 million in 2009) for as dividends to the Government. Accordingly, a income tax, the profit after tax for the year 2010 sum of Rs. 3,096 million has been declared by amounted to Rs. 6,365 million, a 106% increase the Bank as dividends for the year (2009 - compared to Rs. 3,084 million profit after tax Rs. 1,346 million). reported in 2009.

138 BANK OF CEYLON ANNUAL REPORT 2010 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE BANK OF CEYLON

CORPORATE DONATIONS Dr. B Kaluarachchi Standards, Banking Act No. 30 of 1988 and its The donations granted during the year Non-Executive Director amendments, Bank of Ceylon Ordinance amounted to Rs. 1,355,000/-. In addition the No. 53 of 1938 and its amendments and the Mr. V Kanagasabapathy Bank has incurred Rs. 28,893,000/- on Corporate Listing rules of the Colombo Stock Exchange. In Non-Executive Alternate Director to Sustainability & Responsibility activities. the case of Subsidiaries, the Financial statements Dr. R H S Samaratunga are prepared also in accordance with the CORPORATE SUSTAINABILITY AND provisions of the Companies Act No. 7 of 2007. RESPONSIBILITY The Board was reconstituted and the Directors The programmes carried out under the who held office from May/June 2010 were: The Statement of Directors’ Responsibility for Corporate Sustainability and Responsibility Dr. Gamini Wickramasinghe (Chairman) Financial Reporting is given on page 145 of this (CS & R) are detailed on pages 95 to 125 under Independent Non-Executive Director Annual Report and forms an integral part of this the Sustainability Report. Report of the Directors. Mr. S R Attygalle Non-Executive Ex officio Director PROPERTY, PLANT & EQUIPMENT DIRECTORS’ INTERESTS IN CONTRACTS The total capital expenditure incurred by the Mr. Raju Sivaraman Directors’ interests in contracts with the Group on the acquisition of property, plant & Independent Non-Executive Director Bank, both direct and indirect are given on pages 141 to 144. These interests have been equipment during the year amounted to Ms. Nalini Abeywardene declared at meetings of the Board of Directors. Rs. 1,232 million (2009 - Rs. 1,488 million), Non-Executive Director the details of which are given in Note 29 to Except for the contracts given therein, the Financial Statements on pages 202 to 210 of Mr. Chandrasiri de Silva Directors have no any direct or indirect interest this Annual Report. Non-Executive Director in other contracts or proposed contracts with the Bank. Mr. K L Hewage MARKET VALUE OF FREEHOLD PROPERTIES Independent Non-Executive Director The value of freehold properties owned by DIRECTORS’ INTERESTS IN DEBENTURES Mr. V Kanagasabapathy ISSUED BY THE BANK/GROUP the Group as at 31 December 2010 is included Non-Executive Alternate Director to in Note 29 to Financial Statements at Dr. Gamini Wickramasinghe (Chairman) has Mr. S R Attygalle Rs. 4,242 million (2009 - Rs. 4,177 million). invested US$ 349,000 in debentures issued by the Bank during the year 2008 and appears in the Debenture Register as at 31 December 2010. DIRECTORS The Directors are classified as Independent There were no debentures registered in the The Board of Directors of the Bank of Ceylon as Directors on the basis given in Banking Act name of any other Director as at the beginning at 31 December 2010, consists of six members Direction No. 11 of 2007 on Corporate and at the end of the year. including Chairman and they do not hold any Governance for Licensed Commercial Banks executive positions in the Bank. They bring a issued by the Central Bank of Sri Lanka. DIRECTORS’ ALLOWANCES/FEES wide range of skills and experience to the Board. The qualifications and experience of the present BOARD SUBCOMMITTEES The allowances/fees payable to Board of Directors are made in terms of the provisions/ Directors are given on pages 14 to 16 of this The Board has formed four subcommittees contents in the Public Enterprises Circular Nos. Annual Report. complying with the aforesaid Banking PED 35 dated 17 January 2006, PF/PE/23 dated Act Direction No. 11 of 2007 to ensure 19 July 2002, letter dated 24 March 2008 all The Directors of the Bank who held office from oversight control over affairs of the Bank. The issued by the Department of Public Enterprises January to May 2010 during the year under subcommittee composition is given on page 80 of the Ministry of Finance and Planning and the review were: of this Annual Report. Bank of Ceylon Ordinance No. 53 of 1938 and Dr. Gamini Wickramasinghe (Chairman) its amendments. Independent Non-Executive Director DIRECTORS’ MEETINGS Attendance of Directors at Board and Dr. R H S Samaratunga The Directors’ remuneration in respect of the subcommittee meetings are given on page 86 Non-Executive Ex officio Director Group and the Bank for the financial year ended of this Annual Report. 31 December 2010 are given on page 172. Mr. Raju Sivaraman Independent Non-Executive Director DIRECTORS’ RESPONSIBILITIES FOR COMPLIANCE WITH LAWS AND REGULATIONS FINANCIAL REPORTING Mr. G K A Chaminda K Kularatne The Directors, to the best of their knowledge and The Directors are responsible for the preparation Non-Executive Director belief confirm that the Group has not engaged of the Financial Statements that will reflect a true in any activities contravening the laws and Mr. G Gallage and fair view of the state of affairs. The Directors regulations. Details of the Bank’s compliance Independent Non-Executive Director are of the view that these Financial Statements with laws and regulations are given on page 93 have been prepared in conformity with the under Report on Risk and Compliance which requirements of the Sri Lanka Accounting forms an integral part of this Report.

BANK OF CEYLON ANNUAL REPORT 2010 139 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE BANK OF CEYLON

OUTSTANDING LITIGATION AUDIT REPORT The Directors are of the opinion that the The Auditor General is the Auditor of Bank of litigation currently pending against the Bank Ceylon in terms of the provisions of Article 154 will not have a material impact on the reported of the Constitution of the Democratic Socialist financial results or future operations of the Bank. Republic of Sri Lanka. Report of the Auditor General on the Financial Statements of the Bank STATUTORY PAYMENTS and the Consolidated Financial Statements of The Board confirms that all statutory payments the Bank and its Subsidiaries as at 31 December due to the Government and in relation to 2010 is given on page 149 of this Annual employees have been made on time. Report.

ENVIRONMENTAL PROTECTION By Order of the Board, The Bank has not engaged in any activity, which has caused detriment to the environment. Further, precautions taken to protect the environment have been given in Sustainability Report on pages 111 to 113. Janaki Senanayake Siriwardane Secretary, Bank of Ceylon/ POST BALANCE SHEET EVENTS Secretary to the Board The Directors are of the view that no material events have arisen in the interval between Colombo the end of the financial year and the date 24 March 2011 of this Report, that would require adjustments or disclosure.

GOING CONCERN The Directors are confident that the resources of the Bank are adequate to continue its operations. Therefore, it has applied the going concern basis in preparing the Financial Statements.

140 BANK OF CEYLON ANNUAL REPORT 2010 DIRECTORS’ INTERESTS IN CONTRACTS

Related party disclosures as required by the Sri Lanka Accounting Standard No. 30 on ‘Related Party Disclosures’ (Revised 2005) are detailed in Note 47 to the Financial Statements on pages 226 to 233 In addition, the transactions that have been carried out 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, are detailed below:

Company Relationship Nature of Transactions Limit Balance/Amount Balance/Amount Security outstanding outstanding as at 31.12.10 as at 31.12.09 ’000* ’000* ’000*

DR. GAMINI WICKRAMASINGHE Bank of Ceylon (UK) Chairman Current account US$ 138 Limited (Nostro account) (Rs. 15,576) EURO 17,801 (Rs. 2,639,955) GBP 427 (Rs. 73,619) Placements EURO 40,000 (Rs. 5,932,068) GBP 48,749 (Rs. 8,395,450) Other payable 181,675 Ceybank Holiday Homes Chairman Current account – 3,711 2,585 (Private) Limited Time deposit 78 75 Other payable 22 138 Other receivable 700 580 Property Development Chairman Current account 4,502 1,965 PLC Time deposit 755,400 112,000 Repo balance 454,200 989,140 Rent paid in advance 235,179 209,328 Deposit for fuel 907 907 Other payable 38,150 110,547 Letter of credit 5,000 86,815 Related shipping document Letter of guarantee 3,000 Mireka Capital Land Director Current account 1,533 12,673 (Private) Limited Current account US$ 2 US$ 0.3 (Rs. 174) (Rs. 34) Term loan US$ 24,000 US$ 22,700 US$ 24,000 Clean basis and time deposits (Rs. 2,676,120) (Rs. 2,531,163) (Rs. 2,749,320) placed by Shing Kwan Other receivable 12,809 Investment (Singapore) Pte. Limited The Lanka Hospital Director Current account 68 68 Corporation PLC Current account US$ 2 US$ 2 (Rs. 172) (Rs. 176) Informatics Group of Managing Savings account 8 14 Companies** Director Savings account US$ 3 US$ 16 (Rs. 327) Rs. 1,854) Current account 927 9,555 Time deposit US$ 474 US$ 454 (Rs. 52,905) (Rs. 52,008) Overdraft 45,600 46,663 46,369 Time deposits Term loan 17,300 2,883 6,343 Mortgage over commercial property Letter of guarantee 9,600 4,531 2,314 Residential property Letter of guarantee US$ 1,778 (Rs. 203,679) Procurement - transaction value Payable (excluding 55,084 46,556 taxes) * Currencies in thousands ** The Board of Directors of Bank of Ceylon has approved the following: (1) In terms of minute No. 1.2.07 of 05.05.2009 appointing Visual Computing Systems (Private) Limited (A company belonging to Informatics Group) to provide maintenance support in Tandem server. (2) In terms of minute No. 5.2 of 14.08.2009 to procure 12 numbers of Automated Teller Machines from Informatics (Private) Limited.

BANK OF CEYLON ANNUAL REPORT 2010 141 DIRECTORS’ INTERESTS IN CONTRACTS

Company Relationship Nature of Transaction Limit Balance/Amount Balance/Amount Security Outstanding as at Outstanding as at 31.12.10 31.12.09 ’000* ’000* ’000*

MR. S R ATTYGALLE Sri Lanka Ports Authority Director Savings account 188,166 Savings account US$ 381 (Rs. 42,557) Current account 591,113 Time deposit 24,636 Time deposit US$ 23,107 (Rs. 2,576,560) Term loan US$ 62,512 US$ 31,256 Negative pledge over the (Rs. 3,485,215) assets imported Letter of credit 750,000 255,417 Clean Board of Investment Director Current account 280,438

MR. RAJU SIVARAMAN Ceylease Financial Chairman Current account 27,111 6,381 Services Limited Repo balance 27,000 17,000 Overdraft 50,000 Clean Series of loan 450,000 26,689 58,880 Lease receivable/ hire purchase Bridging finance 100,000 receivable backed by Power of Attorney Money market loan 350,000 210,000 86,000 Clean Letter of credit 50,000 Bills of exchange and shipping documents Other receivable 615 Other payable 1,577 Arch-Triad Consultants Managing Consultancy services 980 10,997 (Private) Limited** Director value Milco (Private) Limited Director Current account 25,498 Time deposit 315,431 Lease 17,900 1,465 Machinery Merchant Credit of Director Savings account 86 Sri Lanka Limited Current account 50,875 36,964 Time deposit 15 15 Series of loan 250,000 – Overdraft 50,000 Money market loan 50,000 50,000 30,000 Lease receivables backed by Bridging finance 100,000 Power of Attorney Letter of credit 10,000 Letter of guarantee 4,000 Repo balance – 14,000 Reverse Repo – 127,000 balance

* Currencies in thousands ** The Board of Directors of Bank of Ceylon has approved the following: (1) In terms of minute No. 4.1 of 14.08.2009 appointing Arch-Triad Consultants (Private) Limited as the interior design consultants for interior/exterior refurbishment of Super Grade Branch, Nugegoda. (2) In terms of minute No. 9.2.10 of 27.04.2010 appointing Arch-Triad Consultants (Private) Limited as the consultants for project of constructing a new building for Bank of Ceylon at Nelliady.

142 BANK OF CEYLON ANNUAL REPORT 2010 DIRECTORS’ INTERESTS IN CONTRACTS

Company Relationship Nature of Transaction Limit Balance/Amount Balance/Amount Security Outstanding as at Outstanding as at 31.12.10 31.12.09 ’000* ’000* ’000*

MS. NALINI ABEYWARDENE Hotels Colombo (1963) Director Current account 2,589 5,695 Limited Time deposit 79,610 31,085 Other receivable 19,566 110,195

MR. CHANDRASIRI DE SILVA Hotels Colombo (1963) Director Current account 2,589 5,695 Limited Time deposit 79,610 31,085 Other receivable 19,566 110,195 BoC Travels (Private) Chairman Current account 27,558 17,202 Limited Time deposit 40,000 20,000 Debenture 10,000 5,000 Overdraft 9.600 Book debts Letter of guarantee 50,000 50,000 50,000 Debentures and time deposits Other payable 794

MR. K L HEWAGE Ceybank Asset Chairman Current account 13,486 Management (Private) Repo balance 8,200 Limited Investment in Units 1,309,174

MR. V KANAGASABAPATHY Merchant Bank of Director Current account 35,725 39,361 Sri Lanka PLC Debenture 1,083 370 Overdraft 50,000 25,916 11,615 Series of loan 600,000 81,647 26,250 Lease receivable backed by Money market loan 100,000 Power of Attorney Repo balance 10,000 35,000 Grant on immediate Credit on cheque 1,000 limit Intra day overdraft 5,000 Guarantee 2,500 Hotel Developers Director Savings account US$ 3 US$ 3 Lanka PLC (Rs. 349) (Rs. 357) Savings account JPY 5 JPY 1 (Rs. 7) (Rs. 1) Current account 1,912 4,531 Term loan 350,000 78,750 113,750 Treasury guarantee (Granted under SRCC & T)

* Currencies in thousands

BANK OF CEYLON ANNUAL REPORT 2010 143 DIRECTORS’ INTERESTS IN CONTRACTS

Company Relationship Nature of Transaction Limit Balance/Amount Balance/Amount Security Outstanding as at Outstanding as at 31.12.10 31.12.09 ’000* ’000* ’000* De La Rue Lanka Director Savings account GBP 22 GBP 217 Currency & Securities (Rs. 3,754) (Rs. 39,463) Print (Private) Limited Current account 842 7,091 Current account GBP 46 GBP 170 (Rs. 7,849) (Rs. 30,915) Time deposit 15,962 13,803 Overdraft 30,000 281 14,256 Mortgage over commercial property Letter of credit 38,631 Related shipping documents Letter of credit US$ 34 (Rs. 3,749) Time deposits Letter of guarantee 16,262 7,690

Distance Learning Chairman Current account 2,586 3,382 Centre Limited Time deposit 8,243 7,680 Overdraft 2,000 Time deposits Lanka Hydraulic Director Savings account 47 31 Institute Current account 18 169

* Currencies in thousands

144 BANK OF CEYLON ANNUAL REPORT 2010 DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The responsibility of Directors in relation to INTERNAL CONTROLS, RISK MANAGEMENT The Audit Committee and Integrated Risk financial reporting of the Bank of Ceylon and AND COMPLIANCE Management Committee, on an ongoing basis, the Group is set out in the following statement. The Directors are also responsible for the strengthens the effectiveness of internal control system of internal financial controls and risk and risk management procedures. The reports FINANCIAL STATEMENTS management and place considerable importance of the Audit Committee and Integrated Risk In terms of the provisions of the Bank of Ceylon on maintaining a strong control environment Management Committee are included on Ordinance No. 53 of 1938 and its amendments to protect and safeguard the Bank’s assets pages 81 & 82 and 85 & 86 respectively of read with the Banking Act No. 30 of 1988 and and prevent fraud and mismanagement. this Annual Report. its amendments, Directions issued under it, the Whilst inherent and residual risks cannot be Listing Rules of the Colombo Stock Exchange, completely eliminated, the Bank endeavours to AUDIT REPORT and the Sri Lanka Accounting Standards, the minimise them by ensuring that appropriate Pursuant to provisions of Article 154 of the Directors of the Bank are responsible for: infrastructure, controls, systems and ethical Constitution of the Democratic Socialist behaviour are applied and practiced within Republic of Sri Lanka, the Auditor General is the (a) the state of affairs of the Bank and the predetermined procedures and constraints. Auditor of the Bank and issues the final opinion Group as at 31 December 2010, and on the Financial Statements of the Bank. The (b) the profit of the Bank and the Group for the A statement by the Directors on the Bank’s responsibilities of the Auditor in relation to the financial year ended 31 December 2010. internal control mechanism confirming that the Financial Statements are set out in the Report financial reporting system has been designed of the Auditor General on page 149 of this Accordingly, the Directors confirm that the to provide reasonable assurance regarding the Annual Report. Financial Statements presented reflect a true and reliability of financial reporting is given on pages fair view of the state of affairs of the Bank of 147 and 148 of this Annual Report. The Board Ceylon and the Group as at 31 December 2010. obtained an Assurance Report from the Auditor By Order of the Board, The Directors acknowledge that in preparing General on Directors’ Statement on Internal the Financial Statements for the year 2010, Control and it is given on page 146. presented in this Annual Report, the most appropriate accounting policies have been used The Directors and Management have put in and applied consistently supported by judgments place risk management policies and guidelines. Janaki Senanayake Siriwardane and estimates that are reasonable and prudent. Management committees are established Secretary, Bank of Ceylon/ Material departures, if any, have been disclosed to monitor and manage material risks. Secretary to the Board and explained. Arrangements are made to submit reports on risk to the Integrated Risk Management Colombo GOING CONCERN Committee on a quarterly basis for discussion. 24 March 2011 The Directors are of the view that the Bank Compliance with applicable laws, regulations, and the Group have adequate resources to rules, directives and guidelines are monitored by continue in business for the foreseeable future. the Risk Division and reported to the Board. Accordingly, they have continued to adopt the going concern basis in preparing the Financial Statements.

BANK OF CEYLON ANNUAL REPORT 2010 145 INDEPENDENT ASSURANCE REPORT

24 March 2011

REPORT ON THE DIRECTORS’ STATEMENT ON My responsibilities and compliance with SLSAE 3050 does not require me to consider INTERNAL CONTROLS OF BANK OF CEYLON SLSAE 3050 whether the Statement covers all risks and Introduction My responsibility is to issue a report on the controls, or to form an opinion on the This report is to provide assurance on the Statement based on the work performed. effectiveness of the Bank’s risk and control Directors’ Statement on Internal Control of Bank I conducted my engagement in accordance procedures. SLSAE 3050 also does not require of Ceylon included in the annual report for the with Sri Lanka Standard on Assurance me to consider whether the processes described year ended 31 December 2010. Engagements SLSAE 3050 - Assurance Report to deal with material internal control aspects of for Banks on Directors’ Statement on Internal any significant problems disclosed in the annual Management’s responsibility Control issued by the Institute of Chartered report will, in fact, remedy the problems. Management is responsible for the preparation Accountants of Sri Lanka. and presentation of the Statement in Conclusion accordance with the “Guidance for Directors of Summary of work performed Based on the procedures performed, nothing Banks on the Directors’ Statement on Internal This engagement has been conducted to assess has come to my attention that causes me Control” issued in compliance with the section whether the Statement is both supported by the to believe that the Statement included in 3(8)(ii)(b) of the Banking Act Direction No. 11 of documentation prepared by or for directors and the annual report is inconsistent with my 2007, by the Institute of Chartered Accountants appropriately reflects the process the directors understanding of the process the Board of of Sri Lanka. have adopted in reviewing the system of Directors has adopted in the review of the internal control for the Bank. design and effectiveness of internal control of the Bank. The procedures performed are limited primarily to inquiries of bank personnel and the existence of documentation on a sample basis that supports the process adopted by the Board of Directors. H A S Samaraweera Acting Auditor General

146 BANK OF CEYLON ANNUAL REPORT 2010 DIRECTORS’ STATEMENT ON INTERNAL CONTROL

INTRODUCTION z designing, operating and monitoring a INTERNAL AUDIT FUNCTION The Board is pleased to provide the Directors’ suitable system of internal controls; and The internal audit checks for compliance with Statement on Internal Control (‘Statement’), policies and procedures and the effectiveness z implementing the policies approved by that was prepared in line with Section 3 (8) (ii) of the internal control system on an on-going the Board. of the Banking Act Direction No. 11 of 2007, on basis using samples and rotational procedures, Corporate Governance for Licensed Commercial and highlights significant findings in respect of KEY INTERNAL CONTROL PROCESSES Banks in Sri Lanka which outlines the processes any non-compliance. Audits are carried out on The key processes that the Directors have and procedures that the Board has adopted all units and branches, the frequency of which established in reviewing the adequacy and in reviewing the adequacy and integrity of the is determined by the level of risk assessed, to integrity of the system of internal controls system of internal controls of the Bank. provide an independent and objective report. include the following: The annual audit plan is reviewed and approved RESPONSIBILITY by the Audit Committee. Findings of the internal RISK MANAGEMENT FRAMEWORK The Board acknowledges its overall responsibility audit are submitted to the Audit Committee for z The Board has established an organisation for maintaining a sound internal control system review at their regular meetings. structure with clearly defined lines to safeguard the stakeholders’ interests and of responsibility, authority limits and the Bank’s assets. The Board is of the view that The Audit Committee of the Bank reviews accountability aligned to business and the internal control framework is designed to internal control issues identified by the internal operational requirements, which support the manage the Bank’s risks within an acceptable risk audit, regulatory authorities and management, maintenance of a strong control environment. profile, rather than to eliminate the risk of failure, and evaluates the adequacy and effectiveness of It has extended the responsibilities of the to achieve the policies, goals and objectives the risk management and internal control system. Audit Committee to include the assessment of the Bank. It can therefore only provide They also review the internal audit function with of internal controls, through the internal reasonable, rather than absolute assurance of particular emphasis on the scope of audits and audit function. effectiveness against material misstatement quality of internal audits. The Audit Committee submits its recommendations to the Board along of management and financial information or z The Board has also delegated the against financial losses and frauds. responsibility of reviewing the effectiveness with the minutes of the meetings and follows up of risk management to the Integrated Risk on the action to be taken. Further details of the The Board has in place an on-going process Management Committee. The effectiveness activities undertaken by the Audit Committee of for identifying, evaluating, monitoring and of the risk management system is the Bank during the year under review are set managing significant risks that may affect the monitored and evaluated by the Bank’s risk out in the Audit Committee Report appearing on achievement of business objectives. The process management function, on an on-going basis. pages 81 and 82. which has been instituted throughout the Bank z Risk management principles, policies, is updated and reviewed from time to time to OTHER KEY ELEMENTS OF INTERNAL CONTROL procedures and practices are updated suit the changes in the business environment The other key elements of the procedures regularly to ensure relevance and compliance and this on-going process has been in place for established by the Board that provide effective with current/applicable laws and regulations, the whole financial year under review. internal controls include the following: and are made available to all employees. The Bank also adopted a Whistle-Blower Policy, The process is regularly reviewed by the Board z Submission of annual business plan and providing an avenue for employees to report through the Audit Committee and accords budget is submitted to the Board for actual or suspected malpractice, misconduct with the guidance for Directors of Banks on the approval. Actual performances are reviewed or violations of the Bank’s policies and Directors’ Statement of Internal Control issued against the targeted results on a monthly regulations in a safe and confidential manner. by the Institute of Chartered Accountants of basis allowing timely responses and corrective Sri Lanka. As per the said guidance, significant z Establishment of the three (3) lines of actions to be taken to mitigate risks. The processes affecting significant accounts of the Defence Concept - risk taking units, risk Board reviews regular reports from the Bank were assessed along with the key risk areas control unit (Independent Integrated Risk management on the key operating statistics, of the Bank. Management Unit) and internal audit. The as well as legal and regulatory matters. risk taking units are responsible for the day- The Board also approves any changes or The Management assists the Board in the to-day management of risks inherent in their amendments to the Bank’s policies. implementation of the Board’s policies and business activities while the risk control unit is z Several subcommittees of the Board procedures on risk and control by; responsible for setting the risk management are set up to assist the Board to framework and developing tools and z identifying and evaluating the risks faced; perform its oversight functions. Specific methodologies. The internal audit provides responsibilities have been delegated to these z formulating related policies and procedures independent assurance of the effectiveness of subcommittees, all of which have formalised to manage these risks; the risk management approach. terms of reference. These Committees have the authority to examine all matters within their scope and report to the Board with their recommendations.

BANK OF CEYLON ANNUAL REPORT 2010 147 DIRECTORS’ STATEMENT ON INTERNAL CONTROL

z Asset & Liability Management Committee, REVIEW OF THE STATEMENT BY AUDITOR Credit Policy Committee, Investment GENERAL Committee, Marketing Committee, Human The Auditor General, the External Auditor of the Resource Policy Committee etc are also Bank has reviewed this Directors’ Statement on established as part of its stewardship Internal Control in accordance with Sri Lanka function to ensure effective management Standard on Assurance Engagements (SLSAE) and supervision of the areas under the 3050 - Assurance Report for Banks on Directors’ respective Committees’ purview. Statement on Internal Control issued by The Institute of Chartered Accountants of Sri Lanka. z A clearly defined framework with appropriate empowerment and authority limits has Based on the procedures performed, the been approved by the Board for granting of Auditor General has reported to the Board credits, acquisitions and disposals of assets, that nothing has come to his attention that awarding tenders as well as writing off causes him to believe that this Statement is operational and credit items. inconsistent with his understanding of the z There are policies and procedures in place to process Board has adopted in the review of the ensure compliance with internal control and design and effectiveness of the internal control the prescribed laws and regulations. These system over financial reporting of the Bank. The policies and procedures are set out in the Independent Assurance Report of the Auditor Bank’s Operating Instruction Circulars and General confirming the above is given on are updated from time to time in tandem page 146 of this Annual Report. with changes to the business environment or regulatory guidelines. For and on behalf of the Board,

In assessing the internal control system on financial reporting , the Bank reviews 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 Dr. Gamini Wickramasinghe for suitability of design and effectiveness on an Chairman on-going basis. Documentation of all processes is a dynamic activity that happens on an on- going basis. Areas with respect to related party transactions, risk disclosures, commitments and contingences are identified to be completed Mr. R. Sivaraman in the future. The assessment did not include Director Subsidiaries of the Bank.

CONFIRMATION Based on the above processes and procedures, the Board confirms that the financial reporting Mr. V. Kanagasabapthy system of the Bank has been designed to Chairman provide reasonable assurance on the reliability Audit Committee of financial reporting and the preparation of Financial Statements for external purposes Colombo that has been done in accordance with 24 March 2011 Sri Lanka Accounting Standards and regulatory requirements of the Central Bank of Sri Lanka. The Board also confirms that the Bank complies with section 3 (8) (ii) (b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka in relation to the Directors’ Statement on Internal Control.

148 BANK OF CEYLON ANNUAL REPORT 2010 REPORT OF THE AUDITOR GENERAL

The audit of the accompanying financial SCOPE OF AUDIT AND BASIS OF OPINION I am of opinion that the consolidated financial statements of Bank of Ceylon (“Bank”) and the My responsibility is to express an opinion on statements give a true and fair view of the consolidated financial statements of the Bank these financial statements based on my audit. state of affairs as at 31 December 2010 and and its Subsidiaries as at 31 December 2010 The audit was carried out in accordance with the profit and cash flows for the year then which comprise the Balance Sheet as at that Sri Lanka Auditing Standards which require ended in accordance with Sri Lanka Accounting date, and the Income Statement, Statement of that the audit shall be planned and performed Standards, of the Bank, and its Subsidiaries Changes in Equity and Cash Flow Statement to obtain reasonable assurance as to whether dealt with thereby, so far as concerns the for the year then ended, and a summary of the financial statements are free from material shareholders of the Bank. significant accounting policies and other misstatements. The audit includes examining explanatory notes (Nos. 1 to 48) to the financial on a test basis, evidence supporting the REPORT ON OTHER LEGAL AND REGULATORY statements was carried out under my direction in amounts and disclosures in the said financial REQUIREMENTS pursuance of provisions in Article 154 (1) of the statements. The audit also includes assessing These financial statements present the Constitution of the Democratic Socialist Republic the accounting policies used and significant information required by the Banking Act, No. 30 of Sri Lanka. The financial statements of the estimates made by the management as well as of 1988 and subsequent amendments thereto. Subsidiaries were audited by firms of Chartered evaluating the overall presentation of financial Accountants in public practice appointed by the statements. I have obtained all the information EXEMPTION members of the respective Subsidiaries. and explanations which to the best of my The Bank has been exempted from the knowledge and belief were necessary for provisions of Part II of the Finance Act, No. 38 MANAGEMENT’S RESPONSIBILITY FOR THE the purpose of my audit. I therefore believe of 1971 by an Order of the then Minister of FINANCIAL STATEMENTS that my audit provides a reasonable basis for Finance published in the Government Gazette Management is responsible for the preparation my opinion. No. 715 of 14 May 1992 by virtue of powers and fair presentation of these financial vested in him by Section 5 (1) of the said statements in accordance with the Sri Lanka OPINION Finance Act. Accounting Standards. This responsibility So far as appears from my examination, I am of includes: designing, implementing and opinion that the Bank of Ceylon had maintained REPORT TO PARLIAMENT maintaining internal controls relevant to the proper accounting records for the year ended My report to Parliament in pursuance of preparation and fair presentation of financial 31 December 2010 and the financial statements provisions in Article 154 (6) of the Constitution statements that are free from material give a true and fair view of the state of affairs will be tabled in due course. misstatements, whether due to fraud or error; of the Bank of Ceylon as at 31 December 2010 selecting and applying appropriate accounting and its profit and cash flows for the year then policies; and making accounting estimates that ended in accordance with Sri Lanka Accounting are reasonable in the circumstances. Standards.

H A S Samaraweera Acting Auditor General

BANK OF CEYLON ANNUAL REPORT 2010 149 INCOME STATEMENT

Bank Group For the year ended 31 December Note Page 2010 2009 Change 2010 2009 Change No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

Income 1 167 63,362,866 63,461,366 (0.2) 66,866,792 66,128,194 1.1

Interest income 2 167 50,853,347 53,076,779 (4.2) 53,062,286 55,279,046 (4.0) Interest expense 3 167 (31,205,160) (38,266,874) (18.5) (32,019,161) (39,489,821) (18.9) Net interest income 19,648,187 14,809,905 32.7 21,043,125 15,789,225 33.3

Fee and commission income 4 167 6,014,178 4,255,204 41.3 6,487,663 4,353,702 49.0 Fee and commission expenses 5 168 (467,298) (544,395) (14.2) (556,008) (550,477) 1.0 Net fee and commission income 5,546,880 3,710,809 49.5 5,931,655 3,803,225 56.0

Foreign exchange profit 408,686 1,566,916 (73.9) 418,461 1,566,916 (73.3) Dividend income 6 168 468,998 347,878 34.8 257,910 150,456 71.4 Net gains from investment in securities 7 168 3,105,791 1,961,210 58.4 3,508,297 2,012,436 74.3 Other operating income 8 168 1,143,913 753,247 51.9 1,524,738 1,128,780 35.1 5,127,388 4,629,251 10.8 5,709,406 4,858,588 17.5 Operating income 30,322,455 23,149,965 31.0 32,684,186 24,451,038 33.7

Operating expenses Personnel costs 9 168 (8,044,072) (8,107,775) (0.8) (8,731,783) (8,572,330) 1.9 Staff retirement benefits 10 169 (2,266,119) (2,409,631) (6.0) (2,299,079) (2,427,467) (5.3) Premises, equipment and establishment expenses 11 172 (2,858,245) (2,677,921) 6.7 (2,751,960) (2,491,248) 10.5 Other operating expenses 11 172 (2,908,256) (2,450,593) 18.7 (3,573,401) (2,954,607) 20.9 (16,076,692) (15,645,920) 2.8 (17,356,223) (16,445,652) 5.5 Operating profit before provisions 14,245,763 7,504,045 89.8 15,327,963 8,005,386 91.5

Provision for loan losses 12 172 (1,559,894) (1,801,705) (13.4) (1,725,997) (1,894,977) (8.9) Recovery of non-performing advances 13 173 1,367,953 1,500,132 (8.8) 1,394,539 1,506,205 (7.4) Provision for fall in value of investments and dealing securities – –– (6,957) 49,005 (114.2) Operating profit before VAT 14,053,822 7,202,472 95.1 14,989,548 7,665,619 95.5

Value added tax on financial services (4,001,253) (2,994,825) 33.6 (4,126,961) (3,076,362) 34.2 Operating profit 10,052,569 4,207,647 138.9 10,862,587 4,589,257 136.7

Share of profit of Associate Companies before tax 14 173 – –– 212,898 130,653 62.9 Profit before taxation 10,052,569 4,207,647 138.9 11,075,485 4,719,910 134.7

Provision for taxation 15 173 (3,687,257) (1,123,641) 228.2 (4,162,289) (1,402,987) 196.7 Profit after taxation 6,365,312 3,084,006 106.4 6,913,196 3,316,923 108.4

Attributable to: Equity holder of the parent 6,365,312 3,084,006 106.4 6,760,310 3,299,873 104.9 Minority interest – –– 152,886 17,050 796.7 Profit for the year 6,365,312 3,084,006 106.4 6,913,196 3,316,923 108.4

Per Share: Basic earnings per share (Rs.) 16 175 1,273.06 616.80 1,352.06 659.97 Dividend per share (Rs.) 16 175 619.28 269.28 619.28 269.28

The Significant Accounting Policies on pages 156 to 166 and notes on pages 167 to 236 form an integral part of these Financial Statements.

150 BANK OF CEYLON ANNUAL REPORT 2010 BALANCE SHEET

Bank Group As at 31 December Note Page 2010 2009 Change 2010 2009 Change No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

ASSETS Cash and short-term funds 17 176 14,103,803 13,508,852 4.4 13,754,857 13,517,254 1.8 Balances with Central Banks 18 176 25,894,466 16,263,468 59.2 25,894,466 16,263,468 59.2 Treasury bills, bonds and other eligible bills 19 176 45,379,013 28,735,396 57.9 46,348,696 29,688,285 56.1 Securities purchased under re-sale agreements 40,840,091 6,615,045 517.4 40,840,091 6,667,925 512.5 Dealing securities 20 177 3,232,348 1,827,869 76.8 3,805,443 2,137,383 78.0 Placements with and loans to other banks 21 185 42,679,798 45,867,067 (6.9) 47,773,386 45,887,067 4.1 Treasury bonds maturing after one year 51,296,744 46,910,486 9.4 51,749,203 46,910,486 10.3 Loans and advances to customers - Bills of exchange 22.1 185 15,395,903 15,254,316 0.9 16,015,528 15,700,891 2.0 - Loans & advances 22.2 186 353,097,916 245,602,284 43.8 355,265,395 247,201,769 43.7 - Lease rentals receivable - within one year 22.3 187 1,837,935 1,920,713 (4.3) 4,560,906 4,790,308 (4.8) - Lease rentals receivable - one to five years 22.4 187 2,387,835 2,287,871 4.4 6,743,744 5,106,358 32.1 - Lease rentals receivable - after five years 22.5 188 1,995 207 863.8 2,224 300 641.3 372,721,584 265,065,391 40.6 382,587,797 272,799,626 40.2 Government of Sri Lanka Restructuring Bonds 23 192 8,547,000 8,547,000 – 8,547,000 8,547,000 – Investment securities 24 192 80,643,496 75,844,742 6.3 81,118,367 76,453,242 6.1 Investment properties 25 198 – –– 386,867 391,730 (1.2) Investments in Associate Companies 26 199 844,658 844,658 – 1,284,563 1,084,065 18.5 Investments in Subsidiary Companies 27 200 5,279,094 3,191,859 65.4 – –– Other assets 28 202 17,706,268 19,184,449 (7.7) 18,313,650 19,774,648 (7.4) Property, plant & equipment 29 202 5,544,589 5,660,753 (2.1) 7,370,308 7,072,057 4.2 Leasehold land 30 210 77,515 63,290 22.5 119,978 107,110 12.0 Intangible assets 31 211 163,826 110,812 47.8 170,404 119,205 43.0 Total assets 714,954,293 538,241,137 32.8 730,065,076 547,420,551 33.4

FINANCED BY: LIABILITIES Deposits from customers 32 211 524,232,697 408,607,442 28.3 529,318,700 411,459,582 28.6 Borrowed funds 33 212 52,445,153 33,098,377 58.5 57,432,015 35,767,123 60.6 Securities sold under re-purchase agreements 34 212 53,522,487 34,203,701 56.5 52,968,787 32,968,041 60.7 Insurance provision - life 35.1 212 – –– 66,937 41,336 61.9 Insurance provision - non life 35.2 213 – –– 252,774 181,569 39.2 Tax payable 2,199,758 189,824 1,058.8 2,422,527 287,650 742.2 Deferred tax liability 36 214 457,587 409,453 11.8 489,525 440,132 11.2 Other liabilities 37 215 15,258,392 18,789,140 (18.8) 16,417,749 19,627,591 (16.4) Debentures 38 215 38,706,348 18,044,613 114.5 39,434,565 19,113,386 106.3 Total liabilities 686,822,422 513,342,550 33.8 698,803,579 519,886,410 34.4

SHAREHOLDERS’ EQUITY Stated capital 39 220 5,000,000 5,000,000 – 5,000,000 5,000,000 – Permanent reserve fund 40 220 2,777,500 2,650,000 4.8 2,777,500 2,650,000 4.8 Retained profits 18,712,777 15,819,588 18.3 20,393,029 17,115,523 19.1 Reserves 41 220 1,641,594 1,428,999 14.9 2,025,557 1,817,762 11.4 Total equity attributable to the parent 28,131,871 24,898,587 13.0 30,196,086 26,583,285 13.6 Minority interest – –– 1,065,411 950,856 12.0 Total equity 28,131,871 24,898,587 13.0 31,261,497 27,534,141 13.5 Total shareholders’ equity and liabilities 714,954,293 538,241,137 32.8 730,065,076 547,420,551 33.4

Commitments and contingencies 42 221 223,164,930 246,244,648 (9.4) 224,942,115 246,316,116 (8.7)

The Significant Accounting Policies on pages 156 to 166 and notes on pages 167 to 236 form an integral part of these Financial Statements. These Financial Statements give a true and fair view of the state of affairs of Bank of Ceylon and the Group as at 31 December 2010 and its profit for the year then ended.

W A Asoka Rupasinghe Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Approved and signed for and on behalf of the Board by,

Dr. Gamini Wickramasinghe R Sivaraman B A C Fernando Chairman Director General Manager

Colombo 16 March 2011 BANK OF CEYLON ANNUAL REPORT 2010 151 STATEMENT OF CHANGES IN EQUITY

Stated Permanent Reserves Retained Total Note Page capital reserve fund Other Revaluation profits equity No. reserves reserves Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Bank Balance as at 01 January 2009 5,000,000 2,585,000 1,055,732 126,961 14,334,563 23,102,256 Net profit for the year 2009 – – – – 3,084,006 3,084,006 Dividends for 2009 16.1 176 – – – – (1,346,410) (1,346,410) Transfers to permanent reserve 40 220 – 65,000 – – (65,000) – Revaluation adjustment 41.1 220 – – – (1,662) – (1,662) Net exchange translation adjustment 41.3 221 – – 60,397 – – 60,397 Transfers to primary dealer special risk reserve 41.4 221 – – 187,571 – (187,571) – Balance as at 31 December 2009 5,000,000 2,650,000 1,303,700 125,299 15,819,588 24,898,587

Balance as at 01 January 2010 5,000,000 2,650,000 1,303,700 125,299 15,819,588 24,898,587 Net profit for the year 2010 – – – – 6,365,312 6,365,312 Dividends for 2010 16.1 176 – – – – (3,096,410) (3,096,410) Transfers to permanent reserve 40 220 – 127,500 – – (127,500) – Transfers to exchange gain on conversion of London branch into a Subsidiary 41.3 221 – – (39,566) – – (39,566) Net exchange translation adjustment 41.3 221 – – 3,948 – – 3,948 Transfers to primary dealer special risk reserve 41.4 221 – – 248,213 – (248,213) – Balance as at 31 December 2010 5,000,000 2,777,500 1,516,295 125,299 18,712,777 28,131,871

Attributable to the parent Stated Permanent Reserves Retained Minority Total Note Page capital reserve fund Other Revaluation profits interest equity No. reserves reserves Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Group Balance as at 01 January 2009 5,000,000 2,585,000 1,299,807 180,354 15,826,941 655,342 25,547,444 Net profit for the year 2009 – – – – 3,299,873 17,050 3,316,923 Dividends for 2009 16.1 176 – – – – (1,346,410) (30,629) (1,377,039) Transfers to permanent reserve 40 220 – 65,000 – – (65,000) – – Transfers to other reserves – – 91,295 – (91,295) – – Share issue of Subsidiaries – – – – – 237,094 237,094 Revaluation adjustment 41.1 220 – – – (1,662) – – (1,662) Adjustments – – – – (321,015) – (321,015) Net increase due to change in shareholding ––––– 71,999 71,999 Net exchange translation adjustment 41.3 221 – – 60,397 – – – 60,397 Transfers to primary dealer special risk reserve 41.4 221 – – 187,571 – (187,571) – – Balance as at 31 December 2009 5,000,000 2,650,000 1,639,070 178,692 17,115,523 950,856 27,534,141

Balance as at 01 January 2010 5,000,000 2,650,000 1,639,070 178,692 17,115,523 950,856 27,534,141 Net profit for the year 2010 – – – – 6,760,310 152,886 6,913,196

Dividends for 2010 16.1 176 – – – – (3,096,410) (38,143) (3,134,553) Transfers to permanent reserve 40 220 – 127,500 – – (127,500) – – Adjustments – – – – – (188) (188) Net increase due to change in shareholding – – – – (10,681) – (10,681) Transfers to exchange gain on conversion of London branch into a Subsidiary 41.3 221 – – (39,566) – – – (39,566) Net exchange translation adjustment 41.3 221 – – (852) – – – (852) Transfers to primary dealer special risk reserve 41.4 221 – – 248,213 – (248,213) – – Balance as at 31 December 2010 5,000,000 2,777,500 1,846,865 178,692 20,393,029 1,065,411 31,261,497

The Significant Accounting Policies on pages 156 to 166 and notes on pages 167 to 236 form an integral part of these Financial Statements.

152 BANK OF CEYLON ANNUAL REPORT 2010 CASH FLOW STATEMENT

Bank Group For the year ended 31 December Note 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash flows from operating activities Interest receipts 48,958,295 52,699,040 51,048,298 54,790,121 Interest payments (32,236,920) (36,221,614) (33,076,221) (37,191,635) Commissions, fees and receipts from other operating activities 9,121,713 4,917,426 10,154,963 5,335,677 Premium received from policyholders – – 558,840 264,405 Claims and benefits paid – – (210,662) (126,668) Reinsurance premium paid – – (80,676) (47,696) Reinsurance receipts in respect of claims – – 4,897 8,557 Cash paid to and on behalf of employees (9,544,644) (9,868,539) (10,265,315) (10,350,930) Cash payments to suppliers (5,813,787) (4,165,318) (6,433,716) (4,262,472) Recovery of loans written-off in previous years 70,866 102,013 97,452 108,086 Value added tax on financial services paid (3,667,377) (2,933,948) (3,793,085) (3,015,485) Cash flows from operating activities before changes in operating assets and liabilities I 6,888,146 4,529,060 8,004,775 5,511,960 (Increase)/decrease in operating assets Deposits held for regulatory purposes (9,630,998) (634,388) (9,630,998) (634,388) Funds advanced to customers (107,937,795) 5,520,355 (110,018,536) 4,388,370 Net increase in credit card receivable (259,654) 60,376 (259,654) 60,376 Short-term marketable securities (1,324,765) (704,119) (1,581,389) (793,699) Other operating assets 900,628 (961,357) 2,376,806 (713,922) (118,252,584) 3,280,867 (119,113,771) 2,306,737 Increase/(decrease) in operating liabilities Deposits from other banks 179,675 420,101 418,628 420,101 Deposits from customers 117,571,827 92,117,775 117,440,490 92,861,829 Other operating liabilities (1,611,323) 1,378,267 (1,481,636) 1,171,716 Net cash from/(used in) operating activities before income tax 4,775,741 101,726,070 5,268,486 102,272,343 Income tax paid (1,692,034) (1,611,027) (1,927,120) (1,858,874) Net cash from/(used in) operating activities 3,083,707 100,115,043 3,341,366 100,413,469 Cash flows from investing activities Net increase in Treasury bills and other eligible bills (16,668,014) (2,748,295) (16,684,808) (3,221,280) Proceeds from sale of investment securities 23,571,307 777,133 23,735,457 777,133 Dividends received 468,998 347,878 257,910 150,456 Purchase of investment securities (31,567,092) (13,917,685) (32,050,072) (14,262,931) Net cash effect on investment in Subsidiaries and Associates Net cash effect on investment in Bank of Ceylon (UK) Limited II (a) (1,893,873) – – – Net cash effect on acquisition of Subsidiaries II (b) – – (23,625) (134,800) Net cash effect on investment in other Subsidiaries and Associates II (c) – (433,954) (187,186) (126,048) Purchase of property, plant & equipment (1,043,502) (1,390,830) (1,106,282) (1,430,799) Purchase of intangible assets (107,887) (55,548) (109,473) (56,707) Purchase of leasehold lands (16,521) – (16,521) – Purchase of investment properties – – (2,659) (110,398) Purchase of securities purchased under re-sale agreements (34,225,046) (4,855,545) (34,172,166) (4,908,425) Proceeds from sale of property, plant & equipment 89,179 110,617 98,738 120,878 Net cash from/(used in) investing activities (61,392,451) (22,166,229) (60,260,687) (23,202,921) Cash flows from financing activities Proceeds from issue of shares – – – 237,094 Proceeds from issue of securities sold under re-purchase agreements 19,318,786 (15,597,955) 20,000,746 (15,751,965) Proceeds from issue/(redemption) of debentures 20,678,813 – 20,338,953 (88,750) Net increase/(decrease) in other borrowings 18,642,032 (28,199,518) 21,664,892 (27,453,459) Dividends paid to Government of Sri Lanka (2,923,205) (1,346,410) (2,923,205) (1,346,410) Dividends to minority shareholders – – (38,143) (30,629) Net cash from financing activities 55,716,426 (45,143,883) 59,043,243 (44,434,119) Net increase/(decrease) in cash and cash equivalents (2,592,318) 32,804,931 2,123,922 32,776,429 Cash and cash equivalents at the beginning of the year 59,375,919 26,570,988 59,404,321 26,627,892 Cash and cash equivalents at the end of year III 56,783,601 59,375,919 61,528,243 59,404,321

BANK OF CEYLON ANNUAL REPORT 2010 153 CASH FLOW STATEMENT

Bank Group For the year ended 31 December Note Page 2010 2009 2010 2009 No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

Note I Reconciliation of operating profit before taxation with cash flow from operating activities Profit before taxation 10,052,569 4,207,647 11,075,485 4,719,910

Add/(Less): Net gain from dealing securities (64,339) (835,429) (73,573) (836,290) Net gain from investment securities (1,214,701) (906,066) (1,174,383) (902,061) Reversal of provision for non-performing advances (1,297,087) (1,398,119) (1,297,087) (1,398,119) Net (gain)/loss on marked to market valuation on Government securities (132,069) (361,490) (132,069) (361,490) Net (gain)/loss on marked to market valuation (79,714) (164,076) (79,714) (164,076) Profit on sale of property, plant & equipment 8 168 (26,775) (98,371) (32,494) (111,975) Provision for diminution in value of investment and dealing securities – – (6,957) 49,006 Provision made for staff payments 765,546 648,867 765,547 648,867 Provision made for value added tax 333,876 60,877 333,876 60,877 Exchange revaluation (279,536) (1,402,125) (277,475) (1,402,125) Share of profit of Associate Companies 14 173 – – (212,898) (130,653) Notional tax credit on interest on Government securities 15.5 175 (659,630) (351,925) (685,027) (380,873) Depreciation of investment properties 25 198 – – 3,074 3,060 Depreciation of property, plant & equipment 29 202 784,993 686,428 889,616 790,745 Amortisation of leasehold land 30 210 2,296 8,648 3,653 20,857 Amortisation of intangible assets 31 211 54,873 185,473 59,076 189,860 Loan loss provision 12 172 1,559,894 1,801,705 1,725,997 1,894,977 Accrued interest on loans and advances (1,235,422) (25,813) (1,328,958) (108,049) Accrued interest on deposits and borrowings (1,031,760) 2,045,260 (1,057,060) 2,298,184 Accruals for expenses (422,149) 627,043 (422,149) 627,043 Equity adjustment of Associate Companies – – (5,336) 3,222 Goodwill on acquisition – – 24,676 1,063 Dividends received from Subsidiaries and Associates (222,719) (199,474) – – Profit from sale of Associate Companies – – (91,045) – Cash flows from operating activities before changes in operating assets and liabilities 6,888,146 4,529,060 8,004,775 5,511,960

Note II Net cash effect on investment in Subsidiaries and Associates

2010 Rs. ’000

(a) Net cash effect on investment in Bank of Ceylon (UK) Limited [On 30 April 2010 Bank of Ceylon branch in London was converted into a Subsidiary named Bank of Ceylon (UK) Limited]

Net identifiable assets and liabilities in: Securities held on own account (912,426) Loans and Advances to customers (217,340) Property, plant and equipment (450,090) Other assets (283,068) Deposits from banks (704,745) Customer deposit accounts 2,126,247 Other payables 250,121 Net identifiable assets and liabilities transferred to Bank of Ceylon (UK) Limited (191,301) Cash outflow on the additional investment made in Bank of Ceylon (UK) Limited (1,893,873) Exchange translation adjustment (2,061) Total investment in Bank of Ceylon (UK) Limited since classified as investment in Subsidiaries (2,087,235)

154 BANK OF CEYLON ANNUAL REPORT 2010 CASH FLOW STATEMENT

NOTES TO THE CASH FLOW STATEMENT 2010 Rs. ’000

(b) Net cash effect on acquisition of Subsidiaries: Koladeniya Hydropower (Private) Limited (On 3 December 2010 Koladeniya Hydropower (Private) Limited was acquired by Property Development PLC as a Subsidiary)

Net identifiable assets and liabilities in: Property, plant & equipment (3,604) Trade and other payables 4,655 Net identifiable assets and liabilities 1,051 Goodwill on acquisition (24,676) Cash outflow on acquisition (23,625)

2009 Rs. ’000

MBSL Insurance Company Limited (On 7 April 2009 MBSL Insurance Company Limited was acquired by Merchant Bank of Sri Lanka PLC as a Subsidiary)

Net identifiable assets and liabilities in: Cash and cash equivalents (3,806) Investments (258,210) Amounts recceivable (165,274) Property, plant & equipment (22,075) Trade payables 305,105 Borrowings 6,717 Goodwill on acquisition (1,063) Total purchase price (138,606) Add: Cash of Subsidiaries 3,806 Cash outflow on acquisition of net of cash acquired (134,800)

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

(c) Net cash effect on investment in other Subsidiaries and Associates Merchant Bank of Sri Lanka PLC – (347,906) – – Ceylease Financial Services Limited – (60,000) – – Ceybank Asset Management (Private) Limited – (26,048) – (26,048) MBSL Savings Bank Limited – – (137,186) (100,000) MBSL Insurance Company Limited – – (50,000) – – (433,954) (187,186) (126,048)

Bank Group For the year ended 31 December Note Page 2010 2009 2010 2009 No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

Note III Analysis of cash and cash equivalents Cash and short-term funds 17 176 14,103,803 13,508,852 13,754,857 13,517,254 Placements with and loans to other banks 21 185 42,679,798 45,867,067 47,773,386 45,887,067 56,783,601 59,375,919 61,528,243 59,404,321

The Significant Accounting Policies on pages 156 to 166 and notes on pages 167 to 236 form an integral part of these Financial Statements.

BANK OF CEYLON ANNUAL REPORT 2010 155 SIGNIFICANT ACCOUNTING POLICIES

1. CORPORATE INFORMATION Subsidiaries Bank of Ceylon is a Government Corporation The principal activities of Bank’s Subsidiaries are as follows: domiciled in Sri Lanka, duly incorporated on Name of Company Principal Activity 01 August 1939 under the Bank of Ceylon Ordinance No. 53 of 1938. It is a licensed Property Development PLC Maintain, manage, develop and sustain the utility and value of Bank of commercial bank established under the Banking Ceylon Head Office Building Act No. 30 of 1988 and amendments thereto. Merchant Bank of Sri Lanka PLC Leasing and hire purchase, trade finance, corporate advisory services, fund management, capital market activities, corporate secretarial and legal services The registered office of the Bank is situated at No. 4, Bank of Ceylon Mawatha, Colombo 01, BoC Management and Support Provides management services Services (Private) Limited Sri Lanka. The debentures issued by the Bank are BoC Property Development and Renting of office space of BoC Merchant Tower in Colombo 03 and listed on the Colombo Stock Exchange. Management (Private) Limited Ceybank House in Kandy BoC Travels (Private) Limited Engages in travel related services The staff strength of the Bank as at 31 December Hotels Colombo (1963) Limited Provides hotel services 2010 was 8,204 (2009 - 7,538). Merchant Credit of Sri Lanka Limited Acceptance of deposits, granting lease facilities, hire purchase, loans and other credit facilities, pawning and real estate developments and related The Consolidated Financial Statements of services the Bank prepared for the year ended Ceylease Financial Services Limited Granting finance lease, hire purchase, commercial loan facilities and real estate 31 December 2010 comprise the Bank developments and sales (‘Parent’), its Subsidiaries (together referred to Ceybank Holiday Homes (Private) Managing, operating, maintaining and conducting Pilgrims, Rests, Hotels as the ‘Group’) and the Group’s interests in its Limited and Guest Houses in Sri Lanka Associate Companies. MBSL Insurance Company Limited Offers Life and General Insurance Products Koladeniya Hydropower (Private) Hydropower generation Limited The Bank does not have an identifiable parent Bank of Ceylon (UK) Limited Provides financial services including accepting deposits and dealing in of its own. investments

The Financial Statements for the year ended There have been no significant changes in the nature of principal activities of Subsidiaries during 31 December 2010 were authorised for issue the year under review other than for engaging in hydropower generation through acquisition of on 16 March 2011 in accordance with a Koladeniya Hydropower (Private) Limited to the Group. resolution of the Board of Directors passed on 16 March 2011. Associates The principal activities of Bank’s Associates are as follows: 1.1 PRINCIPAL ACTIVITIES Bank Name of Company Principal Activity The principal activities of the Bank during Ceybank Asset Management (Private) Limited Management of Unit Trust Funds and other private the year were commercial banking, personal portfolios banking, development financing, mortgage Southern Development Financial Company Limited Granting loan facilities financing, lease financing, investment banking, Lanka Securities (Private) Limited Equity trading, debt trading and placements Islamic banking, corporate financing, dealing Mireka Capital Land (Private) Limited Purchasing, hiring and acquiring real estate properties, in Government Securities, pawn broking, credit real estate developments and providing infrastructure card facilities, off-shore banking, foreign currency facilities to real estate development projects operations and other financial services. Transnational Lanka Records Solutions (Private) Limited Real estate - renting out properties MBSL Savings Bank Limited Provides financial services including accepting deposits, There have been no significant changes in the leasing, hire purchase and pawning. nature of these activities during the year. There have been no significant changes in the 3. SUMMARY OF SIGNIFICANT ACCOUNTING nature of principal activities of Associates during POLICIES the year. 3.1 BASIS OF PREPARATION The Financial Statements of the Bank and the 2. DIRECTORS’ RESPONSIBILITY FOR FINANCIAL Group encompassing the Balance Sheet, Income STATEMENTS Statement, Cash Flow Statement, Statement of The Board of Directors is responsible for the Changes in Equity, Accounting Policies and the preparation and presentation of the Financial Notes thereto are prepared in conformity with Statements of the Bank in terms of the provisions Accounting Standards issued by The Institute of the Bank of Ceylon Ordinance and its of Chartered Accountants of Sri Lanka and on amendments read with the Banking Act No. 30 the basis of historical cost convention except of 1988 and its amendments thereto and Sri otherwise stated as required by the above Lanka Accounting Standards. Standards, which have been applied consistently

156 BANK OF CEYLON ANNUAL REPORT 2010 SIGNIFICANT ACCOUNTING POLICIES with that of the previous year. Except as The judgments by the management are required 3.5.1 Foreign Currency Transactions indicated, the Financial Statements presented in the estimation of these amounts and such Transactions in foreign currencies are measured in Sri Lankan Rupees have been rounded to estimations are based on the number of factors at the exchange rate ruling at the date of the the nearest thousand. No adjustment has been such as any deterioration of countries, industry transaction. made for inflationary factors affecting the and technological obsolescence, borrowers’ Financial Statements except on certain land and financial situation. Monetary assets and liabilities denominated buildings, investment properties and in foreign currencies are translated into dealing securities. z Impairment of Other Assets Sri Lankan Rupees at the exchange rate ruling at The Group assesses on each Balance Sheet date the Balance Sheet date. The resulting gains and 3.2 ESTIMATES AND MANAGEMENT or more frequently to determine whether there losses from foreign exchange differences are JUDGMENTS is objective evidence that an asset is impaired. accounted for in the Income Statement. The preparation of Financial Statements requires This requires the management to make an management to make judgments, estimates estimate of expected future cash flows, suitable Non-monetary assets and liabilities measured at and assumptions that affect the application discount rates in order to arrive at the present cost in a foreign currency are translated using of policies and reported amount of assets and value of future cash flows, which can be derived the exchange rate at the date of the transaction. liabilities, income and expenses. The estimates from a particular asset. Non-monetary assets and liabilities measured and associated assumptions are based on at fair value in foreign currencies are translated historical experience and various other factors 3.3 MATERIALITY AND AGGREGATIONS into Sri Lankan Rupees at the exchange rate that are believed to be reasonable under the Each material class of similar items is presented ruling at the date the fair value was determined. circumstances. separately in the Financial Statements. Items of a dissimilar nature or function are presented 3.5.2 Foreign Operations The estimates and assumptions are reviewed separately unless they are immaterial as The results and financial position of the on an ongoing basis. Revisions to accounting permitted by the Sri Lanka Accounting Standard branches in India, Maldives and Bank of Ceylon estimates are recognised in the period in which No. 03 (Revised 2005) on ‘Presentation of (UK) Limited whose functional currency is not the estimates are revised and/or in future Financial Statements’. Sri Lankan Rupees are translated into Sri Lankan periods if the revision affects future periods too. rupees as follows: 3.4 STATEMENT OF COMPLIANCE Key items which involve these judgments, z Assets and liabilities are translated at the The Financial Statements of the Bank and its estimates and assumptions are discussed below: exchange rate ruling at the Balance Sheet Subsidiaries are prepared in accordance with date. the Sri Lanka Accounting Standards (SLASs) laid z Defined Benefit Plans down by The Institute of Chartered Accountants z Income and expenses in the Income The cost of defined benefit plans, gratuity of Sri Lanka and comply with the requirements Statement are translated at an average and pension obligation is determined by of Bank of Ceylon Ordinance and Banking Act exchange rate approximating the exchange using actuarial valuations. It involves making No. 30 of 1988 and amendments thereto. In rates at the dates of the transactions, and in assumptions about discount rates, expected the case of Financial Statements of Subsidiaries the case of income and expenses of overseas rates of return on planned assets, attrition rate, in addition to the above, they comply with branches, the monthly average exchange future salary increases, future cost of living Companies Act No. 07 of 2007, Finance Leasing rates are applied for translation. allowances and future pension increases. All Act No. 56 of 2000, Finance Companies Act z Resulting exchange differences are recognised assumptions are reviewed at each reporting No. 78 of 1988, Insurance Industry Act No. 43 in the foreign currency translation reserve, date due to uncertainty. of 2000 and provisions of International Financial which is a separate component of equity. Reporting Standards (IFRSs). The Financial z When a foreign operation is disposed, the z Impairment on Loans and Advances Statements of the Bank and its Subsidiaries deferred cumulative translation gain or loss In addition to the provisions made for possible present fairly the financial position, financial recognised in Equity relating to that particular losses on loans and advances based on the performance and cash flows. foreign operation is recognised in the Income parameters given in the Sri Lanka Accounting Statement as part of the gain or loss on Standard No. 23 on ‘Revenue Recognition 3.5 FOREIGN CURRENCY TRANSLATION disposal. and Disclosures in the Financial Statements Functional and Presentation Currency z Forward exchange contracts are valued at of Banks’ and Directives issued by the Central Items in the Financial Statements of the Bank the forward market rates ruling on the date Bank of Sri Lanka, the Group reviews its loans and each of its Subsidiaries are translated using of the Balance Sheet. Resulting net unrealised and advances portfolio at each reporting date their functional currency, being the currency of gains and losses are dealt with through the or more frequently, if events or changes are the primary economic environment in which Income Statement. in existence, which require to asses whether the entity operates. The Consolidated Financial a further provision for impairment is required Statements are presented in Sri Lankan Rupees, against exposures. which is the functional and presentation currency of the Bank and except for Bank of Ceylon (UK) Limited whose functional currency is Sterling Pounds.

