Nations Trust Bank PLC Annual Report 2017 Scan to view this report online https://www.nationstrust.com/about/ investor-relations/annual-reports At 18 years, Nations Trust Bank is one of the youngest full service commercial banks around. Yet in that short time, we have built a reputation for innovation, service and value that makes us truly proud. Our team is passionate, youthful and energetic, making us a bank that is perfectly positioned to deliver the best experience of SMART banking to our many customers; the service ethic, technological capability and product models that now define us. Strategic thinking and planning are key elements of our success. It is how we ensure that the design and implementation of our systems and processes, governance policies and sustainable business model are all ahead of their time. The performance reported in this financial review is another example of how we have realized value through business plans we put in place last year. We also report significant growth in many business areas, most especially in the SME sector; while our emphasis on evolving digital innovation saw the launch of Sri Lanka’s first digital bank, FriMi - a next-generation bank account, payment system and e-wallet that will offer convenience, speed and added value to the diverse customers we serve. This is how we remain a bank trusted and relied upon by the thousands of stakeholders who partner us today. Because they know that whatever their financial requirement might be, they can always count on us. Contents 6-9 pg 104-167 pg About this Report Delivering Value The year in numbers 8 Economic and Industry environment in 2017 104 Key Business Lines 106 Financial Capital 120 Investor Information 124 Ten Year Summary 128 Manufactured Capital 130 10-31 pg Human Capital 132 Social and Relationship Capital 138 Our Positioning Intellectual Capital 144 Natural Capital 146 Overview of Nations Trust Bank 10 Independent Assurance Report 152 Board of Directors 12 Mapping Our Material Topics Value Creation Model 18 to GRI and GRI Index 153 Chairman’s Message 20 Board Integrated Risk Management CEO’s Review 24 Committee Report 157 Corporate Management 28 Board Credit Committee Report 158 Vice Presidents 30 Board Supervisory Committee Report 159 Board Nomination Committee Report 160 Human Resources and Remuneration Committee Report 161 Related Party Transactions Review Committee Report 162 Directors’ Statement on 32-101 pg Internal Control Over Financial Reporting 163 Auditors’ Report on Internal Control Creating Value Over Financial Reporting 165 through Strategy Board Audit Review Committee Report 166 Mega Trends in our Operating Environment 32 Stakeholders to Strategy 34 Material Matters 36 Charting our progress-Strategic Framework 38 Sustainability at Nations Trust Bank 40 Corporate Governance 42 Annual Report of the Board of Directors on the Affairs of the Bank 43 Directors' Interest in Contracts with the Bank 65 Risk Management 67 Nations Trust Bank PLC 170-320 pg Financial Statements Our Vision Directors’ Responsibility for Financial Reporting 170 We help people and businesses Independent Auditors’ Report 171 achieve today’s goals and Statement of Financial Position 172 Statement of Profit or Loss 173 tomorrow’s aspirations Statement of Comprehensive Income 174 Statement of Changes in Equity 175 Statement of Cash Flows 176 Notes to the Financial Statements 177 Corporate Governance 277 Our Mission Details of Freehold Land & Buildings 304 Service Network 305 We will work SMART to become Glossary 309 the most respected financial Notice of Meeting 316 Form of Proxy 317 services provider Our Values Agile Proactive Excellence Winning together Trust SMART Speed, More with less, Adaptable, Responsible, Tech-savvy Annual Report 2017 4 NationsNatations TrustTrust BankBank PLCPLC AnnualAnnualRl ReportReport 20172012 17 5 About this Report This is our 4th Integrated Annual Report and primary publication to stakeholders for the year 2017. Through this Report we hope to provide a balanced and concise overview of our financial and non-financial performance, strategic agenda, governance and the risks and opportunities in the operating landscape which shaped our performance during the year. Scope and Boundary of reporting key stakeholders, including our employees, Delivering value This Report covers the operations of Nations customers, suppliers/business partners and Discusses the Bank’s financial and non- Trust Bank PLC and its subsidiaries, Waldock the communities we operate in. financial performance during the year with MacKenzie Limited, Allied Properties Limited reference to the six capital inputs prescribed and Nations Insurance Brokers Limited for How to read this Report by the International Integrated Reporting the