Read this report online

0THNPULH^VYSK^OLYL`V\YÄUHUJPHSPUMVYTH[PVUPZNSVIHSVUSPULHUKYLHS [PTL^OLYLULHYÄLSK[LJOUVSVNPLZZPTWSPM``V\YIHURPUNHJ[P]P[PLZ[VH ZPTWSL[V\JOVMHI\[[VU"^OLYLJVU[HJ[SLZZWH`TLU[ZHYL[OLUVYTHUK JHZOILJVTLZH[OPUNVM[OLWHZ[

0THNPUL`V\YWOVULHZH[Y\Z[^VY[O`HUKZLJ\YLWHY[ULYHK]PZPUN`V\VU PU]LZ[TLU[WYVZWLJ[ZHUKVWWVY[\UP[PLZHZ`V\SLUKIVYYV^HUK[YHKLVU `V\YZVJPHSUL[^VYRWSH[MVYTZ¯ Imagine the future. Sampath Bank is proud to be one of ’s most future friendly banks. For several years, we’ve been setting trends in banking technologies, working through a range of social media networks and smart-phone apps to deliver customer relevant, NYV\UKIYLHRPUNÄUHUJPHSWYVK\J[ZHUKZLY]PJLZ[OH[ZLY]LV\Y customers’ needs best. We maintain vibrant online and face- to-face conversations with all our customers, so we’re aware of what we need to change, expand or improve each day.

The year under review has been an exciting one, where bottom line performance and credit quality were among the industry’s best, while our increased focus on fee based banking operations has shown remarkable results, all of which are discussed in detail in the pages that follow.

We want to lead in our industry now and stay ahead in the future. Our strategies are long-term and our commitment towards corporate sustainability absolute. We believe that by serving our stakeholders well we serve our nation well and that remains our vision, as we look towards even greater success in the years that lie ahead for your #FutureFriendlyBank.

SAMPATH BANK PLC Annual Report 2015 Contents

175 Collaborating with Our Partners 178 Strengthening Our Communities 191 Preserving Our Environment

What’s in *RYHUQDQFH 202 Risk Management 226 Compliance Review 228 Corporate Governance this Report 282 Board Audit Committee Report 285 Board Human Resources and Remuneration Committee Report 287 Board Nomination Committee Report We believe that innovative banking technologies can be a driver of people’s 289 Board Integrated Risk Management success and bring massive economic and social change. Committee Report 292 Board Related Party Transactions Review Committee Report 294 Board Credit Committee Report 296 Board Strategic Planning Committee Report 297 Board Shareholder Relations Committee Report 299 Board Treasury Committee Report 300 Board Marketing Committee Report

)LQDQFLDO6WDWHPHQWV 302 Financial Calendar 303 Annual Report of the Board of Directors on the Affairs of the Company 313 Directors’ Statement on Internal Control Over Financial Reporting 315 Independent Assurance Report to the Board of Directors of Sampath Bank PLC 316 Managing Director’s and Group  *OPLM-PUHUJPHS6MÄJLY»Z Responsibility Statement &RUSRUDWH3URðOH 2SHUDWLRQDO5HYLHZV 317 Statement of Directors’ 3 Sampath Bank in 2015 63 GCFO’s Views Responsibility for Financial Reporting 4 Who we are 69 Business Reviews 319 Independent Auditors’ Report to the 6 Historical Review 71 Personal and Branch Banking Shareholders of Sampath Bank PLC 8 Board of Directors 77 Channel Management 320 :[H[LTLU[VM7YVÄ[VY3VZZ 18 Corporate Management 85 Corporate Banking 321 Statement of Comprehensive Income 22 Chief Managers 91 Development Banking 322 Statement of Financial Position 26 Senior Management 97 Global Business 323 Statement of Cash Flow 30 Product Portfolio 103 Treasury 325 Statement of Changes in Equity 32 Awards & Accolades 107 Operational Support 327 Notes to the Financial Statements 36 Financial Highlights 113 Subsidiaries 39 Non Financial Highlights 117 Branch Network 6XSSOHPHQWDU\,QIRUPDWLRQ 41 9LWVY[7YVÄSLHUK;OLTL 125 Nostro Accounts 454 :[H[LTLU[VM7YVÄ[VY3VZZPU<:  42 Green Recognition 127 Correspondent Banks and 455 Statement of Comprehensive Exchange Companies  0UJVTLPU<:  &RUSRUDWH$FFRXQWDELOLW\ 133 Investor Information 456 :[H[LTLU[VM-PUHUJPHS7VZP[PVUPU<:  44 Chairman’s Message 457 Value Addition 46 Managing Director’s Review Corporate Citizenship 458 Ten Years at a Glance 52 Value Creation Business Model 144 What Corporate Citizenship Means to Us 459 Quarterly Statistics 54 Sustainability Philosophy 146 Caring for Our People 461 Capital Adequacy 57 Stakeholder Management 161 Supporting Our Clients 468 GRI G4 Content Index 59 Materiality Assessment 174 Informing Our Investors 476 GRI Financial Services Sector Disclosures 477 Supplementary Sustainability Indices 478 Independent Assurance Report 479 Glossary of Financial and Banking Terms What is this? 484 Abbreviations This symbol can be found across the report and draws attention to the 487 Sampath Song 488 Notice of Annual General Meeting ZWLJPÄJLMMVY[Z^LHYLTHRPUN[VKPMMLYLU[PH[LV\YZLS]LZHZ:YP3HURH»Z 489 Form of Proxy most future-friendly bank 491 Stakeholder Feedback Form ,%& Corporate Information

Sampath Bank PLC: No 110, Sir James Peiris Mawatha, 02, Sri Lanka. For 24/7 service, Please recycle this Annual Report visit http://www.sampath.lk/ Customer service. You can also call +94 (011) 2300260, (011) 2358358, (011) 4730630, (011) 5331441, (011) 5600600. and remove inserts before recycling

2 SAMPATH BANK PLC Annual Report 2015 *VYWVYH[L7YVÄSL

About the Company Sampath Bank in 2015

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Sampath Bank PLC is a public limited company incorporated in Sri Lanka on 10th March1986, under the Companies Act No. 17 of 1982 and listed on the main board of the . It was originally incorporated as The Investment and Credit Bank Ltd in 1986, with Mr N U Jayawardena as the Chairman. The Bank was registered as a licensed commercial bank under the Banking Act No. 30 of 1988. Sampath Bank PLC was re-registered on 28th April 2008, as mandated by The Companies Act No. 7 of 2007.

Ranked as one of the top-tier banks in the country, Sampath Bank 73*»ZHZZL[IHZLJYVZZLK[OL9Z)UTHYRMVY[OLÄYZ[[PTLPU 2015. Only the 3rd private sector commercial bank to achieve this status, Sampath Bank stands proud as the youngest bank to have reached this landmark. As at 31st December 2015, Sampath Bank PLC recorded a market capitalization value Rs 42,734 Mn, with a base of 17,515 shareholders.

Since the inception, Sampath Bank PLC has built a name as one of the most forward-thinking banks in Sri Lanka. Being a fully computerized Bank, right from the beginning, Sampath Bank e-Banking ^HZ[OLÄYZ[[VPU[YVK\JL[OL\UPIHURPUNTVKLS[V[OLJV\U[Y`[V provide the customer with seamless connectivity in a multi-channel Sampath Bank PLC’s e-banking environment. Over the years, the bank has successfully combined proposition is a vibrant traditional Sri Lankan values with state-of-the-art innovations to offering that brings forth a offer a truly indigenous, yet progressive banking proposition to the new dimension to Sri Lanka’s banking industry. It provides a citizens of Sri Lanka. safe, secure and convenient way for individuals and businesses (M\Y[OLY[LZ[PTVU`[V[OLÄUHUJPHSZ[YLUN[OHUKV]LYHSSX\HSP[`VM to bank from anywhere and at the business model, the London-based Financial Times, presented anytime. Sampath Bank PLC with the globally-acclaimed “Banker Award” and the title of “Sri Lanka’s Bank of the Year for 2015”. Simply put, it is a class apart.

In recognition of strategic efforts to become a truly sustainable  )RU0RUH,QIRUPDWLRQ http://sampath.lk/en/corporatebanking/ bank, Sampath Bank was awarded the highly coveted ‘Overall Best Corporate Citizen’ of 2015 prize, at the Best Corporate Citizen Sustainability Awards presented by the Ceylon Chamber of Commerce of Sri Lanka.

SAMPATH BANK PLC Annual Report 2015 3 *VYWVYH[L7YVÄSL Who we are

%RDUGRI'LUHFWRUVRI6DPSDWK%DQN3/& +L[HPSZ WYVÄSLZVM)VHYKVM+PYLJ[VYZHYLNP]LUVUWHNLZ [V

6XEVLGLDU\&RPSDQLHVRIWKH%DQN Details of Subsidiaries as of 31st December 2015 are tabulated below.

Ownership as at 31st Subsidiary Principal Activities December 2015 6DPSDWK&HQWUH/WG Renting of Commercial Property 97.14% Names of Board of Directors Mr I W Senanayake Chairman Mr S G Wijesinha Director Mr S P Kannangara Director Mr Wije Dambawinne (resigned w.e.f. 12.10.2015) Director Mr D Ihalalanda (appointed w.e.f. 03.12.2015) Director Mr R Silva (appointed w.e.f. 03.12.2015) Director

Ownership as at 31st Subsidiary Principal Activities December 2015 6&6HFXULWLHV 3YW /WG Share Broking 100.00% Names of Board of Directors Mr D J Gunaratne Chairman Mr N H K Fernando CEO / Director Dr S Kelegama Director Mr Deshal De Mel Director Mr Aravinda Perera Director Mr M N R Fernando Director

Ownership as at 31st Subsidiary Principal Activities December 2015 6L\DSDWKD)LQDQFH3/& Leasing, Factoring, Pawning and Accepting 100.00% Deposits Names of Board of Directors Mr Channa Palansuriya Chairman Mr M A Abeynaike Deputy Chairman Mr S G Wijesinha Director Mr P M A Sirimane Director Dr H S D Soysa Director Mr W M P L De Alwis Director Mr Aravinda Perera Director Mr Ranjith Samaranayake Director Mr Tharaka Ranwala (appointed w.e.f. 28.07.2015) Director

4 SAMPATH BANK PLC Annual Report 2015 Ownership as at 31st Subsidiary Principal Activities December 2015 6DPSDWK,QIRUPDWLRQ7HFKQRORJ\6ROXWLRQV/WG Developing Software Solutions and 100% Maintenance of Hardware Names of Board of Directors Mr L J K Hettiaratchi Chairman Mr D J Gunaratne Director Mr M V Indrasoma Director Mr K M S P Herath (retired w.e.f. 03.08.2015) Director Mr M A Salgado (appointed w.e.f. 30.07.2015) Director

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0HPEHUVKLSRI$VVRFLDWLRQV Sampath Bank PLC represents several national and international bodies by being a member of those associations.

Name of the Association Membership Status Sri Lanka Business & Bio Diversity Platform of Ceylon Chamber of Commerce Patron Member Society for Worldwide Interbank Financial Telecommunication (SWIFT) Member Lanka Financial Services Bureau (LFSB) Member Lanka SWIFT User Group (LSUG) Member & Treasurer Lanka Clear (Pvt) Ltd Member Leasing Association of Sri Lanka Member The Association of Banking Sector Risk Professionals - Sri Lanka Member International Chamber of Commerce – ICC Sri Lanka Member Italian Business Council Member CSR Lanka (Guarantee) Ltd Member The European Chamber of Commerce of Sri Lanka Member Sri Lanka Banks’ Association (Guarantee) Ltd Member The Ceylon Chamber of Commerce Patron Member The Financial Ombudsman Sri Lanka (Guarantee) Ltd Member American Chamber of Commerce in Sri Lanka Member Sri Lanka Forex Association ( SLFA) Member Association of Primary Dealers (APD) Member (ZZVJPH[PVUVM*VTWSPHUJL6MÄJLYZVM)HURZ:YP3HURH Member Clearing Association of Bankers Member Payment Card Association of Sri Lanka Member Sri Lanka Association of Software and Service Companies (SLASSCOM) Member

SAMPATH BANK PLC Annual Report 2015 5 *VYWVYH[L7YVÄSL Historical 1987 Appointment of Mr N U Jayawardane as the Chairman of the Bank and Mr Janaka de Silva as the General Manager. The Bank was Review ceremonially opened for business on 15th May 1987 Introduction of a cheque guarantee card, a saving account with checking facilities and extended banking OV\YZ[PSSWTMVY[OLÄYZ[[PTL ,WKDVEHHQDQDPD]LQJ in the country. WZHQW\QLQH\HDUVRI Re-registered as Sampath RSHUDWLRQVIRUWKH%DQN Bank Ltd in 1987 7KLVWLPHOLQHORRNVDWWKH GHðQLQJHYHQWVLQDTXDUWHU 1986 Incorporated on 10th March FHQWXU\RIJURZLQJRXU 1986, as Investment & Credit Bank Ltd followed by EXVLQHVVWRXFKLQJOLYHV [OLJLY[PÄJH[LVMH\[OVYPaPUN DQGVWD\LQJDKHDGRI for the commencement of business operations RXUWLPHü

2014 Selected as the “Best Bank in Sri Lanka – 2014” by the prestigious, global 2012 Business Celebrations to mark Sampath Magazine “The Bank PLC’s Silver Jubilee Euromoney”, 2013 - acknowledging 25 years of for the second unparalleled service to the consecutive year Launch of the “Cardless nation *HZO(;4¹MVY[OLÄYZ[ time in Sri Lanka. A state-of-the-art banking facility that allows 2011 customers to withdraw Revolutionized traditional cash from ATMs without banking culture by introducing using an ATM card or a the “Super Branch” concept of 365-day banking at Dharmapala Mawatha and Kiribathgoda

2014 2015 2015 Gold Award (Banking Asset portfolio crossed Reclaimed the prestigious title of Category) and the Bronze Rs 0.5 Tn (i.e. Rs 500 “Sri Lanka’s Bank of the Year for Award (Overall Excellence Bn), a landmark that was 2015” after winning the Globally in Annual Financial achieved in just 29 years. recognized “Banker Award” Reporting) for the 2013 Sampath Bank PLC is conferred by the London-based Annual Report, at the 50th now one of the only three “The Banker” magazine owned Annual Report Awards private commercial banks by the prestigious “Financial Ceremony organised by in Sri Lanka to reach this Times Group”. the Institute of Chartered status Accountants of Sri Lanka (CA Sri Lanka)

Bank of the Year 2015

6 SAMPATH BANK PLC Annual Report 2015 1989 1998 1999 2001 The Uni-Banking system Received the “Best Invested in a new state- )LJHTL[OLÄYZ[:YP3HURHU was introduced to the Commercial Bank of the of-the-art ATM switch, as organisation to achieve the JV\U[Y`MVY[OLÄYZ[[PTL year” Award conferred by part of the ongoing efforts “Quality Approved Status” “Asiamoney” for the Third to improve products and of best practice, which is 1996 year in succession. services offered by the Bank presented by the Chartered Voted as the “Best Commercial Institute of Management Bank of the year” in Sri Lanka, Accountants. by “Asiamoney”, the most 2000 - Launched WYLZ[PNPV\ZÄUHUJPHSTHNHaPUL the “Sampathnet” 2003 in Internet banking 1999 ;OLÄYZ[IHURPU:YP3HURH[V facility 1988 1997 Successfully migrated to the introduce “one day clearing” Introduction of the ATM for all cheques drawn on Introduced the DEBIT more versatile Bancs2000 (SET) facility, becoming *(9+HUV[OLYÄYZ[PU:V\[O software system, which any Sampath Bank branch, [OLÄYZ[IHURPU:YP3HURH Asia, in association with could accommodate greater collected by any Commercial to operate a multi-point CIRRUS and MAESTRO. Bank in the island and network of Automated product diversity and presented through Sri Lanka Teller Machines ZLY]PJLÅL_PIPSP[`[VJH[LY to the emerging needs of Automated Clearing House customers (SLACH).

2008 2004 2010 The “Sampath eRemittance 3H\UJOVM[OLÄYZ[L]LY Record for the most number of branches System” was honoured Cheque Imaging & and ATMs commissioned by any bank in at the National Science Truncating (CIT) site in Sri Sri Lanka, within a twelve-month period. and Technology Awards Lanka. 40 branches and 39 ATM were set up 2008 in the category of during the year, bringing the total number Locally Developed New 2005 to 171 and 222 respectively, by end of Technologies Declared among the “Top 2010 Ten” at the Best Corporate Citizen awards 2005. 2009202 HonouredHoH as the “Bank 2007 ofo the Year 2009” by Launch of ‘Sampath theththe internationally Mobile Cash’, by acclaimedac ”The integrating advanced Banker”BaB magazine telecommunication ownedowow by the Financial technology with banking Times,TimT London technology to facilitate money transfers via mobile phone

2015 2015 Recognized as the “Best Commercial Adjudged as the “Overall Bank” and “Best Retail Bank” in Sri Best Corporate Citizen Lanka for the second consecutive year 2015” at the Best Corporate by the renowned UK based World Citizen Sustainability Awards Finance Magazine. 2015, presented byy the Receiving all these awards, Ceylon Chamber Sampath Bank PLC of Commerce became the most awarded bank in Sri Lanka for the year 2015

SAMPATH BANK PLC Annual Report 2015 7 *VYWVYH[L7YVÄSL Board of Directors

Meet our Board of Directors whose leadership and vision drive the success of your Bank.