BANK OF CEYLON ANNUAL REPORT 2010 157 SIGNIFICANT ACCOUNTING POLICIES

3.5.3 Consolidation Adjustments The Group’s investments in Associates are cost, less any accumulated impairment losses On consolidation, foreign exchange differences accounted for using Equity Method and initially and goodwill to be reviewed for impairment arising from the translation of net investments carried at cost. The carrying amount is increased annually or more frequently if events or changes in foreign entities, as well as any borrowings or decreased to recognise the Group’s share of in circumstances indicate that the carrying value and instruments designated as foreign currency net assets of the Associate, less any impairment may be impaired. The acquired goodwill is hedges of such investments are taken to in value after the date of acquisition. Where the written-off in full in the year of acquisition. capital reserves. Group’s share of losses in an Associate equals or exceeds its interest in the Associate, including When Subsidiaries/Associates/other business 3.6 BASIS OF CONSOLIDATION any unsecured receivables, the Group does not units are sold, the difference between the selling price and the net assets plus cumulative The Bank’s Financial Statements comprise the recognise further losses, unless it has incurred translation differences and unimpaired goodwill, consolidation of the Financial Statements of the obligations or made payments on behalf of the if any, is recognised in the Income Statement in Domestic Banking Unit, the Off-shore Banking Associate. The Group discontinues the use of the year of disposal. Unit and the foreign operations that are integral Equity Method from the day that it ceases to to the Bank. The Group Financial Statements have significant influence over an Associate and 3.6.4 Transactions Eliminated on Consolidation comprise consolidation of the Financial accounts for the investment in accordance with All intra-group transactions, balances, income Statements of the Bank, its Subsidiaries in terms the Sri Lanka Accounting Standard No. 22 on and expenses are eliminated on consolidation. of the Sri Lanka Accounting Standard No. 26 ‘Accounting for Investments’. Unrealised gains and losses resulting from (Revised 2005) on ‘Consolidated and Separate transactions between the Group and its Financial Statements’ and in terms of the The reporting dates of the Group and the Associates are also eliminated on consolidation Sri Lanka Accounting Standard No. 27 Associates are identical and there are no to the extent of the Group’s interests in the (Revised 2005) on ‘Investments in Associates’. significant restrictions on the ability of Associates Associates. Where necessary, adjustments are to transfer funds to Parent in the form of cash made to the Financial Statements of Subsidiaries 3.6.1 Subsidiaries dividends or to repay loans and advances. The to bring the Accounting Policies used in line with Subsidiaries are those companies in which the results of the Associates are taken from the latest those used by the Group. Bank, directly or indirectly, has an interest of audited accounts or unaudited management accounts of the Associates prepared at dates not more than one-half of the voting rights or has 3.7 TAXATION control over the financial and operating policies. more than three months prior to the end of the Provision for taxation comprises current and financial year of the Group. deferred tax and Social Responsibility Levy. Subsidiaries are consolidated from the date on A listing of the Bank’s Principal Associates is Provision for taxation is recognised in the which effective control is transferred to the Bank shown in Note 26 to the Financial Statements. Income Statement except to the extent that it and are no longer consolidated from the date relates to items recognised directly in equity, in of disposal. 3.6.3 Business Combinations and Goodwill which case it is recognised in equity. Provision Business combinations are accounted for using for taxation on the overseas operations is made The Consolidated Financial Statements are the Purchase Method of Accounting as per on the basis of the profit for the year as suggest prepared to common financial year end of the requirements of the Sri Lanka Accounting for taxation purposes in accordance with the 31 December. The accounting policies of the Standard No. 25 (Revised 2004) on ‘Business provisions of the relevant regulations in the Subsidiaries have been changed wherever Combinations’. This involves recognising respective country. necessary to comply with the Bank’s accounting identifiable assets and liabilities of the acquired policies. There are no significant restrictions business at fair value. Any excess of the cost 3.7.1 Current Taxation on the ability of Subsidiaries to transfer funds of acquisition over the fair values of the Provision for taxation on Sri Lankan operations is to Parent in the form of cash dividends or to identifiable net assets acquired, is recognised made on the basis of the net profit for the year repay loans and advances. All Subsidiaries of as goodwill. If the cost of acquisition is less as adjusted for taxation purposes in accordance the Bank have been incorporated in Sri Lanka than the fair values of the identifiable net assets with the provisions of the Inland Revenue Act except for Bank of Ceylon (UK) Limited, which is acquired, the difference is identified as discount No. 10 of 2006 and the amendments thereto. incorporated in the United Kingdom. on acquisition and is recognised directly in the Provision for taxation on the overseas branches Income Statement in the year of acquisition. is made on the basis of the net profit for A listing of the Bank’s Subsidiaries is given in the year as adjusted for taxation purposes in Note 27 to the Financial Statements. Separate Goodwill acquired in a Business Combination is accordance with the provisions of the relevant disclosure is made in respect of minority interest. initially measured at cost, being the excess of the statutes in those countries. cost of the Business Combination over the Bank’s 3.6.2 Associates interests in the net fair value of the identifiable 3.7.2 Deferred Taxation Associates are entities in which the Group assets, liabilities including contingent liabilities Deferred tax is provided in full, using the has significant influence, but not control, and acquired. Sri Lanka Accounting Standard Liability Method, on temporary differences generally holds a shareholding of between and No. 25 (Revised 2004) on ‘Business arising between the tax bases of assets and including 20% and 50% of the voting rights. Combinations’ requires that following the initial liabilities and their carrying amounts in the recognition, goodwill is to be measured at

158 BANK OF CEYLON ANNUAL REPORT 2010 SIGNIFICANT ACCOUNTING POLICIES

Financial Statements. Deferred tax liabilities 3.7.3 Value Added Tax (VAT) on Financial 4.2 NON-PERFORMING LOANS AND are recognised for all taxable temporary Services PROVISION FOR LOAN LOSSES differences, except: During the year, the Bank’s total value addition 4.2.1 (a) Non-Performing Loans was subjected to a 20% Value Added Tax as per Loans and advances, which are in arrears of z Liabilities arising from goodwill for which Section 25 (a) of the Value Added Tax Act due capital and/or interest are classified as amortisation is not deductible for tax No. 14 of 2002 and amendments thereto. non-performing as per the Direction No. 03 of purposes. 2008 on ‘Classification of Loans and Advances, z Liabilities arising from the initial recognition 3.7.4 Economic Service Charge (ESC) Income Recognition and Provisioning’, as of an asset/liability other than in business In terms of the provisions of the Economic amended by the Direction No. 09 of 2008 on combinations which, at the time of Service Charge Act No. 13 of 2006, ESC is ‘Amendments to Directions on Classification of transaction, does not affect either the payable on the liable turnover at specified rates. Loans and Advances, Income Recognition and accounting or taxable profit. ESC paid is deductible from the income tax Provisioning for Licensed Commercial Banks in liability. Any unclaimed liability can be carried Sri Lanka’ issued by the Central Bank of Deferred tax assets are recognised for all forward and set off against the income tax Sri Lanka. deductible temporary differences, unused tax payable for a further four years. losses to the extent that it is probable that 4.2.1 (b) Foreclosed Properties taxable profit will be available against, which 3.7.5 Social Responsibility Levy (SRL) Foreclosed properties represent properties that the deductible temporary differences can be In terms of the provisions of the Finance Act are acquired in full or partial settlement of debts. utilised, except: No. 05 of 2005, as amended by the Finance These properties are classified as non-performing z Negative goodwill, which was treated Act No. 11 of 2006, SRL is payable at the rate advances and accounted for at the lower of as deferred income under business of 1.5% on all taxes and levies chargeable as cost or market value on an individual property combinations. specified in the First Schedule of the Act. basis. The shortfall between the market value of the foreclosed properties and the related loan z The initial recognition of an asset/liability 3.7.6 Withholding Tax on Dividends outstanding is recognised as a provision for other than in a business combination which, loan losses in the Income Statement. Foreclosed Dividend distributed out of taxable profit of at the time of transaction, does not affect properties are not subject to depreciation. the accounting or taxable profit. the Subsidiaries and Associate Companies attracts a 10% deduction at source and is not Subsequent gains and losses on the disposal of available for set off against the tax liability of The carrying amount of deferred tax asset the foreclosed properties are taken into account the Bank. Thus, the withholding tax deducted at is reviewed at each Balance Sheet date and in determining operating profits. source is added to the tax expense in preparing reduced to the extent that it is no longer the Consolidated Financial Statements as a probable that sufficient taxable profit will be 4.2.2 Provision for Loans, Advances and consolidation adjustment. available to allow the benefit of part or all of Finance Leases that deferred tax assets to be utilised. Any such 4.2.2 (a) Provision for Non-Performing Loans 4. ASSETS AND BASIS OF THEIR VALUATION reduction should be subsequently reversed and Advances to the extent that it becomes probable that 4.1 LOANS AND ADVANCES, FINANCE Provisions for non-performing loans and LEASES AND CREDIT CARD RECEIVABLE sufficient taxable profit would be available. advances are made on the basis of a continuous 4.1.1 Loans and Advances review of all loans and advances in accordance Deferred tax assets and liabilities are measured All loans and advances are recognised when with Sri Lanka Accounting Standard No. 23 at the tax rate that are expected to apply in the cash is advanced to borrowers. Loans and on ‘Revenue Recognition and Disclosures in year when the assets are realised or the liabilities advances are stated in the Balance Sheet net of the Financial Statements of Banks’ and the provisions for loan losses and net of interest, are settled, based on tax rates and tax laws that regulations imposed by the Central Bank of which is not accrued to revenue. have been enacted or substantially enacted at the Sri Lanka. Balance Sheet date. 4.1.2 Finance Leases Accordingly, specific provisions have been made Current tax and deferred tax relating to items Assets leased to customers, which transfer as follows: substantially all the risks and rewards associated recognised directly in equity are also recognised Provision with ownership other than legal title for a specific in equity. Deferred tax assets and liabilities are made net period are accounted for as finance leases. of realisable set off if a legally enforceable right exists to set value of the off current tax assets against current tax liabilities Period outstanding Classification security Lease receivables are stated in the Balance Sheet and the deferred taxes relate to the same taxable 3 to 6 months Special mention – net of initial rentals received, unearned lease entity and the same taxation authority. 6 to 12 months Substandard 20% income and provision for rentals doubtful of recovery. 12 to 18 months Doubtful 50% 18 months and over Loss 100% 4.1.3 Credit Card Receivable Amounts receivable on credit cards are included in advances to customers at the amounts expected to be recovered.

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Additional provisions have also been made over 4.2.2 (c) Provision for Credit Card Receivable Accordingly, the Bank has reduced the general and above the minimum percentages specified When the required minimum payment is provision to 0.9% on total performing and above, on a case-by-case basis depending on in arrears on credit card receivable, specific overdue loans and advances as at 31 December the risk associated with such loans. provision is made as follows: 2010 (1% as at 31 December 2009).

Period of outstanding Classification Provision When a loan is deemed uncollectible, it is 4.2.3 Write-off Policy of the Bank 3 - 4 months Special mention – written-off against the related provision for The Bank writes off a loan net of related loan impairments. Subsequent recoveries are credited 4 - 6 months Substandard 25% loss provisions when it determines that the loan to the Income Statement. 6 - 8 months Doubtful 50% is uncollectible. This decision is made when the Over 8 months Loss 100% borrower can no longer pay or the proceeds In addition, the value of the security is from collateral is not sufficient to pay back the determined on the ‘Hair Cut Rule’ imposed by 4.2.2 (d) Provision for Pawning entire obligation. the Central Bank of Sri Lanka, i.e., the extent A 100% specific provision is made for the up to which the Forced Sale Value (FSV) of total amount advanced for unsold articles at 4.3 INVESTMENTS immovable property can be counted as the value every auction. 4.3.1 Investments in Subsidiaries of security (which is given below) in calculating Investments in Subsidiaries are accounted for the provisioning for non-performing advances. under the Cost Method of accounting in the Bank’s Financial Statements in accordance with % of FSV of immovable property that can be considered the Sri Lanka Accounting Standard No. 26 as the net value of security (Revised 2005) on ‘Consolidated and Separate Freehold Leasehold Financial Statements’. Accordingly, investments Item property property in Subsidiaries are stated in the Bank’s Balance For the advances in the substandard and doubtful category 75 60 Sheet at cost, less impairment losses, if any. For the Advances in the Loss Category 4.3.2 Investments in Associates Less than 12 months 75 60 Investments in Associates are accounted for More than 12 months but less than 24 months 60 50 under the Cost Method in the Bank’s Financial More than 24 months but less than 36 months 50 40 Statements and under the Equity Method in More than 36 months but less than 48 months 40 30 the Group’s Financial Statements in accordance More than 48 months 40 Nil with the Sri Lanka Accounting Standard No. 27 (Revised 2005) ‘Investment in Associates’. 4.2.2 (b) Provision for Lease Rentals 4.2.2 (e) Provision for Regular Advances Receivable in Arrears Apart from specific provisions, the Bank also In the Bank’s Balance Sheet, investments in When the rental is in arrears over a consecutive carried general provision of 1% on total Associates are stated at cost, less impairment period of 90 days, the specific provision is made performing and overdue loans and advances for losses, if any. Under the Equity Method, the as follows: credit losses to absorb all losses inherent in its investments in Associates are initially accounted loan portfolio including credit card receivable, Period of outstanding Classification Provision for at cost and the carrying amount is adjusted lease rentals receivable, and pawning upto 90 - 180 days Special mention – for post-acquisition changes in the Bank’s 30 September 2010. Over 180 days Loss 100% share of net assets of the Associates, less any impairment. According to the Banking Act Direction No. 03 of Category Provision 2010, ‘Amendments to Direction on Classification 4.3.3 Dealing Securities A 100% of capital outstanding of lease of Loans and Advances, Income Recognition and These are marketable securities acquired and held assets minus 50% of the invoice Provisioning for Licensed Commercial Banks in value/condition and valuation report Sri Lanka’, banks shall maintain general provision with the intention of resale over a short period of whichever is lower, net of upfront of 0.5% of total outstanding of on Balance time. Such securities are initially measured at cost rentals and cash security obtained, Sheet performing loans and advances and total and subsequently marked to market and carried if any. outstanding of special mention on-Balance at market value in the Balance Sheet. Any gains/ B 100% of capital outstanding net of Sheet credit facilities net of interest in suspense losses on marked to market valuation are dealt upfront rentals and cash security commencing from 01 January 2012. In order with through the Income Statement. obtained, if any. to fulfil the above requirement, the banks shall reduce 0.1% per quarter during the five quarters Category A- Identified at the time of termination commencing 01 October 2010 to arrive at the of lease contract. statutory requirement. Category B - Identified at the time of loss of the assets.

160 BANK OF CEYLON ANNUAL REPORT 2010 SIGNIFICANT ACCOUNTING POLICIES

4.3.4 Investment Securities to a working condition for its intended use 4.4.7 Derecognition These are acquired and held for yield or capital and the costs of dismantling and removing the The carrying amount of an item of property, growth in the medium or long term with items and restoring the site on which they are plant & equipment is derecognised on disposal the positive intent and ability to hold until located. Purchased software that is integral to or when no future economic benefits are maturity. Such securities are recorded at cost in the functionality of the related equipment is expected from its use or disposal. The gain or accordance with Sri Lanka Accounting Standard capitalised as part of the computer equipment. loss arising from the derecognition of an item No. 22 on ‘Accounting for Investments’. of property, plant & equipment is included 4.4.3 Cost Model Changes in market values of these securities in the Income Statement when the item is are not taken into account, unless there is The Group applies Cost Model to plant & derecognised. considered to be diminution in value, which is equipment and records at cost of purchase other than temporary. or construction together with any incidental When replacement costs are recognised in the expenses thereon, less accumulated depreciation carrying amount of an item of property, plant & and any accumulated impairment losses. 4.3.5 Non-Current Assets Held for Sale equipment, the remaining carrying amount of These are investments classified as held for the replaced part is derecognised. 4.4.4 Revaluation Model sale as at the Balance Sheet date. The Bank intends to recover the value of these assets, The Group applies the Revaluation Model for the 4.4.8 Depreciation entire class of freehold land and buildings. Such principally through a sales transaction rather The Group provides depreciation on straight- properties are carried at a revalued amount, than continuing to hold. These are assets which line basis over the periods appropriate to the being their fair value at the date of revaluation, are available for immediate sale in their present estimated useful lives of the different types less any subsequent accumulated depreciation condition, subject to only the terms that are of assets. usual and customary for sale of such assets and and subsequent accumulated impairment losses. Freehold land and buildings of the Bank where sale is highly probable. These assets are Provisioning for depreciation of property, plant are revalued every seven years on a roll over measured at the lower of the carrying amount & equipment is made on pro-rata basis. and fair value less costs to sell, as per the basis to ensure that the carrying amounts do not differ materially from the fair values at the Sri Lanka Accounting Standard No. 38 (Revised The depreciation on domestic assets is Balance Sheet date. On revaluation of an asset, 2006) on ‘Non-current Assets Held for Sale and determined using the following estimated any increase in the carrying amount is credited Discontinued Operations’. useful lives: directly to equity, under capital reserve or used Freehold Building Over 40 years 4.4 PROPERTY, PLANT & EQUIPMENT to reverse a previous revaluation decrease relating to the same asset, which was debited to Office Equipment Over 08 years The Group applies the requirements of the the Income Statement. In this circumstance, the Sri Lanka Accounting Standard No. 18 (Revised Furniture & Fittings Over 08 years increase is recognised as income to the extent 2005) on ‘Property, Plant & Equipment’ in Computer Equipment Over 05 years of the previous written-down. Any decrease in accounting for its own assets which are held for Motor Vehicles Over 04 years the carrying amount is recognised as an expense and used in the provision of services, for rental in the Income Statement or debited directly to to others or for administrative purposes and are The future economic benefits embodied in equity under revaluation reserve to the extent of expected to be used more than one year. the assets that are used by overseas business any credit balance existing in the capital reserve operations are different from those used 4.4.1 Basis of Recognition in respect of that asset. When a revalued asset domestically in terms of the asset’s expected utility. is disposed off, any revaluation surplus will be Property, plant & equipment are recognised transferred directly to retained earnings. if it is probable that future economic benefits Accordingly, the depreciation on assets associated with the assets will flow to the belonging to overseas operations are determined 4.4.5 Subsequent Costs Group and the cost of the asset can be using the following estimated useful lives: The cost of replacing part of an item of reliably measured. property, plant & equipment is recognised in the Freehold Building Over 50 years carrying amount of the item if it is probable that Freehold/Leasehold 4.4.2 Measurement Refurbishment Over 10 years the future economic benefits embodied within An item of property, plant & equipment that that part will flow to the Group and its cost can Office Equipment & qualifies for recognition as an asset is initially be reliably measured. Computers Over 05 years measured at its cost of purchase directly Furniture & Fittings Over 10 years attributable to the acquisition of the asset or 4.4.6 Restoration Costs construction or valuation together with any The cost incurred on repairs or maintenance of The asset’s residual value, useful life and incidental expenses thereon. property, plant & equipment in order to restore method of depreciation are reviewed at each or maintain future economic benefits is charged Balance Sheet date to change estimates. The cost of self-constructed assets includes the to Income Statement as incurred. cost of materials and direct labour, any other costs directly attributable to bringing the asset

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4.4.9 Capital Work-In-Progress incurred in customising the software for its and the carrying amount of the assets and are Capital work-in-progress is stated at cost. intended use. recognised in the Income Statement. These are expenses of a capital nature directly incurred in the construction of buildings, major 4.6.2 (b) Goodwill 4.7 INVESTMENT PROPERTIES plant and machinery and system development, Goodwill arising on the acquisition represents The Group applies the requirements of the awaiting capitalisation. the excess of the cost of acquisition over the Sri Lanka Accounting Standard No. 40 (Revised Group’s interest in the net fair value of the 2005) on ‘Investment Property’, in accounting 4.4.10 Borrowing Costs acquiree’s identifiable assets, liabilities and for investment properties. Borrowing costs that are directly attributable contingent liabilities at the date of acquisition. to the acquisition, construction or production According to the Sri Lanka Accounting 4.7.1 Basis of Recognition of a qualifying asset have been capitalised as Standard No. 25 (Revised 2004) on ‘Business Investment property is property that is held part of the cost of the asset in accordance with Combinations’, goodwill is no longer amortised. to earn rentals or for capital appreciation or the Sri Lanka Accounting Standard No. 20 on Instead, goodwill is tested for impairment both and the future economic benefits that are ‘Borrowing Costs’. Capitalisation of borrowing annually and assessed for any indication of associated with the investment property but not costs ceases when substantially all the activities impairment at each reporting date to ensure for sale in the ordinary course of business. necessary to prepare the qualifying asset for its that its carrying amount does not exceed its intended use are completed. recoverable amount. If an impairment loss is 4.7.2 Measurement identified, it will be recognised immediately in Investment property is accounted for 4.5 LEASEHOLD PROPERTY the Income Statement. under Cost Model in the Financial Statements. Leasehold properties are recorded at carrying Accordingly, after recognition as an asset, the value in terms of the Sri Lanka Accounting The negative goodwill is recognised immediately property is carried at its cost, less accumulated Standard No. 19 (Revised 2005) on ‘Leases’. in the Income Statement. depreciation and impairment losses.

The carrying value of leasehold properties is 4.6.3 Subsequent Expenditure 4.7.3 Depreciation amortised over the remaining lease term or Expenditure incurred on software is capitalised Depreciation is provided on a straight-line basis useful life of leasehold property, whichever is only when it enhances and extends the over the estimated life of the class of asset from lower. Subsequent revaluations are not carried economic benefits of computer software the date of purchase up to the date of disposal. out for leasehold properties. beyond their original specifications and lives and such cost is recognised as capital improvement 4.7.4 Derecognition 4.6 INTANGIBLE ASSETS and added to the original cost of software. Investment properties are derecognised when The Group applies the requirements of the disposed of, or permanently withdrawn from use Sri Lanka Accounting Standard No. 37 4.6.4 Amortisation because no future economic benefits are expected. Transfers are made to and from investment on ‘Intangible Assets’ in accounting for Intangible assets except for goodwill are property only when there is a change in use. intangible assets. amortised using the straight-line method over the estimated useful life of five years The gain/loss on disposal is calculated as the 4.6.1 Basis of Recognition commencing from the date the application difference between the net disposal proceeds and An intangible asset is recognised if it is software is available for use over the best the carrying amount of the asset and is recognised probable that the future economic benefits estimate of its useful economic life. as income or expense in the Income Statement. that are attributable to the asset will flow to the entity and the cost of the assets can be The unamortised balances of software with 4.8 IMPAIRMENT OF ASSETS measured reliably. finite lives are reviewed for impairment The carrying amounts of the Group’s assets whenever there is an indication for impairment are reviewed at each reporting date to 4.6.2 Measurement and recognised as expenses in the Income determine whether there is objective evidence 4.6.2 (a) Software Statement to the extent that they are no longer of impairment. If any such evidence exists, probable of being recovered from the expected Software represents the value of computer the carrying amount of a particular asset or future benefits. application software licensed for use of the portfolio of assets is reduced to the estimated Group, other than software applied to the recoverable amount by means of a charge 4.6.5 Derecognition operation software system of computers. to the Income Statement, in those expense Intangible assets are derecognised when it Intangible assets are carried at its cost, categories consistent with the function of the reveals that they will not generate economic less accumulated amortisation and any impaired asset or portfolio of assets, except impairment losses. benefits or circumstances indicate that the for property previously revalued where the carrying value is impaired. revaluation was taken to equity. In this case, the The initial costs comprise licence fees paid at impairment is also recognised in equity up to the time of purchase, duties/levies and also Gains or losses arising from derecognition the amount of any previous revaluation. other directly attributable expenditure that are of an intangible asset are measured as the difference between the net disposal proceeds

162 BANK OF CEYLON ANNUAL REPORT 2010 SIGNIFICANT ACCOUNTING POLICIES

The recoverable amount of an asset is the higher 4.10.2 Investments that are held to Maturity 5.6 DEFINED BENEFIT PLANS of its net selling price and value in use. The net Investments in Treasury Bills and Treasury Bonds 5.6.1 Bank of Ceylon Pension Trust Fund selling price is the fair value of an asset or cash- that the Bank intends and is able to hold to The ‘Bank of Ceylon Pension Trust Fund’ is a generating unit, less costs to sell. In determining maturity are reflected at the value of the Bonds/ funded, non-contributory, defined retirement the value in use, the estimated future cash flows Bills purchased and the discount/premium benefit plan, operated for the payment are discounted to their present value using a accrued thereon. Discounts received/premia of pensions until death to the permanent pre-tax discount rate that reflects current market paid are taken to the Income Statement based employees who have completed a minimum of assessments of the time-value of money and the on a pattern reflecting a constant periodic rate ten years of continuous service with the Bank, risks specific to the assets. Impairment losses of return. at their retirement on reaching the retirement recognised in respect of cash-generating units age on or after 55 years or on medical grounds, are allocated first to reduce the carrying amount 5. LIABILITIES AND PROVISIONS before reaching retirement age. The pension of any goodwill allocated to the cash-generating 5.1 DEPOSITS FROM CUSTOMERS is computed as a percentage of the last drawn unit and then, to reduce the carrying amount of Deposits from customers include non-interest salary excluding certain allowances. the other assets in the unit. bearing deposits, savings deposits, term deposits, 7 days’ call deposits and certificate of Contributions to the Pension Trust Fund are An assessment is made at each reporting deposits. They are stated in the Balance Sheet at made monthly, based on the advice of a date as to whether there is any indication amounts payable. Interest paid/payable on these qualified actuary, currently at 56.76% of gross that previously recognised impairment losses deposits is charged to the Income Statement. salary for employees who joined the Bank prior may no longer exist or may have decreased. to 01 January 1996. Employees who joined If such indication exists, the Group makes an 5.2 BORROWED FUNDS the Bank on and after 01 January 1996 may estimate of the recoverable amount. Previously Borrowed funds include call money borrowings, contribute 20% of their gross salary to a Pension recognised impairment losses other than in refinance borrowings and other term Fund in which event the Bank contributes 5%. respect of goodwill are reversed only if there borrowings from banks. They too are stated in This arrangement is tentatively pending until the has been a change in the estimates used to the Balance Sheet at amounts payable. Interest formulation of a contributory pension scheme determine the asset’s recoverable amount since paid/payable on these borrowings is charged to is finalised. the last impairment losses were recognised. the Income Statement. If that is the case, the carrying amount of the The fund is actuarially valued by a qualified asset is increased to its recoverable amount. 5.3 SECURITIES SOLD UNDER RE-PURCHASE actuary once in three years. Such reversal is recognised in the Income AGREEMENTS (REPOS) Statement unless the asset is carried at the Securities sold under re-purchase agreements The Subsidiaries do not operate Pension Funds. revalued amount, in which case, the reversal is (‘Repos’) are treated as collateralised borrowings treated as a revaluation increase. and stated at the consideration received and 5.6.2 Bank of Ceylon Widows’/Widowers’ and Orphans’ Pension Fund interest accrued thereon. These are retained 4.9 SECURITIES PURCHASED UNDER RE-SALE The Bank is liable for and guarantees the in the Financial Statements and the counter- AGREEMENTS (REVERSE REPOS) payments to the beneficiaries of the ‘Bank party liability is accounted for as a liability and Securities purchased under re-sale agreements of Ceylon Widows’/Widowers’ and Orphans’ classified under debt securities in issue. are treated as collateralised lending and Pension Fund’ to which the Bank’s employees recorded at the consideration paid and interest monthly contribute 8% of their gross salary. The difference between sale and re-purchase accrued thereon. The amount lent is shown The Bank’s liability towards the beneficiaries of price is treated as interest paid and accrued as an asset either as loans and advances to the employees arises when an employee who evenly over the life of the Repo period. customers or loans to other banks. has contributed to the fund for five continuous 5.4 DEBENTURES years dies while in service or on the death of a The difference between purchase price and pensioner where the Bank will be liable to pay These represent the funds borrowed by the re-sale price is treated as interest received and a monthly Widows’/Widowers’ and Orphans’ Group for long-term funding requirements, accrued evenly over the life of Repo agreement. Pension to his/her beneficiaries. The pension from the public issues and through private to beneficiaries of an employee who dies while placements. These are recorded in the Balance 4.10 GOVERNMENT OF SRI LANKA TREASURY in service is based on the last drawn salary Sheet at amounts expected to be payable at the BILLS, BONDS AND OTHER SECURITIES excluding certain allowances. 4.10.1 Investments that are held for trading Balance Sheet date. Investments in Treasury Bills and Treasury Bonds The fund is actuarially valued by a qualified 5.5 OTHER LIABILITIES that are acquired for the purpose of short-term actuary once in three years. Funding would be Other liabilities comprise of interest, fees, expenses selling (held for trading) are marked to market done in consultation with the Actuary, Trustees payable and other provisions. These liabilities are and carried at that value in the Balance Sheet. and Beneficiaries. Currently, the Bank contributes recorded at the cash value to be paid. Gains and losses on marked to market valuation a sum of Rs. 456 million per annum to meet the are dealt with through the Income Statement. deficit as recommended by the Actuary.

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Both the Pension Fund and the Widows’/ to Employees’ Provident Fund, in terms of the from the month in which the lease is executed, Widowers’ and Orphans’ Pension Fund Employees’ Provident Fund Act No. 15 of 1958 in proportion to the remaining receivable are approved by the Government and are as amended. balance of the lease. Interests on finance leases independently administered. cease to be accrued when they are in arrears for 5.7.3 Employees’ Trust Fund more than 90 days. Thereafter, such income is 5.6.3 Provision for Gratuity All employees of the Bank and its Subsidiaries recognised on cash basis. Provision has not been made in the Financial are members of the Employees’ Trust Fund Statements for retirement gratuity payable to which Bank/Group contributes 3% of 6.1.3 Interest Income from Other Sources under the Payment of Gratuity Act No. 12 of employees’ monthly gross salary excluding Interest income from securities issued by 1983, to employees who joined the Bank prior overtime, in terms of the Employees’ Trust Fund Government or Central Bank of Sri Lanka is to 01 January 1996 as the Bank has its own Act No. 46 of 1980. recognised on a time proportionate basis as non-contributory retirement benefit scheme in premia/discounts on purchase and amortised to force. However, employees whose services are 5.8 PROVISIONS FOR LIABILITIES income on a straight-line basis over the period to terminated other than by retirement are eligible A provision is recognised in the Balance Sheet maturity. Income from all other interest-bearing to receive a terminal gratuity under the Payment when the Bank has a legal or constructive securities is recognised on an accrual basis. of Gratuity Act No. 12 of 1983, at the rate of obligation as a result of a past event, and it is 6.1.4 Commission and Fee Income one-half of the basic or consolidated wage or probable that an outflow of economic benefits salary, cost of living and all other allowances will be required to settle the obligations, in Commission and fee income mainly comprise fees receivable from customers for guarantees applicable to the last month of the financial year, accordance with the Sri Lanka Accounting and other services provided by the Group, and for each year of continuous service. A provision Standard No. 36 on ‘Provisions, Contingent fees for foreign and domestic payment tariff. is being made in these Financial Statements for Liabilities and Contingent Assets’. retirement gratuities from the first year of service Such income is recognised as revenue at the time the services are provided. for all employees who joined the Bank on or 6. INCOME STATEMENT after 01 January 1996, as they are not covered 6.1 REVENUE RECOGNITION - BANK AND 6.1.5 Income on Discounting of Bills of by the pension scheme of the Bank. NON-INSURANCE BUSINESS Exchange 6.1.1 Interest Income from Loans and Income on the endorsement of Bills of Exchange In terms of the Sri Lanka Accounting Standard Advances is recognised only when the bill is received No. 16 (Revised 2006) on ‘Employee Benefits’, Interest on loans and advances is accounted and either issued or endorsed, and the the Bank and its Subsidiaries have calculated the for in terms of the provisions of the Sri Lanka payment under the particular instrument has post-employment benefit obligations, based on Accounting Standard No. 23 on ‘Revenue been effected. the actuarial valuation method recommended Recognition and Disclosures in the Financial in SLAS 16 and recognised that provision in the Statements of Banks’. Accordingly, interest 6.1.6 Dividend Income Income Statement. income from loans and advances is recognised Dividend income is recognised when the right to on an accrual basis. Interest ceases to be receive payment is established. The Gratuity Liabilities are not externally funded. accrued when the recovery of principal or interest is in arrears for more than 90 days. 6.1.7 Profit/Loss from Sale of Property, 5.7 DEFINED CONTRIBUTION PLANS Interest income from non-performing loans Plant & Equipment Contributions to defined contribution plans and advances is accounted for on cash basis. Profit/Loss arising from sale of property, plant & are recognised as an expense in the Income Interest falling due on non-performing loans equipment is recognised in the period in which Statement as incurred. and advances is credited to interest in suspense the sale occurs and is classified as other income. account on memorandum basis. In addition, 5.7.1 Bank of Ceylon Provident Fund interest accrued upto three months on such 6.1.8 Gains or Losses arising from All employees of the Bank are members of non-performing loans and advances is also Investment Securities the ‘Bank of Ceylon Provident Fund’ to which eliminated from the interest income and Gains or losses arising from the sale of equity the Bank contributes 12% of employees’ transferred to interest in suspense. shares, units, and financial instruments, including monthly gross salary excluding overtime, Treasury Bills sold prior to maturity, are accounted while employees contribute 8%. The Bank’s 6.1.2 Lease Income for on the date on which the transaction takes Provident Fund is an approved Fund, which is Lease income is accounted for in terms of the place. independently administered. provisions of the Sri Lanka Accounting Standard No. 19 (Revised 2005) on ‘Leases’. Accordingly, 6.1.9 Rental Income 5.7.2 Employees’ Provident Fund lease income is the interest component of the Rental income is recognised on an accrual basis. The Subsidiaries and their employees (other than lease rentals of all finance leases receivable 6.1.10 Interest Expenses Bank of Ceylon and its employees) contribute during the year. The excess to the aggregate 12% (15% by Property Development PLC) and rental receivable over the cost of the leased Interest expenses are recognised on an accrual basis. 8% respectively on salary of each employee assets constitutes unearned income, which is taken into revenue over the term of the lease,

164 BANK OF CEYLON ANNUAL REPORT 2010 SIGNIFICANT ACCOUNTING POLICIES

6.1.11 Operating Expenses 6.2.6 Premiums Receivable and claims expenses on those bonds have been All the expenses payable are recognised on an According to the Premium Payment Warranty specifically mentioned in the bond agreements accrual basis in the Income Statement to the (PPW) ruling by the Insurance Board of Sri Lanka with the policyholders. period to which they relate. (IBSL), all policies issued and not recovered over 60 days are cancelled. 6.3 LIFE INSURANCE BUSINESS 6.2 GENERAL INSURANCE BUSINESS 6.3.1 Gross Written Premium 6.2.1 Gross Written Premiums 6.2.7 Reinsurance Receivable Premium from traditional life insurance contracts, including participating contracts Premium is generally recognised as written upon Reinsurance assets include the balances due and annuity policies with life contingencies, is inception of the policy. Upon inception of the from both insurance and reinsurance companies recognised as revenue when cash is received contract, premium is recorded as written and for paid and unpaid losses and loss adjustment from the policyholder. Benefits and expenses are is earned primarily on a pro-rata basis over the expenses. Amounts recoverable from reinsurers provided against such revenue to recognised term of the related policy coverage. However, are estimated in a manner consistent with the profits over the estimated life of the policies. for those contracts for which the period of claim liability associated with the reinsured Moreover, for single premium contracts, risk differs significantly from the contract policy. Reinsurance is recorded gross in the premium is recorded as income when received period, premium is earned over the period of Balance Sheet, unless a right to offset exists. risk in proportion to the amount of insurance with any excess profit deferred and recognise in income in a constant relationship to the protection provided. If a reinsurance asset is impaired, the Company insurance in-force or, for annuities, the amount reduces the carrying amount accordingly and of expected benefit payments. 6.2.2 Reinsurance Premium recognises a loss in the Statement of Income. A Reinsurance premium expense is accounted reinsurance asset is impaired if there is objective 6.3.2 Reinsurance Premium for in the same accounting period as the evidence, as a result of an event that occurred Outward reinsurance premium is recognised Gross Written Premium to which it relates or after the initial recognition of the reinsurance when payable. Reinsurance recoveries are in accordance with the pattern of reinsurance asset, that the Company may not receive credited to match the relevant gross claims. services received. amounts due to it under the terms of their contract, and the event has a reliably measurable 6.3.3 Benefits, Losses and Expenses impact on the amount that the Company will 6.2.3 Unearned Premium receive from the reinsurer. Death claims are recorded on the basis of Unearned premium is the portion of the gross notifications received. Surrenders, maturities premium and reinsurance premium written 6.2.8 Claims and annuity payments are recorded when in the current year in respect of risks related Claims expense and a liability for outstanding due. Claims payable include direct costs of to subsequent periods. Unearned premium claims are recognised in respect of direct and settlement. Interim payments and surrenders are is calculated on the 24th basis in accordance inwards reinsurance business. The liability covers accounted for only at the time of settlement. with the Rules made by the Insurance Board claims Incurred But Not Reported claims (IBNR) of Sri Lanka under the Regulation of Insurance 6.3.4 Actuarial Valuation for Long-Term and the anticipated direct and indirect costs Industry Act No. 43 of 2000. Insurance Provision of settling those claims. Claims outstanding The Directors agree to the long-term insurance are assessed by review of individual claim files 6.2.4 Unexpired Risk provision for the Company at the year end on and estimating changes in the ultimate cost of Provision is made where appropriate for the the recommendations of the Consultant Actuary settling claims, IBNRs and settlement costs using estimated amount required over and above following his annual investigation of the life statistics, based on past experience and trends. unearned premiums to meet future claims and insurance business. The actuarial valuation related expenses on the business in force as at takes into account all liabilities and is based Actuarial valuations are performed on an the reporting date. on assumptions recommended by the annual basis. While the Directors consider Consultant Actuary. that the provision for claims is fairly stated on 6.2.5 Deferred Acquisition Expenses the basis of information currently available, Acquisition expenses, represent commissions the ultimate liability will vary as a result of 7. ISLAMIC BANKING POLICIES and other underwriting expenses, which vary subsequent information and events. This may Islamic Banking operations in the Bank are with and are directly related to the production result in adjustments to the amounts provided. conducted in line with Shari’ah principles while of business, are deferred and amortised over Such amounts are reflected in the Financial complying with the Bank of Ceylon Ordinance the period in which the related written premium Statements for that period. The methods used and the Banking Act No. 30 of 1988 and is earned. Reinsurance Commission is also and the estimates made are reviewed regularly. amendments thereto. A separate unit has treated in the same manner with deferred been formed in line with the Standards set acquisition costs and it is calculated on the In addition to the normal insurance policies, out by the Banking Advisory Committee of All 24th basis in accordance with the Rules made the Company has issued the advance, bid and Ceylon Jamiyathul Ulama (ACJU) - the apex by the Insurance Board of Sri Lanka under the performance bonds during the financial period body of Muslim theologians. Accordingly, Regulation of Insurance Industry Act No. 43 of 2000.

BANK OF CEYLON ANNUAL REPORT 2010 165 SIGNIFICANT ACCOUNTING POLICIES an independent Shari’ah Supervisory Board Geographical segments provide products Accordingly, Sri Lanka Accounting Standards consisting of renowned Shari’ah Scholars of or services within a particular economic are based on International Financial Reporting the country has been formed to advise and environment where risks and returns are different Standards (IFRs) and International Accounting ensure the compliance of Islamic principles. from those of other economic environments. Standards (IASs) formulated by International This expert advice is a part of Governance These segments comprise domestic, off-shore Accounting Standards Board and they will be requirement to ensure the harmonised banking units (branches) and off-shore banking prefixed as SLFRS or LKAS, respectively. operations under the existing regulatory, audit division and foreign subsidiary. and accounting environment. These Standards have not been applied in Measurement of segment results, assets and preparing the Financial Statements as they were Profit sharing deposits are mobilised under the liabilities include items which are directly not effective for the year ended 31 December principle of Mudaraba, which is in line with the attributable or can be reasonably allocated 2010. However, the Bank is in the process of Shari’ah Standards of Accounting and Auditing to a segment. Other items are reported evaluating the impact of adopting to new SLFRSs Organisation for Islamic Financial Institutions as unallocated. and LKASs from 01 January 2012 with greater (AAOIFI). Similarly, demand deposits are consideration on the following Standards: accepted under the concept of ‘Qard’ (loan), 10. CASH FLOW STATEMENT which enables the depositor to withdraw his The Cash Flow Statement has been prepared by z LKAS 32 on ‘Financial Instruments: funds on demand. using the ‘Direct Method’ in accordance with Presentation’. (SLAS 44) the Sri Lanka Accounting Standard No. 09 on z LKAS 39 on ‘Financial Instruments: Asset side of the Islamic Banking Balance Sheet ‘Cash Flow Statements’. Cash and cash Recognition and Measurement’. (SLAS 45) is at present, represented by the following equivalents comprise cash, amounts due from instruments that are also modified in line with other banks and other short-term highly-liquid z SLFRS 7 on ‘Financial Instruments: Standards: investments with less then 90 days, maturity Disclosure’. (SLAS 46) from date of acquisition. z Murabaha to the purchase order Due to the complex nature of the effects of (cost plus sale) 11. COMPARATIVE FIGURES these Standards, the impact of adoption cannot Where necessary, amounts shown for the be estimated as at the date of publication of z Ijarah (leasing) previous year have been reclassified to facilitate these Financial Statements. z Wakala Isthismar (agency arrangement in comparison. fund management) 12. EVENTS AFTER THE BALANCE SHEET 8. COMMITMENTS AND CONTINGENCIES DATE Contingent liabilities are the possible obligations Where necessary, all the material events after whose existence will be confirmed only by the Balance Sheet date have been considered uncertain future events or present obligations and appropriate adjustments/disclosures have where the transfer of economic benefit is been made in the Financial Statements as per not probable or cannot be reliably measured. the Sri Lanka Accounting Standard No. 12 Contingent liabilities are not recognised in the (Revised 2005) on ‘Events After the Balance Balance Sheet but are disclosed, unless they Sheet Date’. are remote. 13. NEW ACCOUNTING STANDARDS ISSUED 9. SEGMENTAL REPORTING BUT NOT EFFECTIVE AS AT THE BALANCE SHEET DATE Segmental information is presented in accordance with Sri Lanka Accounting Standard Following the convergence of Sri Lanka No. 28 (Revised 2000) on ‘Segment Reporting’, Accounting Standards with International in respect of the Group’s business. Financial Reporting Standards, the Council of The Institute of Chartered Accountants of Business segments provide products and Sri Lanka has adopted a new set of Financial services whose risks and returns are different Reporting Standards that would apply for from those of other business segments. These financial periods beginning on or after segments comprise banking, leasing, treasury 01 January 2012. The application of these and investment, property and insurance. Financial Reporting Standards is substantially different to the previous Standards.

166 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

1. INCOME Interest income (Note 2) 50,853,347 53,076,779 53,062,286 55,279,046 Dividend income (Note 6) 468,998 347,878 257,910 150,456 Net gains from investment in securities (Note 7) 3,105,791 1,961,210 3,508,297 2,012,436 Fee and commission income (Note 4) 6,014,178 4,255,204 6,487,663 4,353,702 Foreign exchange profit 408,686 1,566,916 418,461 1,566,916 Other operating income (Note 8) 1,143,913 753,247 1,524,738 1,128,780 Recovery of non-performing advances (Note 13) 1,367,953 1,500,132 1,394,539 1,506,205 Share of profit of Associate Companies before tax (Note 14) – – 212,898 130,653 63,362,866 63,461,366 66,866,792 66,128,194

2. INTEREST INCOME Customer advances Bills of exchange 1,825,130 1,763,957 1,893,923 1,835,221 Loans and advances 24,029,532 25,608,860 24,599,475 25,983,944 Leasing 728,841 936,415 2,086,052 2,335,035 Trade finance 1,510,508 1,876,456 1,536,935 1,898,749 Pawning 7,144,581 6,953,328 7,151,380 6,954,826 Treasury bills, bonds and other eligible bills 13,143,034 13,566,316 13,288,145 13,843,703 Securities purchased under re-sale agreements 990,515 682,904 1,001,487 691,481 Short-term funds 282,908 531,376 306,591 578,920 Government of Sri Lanka Restructuring Bonds 1,025,640 1,025,640 1,025,640 1,025,640 Government securities 172,658 131,527 172,658 131,527 50,853,347 53,076,779 53,062,286 55,279,046

Net interest income earned from the secondary market transactions in Treasury bills and Treasury bonds has been grossed up by adding the notional tax credit to the interest income. More details are given in Note 15.5.

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

3. INTEREST EXPENSE Customer deposits 22,073,580 26,406,994 22,452,332 27,061,880 Securities sold under re-purchase agreements 4,285,640 7,060,149 4,193,817 7,059,146 Debentures 2,953,869 3,112,970 3,071,549 3,358,567 Refinance borrowings 280,914 235,300 280,914 235,300 Other borrowed funds 1,611,157 1,451,461 2,020,549 1,774,928 31,205,160 38,266,874 32,019,161 39,489,821

4. FEE AND COMMISSION INCOME Trade and other related activities 3,733,185 2,310,069 3,983,843 2,312,962 Travel and remittances 412,169 313,032 418,291 313,032 Personal banking 1,674,153 1,507,838 1,678,646 1,507,838 Custodial services 16,987 17,756 16,987 17,756 Brokering services 117,067 65,527 118,684 65,718 Others 60,617 40,982 271,212 136,396 6,014,178 4,255,204 6,487,663 4,353,702

BANK OF CEYLON ANNUAL REPORT 2010 167 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

5. FEE AND COMMISSION EXPENSES Brokering services 125,697 153,012 202,042 153,012 Credit cards 238,066 180,592 238,066 180,592 Fees 69,454 178,039 70,166 182,749 Others 34,081 32,752 45,734 34,124 467,298 544,395 556,008 550,477

6. DIVIDEND INCOME Subsidiaries - Quoted 189,377 172,657 _ _ - Unquoted 12,666 22,140 _ _ Associates - Unquoted 20,676 4,675 _ _ Investment securities - Quoted 73,985 55,252 73,985 55,252 - Unquoted 8,652 24,457 11,048 25,649 Dealing securities held for trading - Quoted 64,339 19,473 73,574 20,333 Income from Unit Trust 98,448 49,224 98,448 49,222 Preference shares 855 – 855 – 468,998 347,878 257,910 150,456

7. NET GAINS FROM INVESTMENT IN SECURITIES Gains/(losses) on mark to market valuation on securities held for trading - Shares 79,714 164,076 216,078 181,019 - Treasury bills and bonds 132,068 363,630 143,923 397,913 Capital gains/(losses) on sale of securities held for trading - Shares 1,856,780 651,881 2,088,752 651,881 - Treasury bills and bonds 1,037,229 781,623 1,059,544 781,623 3,105,791 1,961,210 3,508,297 2,012,436

8. OTHER OPERATING INCOME Profit/(loss) on sale of property, plant & equipment including foreclosed properties 26,775 98,371 32,494 111,975 Other income 1,117,138 654,876 1,492,244 1,016,805 1,143,913 753,247 1,524,738 1,128,780

9. PERSONNEL COSTS Staff emoluments 6,861,601 6,992,726 7,341,451 7,313,945 Employers’ contribution to defined contribution plans - Employees’ Provident Fund 526,179 513,648 582,875 547,729 - Employees’ Trust Fund 130,486 128,002 143,469 136,002 Other personnel cost 525,806 473,399 663,988 574,654 8,044,072 8,107,775 8,731,783 8,572,330

The number of persons employed by the Bank as at 31 December 2010 was 8,204 (7,538 as at 31 December 2009).

168 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

10. STAFF RETIREMENT BENEFITS Employers’ contribution to defined benefit plans Bank of Ceylon Pension Trust Fund 1,730,096 1,883,403 1,730,096 1,883,403 Bank of Ceylon Widows’/Widowers’ and Orphans’ Pension Fund 456,000 456,000 456,000 456,000 Provision for terminal gratuity 80,023 70,228 112,983 88,064 2,266,119 2,409,631 2,299,079 2,427,467

The Bank has a Pension Scheme established under an Industrial Award which is solely funded by the Bank. There is also a Widows’/Widowers’ and Orphans’ Pension Scheme established by the members. Both these funds have been closed to new entrants as from 01 January 1996.

The assets of these two plans are held independently of the Bank’s assets and administered by Boards of Trustees/Managers, representing the management and the employees, as provided in the Trust Deed/Rules of the respective Funds.

Both Funds are subject to annual audits independent of the audit of the Bank, by a firm/s of Chartered Accountants appointed by the members and actuarial valuations are carried out at least once in three years, as per the rules governing these Funds.

10.1 BANK OF CEYLON PENSION TRUST FUND An actuarial valuation of the Pension Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.

The valuation has been done using the ‘Projected Unit Credit Method’, which is recommended in the Sri Lanka Accounting Standard No. 16 (Revised 2006) on ‘Employee Benefits’.

(a) The results of the actuarial valuation of the Pension Fund is summarised as follows:

31 December 31 December 2010 2009 Rs. ’000 Rs. ’000

Present value of funded obligations 41,981,000 38,377,130 Fair value of plan assets (43,907,940) (39,843,170) Present value of net obligations (1,926,940) (1,466,040)

2010 2009 Rs. ’000 Rs. ’000

(b) Movement in the present value of defined benefit obligations Liability for defined benefit obligation at the beginning of the year 38,377,130 33,111,760 Interest cost 3,837,710 3,973,410 Current service cost 570,330 622,180 Benefit paid by the plan (3,439,000) (2,333,330) Actuarial (gain)/loss on obligation 2,634,830 3,003,110 Liability at the end of the year 41,981,000 38,377,130

(c) Plan assets Bonds and securities issued by the Government of Sri Lanka 13,588,916 13,099,040 Debentures issued by Corporates 14,395,460 5,500,000 Investment in equity shares 4,708,274 3,182,390 Fixed deposits 8,450,000 14,620,000 Other investments 478,598 732,585 Other receivable 2,286,692 2,709,155 43,907,940 39,843,170

BANK OF CEYLON ANNUAL REPORT 2010 169 NOTES TO THE FINANCIAL STATEMENTS

2010 2009 Rs. ’000 Rs. ’000 (d) Movement in plan assets Fair value of plan assets at the beginning of the year 39,843,170 33,111,760 Expected return on plan assets 3,984,320 3,969,257 Contribution paid into plan 1,729,642 1,883,403 Benefits paid by the plan (3,439,000) (2,333,330) Actuarial gain/(loss) on plan assets 1,789,808 3,212,080 Fair value of plan assets at the end of the year 43,907,940 39,843,170

(e) Actuarial assumptions Future salary increase 6.5% p.a. 6.5% p.a. Increase in future Cost of Living Allowance (COLA) 6.0% p.a. 6.0% p.a. Increase in pension in payment (Basic) Nil Nil Rate of discounting 10.0% p.a. 10.0% p.a. Rate of return on plan assets 10.0% p.a. 10.0% p.a. Attrition rate 0.4% p.a. 0.4% p.a.

10.2 BANK OF CEYLON WIDOWS’/WIDOWERS’ AND ORPHANS’ PENSION FUND (a) An actuarial valuation of the Pension Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.

The valuation has been done using the ‘Projected Unit Credit Method’, which is recommended in the Sri Lanka Accounting Standard No. 16 (Revised 2006) on ‘Employee Benefits’.

The results of the actuarial valuation of the W/W & O Pension Fund is summarised as follows:

31 December 31 December 2010 2009 Rs. ’000 Rs. ’000

Present value of funded obligations 10,138,000 9,515,950 Fair value of plan assets (10,346,890) (9,035,020) Present value of net obligations (208,890) 480,930

2010 2009 Rs. ’000 Rs. ’000

(b) Movement in the present value of defined benefit obligations Liability for defined benefit obligation at the beginning of the year 9,515,950 7,394,320 Interest cost 951,600 887,320 Benefit paid by the plan (363,140) (313,950) Actuarial (gain)/loss on obligation 33,590 1,548,260 Liability at the end of the year 10,138,000 9,515,950

170 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

2010 2009 Rs. ’000 Rs. ’000 (c) Plan assets Bonds and securities issued by the Government of Sri Lanka 1,739,921 1,304,550 Debentures 4,037,160 2,050,000 Other receivable 4,569,809 5,680,470 10,346,890 9,035,020

(d) Movement in plan assets Fair value of plan assets at the beginning of the year 9,035,020 7,394,320 Expected return on plan assets 903,500 887,320 Contribution paid by members 225,830 244,450 Special contribution paid by the Bank 456,000 456,000 Benefits paid by the plan (363,140) (313,950) Actuarial gain/(loss) on plan assets 89,680 366,880 Fair value of plan assets at the end of the year 10,346,890 9,035,020

(e) Actuarial assumptions Future salary increase 6.5% p.a. 6.5% p.a. Increase in future Cost of Living Allowance (COLA) 6.0% p.a. 6.0% p.a. Increase in Widows‘/Widowers‘ and Orphans‘ Pension in payment (Basic) Nil Nil Rate of discounting 10.0% p.a. 10.0% p.a. Rate of return on plan assets 10.0% p.a. 10.0% p.a. Attrition rate 1.0% & 0.4% p.a. 1.0% & 0.4% p.a.

10.3 GRATUITY FUND Provision is made to meet the Bank’s obligation to pay gratuity in terms of the Payment of Gratuity Act No. 12 of 1983, to all those employees who have joined after 01 January 1996. Provision also includes those who have joined the Bank prior to 01 January 1996 and leave the Bank without being entitled to a pension. The probability of early withdrawal has been considered as 1% in the case of those joined after 01 January 1996 and 0.4% in the case of others by the actuaries based on the historical data.

An actuarial valuation of the Gratuity Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.

The valuation has been done using the ‘Projected Unit Credit Method’, which is recommended in the Sri Lanka Accounting Standard No. 16 (Revised 2006) on ‘Employee Benefits’.

The results of the actuarial valuation of the Gratuity Fund indicate that the present value of the obligation is Rs. 197.93 million as at 31 December 2010 (2009 - Rs. 167.95 million). The provision made by the Bank is adequate to meet its gratuity obligations in full.

The principal actuarial assumptions used in the valuation were as follows:

2010 2009 Rs. ’000 Rs. ’000

Actuarial assumptions Future salary increase 6.5% p.a. 6.5% p.a. Increase in future Cost of Living Allowance (COLA) 6.0% p.a. 6.0% p.a. Increase in gratuity in payment (Basic) Nil Nil Rate of discounting 10.0% p.a. 10.0% p.a. Rate of return on plan assets 10.0% p.a. 10.0% p.a. Attrition rate 1.0% & 0.4% p.a. 1.0% & 0.4% p.a.

BANK OF CEYLON ANNUAL REPORT 2010 171 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

11. PREMISES, EQUIPMENT & ESTABLISHMENT AND OTHER OPERATING EXPENSES Premises, equipment & establishment and other operating expenses include the following: Directors’ emoluments 1,570 1,707 12,604 12,031 Auditors’ remuneration 20,467 21,194 35,835 24,023 Depreciation on property, plant & equipment (Note 29) 784,993 686,428 889,616 790,745 Depreciation on investment properties (Note 25) – – 3,074 3,060 Amortisation of leasehold land (Note 30) 2,296 1,095 3,653 2,452 Amortisation of intangible assets (Note 31) 54,873 185,473 59,076 189,860 Professional expenses 78,554 52,386 104,439 74,924 Legal expenses 34,380 24,636 49,355 32,528 Donations 47 21 1,355 370

As per the Banking Act Direction No. 5 of 2010, the Bank is required to provide a premium of 0.1% or 0.125% of the eligible deposit liabilities depending on the Capital Adequacy Ratio (CAR) of the immediate proceeding audited Financial Statements, payable quarterly on ‘Deposit Insurance Scheme’ with effect from 01 October 2010. Accordingly, the Bank has provided a sum of Rs. 95,952,038/- on account of Deposit Insurance Scheme during the last quarter of year 2010.