period from 1st January to 31st December In determining the content to be included in <IR> Framework. Quantitative information 2017. The Bank adopts an annual reporting our Report, we have applied the principle of is complemented with narrative disclosures cycle, and this Report builds on the Bank’s materiality. Accordingly, we have only included wherever appropriate. previous report for the period from 1st January the issues, opportunities and challenges to 31st December 2016. Any material events that materially impact the Bank’s ability to Reporting Frameworks after this date and up to approval by the Board consistently deliver value to its shareholders The financial statements presented in this of Directors on 27th February 2017 have and other stakeholders. The process we use for Report have been prepared in accordance with also been included. There were no significant determining material content and our material the Sri Lanka Financial Reporting Standards, changes to the Bank’s size, structure, topics are described from pages 36 to 37 of the Banking Act No.30 of 1988 and the shareholding or supply chain during the this Report; these topics influence our strategy requirements of the Companies Act No.7 of year under review. The financial information and information content in this Report. 2007. Preparation of the narrative report presented and discussed in the narrative report The narrative report consists of three main was guided by the principles of the <IR> throughout the Integrated Report represents chapters, each of which focus on a specific Framework, published by the International Consolidated numbers while the non-financial element of value as described below; Integrated Reporting Council (IIRC). For information represents only the Bank. Both sustainability reporting we have opted for financial and non-financial information relate Our positioning early adoption of the Global Reporting to material developments that objectively Provides a high-level overview of the Bank, its Initiative (GRI) Standards ‘In Accordance-Core’ represent the events that shaped our organisational structure and key business lines option and continued disclosures under the performance during the year and are likely to and how it is positioned to generate long-term G4-Financial Services sector disclosures. The impact our future performance. There were no value for its stakeholders. narrative on Corporate Governance (pages 42 restatements of previously reported economic, to 66) complies with the Code of Best Practice social or environmental information. Creating value through Strategy on Corporate Governance issued jointly by the Securities and Exchange Commission Discusses how our strategy is crafted by Targeted readers of Sri Lanka and the Institute of Chartered expectations of our stakeholders and the Accountants of Sri Lanka and the Banking Act As our primary publication to stakeholders the material issues which could impact our ability Direction No.11 of 2007. Report is intended to address the information to create value. This chapter also provides a requirements of our investors such as summary of the Bank’s corporate governance shareholders, funding partners and potential practices and key risk exposures during the investors. We also present information that is year. relevant to the way we create value for other 6 Nations Trust Bank PLC About this Report | Our Positioning | Creating Value through Strategy | Delivering Value | Financial Statements External Assurance We make use of the various independent financial and non-financial assurance teams to assess and assure elements of our external reporting. Elements assured Assurance provider Scope Outcome Frequency Financial statements Messrs. Ernst and Young Annual audit External audit opinion Annual Internal Controls (Director’s Messrs. Ernst and Young Assurance on the effectiveness of the Bank’s External audit opinion Annual Statement on Internal Controls) internal controls Corporate Governance Messrs. Ernst and Young Compliance to the Banking Act No. 7 of 2011 Assurance statement Annual Sustainability Reporting Messrs. Ernst and Young GRI Standards: In accordance- Core option Assurance statement Annual Feedback Please direct your queries, comments and suggestions regarding this Report to, Kushlani Allis, Vice President - Management Reporting and Planning [email protected] Navigation icons - Six Capitals Financial Human Manufactured Intellectual Social and Relationship Natural Capital Capital Capital Capital Capital Capital Navigation icons - Strategic priorities Earnings Growth Customer Value Delivery & Internal Human (EG) Proposition Distribution processes Resources (CV) (DD) (IP) (HR) Annual Report 2017 7 The Year in Numbers Financial Highlights Figures in Rs. million