0U'KDPPLND3HUHUD 0U$UDYLQGD3HUHUD 0U&KDQQD3DODQVXUL\D Chairman Managing Director Deputy Chairman (Until 12th November 2015)

8 SAMPATH BANK PLC Annual Report 2015 The Directors bring together a variety of perspectives to the Board, PUJS\KPUNWYVMLZZPVUHSHJHKLTPJHUK LU[YLWYLUL\YPHSPUZPNO[Z^OPJOLUOHUJL [OLX\HSP[`HUKKLW[OVMKPZJ\ZZPVUZ

0U6DQMLYD6HQDQD\DNH 0U'HHSDO6RRUL\DDUDFKFKL Senior Director/Non - Executive Director Non - Executive Director

SAMPATH BANK PLC Annual Report 2015 9 *VYWVYH[L7YVÄSL

Board of Directors

3URI0DOLN5DQDVLQJKH 0UV'KDUD:LMD\DWLODNH 0LVV$QQLND6HQDQD\DNH Non - Executive Director Non - Executive Director Non - Executive Director

10 SAMPATH BANK PLC Annual Report 2015  ;OLWYPTHY`YLZWVUZPIPSP[PLZVM [OL)VHYKPUJS\KLZZL[[PUN[OL)HUR»Z Z[YH[LNPJKPYLJ[PVU^P[O[OLVIQLJ[P]LVM KLSP]LYPUNZ\Z[HPUHISLZ[HRLOVSKLY]HS\L NV]LYUHUJLZ[Y\J[\YLZHUKMVYT\SH[PUN JVTWYLOLUZP]LWVSPJ`MYHTL^VYRZ

0U'HVKDO'H0HO 0U5DQLO3DWKLUDQD 0UV6DXP\D$PDUDVHNHUD Non - Executive Director Non - Executive Director Non - Executive Director

SAMPATH BANK PLC Annual Report 2015 11 *VYWVYH[L7YVÄSL

Board of Directors

The Board of Directors have a deeper \UKLYZ[HUKPUNVM[OLTH[LYPHSPZZ\LZ HMMLJ[PUN[OL)HURHUKJVU[PU\P[`VM Z[YH[LN`HUKKPYLJ[PVUPZLUZ\YLK

0U5DQMLWK6DPDUDQD\DNH 0UV$QXMD*RRQHWLOOHNH Executive Director Company Secretary

12 SAMPATH BANK PLC Annual Report 2015 0U'KDPPLND3HUHUD 0U$UDYLQGD3HUHUD 0DQDJLQJ )RUPHU$SSRLQWPHQWV &KDLUPDQ 'LUHFWRU Deputy Managing Director, Chief 6NLOOV ([SHULHQFH 6NLOOV ([SHULHQFH 6WLYH[PUN6MÄJLY+LW\[`.LULYHS Extensive governance experience gained Counts over 30 years in the Banking Manager and other roles spanning a through membership of the Boards of sector. Fellow Member of Institute of career of 28 years at Sampath Bank. Sampath Bank, NDB Bank, Pan Asia )HURLYZVM:YP3HURH"-LSSV^4LTILYVM :LUPVY7YVQLJ[6MÄJLY+-**HUK )HURHUKV[OLYÄUHUJPHSPUZ[P[\[PVUZ" the Chartered Institute of Management Departmental Manager and Service a quintessential business leader with (JJV\U[HU[Z<2"*OHY[LYLK,UNPULLY Engineer at Ceylon Tobacco Company, interests in a variety of key industries and Member of the Institute of Engineers, Engineer at National Milk Board, including hydro power generation, :YP3HURH"4)(MYVT[OL

SAMPATH BANK PLC Annual Report 2015 13 *VYWVYH[L7YVÄSL

Board of Directors 0U6DQMLYD6HQDQD\DNH 6HQLRU 'LUHFWRU 6NLOOV ([SHULHQFH 0U&KDQQD3DODQVXUL\D 'HSXW\ Apparel Exporters Association 200gfp, Extensive local and overseas experience &KDLUPDQ8QWLOWK1RYHPEHU Executive Committee Member of Sri PU[OLÄUHUJPHSZLY]PJLZZLJ[VYOH]PUN  Lanka Apparel Sourcing Association served in the senior management 6NLOOV ([SHULHQFH (SLASA), Deputy Chairman of National JHWHJP[PLZH[WYLTPLYÄUHUJPHSPUZ[P[\[PVUZ Over thirty years of extensive experience Livestock Development Board. and as an independent consultant. in the Apparel sector by heading the Orit Group of companies and through )RUPHU$SSRLQWPHQWV $SSRLQWHGWRWKH%RDUG continuous leadership given to other Deputy Chairman of Sampath Bank PLC, 1st January 2012 as an Independent companies in the Apparel Industry. Board Member of Sri Lanka Institute of Non Executive Director and appointed Further being a Board member of the BOI Textile and Apparel, Chairman of Apparel as Senior Director with effect from 26th for ten years, he gained wide experience Exporter’s Association 200gfp during January 2012. in Government Administration. He 2006-2008, Chairman of CG Lanka OHZ^VUH^HYKZZ\JOHZ(ZPH7HJPÄJ Clothing (Pvt) Ltd till 2013 and Board 0HPEHUVKLSRI%RDUG6XE Outstanding Entrepreneurship Award in Member of Board of Investment of Sri &RPPLWWHHV 2013, Sri Lankan Entrepreneur of the Lanka from 2005 to January 2015. Chairman of Board Treasury Committee, Year in 2002 and the Silver Award of Member of the Board Audit Committee, Please refer Annual Report of the Board of Directors the National Chamber of Exporters of on the Affairs of the Company point No 24 Changes Board Credit Committee, Board Sri Lanka for the Garment Extra Large in Directorate, on page 306. Integrated Risk Management Committee, category in 2004. Board Strategic Planning Committee and Board Related Party Transactions Review $SSRLQWHGWRWKH%RDUG Committee. 1st January 2012 as an Independent Non Executive Director. Appointed as Deputy &XUUHQW$SSRLQWPHQWV Chairman on 26th January 2012. Independent Non Executive Director of Sampath Bank PLC, Non Executive 0HPEHUVKLSRI%RDUG6XE Director of Asian Hotels & Properties &RPPLWWHHV PLC, Hemas Pharmaceuticals (Pvt) Ltd. Chairman of Board Shareholder Relations Committee, Member of Board Integrated )RUPHU$SSRLQWPHQWV Risk Management Committee, Board Director of Hemas Power PLC, Senior Human Resources and Remuneration 0U]LZ[TLU[6MÄJLY.SVIHS-PUHUJPHS Committee, Board Strategic Planning Markets, International Finance Committee, Board Nomination Corporation (IFC) – the private sector Committee and Board Credit Committee. investment arm of World Bank Group, Resident Representative for Sri Lanka &XUUHQW$SSRLQWPHQWV and Maldives IFC, Assistant General Chairman of Siyapatha Finance PLC, Manager (Treasury and Investment Chairman/Managing Director of Orit Banking) at National Development Bank Group comprising Orit Apparels Lanka of Sri Lanka, Consultant (Treasury and (Pvt) Ltd, Orit Trading Lanka (Pvt) Ltd, Business Development) at Commercial Chairman Style – Kraft Sportswear (Pvt) , Senior Risk Manager Ltd (Canada) and Orit Inspired Creations - Sydney, Australia, Head of (Pvt) Ltd, Executive Committee Member Treasury and Investment Banking Brunei, of Joint Apparel Association Forum various positions including Treasurer and (JAAF), Executive Committee Member of Head of Public Sector Business, Citibank Colombo.

14 SAMPATH BANK PLC Annual Report 2015 0U'HHSDO6RRUL\DDUDFKFKL 3URI0DOLN5DQDVLQJKH &XUUHQW$SSRLQWPHQWV 6NLOOV ([SHULHQFH 6NLOOV ([SHULHQFH Independent Non Executive Director of Counts over 30 years experience in Extensive governance experience as Sampath Bank PLC, Senior Professor Sales, Advertising, Marketing, Human a Vice-Chancellor and Non Executive in Civil Engineering, University of Resources Development & Strategy Director on corporate boards. A Fellow Moratuwa, Member of University Grants ^P[OL_[LUZP]LL_WLYPLUJLPU[OLÄLSK Member, Chartered Engineer and Commission, Independent Non Executive of insurance. Fellow member of the International Professional Engineer of Director at Textured Jersey Lanka PLC, Chartered Institute of Marketing UK and the Institution of Engineers Sri Lanka, PLC, United Motors a Chartered Marketer. Past President Fellow of the National Academy of Lanka PLC and Resus Energy PLC. of Sri Lanka Institute of Marketing. Sciences Sri Lanka, PhD from University Holds an MBA from the University of British Columbia, Vancouver, Canada )RUPHU$SSRLQWPHQWV of Sri Jayewardenepura. Pioneer in in Civil Engineering as a Canadian Vice Chancellor of the University of disseminating management knowledge *VTTVU^LHS[O:JOVSHY"W\ISPZOLK Moratuwa, Chairman of the Committee in Sinhala Language. A leading extensively on Engineering and of Vice Chancellors and Directors management development consultant Environmental Economics with Project of Sri Lanka, Council Member of and author. Management, recipient of accolades and the Association of Commonwealth awards including the General Research Universities, Fellow of the National $SSRLQWHGWRWKH%RDUG Committee Award for outstanding University of , Independent 5th August 2010 as an Independent Non Contribution to Sri Lankan Science Non Executive Director of the Colombo Executive Director. from the Sri Lanka Association for Stock Exchange, Lanka IOC PLC, Hemas Advancement of Science, the Committee Power PLC. 0HPEHUVKLSRI%RDUG6XE of Vice-Chancellors and Directors &RPPLWWHHV (CVCD) Excellence Award for 2012 for Chairman of Board Human Resources the Most Outstanding Senior Researcher & Remuneration Committee and Board in Technology and related Sciences, Marketing Committee. Member of Board the Award for Outstanding Contribution Audit Committee. to Education 2012 at World Education Congress and the Education Leadership &XUUHQW$SSRLQWPHQWV Award 2013 at the 4th Asia’s Best Independent Non Executive Director of B-School Awards, Singapore. Sampath Bank PLC, Independent Non Executive Director of AIA Insurance Lanka $SSRLQWHGWRWKH%RDUG PLC, Pan Asian Power PLC, Singer Sri 30th August 2011 as an Independent Lanka PLC, Hemas Manufacturing (Pvt) Non Executive Director. Ltd, Consulting Partner - RBL Group USA. 0HPEHUVKLSRI%RDUG6XE &RPPLWWHHV )RUPHU$SSRLQWPHQWV Chairman of Board Credit Committee, Managing Director Aviva NDB Insurance Member of Board Audit Committee, PLC, Commissioner - Sri Lanka Inventors Board Strategic Planning Committee, Commission. Board Treasury Committee, Board Integrated Risk Management Committee and Board Related Party Transactions Review Committee.

SAMPATH BANK PLC Annual Report 2015 15 *VYWVYH[L7YVÄSL

Board of Directors 0U'HVKDO'H0HO 6NLOOV ([SHULHQFH Master of Science degree in International 0UV'KDUD:LMD\DWLODNH 0LVV$QQLND6HQDQD\DNH Political Economics from the London 6NLOOV ([SHULHQFH 6NLOOV ([SHULHQFH School of Economics, Bachelor of Arts Attorney-at-Law, LLB (Cey), Retired from Bachelor of Arts in Management Studies degree with Honours in Philosophy, the Public Service of Sri Lanka in August from the University of Nottingham. Political Science and Economics from HM[LY`LHYZVMZLY]PJL;OLÄYZ[ Leads an English medium terrestrial University of Oxford. lady in Sri Lanka to hold the post of a ;LSL]PZPVU*OHUULSHMÄSPH[LK[V*55 Secretary to a Cabinet Ministry. Heads Corporate Planning for the IWS $SSRLQWHGWRWKH%RDUG /VSKPUNZ.YV\WLUNHNLKPUKP]LYZPÄLK 1st January 2012 as an Independent Non $SSRLQWHGWRWKH%RDUG business interests in telecommunication, Executive Director. 30th August 2011 as an Independent media & broadcast, automobiles, Non Executive Director. aviation, warehousing, food & beverage 0HPEHUVKLSRI%RDUG6XE processing and packaging. &RPPLWWHHV 0HPEHUVKLSRI%RDUG6XE Member of Board Credit Committee, &RPPLWWHHV $SSRLQWHGWRWKH%RDUG Board Human Resources & Remuneration Chairperson of Board Integrated 1st January 2012 as an Independent Non Committee, Board Strategic Planning Risk Management Committee and Executive Director. Committee, Board Shareholder Relations Board Related Party Transactions Committee, Board Treasury Committee Review Committee. Member of Board 0HPEHUVKLSRI%RDUG6XE and Board Marketing Committee. Audit Committee, Board Nomination &RPPLWWHHV Committee and Board Strategic Planning Chairperson of the Board Nomination &XUUHQW$SSRLQWPHQWV Committee. Committee, Member of the Board Non Executive Director of Sampath Credit Committee, Board Marketing Bank PLC, Senior Economist, Hayleys &XUUHQW$SSRLQWPHQWV Committee, Board Human Resources PLC, Member of the Board of Directors Independent Non Executive Director & Remuneration Committee and Board of Centre for Poverty Analysis Member of Sampath Bank PLC, Member of the Strategic Planning Committee. of Economic Fiscal and Policy Planning Public Service Commission, Member of Committee and Export Committee of the the Sri Lanka Law Commission, CEO &XUUHQW$SSRLQWPHQWV Ceylon Chamber of Commerce, Director of The Hotels Association of Sri Lanka Independent Non Executive Director of of SC Securities (Pvt) Ltd. (THASL), Non Executive Director of the Sampath Bank PLC, Chief Executive Centre For Poverty Analysis (CEPA). 6MÄJLYVM(9;;LSL]PZPVU)YVHKJHZ[PUN )RUPHU$SSRLQWPHQWV Company (Pvt) Ltd, Director of IWS Economist, Institute of Policy Studies, Sri )RUPHU$SSRLQWPHQWV Holdings (Pvt) Ltd. Director of RAD Lanka. Secretary to the Ministry of Justice, Productions (Pvt) Ltd. Member of Young Secretary to the Ministry of Plan Leaders Steering Committee, Ceylon Implementation, Secretary to the Ministry Chamber of Commerce. Trustee of Youth of Technology and Research, Advisor Business Sri Lanka, Ceylon Chamber of to Minister of Higher Education and Commerce. Research.

16 SAMPATH BANK PLC Annual Report 2015 0U5DQLO3DWKLUDQD 0UV6DXP\D$PDUDVHNHUD 0U5DQMLWK6DPDUDQD\DNH 6NLOOV ([SHULHQFH 6NLOOV ([SHULHQFH 6NLOOV ([SHULHQFH ,_[LUZP]LL_WLYPLUJLPUÄUHUJLHUK Counts over 28 years in active legal Extensive experience as Head of Finance THUHNLTLU[PUÄUHUJPHSHWWHYLSHUK practice in Civil Law, practicing in the & Planning at National Savings Bank, energy sectors. Fellow member of the Original , Appellate & Supreme Courts Commercial Bank PLC and Sampath Chartered Institute of Management as an Attorney-At-Law. Holds a Masters Bank PLC. Counts over 40 years’ Accountants, UK (FCMA) and holds a degree in Law from the University of L_WLYPLUJLVMTHUHNPUNÄUHUJLPU[OL Bachelor of Commerce degree from the Pennsylvania with particular emphasis on ÄUHUJPHSZLY]PJLZZLJ[VY/VSKZH)HJOLSVY University of Sri Jayewardenepura. Insurance Law, Privacy and Defamation of Commerce (Accountancy Special) Law. She has experience in areas relating Degree from the University of Peradeniya. $SSRLQWHGWRWKH%RDUG to Property, Testamentary, Condominium 1st January 2012 as a Non Executive Disputes, Trusts, Family Law, and Money $SSRLQWHGWRWKH%RDUG Director. Became an Independent Non Recovery. Also litigates on behalf of 1st January 2009 as an Executive Executive Director 31st January 2015. ÄUHUJPHSZLY]PJLZZLJ[VYJSPLU[ZHUKOHZ Director. specialised in local and international 0HPEHUVKLSRI%RDUG6XE arbitrations. 0HPEHUVKLSRI%RDUG6XE &RPPLWWHHV &RPPLWWHHV Chairman of Board Audit Committee, $SSRLQWHGWRWKH%RDUG Member of Board Credit Committee, Member of Board Strategic Planning 1st June 2012 as an Independent Non Board Integrated Risk Management Committee. Executive Director. Committee, Board Strategic Planning Committee, Board Treasury Committee &XUUHQW$SSRLQWPHQWV 0HPEHUVKLSRI%RDUG6XE and Board Related Party Transactions Independent Non Executive Director &RPPLWWHHV Review Committee. of Sampath Bank PLC, Group Finance Member of Board Nomination Committee Director - Hirdaramani Group of and Board Marketing Committee. &XUUHQW$SSRLQWPHQWV Companies, Non-Executive Director Executive Director/Group Chief Financial of Windforce (Pvt) Ltd, Nirmalapura &XUUHQW$SSRLQWPHQWV 6MÄJLY:HTWH[O)HUR73*+PYLJ[VY Windpower (Pvt) Ltd, Esna Power (Pvt) Non Executive Director of Sampath Bank Siyapatha Finance PLC. Ltd, Star Packaging (Pvt) Ltd, Alumex PLC, Legal practitioner, Member of the (Pvt) Ltd, Odel PLC, Taprobane Holdings Bar Association of Sri Lanka. Director of )RUPHU$SSRLQWPHQWV PLC. Manson Investments (Pvt) Ltd. Senior Deputy General Manager, Finance & Planning at Commercial Bank PLC, )RUPHU$SSRLQWPHQWV *OPLM-PUHUJPHS6MÄJLYH[:HTWH[O)HUR *OPLM,_LJ\[P]L6MÄJLYVM=HUPR PLC. )HUNSHKLZO:LJ\YP[PLZ"(=7VM=HUPR Incorporation, Director of Hayleys MGT Knitting PLC and Hayleys PLC.

SAMPATH BANK PLC Annual Report 2015 17 *VYWVYH[L7YVÄSL Corporate Management

A wealth of industry experience lends depth to our strategies and direction.

0U$UDYLQGD3HUHUD 0U5DQMLWK6DPDUDQD\DNH 0U1DQGD)HUQDQGR Managing Director Executive Director / *OPLM6WLYH[PUN6MÄJLY .YV\W*OPLM-PUHUJPHS6MÄJLY

0U7KDUDND5DQZDOD 0U$UXQD-D\DVHNHUD 0U$MDQWKDGH9DV*XQDVHNDUD Deputy General Manager - Deputy General Manager - Deputy General Manager - Finance Marketing & Business Development Human Resources

18 SAMPATH BANK PLC Annual Report 2015  >L»YLKYP]LUI`[OLWHZZPVU [VIYPUN]HS\L[VV\YJ\Z[VTLYZ JVTT\UP[PLZHUKV[OLYWHY[ULYZ

0U'LQXVKD,KDODODQGD 0UV6KDVKL-DVVLP 0U3UDGHHS3HUHUD Deputy General Manager - Operations Deputy General Manager - Credit Head of Internal Audit

0U0DQRM$NPHHPDQD 0U$MLWK6DOJDGR 0UV$\RGK\D,GGDZHOD3HUHUD Deputy General Manager - Branch Banking Head of Information Technology Deputy General Manager - Corporate Banking

SAMPATH BANK PLC Annual Report 2015 19 *VYWVYH[L7YVÄSL

Corporate Management

0U8SDOL'KDUPDVLUL 0UV$QXMD*RRQHWLOOHNH 0UV1LURVKD'H6LOYD Assistant General Manager - Recoveries Company Secretary Assistant General Manager - Card Centre

0U5DMHQGUD5DQDVLQJKH 0U3XQXQXZDQ:LFNUHPDVHNHUD 0U6DQDWK$EKD\DUDWQH Assistant General Manager - *OPLM3LNHS6MÄJLY Assistant General Manager - New IT Business Development Global Business

20 SAMPATH BANK PLC Annual Report 2015  0UHSS[OH[^LKV^L^HU[[V IL[OLWYLMLYYLKIHURMVYL]LY` Z[HRLOVSKLY^LZLY]L

0U6DQMD\D*XQDZDUGHQD 0U0DKHHO.XUDJDPD 0U+%.HHUWKLUDWKQD Assistant General Manager - Assistant General Manager - Operations Assistant General Manager - Finance Strategic Planning & Research

0U$PDO.LULKHQH 0U7KXVLWKD1DNDQGDOD Assistant General Manager - Assistant General Manager - Branch Banking Branch Banking

SAMPATH BANK PLC Annual Report 2015 21 *VYWVYH[L7YVÄSL Chief Managers

Taking responsibility, building trust. Its just what we do every day.