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

12. PROVISION FOR LOAN LOSSES Specific provision for loans and advances 1,066,497 1,340,832 1,082,639 1,245,527 Specific provision for pawning advances 18,806 47,725 18,806 47,725 Specific provision for credit card receivable (38,193) 24,080 (38,193) 24,080 1,047,110 1,412,637 1,063,252 1,317,332 Specific provision for bills of exchange (13,628) 197,954 (15,538) 198,864 Specific provision for leasing facilities 32,684 192,126 148,712 376,613 Specific provision for foreclosed properties 5,712 – 5,712 – Total specific provision for loans and advances 1,071,878 1,802,717 1,202,138 1,892,809

General provision made for regular advances 490,924 (556) 497,944 8,878 General provision for bills of exchange (1,470) (122) 3,121 1,972 General provision for leasing facilities (1,438) (334) 22,794 (8,682) Total general provision for loans and advances 488,016 (1,012) 523,859 2,168 Total provision for loan losses 1,559,894 1,801,705 1,725,997 1,894,977

172 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

13. RECOVERY OF NON-PERFORMING ADVANCES Recovery of loans written-off in previous years 70,866 102,013 97,452 108,086 Reversal of provisions for non-performing advances 1,297,087 1,398,119 1,297,087 1,398,119 1,367,953 1,500,132 1,394,539 1,506,205

14. SHARE OF PROFIT OF ASSOCIATE COMPANIES BEFORE TAX Ceybank Asset Management (Private) Limited – – 26,331 6,215 Southern Development Financial Company Limited – – (495) (722) Lanka Securities (Private) Limited – – 116,606 41,773 Mireka Capital Land (Private) Limited – – 75,773 42,626 Transnational Lanka Records Solutions (Private) Limited – – 5,123 4,885 MBSL Savings Bank Limited – – (10,440) 35,876 – – 212,898 130,653

15. INCOME TAX EXPENSE The break-up of income tax expense is as follows:

15.1 BANK Domestic branch operations Income tax on profit of domestic operations of the Bank 2,465,896 146,718 2,465,896 146,718 Off-shore Banking Division (OBD) Income tax on profits of on-shore operations of OBD 946,236 984,383 946,236 984,383 Income tax on profits of off-shore operations of OBD 74,252 54,719 74,252 54,719 Overseas branch operations Income tax on profits of the branch in Maldives 103,373 97,572 103,373 97,572 Income tax on profits of the branch in Chennai 86,779 102,526 86,779 102,526 (Over)/Under provision for taxation in respect of prior years (37,413) (165,199) 40,043 (155,464) 3,639,123 1,220,719 3,716,579 1,230,454

15.2 SUBSIDIARY COMPANIES Income tax on profit of: Property Development PLC – – 167,361 178,696 Merchant Bank of Sri Lanka PLC – – 105,640 63,770 BoC Management & Support Services (Private) Limited – – 64 193 BoC Property Development & Management (Private) Limited – – 13,006 11,870 BoC Travels (Private) Limited – – 4,711 4,543 Hotels Colombo (1963) Limited – – 8,382 206 Merchant Credit of Sri Lanka Limited – – 27,648 15,722 Ceylease Financial Services Limited – – 5,431 1,152 Ceybank Holiday Homes (Private) Limited – – 877 837 MBSL Insurance Company Limited – – 5,516 – – – 338,636 276,989

BANK OF CEYLON ANNUAL REPORT 2010 173 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

15.3 ASSOCIATE COMPANIES Share of income tax on profit of: Ceybank Asset Management (Private) Limited – – 12,297 4,144 Southern Development Financial Company Limited – – – 175 Lanka Securities (Private) Limited – – 42,353 15,914 Mireka Capital Land (Private) Limited – – 2,236 11 Transnational Lanka Records Solutions (Private) Limited – – 795 865 – – 57,681 21,109

Deferred tax (released)/charged (Note 36) 48,134 (97,078) 49,393 (125,565) 3,687,257 1,123,641 4,162,289 1,402,987

15.4 RECONCILIATION OF ACCOUNTING PROFIT AND INCOME TAX EXPENSE IS AS FOLLOWS: Bank Group For the year ended 31 December 2010 2009 2010 2009 Tax Rate Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Accounting profit before tax 10,052,569 4,207,647 11,075,485 4,719,910 Tax effect at the statutory income tax rates Domestic operations of the Bank 35.0% 2,497,910 433,574 2,497,910 433,574 On-shore banking operations of the off-shore banking division of the Bank 35.0% 946,236 984,383 946,236 984,383 Off-shore banking operations of the off-shore banking division of the Bank 20.0% 74,252 54,719 74,252 54,719

Foreign branch operations Male 25.0% 103,373 97,572 103,373 97,572 Chennai 40.0% 86,779 102,526 86,779 102,526 Subsidiaries [Note 15.4 (a)] – – 300,341 158,175 3,708,550 1,672,774 4,008,891 1,830,949

Tax effect of deductible expenses (3,544,769) (3,166,183) (4,398,874) (3,889,160) Tax effect of non-deductible expenses 3,461,232 2,861,803 4,349,499 3,700,175 Share of income tax expenses of Associates ––57,681 21,109 Social responsibility levy at 1.5% of income tax 51,523 17,524 55,656 20,943 (Over)/Under provision of taxes in respect of prior years (37,413) (165,199) 40,043 (155,464) Deferred tax (reversal)/charge 48,134 (97,078) 49,393 (125,565) Income tax expense reported in the income statement 3,687,257 1,123,641 4,162,289 1,402,987

174 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

15.4 (a) Income tax rates which were applicable for Subsidiaries in 2009 and 2010 are as follows: Subsidiaries 2010 2009 1. Property Development PLC 35% 35% 2. Merchant Bank of Sri Lanka PLC 35% 35% 3. BoC Management & Support Services (Private) Limited 15% 15% 4. BoC Property Development & Management (Private) Limited 35% 35% 5. BoC Travels (Private) Limited 15% 15% 6. Hotels Colombo (1963) Limited 15% 15% 7. Merchant Credit of Sri Lanka Limited 35% 35% 8. Ceylease Financial Services Limited 35% 35% 9. Ceybank Holiday Homes (Private) Limited - Hotel business 15% 15% - Other activities 35% 35% 10. MBSL Insurance Company Limited 35% 35% 11. Koladeniya Hydropower (Private) Limited* – – 12. Bank of Ceylon (UK) Limited 28% –

*As per the agreement with Board of Investment (BOI), Koladeniya Hydropower (Private) Limited is exempted from taxation for the year 2010.

15.5 NOTIONAL CREDIT FOR WITHHOLDING TAX ON GOVERNMENT SECURITIES ON SECONDARY MARKET TRANSACTIONS In terms of the Section 137 of the Inland Revenue Act No. 10 of 2006 and the amendments thereto, a company which derives interest income from the secondary market transactions in Government securities would be entitled to a notional tax credit [being one-ninths (1/9) of the net interest income], provided such interest income form a part of statutory income of the Company for that year of assessment.

Accordingly, the net income earned by the Bank and the Group on the secondary market transactions in Government securities for the year has been grossed up in the Financial Statements and the resulting notional tax credit amounted to a sum of Rs. 659,630,077/- (2009 - Rs. 351,925,417/-) for the Bank and Rs. 685,026,871/- (2009 - Rs. 380,872,682/-) for the Group.

16. EARNINGS PER SHARE AND DIVIDENDS PER SHARE EARNINGS PER SHARE As per the Sri Lanka Accounting Standard No. 34 (Revised 2005) on ‘Earning Per Share’, basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the parent entity (the numerator) by the weighted average number of ordinary shares in issue (the denominator) during the year.

DIVIDENDS PER SHARE Dividends per share is calculated by dividing the total profit distributed to shareholders (the numerator) by the weighted average number of ordinary shares in issue (the denominator) during the year.

Bank Group For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Profit/(loss) attributable to ordinary shareholders of the parent 6,365,312 3,084,006 6,760,310 3,299,873 Total dividends declared to shareholders during the year 3,096,410 1,346,410 3,096,410 1,346,410 Weighted average number of ordinary shares in issue 5,000,000 5,000,000 5,000,000 5,000,000 Basic earnings per share (Rs.) 1,273.06 616.80 1,352.06 659.97 Dividend per share (Rs.) 619.28 269.28 619.28 269.28

BANK OF CEYLON ANNUAL REPORT 2010 175 NOTES TO THE FINANCIAL STATEMENTS

16.1 DIVIDENDS Under the agreement between the Bank of Ceylon and the Government of Sri Lanka, on re-capitalising and granting of autonomy to the Bank, the Government reserves the option of the level of profit after tax that will be retained by the Bank.

All profits after deduction of provision for taxation, provision for loan losses and any such portion for reserves, if any, as the Government shall determine, will be issued as dividends to the Government at the end of each year.

Accordingly, a sum of Rs. 3,096 million has been declared by the Bank as dividends for the year 2010 (2009 - Rs. 1,346 million).

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

17. CASH AND SHORT TERM FUNDS Coins, notes held in local currency 8,044,372 7,241,555 8,079,260 7,261,393 Coins, notes held in foreign currency 715,208 763,214 715,208 763,214 Balances with other banks 5,344,223 5,504,083 4,960,389 5,492,647 14,103,803 13,508,852 13,754,857 13,517,254

18. BALANCES WITH CENTRAL BANKS Central Bank of Sri Lanka (Note 18.1) 22,933,090 13,910,808 22,933,090 13,910,808 Reserve Bank of India (Note 18.2) 393,699 615,333 393,699 615,333 Maldives Monetary Authority (Note 18.3) 2,567,677 1,737,327 2,567,677 1,737,327 25,894,466 16,263,468 25,894,466 16,263,468

18.1 In terms of the provisions of Section 93 of the Monetary Law Act No. 58 of 1949, the Bank is required to maintain a cash reserve with the Central Bank of Sri Lanka. The minimum cash reserve required to be maintained at the Central Bank of Sri Lanka as at 31 December 2010 was 7.0% (2009: 7.0%) of Sri Lanka Rupee deposit liabilities. There is no reserve requirement for foreign currency deposit liabilities maintained by domestic branches and the deposit liability of the Off-shore Banking Division in Sri Lanka (2009: Nil).

18.2 Section 42 (1) of the Reserve Bank of India (RBI) Act of 1934, requires that the branch in Chennai maintains a cash reserve of 6.0% (31 December 2009: 5.5%) with the Reserve Bank of India, being the minimum cash reserve requirement, as at 31 December 2010 on its demand and term deposit liabilities.

18.3 Regulations issued by Maldives Monetary Authority (MMA), requires that 50% of minimum required capital of the branch in Maldives be maintained in a deposit with MMA (2009: 50%). In addition, a reserve of 25% on the deposit liability (2009 - 25%) should also be maintained with the MMA.

19. TREASURY BILLS, BONDS AND OTHER ELIGIBLE BILLS Treasury bills, bonds and other eligible bills are debt securities issued by the Government of Sri Lanka and the respective Government authorities where the overseas branches are located.

Treasury bills, bonds and other eligible bills maturing within the period of less than twelve months have been classified as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross Treasury bills & bonds held for trading 27,685,647 14,576,408 28,655,330 15,529,297 Gain/(loss) on marked to market valuation 62,012 44,075 62,012 44,075 Net Treasury bills & bonds held for trading 27,747,659 14,620,483 28,717,342 15,573,372 Treasury bills, bonds and other eligible bills held to maturity 17,631,354 14,114,913 17,631,354 14,114,913 45,379,013 28,735,396 46,348,696 29,688,285

The details of the Treasury bills & bonds that have been pledged as security for liabilities at the year end are disclosed in Note 44.

176 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

20. DEALING SECURITIES LISTED EQUITY SECURITIES Bank, Finance and Insurance Central Finance Company PLC – – – 66,500 317.50 21,114 Ceylon Investment PLC – – – 17,600 247.50 4,356 Commercial Bank of Ceylon PLC - Voting 16,100 259.90 4,184 2,208,945 189.50 418,595 Commercial Bank of Ceylon PLC - Non-Voting 199,300 162.00 32,287 – – – DFCC Bank 800,000 200.20 160,160 315,900 167.00 52,755 Hatton National Bank PLC - Voting 1,031,600 399.90 412,537 2,665,200 170.25 453,750 Hatton National Bank PLC - Non-Voting 439,900 214.60 94,402 – – – HDFC Bank of Sri Lanka – – – 90,900 147.75 13,431 Lanka ORIX Leasing Company PLC 346,800 127.80 44,321 76,400 137.00 10,467 LB Finance PLC 38,400 261.90 10,057 – – – Nations Trust Bank PLC - Voting 953,500 83.40 79,522 – – – Sampath Bank PLC 629,800 271.90 171,243 – – – 1,008,713 974,468

Diversified Holdings Aitken Spence PLC 212,300 169.90 36,070 36,100 1,325.00 47,833 Carsons Cumberbatch PLC 43,200 513.20 22,170 ––– C T Holdings PLC 310,000 182.70 56,637 100,000 54.00 5,400 Hayleys PLC 157,100 345.00 54,199 63,700 171.75 10,941 Hemas Holdings PLC 30,000 44.50 1,335 1,031,000 122.75 126,555 John Keells Holdings PLC 1,080,235 298.40 322,342 90,084 171.50 15,449 Richard Pieris & Company PLC 8,734,900 10.50 91,716 – – – 584,469 206,178

Manufacturing ACL Cables PLC 379,900 85.10 32,329 94,400 76.25 7,245 Chevron Lubricants Lanka PLC 768,200 159.50 122,528 – – – Dipped Products PLC 882,400 119.70 105,623 24,900 86.00 2,141 Kelani Tyres PLC 50,000 49.30 2,465 – – – Lanka Cement PLC 9,583,809 28.00 268,347 9,583,809 23.25 222,824 Lanka Floortiles PLC 210,000 134.30 28,203 74,800 66.50 4,974 Lanka Walltiles PLC 38,900 138.90 5,403 273,400 57.25 15,652 Piramal Glass Ceylon PLC 1,000,000 7.80 7,800 4,021,200 2.20 8,847 Royal Ceramics Lanka PLC 403,000 304.90 122,875 348,200 66.50 23,155 Sierra Cables PLC 436,400 4.30 1,876 – – – Tokyo Cement Company (Lanka) PLC - Voting 75 55.00 4 506,300 322.25 163,155 697,453 447,993

BANK OF CEYLON ANNUAL REPORT 2010 177 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Hotels & Travels Aitken Spence Hotel Holdings PLC 541,000 105.70 57,184 – – – Asian Hotels & Properties PLC 502,700 194.00 97,524 363,400 94.50 34,341 Eden Hotel Lanka PLC 392,300 57.60 22,596 – – – Hotel Services (Ceylon) PLC 575,800 26.00 14,971 600,000 19.00 11,400 John Keells Hotels PLC 800,600 20.00 16,012 369,200 22.50 8,307 Kandy Hotels Company (1938) PLC – – – 10,000 113.25 1,133 Taj Lanka Hotels PLC 550,000 71.70 39,435 – – – The Lighthouse Hotel PLC 100,000 63.00 6,300 – – – Trans Asia Hotels PLC – – – 100,000 174.25 17,425 254,022 72,606

Power & Energy Hemas Power PLC 1,226,800 29.50 36,191 1,285,100 19.50 25,059 Lanka IOC PLC 233,300 18.90 4,409 283,300 17.25 4,887 Laugfs Gas Limited - Voting 1,232,700 25.90 31,927 – – – Laugfs Gas Limited - Non-Voting 350,400 18.50 6,482 – – – Panasian Power Limited 79,200 3.00* 238 – – – 79,247 29,946

Telecommunications Dialog Axiata PLC 6,400 11.90 76 – – – Sri Lanka Telecom PLC 214,000 49.00 10,486 214,000 46.00 9,844 10,562 9,844

Motors Diesel & Motor Engineering PLC 10,000 973.50 9,735 ––– United Motors Lanka PLC ––– 18,000 64.25 1,157 9,735 1,157

Plantations Agalawatte Plantations PLC 13,600 63.00 857 ––– Balangoda Plantations PLC 103,100 57.40 5,918 ––– Horana Plantations PLC 390,000 36.40 14,196 ––– Kahawatte Plantations PLC 200,000 28.00 5,600 ––– Kegalle Plantations PLC 117,300 161.80 18,979 64,500 33.50 2,161 Kotagala Plantations PLC 9,400 116.90 1,099 ––– Malwatte Plantations PLC ––– 8,000 33.00 264 Namunukula Plantations PLC 66,400 119.10 7,908 ––– 54,557 2,425

Health Care Asiri Hospital Holdings PLC 100,000 8.80 880 100,000 10.25 1,025 Asiri Surgical Hospital PLC 179,200 8.70 1,559 179,200 11.00 1,971 Ceylon Hospitals PLC 6 102.00 1 10,472 80.25 840 Nawaloka Hospitals PLC 3,119,800 3.70 11,543 ––– The Lanka Hospitals Corporation PLC ––– 67,000 19.00 1,273 13,983 5,109

* Represents the allotment price of the shares.

178 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Beverage, Food & Tobacco Cargills (Ceylon) PLC 400,000 195.40 78,160 30,000 65.25 1,958 Coco Lanka PLC 69,900 64.40 4,502 ––– Distilleries Company of Sri Lanka PLC 405,700 177.90 72,174 ––– The Lion Brewery Ceylon PLC 531,700 185.10 98,418 ––– 253,254 1,958

Chemical & Pharmaceuticals Chemical Industries (Colombo) PLC - Voting 208,100 140.70 29,280 1,185,300 63.00 74,674 Chemical Industries (Colombo) PLC - Non-Voting 30,300 99.90 3,027 ––– Haycarb PLC 164,400 168.50 27,701 ––– 60,008 74,674

Construction & Engineering Colombo Dockyard PLC 100,000 275.00 27,500 75 244.75 18 27,500 18

Trading Brown & Company PLC 716,000 246.90 176,780 ––– 176,780 –

Investment Trust Renuka Holdings PLC ––– 11,000 135.75 1,493 – 1,493

Information Technology PC House PLC 182,700 11.30 2,065 ––– 2,065 – Total dealing securities 3,232,348 1,827,869

BANK OF CEYLON ANNUAL REPORT 2010 179 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

LISTED EQUITY SECURITIES Bank, Finance and Insurance Amana Takaful PLC 195,800 3.00 587 ––– Asia Capital PLC 12,200 47.00 573 ––– Central Finance Company PLC ––– 68,500 317.50 21,733 Ceylinco Insurance PLC 14,300 381.00 5,448 Ceylon Investment PLC ––– 17,635 247.50 4,362 Commercial Bank of Ceylon PLC - Voting 30,400 259.90 7,901 2,219,945 189.50 420,449 Commercial Bank of Ceylon PLC - Non-Voting 199,300 162.00 32,287 ––– DFCC Bank 861,800 200.20 172,532 415,900 167.00 68,120 First Capital Holdings PLC 760,000 19.00 14,440 ––– Hatton National Bank PLC - Voting 1,037,100 399.90 414,736 2,699,100 170.25 458,791 Hatton National Bank PLC - Non-Voting 524,300 214.60 112,515 ––– HDFC Bank of Sri Lanka ––– 90,900 147.75 13,431 Janashakthi Insurance Company PLC 805,100 16.00 12,882 205,000 9.50 2,460 Lanka ORIX Leasing Company PLC 356,800 127.80 45,599 101,800 137.00 13,406 Lanka Ventures PLC ––– 40,000 18.00 566 LB Finance PLC 38,400 261.90 10,057 ––– Merchant Bank of Sri Lanka PLC 17,000 45.80 779 ––– National Development Bank PLC 14,600 349.50 5,103 31,000 206.00 4,811 Nations Trust Bank PLC - Voting 1,026,000 83.40 85,568 160,000 36.50 4,275 Nations Trust Bank PLC - Non-Voting 20,000 57.60 1,152 ––– Pan Asia Banking Corporation PLC 2,833 52.00 147 68,000 20.00 1,144 People's Merchant Bank PLC 6,200 29.40 182 ––– Sampath Bank PLC 629,800 271.90 171,243 10,000 204.00 1,736 Seylan Bank PLC - Voting 118,500 97.80 11,589 ––– Seylan Bank PLC - Non-Voting 41,700 49.00 2,043 ––– Singer Finance (Lanka) Limited 2,600 15.00 39 ––– SMB Leasing PLC - Voting 86,800 1.90 165 ––– SMB Leasing PLC - Non-Voting 1,600,000 1.00 1,600 ––– SMB Leasing PLC - Share Warrants (015) 2,000,000 0.80 1,600 ––– SMB Leasing PLC - Share Warrants (016) 1,600,000 0.60 960 1,111,727 1,015,284

180 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Diversified Holdings Aitken Spence PLC 212,300 169.90 36,070 36,100 1,325.00 47,833 Carsons Cumberbatch PLC 43,200 513.20 22,170 ––– C T Holdings PLC 342,200 182.70 62,520 100,000 54.00 5,400 Hayleys PLC 157,100 345.00 54,199 78,700 171.75 13,435 Hemas Holdings PLC 33,900 44.50 1,509 1,031,000 122.75 126,555 John Keells Holdings PLC 1,308,161 298.40 390,355 165,110 171.50 26,121 The Colombo Fort Land & Building Company PLC ––– 15,000 31.50 441 Richard Peiris & Company PLC 10,589,100 10.50 111,185 150,000 39.00 5,655 678,008 225,440

Manufacturing ACL Cables PLC 384,800 85.10 32,746 120,900 76.25 9,116 ACL Plastics PLC ––– 5,000 74.00 329 Central Industries PLC 431,700 90.00 38,853 ––– Ceylon Grain Elevators PLC ––– 40,000 14.25 563 Chevron Lubricants Lanka PLC 768,200 159.50 122,528 12,200 142.00 1,443 Dipped Products PLC 882,400 119.70 105,623 38,400 86.00 3,413 Hayleys Exports PLC 62,600 41.00 2,567 ––– Kelani Tyres PLC 50,000 49.30 2,465 ––– Lanka Cement PLC 9,644,209 28.00 270,038 9,638,809 23.25 224,802 Lanka Floortiles PLC 212,400 134.30 28,525 89,800 66.50 5,708 Lanka Walltiles PLC 40,900 138.90 5,681 294,600 57.25 16,625 Pelwatte Sugar Industries PLC 30,800 27.40 844 ––– Piramal Glass Ceylon PLC 1,200,000 7.80 9,360 4,021,200 2.20 8,847 Richard Pieris Exports PLC ––– 5,000 28.00 129 Royal Ceramics Lanka PLC 403,000 304.90 122,875 388,200 66.50 25,006 Sierra Cables PLC 436,400 4.30 1,876 ––– Tokyo Cement Company (Lanka) PLC - Voting 6,325 55.00 348 556,300 322.25 164,024 Tokyo Cement Company (Lanka) PLC - Non-Voting 7,500 40.30 302 ––– 744,631 460,005

BANK OF CEYLON ANNUAL REPORT 2010 181 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Hotels & Travels Aitken Spence Hotel Holdings PLC 541,000 105.70 57,184 ––– Amaya Leisure PLC 4,214 91.00 383 ––– Asian Hotels & Properties PLC 571,600 194.00 110,890 393,400 94.50 36,422 Ceylon Hotels Corporation PLC 55,100 36.50 2,011 25,100 23.75 665 Citrus Leisure PLC ––– 23,100 2.10 52 Dolphin Hotels PLC 22,800 61.20 1,395 ––– Eden Hotel Lanka PLC 688,100 57.60 39,634 665,100 26.00 17,377 Galadari Hotels (Lanka) PLC 209,100 35.80 7,486 31,600 15.00 499 Hotel Developers (Lanka) PLC ––– 3,000 118.00 411 Hotel Services (Ceylon) PLC 3,602,950 26.00 93,677 7,080,750 19.00 118,504 John Keells Hotels PLC 2,087,233 20.00 41,745 429,000 22.50 9,101 Kandy Hotels Company (1938) PLC ––– 10,000 113.25 1,133 Marawila Resorts PLC 11,300 14.80 167 915,900 5.75 6,012 Mahaweli Reach Hotels PLC 8,100 35.00 284 ––– Riverina Hotels PLC ––– 42,200 68.00 2,865 Serendib Hotels PLC ––– 94,700 39.25 4,015 Stafford Hotels PLC ––– 41,600 28.00 1,120 Taj Lanka Hotels PLC 550,000 71.70 39,435 4,600 23.50 107 Tangerine Beach Hotels PLC ––– 10,000 66.00 707 The Fortress Resorts PLC 123,700 20.60 2,548 70,000 12.25 891 The Lighthouse Hotel PLC 104,600 63.00 6,590 ––– Trans Asia Hotels PLC ––– 100,000 174.25 17,425 403,429 217,306

Power & Energy Hemas Power PLC 1,241,800 29.50 36,633 1,344,700 19.50 26,375 Lanka IOC PLC 341,600 18.90 6,456 295,800 17.25 5,115 Laugfs Gas Limited - Voting 1,405,700 25.90 36,408 ––– Laugfs Gas Limited - Non-Voting 587,300 18.50 10,865 ––– Panasian Power Limited 1,985,000 3.00* 5,955 ––– 96,317 31,490

Telecommunications Dialog Axiata PLC 110,000 11.90 1,309 310,000 7.25 4,643 Sri Lanka Telecom PLC 238,900 49.00 11,706 238,900 46.00 10,980 13,015 15,623

Motors Diesel & Motor Engineering PLC 10,000 973.50 9,735 ––– United Motors Lanka PLC ––– 18,000 64.25 1,157 9,735 1,157

* Represents the allotment price of the shares.

182 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Plantations Agalawatte Plantations PLC 13,600 63.00 857 10,000 21.75 238 Balangoda Plantations PLC 124,600 57.40 7,152 ––– Horana Plantations PLC 390,000 36.40 14,196 ––– Kahawatte Plantations PLC 200,002 28.00 5,600 198,100 31.00 6,218 Kegalle Plantations PLC 117,900 161.80 19,076 69,500 33.50 2,332 Kotagala Plantations PLC 21,700 116.90 2,537 ––– Malwatte Plantations PLC ––– 8,000 33.00 264 Maskeliya Plantations PLC 4,000 27.80 111 10,200 18.50 211 Namunukula Plantations PLC 66,400 119.10 7,908 ––– 57,437 9,263

Health Care Asiri Hospital Holdings PLC 395,200 8.80 3,478 120,000 10.25 1,197 Asiri Surgical Hospital PLC 219,100 8.70 1,906 179,200 11.00 1,971 Ceylon Hospitals PLC 6 102.00 1 10,472 80.25 840 Nawaloka Hospitals PLC 5,589,800 3.70 20,682 200,000 3.10 623 The Lanka Hospitals Corporation PLC ––– 67,000 19.00 1,273 26,067 5,904

Beverage, Food & Tobacco Cargills (Ceylon) PLC 400,000 195.40 78,160 35,000 65.25 2,269 Ceylon Tobacco Company PLC ––– 10,000 185.00 1,784 Coco Lanka PLC 75,005 64.40 4,830 10,000 48.50 397 Distilleries Company of Sri Lanka PLC 535,500 177.90 95,265 129,800 105.25 13,437 Kotmale Holdings PLC 228,200 43.20 9,858 50,000 16.00 837 Lanka Milk Foods (CWE) PLC 81,903 113.00 9,255 22,000 64.00 1,428 Nestle Lanka PLC ––– 1,000 415.00 329 Raigam Wayamba Salterns PLC 47,500 4.00 190 ––– Renuka Agri Foods PLC ––– 1,350,200 3.30 3,038 The Lion Brewery Ceylon PLC 674,700 185.10 124,887 5,000 81.00 422 322,445 23,941

Chemical & Pharmaceuticals Chemical Industries (Colombo) PLC - Voting 253,100 140.70 35,611 1,395,600 63.00 85,734 Chemical Industries (Colombo) PLC - Non-Voting 39,900 99.90 3,986 ––– Chemanex PLC 1,000 122.30 122 ––– Haycarb PLC 194,600 168.50 32,790 ––– Lankem Ceylon PLC ––– 96,400 44.75 3,912 72,509 89,646

BANK OF CEYLON ANNUAL REPORT 2010 183 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Market price Carrying No. of Market price Carrying ordinary per share value ordinary per share value shares Rs. Rs. ’000 shares Rs. Rs. ’000

Construction & Engineering Colombo Dockyard PLC 113,400 275.00 31,185 11,475 244.75 2,061 31,185 2,061

Trading Brown & Company PLC 815,300 246.90 201,297 22,900 74.50 1,347 Ceylon Foreign Trades PLC 100,000 7.70 770 ––– C W Mackie & Company PLC 300 85.10 26 25,000 36.00 834 Tess Agro PLC 139,900 2.70 378 175,000 1.60 327 202,471 2,508

Investment Trust Environmental Resources Investment PLC 35,000 85.90 3,007 ––– Renuka Holdings PLC ––– 11,000 135.75 1,493 3,007 1,493

Information Technology PC House PLC 665,800 11.30 7,524 ––– E-Channelling PLC 13,300 22.00 293 20,000 9.75 237 7,817 237

Land & Property City Housing & Real Estate Company PLC ––– 10,000 21.25 346 Colombo Land & Development Company PLC 53,500 19.40 1,038 65,000 6.50 390 C T Land Development PLC ––– 51,100 21.50 1,174 Equity One PLC 40,600 56.00 2,274 ––– Equity Two PLC 18,200 24.30 442 ––– East West Properties PLC 1,200 12.90 15 ––– Overseas Realty (Ceylon) PLC 403,500 15.30 6,174 40,000 15.50 543 Seylan Developments PLC 100,000 16.80 1,680 ––– Touchwood Investment PLC 25,000 28.30 708 ––– York Arcade Holdings PLC 45,800 24.10 1,104 ––– 13,435 2,453

Footwear & Textile Hayleys MGT Knitting Mills PLC 65,600 32.00 2,099 834,100 35.00 29,994 Ceylon Leather Products PLC 184,300 92.60 17,066 ––– 19,165 29,994

Services John Keells PLC ––– 23,700 153.00 3,578 3,578 3,812,400 2,137,383 Provision for fall in value (6,957) –

Total dealing securities 3,805,443 2,137,383

184 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

21. PLACEMENTS WITH AND LOANS TO OTHER BANKS Placements with banks in Sri Lanka - Sri Lanka rupee placements – 770,000 – 790,000 - Foreign currency placements 8,502,256 762,152 8,502,256 762,152 Placements with banks abroad - Foreign currency placements 34,177,542 44,334,915 39,271,130 44,334,915

42,679,798 45,867,067 47,773,386 45,887,067

22. LOANS AND ADVANCES TO CUSTOMERS 22.1 BILLS OF EXCHANGE Export bills 5,923,519 4,269,855 5,923,519 4,269,855 Import bills 9,852,601 11,828,675 9,852,601 11,828,675 Local bills – – 645,682 469,951 15,776,120 16,098,530 16,421,802 16,568,481 Specific provision for bills of exchange [Note 22.1 (b)] (156,452) (150,371) (168,534) (164,363) General provision for bills of exchange [Note 22.1 (c)] (144,248) (145,718) (158,223) (155,102) Interest in suspense [Note 22.1 (d)] (79,517) (548,125) (79,517) (548,125) Net bills of exchange 15,395,903 15,254,316 16,015,528 15,700,891

22.1 (a) Analysis of net bills of exchange Not later than 3 months 15,307,197 14,567,001 15,920,399 15,013,347 Later than 3 months and not later than 12 months 88,706 687,315 95,129 687,544 15,395,903 15,254,316 16,015,528 15,700,891

22.1 (b) Movement in specific provision for bills of exchange Balance as at 01 January 150,371 281,682 164,363 294,764 Amount provided during the year (13,628) 197,954 (15,538) 198,864 Amount reversed during the year – (301,124) – (301,124) Adjustments/transfers 19,709 (28,141) 19,709 (28,141) Balance as at 31 December 156,452 150,371 168,534 164,363

22.1 (c) Movement in general provision for bills of exchange Balance as at 01 January 145,718 145,840 155,102 153,130 Amount provided/(reversed) during the year (1,470) (122) 3,121 1,972 Balance as at 31 December 144,248 145,718 158,223 155,102

22.1 (d) Movement in interest in suspense of bills of exchange Balance as at 01 January 548,125 553,961 548,125 553,961 Interest suspended during the year 12,448 101,627 12,448 101,627 Amount reversed during the year (481,056) (107,463) (481,056) (107,463) Balance as at 31 December 79,517 548,125 79,517 548,125

BANK OF CEYLON ANNUAL REPORT 2010 185 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.2 LOANS AND ADVANCES Sri Lanka rupee loans and advances Overdrafts 65,418,200 56,946,022 65,418,200 56,946,022 Term loans 164,341,648 96,685,864 166,113,749 98,281,626 Trust receipts 8,785,954 6,797,199 8,785,954 6,797,199 Staff loans 16,465,422 14,001,771 16,544,211 14,058,401 Loans under schemes 11,917,213 10,200,400 12,204,217 10,213,880 Foreclosed properties [Note 22.2 (e)] 814,154 445,876 814,154 445,876 267,742,591 185,077,132 269,880,485 186,743,004 Foreign currency loans and advances Overdrafts 5,899,030 2,666,731 5,976,977 2,666,731 Term loans 87,250,968 66,576,024 87,283,723 66,576,024 Trust receipts 9,369,752 8,381,259 9,369,752 8,381,259 Staff loans 4,334 15,381 9,549 15,381 102,524,084 77,639,395 102,640,001 77,639,395 Total Sri Lanka rupee and foreign currency loans & advances 370,266,675 262,716,527 372,520,486 264,382,399 Specific provision for loans & advances [Note 22.2 (b)] (6,539,181) (7,595,463) (6,589,140) (7,629,954) General provision for loans & advances [Note 22.2 (c)] (2,204,669) (1,719,846) (2,232,972) (1,741,129) Interest in suspense [Note 22.2 (d)] (8,156,736) (7,766,138) (8,164,806) (7,776,751) Provision for foreclosed properties [Note 22.2 (f)] (268,173) (32,796) (268,173) (32,796) Net loans and advances 353,097,916 245,602,284 355,265,395 247,201,769

22.2 (a) Analysis of net loans and advances Not later than 1 year 219,528,496 157,606,283 220,391,054 158,507,011 Later than 1 year and not later than 5 years 77,046,369 44,705,518 78,339,431 45,385,032 Later than 5 years 56,523,051 43,290,483 56,534,910 43,309,726 353,097,916 245,602,284 355,265,395 247,201,769

22.2 (b) Movement in specific provision for loans & advances Balance as at 01 January 7,595,463 7,410,629 7,629,954 7,437,841 Adjustments for difference of currency conversion (64,329) 12,333 (64,329) 12,333 7,531,134 7,422,962 7,565,625 7,450,174 Amounts provided during the year (Note 12) 1,047,110 1,412,637 1,063,252 1,317,332 Amounts recovered/written back on account of provisions previously made (1,279,222) (1,059,849) (1,279,896) (1,064,883) Amount reversed due to loans written off (502,599) (291,240) (502,599) (291,781) Adjustments/transfers (257,242) 110,953 (257,242) 219,112 Balance as at 31 December 6,539,181 7,595,463 6,589,140 7,629,954

22.2 (c) Movement in general provision for loans & advances Balance as at 01 January 1,719,846 1,741,888 1,741,129 1,753,737 Adjustments for difference of currency conversion (6,131) 1,164 (6,131) 1,164 1,713,715 1,743,052 1,734,998 1,754,901 Amounts provided/(reversed) during the year 490,924 (556) 497,944 8,878 Adjustments/transfers 30 (22,650) 30 (22,650) Balance as at 31 December 2,204,669 1,719,846 2,232,972 1,741,129

186 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.2 (d) Movement in interest in suspense of loans & advances Balance as at 01 January 7,766,138 7,912,498 7,776,751 7,915,247 Interest suspended during the year 1,172,174 687,475 1,175,216 687,475 Amount reversed during the year (82,972) (487,237) (86,729) (489,629) Amount reversed due to loans written off (809,899) (322,439) (811,727) (322,439) Adjustments/transfers 111,295 (24,159) 111,295 (13,903) Balance as at 31 December 8,156,736 7,766,138 8,164,806 7,776,751

22.2 (e) Movement in foreclosed properties Balance as at 01 January 445,876 340,832 445,876 340,832 Additions during the year 431,204 111,472 431,204 111,472 Disposals during the year (61,109) (6,428) (61,109) (6,428) Adjustments/transfers (1,817) – (1,817) – Balance as at 31 December 814,154 445,876 814,154 445,876

22.2 (f) Movement in provision for foreclosed properties Balance as at 01 January 32,796 28,501 32,796 28,501 Amount provided during the year 5,712 – 5,712 – Amount reversed during the year (2,345) (988) (2,345) (988) Adjustments/transfers 232,010 5,283 232,010 5,283 Balance as at 31 December 268,173 32,796 268,173 32,796

22.3 LEASE RENTALS RECEIVABLE - NOT LATER THAN ONE YEAR Gross lease rentals receivable 2,414,982 2,788,342 6,676,887 6,961,590 Prepaid rentals (16,480) (17,462) (68,454) (83,493) 2,398,502 2,770,880 6,608,433 6,878,097 Unearned income (366,977) (580,685) (1,463,102) (1,399,152) Specific provision for lease rentals receivable (Note 22.6) (143,562) (159,165) (362,524) (449,992) General provision for lease rentals receivable (Note 22.7) (21,019) (22,105) (63,320) (60,690) Interest in suspense (Note 22.8) (29,009) (88,212) (158,581) (177,955) Net lease rentals receivable 1,837,935 1,920,713 4,560,906 4,790,308

22.4 LEASE RENTALS RECEIVABLE - LATER THAN ONE YEAR AND NOT LATER THAN FIVE YEARS Gross lease rentals receivable 3,152,224 3,101,035 8,849,640 7,077,698 Prepaid rentals (26,229) (29,239) (44,007) (35,659) 3,125,995 3,071,796 8,805,633 7,042,039 Unearned income (566,315) (546,058) (1,689,220) (1,510,798) Specific provision for lease rentals receivable (Note 22.6) (84,589) (104,806) (203,729) (211,499) General provision for lease rentals receivable (Note 22.7) (25,826) (26,639) (72,836) (53,133) Interest in suspense (Note 22.8) (61,430) (106,422) (96,104) (160,251) Net lease rentals receivable 2,387,835 2,287,871 6,743,744 5,106,358

BANK OF CEYLON ANNUAL REPORT 2010 187 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.5 LEASE RENTALS RECEIVABLE - LATER THAN FIVE YEARS Gross lease rentals receivable 170,395 240 170,628 334 Prepaid rentals (63) – (63) – 170,332 240 170,565 334 Unearned income (167,868) (19) (167,872) (20) Specific provision for lease rentals receivable (Note 22.6) – – – – General provision for lease rentals receivable (Note 22.7) (469) (8) (469) (8) Interest in suspense (Note 22.8) – (6) – (6) Net lease rentals receivable 1,995 207 2,224 300

22.6 MOVEMENT IN SPECIFIC PROVISION FOR LEASE RENTALS RECEIVABLE Balance as at 01 January 263,971 116,406 661,491 476,285 Amount recovered/written back on account provisions previously made (15,520) (36,039) (41,432) (36,239) Adjustments/transfers (52,985) (8,522) (62,481) 6,938 Amount reversed due to facility written off – – (140,037) (162,106) Amount provided during the year (Note 12) 32,684 192,126 148,712 376,613 Balance as at 31 December 228,150 263,971 566,253 661,491

22.7 MOVEMENT IN GENERAL PROVISION FOR LEASE RENTALS RECEIVABLE Balance as at 01 January 48,752 49,086 113,831 140,324 Amount provided/(reversed) during the year (1,438) (334) 22,794 (8,682) Adjustments/transfers – – – (17,811) Balance as at 31 December 47,314 48,752 136,625 113,831

22.8 MOVEMENT IN INTEREST IN SUSPENSE FOR LEASE RENTALS RECEIVABLE Balance as at 01 January 194,640 140,158 338,212 168,967 Adjustments/transfers – – (126,422) 94,339 Interest suspended during the year – 347,647 170,753 368,071 Amount reversed during the year (104,201) (293,165) (127,858) (293,165) Balance as at 31 December 90,439 194,640 254,685 338,212

22.9 MOVEMENT IN SPECIFIC PROVISION FOR BILLS OF EXCHANGE, LOANS & ADVANCES, FORECLOSED PROPERTIES AND LEASE RENTALS RECEIVABLE - SUMMARY Balance as at 01 January 8,042,601 7,837,218 8,488,604 8,237,390 Adjustments for difference due to currency conversion (64,329) 12,333 (64,329) 12,333 7,978,272 7,849,551 8,424,275 8,249,723 Amount recovered/written back on account of provisions previously made (1,297,087) (1,398,000) (1,323,673) (1,403,234) Amount reversed due to loans written off (502,599) (291,240) (642,636) (453,887) Adjustments/transfers (58,508) 79,573 (68,004) 203,193 Amount provided during the year (Note 12) 1,071,878 1,802,717 1,202,138 1,892,809 Balance as at 31 December 7,191,956 8,042,601 7,592,100 8,488,604

188 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.10 MOVEMENT IN GENERAL PROVISION FOR BILLS OF EXCHANGE, LOANS & ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY Balance as at 01 January 1,914,316 1,936,814 2,010,062 2,047,191 Adjustments for difference due to currency conversion (6,131) 1,164 (6,131) 1,164 1,908,185 1,937,978 2,003,931 2,048,355 Amounts provided during the year (Note 12) 488,016 (1,012) 523,859 2,168 Adjustments/transfers 30 (22,650) 30 (40,461) Balance as at 31 December 2,396,231 1,914,316 2,527,820 2,010,062

22.11 MOVEMENT IN INTEREST IN SUSPENSE FOR BILLS OF EXCHANGE, LOANS & ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY Balance as at 01 January 8,508,903 8,606,617 8,663,088 8,638,175 Interest suspended during the year 1,184,622 1,136,749 1,358,417 1,157,173 Amount reversed during the year (668,229) (887,865) (695,643) (890,257) Amount written off (809,899) (322,439) (811,727) (322,439) Adjustments/transfers 111,295 (24,159) (15,127) 80,436 Balance as at 31 December 8,326,692 8,508,903 8,499,008 8,663,088

22.12 NON-PERFORMING LOANS & ADVANCES The Bank’s net exposure on non-performing loans & advances as at Balance Sheet date, before adjusting for the value of securities are as follows: Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Non-performing loans and advances Bills of exchange 284,071 792,563 423,826 910,110 Loans & advances 10,969,634 13,548,459 11,473,931 13,605,840 Foreclosed properties 814,155 445,877 814,155 445,877 Lease rentals receivable 570,673 755,421 989,169 1,319,123 Non-performing advances 12,638,533 3.31* 15,542,320 5.65* 13,701,081 3.49* 16,280,950 5.75* Add: Interest receivable on non-performing advances 8,127,464 8,325,915 8,141,233 8,336,890 Gross non-performing advances 20,765,997 23,868,235 21,842,314 24,617,840 Less: Interest in suspense for Bills of exchange 79,517 548,125 79,517 548,125 Loans & advances 8,156,736 7,766,138 8,164,806 7,776,751 Lease rentals receivable 90,439 194,640 254,685 338,212 Total interest in suspense 8,326,692 8,508,903 8,499,008 8,663,088 Net non-performing advances 12,439,305 15,359,332 13,343,306 15,954,752

Less: Specific provision for loan losses for Bills of exchange 156,452 150,371 168,534 164,363 Loans & advances 6,539,181 7,595,463 6,589,140 7,629,954 Foreclosed properties 268,173 32,796 268,173 32,796 Lease rentals receivable 228,150 263,971 566,253 661,491 Total specific provision for loans & advances 7,191,956 1.88* 8,042,601 2.92* 7,592,100 1.93* 8,488,604 3.00* Net exposure 5,247,349 1.37* 7,316,731 2.66* 5,751,206 1.46* 7,466,148 2.64*

* As a percentage of total gross loans & advances (Net of interest in suspense).

BANK OF CEYLON ANNUAL REPORT 2010 189 NOTES TO THE FINANCIAL STATEMENTS

The Bank’s net exposure on non-performing advances of Rs. 5,247 million as at 31 December 2010 (2009: Rs. 7,317 million) is covered by securities valued at Rs. 6,860 million (2009: Rs. 8,459 million).

The reduction in the value of security corresponds with the reduction in the non-performing category.

22.12 (a) Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Provision cover - Gross Specific provision 7,191,956 8,042,601 7,592,100 8,488,604 Non-performing loans & advances 12,638,533 15,542,320 13,701,081 16,280,950 Specific provision to non-performing loans & advances 56.90% 51.75% 55.41% 52.14% Provision cover - Net Specific provision 7,191,956 8,042,601 7,592,100 8,488,604 Net non-performing loans & advances 12,439,305 15,359,332 13,343,306 15,954,752 Specific provision to non-performing loans & advances 57.82% 52.36% 56.90% 53.20%

22.12 (b) Analysis of geographic sector non-performing advances Bank NPA NPA As at 31 December 2010 % 2009 % Rs. ’000 Rs. ’000

Sri Lanka 10,154,252 3.6 12,683,363 5.8 Off-shore banking division 2,244,907 2.4 1,929,640 3.8 Overseas branches 239,374 3.1 929,317 17.6 12,638,533 15,542,320

*NPA % of the particular geographic sector.

22.13 CREDIT CONCENTRATION - GEOGRAPHIC SECTOR RISK CONCENTRATION Geographic sector risk concentration within the customer loan portfolio were as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Sri Lanka 280,739,408 73.4 218,413,729 79.4 291,021,434 74.1 226,689,714 80.0 Off-shore banking division 93,744,288 24.5 51,323,395 18.7 93,744,290 23.87 51,323,394 18.1 United Kingdom – 0.0 215,755 0.1 115,917 0.03 215,755 0.1 Republic of Maldives 5,979,414 1.6 3,842,615 1.4 5,979,414 1.5 3,842,615 1.4 India 1,846,662 0.5 1,226,814 0.4 1,846,662 0.5 1,226,814 0.4 382,309,772 100.0 275,022,308 100 392,707,717 100 283,298,292 100

190 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

22.14 CREDIT CONCENTRATION - ECONOMIC SECTOR RISK CONCENTRATION Economic sector risk concentration within the customer loan portfolio were as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Exports and imports 34,944,448 9.1 32,186,130 11.7 35,394,778 9.0 32,486,450 11.5 Wholesale and retail trade 23,367,576 6.1 21,058,927 7.7 27,680,809 7.0 22,107,979 7.8 Banking, finance and insurance 4,657,807 1.2 3,094,565 1.1 5,579,079 1.4 3,584,324 1.3 Agriculture and fisheries 11,305,962 3.0 7,751,422 2.8 11,628,857 3.0 8,359,859 3.0 Manufacturing 11,532,404 3.0 8,324,054 3.0 12,136,544 3.1 8,810,347 3.1 Hotels, travels and services 19,088,626 5.0 16,814,594 6.1 21,787,255 5.5 21,387,099 7.4 Housing, construction & property development 43,345,196 11.3 35,791,167 13.0 43,967,683 11.3 36,262,928 12.8 Consumption and others 95,420,599 25.0 56,647,624 20.6 95,885,557 24.4 56,945,481 20.1 Government & SOEs 137,833,000 36.1 92,907,949 33.8 137,833,000 35.1 92,907,949 32.8 Foreclosed properties 814,154 0.2 445,876 0.2 814,155 0.2 445,876 0.2 Gross loans & advances 382,309,772 100 275,022,308 100 392,707,717 100 283,298,292 100

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.15 GROSS BILLS OF EXCHANGE, LOANS AND ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY Bills of exchange [Note 22.1] 15,776,120 16,098,530 16,421,802 16,568,481 Loans and advances [Note 22.2] 370,266,675 262,716,527 372,520,486 264,382,399 Lease rentals receivable [Note 22.3, 22.4, 22.5] 4,593,669 4,716,154 12,264,437 11,010,500 390,636,464 283,531,211 401,206,725 291,961,380 Total provision for interest in suspense [Note 22.16] (8,326,692) (8,508,903) (8,499,008) (8,663,088) Total gross bills of exchange, loans and advances and lease rentals receivable 382,309,772 275,022,308 392,707,717 283,298,292 Total provision for loan losses [Note 22.17] (9,588,187) (9,956,917) (10,119,920) (10,498,666) Total net bills of exchange, loans and advances and lease rentals receivable 372,721,585 265,065,391 382,587,797 272,799,626

22.16 TOTAL PROVISION FOR INTEREST IN SUSPENSE - SUMMARY Bills of exchange [Note 22.1 (d)] 79,517 548,125 79,517 548,125 Loans and advances [Note 22.2 (d)] 8,156,736 7,766,138 8,164,806 7,776,751 Lease rentals receivable [Note 22.8] 90,439 194,640 254,685 338,212 8,326,692 8,508,903 8,499,008 8,663,088

22.17 TOTAL PROVISION FOR LOAN LOSSES - SUMMARY Bills of exchange [Note 22.1 (b), 22.1 (c)] 300,700 296,089 326,757 319,465 Loans and advances [Note 22.2 (b), 22.2 (c) and 22.2 (f)] 9,012,023 9,348,105 9,090,285 9,403,879 Lease rentals receivable [Note 22.6, 22.7] 275,464 312,723 702,878 775,322 9,588,187 9,956,917 10,119,920 10,498,666

BANK OF CEYLON ANNUAL REPORT 2010 191 NOTES TO THE FINANCIAL STATEMENTS

As at 31 December 2010 2009 Rate Date of Rs. ‘000 Rs. ‘000 % maturity 23. GOVERNMENT OF SRI LANKA RESTRUCTURING BONDS Date issued Description 24.03.1993 For re-capitalisation purposes 4,780,000 4,780,000 12 24.03.2023 24.03.1993 For settlement of loans 3,767,000 3,767,000 12 24.03.2023 Total 8,547,000 8,547,000

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. INVESTMENT SECURITIES Equity shares Listed equity shares [Note 24 (a)] 1,146,862 1,146,862 1,386,793 1,360,152 Unlisted equity shares [Note 24 (b)] 3,388,581 98,575 3,398,625 113,735 Unlisted preference shares [Note 24 (c )] – 25,000 – 25,000

Debt securities Listed debentures [Note 24 (d)] 35,240 120,000 35,973 120,000 Asset securitisation bonds (unlisted) [Note 24 (e)] – 13,321 – 13,321 Trust certificates [Note 24 (f)] 197,784 – 197,784 –

Bonds Sri Lanka Development Bonds [24 (g)] 72,820,570 71,948,559 72,820,570 71,948,559 Units in unit trusts [Note 24 (h)] 1,309,174 1,110,725 1,312,314 1,110,725 Government securities [Note 24 (i)] 1,745,285 1,381,700 1,745,285 1,381,700 Other investments [Note 24 (j)] – – 221,023 380,050 80,643,496 75,844,742 81,118,367 76,453,242

24. (a) Listed equity shares Bank As at 31 December 2010 2009 No. of Cost of Market No. of Cost of Market ordinary investment value ordinary investment value shares Rs. ‘000 Rs. ‘000 shares Rs. ‘000 Rs. ‘000

National Development Bank PLC 8,185,538 691,862 2,860,846 8,185,538 691,862 1,686,221 Seylan Bank PLC 13,000,000 455,000 1,271,400 13,000,000 455,000 481,000 1,146,862 4,132,246 1,146,862 2,167,221

192 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 No. of Cost of Directors' No. of Cost of Directors' ordinary investment valuation ordinary investment valuation shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (b) Unlisted equity shares Credit Information Bureau of Sri Lanka 47,400 42,256 42,256 27,000 2,700 2,700 Fitch Ratings Lanka Limited 62,500 625 625 62,500 625 625 Kandurata Development Bank* – – – 1,200,000 12,000 12,000 Kandy Textile Industries Limited 191,790 1,918 – 191,790 1,918 – Lanka Clear (Private) Limited 2,100,000 21,000 21,000 2,100,000 21,000 21,000 Lanka Financial Services Bureau Limited 225,000 2,250 2,250 225,000 2,250 2,250 Megpek Exports Limited 300,000 4,355 – 300,000 4,355 – Pradeshiya Sanwardhana Bank 7,418,448 72,000 72,000 – – – Rajarata Development Bank* – – – 1,298,448 12,000 12,000 Ruhunu Development Bank* – – – 1,200,000 12,000 12,000 Sabaragamuwa Development Bank* – – – 1,200,000 12,000 12,000 Serendib Coconut Products Limited 37,500 375 – 37,500 375 – Sri Lankan Airlines Limited 12,115,571 3,250,450 3,250,450 – – – Uva Development Bank* – – – 1,200,000 12,000 12,000 Wayamba Development Bank* – – – 1,320,000 12,000 12,000 3,395,229 3,388,581 105,223 98,575 Provision for diminution in value (6,648) (6,648) – 3,388,581 3,388,581 98,575 98,575

* Development Banks were converted to Pradeshiya Sanwardhana Bank by a Gazette notification on 01 May 2010.

. Bank As at 31 December 2010 2009 Cost of Directors' Cost of Directors' No. of investment valuation No. of investment valuation shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (c) Unlisted preference shares Carson Cumberbatch Company PLC – – – 2,500,000 25,000 25,000 [Non-voting 14.0% redeemable, cumulative preference shares] – – 25,000 25,000

Bank As at 31 December 2010 2009 No. of Cost of Market No. of Cost of Market securities/ investment value securities/ investment value debentures Rs. ‘000 Rs. '000 debentures Rs. ‘000 Rs. '000

24. (d) Listed debentures HDFC Bank of Sri Lanka ––– 750,000 75,000 75,000 [6 months gross TB rate plus 185 basis points subject to cap of 15.0% Rs. 100/- each matured in June 2010] Singer (Sri Lanka) PLC ––– 450,000 45,000 45,000 [6 months gross TB rate plus 150 basis points subject to cap of 15.5% Rs. 100/- each matured in September 2010] Urban Development Authority 352,400 35,240 35,240 ––– [Fixed rate of 11.0% Rs. 100/- each maturing in October 2015] 35,240 35,240 120,000 120,000

BANK OF CEYLON ANNUAL REPORT 2010 193 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 Cost of Market Cost of Market investment value investment value Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (e) Asset securitisation bonds HDFC Bank of Sri Lanka –– 13,321 13,321 [3 months gross TB rate plus 150 basis points matured in May 2010] –– 13,321 13,321 24. (f) Trust certificates Commercial Leasing Company Limited 197,784 197,784 –– 197,784 197,784 ––

Bank As at 31 December 2010 2009 Date of Cost of Net realisable Cost of Net realisable maturity investment value investment value Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (g) Sri Lanka Development Bonds (US$ Bonds) Sri Lanka Development Bonds (6 months LIBOR plus 275 basis points, matured in July 2010) 15.07.2010 – – 22,338,225 22,338,225 Sri Lanka Development Bonds (6 months LIBOR plus 550 basis points) 16.03.2011 557,525 559,331 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 540 basis points) 16.03.2011 1,672,575 1,677,992 1,718,325 1,718,325 Sri Lanka Development Bonds (6 months LIBOR plus 500 basis points) 29.06.2011 557,525 560,898 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 450 basis points) 18.08.2011 557,525 560,055 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 425 basis points) 22.09.2012 557,525 562,079 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 350 basis points) 23.09.2012 557,525 555,199 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 26.03.2013 1,115,050 1,119,695 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 30.06.2013 1,115,050 1,120,297 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 15.07.2013 21,743,475 21,846,865 –– Sri Lanka Development Bonds (6 months LIBOR plus 370 basis points) 15.07.2013 44,386,795 44,333,132 45,600,909 45,600,909 72,820,570 72,895,543 71,948,559 71,948,559

Bank As at 31 December 2010 2009 No. of Cost of Manager’s No. of Cost of Manager’s units investment valuation units investment valuation Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (h) Units in Unit Trusts Ceybank Unit Trust Investments 94,437,649 1,113,433 3,970,159 86,699,503 980,312 1,793,813 Ceybank Century Growth Fund 7,447,569 95,741 534,413 7,327,748 88,413 259,475 Ceybank Surekum Gilt Edged Fund 10,000,000 100,000 100,500 ––– Ceybank Unit Trust - Seed Fund –––4,421,052 42,000 91,472 1,309,174 4,605,072 1,110,725 2,144,760

194 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

As at 31 December 2010 2009 Cost of Manager’s Cost of Manager’s investment valuation investment valuation Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (i) Government securities Investment in Government securities 1,745,285 1,745,285 1,381,700 1,381,700 1,745,285 1,745,285 1,381,700 1,381,700

Group As at 31 December 2010 2009 No. of Cost of Market No. of Cost of Market ordinary investment value ordinary investment value shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (a) Listed equity shares National Development Bank PLC 8,220,538 704,909 2,873,078 8,185,538 691,862 1,686,221 Seylan Bank PLC 13,000,000 455,000 1,271,400 13,000,000 455,000 481,000 The Lanka Hospital Corporation PLC 21,329,000 213,290 676,129 21,329,000 213,290 506,564 DFCC Bank 60,000 13,594 12,012 1,386,793 4,832,619 1,360,152 2,673,785

Group As at 31 December 2010 2009 No. of Cost of Directors’ No. of Cost of Director’s ordinary investment valuation ordinary investment valuation shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (b) Unlisted equity shares Capital Reach Holdings Limited ––– 511,500 5,115 5,115 Ceylinco Investment Company Limited 5,000,000 5,000 5,000 5,000,000 5,000 5,000 Credit Information Bureau of Sri Lanka 47,600 42,300 42,300 37,100 2,745 2,745 Fitch Ratings Lanka Limited 62,500 625 625 62,500 625 625 Kandurata Development Bank* ––– 1,200,000 12,000 12,000 Kandy Textile Industries Limited 191,790 1,918 – 191,790 1,918 – Lanka Clear (Private) Limited 2,100,000 21,000 21,000 2,100,000 21,000 21,000 Lanka Financial Services Bureau Limited 225,000 2,250 2,250 225,000 2,250 2,250 MEGA Containers Limited 1,000,000 10,000 5,000 1,000,000 10,000 5,000 Megpek Export Limited 300,000 4,355 – 300,000 4,355 – Pradeshiya Sanwardhana Bank 7,418,448 72,000 72,000 ––– Rajarata Development Bank* ––– 1,298,448 12,000 12,000 Ruhunu Development Bank* ––– 1,200,000 12,000 12,000 Sabaragamuwa Development Bank* ––– 1,200,000 12,000 12,000 Serendib Coconut Products Limited 37,500 375 – 37,500 375 – Sri Lankan Airlines Limited 12,115,571 3,250,450 3,250,450 ––– Uva Development Bank* ––– 1,200,000 12,000 12,000 Wayamba Development Bank* ––– 1,320,000 12,000 12,000 3,410,273 3,398,625 125,383 113,735 Provision for diminution in value (11,648) – (11,648) – 3,398,625 3,398,625 113,735 113,735

* Development Banks were converted to Pradeshiya Sanwardhana Bank by a Gazette notification on 01 May 2010.