0U3UDVDQWKD'H6LOYD 0U'XVK\DQWKD'DVVDQD\DND 0U$VRND0DQLNJRGD Chief Dealer Chief Manager - Chief Manager - Recoveries Electronic Delivery Channels

0U$QDQGD:LMLWKD 0U7KLODN$EH\VLQJKH 0U6LVLUD'DEDUH Chief Manager - IT (EDP) Head of Deposits Chief Manager - Branch Banking

22 SAMPATH BANK PLC Annual Report 2015  >L^PSSSLHKPUV\YPUK\Z[Y` and set the standards that others ^PSSMVSSV^

0U6DPDQ'H6LOYD 0UV$FKDOD:LFNUDPDUDWQH 0U+HPDQWKD0DUDVLQJKH Chief Manager – Branch Banking Chief Manager – Branch Banking Chief Manager – Administration

0U/DOLWK:HUDJRGD 0U3ULDP.DVWXULUDWQD 0U&KDWXUD5XGHVK Chief Manager - Human Resources .YV\W9PZR6MÄJLY Chief Manager - Trade Services & International Operations

SAMPATH BANK PLC Annual Report 2015 23 *VYWVYH[L7YVÄSL

Chief Managers

0U1DODND*XQDZDUGHQD 0U3UDVDQQD0XOOHJDPD 0U-DQDND-D\DVXUL\D Chief Manager - System Audit Chief Manager - Branch Banking Chief Manager - City & Commercial Credit

0UV.XPDUL-D\DVXUL\D 0U3DVDQ0DQXNLWK 0U'HHSDO'H6LOYD Chief Manager - Branch Banking Chief Manager - IT Systems Development Chief Manager - Branch Banking

24 SAMPATH BANK PLC Annual Report 2015  >LRUV^^OH[V\YJ\Z[VTLYZ HUKV[OLYI\ZPULZZWHY[ULYZULLK MYVT\ZYLZWVUZPIPSP[`PU[LNYP[` HUK]HS\L

0U+DOLQ+HWWLJRGD 0V'XOVLUL-D\DVLQJKH Chief Manager - Network Service Centre Chief Manager - Corporate Finance

SAMPATH BANK PLC Annual Report 2015 25 *VYWVYH[L7YVÄSL Senior Management

A performance-driven team working to the highest standards of business excellence...

0U9LMLWK3HLULV 0U3UDVDGD*RRQDUDWQH 0U/DVDQWKD6HQDUDWQH Senior Manager - Senior Manager - Head of Compliance Computer Operations (IT-EDP) Database Administration

0U*D\DQ5DQDZHHUD 0UV$ORND(NDQD\DNH Senior Manager - Credit Risk Senior Manager - FCBU (resigned on 01.01.2016)

0U/DNPDO0XQDVLQJKH 0U6XPLH0LWKUDSDOD 0U6HQDND+HZDYLWKDUDQD Senior Regional Manager Senior Regional Manager Senior Manager - Legal

26 SAMPATH BANK PLC Annual Report 2015  (ZV\YZ[HRLOVSKLYZULLKZHUK YLX\PYLTLU[ZJOHUNLV]LY[PTLZV ^PSSV\YKLSP]LY`

0UV&KDPSLND1DQD\DNNDUD 0U.DVXQ5DWQD\DNH Senior Manager - Senior Regional Manager Corporate Credit

0U6KLUDQ.RVVLQQD 0U.DVXQ)HUQDQGR 0U-DQDND.DUXQDUDWQH Senior Regional Manager Senior Regional Manager Senior Regional Manager

0U7KXVKDQWKD6XPLWKUDDUDFKFKL 0U8GDUD6XUDZHHUD Senior Manager - Senior Manager - Operations & Systems & Procedures Business Process Re-engineering

SAMPATH BANK PLC Annual Report 2015 27 *VYWVYH[L7YVÄSL

Senior Management

0U.XVDO'H6LOYD 0U&KLQWKDNH'H6LOYD Senior Manager - E Remittance Senior Regional Manager & Bank Notes Operations

0U.HVKDQ'DEDUH 0U0DGKXSUL\D'LVVDQD\DNH 0U3UDERGKD&RRUD\ Senior Manager - Lending Senior Regional Manager Senior Regional Manager Products

28 SAMPATH BANK PLC Annual Report 2015  >L^PSS[HRL[OLSLHKPU ZL[[PUN[OLILUJOTHYRZVM I\ZPULZZHUKVWLYH[PVUHS L_JLSSLUJLPUHSS[OH[^LKV

0UV1D\DQD-D\DVHQD 0U%KDUDQD-D\DZDUGHQD 0UV0DQRML+HWWLJRGD Senior Manager - Senior Regional Manager Senior Manager - Trade Services IT System Development

0U6XGDWK,OOHSHUXPD 0U$PLOD7KHZDUDSSHUXPD Senior Regional Manager Senior Manager - Branch Supervision

SAMPATH BANK PLC Annual Report 2015 29 *VYWVYH[L7YVÄSL Product Portfolio

Our product portfolio is designed to represent Sampath Bank’s vision to be “The Growing Force in Sri Lankan Financial Services.”

G4-04

Our dynamic range of retail and services aim to “Bring the Bank Closer commercial banking products deliver to the Customer” through 24/7, 365-day targeted solutions for both short term access. and long term needs of individuals and businesses alike, while our digital banking

30 SAMPATH BANK PLC Annual Report 2015  >LHYLKLKPJH[LK[VOLSWV\Y J\Z[VTLYZILJVTLIL[[LYVMM[OYV\NOH IYVHKYHUNLVMWYVK\J[ZHUKZLY]PJLZ[OH[ VMMLYWYHNTH[PJZVS\[PVUZMVYHOVZ[VM THPUZ[YLHTIHURPUNULLKZ

1HZ2IIHULQJV

6DPSDWK6DPDFKDUD A special loan scheme tailored especially for state pensioners

6DPSDWK%DQN 6DPSDWK9LVD3ODWLQXP Sampath Credit Cards offers the means $PHULFDQ([SUHVVė 'HELW&DUG of spending responsibly and “Real (YHU\GD\&UHGLW&DUG (M\SS`ÅLKNLKWYVK\J[ Value Deals” on just about everything The only credit card that offers international from clothing to super marketing, from in Sri Lanka to offer a recognition together with electronics to healthcare, from holidays to year round “Cash Back” a host of special offers dining out. In addition to great discounts feature and promotions.

SAMPATH BANK PLC Annual Report 2015 31 *VYWVYH[L7YVÄSL Awards & Accolades Bank of the Year 2015 Sampath Bank, undisputedly the most awarded Bank in 2015 6DPSDWK%DQNKRQRXUHG ZLWKWKHSUHVWLJLRXV ã7KH%DQNHU$ZDUGâ %DQNRIWKH Year 2015

7KH/RQGRQEDVHG)LQDQFLDO 7LPHVKRQRXUHG6DPSDWK%DQN ZLWKWKHSUHVWLJLRXV ã7KH%DQNHU$ZDUGâIRUWKH IRXUWKWLPHLQUHFRJQLWLRQRI WKH%DQNâVVWHDG\SHUIRUPDQFH GXULQJWKHSDVW\HDUDPLGVW FKDOOHQJLQJFLUFXPVWDQFHV &HOHEUDWHGDVWKHã2VFDUVâ RIWKHEDQNLQJLQGXVWU\ 7KH%DQNHU$ZDUGUHZDUGV SUXGHQWULVNDSSURDFKVWURQJ PDQDJHPHQWDQGH[FHOOHQFH LQEDQNLQJSUDFWLFHV7KH UHFRJQLWLRQFULWHULDIRUWKLV DZDUGFRYHUDFRPSUHKHQVLYH UDQJHRIEDQNLQJSUDFWLFHV ZKLOHWKHHYDOXDWLRQSURFHVV KDVDOZD\VEHHQVWULQJHQW

32 SAMPATH BANK PLC(UU\HS9LWVY[ Annual Report 2015 2YHUDOO%HVW&RUSRUDWH&LWL]HQE\&H\ORQ&KDPEHURI&RPPHUFH

6UL/DQNDâV%HVW&RPPHUFLDODQG5HWDLO%DQN $QQXDO5HSRUW$ZDUGVE\&$6UL/DQND LQE\:RUOG)LQDQFH0DJD]LQH

(UU\HS9LWVY[SAMPATH BANK PLCSAMPATH Annual Report BANK 2015PLC 33 *VYWVYH[L7YVÄSL Awards & Accolades

 >LV^L[OPZZ\JJLZZ[V[OLZ\WWVY[ VMV\YZOHYLOVSKLYZ[OL[Y\Z[[OH[V\Y J\Z[VTLYZOH]LPU\ZHUKSHZ[I\[UV[SLHZ[ [OLJVTTP[TLU[VMV\YZ[HMM

1DWLRQDO%HVW4XDOLW\ &65%UDQGRI $VLD5HVSRQVLEOH $&&$6XVWDLQDELOLW\ 6RIWZDUH$ZDUGV the Year 2015 (QWUHSUHQHXUVKLS 5HSRUWLQJ$ZDUGV 1%46$  $ZDUGV 2014

%HVWZHEON$ZDUGV ,QIRV\V)LQDFOH,QQRYDWLRQ $ZDUGV

34 SAMPATH BANK PLC(UU\HS9LWVY[ Annual Report 2015 6XPDWKL$ZDUGV 9LVD,QGLD 6RXWK$VLD &OLHQW)RUXP

WK$VLD%HVW&65 7HFKQRORJ\'HYHORSPHQW 3UDFWLFHV$ZDUGVDQG$VLD DQG$SSOLFDWLRQWKURXJK 6XVWDLQDELOLW\([FHOOHQFH /RFDO3DUWQHUVKLSV$ZDUG $ZDUGV 2014

SAMPATH BANK PLC(UU\HS9LWVY[ 35 *VYWVYH[L7YVÄSL Financial Highlights

BANK GROUP 2015 2014 Change 2015 2014 Change % %

3URðWDELOLW\ 5V0Q Gross income 47,032 44,597 5.5 49,102 46,394 5.8 Total operating income 25,288 21,394 18.2 26,742 22,606 18.3 Operating expenses, impairment losses, VAT & 16,187 14,667 10.4 16,953 15,359 10.4 5);VUÄUHUJPHSZLY]PJLZ 7YVÄ[ILMVYLPUJVTL[H_ 9,101 6,727 35.3 9,790 7,247 35.1 Income tax expense 2,967 1,813 63.7 3,161 1,979 59.7 7YVÄ[MVY[OL`LHY 6,134 4,914 24.8 6,628 5,268 25.8

$VVHWV /LDELOLWLHV 5V0Q Due to banks & other customers (Deposits only) 409,411 341,946 19.7 410,252 341,655 20.1 Loans to & receivables from banks & other 377,348 302,370 24.8 387,929 310,504 24.9 customers after impairment provisions Total equity 35,125 30,912 13.6 39,203 34,604 13.3 Total assets 525,277 432,026 21.6 538,647 442,790 21.6

,QYHVWRU,QIRUPDWLRQ Net asset value per share (Rs) 203.85 179.39 13.6 226.96 200.28 13.3 Market value per share at the year end (Rs) 248.00 236.30 5.0 Earnings per share - Basic (Rs) 35.60 28.52 24.8 38.44 30.55 25.8 Earnings per share - Diluted (Rs) 35.60 28.51 24.8 38.44 30.54 25.8 Dividend per share (Rs) 13.00 11.00 18.2 Dividend cover (Times) 2.74 2.66 3.0 Gross dividend (Rs Mn) 2,240 1,847 21.3 Market capitalisation (Rs Mn) 42,734 39,677 7.7

2WKHU5DWLRV Dividend yield (%) 5.24 4.66 12.4 Price earning ratio (Times) 6.97 8.28 (15.9) Impairment allowance on loans to & receivables 1.83 2.27 (19.5) 1.87 2.31 (19.0) from other customers (%) Liquid assets ratio (%) 22.05 24.54 (10.1)

Fitch rating A+ (lka) AA- (lka) (Stable) (Stable)

*VTWHYH[P]LPUMVYTH[PVUMVY[OL`LHYOHZILLUYLJSHZZPÄLK^OLYL]LYULJLZZHY`[VJVUMVYT[V[OLJ\YYLU[`LHY»ZWYLZLU[H[PVU

36 SAMPATH BANK PLC Annual Report 2015 )LQDQFLDO*RDOVDQG$FKLHYHPHQWV%DQN Goal Achievement Financial Indicators 2015 2014 2013 2012 2011

Return on average assets (after tax) % Over 1% 1.28 1.23 0.98 1.88 1.55 Return on average equity (after tax) % Over 16% 18.42 16.35 12.88 22.26 16.17 .YV^[OPUWYVÄ[ Over 15% 24.83 43.27 (34.43) 54.40 2.58 Growth in total assets % Over 15% 21.58 13.08 23.47 24.93 29.45 Cost to income ratio (excluding VAT & NBT) % Below 50% 52.75 54.82 51.20 51.70 55.30 Capital adequacy ratios (%) -Tier I Over 7.5% 7.90 8.83 10.08 11.80 10.24 -Tier I & II Over 12% 12.26 13.62 14.22 13.61 11.45

26%

Rs6.6Bn 7YVÄ[HM[LY;H_.YV^[O.YV\W 7YVÄ[HM[LY;H_.YV\W

Bank’s Total Assets Bank’s Gross Income Bank’s Profit after Tax Rs Mn Rs Mn Rs Mn 600,000 50,000 7,000

500,000 6,000 40,000 47,032 47,509 5,000

400,000 44,597 525,277

30,000 6,134

4,000 5,231 38,796 300,000 4,914 432,026 3,000

382,042 20,000 200,000 3,430

309,410 2,000 10,000 100,000 1,000

0 0 0 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015

SAMPATH BANK PLC Annual Report 2015 37 *VYWVYH[L7YVÄSL Financial Highlights

Bank’s Earnings per Share Bank’s Net Assets Value per Share Rs Rs 40 ;OL)HUR 250 35.6 31.3 32 28.5 recorded a 200 179.4 203.8 153.0 24 WYL[H_WYVÄ[VM 150 169.4

16 20.5 9Z )UMVY 100

8 the year 2015 50

0 0 2012 2013 2014 2015 2012 2013 2014 2015

Bank’s Return on Equity % 25 22.3

20 18.4 16.4 ATMs 15 Advances Growth - Bank 12.9 370 10 5 25% 0 2012 2013 2014 2015

Branches The banking industry as a whole has 225 experienced a good year, cataloging stable growth in all Total Assets - Group key performance indicators Rs 539Bn

22% 20% Total Assets Deposits Growth - Group Growth - Bank

38 SAMPATH BANK PLC Annual Report 2015 Non Financial Highlights

Customers

Growth in Number Growth in Number of Off-site ATMs of ATMs 13% 85%

E-Banking Growth 532% 80% 88% 54% E-Statements Registrations Sampath App Sampath Vishwa SMS Alerts Downloaded User Base Registrations

Government

Taxes Paid to the Taxes Collected on behalf Government - Bank of the Government - Bank Rs 3.02Bn Rs1.40Bn

SAMPATH BANK PLC Annual Report 2015 39 *VYWVYH[L7YVÄSL Non Financial Highlights

Employees

7YVÄ[WLY,TWSV`LL Employee Retention (Rs Mn) Ratio 1.5 97.0%

Average Training Hours Number of Industrial per Employee Per Annum Disputes 35.4 NIL

Environment Savings from Paper Recycling

1,204 2,250,024 212 283,200 124,254 Number of Fully Water 3HUKÄSS Electricity Oil Grown Trees (Litres) (Cubic metres) (kWh) (Litres) Reduction from Paper Carbon Footprint Recycling

tCO2e 70,804 3,753 Greenhouse -VY/LHK6MÄJL Gas (Kg)

40 SAMPATH BANK PLC Annual Report 2015 9LWVY[7YVÄSLHUK Theme

5HSRUW%RXQGDU\ G4-28,29,30 “In-accordance – Comprehensive” as per Banking Act Direction No 11 of This is the 2nd Integrated Annual Report the G4 guidelines. We have also complied 2007 on Corporate Governance for published by Sampath Bank PLC. Our with the Financial Services Sector Licensed Commercial Banks in Sri ÄYZ[PU[LNYH[LKYLWVY[^HZYLSLHZLK Supplement. Lanka issued by the Central Bank JV]LYPUN[OLÄUHUJPHS`LHY:PUJL of Sri Lanka then, we have worked hard to improve In addition to GRI guidelines, the Bank the level of transparency and quality remains bound by the directives laid out To further emphasize our commitment to of information provided in the current under the Customer Charter issued by sustainable business practices, this report report, which contains an overview of the the Central Bank of Sri Lanka. Further, OHZILLUJLY[PÄLKHZH¸*HYIVU5L\[YHS Sampath Bank PLC’s activities, practices in conformity with global best practices Product” by Sri Lanka Carbon Fund and triple-bottom-line (People, Planet for sustainability reporting, the report (Private) Limited. also carries voluntary disclosures on the HUK7YVÄ[WLYMVYTHUJLMVY[OLÄUHUJPHS G4-33 year ending 31st December 2015. The MVSSV^PUN" Assurance report also includes a section, which To determine the credibility of our reporting framework in line with the captures the performance of subsidiary Code of Best Practice on GRI guidelines, we have sought an companies, for the same period. Corporate Governance issued PUKLWLUKLU[]LYPÄJH[PVUVM[OPZYLWVY[ jointly by the Institute of Chartered from Messrs Ernst and Young, Chartered 7KHPH Accountants of Sri Lanka and Accountants. It is noteworthy that Messrs The theme of this year’s report: “A Future- the Securities and Exchange Ernst and Young have no involvement Friendly Bank”, is meant to highlight Commission of Sri Lanka or interest in the scope of activities the efforts made during the year, to IFC Sustainability Framework conducted by Sampath Bank PLC, other issued by International Finance cultivate a more pre-emptive approach than as external auditors pertaining to the Corporation and build a strong foundation to meet ÄUHUJPHSHZWLJ[ZVM[OL)HUR.YV\WHUK the expectations of stakeholders, in the OECD guidelines for Multinational to provide the independent assurance coming years. Enterprises report for our sustainability mechanisms. UN Global Compact Advanced Please refer page 478 of this report, for G4-15,32 6FRSH Principles the comprehensive assurance report The information contained herein, CSE Listing Rules on Corporate issued by Messrs Ernst and Young. caters to the interests of stakeholders Governance and allows them to determine if our business strategies have been able to deliver what they expect of Sampath $6QDSVKRWRI2XU3URJUHVVWRZDUGV6XVWDLQDELOLW\5HSRUWLQJ Bank PLC. A comprehensive range of ÄUHUJPHSHUKUVUÄUHUJPHSPUMVYTH[PVU Year Report 7YVÄSL GRI Application Level Declaration External and data has been provided, to enable Status Assurance our stakeholders to make an informed Provided decision about their future engagement 2011 Stand-alone Report GRI 3.1 Level B Self-declared Yes with us. We have addressed all material issues pertaining to the business as per 2012 Incorporated in Annual GRI 3.1 Level B Self-declared Yes the Global Reporting Initiative (GRI), G4 Report guidelines for sustainability reporting 2013 Stand-alone Report GRI G4 Comprehensive - Yes and declare our reporting status to be 2014 Integrated Report GRI G4 Comprehensive - Yes 2015 Integrated Report GRI G4 Comprehensive - Yes

SAMPATH BANK PLC Annual Report 2015 41 *VYWVYH[L7YVÄSL Green Recognition

We realize that our business does have some impact on the environment due to the consumption of energy, water and fuel along with the material waste we generate as a result of day-to-day operations. These are the main components of our carbon footprint. 6DPSDWK%DQN3/& $QQXDO5HSRUW  $&DUERQ1HXWUDO3URGXFW

OBJECTIVE: To establish the carbon footprint of Sampath Bank PLC, Annual Report 2015 by quantifying the carbon output generated during the process.

METHODOLOGY: Gather data and map the carbon footprint as a measure of

the total amount of Carbon Dioxide (CO2) and other direct and indirect Green House Gas (GHG) emissions accumulated at each stage of the product lifecycle of the Annual Report 2015.

The result is to be expressed in Kilograms of CO2 equivalents.

PRODUCT STANDARD: The GHG Protocol Product Life Cycle Accounting and Reporting Standard.

OUTCOME: Invest in green projects by purchasing carbon credits

equivalent to measured CO2 Kilograms in the product life cycle HUKVI[HPUKLJSHYH[PVUJLY[PÄJH[LPZZ\LKI`[OL:YP3HURH Carbon Fund (Private) Limited, declaring the ì6DPSDWK%DQN 3/&$QQXDO5HSRUW$&DUERQ1HXWUDO3URGXFWú

42 SAMPATH BANK PLC Annual Report 2015 We want to lead in our industry now and stay ahead in the future

Corporate Accountability

Chairman’s Message Managing Director’s Review Value Creation Business Model Sustainability Philosophy Stakeholder Management Materiality Assessment

SAMPATH BANK PLC Annual Report 2015 43 15 *VYWVYH[L(JJV\U[HIPSP[`

CHAIRMAN’S MESSAGE

service. We recognize that customer- led innovation is crucial in the rapidly changing digital space and stemming Leading from this insight, we have developed new customer focused concepts that will be introduced as we strategically move Sri Lanka into MVY^HYKPU[OLUL_[Ä]L`LHYZ 6\YJVTTP[TLU[[VZLY]PJLPZYLÅLJ[LK in that once again in 2015, we were the Future of adjudged the “Most Nation-Minded Bank” for the second consecutive year. This recognition, we believe is the culmination of a focused strategy over Banking the last twenty-nine years to serve our nation with unstinted dedication. We have done so by pioneering service standards, 6\YJVTTP[TLU[[VZLY]PJLPZYLÅLJ[LK innovating new products and by creating VUJLHNHPUPU"^L^LYLHKQ\KNLK[OL greater accessibility to the banking sector “Most Nation-Minded Bank” for the second across all demographics. consecutive year. Despite a mediocre global outlook - the Dear stakeholders, pace of growth in advanced economies I am indeed proud and privileged to has increased marginally, however emerging markets are slowing, with falling WYLZLU[[V`V\[OLH\KP[LKÄUHUJPHS statements for Sampath Bank PLC global trade volumes and uncertainty on the depth of the slow-down in MVY[OLÄUHUJPHS`LHY+LZWP[LH JOHSSLUNPUN`LHYMVY[OLÄUHUJPHSZLY]PJLZ *OPUH^LYLTHPUJVUÄKLU[VMNYV^[O sector on all fronts - both global and local in the local economy and sectorial - your Bank continued to weather the NYV^[OMVYÄUHUJPHSZLY]PJLZPUHZ pressures and perform on par with our infrastructure development revvs up in the stated strategic plan for the year. Global \WJVTPUNÄUHUJPHS`LHY.VPUNMVY^HYK 36.5% we remain focused on delivering an growth continues to be below trend. Dividend Pay Out Ratio exceptional customer experience through Challenges did not dampen our improving the performance of our core perseverance to perform, to dedicate Technology remains key to our forward businesses, maintaining a strong balance ourselves to our customers and to not strategy, but critically we recognize sheet, investing in digital technology and just meet the obligations but exceed the that in integrating technology, we do enhancing the capabilities of our people. expectations of all of our stakeholders, so with the intention to create a culture across the board. We continued to push [OH[L_LTWSPÄLZZLY]PJLL_JLSSLUJL In closing, I thank our shareholders, the boundaries, merging the realm of our simplifying the interfaces of interaction customers, my fellow directors and services with present needs and future for customers with the Bank, whilst members of management for their innovations. Inspired by our dedication creating secure and safe transactional unstinted support. I also thank our over 3,900 strong Sampath team for their hard [VSLHK[OL:YP3HURHUÄUHUJPHSZLY]PJLZ platforms. In 2015, we have achieved sector into the next service paradigm, a ZPNUPÄJHU[[LJOUVSVN`TPSLZ[VULZ^OPJO work and dedication to the company. Let feat that we have continued to achieve will deliver a better customer experience. us lead, as we have led before, into a over the past two decades since We have successfully modernised our successful 2016. the inception of your Bank, future ITC systems and platforms, which will orientation remained key to our strategic future proof our business. We value the LUKLH]V\YZ;OPZPZRLLUS`YLÅLJ[LKPU trust our customers place in us and the theme for our Annual Report this year as a result, have invested towards the Dhammika Perera “Future Friendly Bank”. right technology and teams to protect Chairman our customers’ information whilst also delivering a faster and more reliable Colombo, Sri Lanka 16th February 2016

44 SAMPATH BANK PLC Annual Report 2015 SAMPATH BANK PLC Annual Report 2015 45 *VYWVYH[L(JJV\U[HIPSP[`

MANAGING DIRECTOR’S REVIEW Leading... and staying ahead

Over the past three decades, Sampath Bank PLC has G4-01 built a solid foundation from which to confront the future: ^LOH]LHZ\JJLZZM\SOPZ[VY`"HKPZ[PUJ[P]LJ\S[\YLHUKH ZOHYLKWYPKLPUV\YWLYMVYTHUJL"V\YMVV[WYPU[PZ\UPX\LHUK coveted by our peers.

Dear stakeholders, model to portray a greater degree of The year 2015 marks the 29th year customer-centricity in our offerings. of operation for Sampath Bank PLC We have successfully combined both >LHSZVJVU[PU\L and as you may be aware, the journey conventional brick and mortar banking thus far has been a momentous one, concepts together with the latest [VLTWOHZPaL with many milestones and accolades developments in global banking to deliver that have come our way. This year was a superior banking experience. We also [OLPTWVY[HUJL an exceptional one, with many more continue to emphasize the importance of strengthening accomplishments to add to the long list of strengthening our IT backbone as the of achievements for Sampath Bank PLC. basis of achieving service excellence. V\Y0;IHJRIVUL This approach has served us well and as the basis of But before I get into these details, I would YLZ\S[LKPUHKLÄUP[LJVTWL[P[P]LLKNL like to share a few observations about the Adding to this, we have over the years, achieving service past year and enlighten you on the steps strategically expanded our island-wide we are taking to become Sri Lanka’s MVV[WYPU[PUVYKLY[VM\SÄS[OLULLKZVM L_JLSSLUJL foremost future-friendly bank. new and emerging market segments. Among other things, our efforts to 6HWWLQJ2XUVHOYHV$SDUW$V WYVTV[LNYLH[LYÄUHUJPHSPUJS\ZPVUPU[OL 6UL/DQNDâVì0RVW1DWLRQ0LQGHG country and stimulate post-war economic %DQNú development in the North and East, It was indeed a proud moment, when are but a few examples that illustrate Sampath Bank PLC was recognized Sampath Bank PLC’s nation-minded as the “Most Nation-Minded Bank” for attitude. the year 2015. This was the second consecutive year in which we have Over the past 12 months, I made a received this accolade. I believe this conscious effort to assess for myself, achievement is the culmination of 29 the views of our stakeholders and I years of dedicated service to the people have met and spoken with many of our of Sri Lanka. shareholders, customers, employees and other key stakeholders around the From the inception, we have always country. These interactions have made it ^VYRLK^P[OVULM\UKHTLU[HSW\YWVZL" clear that Sampath Bank PLC is widely to ensure the betterment of the nation viewed as having a strong industry 25% and its citizens. Over the years, we have position with excellent opportunities 7YVÄ[HM[LY;H_.YV^[O JVUZJPV\ZS`KP]LYZPÄLKV\YI\ZPULZZ for growth. Moreover, it was very

46 SAMPATH BANK PLC Annual Report 2015 SAMPATH BANK PLC Annual Report 2015 47 *VYWVYH[L(JJV\U[HIPSP[` Managing Director’s Review

portfolio to compensate for the loss in revenue from the high-yielding pawning product. Building volumes of other loan offerings and strengthening the loan book, then became a key priority. As a ÄYZ[Z[LW[V^HYKZHJOPL]PUN[OPZNVHS we consolidated our strategies and focused on achieving a healthy product mix that would deliver consistent results in the years ahead. We capitalized on the consistently low Average Weighted Prime Lending Rates (AWPLR) to pursue a volume-driven growth strategy. Our emphasis was to promote retail lending and lifestyle products through our branch- lending model.

The task of mobilizing deposits was also Managing Director receiving the entrusted to the branches. The strategy prestigious ‘The Banker Award’ was aimed at boosting our island-wide rewarding for me to see how the Bank Current and Savings Accounts (CASA) has inspired progress among millions of base, as we began to consciously fellow Sri Lankans, be it paddy farmers downsize our high-cost term deposit PU(U\YHKOHW\YHÄZOLYMVSRPU4HUUHY We have portfolio. or software developers in Colombo. The feedback I received assures me that our LTIYHJLKV\YYVSL We also looked at developing our fee- business strategies are both timely and based income by augmenting the credit relevant, and above all, meet the needs HZJOHTWPVUZVM card, remittance offerings. To boost the of these people. I also found that our JOHUNLMVYHSSV\Y credit card proposition, we introduced a customers appreciate the knowledge, number of unique value additions while expertise and commitment of our team Z[HRLOVSKLYZ aggressively pursuing our merchant and that there is great pride in being acquisition strategies. To offer a wider associated with Sri Lanka’s “Most global coverage for the remittances offering, we expanded our partner Innovative” bank. throughout 2015, we stepped up efforts network in the Middle East, East Asia and to develop key business pillars that would Australia signing up with representatives 6WUDWHJLF%XVLQHVV7KUXVWIRU make a strong positive contribution in six new countries, and expanded our Taking advantage of the robust growth towards the bottom line. During the year, market reach. in private sector credit demand seen ^LKLWSV`LKZWLJPÄJZ[YH[LNPLZHPTLK at developing both our personal banking To boost other sources of fee-based arm as well as the corporate offering. We income, we widened our delivery combined these plans with our overall channels, with special focus on developing strategy for branch growth to ensure that electronic and digital mediums. On the branches play a bigger role in driving other hand, the expansion of conventional medium-term business goals. delivery mechanisms was done more From a personal banking perspective, ZLSLJ[P]LS`[VMHJPSP[H[L[OLULLKZVMZWLJPÄJ geographies. our ongoing efforts to reduce the exposure to pawning meant we had From a Corporate Banking perspective, to rationalize our loans and advances 22% the underlying strategy was to develop Total Assets Growth our capabilities to be able to capture a

48 SAMPATH BANK PLC Annual Report 2015 larger share of the import/export trade. G4-13 We once again called upon our branches Revenue to seize the opportunity to play a bigger Total revenue for 2015 at Rs 47.1 Bn, up 3.7% from the Rs 45.5 Bn recorded role in realizing these goals. Accordingly, in the previous year. 80.5% of the revenue was from interest earning products, all branches were encouraged to improve while fee-based income accounted for 13.8% of the total revenue. their trade volumes, which I believe is a timely move, particularly given the drive to bolster the export trade in the 7YVÄ[HIPSP[` forthcoming year. ;OL)HURYLJVYKLKHWYL[H_WYVÄ[VM9Z )UMVY[OL`LHY]PZH]PZ Rs 6.7 Bn recorded in the previous year, an impressive YoY growth of 35.3%. .H\)LQDQFLDO+LJKOLJKWV 7VZ[[H_WYVÄ[ZMVY[OL`LHY[VVYLJVYKLKHNYV^[OVM MYVT9Z )UPU As at 31st December 2015, our asset 2014 to Rs 6.1 Bn in 2015. portfolio crossed the Rs 0.5 Tn (i.e. Rs 500 Bn) mark. We are now one of the Investments only three private commercial banks in Key investments made during the year were to upgrade the IT infrastructure Sri Lanka to reach this status, which I amounting to a sum of Rs 645.8 Mn. believe will help further strengthen us in the coming years. Other key highlights HYLNP]LUILSV^" Credit Quality and NPLs NPL ratio continued to improve this year as well recording a decrease from 1.93% as at 31st December 2014 to 1.64% as at 31st December 2015. It is important ROA to note that the Bank managed to achieve an overall credit growth without 1.28% compromising on credit quality. Liquidity and Capital Adequacy ROE 6\YSPX\PKP[`WYVÄSL^HZZ[HISL[OYV\NOV\[[OL`LHY^OPSL;PLY0HUK;PLY00JHWP[HS remained strong, boosted by the special measures taken to further strengthen 18.42% both. A scrip issue amounting to Rs 1,007.5 Mn reduced the dividend payout I` ^OPJOTLHU[HSHYNLYJO\URVMWYVÄ[Z^LYLWSV\NOLKIHJRHZWHY[ of Tier I capital. Meanwhile, a Rs 5 Bn debenture issue was announced in EPS November 2015, to secure our Tier II capital. The issue which was immediately oversubscribed, was successfully extended by a further Rs 2 Bn , resulting in a Rs 35.60 total Tier II capital infusion of Rs 7 Bn.

Share Performance $GYDQFLQJWKH7ULSOH%RWWRP/LQH 4HYRL[WYPJLWLYZOHYLÅ\J[\H[LKIL[^LLU9ZSV^LZ[HUK9Z   We are aware that cultivating social and (highest) during the year and settled at Rs 248.00 at the end of the year, up by 5% environmental progress is as important as as against the end of previous year. M\SÄSSPUNWYVÄ[ZL_WLJ[H[PVUZ(UKZV^L have embraced our role as champions of change for all our stakeholders including investing in socially responsive products the year are labelled as #future-friendly shareholders, customers, employees and services, facilitating socio-economic initiatives, which demonstrate our and the communities in which we live progress of communities, advancing willingness to realign our strategies and and work. Leveraging on our strengths, environmental sustainability and caring for continuously advance our triple bottom we continue to focus on areas where our employees. line results. I do however wish to refer we can achieve the greatest impact: by [VHML^ZPNUPÄJHU[Z[LWZ^LOH]L[HRLU Being an integrated report, the pages in 2015, to illustrate how well we have that follow discuss these aspects and balanced the interests of our planet carry comprehensive details of our triple HUKV\YWLVWSL^OPSLTLL[PUNWYVÄ[ bottom line progress for the year. You expectations. will note that many of the activities for

SAMPATH BANK PLC Annual Report 2015 49 *VYWVYH[L(JJV\U[HIPSP[` Managing Director’s Review

Advancing environmental sustainability through our “Green Lending” policy, which offers credit facilities to individuals We are proud to be celebrated for our spirit of ‘Nation- and businesses keen to embrace green Mindedness’, testimony to the Bank’s strong support ethics, was also a success. In 2015 alone, we have disbursed over for local business and industry and for the people and Rs 86 Mn under the purview of the green communities we serve every day. lending scheme. Meanwhile, thematic projects that are part of our mainstream environmental programme aim to inspire scheme is symbolic of our shift from all stakeholders to play a more proactive a philanthropic approach towards a Total Assets and role as green ambassadors. Profit After Tax more transformative CSR model, where we seek to address national priorities Rs Bn Rs Bn Caring for our employees has always 6.1 and key burden issues of our country. 600 6 been on our list of key priorities, for we By working collaboratively with like- 5.2 believe that they are the mainstay of 500 4.9 5 minded institutions, the Sampath Saviya our business. Employing nearly 4,000 programme allows us to prudently lend 400 3.4 525.3 4 men and women across the country, to individuals as well as SMEs. By doing we seek to foster a dynamic, skilled and 432.0 so, we have been able to create jobs, 300 3 diverse workforce able to understand and

382.0 drive economic opportunity and transmit 200 2 interpret the aspirations of our customers. 309.4 widespread socio-economic change It is why, for nearly three decades, we across a broader demographic, while at 100 1 have been committed to help our team the same time offering a lasting solution VMLTWSV`LLZM\SÄSS[OLPY[Y\LWV[LU[PHS0U 0 0 to the national unemployment problem. 2015, we invested Rs 28.6 Mn to develop To date, we have invested more than 2012 2013 2014 2015 our leadership pipeline, focusing primarily Rs 3.5 Mn in the scheme, and since its Total Assets on training and career development. Profit After Tax launch in May 2013, reached out to over Meanwhile, in an effort to expand the 600 SMEs across the island, extending diversity and create a foundation for support to uplift the lives and livelihoods Investing in socially responsive products equal opportunities we recruit and deploy VMTVYL[OHUILULÄJPHYPLZ and services saw, among other things, employees mainly from the respective the expansion of the automated cash geographical regions. deposit kiosks across the island, with the commissioning of 38 new machines in 2015. However, we found that in order to achieve the desired results, direct intervention was needed to educate customers regarding the best use of these technological developments. As part of the introductory phase, we recruited, trained and deployed a team of self-help assistants at each kiosk. These self-help assistants play a dual role, both to change the mindset of the customer, encouraging them to use the facility as well as assisting them to familiarize themselves with the new offering. This modus operandi has now become a standard practice for all new technology- based offerings of Sampath Bank PLC.