BANK OF CEYLON ANNUAL REPORT 2010 195 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 No. of Cost of Directors’ No. of Cost of Director’s preference investment valuation preference investment valuation shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (c) Unlisted preference shares Carson Cumberbatch Company PLC –––2,500,000 25,000 25,000 [Non-voting 14.00% redeemable, cumulative preference shares] –– 25,000 25,000

Group As at 31 December 2010 2009 No. of Cost of Market No. of Cost of Market securities/ investment value securities/ investment value debentures Rs. ‘000 Rs. '000 debentures Rs. ‘000 Rs. '000

24. (d) Listed debentures HDFC Bank PLC ––– 750,000 75,000 75,000 [6 months gross TB rate plus 185 basis points subject to cap of 15.00% Rs. 100/- each, matured in June 2010] Singer (Sri Lanka) PLC ––– 450,000 45,000 45,000 [6 months gross TB rate plus 150 basis points subject to cap of 15.50% Rs. 100/- each, matured in September 2010] Urban Development Authority 352,400 35,240 35,240 ––– [Fixed rate of 11.00% Rs. 100/- each maturing in October 2015] Seylan Bank PLC [Fixed rate of 16.20% Rs. 100/- each, maturing in December 2012] 2,000 215 200 ––– [Fixed rate of 16.75% Rs. 100/- each, maturing in May 2012] 3,400 364 340 ––– [Fixed rate of 13.50% Rs. 100/- each, maturing in July 2011] 1,500 154 150 ––– 35,973 35,930 120,000 120,000

24. (e) Asset securitisation bond HDFC Bank PLC ––– – 13,321 13,321 [3 months gross TB rate plus 150 basis points matured in May 2010] – 13,321 13,321

24. (f) Trust certificates Commercial Leasing Company Limited – 197,784 197,784 ––– – 197,784 197,784

196 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Group As at 31 December 2010 2009 Date of Cost of Net realisable Cost of Net realisable maturity investment value investment value Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (g) Sri Lanka Development Bonds (US$ Bonds) Sri Lanka Development Bonds (6 months LIBOR plus 275 basis points, matured in July 2010) 15.07.2010 – – 22,338,225 22,338,225 Sri Lanka Development Bonds (6 months LIBOR plus 550 basis points) 16.03.2011 557,525 559,331 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 540 basis points) 16.03.2011 1,672,575 1,677,992 1,718,325 1,718,325 Sri Lanka Development Bonds (6 months LIBOR plus 500 basis points) 29.06.2011 557,525 560,898 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 450 basis points) 18.08.2011 557,525 560,055 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 425 basis points) 22.09.2012 557,525 562,079 572,775 572,775 Sri Lanka Development Bonds (6 months LIBOR plus 350 basis points) 23.09.2012 557,525 555,199 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 26.03.2013 1,115,050 1,119,695 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 30.06.2013 1,115,050 1,120,297 –– Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 15.07.2013 21,743,475 21,846,865 –– Sri Lanka Development Bonds (6 months LIBOR plus 370 basis points) 15.07.2013 44,386,795 44,333,132 45,600,909 45,600,909 72,820,570 72,895,543 71,948,559 71,948,559

Group As at 31 December 2010 2009 No. of Cost of Manager’s No. of Cost of Manager’s units investment valuation units investment valuation Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (h) Units in Unit Trusts Ceybank Unit Trust Investments 94,437,649 1,113,433 3,970,159 86,699,503 980,312 1,793,813 Ceybank Unit Trust - Seed Fund – – – 4,421,052 42,000 91,472 Ceybank Century Growth Fund 7,477,569 95,741 545,339 7,327,748 88,413 259,475 Ceybank Surekum Gilt Edged Fund 10,000,000 100,000 100,500 – – – Namal Acuity Value Fund 32,800 3,140 2,952 – – – 1,312,314 4,618,950 1,110,725 2,144,760

Group As at 31 December 2010 2009 Cost of Manager’s Cost of Manager’s investment valuation investment valuation Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (i) Government securities Investment in Government securities 1,745,285 1,745,285 1,381,700 1,381,700 1,745,285 1,745,285 1,381,700 1,381,700

Group As at 31 December 2010 2009 Cost of Director’s Cost of Director’s investment valuation investment valuation Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (j) Other Investments Investment in commercial papers 220,965 220,965 380,000 380,000 Investment in other banks 58 58 50 50 221,023 221,023 380,050 380,050

BANK OF CEYLON ANNUAL REPORT 2010 197 NOTES TO THE FINANCIAL STATEMENTS

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 25. INVESTMENT PROPERTIES Cost Balance as at 01 January – – 396,914 431,181 Additions during the year – – 2,659 110,398 Transfers/adjustments – – – (144,215) Disposals during the year – – (4,798) (450) Balance as at 31 December – – 394,775 396,914

Less: Accumulated depreciation Balance as at 01 January – – 5,184 2,431 Charge for the year – – 3,074 3,060 Transfers/adjustments – – – (307) Released on disposal – – (350) – Balance as at 31 December – – 7,908 5,184 Net investment properties – – 386,867 391,730

No investment properties held by the Bank both for the current year as well as for the previous year.

As at 31 December 2010 2009 Cost Fair value Cost Fair value Building Extent Land Building Total Total Total Total (sq.ft) Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 25.1 INVESTMENT PROPERTIES HELD BY THE GROUP No. 64 & 66, Nonagama Road, Pallegama, Embilipitiya. * 16.61p 1,750 – 1,750 13,000 1,750 3,000 Lot No. 2 & 3 of Muttuweowita. (Acquired by RDA) * 20.40p 714 – 714 1,000 714 1,000 No. 300/8, Thalawathugoda Road, Madiwela, Kotte. * 2,478 16.15p 2,465 2,635 5,100 5,012 5,100 5,012 No. 385/1, Kotte Road, Pittakotte. 2,896 19.01p 2,958 1,730 4,688 5,298 4,688 5,298 No. 19, Galle Road, Angoda, Bentota. 961 2R-00.00p – – – – 2,989 5,816 No. 116, 116/1, 118, 120, 1st Cross Street, Colombo 11. (Sold 90%) * 12.35p 1,249 – 1,249 1,249 1,249 22,500 No. 43, 45, 49, 51 & 53, New Olcott Mawatha, Colombo 11. * – 9.76p 9,950 – 9,950 35,000 9,950 35,000 No. 102 & 104, Dam Street, Colombo 12. * 7,925 1R-10.70p 17,970 4,989 22,959 56,029 22,109 56,029 Kumbuththukuliya Watta, Bangadeniya Road, Puttalam. * – 2.00A 600 – 600 3,400 600 2,000 Mirissawelawatta Hena, Thekka Watta, Dambadeniya. * – 1A-0R-28.00p 162 – 162 600 162 2,560 Rukgahakottunuwa, Gehenuwala, Meepe. – 38.33p 2,418 – 2,418 890 2,418 890 No. 299, Union Place, Colombo 02. * 10,456 50.00p 225,085 10,100 235,185 225,344 235,185 225,344 No. 50/21, Old Kesbewa Road, Raththanapitiya, Boralesgamuwa. ** 44,877 2A-1R-4.35p 65,604 44,396 110,000 229,075 110,000 229,075 Total 330,925 63,850 394,775 575,897 396,914 593,524

Note * The fair value of the investment properties as at 31 December 2010 was based on market valuations carried out by Mr. D N Dhammika Baranage [RICS (UK), DIV AIS (SL)] and Mr. H A W Perera [BSc Estate Management and Valuation (Special)], who are independent valuers not connected with the Group. The Directors have reviewed values of other investment properties as at 31 December 2010 and concluded that there were no impairment.

** Professional valuation has been carried out by Mr. A G Gunarathna [BSc Estate Management and Valuation, FIV (Sri Lanka)], incorporated valuer on basis of Market Approach (Direct Comparison Method) on 24 July 2009.

198 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Market Market Market Market Group’s Cost value/ Group’s Cost value/ Equity value/ Equity value/ interest in Directors’ interest in Directors’ value Directors’ value Directors’ stated valuation stated valuation valuation valuation capital capital % Rs. ’000 Rs. ‘000 % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ‘000 Rs. ’000 Rs. ‘000 26. INVESTMENTS IN ASSOCIATE COMPANIES 26.1 UNQUOTED Lanka Securities (Private) Limited 40.92 41,940 41,940 40.92 41,940 41,940 171,607 171,607 134,081 134,081 (3,495,000 Ordinary shares) (Incorporated in Sri Lanka) Mireka Capital Land (Private) Limited 40.00 750,000 750,000 40.00 750,000 750,000 905,937 905,937 832,400 832,400 (75,000,000 Ordinary shares) (Incorporated in Sri Lanka) Southern Development Financial Company 41.67 25,000 1,670 41.67 25,000 1,670 53 53 692 692 Limited (2,500,001 Ordinary shares) (Incorporated in Sri Lanka) Transnational Lanka Records Solutions 24.69 20,000 20,000 24.69 20,000 20,000 33,605 33,605 29,177 29,177 (Private) Limited (2,000,000 Ordinary shares) (Incorporated in Sri Lanka) Ceybank Asset Management (Private) Limited 43.36 31,048 31,048 49.60 31,048 31,048 61,558 61,558 54,560 54,560 (1,240,002 Ordinary shares) (Incorporated in Sri Lanka) MBSL Savings Bank Limited 49.08 – – 49.88 – – 111,803 111,803 33,155 33,155 (67,809,465 Ordinary shares) (Incorporated in Sri Lanka)

Total investment in Associate Companies 867,988 844,658 867,988 844,658 1,284,563 1,284,563 1,084,065 1,084,065 Provision for diminution in value (23,330) (23,330)

Net investment in Associate Companies 844,658 844,658 844,658 844,658 1,284,563 1,284,563 1,084,065 1,084,065

Bank Group Cost Equity value 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 26.2 MOVEMENT IN INVESTMENTS IN ASSOCIATE COMPANIES Value as at 01 January 867,988 841,940 1,084,065 956,370 Increase/(decrease) in investment – 26,048 80,364 26,048 Share of profit/(loss) before tax – – 212,898 130,653 Share of tax – – (55,384) (21,109) Dividends – – (42,713) (4,675) Other adjustments – – 5,334 (3,222) Value as at 31 December 867,988 867,988 1,284,564 1,084,065

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 26.3 MOVEMENT IN PROVISION FOR DIMINUTION IN VALUE Balance as at 01 January 23,330 23,330 – – Amount provided during the year – – – – Balance as at 31 December 23,330 23,330 – –

BANK OF CEYLON ANNUAL REPORT 2010 199 NOTES TO THE FINANCIAL STATEMENTS

As at 31 December 2010 2009 Rs. ’000 Rs. ’000 26.4 THE GROUP'S INTEREST IN THE SUMMARISED FINANCIAL INFORMATION OF THE ASSOCIATES ARE AS FOLLOWS: Total assets 3,914,506 2,673,026 Total liabilities 2,619,263 2,602,178 For the year ended 31 December Total operating income 740,817 682,975 Total operating expenses (527,919) (552,322) Profit before taxation 212,898 130,653 Provision for taxation (55,384) (21,109) Profit after taxation 157,514 109,544

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 27. INVESTMENT IN SUBSIDIARY COMPANIES Investment in quoted companies (Note 27.2) 2,862,705 2,862,705 – – Investment in unquoted companies (Note 27.3) 3,233,519 1,146,284 – – Total investment in subsidiary companies 6,096,224 4,008,989 – – Provision for diminution in value (Note 27.5) (817,130) (817,130) – – Net investment in Subsidiary Companies 5,279,094 3,191,859 – –

27.1 MOVEMENT IN INVESTMENT IN SUBSIDIARIES Balance as at 01 January 4,008,989 3,601,084 – – Increase/(decrease) in investment 2,087,235 407,905 – – Balance as at 31 December 6,096,224 4,008,989 – –

Bank As at 31 December 2010 2009 Group’s interest Cost Market value/ Group’s interest Cost Market value/ in stated capital Directors’ value in stated capital Directors’ value % Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 27.2 QUOTED Property Development PLC 93.16 740,070 2,766,827 93.16 740,070 1,767,695 (61,485,050 Ordinary shares ) (Incorporated in Sri Lanka) Merchant Bank of Sri Lanka PLC 72.14 2,122,635 4,460,560 72.14 2,122,635 1,899,147 (97,392,136 Ordinary shares ) (Incorporated in Sri Lanka) Investment in quoted Subsidiary Companies 2,862,705 7,227,387 2,862,705 3,666,842

200 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank As at 31 December 2010 2009 Group’s interest Cost Market value/ Group’s interest Cost Market value/ in stated capital Directors’ value in stated capital Directors’ value % Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000

27.3 UNQUOTED BoC Management & Support Services (Private) Limited 100.00 1,000 1,000 100.00 1,000 1,000 (100,000 Ordinary shares) (Incorporated in Sri Lanka) BoC Property Development & Management (Private) Limited 100.00 1,010,000 1,010,000 100.00 1,010,000 1,010,000 (100,999,998 Ordinary shares) (Incorporated in Sri Lanka) BoC Travels (Private) Limited 100.00 2,500 2,500 100.00 2,500 2,500 (250,006 Ordinary shares) (Incorporated in Sri Lanka) Hotels Colombo (1963) Limited 99.99 737 737 98.23 737 737 (73,669 Ordinary shares) (Incorporated in Sri Lanka) Merchant Credit of Sri Lanka Limited 85.79 22,047 22,047 85.79 22,047 22,047 (4,900,018 Ordinary shares) (Incorporated in Sri Lanka) Ceylease Financial Services Limited 55.00 110,000 110,000 55.00 110,000 110,000 (110,000,000 Ordinary shares) (Incorporated in Sri Lanka) Bank of Ceylon (UK) Limited 100.00 2,087,235 2,087,235 – – – (12,119,611 Ordinary shares) (Incorporated in United Kingdom) Investment in unquoted Subsidiary Companies 3,233,519 3,233,519 1,146,284 1,146,284

In addition to the above Subsidiaries, Ceybank Holiday Homes (Private) Limited, MBSL Insurance Company Limited and Koladeniya Hydropower (Private) Limited are indirect Subsidiaries of the Bank.

27.4 INVESTMENTS IN SUBSIDIARIES DURING THE YEAR 1. Bank of Ceylon (UK) Limited The Financial Services Authority (FSA), the regulator of the Financial Services Industry in the United Kingdom, required that the London branch of the Bank be converted to a Subsidiary of Bank of Ceylon that will be operated with its own capital base, management and Board of Directors. As a result, Bank of Ceylon branch in London was converted to a fully-owned Subsidiary during the year 2010 and named ‘Bank of Ceylon (UK) Limited’. Total investment is GBP 12,119,612/-.

2. Koladeniya Hydropower (Private) Limited Koladeniya Hydropower (Private) Limited was acquired by Property Development PLC, Subsidiary of Bank of Ceylon during the year 2010 and became a Subsidiary of Bank of Ceylon through indirect holding of its stated capital.

Group’s interest in the voting shares : 88.12% Amount invested (Rs.) : 23,625,000/- Post-acquisition (loss)/profit to Group account for the financial year 2010 (Rs.) : (1,090,783/-)

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 27.5 MOVEMENT IN PROVISION FOR DIMINUTION IN VALUE Balance as at 01 January 817,130 817,130 – – Amount provided during the year – – – – Balance as at 31 December 817,130 817,130 – –

BANK OF CEYLON ANNUAL REPORT 2010 201 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 28. OTHER ASSETS Accrued interest and other receivables 10,238,043 9,002,621 10,620,946 9,266,588 Consumable stock in hand 338,357 284,242 410,819 349,381 Foreign cheques purchased 102,994 84,721 102,994 84,721 Local cheques purchased 1,236,611 1,414,411 1,236,611 1,414,411 Other assets 5,790,263 8,398,454 5,942,280 8,659,547

17,706,268 19,184,449 18,313,650 19,774,648

Freehold Freehold Leasehold Equipment Motor Leasehold Capital Total Total land building building vehicles motor work-in- vehicles progress As at 31 December 2010 2009 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 29. PROPERTY, PLANT & EQUIPMENT BANK

29.1 COST OR VALUATION As at 01 January 1,566,606 1,767,530 615,472 6,419,846 468,661 33,595 214,431 11,086,141 9,836,873 Additions during the year 26,319 8,581 112,336 645,393 132,263 16,793 229,095 1,170,780 1,390,829 Disposals during the year – – (75) (120,461) (25,878) – – (146,414) (116,599) Exchange rate adjustments – – – (984) 76 – – (908) 51,227 Transfer to Bank of Ceylon (UK) Limited – (432,817) – (76,097) – – – (508,914) – Work-in-progress capitalised – 10,613 75,954 – – – (213,845) (127,278) – Transfers/adjustments – – – (1,683) – – – (1,683) (76,189) As at 31 December 1,592,925 1,353,907 803,687 6,866,014 575,122 50,388 229,681 11,471,724 11,086,141

Accumulated Depreciation As at 01 January – 388,917 332,166 4,426,318 267,430 10,557 – 5,425,388 4,826,427 Charge for the year – 40,452 31,505 631,771 71,858 9,407 – 784,993 686,428 Disposals during the year – – (25) (118,980) (25,338) – – (144,343) (94,512) Exchange rate adjustments – – – (968) 61 – – (907) 14,598 Transfer to Bank of Ceylon (UK) Limited – (63,421) – (74,575) – – – (137,996) – Transfers/adjustments – – – – – – – – (7,553) As at 31 December – 365,948 363,646 4,863,566 314,011 19,964 – 5,927,135 5,425,388

Net book value as at 31 December 2010 1,592,925 987,959 440,041 2,002,448 261,111 30,424 229,681 5,544,589 – Net book value as at 31 December 2009 1,566,606 1,378,613 283,306 1,993,528 201,231 23,038 214,431 – 5,660,753 5,544,589 5,660,753

202 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

29.1.1 Details of freehold lands & buildings held by the Bank as at 31 December 2010 Name of Premises Extent Building Cost/ Cost/ Total Accumulated Net Book (Perches) (Square Feet) Revaluation Revaluation Value Depreciation Value of Land of Building Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Central Province Galaha Branch 15.00 6,340 1,500 5,543 7,043 1,028 6,015 No. 59/37, Deltota Road, Galaha Gampola Branch 175.00 9,270 875 10,287 11,162 4,815 6,347 No. 44, Kadugannawa Road, Gampola Hatton Branch 85.65 8,784 5,000 8,406 13,406 1,522 11,884 No. 46, Circular Road, Hatton Hatton Staff Quarters 40.00 5,560 4,000 7,300 11,300 1,417 9,883 Hatton Kandy 2nd City Branch 42.81 9,017 34,500 34,335 68,835 16,883 51,952 No. 22, Dalada Veediya, Kandy Maskeliya Branch 42.05 6,402 2,000 3,333 5,333 614 4,719 No. 66, Upcot Road, Maskeliya Nawalapitiya Branch 15.00 6,317 3,066 13,127 16,193 1,936 14,257 No. 6, Gampola Road, Nawalapitiya Nuwara Eliya Branch 133.50 13,645 85,000 14,889 99,889 3,009 96,880 No. 43, Lawson Street, Nuwara Eliya Nuwara Eliya Staff Quarters 53.69 5,086 8,000 2,500 10,500 485 10,015 No. 14, 19, Hill Street, Nuwara Eliya Nuwara Eliya Property 27.54 3,070 7,015 12,291 19,306 4,020 15,286 No. 12, Hill Street, Nuwara Eliya Talawakelle Branch 25.30 5,045 2,500 8,854 11,354 1,353 10,001 No. 23, 25, 29, Hatton Road, Talawakelle Talawakelle Staff Quarters 160.00 4,898 2,000 7,000 9,000 1,359 7,641 Talawakelle Estate Plantation 155,456 127,865 283,321 38,441 244,880

Eastern Province Batticaloa Branch 65.00 8,137 16 5,464 5,480 3,976 1,504 Covington Road, Batticaloa Mutur Branch 40.27 2,226 1,260 819 2,079 614 1,465 No. 38, Batticaloa Road, Mutur Pottuvil Branch 10.70 4,976 1,000 1,307 2,307 230 2,077 Main Street, Pottuvil Trincomalee Branch 90.00 9,432 15 5,114 5,129 2,177 2,952 No. 24, Inner Harbour Road, Trincomalee Valachchenai Branch 47.34 6,391 285 7,103 7,388 2,555 4,833 Main Street, Valachchenai 2,576 19,807 22,383 9,552 12,831

BANK OF CEYLON ANNUAL REPORT 2010 203 NOTES TO THE FINANCIAL STATEMENTS

Name of Premises Extent Building Cost/ Cost/ Total Accumulated Net Book (Perches) (Square Feet) Revaluation Revaluation Value Depreciation Value of Land of Building Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Northern Province Jaffna Area Office – 7,300 – 3,027 3,027 2,203 824 No. 476, 476A, Hospital Road, Jaffna Jaffna Branch 164.27 9,775 115 4,388 4,503 2,450 2,053 No. 56, Stanley Road, Jaffna Mannar Branch – 5,720 – 2,318 2,318 1,865 453 No. 52, Pallimunai Road, Grand Bazaar, Mannar Nelliady Branch 42.74 – 15,686 – 15,686 – 15,686 Thikkam Road, Karaveddy, Nelliady 15,801 9,733 25,534 6,518 19,016

North-Western Province Alawwa Branch 31.80 7,305 4,000 5,070 9,070 977 8,093 No. 64, Giriulla Road, Alawwa Chilaw Branch 43.50 3,640 14,000 8,981 22,981 1,698 21,283 Radaguru Edmund Peiris Mawatha, Chilaw Dummalasuriya Branch 41.80 5,353 3,500 5,000 8,500 971 7,529 No. 227, Kuliyapitiya-Madampe Road, Dummalasuriya Kurunegala Province Office, AGM’s Quarters & Chief 225.00 17,210 45,000 18,871 63,871 3,442 60,429 Manager’s Quaters No. 18, Mihindu Mawatha, Kurunegala Kurunegala Branch – 15,100 – 15,604 15,604 6,825 8,779 Commercial Complex, Kurunegala Kurunegala Bazaar Branch 53.00 8,915 55,000 19,569 74,569 3,764 70,805 No. 34, Colombo Road, Kurunegala Madampe Branch 61.10 6,565 4,053 6,292 10,345 1,172 9,173 No. 10, Station Road, Madampe Madurankuliya Branch 279.00 – 445 – 445 – 445 No. 66 , Colombo Road, Madurankuliya Narammala Branch 117.50 5,970 5,500 3,319 8,819 507 8,312 No. 139, Negombo Road, Narammala Puttalam Area Office 72.26 2,000 18 281 299 281 18 No. 53, Kurunegala Road, Puttalam 131,516 82,987 214,503 19,637 194,866

204 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Name of Premises Extent Building Cost/ Cost/ Total Accumulated Net Book (Perches) (Square Feet) Revaluation Revaluation Value Depreciation Value of Land of Building Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Sabaragamuwa Province Balangoda Branch 14.50 3,556 8,500 941 9,441 174 9,267 No. 137, Main Street, Balangoda Dehiowita Branch 38.60 2,088 1,500 3,073 4,573 540 4,033 No. 62, Main Street, Dehiowita Kegalle Branch 131.38 18,023 17,000 21,307 38,307 4,030 34,277 No. 110, Colombo Road, Kegalle Rambukkana Branch 27.25 4,500 2,600 10,674 13,274 1,989 11,285 No. 8A, Diyasunnatha Mawatha, Rambukkana Ratnapura Branch 100.00 9,013 20,000 8,491 28,491 1,572 26,919 No. 6, Dharmapala Mawatha, Ratnapura Ratnapura Branch - (BMC.1/L) 31.69 – 10,439 – 10,439 – 10,439 No. 58, Main Street, Ratnapura 60,039 44,486 104,525 8,305 96,220

Southern Province Ambalangoda Branch 58.00 – 12,166 – 12,166 – 12,166 No. 274, Main Street, Ambalangoda Ambalantota Branch 38.00 6,041 2,250 929 3,179 113 3,066 No. 11, Wanduruppa Road, Ambalantota Galle Province Office 32.63 13,060 4,000 9,611 13,611 1,829 11,782 No. 2, Light House Street, Fort, Galle Galle Branch 31.50 12,570 6,300 10,388 16,688 3,179 13,509 No. 2, Gamini Road, Galle Hakmana Branch 36.70 3,250 263 3,823 4,086 1,602 2,484 Beliatta Road, Hakmana Imaduwa Branch 83.50 2,300 3,000 3,194 6,194 589 5,605 Ahangama Road, Imaduwa Matara Branch 104.50 13,514 21,000 13,102 34,102 2,738 31,364 No. 11, Kumaratunga Mawatha, Matara Matara Bazaar Branch 49.25 – 14,038 – 14,038 – 14,038 Gunawardena Mawatha, Matara Tangalle Branch 21.05 – 13,134 – 13,134 – 13,134 No. 145/147, Sea Street, Tangalle Weligama Branch 97.50 8,500 831 6,165 6,996 2,478 4,518 No. 239, Main Street, Weligama 76,982 47,212 124,194 12,528 111,666

Uva Province Badulla Uva Province Office 118.75 9,048 7,000 6,104 13,104 1,139 11,965 Bank Road, Badulla Bandarawela Branch 9.52 7,731 7,500 8,500 16,000 1,661 14,339 No. 198 B, Badulla Road, Bandarawela Haputale Branch – 4,775 – 7,364 7,364 2,778 4,586 No. 20, Station Road, Haputale Monaragala Branch & Manager’s Quarters 90.10 9,033 45 16,474 16,519 7,259 9,260 No. 401, Wellawaya Road, Moneragala Moneragala Staff Quarters 230.00 3,042 18 440 458 349 109 No. 401, Wellawaya Road, Moneragala 14,563 38,882 53,445 13,186 40,259

BANK OF CEYLON ANNUAL REPORT 2010 205 NOTES TO THE FINANCIAL STATEMENTS

Name of Premises Extent Building Cost/ Cost/ Total Accumulated Net Book (Perches) (Square Feet) Revaluation Revaluation Value Depreciation Value of Land of Building Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Western Province North Borella Branch 42.62 19,195 30,000 44,940 74,940 8,423 66,517 No. 71, Danister de Silva Mawatha, Borella Colombo 1 - City Office 39.50 24,952 100,000 50,863 150,863 11,349 139,514 No. 41, Bristol Street, Colombo 1 Colombo 1 - Grand Oriental Hotel 181.85 232,801 467,225 349,095 816,320 81,642 734,678 York Sreet, Colombo 1 Grandpass Branch 20.12 6,295 12,000 10,576 22,576 1,655 20,921 No. 703, Sirimavo Bandaranaike Mawatha, Grandpass Ja-Ela Branch 40.64 8,090 14,158 10,989 25,147 1,859 23,288 No. 19, Negombo Road, Ja-Ela Kadawatha Branch 28.86 6,181 10,000 11,561 21,561 2,221 19,340 No. 469, Ragama Road, Kadawatha Negombo Branch 97.25 16,754 55,000 15,259 70,259 3,384 66,875 No. 118, Rajapakse Broadway, Negombo Pettah Branch 28.29 24,530 28,440 44,238 72,678 20,538 52,140 No. 212/63, Gas Work Street, Colombo 11 716,823 537,521 1,254,344 131,071 1,123,273

Western Province South Aluthgama Branch 36.60 – 3,435 – 3,435 – 3,435 No. 267, Galle Road, Aluthgama Bambalapitiya Branch – 7,776 – 36,348 36,348 17,063 19,285 No. 10, Unity Plaza Building, Galle Road, Colombo 4 Beruwala Branch 21.50 5,418 26,319 10,613 36,932 44 36,888 No. 165 A, Galle Road, Beruwala Dehiwala Branch 22.00 12,715 2,225 25,360 27,585 8,938 18,647 No. 207, Galle Road, Dehiwala Horana Branch 70.00 8,078 6,000 12,819 18,819 3,824 14,995 No. 87, Anguruwathota Road, Horana Idama Branch 61.12 7,550 8,000 23,305 31,305 4,590 26,715 No. 707, Galle Road, Moratuwa Kalutara Area Office 22.50 3,060 4,500 2,500 7,000 596 6,404 No. 108, Old Road, Kalutara Kalutara Branch 40.86 9,885 17,000 7,773 24,773 1,904 22,869 No. 218, Galle Road, Kalutara South, Kalutara Maharagama Branch 80.00 45,245 11,438 16,267 27,705 7,001 20,704 No. 88, High Level Road, Maharagama Matugama Branch 9.50 2,883 4,500 3,959 8,459 730 7,729 No. 72, Agalawatte Road, Matugama Nugegoda Branch 30.50 38,108 95,000 41,564 136,564 11,631 124,933 No. 174, High Level Road, Nugegoda, Panadura Branch 80.00 6,490 4,000 7,910 11,910 3,410 8,500 No. 4, Super Grade Branch, Susantha Mawatha, Panadura Wadduwa Branch 29.00 – 3,179 – 3,179 – 3,179 No. 557 A, Galle Road, Wadduwa Wellawatte Branch 51.25 15,798 20,510 32,669 53,179 11,436 41,743 No. 149, Galle Road, Colombo 6 206,106 221,087 427,193 71,167 356,026

206 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Name of Premises Extent Building Cost/ Cost/ Total Accumulated Net Book (Perches) (Square Feet) Revaluation Revaluation Value Depreciation Value of Land of Building Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Holiday Homes and Rests Badulla Fernham Bungalow & Property 222.25 4,580 1,071 7,093 8,164 1,958 6,206 No. 153, Spring Valley Road, Badulla Bandarawela Holiday Home 115.00 3,028 45 2,226 2,271 1,214 1,057 Bandarawela Dickoya Upper/Lower Glencarn Bungalow – 7,807 – 10,138 10,138 3,502 6,636 Dickoya Haputale Woodland Bungalow – 3,005 – 5,559 5,559 1,862 3,697 Haputale Lindula Ridge Holiday Home – 3,412 – 5,130 5,130 1,451 3,679 Lindula Nuwara Eliya Holiday Home 185.06 3,388 200 2,669 2,869 1,106 1,763 No. 16, Hill Street, Nuwara Eliya 1,316 32,815 34,131 11,093 23,038

Others General Manager's Bungalow 79.80 7,450 80,000 8,421 88,421 1,588 86,833 No. 75, Ananda Kumaraswamy Mawatha, Colombo 7 Colombo Darley Road, Stores, Browns Building, 151.00 22,337 96,999 7,473 104,472 3,055 101,417 No. 497, T B Jayah Mawatha, Colombo 10 World Trade Centre – 6,935 – 129,389 129,389 19,946 109,443 No. 8, Bank of Ceylon Mawatha,Colombo 1 Kollupitiya - Walkers Sons Ltd. 57.00 – 23,311 – 23,311 – 23,311 No. 28, St. Michael’s Road, Cololmbo 3 Maharagama - Central Training Institute 105.10 36,775 11,437 46,229 57,666 19,861 37,805 No. 88, High Level Road, Maharagama 211,747 191,512 403,259 44,450 358,809 Total freehold land and building 1,592,925 1,353,907 2,946,832 365,948 2,580,884

BANK OF CEYLON ANNUAL REPORT 2010 207 NOTES TO THE FINANCIAL STATEMENTS

Freehold Freehold Leasehold Equipment Motor Leasehold Capital Total Total land building building vehicles motor work-in- vehicles progress As at 31 December 2010 2009 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 GROUP

29.2 COST OR VALUATION As at 01 January 1,566,606 3,801,613 615,475 7,204,244 531,162 33,595 265,911 14,018,606 12,701,259 Additions during the year 26,319 20,090 112,336 683,067 145,859 16,793 229,095 1,233,559 1,452,873 Disposals during the year – – (75) (120,502) (38,180) – – (158,757) (124,454) Exchange rate adjustments – – – (984) 76 – – (908) 51,228 Transfer from equipment to freehold building – 386,190 – (386,190) – – – – – Work-in-progress capitalised – 41,808 75,954 20,285 – – (265,324) (127,277) – Transfers/adjustments – 9,019 – (66,725) – – 4,090 (53,616) (62,300) As at 31 December 1,592,925 4,258,720 803,690 7,333,195 638,917 50,388 233,772 14,911,607 14,018,606 Accumulated depreciation As at 01 January – 1,190,915 332,167 5,118,808 294,102 10,557 – 6,946,549 6,273,023 Charge for the year – 100,792 31,503 665,175 82,739 9,407 – 889,616 790,745 Disposals during the year – – (25) (119,019) (34,578) – – (153,622) (105,931) Exchange rate adjustments – – – (967) 61 – – (906) 14,598 Transfer from equipment to freehold building – 380,955 – (380,955) – – – – – Transfers/adjustments – (63,420) – (75,344) (1,574) – – (140,338) (25,886) As at 31 December – 1,609,242 363,645 5,207,698 340,750 19,964 – 7,541,299 6,946,549

Net book value as at 31 December 2010 1,592,925 2,649,478 440,045 2,125,497 298,167 30,424 233,772 7,370,308 – Net book value as at 31 December 2009 1,566,606 2,610,698 283,308 2,085,436 237,060 23,038 265,911 – 7,072,057 7,370,308 7,072,057

29.2 (a) 1. Revaluation A revaluation of freehold properties was carried out in 2010 by professionally qualified independent valuers based on open market value of existing use and no losses in value have been identified. However, the revaluation gains were not transferred to the revaluation reserve as at December 2010. It will subsequently be included in the Financial Statements with the permission of the Monetary Board of Central Bank of Sri Lanka.

The surplus realised by the revaluation carried out in 2003, a sum of Rs. 2,057 million has been transferred to the revaluation reserve of the Bank. Further, as there is no reduction in the value of assets a provision for impairment was not required to be made in the Financial Statements of 2010.

2. The detailed classification of the ‘equipment’ is given in Note No. 29.10 (a) & (b).

3. Capital work-in-progress which is accounted for on the basis of value of work certified includes mobilisation of advances and other construction expenses.

4. The amount of commitments for the acquisition of property, plant & equipment is given in the Note No. 43.1 (a).

29.3 TITLE RESTRICTION ON PROPERTY, PLANT & EQUIPMENT There were no restrictions that existed in the title of the property, plant & equipment of the Bank and the Group as at the Balance Sheet date.

29.4 PROPERTY, PLANT & EQUIPMENT PLEDGED AS SECURITY FOR LIABILITIES No freehold property, plant & equipment have been pledged as security for any liability.

29.5 COMPENSATION FROM THIRD PARTIES FOR ITEMS OF PROPERTY, PLANT & EQUIPMENT There were no compensation received/receivable from third parties for items of property, plant & equipment which were impaired, lost or given up.

208 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

29.6 FULLY DEPRECIATED PROPERTY, PLANT & EQUIPMENT The initial cost of fully-depreciated property, plant & equipment at the end of year 2010, which are still in use are as follows: Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Motor vehicles 96,250 44,786 103,055 51,403 Computer equipment 1,458,630 1,008,575 1,465,876 1,014,899 Computer software (Intangible) 1,177,284 1,023,906 1,177,650 1,023,906 Equipment, furniture & fittings 357,531 333,205 461,800 488,900 Leasehold building 56,764 46,471 56,764 46,471 Machines, plant & machinery 427,588 398,513 429,420 703,098 3,574,047 2,855,456 3,694,565 3,328,677

29.7 TEMPORARILY IDLE PROPERTY, PLANT & EQUIPMENT There were no temporarily idle property, plant & equipment as at the Balance Sheet date.

29.8 PROPERTY, PLANT & EQUIPMENT RETIRED FROM ACTIVE USE The Bank held no property, plant & equipment retired from active use and which were not classified as held for sale in accordance with Sri Lanka Accounting Standard No. 38 - ‘Non-Current Assets Held for Sale and Discontinued Operations’ (Revised 2006).

29.9 FREEHOLD PROPERTIES The carrying value of the properties, if they were carried at cost less accumulated depreciation is as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Land 43,221 43,221 43,221 43,371 Building 702,359 702,359 702,359 713,255 Accumulated depreciation on building (361,167) (343,608) (361,167) (349,453) 384,413 401,972 384,413 407,173

As at 31 December 2010 2009 Computer Furniture Office Total Total equipment & fittings equipment Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 29.10 EQUIPMENTS 29.10 (a) Bank Cost Balance as at 01 January 3,552,665 1,521,864 1,345,317 6,419,846 5,572,465 Additions during the year 270,895 251,998 122,500 645,393 962,332 Disposals during the year (77,306) (21,288) (21,867) (120,461) (112,048) Exchange rate adjustments (976) (30) 22 (984) 9,387 Transfer to Bank of Ceylon (UK) Limited (49,208) (10,132) (16,757) (76,097) – Adjustments/transfers (1,035) (279) (369) (1,683) (12,290) Balance as at 31 December 3,695,035 1,742,133 1,428,846 6,866,014 6,419,846 Accumulated Depreciation Balance as at 01 January 2,713,075 884,640 828,603 4,426,318 3,929,548 Charge for the year 380,264 144,225 107,282 631,771 580,088 Disposals during the year (77,151) (25,746) (16,083) (118,980) (92,682) Exchange rate adjustments (903) 36 (101) (968) 9,364 Transfer to Bank of Ceylon (UK) Limited (48,472) (9,392) (16,711) (74,575) – Balance as at 31 December 2,966,813 993,763 902,990 4,863,566 4,426,318 Net book value as at 31 December 2010 728,222 748,370 525,856 2,002,448 – Net book value as at 31 December 2009 839,590 637,224 516,714 – 1,993,528

BANK OF CEYLON ANNUAL REPORT 2010 209 NOTES TO THE FINANCIAL STATEMENTS

As at 31 December 2010 2009 Computer Furniture Office Total Total equipment & fittings equipment Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

29.10 (b) Group Cost Balance as at 01 January 3,687,646 2,136,620 1,379,978 7,204,244 6,415,017 Additions during the year 286,871 268,745 127,451 683,067 989,808 Disposals during the year (77,306) (21,323) (21,873) (120,502) (115,460) Exchange rate adjustments (977) (30) 23 (984) 9,387 Transfer from equipments to freehold building – (386,190) – (386,190) – Work-in-progress capitalised – 20,285 – 20,285 – Adjustments/transfers (45,616) (3,983) (17,126) (66,725) (94,508) Balance as at 31 December 3,850,618 2,014,124 1,468,453 7,333,195 7,204,244 Accumulated Depreciation Balance as at 01 January 2,820,849 1,446,394 851,565 5,118,808 4,715,832 Charge for the year 394,644 159,408 111,123 665,175 621,940 Disposals during the year (77,151) (25,781) (16,087) (119,019) (96,225) Exchange rate adjustments (902) 36 (101) (967) 9,364 Transfer from equipment to freehold building – (380,955) – (380,955) – Adjustments/transfers (49,311) (9,388) (16,645) (75,344) (132,103) Balance as at 31 December 3,088,129 1,189,714 929,855 5,207,698 5,118,808 Net book value as at 31 December 2010 762,489 824,410 538,598 2,125,497 – Net book value as at 31 December 2009 866,797 690,226 528,413 – 2,085,436

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 30. LEASEHOLD LAND Cost Balance as at 01 January 73,658 10,159 139,891 65,541 Additions during the year 16,521 – 16,521 – Disposals during the year – – – – Adjustments/transfers – 63,499 – 74,350 Balance as at 31 December 90,179 73,658 156,412 139,891 Accumulated amortisation Balance as at 01 January 10,368 1,720 32,781 11,924 Amortisation during the year 2,296 1,095 3,653 2,452 Disposals during the year – – – – Adjustments/transfers – 7,553 – 18,405 Balance as at 31 December 12,664 10,368 36,434 32,781 Net book value 77,515 63,290 119,978 107,110

Leasehold land represents the leasehold interest in the lands held for own use. The value of buildings situated in the leasehold land is shown separately under property, plant & equipment. The interest on leasehold land is stated at cost less accumulated amortisation.

210 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

31. INTANGIBLE ASSETS Cost Balance as at 01 January 1,411,831 1,348,110 1,450,670 1,376,535 Additions during the year 107,887 55,548 109,473 56,707 Disposals during the year (1,104) – (1,104) – Adjustments/transfers – 8,173 1,668 17,428 Balance as at 31 December 1,518,614 1,411,831 1,560,707 1,450,670 Accumulated amortisation Balance as at 01 January 1,301,019 1,115,546 1,331,465 1,134,694 Amortisation during the year 54,873 185,473 59,076 189,860 Disposals during the year (1,104) – (1,104) – Adjustments/transfers – – 866 6,911 Balance at as 31 December 1,354,788 1,301,019 1,390,303 1,331,465 Net book value 163,826 110,812 170,404 119,205

Intangible assets represent the value of computer application software systems and subsequent modifications including costs directly attributable in customising for its intended use, and are carried at cost less accumulated amortisation and any impairment losses.

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

32. DEPOSITS Local currency deposits Current account deposits 65,438,920 48,612,023 65,270,554 48,495,108 Savings deposits 135,234,980 110,371,042 135,234,894 110,371,042 Time deposits 155,226,772 120,893,683 157,867,930 123,862,640 Certificates of deposits 28,539 29,499 28,539 29,499 Other deposits 1,886,224 968,732 1,886,367 968,831 357,815,435 280,874,979 360,288,284 283,727,120 Foreign currency deposits Current account deposits 24,086,714 6,416,004 25,200,786 6,416,004 Savings deposits 54,866,267 51,816,724 55,141,632 51,816,724 Time deposits 86,281,233 68,798,888 87,504,950 68,798,888 Other deposits 1,183,048 700,847 1,183,048 700,846 166,417,262 127,732,463 169,030,416 127,732,462 524,232,697 408,607,442 529,318,700 411,459,582

32. (a) CUSTOMER-WISE ANALYSIS OF DEPOSITS Deposits from banks 1,065,756 886,081 1,304,709 886,081 Deposits from finance companies 2,538,817 2,220,754 2,538,817 2,220,754 Deposits from other customers 520,628,124 405,500,607 525,475,174 408,352,747 524,232,697 408,607,442 529,318,700 411,459,582

Note: The maturity analysis of deposits is given in Note 46.

BANK OF CEYLON ANNUAL REPORT 2010 211 NOTES TO THE FINANCIAL STATEMENTS

Bank Group 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

33. BORROWED FUNDS Call money borrowings – 11,984,026 947,581 12,070,026 Term borrowings from banks abroad 43,743,353 2,952,643 43,743,914 2,952,643 Term borrowings from banks & other institutions in Sri Lanka 2,787,625 13,269,914 6,826,345 15,852,660 Refinance borrowings 5,914,175 4,891,794 5,914,175 4,891,794 52,445,153 33,098,377 57,432,015 35,767,123 33. (a) MATURITY OF BORROWINGS Not later than 1 year 41,852,436 28,738,695 45,880,019 31,227,321 Later than 1 year and not later than 5 years 10,189,076 1,924,890 11,148,355 2,105,009 Later than 5 years 403,641 2,434,792 403,641 2,434,793 52,445,153 33,098,377 57,432,015 35,767,123

34. SECURITIES SOLD UNDER RE-PURCHASE AGREEMENTS Securities sold under re-purchase agreements 53,522,487 34,203,701 52,968,787 32,968,041 53,522,487 34,203,701 52,968,787 32,968,041

The securities sold under repurchase agreements are debt securities issued by the Bank for short term funding purposes and mature within a period of less than twelve months. The interest rate for such securities varied from 6.0% to 11.0% during the year. (2009 - 6.0% to 20.0%).

35. INSURANCE PROVISION 35.1 INSURANCE PROVISION - LIFE The insurance provision - life balance represents the life fund of MBSL Insurance Company Limited which carries out life and non life insurance business.

This balance indicates the liability on account of policyholders which has been actuarially valued and claims/benefits due to life policyholders, which remain unclaimed to the Balance Sheet date.

Group As at 31 December 2010 2009 Rs. ’000 Rs. ’000 Insurance provision - life 66,365 41,336 Unclaimed benefits 572 – Total 66,937 41,336

Long term insurance contract liabilities included in the Life Insurance Fund, result primarily from traditional non participating life insurance products. Short duration contract liabilities are primarily accident and health insurance products.

The insurance provision has been established based upon the following: (a) Interest rates that vary by product and as required by regulations issued by the Insurance Board of Sri Lanka; (b) Mortality rates based on published mortality tables adjusted for actual experience as required by regulations issued by the Insurance Board of Sri Lanka; and (c) Surrender rates based upon actual experience by geographic area and modified to allow for variations in policy form.

The valuation of the insurance provision - life insurance business as at 31 December 2010 was made by Mr. R Kahakachchi of Actuarial & Management Consultants (Private) Limited for and on behalf of MBSL Insurance Company Limited. In accordance with the consultant actuary’s report, the reserve for the year amounts to of Rs. 66,364,916/- (2009 - Rs. 41,336,000/-) in the opinion of consultant actuary the reserve is adequate to cover the liabilities pertaining to the life insurance businesses.

212 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Further the actuary has estimated that the solvency margin required under the regulation of Insurance Industry Act No. 43 of 2000 as Rs. 3,200,000/- (2009 - Rs. 2,032,000/-). This solvency margin is maintained in the long term insurance fund.

2010 2009 Rs. ’000 Rs. ’000

35.1 (a) Movement in Insurance Provision Fund Balance as at 01 January 41,336 28,842 Increase in life fund 25,601 12,494 Balance as at 31 December 66,937 41,336

35.2 INSURANCE PROVISION - GENERAL INSURANCE The general insurance provision represents non life insurance carried out by MBSL Insurance Company Limited.

The reserve for net unearned premium indicates the amount of premium (net of reinsurance) which is attributable to policies written as at 31 December 2010, but covering period after 31 December 2010.

The reserve for net deferred acquisition cost refers to the commission adjustment (net of reinsurance) linked to the above reserve.

The reserve for gross outstanding claims refers to amount of claims which remain unclaimed as at 31 December 2010. This reserve includes a reserve for claims incurred but not reported (IBNR).

2010 2009 Rs. ’000 Rs. ’000 Reserve for net unearned premiums [Note 35.2 (a)] 188,504 157,059 Reserve for net deferred acquisition cost [Note 35.2 (b)] (11,717) (11,080) Reserve for gross outstanding claims [Note 35.2 (c )] 75,987 35,590 Balance as at 31 December 252,774 181,569

35.2 (a) Movement in the reserve for net unearned premiums Balance as at 01 January 157,059 82,906 Increase/(decrease) during the year 31,445 74,153 Balance as at 31 December 188,504 157,059

35.2 (b) Movement in the reserve for net deferred acquisition cost Balance as at 01 January (11,080) (1,258) Increase/(decrease) during the year (637) (9,822) Balance as at 31 December (11,717) (11,080)

BANK OF CEYLON ANNUAL REPORT 2010 213 NOTES TO THE FINANCIAL STATEMENTS

2010 2009 Rs. ’000 Rs. ’000 35.2 (c) Movement in the reserve for gross outstanding claims Balance as at 01 January 30,479 17,232 Increase/(decrease) during the year 34,464 13,247 Balance as at 31 December 64,943 30,479 IBNR and IBNER claims reserve Balance as at 01 January 5,111 9,720 Increase/(decrease) during the year 5,933 (4,609) Balance as at 31 December 11,044 5,111 Total gross outstanding claims 75,987 35,590

Directors are of the opinion that the total of future claims and related expenses will not exceed the unearned premium and premium related to unexpired risks. IBNR/IBNER claims reserve is determined based on information currently available. However, it is inherent to the nature of the business that the ultimate liability may vary as a result of subsequent developments.

The incurred but not reported claim reserve and Incurred But Not Enough Reported (IBNER) claim reserve have been actuarially computed by Mr. N K Parikh of Messrs K A Pandith, Consultants & Actuaries. The valuation is based on internationally accepted actuarial methods, and is performed on an annual basis.

36. DEFERRED TAX Bank Group As at 31st December 2010 2009 2010 2009 Temporary Tax Temporary Tax Temporary Tax Temporary Tax difference effect difference effect difference effect difference effect Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 36 (a) SUMMARY OF NET DEFERRED TAX LIABILITY Balance as at 01 January 1,169,866 409,453 1,447,232 506,531 1,257,519 440,132 1,616,278 565,697 Deferred tax originated/(reversed) during the year 137,525 48,134 (277,366) (97,078) 141,117 49,393 (358,759) (125,565) Balance as at 31 December 1,307,391 457,587 1,169,866 409,453 1,398,636 489,525 1,257,519 440,132

Bank Group As at 31st December Balance Sheet Income Statement Balance Sheet Income Statement 2010 2009 2010 2009 2010 2009 2010 2009 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 36 (b) RECONCILIATION OF NET DEFERRED TAX LIABILITY Deferred tax liabilities on: Accelerated depreciation for tax purposes: Own assets 329,075 328,278 (797) 6,174 421,582 412,070 (9,512) 915 Leased assets 247,384 175,280 (72,103) 64,531 397,830 355,904 (41,926) 38,878 576,459 503,558 (72,900) 70,705 819,412 767,974 (51,438) 39,793 Deferred tax assets on: Defined benefit plans 118,872 94,105 24,766 26,373 150,171 123,567 26,604 27,633 Unused tax losses – – – – 179,716 204,275 (24,557) 58,339 118,872 94,105 24,766 26,373 329,887 327,842 2,047 85,972 Deferred income tax on income/expense (48,134) 97,078 (49,391) 125,765 Net deferred tax liability 457,587 409,453 489,525 440,132

214 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

37. OTHER LIABILITIES Accrued interest payable 10,630,898 11,662,658 11,037,435 12,094,495 Payable to employees and suppliers 1,558,308 2,052,534 1,558,308 2,052,534 Cheques sent on clearing 769,471 1,000,299 769,471 1,000,299 Lease creditors - Within 12 months 16,805 12,432 16,805 12,432 - Later than 12 months 25,857 21,387 25,857 21,387 Provision for gratuity (Note 37.1) 346,886 272,620 484,730 379,910 Other Payable 1,910,167 3,767,210 2,525,143 4,066,534 15,258,392 18,789,140 16,417,749 19,627,591

37.1 PROVISION FOR GRATUITY Balance as at 01 January 272,620 202,392 379,910 295,152 Provision made during the year 80,023 70,228 112,983 88,868 Payment made during the year (5,757) – (8,163) (4,110) Adjustment/transfers – – – – Balance as at 31 December 346,886 272,620 484,730 379,910

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38. DEBENTURES Listed debentures Unsecured, subordinated, redeemable debentures of Rs. 100/- each (public issue) 9,367,355 4,318,507 9,356,272 4,313,120

Unlisted debentures Unsecured, redeemable debentures of Rs. 100/- each (private placement) 25,378,813 8,700,000 25,918,113 9,330,000 Unsecured, redeemable debentures of Rs. 100/- each (public issue) – – – 14,160 Unsecured, subordinated redeemable debentures of Rs. 100/- each (private placement) 1,550,000 2,550,000 1,550,000 2,550,000 Secured, redeemable debentures of Rs. 100/- each (private placement) – – 200,000 430,000 Unsecured, subordinated, redeemable debentures of US$ 1,000 each (private placement) 2,410,180 2,476,106 2,410,180 2,476,106 38,706,348 18,044,613 39,434,565 19,113,386

38.1 THE MOVEMENT IN DEBENTURES ISSUED WAS AS FOLLOWS: Movement in debentures Balance as at 01 January 18,044,613 17,988,604 19,113,386 19,146,514 Issued during the year 21,678,813 – 22,083,113 330,000 Redemptions (1,000,000) – (1,744,160) (418,750) Interest capitalised* 48,848 41,419 48,848 41,419 Inter-company adjustment – – (696) (387) Exchange rate adjustment (65,926) 14,590 (65,926) 14,590 Balance as at 31 December 38,706,348 18,044,613 39,434,565 19,113,386

* Interest payable on zero coupon debentures has been capitalised to the value of debentures.

BANK OF CEYLON ANNUAL REPORT 2010 215 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38.2 CUSTOMER-WISE ANALYSIS OF DEBENTURES Debentures issued to third parties Fixed interest rate Unsecured, subordinated, redeemable debentures 1,758,313 641,240 1,758,313 641,223 Unsecured, redeemable debentures – – 180,000 – Floating interest rate Unsecured, subordinated, redeemable debentures 11,558,139 8,698,003 11,558,139 8,698,003 Unsecured, redeemable debentures – – 336,800 344,160 Secured, redeemable debentures – – 200,000 430,000 13,316,452 9,339,243 14,033,252 10,113,386

Debentures issued to related entities of the Bank/Group Fixed interest rate Unsecured, subordinated, redeemable debentures 11,083 5,370 – – Unsecured, redeemable debentures 4,428,813 – 4,451,313 – Floating interest rate Unsecured, redeemable debentures 20,950,000 8,700,000 20,950,000 9,000,000 25,389,896 8,705,370 25,401,313 9,000,000 Total debentures issued 38,706,348 18,044,613 39,434,565 19,113,386

38.3 DEBENTURES - SUMMARY Subordinated debentures 13,327,535 9,344,613 13,316,452 9,339,226 Other debentures 25,378,813 8,700,000 26,118,113 9,774,160 Total debentures 38,706,348 18,044,613 39,434,565 19,113,386

216 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Note Interest payable Issue date Maturity Coupon rate Effective Amount as at 31 December frequency date annual rate Bank Group 2010 2009 2010 2009 2010 2009 2010 2009 % % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38.4 TYPE OF DEBENTURES A - Sri Lanka rupee debentures Fixed interest rate Unsecured, subordinated, redeemable debentures (a) Annually 24.11.2008 24.11.2013 19.00 19.00 19.00 19.00 345,190 345,190 339,107 339,803 Unsecured, subordinated, redeemable debentures (a) At maturity 24.11.2008 24.11.2013 – – 17.61 17.61 322,775 273,927 322,775 273,927 Unsecured, subordinated, redeemable debentures (b) Annually 28.06.2010 28.06.2015 11.50 – 11.50 – 1,074,670 – 1,069,670 – Unsecured, redeemable debentures Annually 01.07.2010 01.07.2015 13.20 – 13.20 – 1,000,000 – 1,000,000 – Unsecured, redeemable debentures Annually 14.07.2010 14.07.2015 13.20 – 13.20 – 2,000,000 – 2,000,000 – Unsecured, redeemable debentures Annually 17.09.2010 17.09.2015 11.00 – 11.00 – 1,428,813 – 1,428,813 – Unsecured, redeemable debentures Semi-annually 31.07.2010 31.07.2013 13.00 – 13.85 – – – 80,000 – Unsecured, redeemable debentures Semi-annually 31.08.2010 31.08.2013 13.00 – 13.85 – – – 100,000 – Unsecured, redeemable debentures At maturity 05.05.2010 05.06.2013 15.25 – 15.25 – – – 22,500 – 6,171,448 619,117 6,362,865 613,730

Floating interest rate Unsecured, subordinated, redeemable debentures (a)/(c) Semi-annually 24.11.2008 24.11.2013 8.95 10.00 10.46 17.04 3,699,390 3,699,390 3,699,390 3,699,390 [6 months TB rate (Gross) plus 75 basis points] Unsecured, subordinated, redeemable debentures (c) Semi-annually 31.12.2003 31.12.2011 10.43 10.15 10.56 16.69 250,000 250,000 250,000 250,000 [6 months TB rate (Gross) plus 150 basis points] Unsecured, subordinated, redeemable debentures (b)/(c) Semi-annually 28.06.2010 28.06.2015 8.95 – 11.54 – 3,925,330 – 3,925,330 – [6 months TB rate (Gross) plus 75 basis points] Unsecured, subordinated, redeemable debentures (d) Semi-annually 03.11.2005 03.11.2010 – 11.68 – 20.24 – 1,000,000 – 1,000,000 [12 months TB rate (Gross) plus 70 basis points] Unsecured, subordinated, redeemable debentures (d) Semi-annually 27.10.2006 27.10.2011 8.94 12.11 11.88 20.16 1,000,000 1,000,000 1,000,000 1,000,000 [12 months TB rate (Gross) plus 75 basis points] Unsecured, subordinated, redeemable debentures (d) Annually 15.08.2008 15.08.2013 10.49 14.31 12.87 18.14 300,000 300,000 300,000 300,000 [12 months TB rate (Gross) plus 100 basis points] Unsecured, redeemable debentures (d) Annually 17.11.2006 17.11.2011 8.19 11.36 10.98 19.41 1,200,000 1,200,000 1,200,000 1,200,000 [12 months TB rate (Gross)] Unsecured, redeemable debentures (d) Annually 10.01.2007 10.01.2012 10.39 20.27 10.39 20.40 1,500,000 1,500,000 1,500,000 1,500,000 [12 months TB rate (Gross)] Unsecured, redeemable debentures (d) Annually 12.03.2007 12.03.2012 10.52 19.66 12.30 20.58 1,000,000 1,000,000 1,000,000 1,000,000 [12 months TB rate (Gross)] Unsecured, redeemable debentures (d) Annually 03.10.2007 03.10.2012 8.39 12.82 11.73 19.51 1,000,000 1,000,000 1,000,000 1,000,000 [12 months TB rate (Gross) plus 50 basis points]

BANK OF CEYLON ANNUAL REPORT 2010 217 NOTES TO THE FINANCIAL STATEMENTS

Note Interest payable Issue date Maturity Coupon rate Effective Amount as at 31 December frequency date annual rate Bank Group 2010 2009 2010 2009 2010 2009 2010 2009 % % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.02 19.99 1,500,000 1,500,000 1,500,000 1,500,000 [12 months TB rate (Gross) plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.01 19.99 500,000 500,000 500,000 500,000 [12 months TB rate (Gross) plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 500,000 500,000 500,000 500,000 [12 months TB rate (Gross) plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 1,500,000 1,500,000 1,500,000 1,500,000 [12 months TB rate (Gross) plus 50 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 5,200,000 – 5,200,000 – [12 months TB rate (Gross) plus 150 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 1,750,000 – 1,750,000 – [12 months TB rate (Gross) plus 150 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 5,300,000 – 5,300,000 – [12 months TB rate (Gross) plus 150 basis points] Unsecured, redeemable debentures (c) Semi-annually 05.12.2009 05.12.2011 10.39 12.29 12.53 21.55 – – 330,000 330,000 [6 months TB rate (Gross) plus 200 basis points] Unsecured, redeemable debentures (d) Semi-annually 31.03.2007 31.03.2010 – 17.00 – 16.31 – – – 14,160 [12 months TB rate (Gross) plus 300 basis points] Unsecured, redeemable debentures Semi-annually 05.10.2007 05.10.2010 – 17.85 – 17.36 – – – 300,000 [36 months T Bond rate plus 110 basis points] Unsecured, redeemable debentures (d) Semi-annually 31.03.2010 31.03.2013 11.64 – 12.32 – – – 6,800 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Annually 10.01.2008 10.01.2010 – 22.22 – 22.23 – – – 430,000 [12 months TB rate (Gross) plus 100 basis points]

218 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Note Interest payable Issue date Maturity Coupon rate Effective Amount as at 31 December frequency date annual rate Bank Group 2010 2009 2010 2009 2010 2009 2010 2009 % % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Secured, redeemable debentures (d) Annually 10.01.2010 10.01.2011 11.20 – 11.20 – – – 50,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.07.2011 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.01.2012 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.07.2012 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.01.2013 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.07.2013 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.01.2014 11.20 – 11.83 – – – 25,000 – [12 months TB rate (Gross) plus 150 basis points] 30,124,720 14,949,390 30,661,520 16,023,550

B - United States dollar debentures Fixed interest rate Unsecured, subordinated, redeemable debentures Semi-annually 10.10.2008 10.10.2013 5.50 5.50 5.50 5.50 26,761 27,493 26,761 27,493 Floating interest rate Unsecured, subordinated, redeemable debentures (e) Semi-annually 10.10.2008 10.10.2013 3.46 4.69 3.49 4.74 2,383,419 2,448,613 2,383,419 2,448,613 (6 months LIBOR Plus 300 basis points) 2,410,180 2,476,106 2,410,180 2,476,106

Total value of debentures 38,706,348 18,044,613 39,434,565 19,113,386

Notes

(a) Debentures that are listed in the Colombo Stock Exchange which were issued on 24 November 2008. Some of them have been traded in the Colombo Stock Exchange during the year ended 31 December 2010. (b) Debentures that are listed in the Colombo Stock Exchange which were issued on 28 June 2010. (c) Weighted average 6 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date. (d) Weighted average 12 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date. (e) 6 months London Inter Bank Offered Rate (LIBOR) for US Dollars plus 3% per annum.

BANK OF CEYLON ANNUAL REPORT 2010 219 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

39. STATED CAPITAL Authorised 50,000,000 ordinary shares 50,000,000 50,000,000 50,000,000 50,000,000 Issued and fully paid Balance as at 01 January 5,000,000 ordinary shares 5,000,000 5,000,000 5,000,000 5,000,000 Balance as at 31 December 5,000,000 ordinary shares 5,000,000 5,000,000 5,000,000 5,000,000

40. PERMANENT RESERVE FUND Balance as at 01 January 2,650,000 2,585,000 2,650,000 2,585,000 Transfer during the year 127,500 65,000 127,500 65,000 Balance as at 31 December 2,777,500 2,650,000 2,777,500 2,650,000

The permanent reserve fund is maintained as required by the Bank of Ceylon Ordinance No. 53 of 1938 (Chapter 397), whereby the Bank must, out of net profit after taxation but before any dividend is declared, transfer to a reserve, a sum equivalent to not less than 20% of such profit until the reserve is equivalent to 50% of the issued and paid up capital and thereafter, an appropriate amount determined at 2% per annum under the Banking Act No. 30 of 1988 and amendments thereto until the reserve is equal to the paid up capital.

In order to meet the requirement, an amount of Rs. 127 million was transferred to the reserve during the year (2009 - Rs. 65 million).

The balance in the permanent reserve fund will be used only for the purposes specified in Section 20 (2) of the Banking Act No. 30 of 1988 and amendments thereto.

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41. RESERVES Capital reserves Revaluation reserve (Note 41.1) 125,299 125,299 178,692 178,692 125,299 125,299 178,692 178,692

Revenue reserves Free reserve (Note 41.2) 169,067 169,067 366,644 366,644 Net exchange translation adjustment (Note 41.3) 570,545 606,163 565,745 606,163 Primary dealer special risk reserve (Note 41.4) 776,683 528,470 776,683 528,470 Other reserves – – 137,793 137,793 1,516,295 1,303,700 1,846,865 1,639,070 1,641,594 1,428,999 2,025,557 1,817,762

41.1 REVALUATION RESERVE Balance as at 01 January 125,299 126,961 178,692 180,354 Realised surpluses on disposal of property – (1,662) – (1,662) Balance as at 31 December 125,299 125,299 178,692 178,692

The revaluation reserve represents the surpluses arising on the revaluation of freehold properties which are still in use for banking operations. According to the regulatory directives, Bank can account for the revaluation surplus every seven years. Revaluation reserve is generally used for the issue of bonus shares or for capital reduction programme.

220 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41.2 FREE RESERVE Balance as at 01 January 169,067 169,067 366,644 366,644 Balance as at 31 December 169,067 169,067 366,644 366,644

Free reserve has been created for unforeseeable risk and future losses.

41.3 NET EXCHANGE TRANSLATION ADJUSTMENT Balance as at 01 January 606,163 545,766 606,163 545,766 Currency translation difference during the year 3,948 60,397 (852) 60,397 Transfer to Income Statement due to conversion of London branch into a Subsidiary during the year (39,566) – (39,566) – Balance as at 31 December 570,545 606,163 565,745 606,163

This represents the exchange difference arising from translating investments made in the capital of foreign branches, and also exchange differences arising from translation of the results of overseas branches for this year from the average rate to the exchange rate ruling at the year end. If and when the investments in foreign branches are disposed, the exchange gain or loss will be recognised in the Income Statement.

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41.4 PRIMARY DEALER SPECIAL RISK RESERVE Balance as at 01 January 528,470 340,899 528,470 340,899 Amount transferred during the year 248,213 187,571 248,213 187,571 Balance as at 31 December 776,683 528,470 776,683 528,470

According to a direction issued by the Central Bank of Sri Lanka, primary dealers are required to transfer 25% of their profit after tax annually to a special risk reserve in order to strengthen capital base for further development of the Government securities market.

42. COMMITMENTS AND CONTINGENCIES 42.1 CONTINGENCIES In the normal course of business, the Bank undertakes commitments and incurs contingent liabilities with legal recourse to its customers to accommodate the financial and investment needs of clients, to conduct trading activities, and to manage its own exposure to risk. These financing instruments generate interest or fees and carries elements of credit risk in excess of those amounts recognised as assets and liabilities in the Balance Sheet. However, no material losses are anticipated as a result of these transactions.

These commitments are quantified below:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Acceptances and documentary credits 124,677,407 174,571,889 126,048,237 174,571,889 Bills for collection 3,988,739 3,114,649 4,048,990 3,114,649 Forward exchange contracts 46,722,050 27,928,577 46,722,050 27,928,577 Guarantees 47,666,313 40,427,298 47,876,977 40,498,766 Other commitments 110,421 202,235 245,861 202,235 223,164,930 246,244,648 224,942,115 246,316,116

42.2 The unutilised value of irrevocable commitments which cannot be withdrawn at the discretion of the Bank, without risk of incurring significant penalties or expenses approximates to Rs. 23,305 million as at the Balance Sheet date (2009 - Rs. 15,674 million).

BANK OF CEYLON ANNUAL REPORT 2010 221 NOTES TO THE FINANCIAL STATEMENTS

43. CONTINGENT LIABILITIES AND COMMITMENTS 43.1 (a) CAPITAL COMMITMENTS Capital expenditure approved by the Directors for which no provision has been made in the Financial Statements, amounts to:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Approved and contracted for 1,052,586 920,972 1,173,586 920,972 Approved and not contracted for 286,433 332,740 286,433 332,740 1,339,019 1,253,712 1,460,019 1,253,712

43.1 (b) OPERATING LEASE COMMITMENTS Future minimum lease payments under non-cancellable operating leases where the Bank is the lessee are as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Not later than 1 year 637,889 351,600 637,889 351,600 Later than 1 year and not later than 5 years 842,246 130,597 842,246 130,597 Later than 5 years 10,834 32,500 10,834 32,500 1,490,969 514,697 1,490,969 514,697

43.1 (c) FINANCING LEASE COMMITMENTS Future minimum lease payments under non-cancellable financing leases where the Bank is the lessee are as follows:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Not later than 1 year 16,805 13,930 16,805 13,930 Later than 1 year and not later than 5 years 25,857 22,635 25,857 22,635 42,662 36,565 42,662 36,565

43.1 (d) LITIGATION Usually, money transactions, specially lending and employing persons as a workforce encounter disputes. It is natural that some of the said disputes end in judicial process for determination. Bank of Ceylon, being a major player in banking transactions, thus in lending and being an employer of a large number of staff, attracts the judicial process - litigation as a mode to sort out the issues and disputes.

Bank of Ceylon, due to its efficient and effective dispute resolution, does not carry a bountiful of litigation in its bag. For its enormity of money transaction, which reaches more than 100 trillion a year and for a workforce of over 8,000, the cases by and against the Bank are less in number comparatively in the industry.

Out of these cases, most are in regard to recovery of debts from the defaulting customers, averagely 1,000 cases a year involving a sum of Rs. 500 - 750 million in debt.

The debt recovery cases filed by delinquent customers against the Bank to prevent it from recovering the debts by ’short process‘ known as ’parate proceedings‘. These cases are known as ’injunction cases‘ against the Bank and are eventually held in favour of the Bank as they are filed as dilatic tactics - just to delay the process. Of course, a few are held against the Bank which are financially, just a whisper in the huge economy of the Bank.

All the outstanding cases, disputes and lawsuits have been perused by us and we are of the opinion that they will not cause any material impact on the financial stability of the Bank and therefore no related provisions are made.

222 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

44. ASSETS PLEDGED AS SECURITY The securities sold under repurchase agreements and debentures are debt securities issued by the Bank and the Group and details of assets pledged by the Bank and the Group, to secure those liabilities are given below:

Bank Group As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Securities sold under repurchase agreements 53,522,487 34,203,701 52,968,787 32,968,041 Debentures – – 30,772 16,782 Trust certificates – – 237,135 339,079 Refinance purposes – – 383,329 – 53,522,487 34,203,701 53,620,023 33,323,902

Secured by: Treasury bills held by the Bank 7,055,313 3,510,263 7,055,313 3,510,263 Treasury bonds held by the Bank 51,302,618 30,693,438 51,302,618 30,693,438 Index linked bonds – 4,298,045 – 4,298,045 Lease/hire purchase rentals receivable – – 651,236 355,861 58,357,931 38,501,746 59,009,167 38,857,607

45. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE No material events have occurred since the Balance Sheet date which would require adjustments to, or disclosure in the Financial Statements.

46. MATURITIES OF ASSETS AND LIABILITIES 46.1 BANK The analysis of total assets and liabilities of the Bank into relevant maturity groupings based on the remaining period as at 31 December into the contractual maturity date is given in the table below:

Up to 3 3-12 1-3 3-5 Over 5 Total months months years years years Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Interest earning assets Treasury bills and other short term bills 22,742,419 22,636,594 – – – 45,379,013 Securities purchased under re-sale agreement 40,840,091 – – – – 40,840,091 Placements with and loans to other banks 39,346,316 3,333,482 – – – 42,679,798 Treasury bonds maturing after one year – – 28,349,481 18,953,025 3,994,238 51,296,744 Investment securities 3,611,800 1,115,050 69,839,005 233,024 – 74,798,879 Bills of exchange 15,307,197 88,706 – – – 15,395,903 Loans and advances 86,397,669 133,130,827 41,153,096 35,893,273 56,523,051 353,097,916 Lease rentals receivable 767,581 1,070,798 1,373,207 1,013,741 2,438 4,227,765 GOSL - restructuring bonds – – – – 8,547,000 8,547,000 209,013,073 161,375,457 140,714,789 56,093,063 69,066,727 636,263,109

BANK OF CEYLON ANNUAL REPORT 2010 223 NOTES TO THE FINANCIAL STATEMENTS

Up to 3 3-12 1-3 3-5 Over 5 Total months months years years years Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Non interest earning assets Cash and balances with other banks 14,103,803 – – – – 14,103,803 Balances with Central Banks 17,587,263 7,629,341 474,967 171,972 30,923 25,894,466 Dealing securities 3,232,348 – – – – 3,232,348 Accrued interest and others 10,238,043 – – – – 10,238,043 Investment securities – – – – 5,844,617 5,844,617 Investments in related companies – – – – 6,123,752 6,123,752 Property, plant & equipment – – – – 5,544,589 5,544,589 Leasehold land – – – – 77,515 77,515 Intangible assets – – – – 163,826 163,826 Other assets 6,986,759 397,172 – – 84,294 7,468,225 52,148,216 8,026,513 474,967 171,972 17,869,516 78,691,184 Total assets 261,161,289 169,401,970 141,189,756 56,265,035 86,936,243 714,954,293

Interest bearing liabilities Deposits 270,034,109 150,814,505 9,710,389 3,515,853 632,207 434,707,063 Borrowings 15,046,545 26,805,891 3,521,207 6,667,869 403,641 52,445,153 Securities sold under re-purchase agreements 41,846,407 11,676,080 – – – 53,522,487 Debentures – 2,450,000 14,577,535 21,678,813 – 38,706,348 326,927,061 191,746,476 27,809,131 31,862,535 1,035,848 579,381,051

Non interest bearing liabilities Deposits 89,525,634 – – – – 89,525,634 Accrued interest payable 12,189,206 – – – – 12,189,206 Deferred tax liabilities – 160,156 208,202 89,229 – 457,587 Tax payable – 2,199,758 – – – 2,199,758 Other liabilities 2,683,111 10,420 28,769 – 346,886 3,069,186 Shareholders’ funds – – – – 28,131,871 28,131,871 104,397,951 2,370,334 236,971 89,229 28,478,757 135,573,242 Total liabilities 431,325,012 194,116,810 28,046,102 31,951,764 29,514,605 714,954,293

Net liquidity gap - 2010 (170,163,723) (24,714,840) 113,143,654 24,313,271 57,421,638 – Net liquidity gap - 2009 (136,019,523) (21,492,806) 87,298,502 26,216,211 43,997,616 –

224 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

46. MATURITIES OF ASSETS AND LIABILITIES (CONTD.) 46.2 GROUP The analysis of total assets and liabilities of the Group into relevant maturity groupings based on the remaining period as at 31 December into the contractual maturity date is given in the table below:

Up to 3 3-12 1-3 3-5 Over 5 Total months months years years years Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest earning assets Treasury bills and other short-term bills 22,450,692 23,898,004 – – – 46,348,696 Securities purchased under re-sale agreements 40,840,091 – – – – 40,840,091 Placements with and loans to other banks 44,439,904 3,333,482 – – – 47,773,386 Treasury bonds maturing after one year – – 28,801,941 18,953,025 3,994,237 51,749,203 Investment securities 3,671,800 1,115,030 69,839,083 243,024 151,638 75,020,575 Bills of exchange 15,920,399 95,129 – – – 16,015,528 Loans and advances 87,012,686 133,378,368 41,377,498 36,961,933 56,534,910 355,265,395 Lease rentals receivable 1,426,198 3,020,338 3,551,429 3,190,726 118,183 11,306,874 GOSL - restructuring bonds – – – – 8,547,000 8,547,000 215,761,770 164,840,351 143,569,951 59,348,708 69,345,968 652,866,748

Non interest earning assets Cash and balances with other banks 13,754,857 – – – – 13,754,857 Balances with Central Banks 17,587,263 7,629,341 474,967 171,972 30,923 25,894,466 Dealing securities 3,794,537 10,906 – – – 3,805,443 Accrued interest and others 10,578,148 42,798 – – – 10,620,946 Investment securities – 160,965 – 12,739 5,924,088 6,097,792 Investment properties – 105,745 – 281,122 – 386,867 Investment in related companies 1,284,563 – – – – 1,284,563 Property, plant & equipment – – – 44,047 7,326,261 7,370,308 Leasehold land – – – – 119,978 119,978 Intangible assets – – – 1,360 169,044 170,404 Other assets 6,891,244 668,444 33,957 23,722 75,337 7,692,704 53,890,612 8,618,199 508,924 534,962 13,645,631 77,198,328 Total assets 269,652,382 173,458,550 144,078,875 59,883,670 82,991,599 730,065,076

Interest bearing liabilities Deposits 270,254,128 153,101,977 11,138,650 3,720,398 632,207 438,847,360 Borrowings 17,121,881 28,758,138 3,871,777 7,276,578 403,641 57,432,015 Securities sold under re-purchase agreements 41,292,707 11,676,080 – – – 52,968,787 Debentures 50,000 2,805,000 14,744,852 21,834,713 – 39,434,565 328,718,716 196,341,195 29,755,279 32,831,689 1,035,848 588,682,727

Non interest bearing liabilities Deposits 90,471,340 – – – – 90,471,340 Insurance provision - life – – – – 66,937 66,937 Insurance provision - non life – – 252,774 – – 252,774 Accrued interest and expenditure 12,590,505 – – – 5,238 12,595,743 Deferred tax liability – 160,155 208,202 89,229 31,939 489,525 Tax payable – 2,422,527 – – – 2,422,527 Other liabilities 2,684,352 564,738 95,462 – 477,454 3,822,006 Shareholders’ funds – – – – 31,261,497 31,261,497 105,746,197 3,147,420 556,438 89,229 31,843,065 141,382,349 Total liabilities 434,464,913 199,488,615 30,311,717 32,920,918 32,878,913 730,065,076

Net liquidity gap - 2010 (164,812,531) (26,030,065) 113,767,158 26,962,752 50,112,686 – Net liquidity gap - 2009 (134,078,210) (22,383,849) 88,841,066 28,147,955 39,473,038 –

BANK OF CEYLON ANNUAL REPORT 2010 225 NOTES TO THE FINANCIAL STATEMENTS

46. MATURITIES OF ASSETS AND LIABILITIES (CONTD.) Notes (1) Demand and savings deposits have been categorised as up to 3 months maturity group. However, a major part of these deposits represent a core retail deposit base with longer term maturity.

(2) Bills of exchange, loans and advances and lease rentals receivables are shown net of interest in suspense and provision for bad and doubtful debts.

(3) The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for banks ever to be completely matched since business transacted is often of uncertain terms and of different types. An unmatched position potentially enhances profitability, but also increases the risk of losses.

(4) The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure to changes in interest rates and exchange rates.

(5) Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment because the Bank does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded.

47. RELATED PARTY DISCLOSURES In 2010, the Group entered into transactions with its significant investor, Subsidiaries and Associate companies and post-employment benefit plans for the Bank’s employees, Key Management Personnel (KMP), Close Family Members (CFMs) of KMP in which such parties have control, joint control, significant influence or for which significant voting power is held by such parties. The transactions that have been carried out during the year 2010 include lending activities, acceptance and placements, Off-Balance Sheet transactions and provision of other banking and financial services. The interests, commissions and other fees on their transactions are determined on an arm’s length basis as per Sri Lanka Accounting Standard No. 30 (Revised 2005) on ‘Related Party Disclosures’.

47.1 PARENT AND THE ULTIMATE CONTROLLING PARTY The Bank does not have an identifiable parent of its own.

47.2 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (KMP) According to Sri Lanka Accounting Standard No. 30 (Revised 2005) on ‘Related Party Disclosures’, the Key Management Personnel includes those who are having authority and responsibility for planning, directing and controlling the activities of the Bank and its Subsidiaries and Associates. The Board of Directors, members of the Corporate Management of the Bank, Executive Management and other key employees who are holding directorships in Subsidiaries and Associate companies and their Close Family Members (CFMs) have been classified as Key Management Personnel of the Bank.

Close Family Members are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

226 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Bank Group For the year ended 31 December 2010 2009 2010 2009 (Restated) (Restated) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 47.2.1 Compensation to Key Management Personnel Short-term employment benefits 203,824 154,636 206,657 156,472 Post-employment benefits 62,539 51,618 62,539 51,618 Post-employment benefits paid to past Directors – – – – Total 266,363 206,254 269,196 208,090

47.2.2 Transactions, arrangements and agreements involving Key Management Personnel (KMP), their Close Family Members (CFMs) and entities that are controlled, significantly influenced by the KMP or their CFMs. Bank Group For the year ended 31 December 2010 2009 2010 2009 (Restated) (Restated) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.2.2 (a) Income Statement Interest earned 12,969 17,339 12,969 17,339 Interest paid 4,219 5,266 4,219 5,266 Payments made as shown in Note 47.2.1 266,363 206,254 269,196 208,090

Bank Group As at 31 December 2010 2009 2010 2009 (Restated) (Restated) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.2.2 (b) Balance Sheet Assets Loans and advances 258,974 202,973 258,974 202,973 Credit cards 5,341 3,851 5,341 3,851 264,315 206,824 264,315 206,824

Liabilities Deposits 123,068 72,855 123,068 72,855 Debentures 40,650 41,030 40,650 41,030 163,718 113,885 163,718 113,885

47.2.2 (c) Off-Balance Sheet items Commitments and contingencies Undrawn facilities 164,237 139,527 164,237 139,527 164,237 139,527 164,237 139,527

Net accommodation 387,902 305,321

Net accommodation as a % of the Bank’s regulatory capital 1.1% 1.0%

BANK OF CEYLON ANNUAL REPORT 2010 227 NOTES TO THE FINANCIAL STATEMENTS

47.3 TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATE COMPANIES 47.3.1 Transactions with Subsidiaries and Associate Companies of the Bank The Property Development PLC is a Subsidiary of the Bank which owns, maintains and manages the Bank of Ceylon, Head Office building at No. 4, Bank of Ceylon Mawatha, Colombo 01.

The BoC Property Development & Management (Private) Limited, a fully-owned Subsidiary of the Bank, maintains and manages two buildings in Colombo 03 and Kandy, where a branch of the Bank and also a principal place of business of another Subsidiary are located.

Merchant Bank of Sri Lanka PLC, a Subsidiary of the Bank provides certain management services.

The Ceybank Holiday Homes (Private) Limited, an indirect fully-owned Subsidiary of the Bank, manages the holiday bungalows for the welfare of the Bank staff.

A Subsidiary of the Bank, Property Development PLC has acquired Koladeniya Hydropower (Private) Limited in 2010 which is engaged in hydropower generation.

Bank of Ceylon London branch was converted into a fully-owned Subsidiary of the Bank in 2010 namely, Bank of Ceylon (UK) Limited which is engaged in Financial Services including accepting deposits and dealing in investments.

The aggregate amount of income and expenses arising from their transactions during the year and amount due to and due from the relevant related parties, and total contract sum of Off-Balance Sheet transactions at the year end are as follows:

Subsidiary Companies Associate Companies For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.3.1 (a) Income Statement Interest earned 119,218 194,343 122,977 88,926 Interest paid 109,791 4,366 9,489 2 Other income 22,394 9,210 1,871 1,936 Expenses incurred 525,335 470,578 – 10,801

Subsidiary Companies Associate Companies As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.3.1 (b) Balance Sheet Assets Loans and advances 395,167 212,745 2,535,663 2,750,885 Placements 14,327,518 – – – Other receivable 256,447 448,731 – 12,844 14,979,132 661,476 2,535,663 2,763,729

Liabilities Deposits 4,027,486 328,140 44,470 42,968 Securities sold under re-purchase agreements 553,700 1,235,660 375,200 89,200 Debentures 11,083 5,370 – – Other liabilities 248,225 133,620 – 9 4,840,494 1,702,790 419,670 132,177

47.3.1 (c) Off-Balance Sheet items Commitments and contingencies Letters of credit 86,815 60,000 – – Guarantees 53,000 56,500 – – Undrawn facilities 133,684 147,985 25,500 28,435 Others – – – 50,000 273,499 264,485 25,500 78,435

Net accommodation 894,030 900,591 1,042,465 1,192,572

Net accommodation as a % of the Bank’s regulatory capital 2.6% 3.1% 3.1% 4.1%

228 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

47.3.2 Transactions with Subsidiaries and Associate Companies of the Group Subsidiary Companies Associate Companies For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.3.2 (a) Income Statement Interest earned 119,218 194,343 122,977 91,462 Interest paid 109,791 6,903 9,489 2 Other income 106,362 171,302 13,306 6,451 Expenses incurred 593,092 619,396 27,646 28,589

Subsidiary Companies Associate Companies As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.3.2 (b) Balance Sheet Assets Loans and advances 395,167 212,745 2,535,663 2,750,885 Placements 14,327,518 – – – Other receivables 317,197 465,119 – 108,714 15,039,882 677,864 2,535,663 2,859,599

Liabilities Deposits 4,027,486 328,140 44,470 42,968 Securities sold under re-purchase agreements 553,700 1,235,660 375,200 89,200 Debentures 11,083 5,370 – – Other liabilities 256,088 231,612 52,887 14,275 4,848,357 1,800,782 472,557 146,443

47.3.2 (c) Off-Balance Sheet items Commitments and contingencies Letters of credit 86,815 60,000 – – Guarantees 53,000 56,500 – – Undrawn facilities 133,684 147,985 25,500 28,435 Others – – – 50,000 273,499 264,485 25,500 78,435

Net accommodation 954,780 916,979 1,042,465 1,288,442

Net accommodation as a % of the Bank’s regulatory capital 2.8% 3.1% 3.1% 4.4%

BANK OF CEYLON ANNUAL REPORT 2010 229 NOTES TO THE FINANCIAL STATEMENTS

47.4 TRANSACTIONS WITH THE SIGNIFICANT INVESTORS HAVING SIGNIFICANT INFLUENCE OVER BANK AND THE POST-EMPLOYMENT BENEFIT PLANS FOR BANK’S EMPLOYEES Significant Investor Post-Employment Benefit Plans For the year ended 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.4.1 (a) Income Statement Interest earned 7,212,750 11,514,172 – – Interest paid 177,441 102,729 5,087,479 6,642,868 Contributions made – – 2,712,272 2,853,088

Significant Investor Post-Employment Benefit Plans As at 31 December 2010 2009 2010 2009 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.4.1 (b) Balance Sheet Assets Loans and advances 52,324,373 64,557,521 – – Investment in bonds 85,297,670 81,050,009 – – 137,622,043 145,607,530 – –

Liabilities Deposits 24,429,780 8,900,089 20,954,183 27,557,867 Debentures – – 28,461,433 9,900,000 24,429,780 8,900,089 49,415,616 37,457,867

47.4.1 (c) Off-Balance Sheet items Letters of credit 12,982,848 53,886,192 – – Bills and acceptance 5,378,459 36,862,417 – – Guarantees 8,560,881 8,802,506 – – 26,922,188 99,551,115 – –

Net accommodation 159,544,231 240,158,645 – –

Net accommodation as a % of the Bank’s regulatory capital 472.4% 820.2% – –

47.4.1 (d) Other Transactions No. of Ordinary shares held at the year end 5,000,000 5,000,000 Dividends for the year (Rs. ’000) 3,096,410 1,346,410

230 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

47.5 RELATED PARTY TRANSACTIONS The Bank entered into transactions with its related parties in the ordinary course of business activities including deposits, lending and other banking services. The interest rates, commission and other fees on these transactions are determined on an arm’s length basis. Details thereon are summarised below:

Name of related company Name and relationship Nature of transaction Limit Balance/Amount Security Rs. ’000 outstanding as at 31.12.2010 Rs. ’000

47.5.1 Subsidiaries Property Development PLC Dr. Gamini Wickramasinghe - Chairman Current account 4,502 Mr. P A Lionel - Director Time deposit 755,400 Mr. B M Amarasekara - Director REPO balance 454,200 Mr. L N de Silva Wijeyeratne - Director Letter of credit 5,000 86,815 Related shipping document Letter of guarantee 3,000 Rent paid in advance 235,179 Deposit for fuel 907 Other payable 38,150

Merchant Bank of Sri Lanka PLC Mr. M R Shah - Chairman Current account 35,725 Mr. V Kanagasabapathy - Director Overdraft 50,000 25,916 Ms. W A Nalani - Director REPO balance 10,000 Debentures 1,083 Series of loan 600,000 81,647 Lease receivable backed by Power Money market loan 100,000 – of Attorney Grant on immediate – Credit on cheque limit 1,000 – Intra day overdraft 5,000 –

BoC Management & Mr. B A C Fernando - Chairman Current account 2,467 Support Services Mr. K Dharmasiri - Director Time deposit 1,200 (Private) Limited Ms. L S L de S Wijeyeratne - Director Other payable 322 Other receivable 95

BoC Property Development & Mr. B A C Fernando - Chairman Current account 7,182 Management (Private) Limited Ms. W A Nalani - Alternate Director Time deposit 253,074 Ms. S W S Fernando - Director REPO balance 62,500 Mr. P J Jayasinghe - Director Other payable 9,462 Ms. S H Ranawaka - Director BoC Travels (Private) Limited Mr. Chandrasiri de Silva - Chairman Current account 27,558 Mr. B A C Fernando - Director Time deposit 40,000 Ms W A Nalani - Alternate Director Debenture 10,000 Ms. Kumudiniy Kulatunga - Director Overdraft 9,600 – Book Debts Ms. Deepa Wanniaratchi - Director Other payable 794 Mr. M K Muthukumar - Director Letter of guarantee 50,000 50,000 Indemnity of Directors, Debentures and Rs. 20 million secured by time deposits Hotels Colombo (1963) Limited Mr. Rohan Jayasinghe - Chairman Current account 2,589 Ms. Nalini Abeywardene - Director Time deposit 79,610 Mr. Chandrasiri de Silva - Director Other receivable 19,566 Mr. B A C Fernando - Director Mr. M K Nandasiri - Director Ms. W K I Kularatne - Director Mr. M P R Kumara - Director Mr. C D K Walisundara - Director

BANK OF CEYLON ANNUAL REPORT 2010 231 NOTES TO THE FINANCIAL STATEMENTS

Name of related company Name and relationship Nature of transaction Limit Balance/Amount Security Rs. ’000 outstanding as at 31.12.2010 Rs. ’000 Merchant Credit of Mr. A B L A de Silva - Chairman Current account 50,875 Sri Lanka Limited Mr. Raju Sivaraman - Director Savings account 86 Mr. H M A B Weerasekara - Director Time deposit 15 Ms. Sriyani Anandagoda - Director Overdraft 50,000 – Lease receivables backed by Power Series of loan 250,000 – of Attorney Money market loan 50,000 50,000 Bridging finance 100,000 – Letter of credit 10,000 – Letter of guarantee 4,000 –

Ceylease Financial Mr. Raju Sivaraman - Chairman Current account 27,111 Services Limited Mr. W A Asoka Rupasinghe - Director REPO balance 27,000 Ms. K A D Fernando - Director Overdraft 50,000 – Clean Series of loan 450,000 26,689 Lease receivable/hire purchase Bridging finance 100,000 – receivable backed by Power of Attorney Money Market Loan 350,000 210,000 Clean Letter of credit 50,000 – Bills of exchange & shipping documents Other payable 1,577

Ceybank Holiday Homes Dr. Gamini Wickramasinghe - Chairman Current account 3,711 (Private) Limited Mr. B A C Fernando - Director Time deposit 78 Mr. K Dharmasiri - Alternate Director Other payable 22 Mr. C Samarasinghe - Director Other receivable 700 Mr. H M Mudiyanse - Director Mr. D M Gunasekera - Director Ms. K A D A Pemadasa - Director Mr. W G Ariyaratne - Director Mr. A Kuruppu - General Manager

MBSL Insurance Company Limited Mr. M R Shah - Chairman Current account 7,353 Overdraft 915

Koladeniya Hydropower Dr. Gamini Wickramasinghe - Chairman (Private) Limited

Bank of Ceylon (UK) Limited Dr. Gamini Wickramasinghe - Chairman Current account US$ 138 Mr. B A C Fernando - Director (Nostro accounts) (Rs. 15,576) Mr. I G C Madadeniya - EURO 17,801 Chief Executive Officer (Rs. 2,639,955) Ms. Sandya Jayasinghe - GBP 427 Chief Operating Officer (Rs. 73,619) Placements EURO 40,000 (Rs. 5,932,068) GBP 48,749 (Rs. 8,395,450) Other payable 181,675

232 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Name of related company Name and relationship Nature of transaction Limit Balance/Amount Security Rs. ’000 outstanding as at 31.12.2010 Rs. ’000

47.5.2 Associates Ceybank Asset Management Mr. K L Hewage - Chairman Current account 13,486 (Private) Limited Mr. B A C Fernando - Director REPO balance 8,200 Mr. P A Lionel - Alternate Director Mr. D M Gunasekara - Director Southern Development Mr. D K N Piyasoma - Director Current account 44 Financial Company Limited Savings account 38 Lanka Securities (Private) Limited Mr. K Dharmasiri - Director Current account 19,755 REPO balance 367,000 Overdraft 25,000 – Treasury bills

Mireka Capital Land Dr. Gamini Wickramasinghe - Director Current account US$ 2 (Private) Limited Ms. B C D Wijayakulasuriya - (Rs. 174) Alternate Director Current account Rs. 1,533 Mr. K B S Bandara - Director Term loan US$ 24,000 US$ 22,700 Clean basis and US$ 14.4 million Mr. W P R P H Fonseka - Director (Rs. 2,676,120) (Rs. 2,531,163) secured by Time Deposit placed by Mr. T Mutugala - Alternate Director Shing Kwan Investment (Singapore) Private Limited Transnational Lanka Records Mr. C Samarasinghe - Chairman Overdraft 5,000 4,500 Mortgage over commercial property Solutions (Private) Limited Ms. C K Jayaratne - Director Current account 3 MBSL Savings Bank Limited Mr. M R Shah - Chairman Current account 977 Savings account 8,461

47.5.3 Other Entities Credit Information Bureau of Mr. B A C Fernando - Director Bank has contributed 42,256 Company shares Sri Lanka towards the capital

Pradeshiya Sanwardhana Bank Ms. W A Nalani - Director Bank has contributed 72,000 Company shares towards the capital

Lanka Clear (Private) Limited Mr. B A C Fernando - Director Bank has contributed 21,000 Company shares towards the capital

Lanka Financial Services Mr. B A C Fernando - Director Bank has contributed 2,250 Company shares Bureau Limited towards the capital

Ceybank Century Growth Fund Bank has invested in 95,741 units/mutual funds

Ceybank Unit Trust Investments Bank has invested in 1,113,433 units/mutual funds

Ceybank Surekum Gilt Edged Fund Bank has invested in 100,000 units/mutual funds

Transactions with other entities where the Board of Directors of the Bank hold directorships, are disclosed under Directors’ Interest in Contracts on pages 141 to 144 in this Annual Report.

BANK OF CEYLON ANNUAL REPORT 2010 233 NOTES TO THE FINANCIAL STATEMENTS

48. FINANCIAL REPORTING BY SEGMENT Segmental information is presented in respect of Group business distinguishing the component of the Group that is engaged in different business segments or operations within a particular economic environment which is subject to risk and returns that are different from those of other segments.

48.1 PRIMARY SEGMENT INFORMATION - BUSINESS SEGMENTS (GROUP) Business segments provide products and services whose risk and returns are different from other segments which represents banking, leasing, treasury & investments, property, insurance and other non-banking activities.

Banking Leasing Treasury & investments 2010 2009 2010 2009 2010 2009 (Restated) (Restated) (Restated) Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue from external customers: Interest 33,159,051 34,527,041 62,345 52,494 17,713,343 18,324,885 Exchange (251,547) 133,794 – – 670,008 1,433,122 Lease income – – 2,086,052 2,335,035 – – Commissions 6,278,055 4,169,828 109,559 76,941 – – Other 1,915,729 1,799,925 130,829 106,092 3,835,916 2,193,672 Total revenue 41,101,288 40,630,588 2,388,785 2,570,562 22,219,267 21,951,679 Segment result 8,631,548 3,938,335 1,268,596 1,273,440 7,738,205 5,214,647

Unallocated expenses – – – – – – Profit from operations – – – – – – Income from Associates – – – – – – Income tax expense – – – – – – Minority interest – – – – – – Profit attributable to equity holders/parent – – – – – – Segment assets 377,756,035 266,873,616 11,460,688 10,235,883 312,496,190 240,543,400 Investment in Associates – – – – – – Unallocated assets – – – – – – Total assets 377,756,035 266,873,616 11,460,688 10,235,883 312,496,190 240,543,400

Segment liabilities 375,591,228 265,227,694 7,875,741 7,360,029 317,433,546 246,167,879 Unallocated liabilities – – – – – – Total liabilities 375,591,228 265,227,694 7,875,741 7,360,029 317,433,546 246,167,879

Cash flows from operating activities (38,963,122) 63,685,347 (212,237) (364,099) 47,068,667 39,789,797 Cash flows from investing activities* – – – – (58,820,977) (21,477,780) Cash flows from financing activities 11,691,490 (14,338,027) – – 47,339,896 (30,165,163) Capital expenditure (1,187,231) (1,440,020) (22,759) (21,013) – –

* Excluding capital expenditure.

234 BANK OF CEYLON ANNUAL REPORT 2010 NOTES TO THE FINANCIAL STATEMENTS

Property Insurance Other non-banking/unallocated Total 2010 2009 2010 2009 2010 2009 2010 2009 (Restated) (Restated) (Restated) (Restated) Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

4,313 6,308 29,427 19,870 7,755 13,413 50,976,234 52,944,011 – – – – – – 418,461 1,566,916 – – – – – – 2,086,052 2,335,035 10,711 10,735 89,055 89,187 283 7,011 6,487,663 4,353,702 606,009 605,146 8,665 3,076 401,234 220,619 6,898,382 4,928,530 621,033 622,189 127,147 112,133 409,272 241,043 66,866,792 66,128,194 953,450 880,149 60,656 36,350 107,462 19,468 18,759,917 11,362,389

– – – – – – (7,897,330) (6,773,132) – – – – – – 10,862,587 4,589,257 – – – – – – 212,898 130,653 – – – – – – (4,162,289) (1,402,987) – – – – – – (152,886) (17,050) – – – – – – 6,760,310 3,299,873 1,711,562 1,689,642 226,116 187,349 1,181,262 1,032,704 704,831,853 520,562,592 – – – – – – 1,284,563 1,084,065 – – – – – – 23,948,660 25,773,894 1,711,562 1,689,642 226,116 187,349 1,181,262 1,032,704 730,065,076 547,420,551

394,781 340,752 433,235 264,884 913,606 897,004 702,642,137 520,258,242 – – – – – – (3,838,558) (371,832) 394,781 340,752 433,235 264,884 913,606 897,004 698,803,579 519,886,410

59,373 (47,676) 93,978 16,166 (4,705,293) (2,666,066) 3,341,366 100,413,469 (59,258) (118,740) (148,176) (118,895) – – (59,028,411) (21,715,415) – – 50,000 99,700 (38,143) (30,629) 59,043,243 (44,434,119) (3,806) (4,706) (5,459) (130) (13,021) (21,637) (1,232,276) (1,487,506)

BANK OF CEYLON ANNUAL REPORT 2010 235 NOTES TO THE FINANCIAL STATEMENTS

48. FINANCIAL REPORTING BY SEGMENT (CONTD.) 48.2 SECONDARY SEGMENT INFORMATION - GEOGRAPHICAL SEGMENTS Geographical segments provide products or services within a particular economic environment where risk and returns are different from those of other economic environment.

These segments comprise domestic operations, Off-Shore Banking Divisions and Off-Shore Banking Units (Branches).

Bank Group 2010 2009 2010 2009 Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Assets Domestic operations 487,346,097 68.1 385,328,332 71.6 479,649,757 65.7 394,507,746 72.1 Off-shore banking division 211,371,532 29.6 128,209,185 23.8 211,371,532 29.0 128,209,185 23.4 Off-shore banking units 16,236,664 2.3 24,703,620 4.6 39,043,787 5.3 24,703,620 4.5 714,954,293 100.0 538,241,137 100.0 730,065,076 100.0 547,420,551 100.0

Gross Income Domestic operations 55,441,933 87.5 54,376,215 85.7 58,550,579 87.6 57,043,043 86.3 Off-shore banking division 6,549,119 10.3 7,683,187 12.1 6,549,119 9.8 7,683,187 11.6 Off-shore banking units 1,371,814 2.2 1,401,964 2.2 1,767,094 2.6 1,401,964 2.1 63,362,866 100.0 63,461,366 100.0 66,866,792 100.0 66,128,194 100.0

Profit Before Tax Domestic operations 6,819,905 67.9 1,144,944 27.2 7,857,643 70.9 1,657,207 35.1 Off-shore banking division 2,447,179 24.3 2,459,186 58.5 2,447,179 22.1 2,459,186 52.1 Off-shore banking units 785,485 7.8 603,517 14.3 770,663 7.0 603,517 12.8 10,052,569 100.0 4,207,647 100.0 11,075,485 100.0 4,719,910 100.0

Profits After Tax Domestic operations 4,343,288 68.2 1,095,304 35.5 4,905,994 71.0 1,328,221 40.0 Off-shore banking division 1,426,691 22.4 1,585,283 51.4 1,426,691 20.6 1,585,283 47.8 Off-shore banking units 595,333 9.4 403,419 13.1 580,511 8.4 403,419 12.2 6,365,312 100.0 3,084,006 100.0 6,913,196 100.0 3,316,923 100.0

236 BANK OF CEYLON ANNUAL REPORT 2010 CAPITAL ADEQUACY

In order to support the business growth and to Pillar 3 meet regulatory capital requirement, the Bank Bolster market discipline through enhanced maintains a strong capital base, well above the disclosure by banks. norm set by the Central Bank of Sri Lanka. This has ensured the Bank's ability to withstand There are two Tiers of Capital which required the associated risks of its business. The Bank banks to maintain two CARs, named Tier I measures the Capital Adequacy Ratio (CAR), CAR (Core capital ratio) and Tier I plus Tier II based on the relationship between risk-weighted CAR (Total capital ratio). All commercial banks assets of credit, market and operational are required to maintain minimum of 5% of aspects of the banking business as against the Tier I CAR and minimum of 10% of Tier I plus regulatory capital, as per the Basel II guidelines Tier II CAR. issued by the Central Bank of Sri Lanka. TIER I AND TIER II CAPITAL OF THE BANK The Basel Committee on Banking Supervision Capital is the core measure of a bank's financial published a framework for the International strength from the regulators‘ point of view. Convergence of Capital Measurement and Capital Standards (commonly referred to as Tier I capital as at 31 December 2010 of the Basel II), which replaced the original Basel I Accord Bank was Rs. 25,334 million (2009 - published in 1988. Basel II structured three pillars, Rs. 23,192 million) and for the Group was which are outlined below: Rs. 30,172 million (2009 - Rs. 26,201 million). Tier II capital as at 31 December 2010 of Pillar 1 the Bank was Rs. 8,444 million (2009 - The minimum amount of regulatory capital that Rs. 6,090 million) and for the Group was Bank must hold against the risk they assume. Rs. 10,206 million (2009 - Rs. 6,809 million).

Pillar 2 This is the best means to preserve the integrity Key principles for the supervisory review of a of capital in banks with subsidiaries by bank’s risk management framework and its eliminating double gearing. capital adequacy. It sets out specific oversight responsibilities for the Board and Senior CREDIT RISK - THE STANDARDISED APPROACH Management, reinforcing principles of As per the regulatory requirements, the internal control and other corporate credit risk is measured using the standardised governance practices. approach. This method relies on credit ratings of borrowers assigned by ‘External Credit Assessment Institutions’ (ECAIs) to compute banks’ regulatory capital for credit risk. The applicable risk weights vary from 0% to 150%.

BANK OF CEYLON ANNUAL REPORT 2010 237 CAPITAL ADEQUACY

CAPITAL ADEQUACY COMPUTATION

Bank Group 2010 2009 2010 2009 On-Balance On-Balance On-Balance On-Balance Sheet assets Sheet assets Sheet assets Sheet assets & credit & credit & credit & credit equivalent equivalent equivalent equivalent Risk- of Risk- of Risk- of Risk- of Risk- weighted Off-Balance weighted Off-Balance weighted Off-Balance weighted Off-Balance weighted factor Sheet assets assets Sheet assets assets Sheet assets assets Sheet assets assets Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Assets Claims on Government of Sri Lanka and Central Bank of Sri Lanka 0 305,283 – 289,517 – 306,705 – 290,523 – Claims on foreign sovereigns and their Central Banks 0 - 150 7,448 6,897 5,433 4,665 7,448 6,897 5,433 4,665 Claims on Public Sector Entities (PSEs) 20 - 150 101 101 1,562 1,562 101 101 1,562 1,562 Claims on banks 20 - 150 57,536 12,938 59,232 21,638 62,630 18,031 59,252 21,658 Claims on financial institutions 20 - 150 1,585 1,267 1,666 1,407 1,585 1,267 1,666 1,407 Claims on corporates 20 - 150 73,937 73,506 65,808 65,136 83,537 83,106 72,566 71,893 Retail claims 75 - 100 58,672 48,967 27,802 23,602 58,672 48,967 27,802 23,602 Claims secured by residential property 50 - 100 21,024 14,536 15,853 11,119 21,024 14,536 15,853 11,119 Non-Performing Assets (NPAs) 50 - 150 5,447 6,477 7,500 9,266 5,447 6,477 7,500 9,266 Cash items 0 - 20 13,045 857 13,423 1,084 12,696 857 13,432 1,084 Exposures collateralised by cash, gold & Government Securities 0 226,901 – 130,846 – 226,901 – 130,846 – Property, plant & equipment 100 5,622 5,622 5,724 5,724 7,497 7,497 7,188 7,188 Other assets 100 27,116 27,116 23,175 23,175 28,131 28,131 24,545 24,545 Total exposure 803,717 198,284 647,541 168,378 822,374 215,867 658,168 177,989

Bank Group 2010 2009 2010 2009 Credit conversion Credit Credit Credit Credit factor Assets equivalent Assets equivalent Assets equivalent Assets equivalent % Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Off Balance Sheet Exposures Direct credit substitutes 100 23,438 23,438 14,449 14,449 23,438 23,438 14,449 14,449 Transaction-related contingencies 50 129,686 64,843 184,505 92,253 129,686 64,843 184,505 92,253 Short-term self-liquidating trade-related contingencies 20 11,669 2,334 9,053 1,811 11,669 2,334 9,053 1,811 Other Commitments with an Original maturity of up to one year or which can be unconditionally cancelled at any time 0 23,305 – 15,674 – 23,305 – 15,674 – Foreign exchange contracts 0 - 5 46,722 934 27,929 559 46,722 934 27,929 559 Total off-Balance Sheet exposure 234,820 91,549 251,610 109,072 234,820 91,549 251,610 109,072

The risk-weighted assets in credit risk increased by Rs. 30 billion or 18% compared to 2009, largely driven by increase in exposures to corporate and retail claims. During the year, lending to corporate increased by Rs. 8 billion to Rs. 74 billion whereas retail lending increased by Rs. 31 billion to Rs. 59 billion.

238 BANK OF CEYLON ANNUAL REPORT 2010 CAPITAL ADEQUACY

MARKET RISK - THE STANDARDISED MEASUREMENT APPROACH Market risk is the risk of losses in on-Balance Sheet and off-Balance Sheet positions arising from undesirable market movements. This risk arises from adverse movements in the market prices of interest rate instruments, equities, currencies and gold position.

Bank Group 2010 2009 2010 2009 Rs. '000 Rs. '000 Rs. '000 Rs. '000

CAPITAL CHARGE FOR MARKET RISK Item Capital charge for interest rate risk 692,669 511,243 692,669 511,243 Capital charge for equity 582,919 305,667 582,919 305,667 Capital charge for foreign exchange & gold 2,294 5,932 2,294 5,932 Total capital charge for market risk 1,277,882 822,842 1,277,882 822,842 Total risk-weighted assets for market risk 12,778,820 8,228,420 12,778,820 8,228,420

Market risk increased by Rs. 2.5 billion or 55% to Rs. 12.8 billion during the year 2010, in line with increased trading activities, specially the equity investment. According to the capital charge for market risk increased by Rs. 455 million.

OPERATIONAL RISK - THE BASIC INDICATOR APPROACH Operational risk is defined as the losses resulting from inadequate or failed internal processes, people, systems or any other internal or external events. Under basic indicator approach, the Bank maintains capital for operational risk at 15% on the average positive income of the three immediately preceding years.

Bank Group 2010 2009 2010 2009 Year Rs. '000 Rs. '000 Rs. '000 Rs. '000

Capital charge for operational risk Gross income 2007 – 17,693,645 – 18,859,716 2008 21,383,027 21,383,027 22,526,924 22,526,924 2009 21,201,193 21,201,193 22,451,040 22,451,040 2010 27,216,664 – 29,175,890 – Total income 69,800,884 60,277,865 74,153,854 63,837,680 Average gross income 23,266,961 20,092,622 24,717,951 21,279,227 Total capital charge for operational risk - (15%) 3,490,044 3,013,893 3,707,693 3,191,884 Total risk-weighted assets for operational risk 34,900,442 30,138,933 37,076,927 31,918,840

Operational risk increased by Rs. 4.8 billion or 16% to Rs. 34.9 billion during the year, due to the change in gross income level over a rolling three years‘ time horizon, the growth reflects the strong performance over previous year.

BANK OF CEYLON ANNUAL REPORT 2010 239 CAPITAL ADEQUACY

Bank Group As at 31 December 2010 2009 2010 2009 Rs. million Rs. million Rs. million Rs. million

COMPUTATION OF CAPITAL TIER I: Core Capital Paid-up ordinary shares 5,000 5,000 5,000 5,000 Permanent reserve fund 2,778 2,650 2,778 2,650 Published retained profits 18,713 15,820 20,393 16,901 General and other reserves 1,516 1,304 1,847 1,563 Minority interest (consistent with the above capital constituents) – – 1,065 951 Less: Other intangible assets (164) (111) (164) (111) Advances granted to employees of the Bank for the purchase of shares of the Bank (ESOP) – – – – 50% of the investments in the capital of other banks and financial institutions (2,509) (1,471) (747) (753) Total Eligible Core Capital (TIER I Capital) 25,334 23,192 30,172 26,201

TIER II: Supplementary Capital Revaluation reserves (as approved by the Central Bank of Sri Lanka) 63 63 63 63 General provisions 2,396 1,914 2,396 1,914 Approved subordinated term debt 8,494 5,584 8,494 5,584 Less: 50% of the investments in the capital of other banks and financial institutions (2,509) (1,471) (747) (752) Total Eligible Supplementary Capital (TIER II Capital) 8,444 6,090 10,206 6,809 Total Capital Base 33,778 29,282 40,378 33,010

COMPUTATION OF RATIOS Total Risk-Weighted Assets Total risk-weighted assets for credit risk 198,284 168,378 215,867 177,989 Total risk-weighted assets for market risk 12,779 8,228 12,779 8,228 Total risk-weighted assets for operational risk 34,900 30,139 37,077 31,920 Sub Total 245,963 206,745 265,723 218,137

Minimum Capital Charge Minimum capital charge for credit risk 19,828 16,837 21,587 17,799 Minimum capital charge for market risk 1,278 823 1,278 823 Minimum capital charge for operational risk 3,490 3,014 3,708 3,192 Sub Total 24,596 20,674 26,573 21,814

Total eligible core capital (TIER 1 Capital) 25,334 23,192 30,172 26,201 Total eligible supplementary capital (TIER II Capital) 8,444 6,090 10,206 6,809 Total Capital Base 33,778 29,282 40,378 33,010

Core Capital Ratio (Minimum Requirement 5%) Total eligible core capital (TIER I Capital) 25,334 23,192 30,172 26,201 Total risk-weighted assets 245,963 206,745 265,723 218,137 Core capital ratio 10.30% 11.22% 11.35% 12.01%

Total Capital Ratio (Minimum Requirement 10%) Total capital base 33,778 29,282 40,378 33,010 Total risk-weighted assets 245,963 206,745 265,723 218,137 Capital Adequacy Ratio 13.73% 14.16% 15.20% 15.13%

240 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

The Bank has issued the following debt securities which are listed on the Colombo Stock Exchange (CSE).

Unsecured, subordinated, redeemable debentures with a tenure of 5 years (par value Rs. 100/-) Type Interest payable frequency Interest rate (per annum)

November 2008/2013 series A Annually 19% B Semi annually 6 months TB rate (Gross) plus 75 basis points C At maturity Zero coupon, redeemable at Rs. 225/- each June 2010/2015 series A Annually 11.5% B Semi annually 6 months TB rate(Gross) plus 75 basis points

COMPLIANCE TO THE LISTING RULES ON CONTENTS OF ANNUAL REPORT, WHICH WERE APPLICABLE TO THE BANK FOR THE YEAR ENDED 31 DECEMBER 2010 ENFORCED BY THE COLOMBO STOCK EXCHANGE, ARE SUMMARISED BELOW:

Rule No. Requirement Period Date submitted

7.4 a (i) The interim Financial Statements prepared on quarterly basis, Quarter 1 ended 31 March 2010 14/05/2010 approved by the Board of Directors to be submitted to CSE within Quarter 2 ended 30 June 2010 12/08/2010 45 days from respective quarter ends for the first three quarters and within two months at the end of fourth quarter Quarter 3 ended 30 September 2010 09/11/2010

Quarter 4 ended 31 December 2010 28/02/2011

The quarterly Financial Statements are published in Sinhala, Tamil and English newspapers for public information.

Rule No. Requirement Compliance

7.4 b (i) Comply with SLAS 35 and disclose Group and Bank separately 9 7.4 b (ii) Disclose the additional notes and ratios as per listing rules 9 7.4 b (iii) Be signed by two Directors 9 7.4 b (iv) State whether the Financial Statements are audited or not 9 7.5 a Annual Report to be submitted to CSE within five months The audited Financial Statements for the year ended from the closure of financial year 31 December 2010 was submitted on 24 March 2011. Annual Report for the year 2010 will be submitted before the deadline The Bank also complied with the above requirements in 2009.

BANK OF CEYLON ANNUAL REPORT 2010 241 INVESTOR INFORMATION

Rule No. Disclosure requirement Reference/comments Page No.

7.6 (i) Names of persons who during the financial year were Annual Report of the Board of Directors on Directors of the entity the State of Affairs of the Bank of Ceylon 139 7.6 (ii) Principal activities of the entity and its Subsidiaries Annual Report of the Board of Directors on during the year and any changes therein the State of Affairs of the Bank of Ceylon 137 Significant Accounting Policies 156 Subsidiaries & Associates 256

7.6 (iii) The names and the number of shares held by the 20 largest The Government of Sri Lanka is the sole holders of voting and non-voting shares and the percentage shareholder of the Bank of Ceylon of such shares held

7.6 (iv) The public holding percentage Not applicable

7.6 (v) A statement of each Directors’ holding and Chief Executive Not applicable Officer’s holding in shares of the entity at the beginning and end of each financial year

7.6 (vi) Information pertaining to material foreseeable Risk Management & Compliance risk factors of the entity 87

7.6 (vii) Details of material issues pertaining to employees and No material issues occurred during the – industrial relations of the entity year under review

7.6 (viii) Extents, locations, valuations and the number of buildings Note No. 29 to the Financial Statements 203 of the entity’s land holdings and investment properties on property, plant and equipment 7.6 (ix) Number of shares representing the entity’s stated capital Note No. 39 to the Financial Statements 220 on stated capital 7.6 (x) A distribution schedule of the number of holders in each class Investor Information 249 of equity securities and percentage of their total holdings

7.6 (xi) Ratios and market price information: 1. Dividend per share, net asset value per share, interest rate Investor Information 247,253 of comparable government securities, debt/equity ratio, Note No. 16 to the Financial Statements on interest cover and liquid asset ratio earnings per share and dividends per share 175 2. Market information on listed debentures Investor Information 249 Note No. 38 to the Financial Statements on debentures 215 3. Any changes in credit rating Investor Information 251 7.6 (xii) Significant changes in the entity’s or its subsidiaries fixed Note No. 29 to the Financial Statements assets and the market value of the land, if the value differs on property, plant & equipment 202 substantially from the book value

7.6 (xiii) During the year the entity has raised funds either through Note No. 38 to the Financial Statements a public issue, rights issue and private placement on debentures 215 7.6 (xiv) Information in respect of each employee share ownership Not applicable or stock option scheme

7.6 (xv) Disclosures pertaining to Corporate Governance practices in Exempted under section 7.10 of listing rules, terms of Rules 7.10.3, 7.10.5.c and 7.10.6.c of Section 7 of since the Bank complies with Directions laid the Rules down is the Banking Act Direction No. 11 of 2007 on Corporate Governance

7.6 (xvi) Related party transactions exceeding 10% of the equity or Investor Information 254 5% of the total assets of the entity as per Audited Financial Statements, whichever is lower

242 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

INCOME STATEMENT IN US$ Bank Group For the year ended 31 December 2010 2009 2010 2009 US$ ’000 US$ ’000 US$ ’000 US$ ’000

Income 568,250 553,981 599,676 577,262

Interest income 456,063 463,330 475,874 482,555 Interest expense (279,854) (334,048) (287,154) (344,724) Net interest income 176,209 129,282 188,720 137,831

Fee and commission income 53,936 37,146 58,183 38,005 Fee and commission expenses (4,191) (4,752) (4,986) (4,805) Net fee and commission income 49,745 32,394 53,197 33,200

Foreign exchange profit 3,665 13,678 3,753 13,678 Dividend income 4,206 3,037 2,313 1,313 Net gains from investment securities 27,853 17,120 31,463 17,567 Other operating income 10,259 6,575 13,674 9,854 45,983 40,410 51,203 42,412 Operating income 271,937 202,086 293,120 213,443

Operating expenses Personnel costs (72,141) (70,776) (78,308) (74,832) Staff retirement benefits (20,323) (21,035) (20,619) (21,190) Premises, equipment and establishment expenses (25,633) (23,377) (24,680) (21,747) Other operating expenses (26,082) (21,392) (32,047) (25,792) (144,179) (136,580) (155,654) (143,561) Operating profit before provisions 127,758 65,506 137,466 69,882

Provision for loan losses (13,989) (15,728) (15,481) (16,542) Recovery of non-performing advances 12,268 13,095 12,507 13,148 Provision for fall in value of investments and dealing securities – – (62) 428 Operating profit before VAT 126,037 62,873 134,430 66,916

Value added tax on financial services (35,884) (26,143) (37,012) (26,855) Operating profit 90,153 36,730 97,418 40,061

Share of profit of Associate Companies before tax – – 1,909 1,141

Profit before taxation 90,153 36,730 99,327 41,202

Provision for taxation (33,068) (9,809) (37,328) (12,247)

Profit after taxation 57,085 26,921 61,999 28,955

Attributable to: Equity holder of the parent 57,085 26,921 60,628 28,806 Minority interest – – 1,371 149 Profit for the year 57,085 26,921 61,999 28,955

Basic earnings per share (US$) 11.42 5.38 12.13 5.76 Dividend per share (US$) 5.55 2.35 5.55 2.35

Exchange rate of 1 US$ was Rs. 111.5050 as at 31 December 2010. (Rs. 114.5550 as at 31 December 2009)

The Income Statement given on this page does not form part of the Audited Financial Statements and it is solely for the convenience of the shareholders, investors, bankers and other interested parties of the Financial Statements of our Bank.