Managing Director receiving the Overall Best Corporate Citizen 2015 award at the Best Corporate Citizen Facilitating socio-economic progress Sustainability Awards presented by the Ceylon Chamber of Commerce of communities vis-à-vis our Sampath Saviya entrepreneur development

50 SAMPATH BANK PLC Annual Report 2015 G4-13 ([SDQGLQJWR5HJLRQDO0DUNHWV 7KH3URPLVHRI3URJUHVV For some time now, we have been Over the past three decades, Sampath ([FHOOLQJLQ(YHU\6SKHUH drawing up plans to expand beyond Sri Bank PLC has built a solid foundation Our goal has always been to excel in Lanka and take our proposition to other from which to confront the future: we whatever we do and I believe we have territories in the region. In 2015, we took OH]LHZ\JJLZZM\SOPZ[VY`"HKPZ[PUJ[P]L done just that. You will no doubt be [OLÄYZ[Z[LWZ[V^HYKZHJOPL]PUN[OPZNVHS culture and a shared pride in our delighted to note that 2015 has been a by expanding to Myanmar. Being a truly WLYMVYTHUJL"V\YMVV[WYPU[PZ\UPX\L year of great recognition for Sampath indigenous Sri Lankan bank, we felt we and coveted by our peers. Moreover, Bank PLC, in many spheres. could use the cultural similarities between throughout the Bank, employees place two countries as a platform to present our great value on working together and 4VZ[ZPNUPÄJHU[S`^LYLJSHPTLK[OL proposition to the people of Myanmar. share a genuine desire to serve our prestigious title of “Sri Lanka’s Bank And so, in October 2015, we opened a J\Z[VTLYZ>LHYLJVUÄKLU[[OH[V\Y of the Year for 2015” after winning the :HTWH[O)HURYLWYLZLU[H[P]LVMÄJLPU strategy is sound and the execution of globally recognized “Banker Award” Yangon, Myanmar’s largest city. these strategies would bring meaningful conferred by the London-based “The progress and create longer-term value Banker” magazine owned by the for all stakeholders of the business. It is prestigious “Financial Times Group”. /RRNLQJ$KHDG how we expect to articulate the promise Easily the pinnacle of achievement for any (FRQRPLF2XWORRN I expect Sri Lanka will register an of progress and truly live up to our brand bank, I believe this is a testament to our improved economic performance over proposition: “We present your future”. JVUZPZ[LU[ÄUHUJPHSWLYMVYTHUJLWY\KLU[ the course of 2016, particularly as the risk management principles, strong country adjusts to government reforms $FNQRZOHGJHPHQWV governance mechanism and excellence In closing, I would like to thank our in banking practices, which has helped HUKL]VS]PUNÄZJHSHUKTVUL[HY`WVSPJPLZ This will no doubt augur well for Sampath 2.3 Mn customers across the country, us secure this title for the third time in the Bank PLC’s dynamic business model, for your loyal support and the privilege to past six years. which is designed to mitigate the impact serve each and every one of you. I also of volatility from any one area. want to thank the Board of Directors for We also clinched the highly coveted, [OLPYJVUÄKLUJLHUKJVU[PU\LKZ\WWVY[ “Overall Best Corporate Citizen Award I wish to extend my heartfelt gratitude to for 2015”, at the Sustainability Awards &RPSHWLWLYH&KDOOHQJHV We are also likely to experience the 3,993 strong, Sampath team for their conducted by the Ceylon Chamber of increased competition in the coming commitment and dedication in working Commerce, to recognize corporates years, particularly with the issuance of [V^HYKZV\YJVTTVUNVHS(UKÄUHSS` who are able to show “Higher State of to our shareholders, I thank you for your Corporate Excellence” in advancing the Ä]LUL^IHURPUNSPJLUZLZ[OH[^V\SK allow the entry of new foreign banks [Y\Z[HUKJVUÄKLUJLHUKZLLR`V\Y Triple Bottom Line. to the market. Notwithstanding the continued patronage to take Sampath Bank PLC to even greater heights, in the Our IT innovations received international PUJYLHZLKJVTWL[P[PVU0HTJVUÄKLU[ that the Sampath brand will retain its years ahead. recognition too, at the Infosys-Finacle leadership position, bolstered by ongoing Innovation Awards 2015, which saw the investments in people, processes and participation of corporates from across technology to deliver the needs of new the globe, including a number of leading and existing customers throughout our IHURZHUKÄUHUJLJVTWHUPLZMYVT:YP footprint. Aravinda Perera Lanka. Nevertheless, Sampath Bank Managing Director PLC was able to triumph over this stiff competition to be the only organization 5HJXODWRU\&RPSOLDQFH Over the past three decades, we have Colombo, Sri Lanka from Sri Lanka to be recognized under always responded quickly and surely the highly-regarded “Product Innovation” 16th February 2016 to all regulatory changes, investing a category at the recently concluded considerable amount of time and money awards ceremony held in . to adapt to new standards. I am indeed pleased to note, that our foresight has led Many more accolades, too numerous to us to commence the process of adapting mention here, also came our way as we to the BASEL III regulations, which I went on to excel in many other spheres hope would make the transition much as well. As you read through this report, smoother one, when it does come into `V\^PSSÄUK[OLZLJHW[\YLKPUNYLH[LY effect in 2016. detail in their respective areas.

SAMPATH BANK PLC Annual Report 2015 51 *VYWVYH[L(JJV\U[HIPSP[` Value Creation Business Model

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)LQDQFLDO&DSLWDO 2XU9LVLRQ Capital Structure (Equity) “The Growing Force in Sri Lankan Financial Services” Liquid Assets Reserves 2XU9DOXHV Capital Adequacy (Core/ Total) Create a learning culture that promotes individual and organisational development as well as promoting innovation and value for customers. +XPDQ&DSLWDO Treat all internal and external customers the way we would like to be treated. Employee Engagement Encourage and promote teamwork in all aspects of behaviour. Core Competencies Open to feedback and demonstrate an eagerness for personal development. Work Life Balance Monitor and demonstrate an impressive commitment to results. Diversity and Equality Uncompromising ethical and professional standards of behaviour. Work Experience

,QWHOOHFWXDO&DSLWDO Technological Capabilities %XVLQHVV$FWLYLWLHV 6XSSRUWLQJ$FWLYLWLHV Integrated Risk Management Strategic Planning and Budgeting Human Resources and Training Management and Control Systems Retail Banking Operations Information Systems and Database Corporate Banking Marketing Development Banking Administration and Engineering Corporate Finance Research and Development 0DQXIDFWXULQJ&DSLWDO Treasury and Investments IT System Development New Business Developments FCBU Legal Innovations and Value Additions Trade Services Recoveries Customer Touch Points Wealth Management Finance Card Centre Internal Audit E- Remittance System Audit 6RFLDO 5HODWLRQVKLS&DSLWDO Strategic Business Development Relationship with Stakeholders Awards and Recognitions Products and Services 5LVN0DQDJHPHQWDQG*RYHUQDQFH Customer Engagements CSR Projects 6WDNHKROGHU(QJDJHPHQW

1DWXUDO&DSLWDO 6WUDWHJLF0DQDJHPHQW$SSURDFK Biodiversity and Eco Projects )LQDQFLDO6WDELOLW\ Green Business Practices Renewable Energy Usage 7ULSOH%RWWRP/LQH$SSURDFK 7LVWSL7SHUL[7YVÄ[

52 SAMPATH BANK PLC Annual Report 2015 Outputs

)LQDQFLDO&DSLWDO Highlights for 2015 Strengthen Tier I and Tier II capital and maintain Debenture Issue of Rs 7 Bn Capital Adequacy Ratios (CAR), in order to deliver Core Capital Ratio – 7.90% (statutory requirement: 5%) sustainable growth and safeguard the business Total Capital Ratio – 12.26% (statutory requirement: 10%) through different points in the credit cycle Liquid Assets Ratio (Bank) 22.05%

+XPDQ&DSLWDO Highlights for 2015 Develop a dedicated and motivated workforce who Zero industrial disputes will become the driving force behind corporate 35.4 Training hours per team member per annum ambitions 232 team members considered under the Executive Talent Development Programme  ;LHTTLTILYZWYVTV[LKMVYPKLU[PÄLKWVZP[PVUZ

,QWHOOHFWXDO&DSLWDO Highlights for 2015 Product Stewardship and Customer Privacy Upgrading the Internet Payment Gateway

0DQXIDFWXULQJ&DSLWDO Highlights for 2015 Present a unique value proposition through brand- Introduction of the Sampath Bank American Express® Everyday ZWLJPÄJKPMMLYLU[PH[PVU Credit Card Introduction of the Online Loan Application tool Wider physical outreach and diverse distribution Expanding the e-commerce platform channels to bring the Bank closer to customer and 5 new branches opened bringing the total island-wide network of provide 24/7 access branches to 225

6RFLDO 5HODWLRQVKLS&DSLWDO Highlights for 2015 Manage the direct & indirect impact resulting from Financial inclusion through the Sampath Saviya, Entrepreneur business activities in a manner that would produce +L]LSVWTLU[7YVNYHTTLILULÄJPHYPLZ positive results for the community Over 2 million customer base 60 CSR Projects 24 Local and International Awards and Recognitions

1DWXUDO&DSLWDO Highlights for 2015 Become a truly “Green” bank Carbon Footprint Calculation (3,753 tCO2e - 2015, 2,753 tCO2e - 2014) Financing Non-Conventional Renewable Energy Projects (292% more projects than last year) Commissioning Solar Power Grids at Colombo Super branch

SAMPATH BANK PLC Annual Report 2015 53 *VYWVYH[L(JJV\U[HIPSP[`

Sustainability G4-42 Emerging Sustainability Philosophy Trends

In this day and age, banks are called upon to play a wider Sustainability has been and will always at the same time ensuring the health and role and the current trends be an integral part of Sampath Bank sustainability of our business. seem to demand that banks PLC’s status quo. We therefore strive to not only meet the needs of accomplish our corporate goals in sync We understand that achieving this begins their customers, but also work with national priorities, while promoting with intuitive decision-making and smart to empower more and more global best practices for managing the choices that address economic, social people to participate in the economic, environmental and social and environmental issues both at the country’s formal economic impacts of the business. At the same strategic level and in our day-to-day system. This means promoting time, we will remain true to our core work. To do this, we have begun to NYLH[LYÄUHUJPHSPUJS\ZPVUHUK banking values and adhere to the highest develop a range of multi-stakeholder ÄUHUJPHSLK\JH[PVUHTVUN[OL ethical standards, in order to manage our solutions that will help to reinforce the communities. triple-bottom-line. Bank’s triple bottom line position, today, tomorrow and in the years to come. Addressing broader Our aim is to differentiate ourselves as environmental concerns is an exceptional commercial bank, while yet another area that has of late, been assigned to the banking sector. Here, banks are expected to make a difference, by investing in commercially viable “Green” energy projects and promoting eco-friendly 6WUDWHJLF)RFXVRQ7ULSOH%RWWRP/LQH business practices among stakeholders.

Modern day banks are also

9,6,21 Work to create 9,6,21 Focus on providing expected to go beyond their a healthier planet by t P real solutions that enrich commercial operations and help e e supporting the environment n o the lives of our clients, p a society to address a variety of that supports us. In doing l l customers, employees, e so, we strive to challenge P suppliers, business partners important needs, particularly in the way people think about and communities connected the role of banks in building to our work times of crisis. a greener planet In order to survive and indeed progress in this environment, Profit today’s commercial banks would need to move beyond the traditional brick and mortar 9,6,21

54 SAMPATH BANK PLC Annual Report 2015 2XU6XVWDLQDELOLW\9LVLRQ0$SSURDFKWR6XVWDLQDELOLW\ Adopt globally accepted best practices for sustainability G4-02,42 management. Comply with international sustainability standards to ensure a Sustainability Trends transparent reporting framework.

Corporate 2SSRUWXQLWLHVDQG7KUHDWV Objectives Stakeholder Leverage on emerging Rights technologies to achieve Framework differentiation as a more customer- centric bank. 3600  7YVTV[LÄUHUJPHSPUJS\ZPVU[V[OL unbanked community. Approach to Strategic Encourage customers to subscribe 6XVWDLQDELOLW\ Planning Process to a new business paradigm that Sustainability addresses the consequences of Product Stewardship climate change. Increasing employee sustainability by managing the needs of the younger generation. Opportunities Risk and Threats Addressing Human Resources Management challenges resulting from an ageing workforce.

5LVN0DQDJHPHQW Establish strong fundamental governance framework. Adherence to all mandatory &RUSRUDWH2EMHFWLYHV  0TWYV]LJ\Z[VTLYWYVÄ[HIPSP[` regulations. Maintain higher credit growth while through customer retention. Encourage employee goal focusing more on retail products  (KVW[PUNJVZ[LMÄJPLU[Z[YH[LNPLZ congruence. such as housing, leasing and credit [VLUOHUJL[OLWYVÄ[HIPSP[`PU[OL Create a robust communicative cards. wake of falling NIM. culture. Increase funding through low cost Invest in employee learning and deposits by focusing more on 6WUDWHJLF3ODQQLQJ3URFHVV development. minor savings and senior citizens Integrating key economic, accounts. environmental and social concerns 6XVWDLQDELOLW\3URGXFW6WHZDUGVKLS Additional fee based income as a part of the day-to-day Continuous monitoring throughout generation to supplement the drop operations. the product life cycle to ensure in Net Interest Margin (NIM). Reduce procedural complexity, that they remain sustainable in Venture in to overseas markets. minimize organizational layers cognizance to changes in the Maintain a moderate growth in the and delegate more decision- operating environment. branch network while expanding making powers to regional/branch Uniform service standards across standalone ATMs to increase managers. HSSKLSP]LY`JOHUULSZYLÅLJ[PUN the Bank’s access points to Ongoing investments to improve WYVMLZZPVUHSLMÄJPLU[HUK customers. the core business model and personalized service at all levels. Focus on speedy alternative enhance the triple bottom line Sustaining customer trust and electronic delivery channels. performance of Sampath Bank, in satisfaction through innovation and the long term. best practices.

SAMPATH BANK PLC Annual Report 2015 55 *VYWVYH[L(JJV\U[HIPSP[` Sustainability Philosophy

Empower customer community [OYV\NOPTWYV]LKÄUHUJPHS CSR & G4-45,46,48 discipline. Maintaining a competitive edge by Sustainability Once the authorization of the CSR Committee has been ^LSSZ[Y\J[\YLKÄUHUJPHSZVS\[PVUZ Governance Ensure customer complaints obtained, all such sustainability information is then presented HYLHKKYLZZLKLMÄJPLU[S`HUK Recording, evaluating effectively. and reporting of key to the governance body of the  9LKLÄUPUNPUK\Z[Y`ILUJOTHYRZ sustainability indicators IHURMVYÄUHSHWWYV]HS through best in-class banking and material aspects The governance body then technology. comes under the purview carries out a comprehensive Leading by example in promoting of the CSR Committee, review of all sustainability eco-friendly business practices. headed by the DGM- aspects to verify the accuracy Marketing & Business of each of the economic, social 6WDNHKROGHU5LJKWV)UDPHZRUN Development. and environmental topics that Re-align strategic goals to are to be disclosed in the move away from a traditional annual report. philanthropic focus, towards a more strategic approach that creates competitive advantages for all our stakeholders. Wealth creation for all stakeholders vis-a-vis forward looking corporate strategies, while assessing the relative market risk. Ensure the value creation for ¸7LVWSL7SHUL[HUK7YVÄ[¹[OYV\NO a sustainable banking platform.

6XVWDLQDELOLW\7UHQGV Greater emphasis on consumer engagement Growing demand for multi-channel banking Popularity of social media Equal opportunities in the work place Best business practices for Human Rights Use of non-conventional renewable energy (NCRE) as a solution to the global energy crisis Eco-friendly business practices and green ethics

56 SAMPATH BANK PLC Annual Report 2015 promotes healthy and enlightened Stakeholder dialogue between the Bank and all those connected to the business. This helps us to better manage their expectations and work out the social, economic, Management environmental, legal and regulatory factors that are likely to have either a direct or indirect impact on the way in The simple act of getting to know our results and manage our reputational which we operate. stakeholders is vital for us in order to risk. We subscribe to an integrated achieve the desired triple bottom line stakeholder management model that

6WDNHKROGHU0DQDJHPHQW0RGHO G4-37 ,GHQWLðFDWLRQRI,VVXH

No Material Aspect Yes

Categorisation of Issues

:[HRLOVSKLY0KLU[PÄJH[PVU0TWHJ[(ZZLZZTLU[

Suppliers Customers Employees Regulators Community Environment Shareholders & Service Providers

Evaluation & Getting Feedback from Stakeholders

Stakeholder Engagement

Setting Goals and Objectives Evaluating Alternatives

Implementation and Monitoring

Review

Stakeholder Engagement

Materiality Testing

No Acceptable Yes

Reporting and Record Keeping

SAMPATH BANK PLC Annual Report 2015 57 *VYWVYH[L(JJV\U[HIPSP[` Stakeholder Management

G4-24,25

improve the alignment between the Bank and all key stakeholders. This integrated 6WDNHKROGHU(QJDJHPHQW our strategy execution process. By approach has become a key differentiator As the mainstay of our stakeholder developing and maintaining meaningful that has helped us stay ahead and secure management model, stakeholder relationships through ongoing stakeholder HKLÄUP[LJVTWL[P[P]LHK]HU[HNL engagement is a critical aspect of engagement, we are able to continuously

Employees Regular engagement with our employees helps us to generate better value for our team and create a dedicated team to deliver superior customer service, so that they may in turn become the core drivers of corporate goals. More on page 146 (Refer to “Caring for Our People ”)

Customers The feedbacks we receive from individual customers enable us to develop new products that are tailored to help answer individuals’ needs at every stage of their lives. It has also helped us understand how we can become a more proactive bank, capable of offering dynamic solutions to meet the expectations of today’s customers. Meanwhile, by engaging with our corporate clients we have been able to provide customized, strategic and forward-looking business solutions. More on page 161 (Refer to “Supporting Our Clients”)

Shareholders Communications with our shareholders are highly transparent and seek to address key concerns that they may have. This is in addition to the disclosure framework that provides details regarding our economic performance and strategy. More on page 174 (Refer to “Informing Our Investors”)

Suppliers and Service Providers Ongoing dialogue with our Suppliers and Service Providers, seek to align them with our business ethics and value system. This will allow us to grow together by embracing best business practices and internationally accepted governance standards. More on page 175 (Refer to “Collaborating with our Partners”)

Communities Engagement with communities, help us to understand how our business impacts their lives. We are then able to take appropriate action to minimize the negative impacts. Regular engagement also sheds light on how we can step in to empower communities and improve their social-economic standards in the long term. More on page 178 (Refer to “Strengthening Our Communities”)

58 SAMPATH BANK PLC Annual Report 2015 different views and perspectives of our Materiality stakeholders and evaluate how these issues may impact our business. We are then able to map out the best strategies Assessment to actively address evolving economic, social and environmental issues and deliver on the promises made to each of our stakeholders.