BANK OF CEYLON ANNUAL REPORT 2010 243 INVESTOR INFORMATION

BALANCE SHEET IN US$ Bank Group As at 31 December 2010 2009 2010 2009 US$ ’000 US$ ’000 US$ ’000 US$ ’000

ASSETS Cash and short term funds 126,486 117,925 123,356 117,998 Balances with Central Banks 232,227 141,971 232,227 141,971 Treasury bills, bonds and other eligible bills 406,968 250,844 415,665 259,162 Securities purchased under re-sale agreements 366,262 57,746 366,262 58,207 Dealing securities 28,988 15,956 34,128 18,658 Placement with and loans to other banks 382,761 400,393 428,442 400,568 Treasury bonds maturing after one year 460,040 409,502 464,098 409,502 Loans & advances to customers - Bills of exchange 138,074 133,162 143,631 137,060 - Loans and advances 3,166,655 2,143,968 3,186,094 2,157,931 - Lease rentals receivable - within one year 16,483 16,767 40,903 41,817 - Lease rentals receivable - one to five years 21,415 19,972 60,479 44,576 - Lease rentals receivable - after five years 18 2 20 3 3,342,645 2,313,871 3,431,127 2,381,387 Government of Sri Lanka Restructuring Bonds 76,651 74,610 76,651 74,610 Investment securities 723,228 662,081 727,486 667,393 Investment properties – – 3,470 3,420 Investments in Associate Companies 7,575 7,373 11,520 9,463 Investments in Subsidiary Companies 47,344 27,863 – – Other assets 158,795 167,469 164,241 172,621 Property, plant & equipment 49,725 49,415 66,098 61,735 Leasehold land 695 552 1,076 935 Intangible assets 1,469 967 1,528 1,041 Total assets 6,411,859 4,698,538 6,547,375 4,778,671 FINANCED BY: LIABILITIES Deposits from customers 4,701,428 3,566,911 4,747,040 3,591,808 Borrowed fund 470,339 288,930 515,062 312,227 Securities sold under re-purchase agreements 480,001 298,579 475,035 287,792 Insurance provision - life – – 600 361 Insurance provision - non-life – – 2,267 1,585 Tax payable 19,728 1,657 21,726 2,511 Deferred tax liability 4,104 3,574 4,390 3,842 Other liabilities 136,840 164,018 147,238 171,339 Debentures 347,127 157,519 353,657 166,849 Total liabilities 6,159,566 4,481,188 6,267,015 4,538,314

SHAREHOLDERS' EQUITY Stated capital 44,841 43,647 44,841 43,647 Permanent reserve fund 24,909 23,133 24,909 23,133 Retained profits 167,820 138,096 182,889 149,409 Reserves 14,722 12,474 18,166 15,868 Total equity attributable to the parent 252,292 217,350 270,805 232,057 Minority interest 9,555 8,300 Total equity 252,292 217,350 280,360 240,357 Total shareholders' equity and liabilities 6,411,859 4,698,538 6,547,375 4,778,671 Commitments and contingencies 2,001,389 2,149,576 2,017,328 2,150,200

Exchange rate of 1 US$ was Rs. 111.5050 as at 31 December 2010. (Rs. 114.5550 as at 31 December 2009)

The Income Statement given on this page does not form part of the Audited Financial Statements and it is solely for the convenience of the shareholders, investors, bankers and other interested parties of the Financial Statements of our Bank.

244 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION - QUARTERLY FINANCIAL PERFORMANCE

SUMMARY OF THE INCOME STATEMENT 2010 2009 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total For the quarter ended 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Dec. Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Bank Net interest income 3,915 4,624 5,041 6,068 19,648 3,405 3,750 3,204 4,451 14,810 Non-interest income 2,356 3,632 3,184 3,336 12,508 2,811 2,877 2,291 2,405 10,384 Less: Non-interest expenses 3,905 4,211 4,064 4,364 16,544 3,539 3,919 4,099 4,634 16,191 Provision for bad & doubtful debts 553 606 441 (41) 1,559 666 717 378 40 1,801 Profit from operations before taxes 1,813 3,439 3,720 5,081 14,053 2,011 1,991 1,018 2,182 7,202 Less: Value added tax on financial services 599 1,062 1,086 1,254 4,001 581 714 707 992 2,994 Profit before taxation 1,214 2,377 2,634 3,827 10,052 1,430 1,277 311 1,190 4,208 Less: Income tax expenses 457 937 698 1,595 3,687 450 464 108 102 1,124

Profit after taxation 757 1,440 1,936 2,232 6,365 980 813 203 1,088 3,084 Quarterly profit as a % of the profit after tax 12 23 30 35 100 32 26 7 35 100 Cumulative profit as a % of the profit after tax 12 35 65 100 – 32 58 65 100 –

Group Net interest income 4,223 4,940 5,408 6,472 21,043 3,617 3,957 3,443 4,772 15,789 Non-interest income 2,404 3,882 3,652 3,652 13,590 2,807 2,914 2,401 2,597 10,719 Less: Non-interest expenses 4,099 4,498 4,432 4,890 17,919 3,676 4,018 4,207 5,046 16,947 Provision for bad & doubtful debts 575 650 467 34 1,726 701 772 418 4 1,895 Profit from operations before taxes 1,953 3,674 4,161 5,200 14,988 2,047 2,081 1,219 2,319 7,666 Less: Value added tax on financial services 617 1,090 1,126 1,293 4,126 587 723 720 1,046 3,076 Profit from operations before corporate tax 1,336 2,584 3,035 3,907 10,862 1,460 1,358 499 1,273 4,590 Add: Share of profit of Associate Companies 74 69 (6) 76 213 17 36 (61) 139 131 Profit before taxation 1,410 2,653 3,029 3,983 11,075 1,477 1,394 438 1,412 4,721 Less: Income tax expense 555 1,053 828 1,726 4,162 518 523 179 184 1,404 Profit after taxation 855 1,600 2,201 2,257 6,913 95 871 259 1,228 3,317 Quarterly profit as a % of the profit after tax 12 23 32 33 100 29 26 8 37 100 Cumulative profit as a % of the profit after tax 12 35 67 100 – 29 55 63 100 –

BANK OF CEYLON ANNUAL REPORT 2010 245 INVESTOR INFORMATION - QUARTERLY FINANCIAL PERFORMANCE

SUMMARY OF THE BALANCE SHEET

2010 2009 As at As at As at As at As at As at As at As at As at 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec. Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Bank Net loans & advances 292,342 330,582 318,212 372,722 274,273 260,844 264,809 265,065 Investments 185,417 171,508 208,719 236,063 149,124 155,920 164,987 172,517 Property, plant & equipment 5,892 5,682 5,991 5,622 5,305 5,630 6,011 5,724 Other assets 62,444 79,253 88,718 100,547 64,591 71,435 98,303 94,935 546,095 587,025 621,640 714,954 493,293 493,829 534,110 538,241

Deposits 406,515 430,690 452,587 524,233 332,313 359,023 399,245 408,607 Borrowings 97,020 113,764 124,337 144,674 118,203 91,936 89,667 85,347 Other liabilities 19,080 17,651 18,611 17,915 18,868 18,431 21,379 19,388 Shareholders’ funds 23,480 24,920 26,105 28,132 23,909 24,439 23,819 24,899 546,095 587,025 621,640 714,954 493,293 493,829 534,110 538,241

Group Net loans & advances 300,257 339,037 327,588 382,588 280,786 267,998 272,218 272,800 Investments 182,660 168,842 205,887 233,693 147,489 154,333 163,673 171,488 Property, plant & equipment 7,336 7,569 7,885 7,490 6,745 7,056 6,811 7,179 Other assets 63,579 91,321 94,179 106,294 66,007 72,904 100,473 95,954 553,832 606,769 635,539 730,065 501,027 502,291 543,175 547,421

Deposits 407,727 434,889 456,020 529,319 334,638 361,621 402,154 411,460 Borrowings 99,422 124,855 130,032 149,835 120,075 94,410 92,293 87,849 Other liabilities 20,472 19,232 20,234 19,650 19,990 19,371 22,404 20,578 Shareholders’ funds 26,211 27,793 29,253 31,261 26,324 26,889 26,324 27,534 553,832 606,769 635,539 730,065 501,027 502,291 543,175 547,421

246 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

SUMMARY OF FINANCIAL STATISTICS (QUARTERLY)

2010 2009 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec.

Bank Profitability Interest margin (%) 2.89 3.04 3.12 3.14 2.79 2.93 2.71 2.90 Return on assets (before tax) (%) 0.89 1.28 1.43 1.60 1.17 1.11 0.79 0.82 Return on equity (after tax) (%) 12.48 17.62 21.59 24.01 16.67 15.08 11.34 12.85

Investor Information Debt equity (%) 100.37 114.07 175.37 158.61 95.40 92.52 94.28 92.12 Interest cover (times) 1.59 1.87 1.94 2.10 1.38 1.40 1.33 1.35 Earnings per share (Rs.) 603.94 878.03 1,101.38 1,273.06 783.59 717.10 532.17 616.80 Net assets per share (Rs.) 4,696.06 4,984.09 5,221.11 5,626.37 4,781.71 4,887.89 4,763.83 4,979.72 Capital Adequacy Ratios Tier 1 (%) 10.95 10.20 9.59 10.30 10.75 10.78 10.66 11.22 Total (Tier 1+ Tier 2) (%) 13.83 14.92 14.27 13.73 15.31 15.30 14.97 14.16

Assets Quality Net non-performing asset ratio (%) 2.78 2.79 2.39 1.42 3.00 3.40 3.46 2.79 (Net of interest in suspense & provision) Gross non-performing asset ratio (%) 5.39 5.65 4.73 3.30 5.72 6.44 6.53 5.65 (Net of interest in suspense) Regulatory Liquidity Statutory liquid asset ratios Domestic banking unit (%) 24.55 21.13 25.87 28.65 22.55 26.79 28.39 21.13 Off-shore banking unit (%) 41.40 55.46 44.52 74.17 52.10 57.84 69.28 55.46

Group Profitability Interest margin (%) 3.07 3.18 3.28 3.29 2.91 3.05 2.84 3.04 Return on assets (before tax) (%) 1.02 1.41 1.60 1.73 1.19 1.15 0.85 0.91 Return on equity (after tax) (%) 13.20 18.46 21.91 24.35 14.78 13.96 11.01 12.50

Investor Information Earnings per share (Rs.) 664.69 964.18 1,215.09 1,352.06 766.12 732.93 557.09 659.97 Net assets per share (Rs.) 5,049.13 5,365.27 5,646.36 6,039.20 5,135.31 5,253.40 5,141.93 5,316.66

Capital Adequacy Ratios Tier 1 (%) 11.88 10.93 10.58 11.35 12.11 11.69 11.30 12.01 Total (Tier 1+ Tier 2) (%) 13.83 15.83 15.57 15.20 16.86 16.26 15.67 15.13

Assets Quality Net non-performing asset ratio (%) 2.97 2.61 2.56 1.55 3.12 2.77 2.86 2.75 (Net of interest in suspense & provision) Gross non-performing asset ratio (%) 5.63 4.96 4.95 3.49 5.91 6.71 6.80 5.75 (Net of interest in suspense)

BANK OF CEYLON ANNUAL REPORT 2010 247 INVESTOR INFORMATION

ANALYSIS OF DEPOSITS As at 31 December 2006 2007 2008 2009 2010 Rs. million Rs. million Rs. million Rs. million Rs. million

Local Currency Deposits Demand 47,242 44,933 44,304 48,612 65,439 Savings 78,118 87,379 91,324 110,371 135,235 Time 44,690 69,475 83,085 120,894 155,227 Certificates of deposit 173 59 30 29 29 Other 2,160 740 662 969 1,886 172,383 202,586 219,405 280,875 357,816

Foreign Currency Deposits Demand 3,615 4,387 3,604 6,416 24,087 Savings 36,887 39,277 37,993 51,817 54,866 Time 48,181 60,413 51,427 68,799 86,281 Other 1,610 2,193 3,641 700 1,183 90,293 106,270 96,665 127,732 166,417 Total Deposits 262,676 308,856 316,070 408,607 524,233

ANALYSIS OF LOANS AND ADVANCES As at 31 December 2006 2007 2008 2009 2010 Rs. million Rs. million Rs. million Rs. million Rs. million

Bills of exchange 4,528 11,430 16,908 16,099 15,776 Loans and advances 235,509 281,872 266,423 262,716 370,267 Lease rentals receivable 2,003 5,918 6,155 4,716 4,594 242,040 299,220 289,486 283,531 390,637

Less: Interest in suspense 8,422 7,859 8,607 8,509 8,327 Total gross loans and advances 233,618 291,361 280,879 275,022 382,310

248 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

SHARE INFORMATION As at 31 December 2010 2009 Shareholder No. of Ordinary Shares Holding % No. of Ordinary Shares Holding %

Government of Sri Lanka 5,000,000 100 5,000,000 100

INFORMATION ON DEBENTURES ISSUED BY THE BANK

Effective Interest Amount as at Coupon rate annual rate rate of 31 December comparable Interest payable Maturity Government Description Note frequency Issue date date 2010 2009 2010 2009 security 2010 2009 % % % %%Rs. ’000 Rs. ’000

A - Sri Lanka Rupee debentures Fixed interest rate Unsecured, subordinated, redeemable debentures (a) Annually 24.11.2008 24.11.2013 19.00 19.00 19.00 19.00 8.15 345,190 345,190 Unsecured, subordinated, redeemable debentures (a) At maturity 24.11.2008 24.11.2013 – – 17.61 17.61 8.15 322,775 273,927 Unsecured, subordinated, redeemable debentures (b) Annually 28.06.2010 28.06.2015 11.50 – 11.50 – 9.15 1,074,670 – Unsecured, redeemable debentures Annually 01.07.2010 01.07.2015 13.20 – 13.20 – 9.15 1,000,000 – Unsecured, redeemable debentures Annually 14.07.2010 14.07.2015 13.20 – 13.20 – 9.15 2,000,000 – Unsecured, redeemable debentures Annually 17.09.2010 17.09.2015 11.00 – 11.00 – 8.95 1,428,813 – 6,171,448 619,117

Floating interest rate Unsecured, subordinated, redeemable debentures (b)/(c) Semi annually 28.06.2010 28.06.2015 8.95 – 11.54 – 9.15 3,925,330 – [6 months TB rate (Gross) plus 75 basis points] Unsecured, subordinated, redeemable debentures (a)/(c) Semi annually 24.11.2008 24.11.2013 8.95 10.00 10.46 17.04 8.15 3,699,390 3,699,390 [6 months TB rate (Gross) plus 75 basis points] Unsecured, subordinated, redeemable debentures (c) Semi annually 31.12.2003 31.12.2011 10.43 10.15 10.56 16.69 7.55 250,000 250,000 [6 months TB (Gross) rate plus 150 basis points] Unsecured, subordinated, redeemable debentures (d) Semi annually 03.11.2005 03.11.2010 – 11.68 – 20.24 – – 1,000,000 [12 months TB (Gross) rate plus 70 basis points] Unsecured, subordinated, redeemable debentures (d) Semi annually 27.10.2006 27.10.2011 8.94 12.11 11.88 20.16 7.45 1,000,000 1,000,000 [12 months TB (Gross) rate plus 75 basis points] Unsecured, subordinated, redeemable debentures (d) Annually 15.08.2008 15.08.2013 10.49 14.31 12.87 18.14 8.10 300,000 300,000 [12 months TB (Gross) rate plus 100 basis points] Unsecured, redeemable debentures (d) Annually 17.11.2006 17.11.2011 8.19 11.36 10.98 19.41 7.46 1,200,000 1,200,000 [12 months TB (Gross) rate] Unsecured, redeemable debentures (d) Annually 10.01.2007 10.01.2012 10.39 20.27 10.39 20.40 7.56 1,500,000 1,500,000 [12 months TB (Gross) rate] Unsecured, redeemable debentures (d) Annually 12.03.2007 12.03.2012 10.52 19.66 12.30 20.58 7.58 1,000,000 1,000,000 [12 months TB (Gross) rate] Unsecured, redeemable debentures (d) Annually 03.10.2007 03.10.2012 8.39 12.82 11.73 19.51 7.65 1,000,000 1,000,000 [12 months TB (Gross) rate plus 50 basis points]

BANK OF CEYLON ANNUAL REPORT 2010 249 INVESTOR INFORMATION

Effective Interest Amount as at Coupon rate annual rate rate of 31 December comparable Interest payable Maturity Government Description Note frequency Issue date date 2010 2009 2010 2009 security 2010 2009 % % % %%Rs. ’000 Rs. ’000

Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.02 19.99 7.65 1,500,000 1,500,000 [12 months TB (Gross) rate plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.01 19.99 7.65 500,000 500,000 [12 months TB (Gross) rate plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 8.00 500,000 500,000 [12 months TB (Gross) rate plus 50 basis points] Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 8.00 1,500,000 1,500,000 [12 months TB (Gross) rate plus 50 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 9.20 5,200,000 – [12 months TB (Gross) rate plus 150 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 9.20 1,750,000 – [12 months TB (Gross) rate plus 150 basis points] Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 9.20 5,300,000 – [12 months TB (Gross) rate plus 150 basis points] 30,124,720 14,949,390

B - United States Dollar debentures Fixed interest rate Unsecured, subordinated, redeemable debentures Semi annually 10.10.2008 10.10.2013 5.50 5.50 5.50 5.50 4.43 26,761 27,493 Floating interest rate Unsecured, subordinated, redeemable debentures (e) Semi annually 10.10.2008 10.10.2013 3.46 4.69 3.49 4.74 4.43 2,383,419 2,448,613 [6 months LIBOR plus 300 basis points] 2,410,180 2,476,106 Total value of Debentures 38,706,348 18,044,613

Notes (a) Debentures that are listed in the Colombo Stock Exchange were issued on 24 November 2008. Some of these have been traded in the Colombo Stock Exchange during the year ended 31 December 2010. (b) Debentures that are listed in the Colombo Stock Exchange were issued on 28 June 2010. (c) Weighted average 6 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date. (d) Weighted average 12 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date. (e) 6 months London Inter Bank Offered Rate (LIBOR) for US Dollars plus 3% per annum.

250 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

INFORMATION ON LISTED DEBENTURES Interest yield as at date of Yield to maturity of Market price Rs. last trade done % last trade done % For the year ended 31 December 2010 2009 2010 2009 2010 2009

BoC Debenture 2008/2013, Unsecured, subordinated, redeemable, 5 years, fixed rate (19.0%) 17.76 18.18 16.36 18.56 Highest (Rs.) 107.00 101.00 Lowest (Rs.) 107.00 100.00 Last transaction (Rs.) 107.00 101.00

Unsecured, subordinated, redeemable, 5 years, floating rate [06 months TB rate (gross) plus 75 basis points] Not Traded Not Traded Not Traded Not Traded Highest (Rs.) Not Traded Not Traded Lowest (Rs.) Not Traded Not Traded Last transaction (Rs.) Not Traded Not Traded

Unsecured, subordinated, redeemable, 5 years, zero coupon 13.13 Not Traded 15.57 Not Traded Highest (Rs.) 135.11 Not Traded Lowest (Rs.) 134.15 Not Traded Last transaction (Rs.) 134.15 Not Traded

BoC Debenture 2010/2015, Unsecured, subordinated, redeemable, 5 years, fixed rate (11.5%) Not Traded N/A Not Traded N/A Highest (Rs.) Not Traded N/A Lowest (Rs.) Not Traded N/A Last transaction (Rs.) Not Traded N/A

Unsecured, subordinated, redeemable, 5 years, floating rate [06 months TB rate (gross) plus 75 basis points] Not Traded N/A Not Traded N/A Highest (Rs.) Not Traded N/A Lowest (Rs.) Not Traded N/A Last transaction (Rs.) Not Traded N/A

CREDIT RATINGS Fitch Ratings Lanka Limited has revised the Bank’s outlook to ‘Positive’ from ‘Stable’ and affirmed its national long-term rating at ‘AA(lka)’. Further, the debt instrument issued by the Bank in 2008 and 2010 were assigned an ‘AA-(lka)’ rating by the same rating agency.

BANK OF CEYLON ANNUAL REPORT 2010 251 INVESTOR INFORMATION

Ten Year Statistical Summary - Bank

For the year ended 31 December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Operating results Income 28,410 24,578 22,805 23,957 27,324 35,192 50,159 60,182 63,461 63,363 Interest income 22,887 20,258 17,040 16,609 20,595 26,823 42,286 49,684 53,077 50,853 Interest expense (17,704) (12,794) (8,438) (8,256) (11,231) (15,744) (29,453) (35,989) (38,267) (31,205)

Net interest income 5,183 7,463 8,602 8,353 9,364 11,079 12,833 13,695 14,810 19,648

Foreign exchange profit 1,205 737 707 1,781 1,015 2,261 1,178 2,887 1,567 409 Other income 3,270 3,384 4,817 5,310 5,716 6,107 6,695 7,611 8,818 12,101 Other operating expenses (6,892) (7,406) (8,676) (9,127) (10,400) (12,174) (13,105) (14,514) (16,190) (16,544) Provision for loan losses and fall in value of investments and dealing securities (1,875) (2,941) (3,012) (2,886) (1,659) (1,369) (1,210) (2,375) (1,802) (1,560) Operating profit before VAT 891 1,238 2,438 3,431 4,036 5,904 6,391 7,304 7,203 14,054

Value added tax on financial services – – (638) (872) (916) (1,767) (1,873) (2,073) (2,995) (4,001) Profit before taxation 891 1,238 1,800 2,559 3,120 4,137 4,518 5,231 4,208 10,053 Income tax expense (74) (219) (168) (590) (1,225) (1,510) (1,675) (1,670) (1,124) (3,687) Profit after taxation 817 1,019 1,632 1,969 1,895 2,627 2,843 3,561 3,084 6,365

As at 31 December Assets Cash and short term funds 4,122 4,275 4,179 5,584 6,127 7,790 9,244 10,168 13,509 14,104 Balances with Central Banks 8,835 9,198 7,944 12,480 13,933 17,106 17,253 15,629 16,263 25,894 Treasury bills, bonds and other eligible bills 4,313 13,134 13,837 25,502 41,366 45,808 39,205 27,707 35,350 86,219 Dealing securities 797 503 1,411 507 54 1,180 3,184 144 1,828 3,232 Placements with and loans to other banks 10,642 13,494 26,412 27,362 36,851 23,735 19,722 16,403 45,867 42,680 Treasury bonds maturing after one year 3,217 10,955 16,554 15,334 9,882 24,263 27,337 38,834 46,910 51,297 Bills of exchange & loans and advances 143,288 115,255 114,287 131,096 165,668 222,971 278,619 265,256 260,857 368,494 Lease rentals receivable 266 276 406 579 936 1,991 5,877 5,849 4,209 4,228 Government of Sri Lanka Restructuring Bonds 17,883 17,883 17,883 17,883 17,883 8,547 8,547 8,547 8,547 8,547 Investment securities 23,418 16,593 10,227 6,493 2,787 2,380 2,362 69,681 75,845 80,643 Investment properties – 754 1,150 1,150 1,236 1,088 559 – – – Investment in Subsidiaries and Associates 2,822 2,831 4,008 4,984 4,225 3,711 3,650 3,603 4,037 6,124 Other assets 14,619 19,532 17,746 12,498 12,833 11,928 16,901 17,304 19,184 17,706 Deferred tax assets ––––70423660––– Property, plant & equipment 3,451 3,192 4,344 4,947 4,769 5,145 4,982 5,018 5,724 5,622 Intangible assets 467 420 399 233 111 164 Total assets 237,673 227,875 240,388 266,399 319,721 378,299 437,901 484,376 538,241 715,056

252 BANK OF CEYLON ANNUAL REPORT 2010 INVESTOR INFORMATION

For the year ended 31 December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Liabilities Deposits from customers 147,389 170,544 187,256 206,184 232,822 262,990 308,856 316,070 408,607 524,233 Borrowed funds 54,285 21,510 17,908 28,778 54,686 81,106 84,658 111,100 67,302 105,968 Tax payable 134 402 62 137 76 727 885 1,079 190 2,200 Deferred tax liability –––––––506409458 Other liabilities 12,070 12,356 11,242 9,152 8,436 11,714 13,302 14,531 18,789 15,258 Debentures 12,550 11,225 9,600 6,800 7,350 3,850 9,150 17,988 18,045 38,706 Total liabilities 226,428 216,036 226,068 251,051 303,370 360,387 416,851 461,274 513,342 686,822

Shareholders’ equity Stated capital 2,600 2,600 2,600 2,600 4,000 4,000 5,000 5,000 5,000 5,000 Permanent reserve fund 1,225 1,430 1,465 1,505 1,915 2,455 2,515 2,585 2,650 2,778 Retained profits 7,033 7,173 8,097 9,034 9,475 10,298 12,161 14,335 15,820 18,712 Reserves 387 636 2,158 2,209 961 1,159 1,374 1,182 1,429 1,642 Total shareholders’ equity 11,245 11,839 14,320 15,348 16,351 17,912 21,050 23,102 24,899 28,132 Total equity and liabilities 237,673 227,875 240,388 266,399 319,721 378,299 437,901 484,376 538,241 714,954

Commitments and contingencies 73,316 62,996 50,087 58,841 80,187 105,502 134,713 164,813 246,245 223,165

Ratios Return on average assets (%) 0.38 0.53 0.77 1.01 1.06 1.19 1.11 1.13 0.82 1.60 Return on average shareholders’ funds (%) - after tax 7.31 8.83 12.48 13.28 11.96 15.33 14.59 16.13 12.85 24.01 Income growth (%) 24.86 (13.49) (7.21) 5.05 14.05 28.80 42.53 19.98 5.45 (0.16) Capital adequacy ratio (%) - Tier I 12.40 11.64 12.11 12.33 12.67 11.90 11.38 11.29 11.22 10.30 - Tier I + Tier II 13.05 12.44 13.11 12.44 13.18 12.30 11.40 15.88 14.16 13.73 Capital funds to liabilities including contingent liabilities (%) 3.75 4.24 5.19 4.95 4.26 3.84 3.82 3.69 3.28 3.09 Liquidity ratio (%) 28.50 34.19 25.34 23.82 26.87 22.19 21.20 24.21 21.13 28.65 Cost to income ratio (%) 73.43 66.21 68.77 61.76 72.63 68.93 67.48 64.24 68.33 53.73

Other information No. of employees 9,245 9,268 8,927 8,718 8,891 8,363 8,253 7,912 7,538 8,204 No. of branches 296 297 299 300 304 305 307 309 310 309 No. of ATMs 54 79 85 104 104 190 203 251 329 352 No. of advances (in ‘000) 718 796 1,061 1,218 1,285 1,541 1,867 1,839 2,011 2,261 No. of depositors (in ‘000) 4,896 5,089 5,274 5,491 5,782 6,248 6,993 7,494 8,440 9,321 Cash flow from operating activities 6,970 16,396 18,187 1,374 (8,961) (24,200) (13,713) 30,262 100,115 3,084 Cash flow from investing activities 1,946 197 1,238 5,575 (6,315) (8,998) 3,034 (67,091) (20,775) (60,349) Cash flow from financing activities (8,104) (5,175) (5,901) 7,070 25,309 21,746 8,120 34,433 (45,144) 55,716 Capital expenditure on purchase of property, plant & equipment (377) (322) (519) (911) (927) (912) (514) (627) (1,391) (1,044)

BANK OF CEYLON ANNUAL REPORT 2010 253 INVESTOR INFORMATION

DESCLOSURE IN TERMS OF SECTION 7.6 (XVI) OF THE LISTING RULES OF THE COLOMBO STOCK EXCHANGE ON RELATED PARTY TRANSACTIONS EXCEEDING 10% OF THE EQUITY OR 5% OF THE TOTAL ASSETS OF THE BANK The Bank did not carry out any transactions exceeding 10% of the equity or 5% of the total assets of the Bank whichever is lower, with the related parties given in Note No. 47 to the Financial Statements, except for the transactions engaged with the Government of Sri Lanka.

The Government of Sri Lanka, who holds 100% shareholding in Bank of Ceylon, carries out transactions with the Bank, in the ordinary course of business and the aggregate monetary value of these transactions exceeded the threshold given in Section 7.6 (xvi) of the Listing Rules of Colombo Stock Exchange. These transactions include;

1. Overdraft facility granted to the Deputy Secretary to the Treasury.

2. Foreign currency loans granted to the Government of Sri Lanka.

3. Investment in Sri Lanka Development Bonds and Restructuring Bonds issued by the Government of Sri Lanka.

4. Extending of trade finance credit and other related services to facilitate import transactions of the Government of Sri Lanka.

5. Deposits made by the Government Departments with the Bank.

Most of these transactions are considered as recurrent nature transactions and the outstanding balances as at Balance Sheet date and the during the year transactions are given in the Note No. 47.4 to the Financial Statements.

254 BANK OF CEYLON ANNUAL REPORT 2010 GROUP STRUCTURE

Bank of Ceylon

Associates Subsidiaries

43.36% 100% 88.12%

Ceybank Asset Management Koladeniya Hydropower Bank of Ceylon (UK) Limited (Private) Limited (Private) Limited

41.67% 93.16%

Southern Development 94.59% Property Development PLC Financial Company Limited

24.69% 99.99%

Transnational Lanka Records Hotels Colombo (1963) Limited Solutions (Private) Limited

40% 55% 100%

Mireka Capital Land Ceylease Financial Services Ceybank Holiday Homes (Private) Limited Limited (Private) Limited

40.92% 100%

Lanka Securities 20% BoC Management & Support 42.86% (Private) Limited Services (Private) Limited

49.08% 100%

BoC Property Development & MBSL Savings Bank Limited 42.86% Management (Private) Limited

100%

14.28% BoC Travels (Private) Limited

85.79% 49% Merchant Credit of 72.14% Sri Lanka Limited

Merchant Bank of Sri Lanka PLC

72.14% 29% 51% MBSL Insurance 68.03% 100% Company Limited

BANK OF CEYLON ANNUAL REPORT 2010 255 SUBSIDIARIES & ASSOCIATES

Principal Activities Bank’s Interest Directors Highlights 2010 2009 % Rs. million Rs. million

SUBSIDIARY COMPANIES Property Development PLC Maintain, manage, develop 93.16 Dr. Gamini Wickramasinghe Stated capital 660.0 660.0 19th Floor, and sustain the utility and (Chairman) Total assets 2,256.3 2,122.3 BoC Head Office Building, value of Bank of Ceylon Mr. P A Lionel Investment by No. 4, Bank of Ceylon Mawatha, Head Office Building Mr. B M Amarasekera the Bank 740.1 740.1 Colombo 01 Dr. M S Perera Profit before tax 404.0 453.7 Tel: 011 2544328 Mr. L N de Silva Wijeyeratne Profit after tax 252.9 292.8 Mr. S E de Silva EPS (Rs.) 3.8 4.4 Secretaries Merchant Bank of Sri Lanka PLC

Merchant Bank of Sri Lanka PLC Leasing and hire purchase, 72.14 Mr. M R Shah Stated capital 1,607.0 1,607.0 BoC Merchant Tower, trade finance, corporate (Chairman) Total assets 7,182.6 5,578.9 No. 28, St. Michael’s Road, advisory services, fund Mr. V Kanagasabapathy Investment by Colombo 03 management, capital Ms. W A Nalani the Bank 2,122.6 2,122.6 Tel: 011 4711711, 011 2565636 market activities, Dr. R W T M Ranjith Bandara corporate secretarial and Mr. Lakshman Perera Profit before tax 650.7 254.3 legal services Mr. A B L A de Silva Profit after tax 449.7 201.0 Mr. P G Rupasinghe Mr. M S S Paramananda EPS (Rs.) 3.3 2.2 Secretary Ms. Marina Pillips Mr. B A C Fernando BoC Management & Support Provides management 100 Stated capital 1.0 1.0 (Chairman) Services (Private) Limited services Total assets 8.0 7.8 Mr. K Dharmasiri 25th Floor, Investment by Ms. L S L de S Wijeyeratne BoC Head Office Building, the Bank 1.0 1.0 No. 4, Bank of Ceylon Mawatha, Secretaries Profit before tax 0.4 0.5 Colombo 01 Merchant Bank of Sri Lanka PLC Profit after tax 0.3 0.4 Tel: 011 2446790 EPS (Rs.) 0.3 0.4

BoC Property Development & Renting of office space of 100 Mr. B A C Fernando Stated capital 1,010.0 1,010.0 Management (Private) Limited BoC Merchant Tower in (Chairman) Total assets 951.5 905.4 19th Floor, Colombo 03 and Ceybank Ms. S W S Fernando Investment by BoC Head Office Building, House in Kandy. Mr. P J Jayasinghe the Bank 1,010.0 1,010.0 No. 4, Bank of Ceylon Mawatha, Ms. S H Ranawaka Profit before tax 58.6 54.8 Colombo 01 Ms. W A Nalani Profit after tax 32.6 31.2 Tel: 011 2388229 (Alternate Director to EPS (Rs.) – – Mr. B A C Fernando) Secretaries Merchant Bank of Sri Lanka PLC

BoC Travels (Private) Limited Engages in travel related 100 Mr. Chandrasiri de Silva Stated capital 2.5 2.5 1st Floor, services (Chairman) Total assets 116.5 104.7 BoC Super Grade Branch Building, Mr. B A C Fernando Investment by Baseline Road, Ms. Kumudiniy Kulatunga the Bank 2.5 2.5 Colombo 08 Ms. Deepa Wanniaratchi Profit before tax 22.1 20.6 Tel: 011 2688154-8 Mr. M K Muthukumar Profit after tax 18.2 16.6 Mr. C Wijayatilake EPS (Rs.) 72.9 66.2 Ms. W A Nalani (Alternate Director to Mr. B A C Fernando) Secretaries Merchant Bank of Sri Lanka PLC

Hotels Colombo (1963) Limited Provides hotel services 99.99 Mr. Rohan Jayasinghe Stated capital 100.8 0.8 No. 2, York Street, (Chairman) Total assets 199.9 140.4 Colombo 1 Ms. Nalini Abeywardene Investment by Tel: 011 2320391-3 Mr. Chandrasiri de Silva the Bank 0.7 0.7 Mr. B A C Fernando Profit before tax 40.0 (14.6) Mr. M K Nandasiri Profit after tax 37.0 (14.7) Ms. W K I Kularatne EPS (Rs.) 40.7 – Mr. M P R Kumara Mr. C D K Walisundara Mr. J C Ratwatte Secretaries Merchant Bank of Sri Lanka PLC

256 BANK OF CEYLON ANNUAL REPORT 2010 SUBSIDIARIES & ASSOCIATES

Principal Activities Bank’s Interest Directors Highlights 2010 2009 % Rs. million Rs. million

Merchant Credit of Sri Lanka Limited Acceptance of deposits, 85.79 Mr. A B L A de Silva Stated capital 100.0 100.0 11th Floor, BoC Merchant Tower, granting lease facilities, (Chairman) Total assets 4,503.1 3,817.3 No. 28, St. Michael’s Road, hire purchase, loans and Mr. Raju Sivaraman Investment by Colombo 03 other credit facilities, Mr. H M A B Weerasekara the Bank 22.1 22.1 Tel: 011 2301500-3 pawning and real estate Dr. R W T M Ranjith Bandara Profit before tax 139.1 91.1 developments and related Ms. Sriyani Anandagoda Profit after tax 111.9 70.8 services Mr. M R Shah EPS (Rs.) 11.0 7.0 Mr. V Kanagasabapathy (Director for a short period) Secretaries Merchant Bank of Sri Lanka PLC

Ceylease Financial Services Limited Granting finance lease, 55.00 Mr. Raju Sivaraman Stated capital 200.0 200.0 No. 182, Platinum Tower, hire purchase, commercial(Chairman) Total assets 1,534.5 1,449.2 Elvitigala Mawatha, loan facilities and real estate Mr. W A Asoka Rupasinghe Investment by Colombo 08 developments and sales Ms. K A D Fernando the Bank 110.0 110.0 Mr. S Liyanwala Tel: 011 2681850, 011 2358000 Profit before tax 18.3 (132.2) Mr. B Premalal Profit after tax 15.7 (106.0) Mr. Kishan Jayasekara Mr. Chaminda Prabhath EPS (Rs.) 0.8 – Mr. M Aslam Omar (Alternate Director to Mr. Kishan Jayasekara) Secretaries Varners International (Private) Limited

Ceybank Holiday Homes Managing, operating 100 Dr. Gamini Wickramasinghe Stated capital – – (Private) Limited maintaining and conducting (Chairman) Total assets 14.6 10.00 Pilgrims, Rests, Hotels and Mr. B A C Fernando 12th Floor, Investment by Guest Houses in Sri Lanka Mr. C Samarasinghe BoC Head Office Building, the Bank – – Mr. D M Gunasekara No. 4, Bank of Ceylon Mawatha, Profit before tax 2.0 3.7 Mr. H M Mudiyanse Colombo 01 Ms. K A D A Pemadasa Profit after tax 1.1 2.8 Tel: 011 2447845 Mr. W G Ariyaratne EPS (Rs.) 16,169.7 40,182.2 Mr. K Dharmasiri (Alternate Director to Mr. B A C Fernando) Secretary Ms. Janaki Senanayake Siriwardane

MBSL Insurance Company Limited Offers Life and General 72.14 Mr. M R Shah Stated capital 528.5 478.5 No. 388, Galle Road, Insurance products (Chairman) Total assets 632.4 449.4 Colombo 03. Mr. Lakshman Perera Investment by Tel: 011 2574500 Mr. P G Rupasinghe the Bank – – Mr. A P G Karunathilake Profit before tax 10.0 (119.9) Dr. R W T M Ranjith Bandara Profit after tax 4.5 (119.9) Mr. P S K L Gajanayake EPS (Rs.) – – Mr. S Senerath Secretaries Merchant Bank of Sri Lanka PLC

Koladeniya Hydropowr (Private) Limited Hydropower generation 88.12 Dr. Gamini Wickramasinghe Stated capital – – No. 28/7A, Rathupalliya Road, (Chairman) Total assets 4.1 – Sarikkamulla, Dr. M S Perera Investment by Panadura Mr. S E de Silva the Bank – – Tel: 011 2544328 Mr. M W V Suranga Profit before tax (1.2) – Mr. U J Jayatissa Profit after tax (1.2) – Secretaries EPS (Rs.) – – M/S Em En Es (Assignments) (Private) Limited

Bank of Ceylon (UK) Limited Provides financial services 100 Dr. Gamini Wickramasinghe Stated capital 2,087.2 – No. 1, Devonshire Square, including accepting deposits (Chairman) Total assets 22,807.1 – London Ec 2M 4WD and dealing in investmentsMr. B A C Fernando Investment by United Kingdom Mr. I G C Madadeniya the Bank 2,087.2 – Tel: 0044 207 3771888 Ms. S K Jayasinghe Profit before tax (14.8) – Mr. David Swanney Profit after tax (14.8) – Mr. Roy England EPS (Rs.) – – Secretary Ms. S K Jayasinghe

BANK OF CEYLON ANNUAL REPORT 2010 257 SUBSIDIARIES & ASSOCIATES

Principal Activities Bank’s Interest Directors Highlights 2010 2009 % Rs. million Rs. million

ASSOCIATE COMPANIES Ceybank Asset Management Management of Unit (Private) Limited Trust Funds and other 43.36 Mr. K L Hewage Stated capital 37.6 25.0 3rd Floor, BoC Building, private portfolios (Chairman) Total assets 246.3 224.2 York Street, Mr. M Selvanathan Investment by Colombo 01 Mr. C Sathkumara the Bank 31.1 31.1 Tel: 011 7602000-2 Mr. B A C Fernando Profit before tax 53.1 19.0 Mr. D M Gunasekara Profit after tax 28.9 10.9 Mr. B Babu Rao EPS (Rs.) 0.8 0.4 Mr. M S P R Perera Mr. P P J Perera Mr. P A Lionel (Alternate Director to Mr. B A C Fernando) Secretaries Carsons Management Services (Private) Limited

Southern Development Financial Granting loan facilities 41.67 Mr. R Gunasekara Stated capital 60.0 60.0 Company Limited (Chairman) Total assets 37.9 43.1 No. 18, Bandarawatta, Mr. A Siripala Investment by Pamburana, Mr. D K N Piyasoma the Bank 25.0 25.0 Matara Secretaries Profit before tax (1.1) (1.7) Tel: 041 2221618 MSL Galle (Private) Limited Profit after tax (1.1) (2.2) EPS (Rs.) – –

Lanka Securities (Private) Limited Equity trading, 40.92 Mr. Salmaan Taseer Stated capital 279.6 279.6 No. 228/2, debt trading and (Chairman) Total assets 705.9 504.5 Galle Road, placements Mr. M Eshan ul-Haq Investment by Colombo 04 Mr. R Siriwardena the Bank 41.9 41.9 Tel: 011 4706757 Mr. K Dharmasiri Profit before tax 285.0 100.4 Mr. Farooq Bin Habib Profit after tax 186.1 62.5 Mr. K U D Gamage EPS (Rs.) 10.65 3.58 Mr. M R Shah Mr. S Muqeel Hasnain (Alternate Director to Mr. M Eshan ul-Haq) Mr. Shahbaz Ali Taseer (Alternate to Mr. Salmaan Taseer) Secretaries Merchant Bank of Sri Lanka PLC

258 BANK OF CEYLON ANNUAL REPORT 2010 SUBSIDIARIES & ASSOCIATES

Principal Activities Bank’s Interest Directors Highlights 2010 2009 % Rs. million Rs. million

Mireka Capital Land Purchasing, hiring and 40 Mr. S P Tao Stated capital 1,875.0 1,875.0 (Private) Limited acquiring real estate (Chairman) Total assets 5,555.9 5,635.2 No. 324, Havelock City, properties, real Mr. H Z Cassim Investment by Colombo 05 estate developments and Dr. Gamini Wickramasinghe the Bank 750.0 750.0 Tel: 011 2596793, 011 2502247 providing infrastructure Mr. K B S Bandara Profit before tax 189.4 106.6 facilities to real estate Mr. W P R P H Fonseka Profit after tax 176.8 106.5 development projects. Mr. A M de S Jayaratne EPS (Rs.) 0.94 0.57 Mr. L R de Lanerolle Ms. M T Ong Mr. M B Pereira (Alternate Director to Ms. M T Ong) Ms. B C D Wijayakulasuriya (Alternate Director to Dr. Gamini Wickramasinghe) Mr. T Muthugala (Alternate Director to Mr. W P R P H Fonseka) Mr. E P Ong (Alternate Director to Mr. S P Tao) Secretary Ms. Jayanga Kumudu Kumari Wegodapola

Transnational Lanka Real estate - renting out 24.69 Mr. C Samarasinghe Stated capital 81.0 81.0 Records Solutions (Private) Limited properties (Chairman) Total assets 163.9 120.4 No. 160/16, Mr. L R Watawala Investment by Kirimandala Mawatha, Mr. M H Cassim the Bank 20.0 20.0 Narahenpita, Mr. D K W Liew Profit before tax 20.7 19.7 Colombo 05 Ms. C K Jayaratne Profit after tax 17.9 16.2 Tel: 011 2369007, 011 2369001-4 Mr. S J Jebarathnam EPS (Rs.) 0.2 0.2 Mr. M S Saleem (Alternate Director to Mr. D K W Liew) Mr. T H C E de Silva (Alternate Director to Mr. S J Jebarathnam) Secretaries PW Corporate Secretarial (Private) Limited

MBSL Savings Bank Limited Provides financial services 49.08 Mr. M R Shah Stated capital 728.7 546.2 No. 2, Deal Place, including accepting deposits, (Chairman) Total assets 2,463.7 2,138.8 leasing, hire purchase Mr. A P G Karunathilake Colombo 03. Investment by and pawning Dr. T Senthilverl Tel: 011 2374000 the Bank – – Mr. B R S T Edirisinghe Profit before tax (20.9) 40.3 Dr. R W T M Ranjith Bandara Mr. P G Rupasinghe Profit after tax (20.9) 40.3 Mr. M S S Paramananda EPS (Rs.) – 0.4 Dr. S T S de Silva Secretary Mr. A V C Fernando

BANK OF CEYLON ANNUAL REPORT 2010 259 CORPORATE OFFICES & OVERSEAS BRANCHES

REGISTERED HEAD OFFICE TREASURY DIVISION METROPOLITAN BRANCH No. 4, Bank of Ceylon Mawatha, 7th Floor, Head Office Building, Bank of Ceylon Building, York Street, Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, Colombo 1, Sri Lanka. Tel:+94 11 2446790-811 (22 lines) Colombo 1, Sri Lanka. Tel: +94 11 2449063, 2329419, +94 11 2338741-55 (15 lines) Tel: +94 11 2471905, 2203603 2328521 (10 lines) +94 11 2544340-344 (5 lines) Fax: +94 11 2394583 Fax: + 94 11 2325629, 2328691, 2320838, Telegraphic Address: ’HEADBANK’ Email: [email protected] 2472646, 2328197 Telex: 21331 BOCST CE Branch Code - 760 Email: [email protected] SWIFT Code: BCEYLKLX Branch Code - 618 Website: www.boc.lk DEALING ROOM Bank Code - 7010 7th Floor, Head Office Building, TAPROBANE BRANCH No. 4, Bank of Ceylon Mawatha, Bank of Ceylon Building, York Street, INTERNATIONAL DIVISION Colombo 1, Sri Lanka. Colombo 1, Sri Lanka. 9th Floor, Head Office Building, Tel: +94 11 2445785-7, 2386862 Tel: +94 11 2422267, 2447173, No. 4, Bank of Ceylon Mawatha, Fax: +94 11 2445788 2328521 (10 lines) Colombo 1, Sri Lanka. Email: [email protected] Fax: + 94 11 2430267 Tel/Fax: +94 11 2445794 Branch Code - 760 Email: [email protected] Email: [email protected] Branch Code - 747 Branch Code - 087 PRIMARY DEALER UNIT 7th Floor, Head Office Building, OFFSHORE BANKING DIVISION CORRESPONDENT BANKING DIVISION No. 4, Bank of Ceylon Mawatha, 2nd Floor, Head Office Building, 9th Floor, Head Office Building, Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, No. 4, Bank of Ceylon Mawatha, Tel: +94 11 2448830 Colombo 1, Sri Lanka. Colombo 1, Sri Lanka. Fax: +94 11 2448207 Tel: +94 11 2338765, 2389123, 2389122, Tel: +94 11 2445791 Email: [email protected] 2346553, 2346598, 2346551 Fax: +94 11 2445791 Branch Code - 099 Fax: + 94 11 2448776, 2445784, Email: [email protected], [email protected] 2346536, 2346596 Branch Code - 087 CORPORATE BRANCH Email: [email protected] 1st, 2nd, 3rd Floors, Head Office Building, SWIFT Code: BCEYLKLX 131 INWARD REMITTANCES No. 4, Bank of Ceylon Mawatha, Branch Code - 726 8th Floor, Head Office Building, Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, Tel: +94 11 2446814, 2445803, 2345428, TRADE SERVICES Colombo 1, Sri Lanka. 2471613, 2446818-20 2nd Floor, Head Office Building, Tel: +94 11 2445792, 2541933, 5742978 Fax: +94 11 2389128, 2446813, 2399562 No. 4, Bank of Ceylon Mawatha, Fax: +94 11 2344845 Telex: 21331 Colombo 1, Sri Lanka. Email: [email protected] Email: [email protected], [email protected] Tel: +94 11 2394310, 2338763 Branch Code - 185 SWIFT Code: BCEYLKLX Fax: +94 11 2542170 Branch Code - 660 Email: [email protected] SWIFT/TELEX CENTRE Branch Code - 660 8th Floor, Head Office Building, PETTAH BRANCH No. 4, Bank of Ceylon Mawatha, No. 21/63, Gas Work Street, CORPORATE RELATIONS Colombo 1, Sri Lanka. Colombo 11, Sri Lanka. 2nd Floor, Head Office Building, Tel: +94 11 2544309 Tel: +94 11 2452368, 2393544, No. 4, Bank of Ceylon Mawatha, Fax: +94 11 2447171 2434478-9, 2431555 Colombo 1, Sri Lanka. Email: [email protected] Fax: +94 11 2432629, 2435949 Tel: +94 11 2446817, 2389124, 2447802, Branch Code - 087 Email: [email protected], [email protected] 2446814, 2440080 Branch Code - 004 Fax: +94 11 4713396, 2389128 Email: [email protected] Branch Code - 660

260 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE OFFICES & OVERSEAS BRANCHES

CREDIT SUPPORT CARD CENTRE OVERSEAS BRANCHES 3rd Floor, Head Office Building, World Trade Centre MALE BRANCH No. 4, Bank of Ceylon Mawatha, Echelon Square, West Tower, Bank of Ceylon, Colombo 1, Sri Lanka. Level - 1, Bank of Ceylon Mawatha, ‘Aage’ 12, Tel: +94 11 2541943 Colombo 1, Sri Lanka. Boduthakurufaanu Magu, Fax: +94 11 2446820 Tel: +94 11 2445799, 2325088, 2395806 Henveiru, Male 20094, Email: [email protected] Fax: +94 11 2325099, 2325092 Republic of Maldives. Branch Code - 660 Email: [email protected], [email protected] Tel: 00960 3323045, 00960 3323046 Branch Code - 731 Fax: 00960 3320575 SECOND CORPORATE BRANCH SWIFT Code: BCEYMVMV 3rd Floor, Head Office Building, ELECTRONIC BANKING UNIT Email: [email protected] No. 4, Bank of Ceylon Mawatha, 21st Floor, Head Office Building, Branch Code - 632 Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, Tel: +94 11 2325742 Colombo 1, Sri Lanka. CHENNAI BRANCH Fax: +94 11 2446816 Tel: +94 11 2542162, 2204650-54 (5 lines) Bank of Ceylon Email: [email protected] Fax: +94 11 2447569 1090, Poonamallee High Road, Branch Code - 822 Email: [email protected] Chennai 600 084, India. Branch Code - 777 Tel: 009144-26423501, 26420972 RECOVERY - CORPORATE Fax: 009144-25325590 3rd Floor, Head Office Building, ISLAMIC BANKING UNIT SWIFT Code: BCEYIN5M No. 4, Bank of Ceylon Mawatha, 25th Floor, Head Office Building, Email: [email protected] Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, Branch Code - 758 Tel: +94 11 2386080, 2203410, Colombo 1, Sri Lanka. Fax: +94 11 2389130 Tel: +94 11 2205036 Email: [email protected] Fax: +94 11 2445811 Branch Code - 2220 Email: [email protected] Branch Code - 776 RECOVERY - PROVINCE 3rd Floor, Head Office Building, INVESTMENT BANKING DIVISION No. 4, Bank of Ceylon Mawatha, 23rd Floor, Head Office Building, Colombo 1, Sri Lanka. No. 4, Bank of Ceylon Mawatha, Tel: +94 11 2394584, 2439540 Colombo 1, Sri Lanka. Fax: +94 11 2452017 Tel: +94 11 2346845, 2448348 Email: [email protected], [email protected] Fax: +94 11 2346842 Branch Code - 2210 Email: [email protected] Branch Code - 756 PRODUCT AND DEVELOPMENT BANKING DIVISION CONSUMER PRODUCT MANAGEMENT 25th Floor, Head Office Building, 20th Floor, Head Office Building, No. 4, Bank of Ceylon Mawatha, No. 4, Bank of Ceylon Mawatha, Colombo 1, Sri Lanka. Colombo 1, Sri Lanka. Tel: +94 11 2395812, 2394592 Tel: +94 11 2435811, 2448606, Fax: +94 11 2439558 5764241, 5764247 Email: [email protected] Fax: +94 11 2338762, 2445812 Branch Code - 1800 Email: [email protected] Branch Code - 1630

BANK OF CEYLON ANNUAL REPORT 2010 261 BOC SERVICE POINTS

Northern Province 61

North Central Province 67

North Western Province Eastern 84 Province 62

Central Province 95

Western Uva Province Province 284 54 Sabaragamuwa Province 71

Southern Province 97

BANK OF CEYLON SERVICE POINTS AS AT 31 DECEMBER 2010

Province No. of No. of No. of Total Branches Extension Offices ATMs Service Points

Central Province 33 28 34 95 Eastern Province 17 30 15 62 North Central Province 30 12 25 67 Northern Province 17 23 21 61 North Western Province 34 17 33 84 Sabaragamuwa Province 24 23 24 71 Southern Province 37 20 40 97 Uva Province 25 13 16 54 Western Province - North 41 18 62 121 Western Province - South 43 21 70 134 Corporate Branches 6 13 10 29 Overseas Branches 2 0 2 4

309 218 352 879

262 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 95 CENTRAL PROVINCE

Branch Name of Branch Telephone E-Mail Address Address Branch Name of Branch Telephone E-Mail Address Address Code Code

768 Alawathugoda 066-2242327 [email protected] 1496, Matale Road, 531 Talawakelle „ 052-2258892 [email protected] 29, Hatton Road, Alawathugoda Talawakelle 576 Dambulla ‘ 066-2285270 [email protected] 438 D, Anuradhapura 606 Udadumbara 081-2402317 [email protected] 44, 46, Mahiyangana Road, Road, Dambulla Udadumbara 273 Digana 081-2376928 [email protected] 2, New Town, Digana, 743 Walapane c 052-2279238 [email protected] Ratnayake Building, Rajawella Walapana 615 Galagedara 081-2461214 [email protected] 237, Rambukkana Road, 340 Wattegama 081-2475838 [email protected] 4/110, Kandy Road, Galagedara Wattegama 101 Galaha 081-2467213 [email protected] 59/37, Deltota Road, 144 Yatawatta 066-2221084 [email protected] 35 A, Matalapitiya Road, Galaha Yelakkaraya, Yatawatta 432 Galewala c 066-2289262 [email protected] 168, Kurunegala- Dambulla Road, Galewala 575 Gampola c 081-2350108 [email protected] 79, Kadugannawa Road, Extension Office Telephone Address Gampola 1. Agarapatana „ 051-2230133 24, Main Street, Agarapatana 524 Gelioya 081-2310214 [email protected] 430/B, Gampola Road, Karamada, Gelioya 2. Akurana 081-2301477 197, Matale Road, Akurana 040 Hatton „ 051-2225015 [email protected] 46, Circular Road, Hatton 3. Bogawanthalawa „ 052-2267599 30, Bridwell Bazaar, Bogawanthalawa 633 Kandapola 052-2229636 [email protected] 30, 31, 32, Main Street, Kandapola 4. BOI Pallekele 081-5672445 Kandy Industrial Park, Pallekelle 002 Kandy c 081-2223697 [email protected] 88, Dalada Veediya, Kandy 5. Bokkawala 081-2461056 33/1, Bokkawala Main Street, Bokkawala 649 Kandy City ‘ 081-2234292 [email protected] 22, Dalada Veediya, Kandy 6. Danture 081-2575228 572, Main Street, Danture 666 Katugastota 081-2499398 [email protected] 161/A, Madawala Road, Katugastota 7. Daulagala 081-2315171 01/1, Imbuldeniya, Handessa 8. Dedicated Economic Centre 066-2285217 Dedicated Economic Centre, 581 Madawala c 081-2470484 [email protected] 35 A2, Wattegama Road, - Dambulla Dambulla Madawala z 9. Digana Village 081-2375851 Digana Village, Digana 506 Maskeliya 052-2277280 [email protected] 66, Upcot Road, Maskeliya 10. Gampola City 081-2354214 23, Nawalapitiya Road, Gampola 068 Matale c 066-2222262 [email protected] 5/2, Trincomalee Street, Matale 11. Ginigathhene 051-2242310 91/1, Hatton Road, Ginigathhene 092 Naula c 066-2246280 [email protected] 85, Dambulla Road, Naula 12. Hatharaliyadda 081-2464187 21/5, Kandy Road, 598 054-2222233 [email protected] 106, Gampola Road, Nawalapitiya „ Hatharaliyadda Nawalapitiya 13. Kandy City Centre ‘ 081-2205110 Premises No. 19, Level 1, 029 Nuwara Eliya „ 052-2224047 [email protected] 43, Lawson Street, Dalada Veediya, Kandy Nuwara Eliya 14. Kandy Kachcheri 081-2224214 Kachcheri Building, Kandy 492 Padiyapelella 052-3536628 [email protected] 35, 35 1/1 Ragala Road, Padiyapelella 15. Kandy Teaching Hospital 081-2233335 Kandy Teaching Hospital, Kandy 640 Pallepola „ 066-2247272 [email protected] 19, 19/1 Akuramboda 16. Kotagala „ 051-2223206 184-186 Wooten Bazaar, Road, Pallepola Kotagala 588 Peradeniya 081-4475283 [email protected] 1157, Sirimavo 17. Matale Kachcheri 066-2222024 Kachcheri Building, Matale Bandaranaike Mawatha, 18. Meepilimana 052-2234410 67/68 A, Meepilimana, Peradeniya Nuwara Eliya 587 Pilimatalawa 081-5674566 [email protected] 237, Colombo Road, 19. Menikhinna 081-2376911 19, Teldeniya Road, Menikhinna Pilimatalawa 20. Nuwara Eliya Kachcheri 052-2222770 Kachcheri Building, Nuwara Eliya 425 Pundaluoya 051-2233205 [email protected] 45, Upper Bazaar, „ 21. Palapathwala 066-2225505 409, Matale Road, Palapathwala Pundaluoya 22. Peradeniya Botanical Gardens 081-2386463 Peradeniya Botanical Gardens 337 Pussellawa „ 081-2478664 [email protected] 500, Nuwara Eliya Road, Pussellawa 23. Poojapitiya 081-2301718 15, Medawala Road, Poojapitiya 639 Rattota 066-2255280 [email protected] 72, Main Street, Rattota 24. Ragala „ 052-2265660 1/19, Ragala, Halgranoya 167 Rikillagaskada c 081-2365314 [email protected] 3, Dimbulkumbura Road, 25. Sigiriya 066-2286270 1, Air Port Road, Kimbissa Rikillagaskada 26. Teldeniya 081-2376820 19, Circular Road, New Town, 650 Talatuoya 081-2404334 [email protected] 2 B, Kandy Road, Talatuoya Karaliyadda, Teldeniya 27. University of Peradeniya 081-2392422 University of Peradeniya, Peradeniya Holiday Banking Service 28. Wilgamuwa 066-2250002 80/2/1, Hettipola New Town, Wilgamuwa Saturday c Sunday „ Saturday & Sunday ‘ Night Banking z