G4-18,48 issues as and when they emerge. It is a formal analysis that helps to identify, The materiality assessment forms a prioritize and review material economic, key part of stakeholder management social and environmental topics that mechanism. For this purpose we use a impact Sampath Bank PLC. It is how comprehensive Materiality Matrix to track we gain a better understanding of the stakeholder concerns and identify new

,GHQWLI\ Prioritize 5HYLHZ

6WDNHKROGHUV 0DWHULDO,VVXHV 3URJUHVV Customers Importance to Stakeholder Strategic goal alignment Employees Awareness of the issues Reporting parameters Suppliers and Service Evidence and impact of the Providers issue Shareholders Industry and peer response Regulators Relevance to Sampath Bank Community Potential short and long term impacts Over 25 stakeholders were Ethical considerations interviewed in 2015 Regulatory commitments Reputational risk Aspects Economic Environmental Social

SAMPATH BANK PLC Annual Report 2015 59 *VYWVYH[L(JJV\U[HIPSP[` Materiality Assessment

G4-19,20,21

678 18 22 34 1 2 3 4 11 12 36 37 17 19 20 21 24 25 H 93314 26 27 28 29 30 35 39 42 45 46

15 16 23 43 44

M 10 13 32 38 40

31 41 H High L 5 M Medium

Material Level within the Organization L Low

L M H

Material Level out side the Organization

Material Level within the Material Level out side No Aspect Boundary Organization the Organization (FRQRPLF 1 Economic Performance Sampath Bank High High 2 Market Presence Sampath Bank High High 3 Indirect Economic Impacts Sampath Bank / High High Community 4 Procurement Practices Supplier High High (QYLURQPHQWDO 5 Materials Sampath Bank Low Low 6 Energy Sampath Bank High Low 7 Water Sampath Bank High Low 8 Biodiversity Sampath Bank High Low 9 Emissions Sampath Bank High Low 10 ,MÅ\LU[HUK>HZ[L Community Medium Low 11 Products and Services Sampath Bank High High 12 Compliance - Environmental Sampath Bank High High 13 Transport Community Medium Low 14 Overall Sampath Bank High Low 15 Supplier Environment Assessment Suppliers Medium Medium 16 Environment Grievance Mechanisms Sampath Bank Medium Medium

60 SAMPATH BANK PLC Annual Report 2015 Material Level within the Material Level out side No Aspect Boundary Organization the Organization 6RFLDO/DERXU3UDFWLFHVDQG'HFHQW:RUN 17 Employment Sampath Bank High High 18 Labour/ Management Relations Employee High Medium 19 Occupational Health and Safety Employee High High 20 Training and Education Employee High High 21 Diversity and Equal Opportunity Sampath Bank High High 22 Equal Remuneration for Women & Men Sampath Bank High Medium 23 Supplier Assessment for Labour Practices Supplier Medium Medium 24 Labour Practice Grievance Mechanisms Employee High High +XPDQ5LJKWV 25 Investment - Human Rights Sampath Bank High High 26 Non Discrimination Sampath Bank High High 27 Freedom of Association & Collective Bargaining Employee High High 28 Child Labour Sampath Bank High High 29 Forced or Compulsory Labour Sampath Bank High High 30 Security Practices - Human Rights Sampath Bank High High 31 Indigenous Rights Sampath Bank Low Medium 32 Assessment - Human Rights Sampath Bank Medium Medium 33 Supplier Human Rights Assessment Sampath Bank High Low 34 Human Rights Grievance Mechanisms Sampath Bank High Medium 6RFLHW\ 35 Local Communities Community High High 36 Anti-Corruption Sampath Bank High Medium 37 Public Policy Sampath Bank High Medium 38 Anti-Competitive Behaviour Sampath Bank Medium Medium 39 Compliance - Society Sampath Bank High High 40 Supplier Assessment for Impact on Society Supplier Medium Medium 41 Grievance Mechanism for impact on Society Sampath Bank Low High 3URGXFW5HVSRQVLELOLW\ 42 Customer Health and Safety Customer High High 43 Product and Service Labelling Sampath Bank Medium High 44 Marketing Communications Sampath Bank Medium High 45 Customer Privacy Sampath Bank High High 46 Compliance - Product Responsibility Sampath Bank High High

G4-23

To expand our sustainability parameters, we carried out an internal stakeholder and materiality assessment in 2015. Notably, this exercise has led to a slight change in our materiality levels for the reporting period

SAMPATH BANK PLC Annual Report 2015 61 Customer relevant, ground-breaking ÄUHUJPHSWYVK\J[Z HUKZLY]PJLZ Operational Reviews

.*-6»Z=PL^Z )\ZPULZZ9L]PL^Z  7LYZVUHSHUK)YHUJO)HURPUN  *OHUULS4HUHNLTLU[  *VYWVYH[L)HURPUN  +L]LSVWTLU[)HURPUN  .SVIHS)\ZPULZZ  ;YLHZ\Y`  6WLYH[PVUHS:\WWVY[  :\IZPKPHYPLZ )YHUJO5L[^VYR 5VZ[YV(JJV\U[Z *VYYLZWVUKLU[)HURZHUK,_JOHUNL*VTWHUPLZ 0U]LZ[VY0UMVYTH[PVU

62 SAMPATH BANK PLC Annual Report 2015 6WLYH[PVUHS9L]PL^Z

GROUP CHIEF FINANCIAL OFFICER’S VIEWS An exciting year of success

In yet another landmark achievement, the Bank’s total 4 What do you see as the key asset base surpassed Rs 500 Bn mark during the year. MHJ[VYZ[OH[PUÅ\LUJLK[OLOLHS[OVM Interestingly, compared to the other large banks in Sri Sri Lanka’s economy in 2015? Lanka, Sampath Bank appears to have reached this milestone in a much shorter time frame. A Having laid the foundation for progressive economic growth, I believe Sri Lanka is on track to achieve most of the macro economic targets for 2015, despite the political and economic uncertainties, that accompanied the two major elections held within the space of eight months. The political transition is now over and post-election business sentiments in the country appear to support the continuation of market friendly economic policies. The new government has put forward their 1st budget, which contains many proposals for far reaching changes, including those on tax reforms.

The GDP growth registered in 2015 is estimated to be around 5.3%. Encouragingly, the tourism sector continues to show signs of consistent growth, despite the many economic ups and downs during the year. The services sector too showed signs of recovery since August 2015, registering a strong WVZP[P]LJVU[YPI\[PVUPU[OLÄUHSML^ months of the year.

Ranjith Samaranayake .YV\W*OPLM-PUHUJPHS6MÄJLY

SAMPATH BANK PLC Annual Report 2015 63 6WLYH[PVUHS9L]PL^Z

.YV\W*OPLM-PUHUJPHS6MÄJLY»Z=PL^Z

With the marginal widening of the trade KLÄJP[HUKJHWP[HSV\[ÅV^Z[OLY\WLL too came under some pressure, which The performance of Sri Lanka’s external prompted the CBSL to step in and allow Inflation sector was disappointing with both NYLH[LYÅL_PIPSP[`PU[OLKL[LYTPUH[PVUVM the imports and exports recording the exchange rate with effect from early % negative growths in 2015. However, the September 2015. Consequently, the escalation of consumer demand led to rupee depreciated by 9.9% against the 12 a considerable spike in non-oil imports, US Dollar, and settled at Rs 144.20 by

10 9.2 mainly due to a dramatic increase in 31st December 2015. vehicle imports. This was a direct result 8 of the duty concessions allowed for 4 What were the key market 6 the import of smaller capacity vehicles drivers that steered the course of together with the relatively low interest the banking industry in 2015? 4 4.7 rates on vehicle leases. Overall imports 2.1 2 2.8 declined marginally due to a sharp drop in A It is no secret that since 2014, commodity prices, led by oil. Meanwhile, the banking industry has been facing 0 the export sector continued to struggle an excess liquidity situation caused by

2012 2013 2014 2015 for the second consecutive year. This was weak credit demand. However, from mainly due to the ongoing decline in oil about February 2015, we saw this trend reversing, as private sector credit demand ZOV^LKZPNUZVMHKLÄUP[LWPJR\WOH]PUN From about February GDP Growth ÄUHSS`KLJPKLK[VTHRL\ZLVM[OLSV^ Average Weighted Prime Lending Rates % 2015, private sector (AWPLR). While this signalled an end to

8 the credit slump of the past two years, credit demand 7.4 7.2 I believe it was also the turning point showed signs of for the entire banking industry, which 6 HKLÄUP[LWPJR\W 6.3 5.3 registered a robust 15.4%, credit growth PU[OLÄYZ[UPULTVU[OZVM[OL`LHY;OPZPZ OH]PUNÄUHSS`KLJPKLK 4 in sharp contrast to the lacklustre growth to make use of of 5.0% recorded for the corresponding the low Average 2 period in previous year.

Weighted Prime 0

Lending Rates 2012 2013 2014 2015 AWPLR

(AWPLR). %

prices, which restricted the purchasing 16 power of middle-eastern countries, 14.4 14 Meanwhile, the tax concessions and resulting a lesser demand for Ceylon Tea. 12 wage increases offered under each The global demand for natural rubber 10 successive election manifestos, helped too began to slip from about mid-April, 9.9 8 boost the average disposable income parallel to the drop in the price of synthetic 6.3 7.5 leading to a notable uptick in consumer rubber in the world market. Stymied by 6 demand for the year. Nevertheless, the weak demand for Tea and Rubber, Sri 4 PUÅH[PVUYLTHPULK^LSSHUJOVYLKMVY Lanka’s exports fell by 4.4% compared 2 to the previous year. Despite showing the most part and is estimated to 0 stay in the region of 2.8% as at 31st robust growth in the past, earnings from December 2015. migrant worker remittances also grew only 2012 2013 2014 2015 marginally throughout the year.

64 SAMPATH BANK PLC Annual Report 2015 4 How do you compare the growth registered by Sampath Bank PLC against that of the 6\YKLWVZP[ industry? And what are the key WVY[MVSPV performance highlights?

Z\YWHZZLK A Not only have we achieved our growth expectations but also clearly PUK\Z[Y`Z[H[PZ[PJZ exceeded them and in doing so, to register a strong outperformed many industry benchmarks as well.

CA Sri Lanka Annual Report Awards 2015 NYV^[OVM   Our deposit portfolio surpassed industry PU statistics, to register a strong growth of 4 Given these conditions, 19.7% in 2015. This was even better what were the key performance than the 13.1% growth achieved in the PUKPJH[VYZ[OH[YLÅLJ[[OLWYVNYLZZ Meanwhile, total deposits of the banking previous year. CASA, which accounted of the banking industry in 2015? industry grew by 9.4% by the end of for 47.3% of the total deposit base as the third quarter. Current and Savings at 31st December 2015, also improved A The banking industry as a whole has Accounts (CASA) as a percentage of slightly during the year. Our total deposit experienced a good year, cataloguing total deposits also marginally improved base surpassed Rs 400 Bn mark this year stable growth in all key performance [V K\YPUN[OLÄYZ[UPULTVU[OZVM MVY[OLÄYZ[[PTL indicators (KPIs), as at 30th September 2015. 2015.

Industry credit growth stood at 15.4%, Industry CASA Liabilities which is an improvement compared to the 5.0% growth recoded for the % Rs Bn corresponding period in 2014. Almost 500 all loan products contributed to the 50

above achievement except for pawning. 5.3 40.3 400 Interestingly the industry-wide 40 4.9 33.9 39.3 non-performing loan ratio also improved 35.2 300 7.8 30 from 4.2% in 2014 to 3.2% by end of 32.7

200 406.3 75.4 8.4 2015. 20 340.0 55.8

100 300.5 48.2 As banks continued to utilize their excess 10 243.3 liquidity to feed the demand for credit, 0 the liquidity ratio of the banking industry 0

decreased from 39.5% as at end of 2014 2012 2013 2014 2015 2012 2013 2014 2015 to 33.8% by end of 2015. Due to Other Customers Other Financial Liabilities Non Financial Liabilities

Despite the continuous pressure on the In yet another landmark achievement, the Net Interest Margin (NIM) caused by the Bank’s total asset base surpassed the consistently low AWPLR, industry-wide Rs 500 Bn mark during the year. WYVÄ[HIPSP[`L_WLYPLUJLKHZ[LHK`NYV^[O Interestingly, compared to the other Statistics released up to 30th September large banks in Sri Lanka, Sampath Bank 2015 indicate a 26.9% growth, compared appears to have reached this milestone in to the corresponding period for 2014. a much shorter time frame, signalling our This was due mainly to an expansion in commitment to be the “Growing Force in credit volumes during this period. Sri Lanka’s Financial Services Industry”.

SAMPATH BANK PLC Annual Report 2015 65 6WLYH[PVUHS9L]PL^Z

.YV\W*OPLM-PUHUJPHS6MÄJLY»Z=PL^Z

Since the reduction in gold prices that affected the pawning product in April 2013, we have continued to reduce our exposure to pawning, as part of Total Advances vs the ongoing risk management strategy Pawning Advances to achieve a healthier asset-mix. The Rs Bn % exposure on pawning as at 31st

(SSSVHUWYVK\J[Z 400 30 December 2015 therefore stood at 3.5% of the loan book, down from 7.9% as at WLYMVYTLK^LSS 350 25.4 25 31st December 2014. 300 384.6 19.7 YLJVYKPUNOLHS[O` 20 250

310.5 Ever since the pawning crisis hit in 2013, NYV^[OJVTWHYLK 200 15 we have been facing high impairment 271.1 150 provisions as well. However, since then, 216.6 10 [V[OLWYL]PV\Z 7.9 100 by strictly rationalizing our asset-mix and 3.5 5 reducing the exposure to pawning, we `LHY 50 have been able to bring down impairment 0 0 provisions and our total impairment

2012 2013 2014 2015 charge dropped from Rs 1,401.4 Mn Gross Advances - Other Customers in 2014 to Rs 943.6 Mn in 2015, an Exposure - Pawning impressive YoY decline of 32.7%.

Assets The fact that we were able to achieve Shifting away from the over-reliance on this overall credit growth without the high-yielding pawning product in Rs Bn compromising on the credit quality is favour of other lower-yielding offerings, indeed a commendable achievement. meant we had to content with a loss in 600 Our NPL ratio registered a decrease NIMs generated through fund-based 500 from 1.93% as at 31st December 2014 operations. Being the main source of

9.2 to 1.64% as at 31st December 2015. income for the Bank, NII account for a 400 9.6 However, our current NPL ratio is believed ZPNUPÄJHU[WVY[PVUVM[OL)HUR»ZVWLYH[PUN 300 8.5 to be the lowest among industry peers. income (68.8% in 2015 compared to 377.4 138.8 9.1 73.5% in 2014). 91.9

200 302.4 120.4 260.0 112.4

100 209.0

0 NPL NII & NIM 2012 2013 2014 2015 Loans & Receivables Other Financial Assets Rs Bn % Non Financial Assets % 20 5 3.0 4.39 2.68 4.05 4 2.5 15 3.95 Coming back to our performance for the 2.07 3.64 year, we made use of the strong appetite 2.0 1.93 3 for credit to grow our loan book. All loan 10 products (except for pawning) performed 1.5 1.64 2 17.4 well, recording healthy growth compared 1.0 5 15.7 1 to the previous year. This meant we were 15.3 11.6 able to achieve a sizable 24.0% growth 0.5 0 0 in our lending portfolio as opposed to 0.0

15.4% industry-wide growth as at 30th 2012 2013 2014 2015 September 2015. 2012 2013 2014 2015 Net Interest Income (NII) Net Interest Margin (NIM)

66 SAMPATH BANK PLC Annual Report 2015 To compensate for the loss in fund-based ;OL)HURYLJVYKLKHWYL[H_WYVÄ[VM income, we focused on strengthening Rs 9.1 Bn for the year 2015, compared to Operating Expenses and commission and fee based income by Growth in Operating Expenses Rs 6.7 Bn recorded in 2014, a YoY leveraging on non-fund based income Rs Mn % NYV^[OVM ;OLWYL[H_WYVÄ[ sources such as credit and debit card growth rate outperformed the post-tax 14,000 14.8 15.0 16 operations, trade related services and WYVÄ[NYV^[OYH[LTHPUS`ILJH\ZL[OL[H_ 14 other banking services. These efforts 12,000 13.7 ÄN\YLMVYPUJS\KLK9Z4U^VY[O 12 paid off and Sampath Bank was able 10,000 of reversals on account of over provisions to record one of the highest volume 10.3 10 made in the previous years. As such, 8,000

increases for commission and fee-based 13,339 8 7VZ[[H_WYVÄ[ZMVY[OL`LHYYVZLI`VUS` 6,000 income, among industry peers, as at 30th 11,729 6 24.8% from Rs 4.9 Bn in 2014 to Rs 6.1

September 2015. 4,000 10,634 Bn in 2015. 9,248 4

2,000 2

0 0 Net Fee and Profit before Tax and Commission Income 2012 2013 2014 2015 Profit after Tax Operating Expenses Rs Bn Rs Mn Growth in Operating Expenses 10 6,000 5,287 9

5,000 Nevertheless, purely from a cost 8 9.1 perspective, I think our cost to income 7 4,000 7.4 4,187 ratio of 52.7% as at 31st December 6 6.7 5 6.1 3,000 2,543 2015, is still somewhat high compared 5.2

4 4.9 to some of our peer banks. Although in 4.5 2,000 3 2,149 2015 we did manage to bring down the 3.4 2 ratio to above status from 54.8% in 2014, 1,000 1 we are of the view that this ratio can be 0 0 improved further by generating more 2012 2013 2014 2015

2012 2013 2014 2015 income using the existing cost base. Profit before Tax However, I admit, we do have some way Profit after Tax to go before cost optimization can have a Meanwhile, other operating income also UV[HISLPTWHJ[VUWYVÄ[HIPSP[` Shareholders’ funds increased by increased by 175.0% over and above Rs 4,213 Mn from Rs 30,912 Mn as at 31st Rs 1,069.5 Mn recorded in the previous December 2014 to Rs 35,125 Mn as at year, partly due to the higher exchange Cost to Income Ratio 31st December 2015. This was a 13.6% gains during the year. This was to some growth. Stated Capital increased from extent supported by the exchange % Rs 4,470 Mn as at 31st December 2014 revaluation gains, arising from currency 60 to Rs 5,381 Mn due to the capitalisation depreciation that took place since of scrip dividend in April 2015. The net September 2015. 50 54.8 negative impact on other comprehensive 52.7 51.7 40 51.2 income on the shareholders’ funds Operating expenses, which stood at amounted to Rs 308 Mn. Losses on re- Rs 11.7 Bn in 2014, increased to 30 TLHZ\YPUN[OLH]HPSHISLMVYZHSLÄUHUJPHS 9Z)UPUYLÅLJ[PUNHU 20 assets reduced the available for sale increase of 13.7%. This variance was reserve by Rs 391.7 Mn from mainly due to the salary increments 10 Rs 1,267.4 Mn in 2014 to Rs 875.7 Mn in granted to staff members, increase in 0 2015. However the net actuarial gains on credit/debit card acquisition charges KLÄULKILULÄ[WSHUZHTV\U[PUN[V and increase in business promotional 2012 2013 2014 2015 Rs 83.5 Mn had a positive impact on expenses. On a positive note, the 13.7% YL[HPULKWYVÄ[ increase in operating expenses has stayed well below the 18.2% growth in operating income achieved for 2015.

SAMPATH BANK PLC Annual Report 2015 67 6WLYH[PVUHS9L]PL^Z

.YV\W*OPLM-PUHUJPHS6MÄJLY»Z=PL^Z

ROE and ROA

Due mainly to the rapid credit growth, we OH]LYLJVTTLUKLKHÄUHSKP]PKLUKVM %% managed to reduce our liquidity ratio to Rs 13.00 per share, which will be paid 25 1.88 2.0 a more acceptable level during the year. 46.2% in cash and 53.8% in the form of 1.8 Nonetheless we remained comfortably scrip dividends. 20 1.28 1.6 above the minimum statutory requirement 1.23 1.4 22.26 of 20% and our liquidity ratio stood at 4 In conclusion, do you feel there 15 0.98 1.2 1.0

22.05% at the end of 2015, compared to are any challenges for the future 18.42 10 0.8 24.54% as at end 2014. progress of the Bank? 16.35

12.88 0.6 5 0.4 The Core Capital (Tier I) and Total Capital A 4`JVUJLYUZHYLUV[ZWLJPÄJ[V 0.2 (Tier I+ Tier II) adequacy ratios as at 31st Sampath Bank, but refer to the overall 0 0.0 December 2015 declined by 0.93% and tax framework applicable to Sri Lanka’s 1.36% respectively compared to 31st banking industry in general. Although we 2012 2013 2014 2015 Return on Equity (ROE) December 2014. This is mainly due to the are proud of being among the highest Return on Assets (ROA) presence of more risk-weighted assets in taxpayers in the country, thereby making the lending-mix, being the direct result of a substantial contribution towards the cutback in the pawning portfolio. As national economic development, I believe environment, I believe that Banks should at 31st December 2015, the Core Capital that taxes should not be excessive. At be allowed to plough back a bulk of and Total Capital Adequacy ratios stood WYLZLU[ULHYS` VMIHURWYVÄ[ZHYL [OLPYWYVÄ[ZMVYI\ZPULZZNYV^[O:\JO at 7.90% and 12.26% respectively, well taxed and I believe that this originates measures would not only, enhance above the required levels of 5% and 10% from the perception that banks are cash [OLJYLKPIPSP[`VM[OLJV\U[Y`»ZÄUHUJPHS system but also lead to greater economic respectively. YPJOHUKOPNOS`WYVÄ[HISLPUZ[P[\[PVUZ Although banks carry large Balance maturity, while at the same time create a The Bank also issued Debentures Sheets, these are mainly from deposits scalable platform for growth for nation- amounting to Rs 7.0 Bn during the last that have been mobilized from the wide development in the coming years. quarter to strengthen the Tier II and general public for lending purposes. the total capital. Our goal is to optimize Banks cannot claim ownership to all capital utilization, while maintaining an these cash resources and merely act Shareholders’ Fund adequate capital buffer to support future as custodians, involved in the business Rs Mn business expansion and safeguard an of managing other peoples’ funds. The HJJLW[HISLYPZRWYVÄSL Return on Assets (ROA) or in other 35,000 words, the overall return generated by 30,000

Can you comment on the managing these funds is very moderate 35,125 4 25,000 performance of the Sampath share and the industry average in our country 30,912 in 2015? is just above 1.3%. At the same time, 20,000 28,418 25,644 IHURZULLK[VNLULYH[LZ\MÄJPLU[JHWP[HS 15,000

A Sampath share’s market price as at M\UKZ[OYV\NO[OLPYHM[LY[H_WYVÄ[Z[V 10,000 31st December 2015 was at Rs 248.00. M\SÄSS[OLTHUKH[VY`JHWP[HSHKLX\HJ` Compared to the last traded price of requirements, which is an essential factor 5,000 the previous year, Rs 236.30, this was a for the growth of the banking industry. 0 5% growth. Net assets per share as at 2012 2013 2014 2015 31st December 2015 recorded a growth As an engine of growth for the economy, of 13.6% from Rs 179.39 per share in I believe, it is important to create a 2014 to Rs 203.85 per share as at end suitable environment where banks can of 2015. Earnings per share for 2015, act as agents of change and engage in which stood at Rs 35.60 too was a a supporting role to facilitate economic growth of 24.8%, compared to Rs 28.52, development of the nation. As a major for the corresponding year. Directors step towards establishing such an

68 SAMPATH BANK PLC Annual Report 2015 Business Reviews

Business Categories Primary Objective Pages

3HUVRQDODQG%UDQFK%DQNLQJ To respond to each and every customer with timely and 70-75 relevant banking solutions that cater to the young and old, today, tomorrow and in the future

&KDQQHO0DQDJHPHQW To facilitate a robust, multi-channel delivery model that is 76-83 capable of bringing the Bank closer to the customer

&RUSRUDWH%DQNLQJ To act as animators of nation-wide economic progress by 84-89 WYV]PKPUNHNPSLM\[\YLMYPLUKS`ÄUHUJPHSZVS\[PVUZMVY[OL corporates

'HYHORSPHQW%DQNLQJ To champion a new business culture and create a scalable 90-95 platform to grow the Micro, Small and Medium-scale Enterprise (MSME) sector

*OREDO%XVLQHVV To provide innovative solutions that help individuals and 96-101 businesses to transact globally

7UHDVXU\ To offer bespoke fund management solutions to clients and 102-105 strengthen the Bank’s core liquidity position

2SHUDWLRQDO6XSSRUW 106-111

Network Services Centre and To ensure seamless integration between back-end and front- Central Cash Department LUKVWLYH[PVUZVM[OL)HURPUVYKLY[VM\SÄSS[OLL_WLJ[LK service quality

Recoveries To improve the quality of the advances portfolio by maintaining a consistently low non performing loan (NPL) ratio

Information Technology To adopt the latest developments in information technology MVY[OLILULÄ[VMHSSZ[HRLOVSKLYZPUJS\KPUNJ\Z[VTLYZ shareholders, employees etc.

6XEVLGLDULHV A review of subsidiary company performances 112-116

SAMPATH BANK PLC Annual Report 2015 69 70 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Personal and Rs 409 Bn Deposit Base Surpassed Rs 400 Bn Branch Banking Milestone

20% Deposit Growth Rs 67 Bn Growth over Last Year

47% CASA One of the Highest in the Industry

Rs 386Bn Advance Portfolio Only 3.5% Exposure on Pawning

24% Advance Growth Rs 75 Bn Growth over Last Year

30% Advance Growth Efforts to tap into key under- Excluding served and emerging market CASA Base Pawning segments also saw the revamp Rs Bn

of existing products to capture 200 the changing market dynamics 17% Card Base Growth and also to bridge the gap. This 150 193.5 Only Bank to Offer Visa,

meant studying peer tactics and 157.0 Master & Amex Cards mapping market trends in a bid 100 to properly realign the CASA mix 100.3 HUKZLJ\YLHKLÄUP[LJVTWL[P[P]L 50 82.3 % 29 advantage. Card Acquiring Business Growth 0 Rs 12 Bn Growth over 2012 2013 2014 2015 Last Year

SAMPATH BANK PLC Annual Report 2015 71 6WLYH[PVUHS9L]PL^Z Personal and Branch Banking

In order to better cater to the children’s savings market, a series of value additions were brought in to the two Forming part of the North-East reconciliation initiatives, was ÅHNZOPWWYVK\J[Z7\I\K\HUK:HWPYP yet another branch-driven exercise, which saw additional which allowed us to create different resources being commissioned in a bid to support the propositions in the market. The Bank precise requirements of customers in these areas. also took initiatives to create new value additions to the senior citizens’ saving product. These two value creations 'HSRVLWV This was largely due to a two pronged allowed the Bank to differentiate its The deposit unit registered a strong NYV^[OJVYLZ[YH[LN`ÄYZ[S`[VWYVK\JL product offerings to these two market performance for the year, with year-end organic growth by mobilizing CASA segments compared to the competitors. results indicating a 19.7% growth in the in existing markets and secondly Further, it was felt that addressing the overall deposit portfolio compared to the penetrating new markets to secure requirements of a broader spectrum of previous year. inorganic growth of the portfolio. the customer market would be crucial in Accordingly, all promotional activities for retaining overall market leadership in the While the steady increase in the L_PZ[PUN*(:(VMMLYPUNZ^LYLPU[LUZPÄLK future. Average Weighted Deposit Rate (AWDR) together with a range of value additions throughout 2015 helped mobilize term and service enhancements. Meanwhile, /RDQVDQG$GYDQFHV deposits, a conscious decision was made efforts to tap into key under-served and As the initial post-election uncertainty to shed these high-cost term deposits. emerging market segments also saw the ^VYLVMMPU[OLÄYZ[X\HY[LYVM[OL`LHY Instead, efforts to expand the Current revamp of existing products to capture the Bank leveraged on the low Average and Savings Accounts (CASA) base were the changing market dynamics and also Weighted Prime Lending Rate (AWPLR) stepped up with the branches being to bridge the gap. This meant studying to record a steady growth in the loan assigned as key drivers of this goal. peer tactics and mapping market trends book from April 2015, ending the year The move proved to be a phenomenal in a bid to properly realign the CASA with a 24.0% growth compared to the success with the 23.3% YoY growth in TP_HUKZLJ\YLHKLÄUP[LJVTWL[P[P]L previous year. This was the outcome of the CASA portfolio as at 31st December advantage. a systematic growth strategy aimed at 2015. producing consistent results for the year ended 31st December 2015.

The year began with efforts to rationalize the overall advances portfolio, presently comprising of SME, Retail & Commercial Lending, Leasing & Hire Purchase, Housing & Personal Loans and Pawning. The main aim of this exercise was to generate a healthy product mix capable of making a strong positive contribution to the business in the long term, while maintaining the overall credit quality of the portfolio. Among the key steps taken in this regard, was the decision to drastically cut back on the exposure to pawning, particularly as no visible improvement was seen in the global gold markets even as the year progressed.

Sampath Ithurum Siththam-World Children’s Day celebrations by Sampath Bank

72 SAMPATH BANK PLC Annual Report 2015 Expanding the housing loans portfolio was yet another key priority, in the face of the rapid proliferation of the housing market. Efforts in this regard were led by highly focused, thematic campaigns to tap into the thriving porperty development and condominium segments in the housing market. To make inroads into these source markets, a number of tie ups were negotiated with leading developers to promote the housing loan option to potential buyers.

As these measures began to deliver results, a notable shift in the lending mix was observed, with retail lending accounting for 61.5% and corporate Central Credit Processing Unit at Gangodawila lending standing at 38.5% of the total advances portfolio as at 31st December Meanwhile, special emphasis was 4VYLV]LYKLZWP[LP[ZSV^YPZRWYVÄSL 2015. the 6 – 12 month tenure applicable on placed on promoting all retail advance pawning makes it a short term customer products in the North and East regions A number of operational changes were commitment relative to other advances of the country. Forming part of the also implemented to offer greater support products which carry a commitment of North-East reconciliation initiatives, this to the retail lending arm, key among them 4 -5 years. Therefore, it was felt that, was yet another branch-driven exercise, was the setting up of the Central Credit from a business perspective, promoting which saw additional resources being Processing Unit (CCPU) and the “online products with an extended commercial commissioned in a bid to support the loan application” tool, both of which are value is the only sure way to secure a precise requirements of customers in aimed at expediting the loan approval steady contribution to the Bank’s bottom these areas. line in the medium term. This prompted process. a shift in focus towards developing the SME, Retail & Commercial Lending and Total Deposits and CASA &DUGV Leasing portfolios which carry a longer It was another successful year for commercial tenure. Furthermore, it was Rs Bn % SampathCards, with all formats felt that these products would also be demonstrating strong growth for the 500 45.9 47.3 50 the ideal platform from which to promote 45 year ended 31st December 2015, NYLH[LYÄUHUJPHSPUJS\ZPVUPU:YP3HURH 400 40 notwithstanding the severe market Aggressive efforts were then deployed 33.8 33.2 35 competition from both local and foreign to widen the island-wide customer 300 409.4 30 banks. In comparison to the industry base under each of these advanced 341.9 25 growth rate of 2.9%, the SampathCards 302.4 categories, with special emphasis being 200 20 portfolio grew by nearly 17.6%, largely 243.6 15 placed on facilitating the needs of SMEs as a result of higher volumes generated 100 10 vis-à-vis retail lending, and leasing by the existing customer base. Not only facilities. 5 0 0 does this indicate the superiority of the SampathCard offering, but also highlights

The branches were commissioned to 2012 2013 2014 2015 the relevance and timeliness of the [HWPU[VPKLU[PÄLKTHYRL[Z]PHZ[Y\J[\YLK Total Deposits CASA promotional campaigns initiated during the localised promotional campaigns to year. Meanwhile, growth in the Card base stimulate the demand for these offerings. also showed a YoY increase of 20.6% Among other things, branches also took The above measures produced as at 31st December 2015, a testament the initiative to tie up with local vehicle exceptional results, with the lending to the success of the card issuance dealers in their area to strengthen the portfolio attributed to branches, growing strategies deployed during the year. vehicle lease offering. ZPNUPÄJHU[S`JVTWHYLK[V[OLWYL]PV\Z year.

SAMPATH BANK PLC Annual Report 2015 73 6WLYH[PVUHS9L]PL^Z Personal and Branch Banking

In the months following the launch of the Ultra Rewards Programme in May 2015, a steady growth in usage volumes was observed, indicative of its potential to generate sustainable returns in the coming years. This ILULÄ[^HZZ\IZLX\LU[S`L_[LUKLK[V all Visa, MasterCard Gold and Classic Cardholders as well.

Key activities conducted under the ongoing promotional agenda also helped boost both usage volumes as well as grow card issuance numbers. Among the key activities for the year, was the strengthening of ties between the Cargills FoodCity supermarket chain to enhance the current proposition. The “SampathCards Town On Sale” Visa India & South Asia Client Forum 2015 promotion, which was held in Jaffna town As has been the case in the past few on 12th and 13th September 2015 was yet another example of a successfully No of Credit Cards years, this year too, the goal was to grow both usage and issuance volumes by concluded campaign. further expanding the versatility across all Meanwhile, to further expand the diversity 200,000 card formats. of the credit card portfolio, the Sampath Bank American Express® Everyday Credit 150,000 Progressing from the discount-driven proposition adopted in the past for credit Card was launched in November 2015. cards, the focus was to provide more Aimed at supplementing the needs of the 100,000 value additions via loyalty and rewards THZZTHYRL[P[PZ[OLÄYZ[L]LYJYLKP[JHYK programmes. in Sri Lanka to accurately map the pulse 50,000 of the customer. Tied to a guaranteed Among the key highlights in this cash-back proposition in addition to other mainstream discount options, the product 0 regard, was the launch of the “Ultra Rewards” Programme for Visa Premium is proven to be a highly versatile, multi- 2012 2013 2014 2015 Cardholders. The key differentiator of layered purchasing tool for the customer, the “Ultra Rewards” scheme is the wide enabling them to save while they spend. number of redemption options available to the Cardholder. Under the scheme, Efforts to popularise the debit card Cardholders can choose to redeem their option also got off the ground with the accumulated rewards points from an launch of the Visa Platinum Debit Card, a array of international merchant partners. premium offering targeting high-spenders. In order to expand access even further, The main aim here was to introduce a 17.6% differentiated product that would change tie-ups were negotiated with selected Growth of Sampath Credit local online retail merchants, where the customer perceptions regarding the Card Portfolio Cardholders can now redeem their use of a debit card for purposes other rewards points in exchange for a range of than as a mere ATM withdrawal card. products at MyDeal.lk, MyStore.lk & travel Following its launch in August 2015, a deals at Findmyfare.com. considerable increase in the number of “Point-of-Sale” (PoS) transactions attributed to the Platinum debit card

74 SAMPATH BANK PLC Annual Report 2015 Launch of Sampath Bank American Express® Everyday Credit Card Jaffna Town On Sale Promotion was observed, a clear indication of the Shopping Festival, Colombo International 31st December 2015. This in turn growing acceptance of the product as Book Fair and Singer Lifestyle fair, where points to the growing acceptance of a convenient settlement option for the SampathCards was appointed as the SampathCards among users as well as customer. 6MÄJPHS*YLKP[*HYK7HY[ULY merchants.

In general, all Sampath Card formats Further steps were also taken to These achievements were also honoured continued to maintain a very high strengthen ties with merchants who offer at the Visa India and South Asia Client level of acceptance among merchant interest-free-installment options that Forum 2015 awards held in Goa India, partners. Nevertheless, efforts to increase allow clients access to a wider range where SampathCards walked away with merchant acquisitions were accelerated in of products, which correspond to the two main category awards. The award a bid to provide cardholders with access changing lifestyles of today. for “Outstanding achievement in Credit to a broader island-wide merchant Card Portfolio growth in Sri Lanka” was demographic. Notably, the functionality /V^L]LY[OLTVZ[ZPNUPÄJHU[[YLUK in recognition of portfolio growth. The of the m-POS device introduced in 2014 tapped into in 2015, was the strategy award for “Breaking Barriers in Point of was instrumental in developing the SME to widen the e-commerce portfolio that Sale and eCommerce Acceptance in Sri merchants and continues to underpin led to the signing up of www.mydeal.lk, Lanka” is a measure of card acceptance. efforts to expand the diversity of the www.mystore.lk,www.retailgenius.com, Incidentally, Sampath Bank was the only merchant network. ^^^[HRHZSR^^^SHZZHUHÅVYHSR^^^ Bank in the entire South Asian region to OV\ZLVMNPM[ZSR^^^ÄUKT`MHYLJVTHUK receive these two main category awards In yet another move to strengthen the www.wow.lk within the year. from among 70 peer banks in India, number of touch points available to the Bangladesh, Nepal, Maldives and Sri customer, SampathCards also tied- These initiatives produced exceptional Lanka. up with a few of the main exhibitions results, breaking all records for usage held in Sri Lanka, namely the Colombo volumes for the twelve months ending

SAMPATH BANK PLC Annual Report 2015 75 76 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Channel 225 No of Branches Over 70% Growth Management Since 2009 38 No of Cash Deposit Kiosks Installed Increased Customer Convenience

Introduction of E-Vault Register

370 No of ATMs 36 New Off-site ATMs Installed in 2015

ATM Daily Withdrawal Limit Up to Rs 100,000/-

90% Growth From a business perspective, Retail Internet Banking it was felt that keeping up with, On Site and Off Site ATMs Customer Base and more importantly anticipating

digital trends is the only sure way 400 76 Introduction to sustain market leadership in the 350 41 of Total Internet banking space. 300 Corporate IT 10 This prompted a coordinated 250

Solutions 294 effort to align the Bank’s IT 200 285 264 255 9 strategy with developments in 150

Introduction the National IT development 100 of Touch Pad agenda, followed by a market 50 Enabled Self Service at mapping exercise to establish a 0 Branches medium-term growth strategy for 2012 2013 2014 2015 both retail and corporate Internet On Site ATMs channels. Off Site ATMs

SAMPATH BANK PLC Annual Report 2015 77 6WLYH[PVUHS9L]PL^Z Channel Management

gives the consumer the freedom and [OLÅL_PIPSP[`[VKV[OLPYIHURPUNH[[OLPY convenience, at a time and place of their Leveraging on the in-house expertise in state-of-the-art, choosing. responsive technology to facilitate multi-device access, steps were taken to enhance the customer-centricity and ,QWHUQHW%DQNLQJ user-friendliness of the entire Internet banking process. For the retail Internet offerings, the focus was mainly to strengthen the range of existing Internet and web-based 'LJLWDO%DQNLQJ From a business perspective, it was applications, amidst ongoing efforts to Customer convenience has always felt that keeping up with, and more improve the functionality of each product. been the key driver responsible for the importantly anticipating digital trends Leveraging on the in-house expertise in evolution of Sampath Bank’s digital is the only sure way to sustain market state-of-the-art, responsive technology to banking portfolio, which has grown leadership in the Internet banking space. facilitate multi-device access, steps were progressively in tandem with global This prompted a coordinated effort taken to enhance the customer-centricity changes in digital mediums. From to align the Bank’s IT strategy with and user-friendliness of the entire Internet conventional banking concepts to a developments in the National IT banking process. broader spectrum of web-based and development agenda, followed by a mobile and Internet channels, the Bank’s market mapping exercise to establish Among the key developments for the digital framework has undergone major a medium-term growth strategy for `LHY^HZ"[OLWYVTV[PVUVM[OLTVIPSL changes within a short span of time. This both retail and corporate eletronic cash offering to facilitate peer-to-peer is mainly due to the rapid increase in the delivery channels. To outline priorities, transactions, introduction of touch-pad level of Internet penetration in the country, an expansion blueprint was drawn up. enabled self-service sign-up facilities which has opened the gateway to the The goal here was to develop a dynamic provided at branches, simplifying the information super highway. Similarly, the e-banking model that would enhance online sign-up process and implementing proliferation of digital smart technology customer experience and help the Bank self-assigned daily transfer limits. A OHZNP]LUIPY[O[VHZLLTPUNS`PUÄUP[L to reduce operational costs. The key U\TILYVMV[OLY]HS\LHKKP[PVUZPUJS\KPUN" demand for web-based services. thrust was to create a lifestyle brand that ZPTWSPÄLKWH`TLU[[LTWSH[LZHUK diverse bill payment options were also introduced, while security protocols were tightened to ensure the safety, security and maintenance of customer privacy across all e-banking platforms.