BANK OF CEYLON ANNUAL REPORT 2010 263 BOC SERVICE POINTS 62 EASTERN PROVINCE

ATMs No. Branch Name of Branch Telephone E-Mail Address Address Code 1. Alawathugoda Branch 1 590 Akkaraipattu 067-2277235 [email protected] 288, Main Street, 2. Dambulla Branch 1 Akkaraipattu 3. Dedicated Economic Centre, Dambulla 1 021 Ampara 063-2222137 [email protected] 115 A, D. S. Senanayaka 4. Digana Branch 1 Street, Ampara 5. Galagedara Branch 1 012 Batticaloa 065-2227410 [email protected] Covington Road, Batticaloa 6. Galewala Branch 1 630 Chenkalady 065-2240492 [email protected] Trincomalee Road, 7. Gampola Branch 1 Chenkalady 8. Gelioya Branch 1 509 Hingurana 063-2240037 [email protected] Jeyalanka Building, 9. Hatton Branch 1 Hingurana Junction, Hingurana 10. Kandy Branch 3 510 Kalmunai 067-2229774 [email protected] 78, Kitddanki Road, Kalmunai 11. Kandy City Centre - Extension Office 1 611 Kalawanchikudy 065-2250012 [email protected] Main Street, Kalawanchikudy 12. Kandy Teaching Hospital - Extension Office 1 623 Kantale 026-2234230 [email protected] 91, Agrabodhi Mawatha, 13. Kandy Second City Branch 2 Kantale 14. Katugastota Branch 1 648 Kattankudy 065-2246613 [email protected] 40, 40b, 40c, Fowzy 15. Madawala City Branch 1 Mawatha, Kattankudy-1 16. Maskeliya Branch 1 735 Kinniya 026-2236270 [email protected] 27, 27/1, 27/2, 29, Lathef 17. Matale Branch 2 Vidhanayar Road, Kinniya 18. Naula Branch 1 118 Mutur 026-2238327 [email protected] 38, Batticaloa Road, Mutur 19. Nawalapitiya Branch 1 591 Nintavur 067-3696117 [email protected] 75, Main Street, Nintavur 20. Nuwara Eliya Kachcheri - Extension Office 1 318 Pottuvil 063-2248021 [email protected] Main Street, Pottuvil 21. Nuwara Eliya Branch 1 440 Sammanthurai c 067-2260898 [email protected] 49/1 C , Ampara Road, 22. Pallekelle Extension Office 1 Sammanthurai 23. Peradeniya Branch 1 006 Trincomalee 026-2223084 [email protected] 24, Inner Harbour Road, Trincomalee 24. Peradeniya Botanical Gardens - Extension Office 1 624 Trincomalee City c 026-2223880 [email protected] 9, Main Street, Trincomalee 25. University of Peradeniya - Extension Office 1 @ 26. Rikillagaskada Branch 1 626 Valachchenai 065-2257007 boc626 boc.lk Main Street, Valachchenai 27. Sigiriya Extension Office 1 28. Talawakelle Branch 1 Extension Office Telephone Address 29. Udadumbara Branch 1 30. Wattegama Branch 1 1. Addalaichchenai 067-2279303 Main Street, Addalaichchenai 2. Ampara Kachcheri 063-2224150 Kachcheri Building, Ampara 3. Arayampathy 065-2247939 Co-operative Building, Kalmunai Road, Arayampathy 4. Batticaloa 065-2227032 5, Station Road, Batticaloa 5. Batticaloa Kachcheri 065-2257708 Kachcheri Building, Batticaloa 6. China Bay (4th Mile Post) 026-2242327 61, Kinniya Road, China Bay 7. Eastern University 065-2240490 Vantharumulai, Batticaloa 8. Eravur 065-2241012 Divisional Secretariat Building, Eravur 9. Gonagolla 063-3632943 Kandy Road, Gonagolla 10. Kallady 065-2227962 180 A, New Kalmunai Road, Kallady 11. Kallar 067-2225421 Main Street, Periyakallar-1 12. Karadiyanaru 065-2241330 1, Badulla Road, Karadiyanaru 13. Karitivu 067-2225484 20, Main Street, Karitivu 14. Kokkaddicholai 065-2227916 Main Street, Ward No. 10, Kokkaddicholai 15. Mamanagam 065-2227973 450, Bar Road, Mamanagam, Batticaloa 16. Maruthamunai 067-2220503 Main Street, Periyanilawanai, Maruthamunai Holiday Banking Service 17. Morawewa 026-2225825 Provincial Council Building, Morawewa 18. Nilaveli 026-2232290 Ward No. 2, Main Street , Nilaveli Saturday c 19. Oddamavadi 065-2258111 Main Street, Mawadichchenai, Sunday „ Oddamavadi Saturday & Sunday ‘ 20. Polwatta 063-2242128 10, Polwaga Janapadaya, Night Banking z Polwatta, Ampara

264 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 67 NORTH CENTRAL PROVINCE

Extension Office Telephone Address Branch Name of Branch Telephone E-Mail Address Address Code 21. Sainthamarathu 067-2220478 15, Main Street, Sainthamarathu - 11 022 Anuradhapura c 025-2222393 [email protected] Maithripala Senanayake Mawatha, Anuradhapura 22. Serunuwara 026-2251010 Agrarian Service Building, Serunuwara 551 Anuradhapura 025-2225932 [email protected] Market Complex, 23. Thambiluvil 067-2265309 Main Street, Thambiluvil - 2 City c Anuradhapura 24. Thampalagamam 026-2248043 Agrarian Service Building, 098 Anuradhapura 025-2223685 [email protected] New Town, Anuradhapura Kandy Road, Thampalagamam New Town ‘ 25. Thoppur 026-2240989 Main Road, Thoppur 599 Aralaganwila c 027-3279257 [email protected] Aralaganwila 26. Trincomalee Kachcheri 026-2222465 Kachcheri Building, Trincomalee 652 Bakamoona c 066-2256680 [email protected] Lanka Banku Mawatha, 27. Uhana 063-2250001 Jayanthi Building, Kandy Road, Uhana Bakamoona 28. Uppuveli 026-2226227 Agrarian Service Centre, 686 Dehiattakandiya c 027-2250287 [email protected] New Town, Dehiattakandiya Love Lane, Uppuveli 692 Eppawala 025-2249180 [email protected] Talawa Road, Eppawala 29. Vakarai 065-2258181 Trincomalee Road, Kandalady, Vakarai 122 Galenbindunu- 025-2258280 [email protected] Denzil Kobbekaduwa 30. Vellavely 065-2251113 100 B, Main Street, Vellavely wewa c Mawatha, Galenbindunuwewa 653 Galkiriyagama c 025-3853065 [email protected] New Town, Galkiriyagama ATMs No. 514 Galnewa c 025-3855484 [email protected] Thambuttegama Road, Galnewa 1. Akkaraipattu Branch 1 601 Hingurakgoda „ 027-2247642 [email protected] St. Micheal Building, 2. Ampara Branch 1 Main Street, Hingurakgoda 3. Batticaloa Branch 1 217 Horowpatana c 025-2278416 [email protected] Anuradhapura Road, 4. Chenkalady Branch 1 Horowpatana 5. Eastern University Extension Office 1 236 Ipalogama „ 025-2264279 [email protected] Kekirawa Road, Ipalogama 6. Kalawanchikudy Branch 1 600 Jayanthipura c 027-2222266 [email protected] 22nd Mile Post, Jayanthipura 7. Kalmunai Branch 1 502 Kaduruwela 027-2225025 [email protected] 612, 614, Batticaloa Road, 8. Kantale Branch 1 c Kaduruwela 9. Mutur Branch 1 622 Kahatagasdigiliya c 025-2247480 [email protected] Trincomalee Road, 10. Sri Lanka Navy - Trincomalee 1 Kahatagasdigiliya 11. Pothuvil Branch 1 621 Kebithigollawa „ 025-2298680 [email protected] Horowpatana Road, 12. Sammanthurai Branch 1 Kebithigollawa @ 13. Trincomalee Branch 1 676 Kekirawa c 025-2264162 boc676 boc.lk 3, Habarana Road, Kekirawa 14. Sri Lanka Air Force China Bay - Trincomalee 1 654 Madatugama c 025-2264283 [email protected] Kekirawa-Dambulla Road, 15. Valachchenai Branch 1 Madatugama 162 Medawachchiya c 025-2245683 [email protected] 36, Jaffna Road, Medawachchiya 641 Medirigiriya c 027-2248337 [email protected] School Junction, Medirigiriya 728 Meegalewa „ 025-3855054 [email protected] Meegallewa 335 Mihintale c 025-2266503 [email protected] Trincomalee Road, Mihintale 656 Nochchiyagama 025-2257880 [email protected] Main Street, Nochchiyagama 127 Padavi 025-2254018 [email protected] Padavi Parakramapura Parakramapura c 152 Pemaduwa c 025-2223307 [email protected] Mannar Road, Pemaduwa 083 Polonnaruwa 027-2223009 [email protected] 286, 286/1, New Town, New Town c Polonnaruwa New Town 183 Sewagama c 027-2222585 [email protected] Nandana Building, Sewagama 655 Thambuttegama c 025-2276280 [email protected] Rajanganaya Road, Thambuttegama Holiday Banking Service 157 Tirappana c 025-3853087 [email protected] Colombo-Anuradhapura Road, Tirappana Saturday c Sunday „ Saturday & Sunday ‘ Night Banking z

BANK OF CEYLON ANNUAL REPORT 2010 265 BOC SERVICE POINTS 61 NORTHERN PROVINCE

Extension Office Telephone Address Branch Name of Branch Telephone E-Mail Address Address Code 1. Anuradhapura Kachcheri 025-2222142 Kachcheri Building, Anuradhapura 778 Atchuvely c 021-3215237 [email protected] Central College View, Rosa Veethy, Atchuvely 2. Galamuna „ 027-2226650 Galamuna, Pansalgodalla 501 Chavakachcheri c 021-3214229 [email protected] V.M.K. Building, Kandy Road, 3. General Hospital - 025-3778400 General Hospital, Chavakachcheri Anuradhapura Anuradhapura 053 Chunnakam c 021-3214228 [email protected] 146, KKS Road, Chunnakam 4. Habarana 066-2270048 Trincomalee Road, Habarana 005 Jaffna c 021-2224018 [email protected] 476, 476 A, 5. Minneriya „ 027-2245333 Habarana Road, Minneriya Hospital Road, Jaffna 6. Padaviya 025-2253011 Bandaranayake Mawatha, 500 Jaffna City 021-2222598 [email protected] 56, Stanley Road, Jaffna Padaviya 605 Kankesanthurai 021-3212716 [email protected] 51, K.K.S. Road, 7. Rajanganaya „ 025-2276558 5th Mile Post, Rajanganaya Kankesanthurai 8. Rajina Junction 025-2276538 157, Rajina Junction, 749 Karainagar 021-3212381 [email protected] Post Office View, Karainagar Thambuttegama 063 Kayts c 021-3215215 [email protected] Vangalavadi Junction, 9. Rambewa 025-2266555 Jaffna Road, Rambewa Velanai 10. Ranajayapura 025-2262003 Ranajayapura, Ipalogama 093 Kilinochchi 024-3248004 [email protected] Karadipokku Junction, A9 Road, Kilinochchi 11. Sevanapitiya c 060-2277263 63, Sevanapitiya 281 Manipay c 021-2255188 [email protected] 174, Jaffna Road, Manipay 12. Thalawa 025-2275090 Anuradhapura Road, Talawa 574 Mankulam 024-3248037 [email protected] Main Road Mallavie, Mankulam 046 Mannar c 023-2251001 [email protected] 52, Pallimunai Road, ATMs No. Grand Bazaar, Mannar 1. Sri Lanka Air Force - Anuradhapura 1 511 Mullaitivu 024-3245730 [email protected] Paranthan Road, Mullaitivu 2. Sri Lanka Air Force - Hingurakgoda 1 638 Nelliady c 021-2264815 [email protected] Thikkam Road, Karaveddy, Nelliady 3. Anuradhapura Branch 2 028 Point Pedro c 021-2263570 [email protected] 155/10, Main Street, 4. Anuradhapura City Branch 1 Point Pedro 5. Anuradhapura General Hospital Extention Office 1 761 Thirunelveli c 021-2223948 [email protected] 531, Palaly Road, Thirunelveli 6. Bakamoona Branch 1 044 Vavuniya c 024-2222358 [email protected] 75, Station Road, Vavuniya 7. Dehiattakandiya Branch 1 8. Galenbindunuwewa Branch 1 9. Galnewa Branch 1 Extension Office Telephone Address 10. Hingurakgoda Branch 1 1. Anandakulam W/C* 023-3233751 Anandakulam, Adampan 11. Horowpatana Branch 1 2. Ananthakumarasamy W/C* 024-3248036 Zone 01, Menik Farm, Wanni 12. Kaduruwela Branch 1 3. Chankanai c 021-3214232 Main Street, Chankanai 13. Kekirawa Branch 1 4. Delft 021-3205614 Delft 14. Maliban Textiles (Private) Limited - Dehiattakandiya 1 5. Jaffna Bus Stand 021-2221010 400, Hospital Road, Jaffna 15. Medawachchiya Branch 1 6. Jaffna Kachcheri 021-2228808 Kachcheri Building, Jaffna 16. Medirigiriya Branch 1 7. Jaffna Main Street 021-2224564 St. Martin Bishops House, Main Street, Jaffna 17. Mihintale Branch 1 8. Kaithady 021-3737100 Kandy Road, Jaffna 18. New Town - Anuradhapura Branch 1 9. Kayts 021-3214227 Main Street, Kayts 19. Padavi Parakramapura Branch 1 10. Kodikamam 021-3737070 Kandy Road, Jaffna 20. Polonnaruwa Hospital Branch 1 11. Kokuvil 021-3737765 K.K.S. Road, Kokuvil 21. Rajarata University 1 12. Kopay c 021-2228484 Kopay 22. Ranajayapura Extension Office 1 13. Mallavi 024-3248038 Main Street, Mallavi 23. Tambuttegama Branch 1 14. Mannar Kachcheri 023-2232234 Kachcheri Building, Wanni 24. Nochchiyagama Branch 1 15. Murunkan c 023-3238095 Chilawatura Road, Murunkan 16. Nanatan 023-3233515 Uyilankulam Road, Moddakkadai, Nantan 17. Pesalai 023-3233511 Church Road, Pesali 18. Poovarasakulam (Thalikkulam) 024-3248002 Mannar Road, Poovarasakulam, Holiday Banking Service Vavuniya 19. Puthukulam 024-3248034 Sasthri Kolankulam, Vavuniya Saturday c 20. Talaimannar Pier 023-2281085 Thalaimannar Pier, Thalaimannar Sunday „ 21. Valvettiturai 021-2264883 D, Yale Road, Valvettiturai Saturday & Sunday ‘ 22. Vavuniya Kachcheri 024-2222626 Kachcheri Building, Vavuniya Night Banking z 23. Zone 4 W/C* 060-2248039 Zone 4, Menik Farm, Wanni

* W/C - Welfare Centre

266 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS

ATMs No. Branch Name of Branch Telephone E-Mail Address Address Code 1. Adampan Extention Office 1 052 Kuliyapitiya 037-2281280 [email protected] 70, Madampe Road, 2. Ananthakumarasamy W/C* 1 c Kuliyapitiya 3. Atchuveli Branch 1 009 Kurunegala c 037-2233880 [email protected] Commercial Complex, 4. Chavakachcheri Branch 1 Kurunegala 5. Chunnakam Branch 1 513 Kurunegala 037-2231472 [email protected] 34, Colombo Road, 6. Jaffna Branch 1 City ‘ Kurunegala 7. Jaffna Campus - Thirunelvely 1 544 Madampe 032-2247680 [email protected] 10, Station Road, Madampe 8. Jaffna Hospital 1 565 Madurankuliya c 032-2268003 [email protected] 66, Colombo Road, Madurankuliya 9. Jaffna Main Street, Extention Office 1 564 Maho c 037-2275280 [email protected] 145, Nikaweratiya Road, 10. Jaffna Second City Branch 1 Maho 11. Kilinochchi Branch 1 257 Mawathagama „ 037-2299259 [email protected] Kandy Road, Mawathagama 12. Mallawi Extention Office 1 555 Melsiripura „ 037-2250088 [email protected] 254, Dambulla Road, 13. Manipay Branch 1 Melsiripura 14. Mankulam Branch 1 534 Narammala „ 037-2248771 [email protected] 139, Negombo Road, Narammala 15. Mannar Branch 1 050 Nattandiya „ 032-2254280 [email protected] Kuliyapitiya Road, Nattandiya 16. Nelliady Branch 1 547 Nikaweratiya c 037-2260922 [email protected] Puttalam Road, Nikaweratiya 17. Point Pedro Branch 1 779 Norochcholai c 032-2268555 [email protected] Kalpitiya Road, Norochcholai 18. Vavuniya Branch 2 546 Pannala c 037-2245071 [email protected] Public Ground Road, Pannala 19. Vavuniya Kachcheri Extension Office 1 526 Polgahawela 037-2243280 [email protected] 64, Kegalle Road, 20. Zone 4 W/C* 1 Polgahawela * W/C - Welfare Centre 664 Pothuhera c 037-2237619 [email protected] 96, Colombo Road, Pothuhera 048 Puttalam „ 032-2265255 [email protected] 53, Kurunegala Road, 84 Puttalam 532 Ridigama c 037-2252080 [email protected] 84, Kurunegala Road, NORTH-WESTERN PROVINCE Ridigama Branch Name of Branch Telephone E-Mail Address Address 558 Waikkal 031-2277280 [email protected] Thopputhota, Waikkal Code 379 Wariyapola „ 037-2267348 [email protected] 1, Chilaw Road, Wariyapola 498 Alawwa 037-2278032 [email protected] 64, Giriulla Road, Alawwa 104 Welpalla 031-2299512 [email protected] Agriculture Service Centre, 548 Anamaduwa „ 032-2263280 [email protected] 27, 27/1, & 31, Kurunegala Welpalla Road, Anamaduwa 508 Wennappuwa c 031-2255280 [email protected] 197, Chilaw Road, 554 Bingiriya „ 032-2246107 [email protected] 35 A, Chilaw Road, Bingiriya Wennappuwa 020 Chilaw c 032-2222335 [email protected] Radaguru Edmund Peiris Mawatha, Chilaw 497 Dankotuwa 031-2258180 [email protected] 46, 48, Kurunegala Road, Extension Office Telephone Address Dankotuwa 1. Ambanpola c 037-2254099 Anuradhapura Road, Ambanpola @ 580 Dummalasuriya 032-2240690 boc580 boc.lk 227, Kuliyapitiya- 2. Anavilundawa 032-2259050 55, 57, Puttalam Road, Madampe Road, Anavilundawa Dummalasuriya 3. Dambadeniya c 037-2266144 70, Kurunegala Road, Dambadeniya 549 Galgamuwa „ 037-2253080 [email protected] 67, 69, Anuradhapura Road, Galgamuwa 4. Katupotha 037-2247471 Rambawewa Road, Katupotha 553 Giriulla c 037-2288080 [email protected] Market Complex, Giriulla 5. Kirimatiyana 031-2249960 60, Negombo Road, Kirimatiyana, Lunuwila 570 Hettipola c 037-2291080 [email protected] 45, 47, Kurunegala Road, Hettipola 6. Kochchikade c 031-2277353 23, Chilaw Road, Kochchikade 569 Hiripitiya „ 037-2264080 [email protected] Kumbukgete Road, Hiripitiya 7. Kurunegala Kachcheri 037-2229726 Kachcheri Building, Kurunegala 770 Ibbagamuwa c 037-2259970 [email protected] 110, Dambulla-Kurunegala 8. Makandura „ 031-2298303 Bandaranayaka Mawatha, Road, Ibbagamuwa Makandura 589 Kalpitiya „ 032-2260702 [email protected] 90, Main Street, Kalpitiya 9. Marawila 032-2252675 27/1, Chilaw Road, Marawila 10. Palaviya 032-2269210 Deshani Motors Building, 172 Kobeigana 037-2293101 [email protected] Main Street, Kobeigana Colombo Road, Palaviya 11. Paragahadeniya 037-2296085 Kandy Road, Paragahadeniya 12. Polpithigama 037-2273103 Madagalla Road, Polpithigama Holiday Banking Service 13. Puttalam Kachcheri 032-2265351 Kachcheri Building, Puttalam 14. Toduwawa 032-2256330 Church Road, Thoduwawa Saturday c c 15. Udappuwa 032-2258675 47, Main Street, Udappuwa Sunday „ 16. Wayamba University 037-2284480 Wayamba University, Kuliyapitiya Saturday & Sunday ‘ 17. Wellawa 037-2235499 Sovis Building, Hiripitiya Road, Night Banking z Wellawa

BANK OF CEYLON ANNUAL REPORT 2010 267 BOC SERVICE POINTS 71 SABARAGAMUWA PROVINCE

ATMs No. Branch Name of Branch Telephone E-Mail Address Address Code 1. Alawwa Branch 1 566 Aranayake 035-2258016 [email protected] 480, Dippitiya, Aranayake 2. Anamaduwa Branch 1 530 Avissawella c 036-2222099 [email protected] 47, Dharmapala Mawatha, 3. Bingiriya Branch 1 Avissawella 4. Chilaw Branch 1 401 Ayagama 045-2250080 [email protected] 38, Kalawana Road, 5. Dankotuwa Branch 1 Ayagama 6. Dummalasuriya Branch 1 688 Balangoda „ 045-2288390 [email protected] 137, Main Street, Balangoda 7. Galgamuwa Branch 1 634 Dehiowita ‘ 036-2222580 [email protected] 62, Main Street, Dehiowita 8. Giriulla Branch 1 642 Deraniyagala 036-2249280 [email protected] 4, Dehiowita Road, Deraniyagala 9. Hettipola Branch 1 057 036-2259571 [email protected] 46, Main Street, Eheliyagoda 10. Hiripitiya Branch 1 Eheliyagoda „ @ 11. Kalpitiya Branch 1 535 Embilipitiya 047-2230980 boc535 boc.lk 545, New Town, Embilipitiya @ 12. Katupotha Extention Office 1 772 Hemmathagama 035-2257280 boc772 boc.lk 86, Mawanella Road, Hemmathagama 13. Kuliyapitiya Branch 2 507 Kahawatta 045-2270180 [email protected] 746, Main Street, Kahawatta 14. Kurunegala Branch 1 645 Kalawana 045-2255280 [email protected] 53C, 53C 1/1, 53C 1/2, 15. Kurunegala Base Hospital 1 Ratnapura Road, Manana, 16. Kurunegala City Branch 2 Kalawana @ 17. Kurunegala Kachcheri 1 027 Kegalle 035-2230600 boc027 boc.lk 110, Colombo Road, Kegalle @ 18. Madampe Branch 1 536 Kegalle City 035-2222550 boc536 boc.lk 681/5, Main Street, Kegalle @ 19. Madurankuliya Branch 1 325 Kuruwita c 045-2262581 boc325 boc.lk 60, Ratnapura Road, Kuruwita 20. Mawathagama Branch 1 559 Mawanella 035-2246280 [email protected] 43, Main Street, Mawanella 21. Melsiripura Branch 1 597 Nivitigala „ 045-2279086 [email protected] 72, Kalawana Road, 22. Narammala Branch 1 Nivitigala 23. Nattandiya Branch 1 683 Pelmadulla 045-2274380 [email protected] 57, Main Street, Pelmadulla 24. Nikaweratiya Branch 1 594 Rakwana c 045-2246280 [email protected] 51, Main Street, Rakwana 25. Norochcholai Branch 1 582 Rambukkana 035-2265280 [email protected] 8 A, Diyasunnatha Mawatha, 26. Pannala Branch 1 Rambukkana 27. Polgahawela Branch 1 031 Ratnapura „ 045-2222100 [email protected] 6, Dharmapala Mawatha, Ratnapura 28. Puttalam Branch 1 684 Ratnapura City 045-2222710 [email protected] 58, Main Street, Ratnapura 29. Wariyapola Branch 1 585 Ruwanwella „ 036-2268005 [email protected] Public Trade Complex, 30. Wayamba University 1 Ruwanwella 31. Wennappuwa Branch 1 562 Warakapola 035-2267258 [email protected] 89 A, Main Street, Warakapola 477 Yatiyantota 036-2271280 [email protected] 93, Ginigathhena Road, Yatiyantota

Extension Office Telephone Address

1. Bulathkohupitiya 036-2247356 76, Kegalle Road, Bulathkohupitiya 2. Embilipitiya 047-2261981 15, Moraketiya Road, Embilipitiya 3. Endana 060-2450661 New Town, Endana, Gabbela, Kahawatta 4. Galigamuwa 035-2282050 Avissawella Road, Galigamuwa Junction 5. General Hospital - Ratnapura 045-2223561 General Hospital, Ratnapura 6. Godakawela „ 045-2240080 170, Main Street, Godakawela 7. Gonagaldeniya 036-5677923 Basnagoda Road, Gonagaldeniya 8. Idangoda 045-2265080 7 A, Idangoda, Kiriella Holiday Banking Service 9. Karawanella 036-2268780 133/7, Avissawella Road, Saturday c Karawanella Sunday „ 10. Karawita 045-2222454 Palawela Road, Udakarawita Saturday & Sunday ‘ 11. Kegalle Kachcheri 035-2231574 Kachcheri Building, Kegalle 12. Kegalle Hospital 035-2222765 Base Hospital Premises, Kegalle Night Banking z

268 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 97 SOUTHERN PROVINCE

Extension Office Telephone Address Branch Name of Branch Telephone E-Mail Address Address Code 13. Kitulgala „ 036-2287747 81, Hatton Road, Kithulgala 754 Ahungalla 091-2264107 [email protected] 60, Galle Road, Ahungalle 14. Kolonna 045-2260280 Hospital Junction, Kolonna 613 Akuressa 041-4922380 [email protected] 64, Matara Road, Akuressa 15. Kotiyakumbura 035-2289240 110, Kegalle Road, Kotiyakumbura 047 Ambalangoda 091-2256307 [email protected] 274, Main Street, 16. Sabaragamuwa University 045-2280093 Sabaragamuwa University, Ambalangoda Pambahinna, Balangoda 537 Ambalantota 047-2223280 [email protected] 11, Wanduruppa Road, 17. Pinnawala Elephant 035-2264294 Elephant Orphange, Pinnawala Ambalantota Orphange 774 Angunakolapelessa 047-2229120 [email protected] Hungama Road, 18. Sabaragamuwa Provincial 045-2226116 Provincial Council New Building, Angunakolapelessa Council New Town, Ratnapura 525 Baddegama „ 091-2292280 [email protected] S. Abeywickrama Building, 19. Ratnapura Kachcheri 045-2222454 Kachcheri Building, Ratnapura Baddegama 20. Seethawakapura BOI Complex 036-2232656 BOI Sri Lanka Office Complex, 522 Batapola c 091-2260405 [email protected] Aluthmawatha, Batapola Avissawella 539 Beliatta 047-2243274 [email protected] New Shopping Complex, 21. Udawalawa 047-2232180 24/4, Udawalawa Junction, 1st Floor, No. 06, Beliatta Kolambageara 102 Bentota 034-2271796 [email protected] Tourist Village, Bentota 22. Weligepola 045-2227180 299/2, Weligepola 528 Deniyaya 041-2273870 [email protected] Main Street, Deniyaya 23. Welioya c 045-3603304 Gunarathna Building, Welioya 504 Devinuwara 041-2226280 [email protected] Tangalle Road, Devinuwara 592 Dickwella 041-2255280 [email protected] 28 & 28/1, Beliatta Road, Dickwella ATMs No. 619 Elpitiya c 091-4387524 [email protected] Janadhipathi Mawatha, 1. Avissawella Branch 2 Elpitiya 2. Balangoda Branch 1 003 Galle 091-2234214 [email protected] 2, Light House Street, Fort, Galle 3. Eheliyagoda Branch 1 089 Galle City c 091-2234478 [email protected] 2, Gamini Road, Galle 4. Embilipitiya Branch 1 691 Hakmana c 041-2286280 [email protected] Beliatta Road, Hakmana 5. Kahawatte Branch 1 085 Hambantota 047-2220180 [email protected] 33, Tower Hill Road, 6. Kalawana Branch 1 Hambantota 7. Kegalle Branch 1 609 Hikkaduwa 091-2277813 [email protected] 223, Galle Road, 8. Kegalle Hospital Extension Office 1 Hikkaduwa 9. Kuruwita Branch 1 135 Imaduwa 091-2286030 [email protected] Ahangama Road, Imaduwa 10. Mawanella Branch 1 529 Kamburupitiya „ 041-2292213 [email protected] School Lane, Kamburupitiya 11. Nivithigala Branch 1 616 Kataragama 047-2235280 [email protected] 315, Tissamaharama Road, Kataragama 12. Pelmadulla Branch 1 750 Koggala 091-2283380 [email protected] Galle Road, Koggala 13. Rakwana Branch 1 024 Matara 041-2229280 [email protected] 11, Kumaratunga 14. Rambukkana Branch 1 Mawatha, Matara 15. Ratnapura Branch 1 614 Matara City 041-2222218 [email protected] Gunawardena Mawatha, 16. Ratnapura City Branch 1 Matara 17. Ratnapura Hospital Office Extension 1 518 Middeniya 047-2247280 [email protected] Panamura Road, Middeniya 18. Ruwanwella Branch 1 667 Neluwa 091-3783014 [email protected] Kadihingala Road, Neluwa 19. Sabaragamuwa Provincial Council Extension Office 1 610 Pitigala „ 091-2291205 [email protected] 39, North Pitigala Road, 20. Sabaragamuwa University 1 Pitigala @ 21. Seethawakapura Extension Office 1 693 Ruhunu Campus 041-2232880 boc693 boc.lk Ruhunu Campus Branch, Wellamadama, Matara 22. Warakapola Branch 1 596 Talgaswela 091-3920100 [email protected] Elpitiya, Mapalagama Road, 23. Yatiyantota Branch 1 Talgaswela 056 Tangalle 047-2240280 [email protected] 145/147, Sea Street, Tangalle 250 Tawalama 091-3783030 [email protected] Tawalama 538 Tissamaharama 047-2237280 [email protected] 70, Main Street, Tissamaharama @ Holiday Banking Service 298 Urubokka „ 041-2272280 boc298 boc.lk Main Street, Urubokka 517 Walasmulla c 047-2245280 [email protected] 70, Beliatta Road, Saturday c Walasmulla Sunday „ 139 Weeraketiya 047-2246280 [email protected] Main Street, Weeraketiya Saturday & Sunday ‘ 520 Weligama c 041-2250280 [email protected] 239, Main Street, Weligama Night Banking z 578 Yakkalamulla „ 091-2286080 [email protected] Yakkalamulla

BANK OF CEYLON ANNUAL REPORT 2010 269 BOC SERVICE POINTS

Extension Office Telephone Address ATMs No.

1. Ahangama 091-2283977 71/1, Galle Road, Ahangama 20. Koggala Branch 1 2. Barawakumbuka „ 047-3621008 New Road, Barawakumbuka 21. Kudawella Extension Office 1 3. Deiyandara 041-2268598 Hakmana Road, Deiyandara 22. Maha-Edanda Branch 1 4. Galle Kachcheri 091-2234514 Kachcheri Building, Galle 23. Makandura Extension Office 1 5. Karapitiya 091-2227090 161 A, Hirimbura 24. Matara Branch 1 Cross Road, Galle 25. Matara City Branch 1 6. Katuwana 047-3621005 Urubokka Road, Katuwana c 26. Matara General Hospital 1 7. Kekanadura 041-2265061 Sarath Building, Kekanadura 27. Middeniya Branch 1 Junction, Kekanadura 28. Neluwa Branch 1 8. Kosmodara 041-2271070 Jayabima Building, Kosmodara, Kotapola 29. Pitigala Branch 1 9. Kudawella 041-2257514 116 B, East Kudawella, 30. Ranna Extension Office 1 Nakulugamuwa 31. Ruhunu Campus Branch 1 10. Lunugamvehera 047-3621007 New Town, Lunugamvehera 32. Tangalle Branch 1 11. Maha-Edanda 091-3932627 Sanasa Mandiraya, 33. Thalgaswala Branch 1 Maha-Edanda, Karandeniya 34. Tissamaharama Branch 1 12. Makandura „ 041-2268785 Samarasinghe Building, Makandura 35. Urubokka Branch 1 13. Matara Kachcheri 041-2222673 Kachcheri Building, Matara 36. Walasmulla Branch 1 14. Morawaka 041-2282700 Wijaya Building, Morawaka 37. Weeraketiya Branch 1 15. Pitabeddara „ 041-2281081 Deniyaya Road, Pitabeddara 38. Weligama Branch 1 16. Ranna 047-2227280 165/1, Tissa Road, Ranna 39. Yakkalamulla Branch 1 17. Suriyawewa c 047-2288280 27/1, Main Street, Suriyawewa 18. Udugama 091-2285015 H.A.L.A. Building, Watte Kade, Udugama 54 19. Uragasmanhandiya c 091-2264865 125 1/1, Main Street, UVA PROVINCE Uragasmanhandiya Branch Name of Branch Telephone E-Mail Address Address 20. Warapitiya 047-3623303 Sithamagalla Road, Code Rammala, Warapitiya 540 Badalkumubura c 055-2250279 [email protected] 191, 191 1/1, Main Street, Badalkumubura ATMs No. 011 Badulla „ 055-2222129 [email protected] Bank Road, Badulla @ 1. Akuressa Branch 1 320 Balleketuwa „ 055-2285160 boc320 boc.lk 36, Passara Road, Balleketuwa 2. Ambalangoda Branch 1 515 Bandarawela „ 057-2230014 [email protected] 198 B, Badulla Road, 3. Ambalantota Branch 1 Bandarawela 4. Baddegama Branch 1 579 Bibile c 055-2265480 [email protected] 41, Mahiyangana Road, Bibile 5. Beliatta Branch 1 560 Buttala 055-3562610 [email protected] 23, Moneragala Road, 6. Bentota Branch 1 Buttala 7. Deniyaya Branch 1 260 Diyatalawa „ 057-3579407 [email protected] 28, Chandrasiri Building, 8. Devinuwara Branch 1 Main Street, Diyatalawa @ 9. Dikwella Branch 1 476 Ettampitiya 055-2294080 boc476 boc.lk 21, Nuwara Eliya Road, Ettampitiya 10. Elpitiya Branch 1 669 Girandurukotte 027-2254380 [email protected] New Town, Girandurukotte 11. Galle Branch 1 463 Haldummulla 057-3576821 [email protected] 25, Main Street, 12. Galle City Branch 2 Haldummulla 13. Hakmana Branch 1 035 Haputale „ 057-2268080 [email protected] 20, Station Road, Haputale @ 14. Hambantota Branch 1 629 Koslanda 057-2257780 boc629 boc.lk 15, Wellawaya Road, Koslanda 15. Hikkaduwa Branch 1 577 Lunugala 055-2263980 [email protected] 149, Main Street, Lunugala 16. Imaduwa Branch 1 647 Lunuwatta 057-2232742 [email protected] Padmasiri Building, 17. Kamburupitiya Branch 1 Udapussellawa Road, Lunuwatta 18. Karapitiya Extension Office 1 542 Mahiyangana c 055-2258195 [email protected] 7, New Town, Badulla Road, 19. Kataragama Branch 1 Mahiyangana 238 Medagama 055-2265580 [email protected] Moneragala Road, Holiday Banking Service Medagama 384 Meegahakiwula 055-2245707 [email protected] Ratnayake Complex, Saturday c Meegahakiwula Sunday „ 082 Moneragala 055-2276080 [email protected] 401, Wellawaya Road, Moneragala Saturday & Sunday ‘ 348 Padiyatalawa 063-2246003 [email protected] Main Street, Padiyatalawa Night Banking z

270 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 121 WESTERN PROVINCE - NORTH

Branch Name of Branch Telephone E-Mail Address Address Branch Name of Branch Telephone E-Mail Address Address Code Code

503 Passara „ 055-2288865 [email protected] 382, Main Street, Passara 494 Andiambalama 011-2265565 [email protected] 113, Minuwangoda Road, 416 Siyambalanduwa 055-3555360 [email protected] Moneragala Road, Andiambalama Siyambalanduwa 732 Biyagama 011-2488770 [email protected] IPZ Administrative Complex, 322 Thanamalwila 047-2234080 [email protected] 6, Tissa Road, Thanamalwila Biyagama 343 Uva-Paranagama 057-3577000 [email protected] Lunuatugama, 038 Borella c 011-4612617 [email protected] 71, Danister De Silva Walahamulla, Mawatha, Borella Uva-Paranagama 668 Borella City 011-2685140 [email protected] 845, Super Market Complex, 730 Welimada „ 057-2245984 [email protected] 12,12 A, Hemapala Borella Munidasa Mawatha, 573 Central Bus 011-2326761 [email protected] Central Bus Stand, Welimada Stand c Colombo 11 434 Wellawaya 055-2274628 [email protected] Tissamaharama Road, @ Wellawaya 672 Central Super 011-2357573 boc672 boc.lk 2nd Floor, Central Super Market c Market, Colombo 11 001 City Office 011-2438455 [email protected] 41, Bristol Street, Colombo 1 Extension Office Telephone Address 561 Dematagoda 011-2698588 [email protected] 45, 37, Kolonnawa Road, 1. Badulla City Office 055-2229580 1, Bandarawela Road, Badulla Dematagoda @ 2. Badulla Kachcheri 055-2225475 Kachcheri Building, Badulla 433 Divulapitiya 031-4921640 boc433 boc.lk 34, Negombo Road, Divulapitiya 3. Bogahakumbura „ 057-2280088 Ambewela Road, Bogahakumbura 060 Fifth City 011-2449646 [email protected] 85, York Street, Colombo 1 4. Dambagalla c 055-2276079 Makulla Town, Dambagalla @ 5. Ella 057-2228899 Wellawaya Road, Ella 045 Gampaha c 033-2234403 boc045 boc.lk 16, Rest House Road, Gampaha 6. Ethiliwewa 055-3594115 Ethiliwewa Junction, Ethiliwewa 628 Grandpass c 011-2448202 [email protected] 703, Sirimavo Bandaranaike 7. Hali-Ela 055-2295080 47, Bandarawela Road, Hali-Ela „ Mawatha, Grandpass 8. Hasalaka 055-2257180 New Town, Hasalaka 032 Hulftsdorp 011-2320374 [email protected] 30, St. Sebastian Hill, 9. Keppetipola 057-2280043 Timber Corporation Junction, Hulftsdorp Nuwara Eliya Road, Keppetipola 039 Ja-Ela c 011-5342311 [email protected] 19, Negombo Road, Ja-Ela 10. Moneragala Kachcheri 055-2277270 Kachcheri Building, Moneragala 059 Kadawatha c 011-2920687 [email protected] 469, Ragama Road, 11. Moneragala Town ‘ 055-2277270 94/2, Kumaradola Road, Kadawatha Moneragala @ 12. Okkampitiya 055-2273395 Weeragashandiya, Okkampitiya 771 Kandana 011-2232398 boc771 boc.lk 41/B-1/1 Negombo Road, Kandana 13. Pelwatta Sugar Industries 055-3559825 Pelawatta Sugar Industries Complex c Complex, Pelwatta 658 Katunayake IPZ 011-2259583 [email protected] 436, Baseline Road, Averiwatta, Katunayake IPZ 543 Kiribathgoda c 011-2911304 [email protected] 201, Kandy Road, ATMs No. Kiribathgoda 1. Sri Lanka Air Force Camp - Diyatalawa 1 571 Kirindiwela 033-2267280 [email protected] 21, Radawana Road, Kirindiwela 2. Badulla Branch 1 595 Kolonnawa 011-2572265 [email protected] 430 A, IDH Road, 3. Badulla Hospital 1 Kolonnawa 4. Bandarawela Branch 1 663 Kotahena 011-2448632 [email protected] 182, George R De Silva 5. Bibile Branch 1 Mawatha, Kotahena 6. Buttala Branch 1 636 Lake House 011-5863723 [email protected] D.R. Wijewardena Mawatha, 7. Diyatalawa Branch 1 Colombo 1 8. Haputale Branch 1 612 Lake View 011-2314207 [email protected] 142, Sir James Peiris 9. Mahiyangana Branch 1 Mawatha, Colombo 2 10. Moneragala Branch 1 026 Main Street 011-2329631 [email protected] 94, Main Street, 11. Padiyatalawa Branch 1 Colombo 11 12. Passara Branch 1 041 Maradana 011-2696550 [email protected] 94, S. Mahinda Himi Mawatha, Colombo 10 13. Pelwatta Sugar Industries Complex Extension Office 1 545 Minuwangoda 011-2295214 [email protected] 19, Divulapitiya Road, 14. Siyambalanduwa Branch 1 Minuwangoda 15. Welimada Branch 1 088 Mirigama c 033-2276844 [email protected] 12, Amaratunga Mawatha, 16. Wellawaya Branch 1 Mirigama 762 Narahenpita 011-2368514 [email protected] 540, Thimbirigasyaya Road, Narahenpita @ Holiday Banking Service 018 Negombo c 031-2224711 boc018 boc.lk 118, Rajapakse Broadway, Negombo Saturday c 572 Negombo City 031-2222156 [email protected] 111, Main Street, Negombo Sunday „ 675 Nittambuwa 033-2287280 [email protected] Super Market Complex, Nittambuwa Saturday & Sunday ‘ Night Banking z

BANK OF CEYLON ANNUAL REPORT 2010 271 BOC SERVICE POINTS

Branch Name of Branch Telephone E-Mail Address Address ATMs No. Code 1. Agio Tobacco Company - BEPZ, Malwana 1 042 Peliyagoda 011-2930397 [email protected] 42, Negombo Road, 2. Sri Lanka Air Force Camp - Ekala 1 Peliyagoda 3. Sri Lanka Air Force - Katunayake 1 681 Personal 011-2446821 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1 4. Andiambalama Branch 1 765 Pugoda 011-2404821 [email protected] 40/1, 43, Kospitiyana, 5. Biyagama Branch 1 Pugoda 6. Borella Branch 2 764 Ragama 011-2960291 [email protected] 35/26, 36/26, Kadawatha 7. Castle Hospital, Borella 1 Road, Ragama 8. Courtaulds Clothing Garments Extension Office 1 @ 627 Regent Street c 011-2690506 boc627 boc.lk National Hospital, 9. City Office Branch 2 Colombo 8 10. Divulapitiya Branch 1 421 Seeduwa 011-2252019 [email protected] 429, 1/1, Negombo Road, Seeduwa 11. Gampaha Branch 2 682 Veyangoda 033-2287279 [email protected] 203 A, Negombo Road, 12. Ganemulla Branch 1 Veyangoda 13. Gothatuwa Extension Office 1 505 Wattala c 011-2932280 [email protected] 520, Negombo Road, 14. Grandpass Branch 1 Wattala 15. Hulftsdorp Branch 1 527 Welisara c 011-2958485 [email protected] 540/2, Negombo Road, Welisara 16. IPZ Katunayake Branch 1 769 Yakkala „ 033-2233591 [email protected] 46, Kandy Road, Yakkala 17. Ja-Ela Branch 1 18. Kadawatha Branch 2 19. Kandana Branch 1 Extension Office Telephone Address 20. Katunayake Air Port 1 1. BOI Cash Collection Centre 011-2448875 BOI, No. 14, Baron Jayathilake 21. Kiribathgoda Branch 2 Mawatha, Colombo 1 22. Kirindiwela Branch 1 2. BOI Katunayake Cash 011-2252523 Export Processing Road, 23. Kolonnawa Branch 1 Collection Centre Katunayake 24. Kotahena Branch 1 3. Bopitiya 011-2243172 2, Bopitiya Junction, Pamunugama 25. Lady Ridgeway Hospital 1 4. Cargo Office 011-2251943 IPZ Katunayake 26. Lake House Branch 1 5. Central Hospital 011-2690546 114, 4th Floor, 27. Linea Aqua Garments - Kapugoda 2 Norris Canal Road, Colombo 10 28. Main Street Branch 1 6. Courtaulds Clothing Lanka 011-2295214 487, Negombo Road, 29. Maradana Branch 1 (Private) Limited Katuwellegama 30. Minuwangoda Branch 1 7. Delgoda 011-2402970 351/ H/5, New Kandy Road, Delgoda 31. Mirigama Branch 1 8. Demanhandiya 031-2228730 370, Westerciten Farm, 32. Sri Lanka Navy Camp - Welisara 1 Divulapitiya Road, Demanhandiya 33. Narahenpita Economic Centre 1 9. Enderamulla 011-2937240 117, Gongithota Road, 34. Negombo Branch 2 Enderamulla, Wattala 35. Negombo City 1 10. Gampaha Kachcheri 033-2220868 Kachcheri Building Gampaha 36. Sri Lanka Ports Authority, New Nuge Road, 1 11. Ganemulla 033-2264888 182/1, Kirindiwita Road, Bagage Office - Peliyagoda Ganemulla 37. Nittambuwa Branch 2 12. Gothatuwa New Town 011-5344593 19, Welikada Road, Gothatuwa 38. Peliyagoda Branch 1 13. Katana 031-2228353 305/J/1, Mirigama Road, 39. Personal Branch 3 Mahahunupitiya 40. Presidential Secretariat 1 14. Makola 011-2964401 177/1, Makola South, Makola 41. Petrolium Corporation - Kolonnawa 1 15. Naiwala 033-2297720 Divulapitiya Road, Naiwala 42. Pugoda Branch 1 16. Narahenpita Economic Centre z 011-2369622 Dedicated Economic Centre, Narahenpita 43. Regent Street Branch 1 17. Raddolugama 011-2289977 275, National Housing Scheme, 44. Regent Street Doctors’ Quarters 1 Raddolugama 45. Seeduwa Branch 1 18. Weliweriya 033-2255444 342, New Kandy Road, Weliveriya 46. Trelleborg Garments - Sapugaskanda 1 47. Veyangoda Branch 1 48. Wattala Branch 2 Holiday Banking Service 49. Welisara Branch 1

Saturday c 50. World Trade Centre - Colombo 1 1 Sunday „ 51. Yakkala Branch 1 Saturday & Sunday ‘ Night Banking z

272 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 134 WESTERN PROVINCE - SOUTH

Branch Name of Branch Telephone E-Mail Address Address Branch Name of Branch Telephone E-Mail Address Address Code Code

657 Agalawatta c 034-2243980 [email protected] 5, Kalutara Road, Agalawatta 607 Panadura City c 038-2243324 [email protected] 21, Jayathilake Mawatha, 680 Aluthgama c 034-2271413 [email protected] 267, Galle Road, Aluthgama Panadura @ 757 Athurugiriya c 011-2560599 [email protected] 70/20, Malabe Road, 644 Parliament 011-2777310 boc644 boc.lk Sri Lanka Parliament, Athurugiriya Sri Jayawardenapura, Kotte @ 037 Bambalapitiya c 011-2598390 [email protected] 10, Unity Plaza Building, 690 Pelawatta 011-2785550 boc690 boc.lk 18 A, New Parliament Road, Galle Road, Colombo 4 Pelawatta, Battaramulla @ 665 Bandaragama „ 038-2290280 [email protected] Janadhipathi Mawatha, 736 Piliyandala 011-2614165 boc736 boc.lk 58, Moratuwa Road, Bandaragama Piliyandala @ 679 Battaramulla 011-2862575 [email protected] 231, Main Street, 746 Rajagiriya 011-5368641 boc746 boc.lk 608, Nawala Road, Rajagiriya Battaramulla, 689 Ratmalana c 011-2738030 [email protected] 452, Galle Road, Ratmalana 058 Beruwala c 034-2279899 [email protected] 165 A, Galle Road, Beruwala 512 Thimbirigasyaya 011-2587345 [email protected] 174, Havelock Road, 673 Bulathsinhala „ 034-4912984 [email protected] 40, Horana Road, Athura, Colombo 5 Bulathsinhala 043 Union Place 011-2302470 [email protected] 278, Access Tower, 051 Dehiwala 011-2738514 [email protected] 207, Galle Road, Dehiwala Colombo 2. @ 563 Dharga Town c 034-2275247 [email protected] 298, Main Street, 775 Visakha Vidyalaya 011-2556215 boc775 boc.lk 133 C, Vajira Road, Dharga Town Colombo 4 @ 293 Dodangoda c 034-2281628 [email protected] 16, Thudugala, Matugama 584 Wadduwa c 038-2284304 boc584 boc.lk 557 A, Galle Road, Road, Dodangoda Wadduwa @ 741 Hanwella 036-2253520 [email protected] 133/8, Main Street, 023 Wellawatta c 011-2584232 boc023 boc.lk 149, Galle Road, Colombo 6 Hanwella, 568 Homagama 011-2855059 [email protected] 93, High Level Road, Homagama Extension Office Telephone Address 054 Horana „ 034-2261280 [email protected] 87, Anguruwathota Road, Horana 1. Administrative Complex - 011-2785875 Ministry of Education, Isurupaya, Isurupaya Pelawatta, Battaramulla 521 Hyde Park 011-2687281 [email protected] 500, T. B. Jaya Mawatha, Colombo 10 2. BMICH Premises 011-2696820 BMICH Premises, 453 Independent 011-2678073 [email protected] 30 A, Independence Avenue, Bauddhaloka Mawatha, Square Colombo 7 Colombo 7 604 Ingiriya „ 034-2269580 [email protected] 20, Ratnapura Road, Ingiriya 3 Baduraliya 034-2244952 36/1, Agalawatta Road, Baduraliya 608 Kaduwela c 011-2571253 [email protected] Seevali Mahal, Avissawella Road, Kaduwela 4. Bodyline (Private) Limited 034-4285500 Bodyline (Private) Limited, 016 Kalutara c 034-2222214 [email protected] 218, Galle Road, Kalutara Ratnapura Road, Gurugoda, South, Kalutara Horana 030 Katubedda c 011-2625438 [email protected] 601, Galle Road, Moratuwa 5. Bombuwala 034-2289824 Temple Road, Mankada, 034 Kollupitiya 011-4795035 [email protected] 28, St. Michael's Road, Bombuwala Colombo 3 6. Boralesgamuwa 011-2518478 8, Colombo Road, 670 Kollupitiya City 011-2565380 [email protected] 409, Galle Road, Colombo 3 Boralesgamuwa 773 Kottawa 011-2783313 [email protected] 264/5 A & B, High Level 7. Immigration & 011-3071267 45, Ananda Rajakaruna Road, Kottawa, Pannipitiya Emigration Office Mawatha, Colombo 10. 055 Maharagama c 011-2850339 [email protected] 88, High Level Road, 8. Kalutara Kachcheri 034-2222286 Kachcheri Branch, Maharagama Divisional Secretariate, Kalutara @ 763 Malabe „ 011-2760753 boc763 boc.lk 410/1, Athurugiriya Road, 9. Katubedda Campus 011-2650301 Katubedda Campus Premises, Malabe Bandaranayake Mawatha, 556 Matugama „ 034-2243590 [email protected] 72, Agalawatta Road, Moratuwa Matugama 10. Kesbewa 011-2602517 229/D/2, Bandaragama Road, @ 593 Milagiriya 011-2504627 boc593 boc.lk 248, Galle Road, Colombo 4 Kesbewa 061 Moratuwa c 011-2645127 [email protected] 707, Galle Road, Moratuwa 11. Keselwatte 038-2298330 29, Galle Road, Keselwatte, @ 766 Mount Lavinia 011-2721059 boc766 boc.lk 286, Galle Road, Panadura Mount Lavinia 12. Kirulapone 011-2513874 88, High Level Road, Kirulapone 049 Nugegoda c 011-2812091 [email protected] 174, High Level Road, Nugegoda 13. Lotteries Board 011-2333546 356, Dr. Colvin R. De Silva 678 Padukka c 060-2175401 [email protected] 45, Hanwella Road, Padukka Mawatha, Union Place, Colombo 2 007 Panadura c 038-2232214 [email protected] 4, Susantha Mawatha, Panadura 14. Meegoda Economic Dev. 011-2831589 35, Padukka Road, Centre - Meegoda z Library Building, Meegoda Holiday Banking Service 15. Moratumulla 011-2652178 242, De Zoysa Road, Moratumulla, Moratuwa Saturday c Sunday „ Saturday & Sunday ‘ Night Banking z

BANK OF CEYLON ANNUAL REPORT 2010 273 BOC SERVICE POINTS

Extension Office Telephone Address ATMs No.

16. National Institute of 011-7601601 21, High Level Road, 28. Kalutara Branch 1 Education Maharagama 29. Kalutara Kachcheri Extension Office 1 17. Pita Kotte 011-2820311 130 C, Pagoda Road, Nugegoda 30. Katubedda Branch 1 18. Sethsiripaya 011-2863637 Sethsiripaya Complex, 31. Katubedda University Extension Office 1 Battaramulla 32. Kesbewa Extension Office 1 19. Srawasthi Mandiraya 011-2681366 Srawasthi Mandiraya, Colombo 7 33. Keselwatte Extension Office 1 20. Sri Jayawardenapura 011-2779136 Sri Jayawardenapura Hospital, Hospital Thalapathpitiya, Nugegoda 34. Kirulapone Extension Office 1 21. Thalawathugoda 011-2775027 215/2, Pannipitiya Road, 35. Kollupitiya Branch 1 Thalawathugoda 36. Kotalawela Defence Academy - Ratmalana 1 37. Kottawa Branch 1 38. Maharagama - Cancer Hospital 1 ATMs No. 39. Maharagama Branch 2 1. Agalawatta Branch 1 40. Malabe Branch 1 2. Aluthgama Branch 1 41. Matugama Branch 1 3. Athurugiriya Branch 1 42. Milagiriya Branch 1 4. Baduraliya Extention Office 1 43. Moratumulla Extension Office 1 5. Bally's Entertainment Centre, D.R. Wijewardena 1 44. Moratuwa Branch 1 Mawatha, Colombo 10 45. Mount Lavinia Branch 1 6. Bambalapitiya Branch 2 46. Nugegoda Branch 3 7. Bandaragama Branch 1 47. Odel - Alexandra Place 1 8. Battaramulla Branch 1 48. Padukka Branch 1 9. Beruwala Branch 1 49. Panadura Branch 1 10. BMICH 1 50. Panadura City Branch 1 11. Body Line Garments Extension Office 1 51. Parliament Branch 1 12. Boralesgamuwa Extension Office 1 52. Piliyandala Branch 1 13. Central Engineering Consultancy Bureau - 1 Bauddhaloka Mawatha 53. Rajagiriya Branch 1 14. Colombo Municipal Council - Town Hall 1 54. Ratmalana Branch 1 15. Dehiwala Branch 1 55. Sintesi Garments - Ranala 1 16. Dodangoda Branch 1 56. Srawasthi Mandiraya Extension Office 1 17. German Technical College, Ratmalana 1 57. Talawathugoda Extension Office 1 18. Hanwella Branch 1 58. Thimbirigasyaya Branch 1 19. Hirdaramani Garments - Kahathuduwa 1 59. Union Place Branch 1 20. Homagama 2 60. Visakha Vidyalaya Branch 1 21. Horana 2 61. Wadduwa Branch 1 22. Ingiriya 1 62. Water Board - Ratmalana 1 23. Independence Square Branch 1 63. Wellawatta Branch 2 24. Isurupaya Branch 1 25. Sri Jayawardenapura Hospital Extension Office 1 26. Kaduwela Branch 1 27. Kalubowila Hospital 1

Holiday Banking Service

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274 BANK OF CEYLON ANNUAL REPORT 2010 BOC SERVICE POINTS 29 CORPORATE BRANCHES

Branch Name of Branch Telephone E-Mail Address Address ATMs No. Code 1. Sri Lanka Air Force Head Quarters - Colombo 2 1 660 Corporate 011-2345428 [email protected] 4, Bank of Ceylon 2. Bellagio Club - Duplication Road, Colombo 3 1 Mawatha, Colombo 1 3. Sri Lanka Bureau of Foreign Employment 1 822 Corporate 2nd 011-2394584 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1 4. Metropolitan Branch 1 618 Metropolitan 011-2329419 [email protected] 10, York Street, Colombo 1 5. MGM Club - Galle Road, Bambalapitiya 1 004 Pettah 011-2393544 [email protected] 212/63, Gas Work Street, 6. Mobile Banking Unit 1 Colombo 11 7. Pettah Branch 2 747 Taprobane 011-2422267 [email protected] 10, York Street, Colombo 2 8. Sri Lanka Ports Authority - Jaya Terminal 1 726 Off-Shore 011-2338765 [email protected] 4, Bank of Ceylon 9. Health Ministry - Suvasiripaya 1 Banking Unit Mawatha, Colombo 1

Extension Office Telephone Address 4 1. Board of Investment - SLPA 011-2448875 Sri Lanka Port Authority OVERSEAS BRANCHES

2. Jawatta Inland Revenue 011-5657162 Inland Revenue Department Branch Name of Telephone E-Mail Address Address No. 80, Jawatte Road, Colombo 5 Code Branch

3. Canal Yard - SLPA 011-2483526 Sri Lanka Port Authority 758 Chennai 009144-26423501 ceybank@ No. 1090, Poonamalee High 4. Permit Office - SLPA Hunters Sri Lanka Port Authority 009144-26420972 vsnl.com Road, Chennai 600 084, India. 5. Sri Lanka Bureau of 011-2864147 234, Denzil Kobbakaduwa 632 Malé 00960-3323045 bcmale@ 'Aage', 12, Boduthakurufaanu, Foreign Employment Mawatha, Koswatta, Battaramulla 00960-3323046 dhivehinet.net.mv Magu, Henveiru, Male. 20094 Republic of Maldives 6. Ware House Sri Lanka 011-2942620 Sri Lanka Port Authority, Port Authority Nawa Nuge Road, Peliyagoda 7. Pettah Kachcheri 011-2434478-50 Kachcheri Building, Pettah ATMs No. 8. Ceylon Shipping Lines Limited 011-2445268 450, D.R. Wijewardena Mawatha, 1. Malé 2 Colombo 10 9. Customs Imports Unit 011-2436663 Sri Lanka Customs, Chaitya Road, Colombo 1 10. Inland Revenue Department 011-2337367 Inland Revenue Building, Sir Chittampalam A. Gardiner Mawatha, Colombo 2 11. Health Ministry Suvasiripaya 011-2681361 Ministry of Health, 385, Baddegama Wimalawansa Mawatha, Colombo 10 12. Laksiriseva (Private) Limited 011-2917729-ext 66, New Nuge Road, Peliyagoda 730 13. Trico Maritime (Private) Limited 011-4610977 50, K. Cyril C. Perera Mawatha, Colombo 13

Holiday Banking Service

Saturday c Sunday „ Saturday & Sunday ‘ Night Banking z

BANK OF CEYLON ANNUAL REPORT 2010 275 CORRESPONDENT BANKS BY COUNTRY

AFGHANISTAN BELARUS COLOMBIA 1. Afghanistan Bank DA 42. Belarus Bank (Formerly Minskcomplex Bank) 87. Banco Popular 43. Belvnesheconombank ALBANIA COOK ISLANDS 2. Raiffeisen Bank BELGIUM 88. WSBC Bank (Wall Street Banking 44. Antwerpse Diamant Bank NV Corporation Limited) ALGERIA 45. Banca Monte Paschi, Belgio 3. Banque Exterieure D’Algerie CROATIA 46. Byblos Bank Europe SA 89. Zagrebacka Banka DD ARGENTINA 47. Deutsche Bank SA/NV 4. Banco Macri Bansud SA 48. Fortis Bank NV/SA CUBA 5. Banco Finansur SA 49. Ing Belgium SA/NV 90. Banco National De Cuba (Vol. 6) 6. Banco Credicoop Cooperativo Limited (Formerly Bank Brussels Lambert) 50. Kbc Bank NV CYPRUS ARMENIA 91. Alpha Bank Cyprus Limited 7. Ardshininvestment Bank BERMUDA 92. Bank of Cyprus Public Company Limited 51. Bank of Bermuda Limited 93. Hellenic Bank Public Company Limited AUSTRALIA 94. Marfin Popular Bank Public Company BOTSWANA 8. Australia & New Zealand Banking Limited (Formerly Cyprus Popular Bank Public 52. Barclays Bank of Botswana Limited Group Limited Company Limited) (Laiki Bank) 9. Commonwealth Bank of Australia BRAZIL 95. National Bank of Greece (Cyprus) Limited 10. HSBC Bank Australia Limited 53. Banco Abc Brasil SA 11. National Australia Bank Limited CZECH REPUBLIC 54. Banco Fibra SA 12. Westpec Banking Corporation 96. Ceska Sporitelna AS 55. Banco Industrial E Commercial SA (Bicbanco) 97. Ceskoslovenska Obchodni Banka AS 56. Banco Indusval SA AUSTRIA 98. Ge Money Bank AS 13. Allgemeine Sparkasse Oberosterreich BULGARIA 99. Komercni Banka AS 14. Bank Austria Creditanstalt AG 57. Central Cooperative Bank 15. Bawag Psk Bank DENMARK 58. Investbank PLC 16. Bks Bank AG 100. Als Skiern Bank 59. Municipal Bank PLC 17. Erste Bank Der Oesterreichischen Sparkassen AG 101. Danmarks National Bank 60. Texim Bank 18. Erste Group Bank AG 102. Danske Bank AS 61. Unicredit Bulbank AD (Formerly Bulbank AD) 19. Oberbank AG 103. Jyske Bank AS 62. United Bulgarian Bank AD 20. Osterreichische Volksbanken AG 104. Nordea Bank Denmark AS 21. Raiffeisen Zentrale Bank Osterreich AG CAMBODIA 105. Nordjyske Bank AS 22. Raiffeisenlandesbank Oberosterreich 63. Acleda Bank PLC 106. Skjern Bank Aktiengesellschaft 107. Spare Nord Bank 23. Salzburger Landes - Hypothekenbank AG CANADA 108. Sparebank Vest 64. Bank of Montreal 109. Sydbank AS BAHRAIN 65. Bank of Nova Scotia 110. Vestjysk Bank 24. Albaraka Islamic Bank 66. Canadian Imperial Bank of Commerce 25. Arab Banking Corporation 67. HSBC Bank Canada ECUADOR 26. Bahrain Islamic Bank (Formerly Credit Lyonnais Canada) 111. Banca International Produbanco 27. BBK (Formerly Bank of Bahrain & Kuwait BSC) 68. Royal Bank of Canada EGYPT 28. Bmi Bank BSC (C) 69. Toronto Dominion Bank 112. ABC Egypt (Arab Banking Corporation) 29. Habib Bank Limited CHILE 113. Arab International Bank 30. HSBC Bank Middle East 70. Corpbanca 114. Bank of Alexandria 31. National Bank of Bahrain 115. Banque Du Carie SAE 32. The Arab International Company CHINA 116. Banque Misr SAE 71. Bank of Changsha BANGLADESH 117. Central Bank of Egypt 72. Bank of China 33. Agrani Bank 118. Commercial International Bank (Egypt) SAE 73. Bank of Communications 34. Bangladesh Krishi Bank 119. Egyptian Saudi Finance Bank 74. Bank of Hangzhou Company Limited 35. Basic Bank Limited (Bangladesh Small 120. Faisal Islamic Bank of Egypt SAE Industries & Commerce Bank Limited) 75. Bank of Jiangsu 121. Mohandes Bank 36. Janata Bank 76. Bank of Jiujiang Company Limited 122. National Bank of Egypt 37. Prime Bank Limited 77. Bank of Nanjing 123. Suez Canal Bank SAE 38. Pubali Bank Limited 78. Bank of Shaoxing Company Limited ESTONIA 39. Sonali Bank 79. Changshu Rural Commercial Bank 124. Seb Pank 40. The Premier Bank Limited 80. China Construction Bank 81. China Everbright Bank 41. Uttara Bank ETHIOPIA 82. Evergrowing Bank 125. Commercial Bank of Ethiopia 83. Export Import Bank of China 84. Xian City Commercial Bank Company Limited FIJI 85. Zhejiang Nanxun Rural Cooperative Bank 126. National Bank of Fiji Limited 86. Zhejiang Xiaoshan Rural Cooperative Bank (Colonial National Bank)

276 BANK OF CEYLON ANNUAL REPORT 2010 CORRESPONDENT BANKS BY COUNTRY

FINLAND 177. NRW Bank 223. Development Credit Bank Limited 127. Aktia Bank PLC 178. Oldenburgische Landesbank AG 224. HDFC Bank 128. Nordea Bank Finland PLC 179. Sparkasse Bielefeld 225. ICICI Bank Limited 129. Oko Osuuspankkien Keskuspankki Oyj 180. Sparkasse Duren 226. IDBI Bank Limited 130. Pohjola Bank PLC 181. Sparkasse Herford 227. Indian Bank 131. Sampo Bank PLC 182. Sparkasse Pforzheim CALW 228. Indian Overseas Bank 183. Standard Chartered Bank (Frankfurt - Germany) 229. Indusind Bank Limited FRANCE 184. Stadtsparkasse Monchengladbach 230. Jammu & Kashmir Bank Limited 132. Bank of India (Paris Branch) 185. Stadtsparkasse Wuppertal 231. Karur Vysya Bank 133. Banque De Neuflize, Schlumberger, 186. Westlb AG 232. Punjab & Sind Bank Limited Mallet, Demachy 233. Punjab National Bank 134. Banque D'escompte GHANA 234. Saraswat - Cooperative Bank Limited 135. Banque Federative Du Credit Mutuel 187. Ghana Commercial Bank Limited 235. State Bank of India 136. Banque Palatine 236. State Bank of Hyderabad 137. Banque Sba GREECE 237. State Bank of Travancore 138. Bnp Paribas 188. Alpha Bank 238. Syndicate Bank 139. Calyon 189. Aspis Bank 239. Tamilnad Mercantile Bank Limited 140. Credit Agricole 190. Efg Eurobank Ergasias SA 240. The Bank of Rajastan Limited 141. Credit Agricole Indosuez (Egypt) SAE 191. Marfin Egnatia Bank SA 241. UCO Bank (Now Calyon Bank Egypt) SAE (Formerly Egnatia Bank SA) 242. Union Bank of India 142. Credit Du Nord 192. National Bank of Greece 243. United Bank of India 143. Credit Industrial Del' Quest 193. Piraeus Bank 144. Credit Industrial ET Commercial (CIC) HONG KONG INDONESIA 145. Credit Lyonnais 194. Bank of East Asia Limited 244. PT Bank Pan Indonesia Tbk (Panin Bank) 146. HSBC Private Bank France SA 195. CATHAY BANK 245. Bank Mega 147. Natixis (Formerly Natexis Banque Populaires) 196. Chiyu Banking Corporation Limited 246. PT Bank Bukopin 148. Societe Generale 197. Chong Hing Bank Limited (Formerly Liu 247. PT Bank Ekspor Indonesia 149. Union De Banques A Paris Chong Hing Bank Limited) 248. PT Bank Mandiri (Persero) 150. VTB Bank (France) SA (Formerly Banque 198. DAH Sing Bank Limited 249. PT Bank Negara Indonesia Tbk Commerciale Pour L’Europe Du 199. DBS Bank (Hong Kong) Limited 250. PT Bank Rabobank International Nordeurobank) 200. Hang Seng Bank Limited 251. PT Bank Rakyat Indonesia GEORGIA 201. Hongkong & Shanghai Banking Corporation IRAN 151. Bank of Georgia 202. Industrial & Commercial Bank of China (Asia) Limited 252. Bank Markazi Jomhouri Islami GERMANY 203. Nan Yang Commercial Bank Limited 253. Bank Mellat 152. Baden Wuttenbergische Bank AG 204. Oversea - Chinese Banking Corporation 254. Bank Melli Iran 153. Bankhaus Carlf Plump & Co. 205. Shanghi Commercial Bank Limited 255. Bank Pasargad 154. Bankhaus Neelmeyer AG 206. Wing Hang Bank Limited 256. Bank Sederat 155. Bayerische Hypo-Und Vereinsbank AG 257. Bank Sepah 156. Bayerische Landesbank HUNGARY 258. Bank Tejarat 157. Berliner Volksbank EG 207. Budapest Credit Development Bank RT 259. En Bank Pjsc (Bank Eghtesad Novin-Iran) 158. BHF Bank Aktiengeselschaft 208. Central-European Int’l Bank Limited 260. Export Development Bank of Iran (CIC Bank) 159. Bremer Landesbank 261. Karafarin Bank (Public Joint Stock Co.) 209. Erst Bank Hungary NYRT 160. Commerzbank AG (Dusseldorf - Germany) 262. Parsian Bank 210. Kereskedelmi Es Hitelbank 161. Commerzbank AG (Frankfurt - Germany) 263. Post Bank of Iran (K and H Bank NYRT) 162. Deutsche Bank AG 264. Saman Bank 211. Magyar Nemzeti Bank 163. Deutsche Bundesbank 212. Raiffeisen Bank ZRT IRAQ 164. Deutsche Postbank AG 213. Unicredit Bank Hungary ZRT 265. Central Bank of Iraq 165. DVB Bank AG 266. Rafidain Bank 166. DZ Bank AG ICELAND 267. Rasheed Bank 167. Frankfurter Volksbank EG 214. Glitnir Banki HF (Formerly Islandsbanki - 168. HSBC Trinkaus & Burkhardt KGA FBA Limited) IRELAND 169. Ing Bhf - Bank AG 268. Allied Irish Bank PLC INDIA 170. Kreissparkasse Goppingen 215. Allahabad Bank 171. Landesbank Baden-Wurttemberg ISRAEL 216. Andhra Bank 269. 172. Landesbank Berlin AG (Merger of Bankgesel- Bank Hapoalim BM 217. Ischaft Berlin AG & Landesbank Berlin AG) Axis Bank 270. Bank Leumi Le Israel BM 218. 173. Landesbank Hessen Thuringen Girozentrale Bank of Baroda 271. Bank of Palestine 219. 174. LRP Landesbank Rheinland Pfalz Bank of India (Mumbai) 272. First International Bank of Israel Limited 220. 175. Nassauische Sparkasse Bank of Maharashtra 273. Israel Discount Bank 221. 176. Nordeutsche Landesbank Girozentrale Canara Bank 274. Mercantile Discount Bank Limited 222. Central Bank of India 275. Mizrahi Tefahot Bank Limited 276. Union Bank of Israel Limited

BANK OF CEYLON ANNUAL REPORT 2010 277 CORRESPONDENT BANKS BY COUNTRY

ITALY 323. Gunma Bank Limited KOREA 277. Banca Agricola Mantovana SPA 324. Higashi-Nippon Bank 371. Citibank Korea Inc. (Formerly Koram Bank) 278. Banca Antonveneta SPA 325. Horuriku Bank Limited 372. Foreign Trade Bank of The Democratic 279. Banca Carige SPA 326. Kinki Osaka Bank Limited People’s Bank of Korea 280. Banca Delle Marche SPA 327. Kiyo Bank Limited 373. Hana Bank (Merger of Hana Bank & 281. Banca Di Credito Cooperativo Di Alba 328. Kyoto Shinkin Bank Seoul Bank) 282. Banca Di Imola SPA 329. Minato Bank Limited 374. Kookmin Bank 283. Banca Di Roma (Formerly Midori Bank Limited) 375. Korea Development Bank 284. Banca Etruria Soc Coop 330. Mitsubishi Trust & Banking Company 376. Korea Exchange Bank 285. Banca Monte Dei Paschi Di Siena 331. Mizuho Bank Limited 377. Kyongnam Bank 286. Banca Nazional Del Lavoro SPA 332. Mizuho Corporate Bank Limited 378. Pusan Bank (Merged Into BNP Paribas) 333. Nishi Nippon City Bank Limited 379. The Kwagju Bank Limited 287. Banca Popolare - Volksbank 334. Okazaki Shinkim Bank 380. Woori Bank (Banca Popolare Dell Alto Adige) 335. Resona Bank Limited KUWAIT 288. Banca Popolare Dell Emilia Romagna 336. Saitama Resona Bank Limited 381. Bank of Kuwait & The Middle East 289. Banca Popolare Di Milano 337. Seto Shinkin Bank 382. Burgan Bank SAK 290. Banca Popolare Di Ravenna SPA 338. Shiga Bank Limited 383. Commercial Bank of Kuwait SAK 291. Banca Popolare Di Sondrio 339. Shinkin Central Banko 384. Gulf Bank 292. Banco Popolare Di Verona E Novara Scrl 340. Shinsei Bank Limited 385. National Bank of Kuwait SAK (Including Credito Bergamasco SPA, Banca (Formerly Long-Term Credit Bank of Japan) Popolare Di Novara SPA) Verona 341. Standard Chartered Bank KYRGYZSTAN 293. Banca Popolare Di Vicenza Scparl 342. Sugamo Shinkin Bank 386. Asia Universal Bank 294. Banca Regionale Europea SPA 343. Sumitomo Mitsui Banking Corporation 295. Banca Toscana SPA 344. The Asahi Shinkin Bank LATVIA 296. Banca Ubae SPA 345. The Ashikaga Bank Limited 387. Parex Bank 297. Banca Valsabbina SCPA 346. The Hokkaido Bank Limited 388. Rietumu Bank 298. Banco Carim - Cassa Di Risparmio 347. The Shikoku Bank Limited 389. Seb Banka Di Rimini SPA 348. The Shizuoka Bank Limited 299. LEBANON Banco Di Desio E Della Brianza SPA 349. The Yokohama Shinkin Bank 300. 390. Al Ahli International Bank SAL Banco Di Sardegna SpA 350. Tokushima Bank Limited 301. 391. Arab African International Bank Banco Di Sicilia 351. Tokyo Tomin Bank Limited 302. 392. Arab Bank PLC Bipop-Carires 352. Tomato Bank Limited 303. (Lebanon Branches Centre) Beirut Cariparma SPA 353. Towa Bank Limited 304. 393. Audi Saradar Private Bank SAL Cassa Di Risparmio Di Carrara SPA 354. Yamagata Bank Limited 305. 394. BLC Bank SAL Cassa Di Risparmio Di Prato SPA (Cariprato) 355. Yamaguchi Bank Limited 306. 395. Bank Audi SAL - Audi Saradar Group Deutsche Bank SPA 356. Yamanashi Chuo Bank Limited 307. Hipo Alpe-Adria-Bank SPA 396. Bank of Beirut SAL 308. Intesa Sanpaolo SPA JORDAN 397. Bbac SAL (Formerly Bank of Beirut & The Arab Countries SAL) (Formerly Banca Intesa SPA) 357. Arab Bank PLC 398. BLC Bank SAL (Formerly Banque Libanaise 309. Unicredito Italiano SPA 358. Arab Jordan Investment Bank Pour Le Commerce SAL) 310. Unipol Banca SPA 359. Bank of Jordan PLC 399. BLOM Bank SAL 360. Cairo Amman Bank JAMAICA 400. Byblos Bank SAL 361. Housing Bank for Trade & Finance 311. National Commercial Bank of Jamaica Limited 401. Credit Libanais SAL 362. Islamic International Bank Limited 402. Fransbank SAL 363. Jordan Ahli Bank PLC w.e.f. 12.11.2006 JAPAN 403. IBL Bank (Formerly Jordan National Bank) 312. 77 Bank Limited 404. Jamal Trust Bank SAL 313. Aozora Bank Limited 364. Jordan Commercial Bank (Formerly Jordan Gulf Bank) 405. Lebanese Canadian Bank SAL 314. Australia & New Zealand 406. Meab Bank Banking Group Limited 365. Jordan Investment & Finance Bank (JIF Bank) 407. Near East Commercial Bank SAL 315. Awa Bank Limited 366. Jordan Kuwait Bank 367. Union Bank for Savings & Investment 408. Societe Nouvelle De La Banque De 316. Bank of Kochi Limited Syrie Et Du Liban SAL 317. Bank of Kyoto KAZAKSTAN 318. LIBYA Bank of Tokyo-Mitsubishi Ufj Limited 368. JSC Bank Centercredit 319. Bank of Yokohama Limited 409. Gumhoria Bank 320. Chiba Kogyo Bank Limited KENYA 410. National Commercial Bank SAL 321. Chukyo Bank Limited 369. Barclays Bank of Kenya Limited 411. Umma Bank SAL 322. Chuo Mitsui Trust and Banking 370. Kenya Commercial Bank Limited 412. Wahda Bank Company Limited

278 BANK OF CEYLON ANNUAL REPORT 2010 CORRESPONDENT BANKS BY COUNTRY

LITHUANIA NEPAL PALESTINIAN AUTONOMOUS AREAS 413. AB Bankas Hansa Bankas 447. Himalayan Bank Limited 491. Arab Islamic Bank 414. Seb Bank 448. Nepal Bank Limited PAPUA NEW GUINEA 415. Ukio Bank AS 449. Standard Chartered Bank Nepal Limited 492. Westpac Bank Png Limited MADAGASCAR THE NETHERLANDS PARAGUAY 416. Bank of Africa - Madagascar 450. Abn Ambro Bank 493. Banco Amambay SA 417. Banque Centrale De Madagascar 451. F Van Lanschot Bankiers NV 452. Hollandsche Bank - Unie NV PERU MALAWI 453. ING Bank NV 494. Banco De Credito Del Peru 418. National Bank of Malawi 454. Lan Schot Bankiers NV F Van PHILIPPINES MALAYSIA 455. Rabobank Nederland 495. Metropolitan Bank & Trust Company 419. Alliance Bank Malaysia, Berhad 456. SNS Bank NV 496. Philippine National Bank 420. Ambank Berhad NEW ZEALAND (Formerly Arab-Malaysian Bank - Berhad) 457. ANZ Bank National Bank Limited POLAND 421. Bank Islam Malaysia Berhad 458. ASB International Bank 497. Bank BGZ 422. CIMB Bank Berhad (Formerly Bumiputra- 459. Bank of New Zealand 498. Bank Gospodarstwa Krajowego Commerce Bank Berhad) 460. Westpec Banking Corporation 499. Bank Handlowy Warszawa SA 423. Eon Bank Berhad 500. Bank Millennium SA 424. Malayan Banking Berhad (May Bank) NIGERIA 501. Kredyt Bank SA 425. OCBC (Malaysia) Berhad 461. First Bank of Nigeria PLC 502. Raiffeisen Bank Polska SA 426. Overseas - Chinese Banking Corporation 462. Union Bank of Nigeria PLC Limited (Kuala Lumpur) NORWAY PORTUGAL 427. Public Bank Berhad 463. DNB Nor Bank ASA 503. Banco BPI SA 428. Royal Bank of Scotland (Formerly Den Norske Bank NA) 504. Banco Espirito Santo SA 429. United Overseas Bank (Malaysia) Berhad 464. Nordea Bank Norge AS 505. BNP - Banco Portugues De Negocios SA 465. Sparebanken Hedmark 506. Finibanco SA MALDIVES 466. Sparebanken More 507. Millennium BCP (Formerly Banco 430. Bank of Maldives PLC 467. Sparebanken Nord Norge Commercial Portugues SA) 431. Habib Bank Limited OMAN QATAR MALTA 468. Bank Dhofar SAOG 508. Barwa Bank 432. Bank of Valleta 469. Bankmuscat SAOG 509. Doha Bank 433. FIM Bank PLC Limited 470. National Bank of Oman SAOG 510. Qatar International Islamic Bank 434. HSBC Bank Malta PLC 471. Oman Arab Bank SAOC 511. Qatar Islamic Bank SAQ 472. Oman International Bank MAURITIUS ROMANIA 435. State Bank of Mauritius Limited PAKISTAN 512. Banca Comerciala Carpatica 436. The Mauritius Commercial Bank Limited 473. Allied Bank of Pakistan 513. Banca Commerciala Romana SA MEXICO 474. AskariBank Limited (Formerly Askari 514. Banca Transilvania 437. Banco Nacional De Mexico SA Commercial Bank Limited) 515. Brd - Groupe Societe Generale SA 438. 475. Atlas Bank Banco Santander Mexicano SPA RUSSIA 439. 476. Bank Al Habib Limited BBVA Bancomer SA 516. Bank for Development & Foreign Economic 477. Bank of Khyber 440. HSBC Mexico SA Affairs (Formerly Bank for Foreign Economic 478. Bank of Punjab Affairs of the USSR) MOZAMBIQUE 479. Dawood Islamic Bank Limited 517. Bank Jugra 441. Banco International De Mocambique SARL 480. Faysal Bank Limited 518. Bank of Moscow 481. Habib Bank Limited MONGOLIA 519. Bin Bank 482. Habib Metropolitian Bank Limited 442. Trade & Development Bank of Mongolia 520. International Moscow Bank 483. KASB Bank 521. JSC VTB Bank [Formerly Bank for Foreign MOROCCO 484. MCB Bank Limited (Formerly Muslim Trade (Vneshtorgbank)] 443. Credit Du Marco SA Commercial Bank) 522. M D M Bank 485. Meezan Bank Limited 523. Nomos-Bank (Novaya Moskva) MYANMAR 486. Mybank Limited 524. ROS Bank 444. Myanmar Foreign Trade Bank 487. National Bank of Pakistan 525. Sberbank 445. Myawaddy Bank Limited 488. Soneri Bank Limited 526. Trans Credit Bank 489. Standard Chartered Bank (Pakistan) Limited NAMIBIA 527. Vneshtconombank 490. United Bank Limited 446. Bank Windhoek Limited

BANK OF CEYLON ANNUAL REPORT 2010 279 CORRESPONDENT BANKS BY COUNTRY

SAUDI ARABIA SOUTH AFRICA TANZANIA 528. Al Rajhi Bank (Formerly Al Rajhi Banking & 565. ABSA Bank Limited 612. NCB Limited (National Bank of Commerce) Investment Corporation) 566. Firstrand Bank Limited THAILAND 529. Arab National Bank 567. Nedcor Bank Limited (NED BANK) 613. Bangkok Bank Public Company Limited 530. Bank Al Bilad 568. Standard Bank of South Africa Limited 614. Bank of Ayudhya Public Company Limited 531. Bank Al Jazira 569. The Standard Chartered Bank of South Africa 532. Banque Saudi Fransi 615. Export Import Bank of Thailand 533. National Commercial Bank Limited SPAIN 616. Kasikornabank Public Company Limited (Formerly Thai Farmers Bank) 534. Riyad Bank 570. Banco Bilbao Vizcaya Argentaria 617. Krung Thai Bank Public Company Limited 535. Samba Financial Group 571. Banco De Europa SA 618. Siam City Bank Public Company Limited 536. Saudi British Bank 572. Banco De Sabadell 619. Siam Commercial Bank PCL 537. Saudi Hollandi Bank 573. Banco De Valencia 574. Banco Guipuzcoano SA 620. Standard Chartered Bank (Thai) Public SCOTLAND 575. Banco Intercontinental Espanol (Bankinter) Company Limited 538. Royal Bank of Scotland 576. Banco Pastor SA 621. United Overseas Bank (Thai) 577. Banco Santander Central Hispano Public Company Limited SERBIA 578. Caixa’d Estalvis De Catalunya 539. Banca Intesa AD Beograd TUNISIA 579. Caja De Ahorrosy Pensiones 622. Attijari Bank De Barcelona La Caixa SERBIA AND MONTENEGRO 623. Banque Nationale Agricole 580. Caja Madrid 540. National Bank of Serbia 624. Societe Tunisienne De Banque SUDAN SEYCHELLES TURKEY 581. Bank of Khartoum 541. Seychelles International Mercantile Banking 625. AK Bank TAS 582. National Bank of Sudan (NOUVOBNQ) 626. Anadolu Bank SINGAPORE SWEDEN 627. Arab Turkish Bank 542. Bank of India (Singapore) 583. Nordbanken AB (Publ) 628. Asya Katilim Bankasi AS (Formerly Asya Finans Kurumu AS) 543. DBS Bank Limited 584. Skandinaviska Enskilda Banken AB (Publ.) 629. Euro Tekfen AS 544. Dexia Banque Internationale A Luxembourge 585. Svenska Handelsbanken AG (Publ.) 630. Kocbank AS (Merged into Yapi 545. Far Eastern Bank Limited 586. Swed Bank Ve Kredi Bankasi) 546. Indian Bank SWITZERLAND 631. Kuvoyt Turk Katilim Bankasi AS 547. Oversea-Chinese Banking Corporation Limited 587. Banque Cantonale De Geneve 632. Oyak Bank AS (ING Bank AS) Name changed 548. Skandinaviska Enskilda Banken AB 588. Banque Cantonale Vandoise on 07.07.2007 549. Standard Chartered Bank 589. Banque De Commerce Et De Placements 633. Tekstil Bankasi AS 550. The Bank of East Asia Limited 590. BNP Paribas (Suisse) SA 634. Turk Economi Bankasi 551. UCO Bank 591. BSI SA 635. Turkiye Finance Katilinu Bankasi AS 552. Union De Banques Arabes ET Francaises (UBAF) 592. Credit Agricole (Suisse) SA 636. Turkiye Garanti Bankasi AS 553. United Overseas Bank Limited 593. Credit Suisse 637. Turkiye Is Bankasi AS 554. VTB Bank Europe PLC (Formerly Moscow 594. Habib Bank AG Zurich 638. Turkiye Vakiflar Bankasi TAO Narodny Bank Limited) 595. Luzerner Kantonal Bank 639. Turkland Bank - T Bank SINGAPORE/MALAYSIA 596. UBS AG (Union Bank of Switzerland) 640. Yapi Ve Kredi Bankasi AS 555. ABN Amro 597. Zurcher Kantonalbank UNITED ARAB EMIRATES SLOVAKIA SYRIA 641. Abu Dhabi Commercial Bank 556. Postova Bank AS 598. Bank Audi Syria 642. Abu Dhabi Islamic Bank 557. Slovenska Sporitelna AS 599. Commercial Bank of Syria 643. Arab Bank For Investment & Foreign Trade 558. Tarta Bank AS 644. Commercial Bank International PLC TAIWAN 559. Vseobecna Uverova Bank AS 645. Commercial Bank of Dubai PSC 600. Bank of Taiwan 646. Dubai Islamic Bank PLC SLOVENIA 601. China Trust Commercial Bank 647. Emirates Bank International PJSC 560. Abanka Vipa DD 602. Chinfon Commercial Bank 648. First Gulf Bank 561. Nova Kreditna Banka Maribor DD 603. E-sun Commercial Bank Limited 649. Mashreqbank PSC 562. Nova Ljubljanska Banka DD Ljubljana 604. First Commercial Bank 650. Middle East Bank PJSC 605. Hua Nan Commercial Bank 651. National Bank of Abu Dhabi SOLOMON ISLANDS 606. Mega International Commercial Bank 652. National Bank of Fujirah 563. National Bank of Solomon Islands 607. Shanghai Commercial & Savings Bank Limited 653. Noor Islamic Bank SOMALIA 608. Shin Kong Bank 654. Union National Bank 564. Commercial & Savings Bank of Somalia 609. Taipei Fubon Commercial Bank 655. United Arab Bank 610. Taiwan Cooperative Bank 611. Union Bank of Taiwan

280 BANK OF CEYLON ANNUAL REPORT 2010 CORRESPONDENT BANKS BY COUNTRY

UGANDA 692. JP Morgan Chase Bank 656. Barclays Bank of Uganda Limited 693. La Salle Bank Midwest 694. M & T Bank (Formerly Allfirst Bank) UKRAINE 695. National City Bank of Indiana 657. Calyon Bank 696. Northern Trust Company 658. First Ukrainian International Bank-Pjsc 697. PNC Bank NA 659. Otp Bank - Public Joint Stock Company 698. San Diego National Bank 660. Pjsc ‘Alfa - Bank’ 699. Silicon Valley Bank 661. Ukreximbank (State Export-Import 700. Sovereign Bank Bank of Ukrain) 701. Standard Chartered Bank UNITED KINGDOM 702. State Street Bank & Trust Company 662. AIB Group (Formerly Allied Irish Bank) 703. Sun Trust Bank Limited 663. Barclays Bank PLC 704. The Bank of NewYork Mellon (Bank of New 664. Clydesdale Bank PLC York merged with Mellon Bank 21.07.08) 665. Gulf International Bank (UK) Limited 705. UMB Bank NA 666. Habib Bank Ag Zurich 706. Union Bank of California NA 667. Habibsons Bank Limited 707. US Bank NA 668. HSBC Bank PLC 708. WELLS FARGO BANK NA (Wachovia Bank 669. Investec Bank (UK) Limited NA merged with Wells Fargo) 670. Lloyd’s TSB Bank PLC URUGUAY 671. National Westminster Bank PLC 709. The Banco De La Republic Oriental 672. Royal Bank of Scotland PLC Del Uruguay 673. Standard Bank PLC 674. Standard Chartered Bank VIETNAM 710. Bank for Foreign Trade of Vietnam UNITED STATES OF AMERICA 711. Bank for Investment & Development 675. American Express Bank Limited of Vietnam 676. Banco Del Pichincha CA 677. Bank of America NA YEMEN 712. 678. Bank of Tampa International Bank of Yemen YSC 713. 679. Branch Banking & Trust Company National Bank of Yemen 714. 680. Brown Brothers Harriman & Company Yemen Bank for Reconstruction & Development 715. 681. Citibank NA Yemen Commercial Bank 716. 682. Cobank ACB Yemen Kuwait Bank 683. Commerce Bank NA ZAMBIA 684. Deutsche Bank Trust Company Americas 717. Barclays Bank of Zambia Limited 685. First Hawaiian Bank 686. French American Banking Corporation ZIMBABWE 687. Habib American Bank 718. Barclays Bank of Zimbabwe Limited 688. HSBC Bank USA 689. Hibernia National Bank 690. Huntington National Bank 691. Israel Discount Bank of New York

BANK OF CEYLON ANNUAL REPORT 2010 281 EXCHANGE COMPANIES BY COUNTRY

AUSTRALIA OMAN UNITED KINGDOM 1. Ceylon Exchange (Pty) Limited 37. Asia Express Exchange 84. 3R Telecom Limited 2. Kapruka (Pty) Limited 38. Gulf Overseas Exchange Company LLC 85. An Express Limited 3. Serendib Financial Services 39. Hamdan Exchange 86. Coinstar 4. Serendib (Pty) Limited Rs. A/C NZ 40. Majan Exchange LLC 87. Currency Exchange Corporation (Fast Cash) 41. Modern Exchange Company LLC 88. Global Exchange Limited BAHRAIN 42. Musandam Exchange 89. Intl Global Currencies Limited 5. Bahrain Financing Company 43. Mustafa Sultan Exchange Company LLC 90. Moneygram 6. Bex Money - Bahrain Express Exchange 44. Oman & UAE Exchange Centre Company LLC (Formerly Bahrain Express Exchange) UNITED STATES OF AMERICA 45. Oman International Exchange LLC 7. Dalil Exchange 91. Trans-Fast Remittance LLC 8. Ezremit Limited 46. Oman United Exchange Company LLC 9. National Finance & Exchange Company WLL 47. Purshottam Kanji Exchange Company LLC 10. Zenj Exchange QATAR 11. Zenj Exchange Company WLL (Turbo Cash) 48. Al Dar For Exchange Works CANADA 49. Al Fardan Exchange Company WLL 12. Delma Exchange Canada 50. Al Sadd Exchange 51. Arabian Exchange Company WLL GREECE 52. Eastern Exchange EST 13. International Express Remittance International 53. Gulf Exchange Company Money Transfer Mediation Company 54. Habib Qatar International Exchange Limited 55. Islamic Exchange HONG KONG 56. National Exchange Company WLL 14. Lotus Forex Limited (Formerly Al Shaibei Exchange Company) ISRAEL 57. Trust Exchange Company Limited 15. Tifco Logistics & Trade Limited 58. Union Exchange

ITALY SINGAPORE 16. Valutrans SPA 59. HBZ International Exchange Company (Singapore) Pvt Limited JORDAN 60. Mustafa Foreign Exchange 17. Al Samhouri Exchange Company 18. Alawaneh Exchange Company SWITZERLAND 19. Shift Financial Services Limited 61. Motherhouse GMBH

KUWAIT UNITED ARAB EMIRATES 20. Al Mulla International Exchange Company WLL 62. Al Ahalia Money Exchange Bureau 21. Al Muzaini Exchange Company KSC (Closed) 63. Al Ansari Exchange EST 22. Bahrain Exchange Company WLL 64. Al Fardan Exchange 23. City International Exchange Company WLL 65. Al Mona Exchange Company LLC 24. Dollarco Exchange Company Limited 66. Al Razouki International Exchange 25. Etemadco Exchange Company WLL Company LLC 26. International Financial Line Company 67. Al Rostamani International Exchange (Formerly Thomas Cook Al Rostamani 27. Kuwait Asian International Exchange Exchange Company) Company WLL 68. Alukkas Exchange 28. Kuwait Bahrain International Exchange Co. 69. Asia Exchange Centre 29. Kuwait India International Exchange Company 70. Delma Exchange 30. National Exchange Company WLL 71. Dubai Exchange Centre LLC 31. National Money Exchange Company WLL 72. Emirates India International Exchange Company 32. Oman Exchange Company Limited 73. Habib Exchange Company LLC 33. Security Exchange Company WLL 74. Hadi Express Exchange 34. UAE Exchange Centre WLL 75. Lari Exchange Establishment LEBANON 76. Lulu International Exchange LLC 35. Services Exchange Company (Imad Al Hariri 77. National Exchange Company Trading Company & Partners - SECO) 78. Orient Exchange Company LLC 79. Redha Al-Ansari Exchange EST MALAYSIA 80. UAE Exchange Centre 36. Merchantrade Asia SDN BHD 81. Wall Street Exchange Centre 82. Xpress Money Services Limited 83. Zareen Exchange

282 BANK OF CEYLON ANNUAL REPORT 2010 GLOSSARY OF FINANCIAL/BANKING TERMS

A BUSINESS SEGMENT COUNTRY RISK ACCOMMODATION A distinguishable component of an entity that The credit risk associated with lending to borrowers Credit exposure including on & Off-Balance Sheet is engaged in providing an individual product or within a particular country, sometimes taken to Commitments and investment exposure including service or a group of related products or services include sovereign risk. and that is subject to risks and returns that are all financial investments except for investments in CREDIT RISK equity (only ordinary shares). different from those of other business segments. The risk of loss due to non-payment of a loan or ACCOUNTING POLICIES C other line of credit (either the principal or interest The specific principles, bases, conventions, rules CAPITALISATION or both), by the borrower or a counter party. Recognising a cost as part of the cost of an asset. and practices adopted by an entity in preparing CREDIT RATINGS and presenting Financial Statements. CAPITAL ADEQUACY RATIO (CAR) An evaluation of a corporate’s ability to repay its ACCRUAL BASIS The percentage of the risk-adjusted assets supported obligations or the likelihood of not defaulting, To recognise the effects of transactions and other by capital, as defined under the framework of carried out by an independent rating agency. events as they occur without waiting for the receipt risk-based capital standards developed by the Bank D or payment of related cash or its equivalent. for International Settlements (BIS) and as modified DEALING SECURITIES to suit local requirements by the Central Bank of ACTUARIAL ASSUMPTIONS Sri Lanka. Securities acquired and held with the intention of An entity’s unbiased and mutually compatible reselling them in the short-term. best estimates of the demographic and financial CAPITAL RESERVE DEBT EQUITY RATIO variables that will determine the ultimate cost of Capital reserve consists of revaluation reserves arising providing post-employment benefits. from revaluation of properties owned by the Bank Long-term borrowings (Refinance borrowings + and permanent Reserve Fund set aside for specific Debentures) divided by Shareholders' equity. ACTUARIAL GAINS AND LOSSES purposes defined under the Banking Act No. 30 of DEFERRED INTEREST Actuarial gains and losses comprise the effects 1988 and shall not be reduced or impaired without Interest not due at a particular date, but which will of differences between the previous actuarial the approval of the Monetary Board. assumptions and what has actually occurred and be due later. CASH EQUIVALENTS the effects of changes in actuarial assumptions. DEFERRED TAXATION Investments/assets that are readily convertible to Sum set aside for tax in the Financial Statements ACTUARIAL PRESENT VALUE OF PROMISED cash, subject only to an insignificant risk of change that will become payable in a financial year other RETIREMENT BENEFITS in their value. The present value of the expected payments by than the current financial year. COMMITMENT TO EXTEND CREDIT a retirement benefit plan to existing and past DEFINED BENEFIT PLANS Refers to contractual arrangements between a employees, attributable to the service already Retirement benefit plans under which amounts to bank and a customer to extend credit in the future. rendered. be paid as retirement benefits are determined by The agreement will stipulate conditions that reference to a formula usually based on employees’ ACTUARIAL VALUATION must be satisfied by the customer for the facility remuneration and/or years of service. Fund value as determined by computing its normal to be utilised. cost, actuarial accrued liability, actuarial value of its DEPRECIATION COMPOUND ANNUAL GROWTH RATE (CAGR) assets and other relevant costs and values. The systematic allocation of the depreciable The year-over-year growth rate over a specified amount of an asset over its useful life. AMORTISATION period of time. The systematic allocation of the depreciable DERIVATIVES CONSOLIDATED FINANCIAL STATEMENTS amount of an asset over its useful life. In the A financial instrument, the price of which has a The Financial Statements of a Group presented as case of an intangible asset or goodwill, the strong relationship with an underlying commodity, those of a single entity. term ‘amortisation’ is generally used instead of currency variable or financial instrument. ‘depreciation’. Both terms have the same meaning. CONTINGENT LIABILITIES DIVIDEND PER SHARE ASSOCIATE COMPANY Liabilities that at Balance Sheet date can either not Dividend per share is calculated by dividing the total be measured or can only be anticipated to arise if a A company other than a Subsidiary in which a profit distributed to shareholders by the weighted particular event occurs. holding company has a participating interest and average number of shares in issue during the year. exercise a significant influence over its operating CORRESPONDENT BANK and financial policies. DOCUMENTARY LETTERS OF CREDIT (L/C’s) A bank that acts as an agent for another bank. The Written undertakings by a bank on behalf of its ATTRITION RATE correspondent bank will generally provide a wide customers (typically an importer), authorising a third variety of banking services on behalf of the other A measure of how many employees leave over a party (e.g., an exporter) to draw drafts on the bank bank in the region in which the correspondent certain period of time. up to a stipulated amount under specific terms and bank is located. B conditions. Such undertakings are established for BILL OF EXCHANGE CORPORATE GOVERNANCE the purpose of facilitating international trade. A signed written unconditional order addressed by The way in which corporate entities are managed E and organised, ensuring in particular that the one person (the drawer) directing another person EARNINGS PER SHARE (EPS) interests of stakeholders are given sufficient weight. (the drawee) to pay a specified sum of money Net profits earned during a period attributable to to the order of a third person (the payee). The COSO FRAMEWORK ordinary shareholders of a company divided by terms ‘bill of exchange and draft’ are often used Internal control framework developed by the number of shares in issue during that period. interchangeably. Committee of Sponsoring Organisations of the EFFECTIVENESS BORROWING COSTS US-based Trade Way Commission and now accepted Doing things that influences quality of output. Interest and other costs incurred by an entity in globally as the standard. connection with the borrowing of funds. COST/INCOME RATIO EFFECTIVE TAX RATE Operating expenses compared to net income. Provision for taxation divided by the profit before taxation.

BANK OF CEYLON ANNUAL REPORT 2010 283 GLOSSARY OF FINANCIAL/BANKING TERMS

EFFICIENCY GROUP L Doing the things right. Refers to the ratio of output A Parent and all its subsidiaries. LEVERAGE to input. Example: Cost to Income Ratio. GUARANTEES Total liabilities as number of times of equity. EQUITY METHOD Primarily represent irrevocable assurances that a LIQUID ASSETS A method of accounting whereby the investment bank will make payments in the event that Assets that are held in cash or in a form that can is initially recorded at cost and adjusted thereafter its customer is unable to perform its financial be converted to cash readily, such as deposits with for the post-acquisition change in the investor’s obligations to third parties. Certain other other banks, Bills of Exchange, Treasury Bills. share of net assets of the invested. The Income guarantees represent non-financial undertakings Statement reflects the investor’s share of the results such as bid and performance bonds. LIQUID ASSETS RATIO of operations of the invested. Liquid assets expressed as a percentage of total H liabilities other than shareholders’ funds. EVENTS AFTER THE BALANCE SHEET DATE HISTORICAL COST CONVENTION Events after the Balance Sheet date are those events, Recording transactions at the actual value received M both favourable and unfavourable, that occur or paid. MARKET CAPITALISATION between the Balance Sheet date and the date when Number of ordinary shares issued multiplied by the the Financial Statements are authorised for issue. I market value of each share. IMPAIRMENT EFFECTIVE ANNUAL YIELD When recoverable amount declines below carrying MARKET RISK Return as a percentage of market value of the amount. The risk that the value of an investment will change investment. due to moves in market factors. INTANGIBLE ASSET F An identifiable non-monetary asset without MATERIALITY FAIR VALUE physical substance held for use in the production or The relative significance of a transaction or an The amount for which an asset could be exchanged, supply of goods or services, for rental to others, or event the omission or misstatement of which could or a liability settled, between knowledgeable, willing for administrative purposes. influence the economic decisions of users of parties in an arm’s length transaction. Financial Statements. INTEREST IN SUSPENSE FINANCE LEASE The interest due on non-performing assets held MINORITY INTEREST Leases which transfer risks and rewards of ownership. in suspense until all the arrears of principal and That portion of the profit or loss and net assets Title may or may not eventually be transferred. interest are settled, or a specific reverse entry is of a subsidiary attributable to equity interests made when they are determined as bad. Interest that are not owned, directly or indirectly through FINANCING ACTIVITIES falling due from the date of classification as a non- subsidiaries, by the Parent. Activities that result in changes in the size and performing asset is credited to interest in suspense. composition of the equity capital and borrowings MORTALITY RATE of the entity. INTEREST MARGIN A measure of the number of deaths in some Net interest income expressed as a percentage of population, scaled to the size of that population, FORECLOSED PROPERTIES average interest earning assets. per unit time. Properties acquired in full or partial settlement of debts, which will be held with the intention of INTEREST SPREAD N re-sale at the earliest opportunity. Represents the difference between the average NET INTEREST INCOME interest rate earned on interest earning assets The difference between what Bank earns on assets FOREIGN EXCHANGE INCOME and the average interest rate incurred on interest such as loans and securities and what it pays on The gain recorded when assets or liabilities bearing liabilities. liabilities such as deposits, refinance funds and denominated in foreign currencies are translated interbank borrowings. into Sri Lankan Rupees on the Balance Sheet date INVESTING ACTIVITIES at prevailing rates which differ from those rates in The acquisition and disposal of long-term assets and NET REALISABLE VALUE force at inception or on the previous Balance Sheet other investments not included in cash equivalents. The estimated selling price in the ordinary course date. Foreign exchange income also arises from of business, less the estimated costs of completion INVESTMENT FLUCTUATION RESERVE trading in foreign currencies. and the estimated costs necessary to make the sale. Reserve created to meet fluctuation in investments. FORWARD EXCHANGE CONTRACT NON-PERFORMING ADVANCES (NPA) INVESTMENT PROPERTIES Agreement between two parties to exchange one A loan placed on cash basis (i.e., interest income currency for another at a future date at a rate Land and buildings not occupied substantially for is only recognised when cash is received) because, agreed upon today. use by or in the operations of the Bank. in the opinion of the management, there is G INVESTMENT SECURITIES reasonable doubt regarding the collectibility of principal or interest. Loans are automatically placed GENERAL PROVISIONS Securities acquired and held for yield or capital on cash basis when a payment is 90 days past due. growth purposes and usually held to maturity. A provision made as a percentage on total All loans are classified as non-performing when a performing advances and special mention loans K payment is 90 days in arrears. and advances, for the potential credit risk. KEY MANAGEMENT PERSONNEL NPA RATIO GROSS DOMESTIC PRODUCT Those persons having authority and responsibility for Total Non-performing Advances (net of Interest in The value of all goods and services produced planning, directing and controlling the activities of Suspense) divided by total advances portfolio (net domestically in an economy during a specified the entity, directly or indirectly, including any Director of Interest in Suspense) period, usually a year. Nominal GDP, adjusted for (whether Executive or otherwise) of that entity. inflation, gives GDP in real terms. O KEY PERFORMANCE INDICATORS (KPI) OFF-BALANCE SHEET TRANSACTIONS KPIs are quantifiable measurements, agreed before Transactions not recognised as assets or liabilities hand that reflect the critical success factors of a in the Balance Sheet but which give rise to company. contingencies and commitments.

284 BANK OF CEYLON ANNUAL REPORT 2010 GLOSSARY OF FINANCIAL/BANKING TERMS

OPERATING ACTIVITIES REPOs SUBSIDIARY COMPANY The principal revenue-producing activities of an Repurchase Agreements relating to securities A Company is a subsidiary of another company if entity and other activities that are not investing or sold to creditors (who lend money for funding the Parent Company holds more than 50% of the financing activities. purposes), with the intention of buying them back nominal value of its equity capital or holds some at a set price. shares in it and controls the composition of its OPERATIONAL RISK Board of Directors. The risk of loss resulting from inadequate or failed RETURN ON AVERAGE ASSETS (ROAA) internal processes, people and systems, or from Net income expressed as a percentage of average SUBSTANCE OVER FORM external events. total assets. Used along with ROE, as a measure Refers to the consideration that the accounting of profitability and as a basis of intra-industry treatment of transactions and the events should P performance comparison. be governed by their financial reality and not by PARENT COMPANY presentation form. A Parent Company is an entity that has one or RETURN ON AVERAGE EQUITY (ROAE) more subsidiaries. Net income, less preference share dividends, SURRENDER VALUE if any, expressed as a percentage of average The amount payable by an insurer to a policyholder PLAN ASSETS (OF AN EMPLOYEE BENEFIT PLAN) ordinary shareholders’ equity. on termination of an insurance policy before the Assets held by a long-term employee benefit fund. expiry of its term (more common in Life Insurance). REVENUE RESERVE PRICE EARNINGS RATIO (P/E RATIO) Reserves set aside for future distribution and SWAPS (CURRENCY) The current market price of a share divided by its investment. The purchase of currency for spot settlement and earnings per share (EPS). its simultaneous sale for settlement at a future REVERSE REPO date. Alternatively, the simultaneous spot sale and PROJECTED UNIT CREDIT METHOD The purchase of securities under an agreement to future purchase of a currency. An actuarial valuation method that sees each re-sell at a given price on a specific future date. period of service as giving rise to an additional T RISK-ADJUSTED ASSETS unit of benefit entitlement and measures each unit TIER I CAPITAL Used in the calculation of risk-based capital ratios. separately to build up the final obligation. Consists of the sum total of paid-up ordinary The face amount of lower risk assets is discounted shares, non-cumulative, non-redeemable PRIMARY DEALER SPECIAL RISK RESERVE using risk-weighting factors in order to reflect preference shares, share premium, statutory reserve Reserve maintained in order to strengthen capital a comparable risk per Rupee among all types fund, published retained profits, general and other base further with development of capital market. of assets. The risk inherent in Off-Balance Sheet reserves, less goodwill. instruments is also recognised, first by adjusting PROPERTY, PLANT & EQUIPMENT notional values to Balance Sheet (or credit) TIER II CAPITAL Tangible assets that: equivalents and then by applying appropriate risk Consists of the sum total of revaluation reserves, (a) are held for use in the production or supply weighting factors. general provisions, hybrid capital instruments and approved subordinated debentures. of goods or services, for rental to others, or for RISK-WEIGHTED ASSETS administrative purposes; and On Balance Sheet assets and the credit equivalent TOTAL CAPITAL (b) are expected to be used during more than of Off-Balance Sheet assets multiplied by the Is the sum of Tier I capital and Tier II capital. one period. relevant risk- weighting factors. U PROVISION FOR LOAN LOSSES S UNIT TRUST A charge to income added to the allowance for SEGMENT REPORTING An undertaking formed to invest in securities under loan losses. Specific provisions are established to Segment reporting indicates the contribution to the terms of a trust deed. reduce the book value of specific assets (primarily the revenue derived from business segments such loans) to estimated realisable values. as banking operations, leasing operations, treasury UNSECURED and investments, property and insurance. Repayment of the principal and interest not being PRUDENCE secured by any specific asset. Inclusion of a degree of caution in the exercise of SHAREHOLDERS’ FUNDS judgment needed in making the estimates required Shareholders’ funds consist of issued and fully-paid V under conditions of uncertainty, such that assets ordinary share capital plus capital and revenue VALUE ADDED or income are not overstated and liabilities or reserves. Value added is the wealth created by providing expenses are not understated. banking services, less the cost of providing SIGNIFICANT INFLUENCE R such services. The value added is allocated Significant influence is the power to participate among the employees, the providers of capital, REDEMPTION in the financial and operating-policy decisions of to Government by way of taxes and retained for Repayments of principal monies. an investee but is not control or joint control over expansion and growth. those policies. REINSURANCE Transfer of all or part of the risk assumed by a SOLVENCY primary insurer under one or more insurance to The availability of cash over the longer term to another insurer. meet financial commitments as they fall due.

RELATED PARTIES SUBORDINATE DEBENTURE Two parties where one controls the other or The claims of debenture holders shall in the event of exercise significant influence in financial and winding up, rank after all the claims of the secured operating decisions. and unsecured creditors and any preferential claims under any statutes, but in priority to and over claims and right of the shareholders.

BANK OF CEYLON ANNUAL REPORT 2010 285 NOTES

286 BANK OF CEYLON ANNUAL REPORT 2010 NOTES

BANK OF CEYLON ANNUAL REPORT 2010 287 NOTES

288 BANK OF CEYLON ANNUAL REPORT 2010 CORPORATE INFORMATION

NAME OF THE INSTITUTION ACCOUNTING YEAR END Bank of Ceylon 31 December AUDITOR The Auditor General LEGAL FORM STOCK EXCHANGE LISTING The Auditor General’s Department * A banking corporation domiciled in Sri Lanka, The Unsecured, Subordinated Redeemable Debentures Independence Square, Colombo 07, Sri Lanka duly incorporated on 01 August 1939 under the Bank of November 2008/November 2013 series with fixed, Tel: + 94 11 2691151 of Ceylon Ordinance No. 53 of 1938. floating and zero coupon interest rates and June 2010/ Facsimile: + 94 11 2697451 June 2015 series, with fixed and floating interest rates of Email: [email protected] * A licensed commercial bank established under the the Bank are listed on the Colombo Stock Exchange. (Appointed in terms of the provisions of Article 154 Banking Act No. 30 of 1988. of the Constitution of the Democratic Socialist Republic CREDIT RATINGS of Sri Lanka) REGISTERED OFFICE ‘AA (lka)/Positive Outlook’ by Fitch Ratings Lanka Limited No. 4, Bank of Ceylon Mawatha, Colombo 1, Sri Lanka Level 15-04, East Tower, World Trade Centre, REGISTRARS TO THE DEBENTURE ISSUES Tel: +94 11 2446790-811 (22 lines) Colombo 01, Sri Lanka 2010/2015 Series +94 11 2338741-55 (15 lines) Tel: +94 11 2541900 Bank of Ceylon Facsimile: +94 11 2449401 Facsimile: +94 11 2541903 Investment Banking Division Bank Code: 7010 Website: www.fitchratings.lk 23rd Floor, No. 04 Bank of Ceylon Mawatha, Telex: 21331 BOCST CE www.fitchratings.com Colombo 1, Sri Lanka SWIFT Code: BCEYLKLX Tel: +94 11 2542167, +94 11 2448348 Email: [email protected] LAWYERS +94 11 2446790 - 811 (22 lines) Facsimile: + 94 11 2346842 Website: www.boc.lk Mr. M K Muthukumar Email: [email protected] Chief Legal Officer of Bank of Ceylon and his assistants CALL CENTRE Tel: + 94 11 2445813 2008/2013 Series Tel: +94 11 2204444 (16 lines) Facsimile: + 94 11 2321167 Merchant Bank of Sri Lanka PLC Facsimile: +94 11 2320864 Email: [email protected] Level 18, Bank of Ceylon Merchant Tower No. 28, St. Michael's Road, Colombo 3, Sri Lanka TAX PAYER IDENTIFICATION NUMBER (TIN) COMPLIANCE OFFICER Tel: +94 11 4711766, +94 11 4711711 409000070 Mr. M L J Fernando (Assistant General Manager - Facsimile: +94 11 4711704 Risk Management & Compliance) Email: [email protected] VAT REGISTRATION NUMBER Tel: + 94 11 2321169 409000070 - 7000 Facsimile: + 94 11 2439546 Email: [email protected]

BOARD OF DIRECTORS AUDIT COMMITTEE NOMINATION AND CORPORATE Dr. Gamini Wickramasinghe (Chairman) Mr. V Kanagasabapathy (Chairman) GOVERNANCE COMMITTEE Mr. S R Attygalle (Alternate Director to Mr. S R Attygalle) Mr. Raju Sivaraman (Chairman) Mr. Raju Sivaraman Mr. Raju Sivaraman Mr. S R Attygalle Ms. Nalini Abeywardene Mr. K L Hewage Mr. K L Hewage Mr. Chandrasiri de Silva Mr. V Kanagasabapathy Mr. K L Hewage HUMAN RESOURCES AND REMUNERATION (Alternate Director to Mr. S R Attygalle) Mr. V Kanagasabapathy COMMITTEE (Alternate Director to Mr. S R Attygalle) Ms. Nalini Abeywardene (Chairperson) INTEGRATED RISK MANAGEMENT COMMITTEE Mr. Raju Sivaraman Mr. V Kanagasabapathy (Chairman) SECRETARY TO THE BOARD Mr. Chandrasiri de Silva as Alternate Director to Mr. S R Attygalle Ms. Janaki Senanayake Siriwardane Mr. K L Hewage Mr. Raju Sivaraman Mr. K L Hewage

SUBSIDIARY COMPANIES ASSOCIATE COMPANIES Property Development PLC Ceybank Asset Management (Private) Limited Merchant Bank of Sri Lanka PLC Southern Development Financial Company Limited BoC Management & Support Services (Private) Limited Lanka Securities (Private) Limited BoC Property Development & Management Mireka Capital Land (Private) Limited (Private) Limited Transnational Lanka Records Solutions (Private) Limited BOC Travels (Private) Limited MBSL Savings Bank Limited Hotels Colombo (1963) Limited Merchant Credit of Sri Lanka Limited Ceylease Financial Services Limited Ceybank Holiday Homes (Private) Limited MBSL Insurance Company Limited Koladeniya Hydropower (Private) Limited Bank of Ceylon (UK) Limited

CLARIFICATIONS ON THE REPORT, PLEASE CONTACT Deputy General Manager (Finance & Planning) 10th Floor, Bank of Ceylon No. 4, Bank of Ceylon Mawatha, Colombo 1, Sri Lanka Tel: +94 11 2432680, +94 11 2386854 Facsimile: +94 11 2448203 Email: [email protected]