Parallel to these enhancements, an aggressive mass marketing campaign was launched to promote the retail Internet banking proposition as a mainstream offering, leading to a YoY increase of nearly 90% in the retail Internet banking customer base for 2015. This was also accompanied by an exponential increase in the number of transactions for the same period. Sampath Vishwa Internet Banking Facility Meanwhile, an analysis of regional distribution showed that growth in

78 SAMPATH BANK PLC Annual Report 2015 Certain rural pockets &RUSRUDWH,76ROXWLRQV A focused strategy was adopted Special Effort across the country to develop the business enterprise to promote also appeared to solutions model as well. Among the key developments for the year was the a “Green” show promising PU[LNYH[PVUVMHJVTWYLOLUZP]LÄUHUJPHS Culture growth potential in supply chain management tool into the corporate IT solutions portfolio. The In a special effort to promote tandem with the suite of services now covers a diverse environmental consciousness range of integrated business tools evolution of suburban among corporates, this year PUJS\KPUN"JVSSLJ[PVUZWH`TLU[ZHUK the Bank strived to further lifestyles. There also investment management. These dynamic proliferate the idea of the solutions allow corporates to completely appears to be a WHWLYSLZZVMÄJLHUK\YNL H\[VTH[L[OLPYÄUHUJLM\UJ[PVUPTWYV]L corporates to lower their strong link between VWLYH[PVUHSLMÄJPLUJ`HUKILULÄ[MYVT carbon footprint. The goal here lower administrative costs. In addition to island-wide Internet was to reduce, or possibly these features, the key differentiator in eliminate use of paper-based penetration levels Enterprise Automation space, is the “time payment methodologies such to deploy” measurement. Sampath Bank and the growth in as cheques by encouraging has continued to retain its leadership corporates to migrate to Internet banking. position with an average turnaround time Sampath Bank’s e-payment of less than one week, from set-up to live technologies. Offering a deployment. the Western Province remained the complete end-to-end, paperless strongest. Interestingly however, certain payment and collection solution, Amidst the growing popularity of these rural pockets across the country also the Sampath Bank e-payment offerings, corporate business automation appeared to show promising growth module also drastically cuts continued to register healthy growth, with potential in tandem with the evolution of down administrative costs and a growing number of corporates signing suburban lifestyles. There also appears minimizes waste. up for Sampath corporate solutions. to be a strong link between island-wide Internet penetration levels and the growth in Internet banking. 6DPSDWK9LVKZD&RUSRUDWH Efforts to improve the functionality of the Sampath Vishwa Corporate Internet Growth in New Customers for Sampath Vishwa Internet Banking Banking module continued in this year % as well. These improvements have now made it possible for companies to use 180 170 the Sampath Vishwa portal to perform 160 B2B operations using the World Wide 140 Web, in addition to controlling their 120 collection function, managing trade 100 related operations, monitoring supply and 80 72 value chains and administering statutory 60 *VYWVYH[LI\ZPULZZ government payments. 40 27 20 5 H\[VTH[PVU In another important development, the 0 JVU[PU\LK[V Mobile Cash concept was integrated 2012 2013 2014 2015 YLNPZ[LYOLHS[O` with Sampath Vishwa, Corporate Internet NYV^[O

SAMPATH BANK PLC Annual Report 2015 79 6WLYH[PVUHS9L]PL^Z Channel Management

preferred to bypass the personal computer and move directly to a personal hand-held device as their primary access point of the World Wide Web. Hence, a Supporting concentrated effort was made to develop banking through the mobile device. This the led to the release of version 2 of the e-Commerce mobile app. Version 2 improvements Movement in include social media connectivity and Sri Lanka additional service locator options together with a completely new look and feel. The The e-commerce boom that app upgrade was released on iOS and originated in mid-2014 saw Android mobile operating systems. An HUPUÅ\_VMLIHZLKZ[HY[\WZ app for the Windows operating system seeking to break into what was is being developed and is currently in obviously new market territory beta testing phase. It is expected to be in Sri Lanka. As the pioneering deployed in the early part of next year to Internet Payment gateway the general public. Sampath Mobile Cash service provider in Sri Lanka, Sampath Bank took a strategic SMS Banking platform also saw decision to support these ZPNUPÄJHU[PUJYLHZLPUJ\Z[VTLYZPNU e-commerce startups. Designed ups spearheaded by the introduction ;OL:4:)HURPUN to give special weightage to the of Z-reload tool, which offers users a e-commerce business model, convenient option to re-load their prepaid WSH[MVYTZH^ Sampath Bank’s proposition mobile phones via SMS. ZPNUPÄJHU[ immediately made a strong impact among the e-commerce Meanwhile, the “SMS Alertz” facility increase in business community in Sri was extended to pawning customers, Lanka. In 2015 alone the Bank’s in order to provide these customers J\Z[VTLYZPNU e-commerce customer base with important information regarding NYL^ZPNUPÄJHU[S`JV]LYPUNZ\JO upcoming settlement dates, amounts due \WZZWLHYOLHKLK diverse businesses as retail, etc. I`[OLAYLSVHK travel, leisure, airline ticketing, and government services. It was also found that over 50% of the [VVS new retail customers are opting for this ZLY]PJL^OLUVWLUPUN[OLPYÄYZ[HJJV\U[ This points to the obvious security ILULÄ[ZHZZVJPH[LK^P[O[OLMHJPSP[`^OPJO Banking suite, allowing corporates versatility of the offering. Upgrading of the is designed to alert the customer via to make transfers to customers who Internet payment gateway, introduction text message, each time a transaction is are non- Sampath account holders of multi-layer security protocols (both performed in their account. as well. Thereby corporates are now vertical and horizontal), improvements able to reach out to the vast unbanked [V[OLIHJRVMÄJLPU[LNYH[PVUZVM[^HYL The facility has also become immensely demographic in the country and support YLÄUPUN[OLWH`TLU[ZLY]PJLZTLJOHUPZT popular among existing customers and the Government’s digital-Inclusion and reducing procedural complexity current records indicate that, one in programme. & paperwork, were among the key three Sampath Bank customers have developments that took place in 2015. subscribed for this service. Efforts were also initiated to strengthen key operational aspects of the corporate 0RELOH%DQNLQJ The SMS Alertz base registered a 42.8% Internet banking modules, in order As many customers made the transition YoY growth as at 31st December 2015. [VIVVZ[LMÄJPLUJ`HUKPTWYV]L[OL towards Internet banking, it was found that the gen Y and gen Z demographic

80 SAMPATH BANK PLC Annual Report 2015 %UDQFK1HWZRUN 5 branches being added to the network 5 existing branches were relocated Having invested heavily in the past to within the twelve month period. during the year. Among them was the expand the outreach, the iconic Sampath Kalutara branch, which was shifted footprint is now well represented across The main thrust was therefore to to the newly constructed three story all provinces and districts in Sri Lanka, consolidate the network and develop Sampath Bank building at No 312 A, with a total branch count of 225 as core branch competencies in order to Galle Road, Kalutara South, Kalutara. at 31st December 2015. Being the WYVTV[LNYLH[LYÄUHUJPHSPUJS\ZPVUPU[OL Offering the full range of banking services, Bank with one of the highest branch country. Branches opened in 2015 also unmatched customer convenience and penetration levels among local private YLÅLJ[LK[OPZNVHSPUJS\KPUN;OHSH^HRLSL ample parking facilities, the new upscale banks, the expansion strategy adopted (Nuwaraeliya District), Poojapitya (Kandy Kalutara branch is now fully geared to for 2015 was a selective one, with only District), Kesbewa, Nawala-Koswatta complement the multi-faceted needs of (Colombo District), and Godakawela this fast developing commercial hub. The (Ratnapura District), which were selected Rajagiriya, Pelmadulla, Main Street and for their strategic importance and Ragama branches were also relocated Number of Branches capability to reach out to the rural/urban to new premises in order to deliver more unbanked masses in their respective comprehensive banking solutions to feed areas. Anchored to many neighbouring the needs of business and communities 250 townships and an even larger number in these areas.

200 of fringe villages, these hub towns have 225 220

212 become major economic centres for the The super branch concept continued to 209 206 150 people of the area. Therefore, developing be well received by the customers with all 171 a strong branch presence in these hub 12 units showing exceptional results for 100 131 towns was seen as the key to delivering the year.

112 sustainable economic development 50 across a broader social spectrum. Meanwhile, ongoing efforts to strengthen the branch infrastructure saw a number of 0 Moreover, in an effort to maintain the value additions including the introduction

2008 2009 2010 2011 2012 2013 2014 2015 JVUZPZ[LU[PZSHUK^PKLIYHUJOWYVÄSL of digital displays at each branch to offer 12 branches were renovated and online real-time currency, interest rate and tariff updates etc. The safety locker facility

Opening of Nawala Koswatta Branch

SAMPATH BANK PLC Annual Report 2015 81 6WLYH[PVUHS9L]PL^Z Channel Management

Number of ATMs

Efforts to grow the 1HZ2SHQLQJV 400 number of island- 370 300 wide touch points, 9 36 326 274

also forms a part On-site Off-site 264 200 of the broader ATMs ATMs

100 purpose to increase 76

$701HWZRUN 41

24/7 cash access, In 2015, the Sampath ATM network 9 10 0 and make inroads became the main facilitator in expanding the Bank’s footprint across the country. 2012 2013 2014 2015 Total ATMs into yet untapped A total of 9 on-site and 36 off-site ATMs Off Site ATMs market segments at a provincial and at a rural level.

coupled with customer convenience was also extended to branches in the network, which resulted in 352 new lockers being allocated in 2015. However, the major investment for the year was in commissioning self-deposit kiosks H[IYHUJOLZ;OLÄYZ[WOHZLVM[OL Opening of the Godakawela Branch project was rolled out in October 2014 to equip 10 branches across the island. In addition to enhancing the level of customer convenience, the introduction of these self-deposit kiosks is expected to greatly relieve the workload of the teller staff at the branch. This would not only help to streamline the branch cadre but also improve overall productivity as branch staff accept more cross-functional responsibilities, laying the foundation for a truly sustainable branch model for the future.

Opening of the Gampaha Railway Station Off-Site ATM

82 SAMPATH BANK PLC Annual Report 2015 were installed within the twelve-month 2IIVLWH$70V period, bringing the total number of The installation of off-site ATMs at housing schemes, educational institutions Sampath branded units to 370 as at 31st and public transport terminals, convey a more dynamic approach to “Bring December 2015. the Bank closer to the customer”.

Now one of the most geographically widespread grids in Sri Lanka, ongoing investments to expand the ATM network highlights the Bank’s commitment to deliver greater convenience to all customers across Sri Lanka. %XV6WDQGV 3DQDGXUD Efforts to grow the number of island- 1HJRPER wide touch points, also forms a part of the broader purpose to increase 24/7 cash access, and make inroads into yet untapped market segments at a provincial and at a rural level. To further supplement this goal, a series of value additions were also introduced to boost the functionality offered by the ATM. Key 5DLOZD\6WDWLRQV among them was the enhancement of the 0DUDGDQD daily withdrawal limit from Rs 80,000/- to *DPSDKD Rs 100,000/- and extending e-remittance 9H\DQJRGD withdrawals to the ATM platform.

+RXVLQJ6FKHPHV 5XNPDOJDPD 5DGGROXJDPD 0DOLJDZDWWH =R\VDSXUD

7UDQVLW-XQFWLRQV *RGDJDPD Meepe

SAMPATH BANK PLC Annual Report 2015 83 84 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Corporate 58% Investment Portfolio Growth Banking Corporate Finance

9% Contribution to the Bank’s Bottom Line Corporate Finance

23% Advance Portfolio Growth Corporate Credit

15% Contribution to the Bank’s Bottom Line Corporate Credit

30% Advance Portfolio Growth Commercial Credit

13% (ZHÄYZ[Z[LW[V^HYKZKL]LSVWPUN Advance Portfolio [OLVMMZOVYLKLI[ÄUHUJPUN Gross Loans and Receivables - FCBU Growth capabilities of Sampath Bank, the Foreign Currency USD Mn Banking Unit Corporate Finance unit stepped 250 PUHZSLHKÄUHUJPLYMVYHU\TILY of Sri Lankan investors seeking 200 211.9 to expand overseas. Among the 205.5 16% 150 Contribution notable efforts for the year, the 166.0 to the Bank’s Corporate Finance unit undertook 100 136.5 Bottom Line to structure a syndicate debt to Foreign Currency 50 Banking Unit set up a hospitality project in a regional destination. 0 2012 2013 2014 2015

SAMPATH BANK PLC Annual Report 2015 85 6WLYH[PVUHS9L]PL^Z Corporate Banking

The Corporate Finance unit also extended its organisations in the health and leisure activities to provide investment advisory services for sectors were among the other major a number of development projects in South-East Asia clients who opted for these new and North . structured offerings, including the securitisation of future receivables. These

Corporate Finance The Corporate Finance division contributes towards the Bank’s non- interest income by generating fee income for corporate advisory services offered with regard to large/syndicate debt structuring, debt securitisations and custodian services among others. Interestingly of late, to help counteract the stress on NIMs hit by the decline in market interest rates, the division has been called upon to play a bigger role as a key driver of fee-based income.

With large corporates showing increasing keenness to make use of the lower Amari Havodda Resort Maldives rates, many were seen moving away from loans in favour of longer-term debt efforts also yielded good results with the instruments. Moreover, the distinctive tax Sector-wise Corporate Finance securitisation portfolio growing by 72% breaks on listed debt instruments also Loan Portfolio compared to the previous year. provided further incentives for companies to opt for debentures as a viable funding % On the back of positive market 2.5 alternative. Companies with lower 3.2 0.4 sentiments resulting from the post- 3.6 20.1 ratings were found to be seeking credit election hype, the custodian portfolio enhancements in order to have a broad 15.2 also picked up from April 2015, ending investor base for their debentures. the year with a 44% growth compared to :[LWWPUNPU[VM\SÄSS[OPZKLTHUK[OL 2014. Corporate Finance unit was able to structure credit enhancement facilities 19.7 The exceptional growth recorded by each for a number of these smaller clients. 16.9 of these portfolios translated well for Capitalizing on these developments, the bottom line, with the total fee-based

Sampath Bank’s Corporate Finance unit 18.4 income growing by 28.3% compared to was able to register a 58.1% increase in Financial & Business Tourism & Hotels the previous year. the debenture investments portfolio as at Telecommunication & IT Construction 31st December 2015. Health Infrastructure Further measures to boost fee income Manufacturing Transport Other Services included, among other things fees Meanwhile, the interest shown in generated from arranging syndications, structured debt instruments, particularly both locally and offshore. by the NBFI sector, paved the way for the division to offer bespoke solutions Meanwhile, the notable lack of investment to address the precise needs of the projects in the country meant the demand client. Many large-scale service sector for new large-scale debt was somewhat

86 SAMPATH BANK PLC Annual Report 2015 limited in 2015. This prompted the &RUSRUDWH&UHGLW Corporate Finance unit to explore the In 2015, the Corporate Credit division prospects of off-shore lending in other looked to reform the customary lending geographical locations. With NIMs of ;OLMVJ\ZMVY strategy, which prompted a rethink of rupee lending coming under pressure the conventional product mix. The main amidst falling market interest rates ^HZ[V aim here was to grow the corporate loan developing this line of business was seen L_WSVYLSV^JVZ[ book, in part to safeguard the Bank’s HZH]PHISLVW[PVUMVY[OLM\[\YL(ZHÄYZ[ bottom line as NIMs continued to thin on step towards developing the offshore KLI[HS[LYUH[P]LZ the back of low market interest rates, and KLI[ÄUHUJPUNJHWHIPSP[PLZVM:HTWH[O also to increase overall market share. Bank, the Corporate Finance unit ^P[O[OLK\HSHPT Z[LWWLKPUHZSLHKÄUHUJPLYMVYHU\TILY VMZ\WWVY[PUN Amidst these conditions, it was felt that of Sri Lankan investors seeking to expand growth should ideally be induced by a overseas. Among the notable efforts IHSHUJLZOLL[ volume-based approach to promote for the year, the Corporate Finance unit products with a more sustainable, long- undertook to structure a syndicate debt NYV^[OHSVUNZPKL term yield capacity. From a marketing to set up a hospitality project in a regional perspective, a series of measures were destination. PTWYV]LTLU[Z[V initiated to differentiate Sampath Bank’s [OLIV[[VTSPUL offering from other mainstream products In a further attempt to tap into the in the market. In doing so, some products offshore debt syndication market, tie-ups were re-priced in line with the market and with foreign banks were aggressively yet others were enhanced with add-ons pursued and the Bank was awarded a issue of 50 Mn listed debentures at and bundled offers to convince clients to participatory role in a large syndicate Rs 100/-, valued at a total of Rs 5 Bn, make a long term commitment. Moreover, facility in the Indian sub continent. This with the option to issue a further 20 Mn it was felt that strengthening customer OHZJVU[YPI\[LKZPNUPÄJHU[S`[V^HYKZ debentures, at Rs 100/- each, in the relationships would be key to promoting boosting Sampath Bank’s Foreign event of oversubscription. Having opened these long-term offerings. Accordingly, currency loan portfolio. The Corporate on 12th November 2015, the debenture the business development unit was Finance unit also extended its activities issue was oversubscribed on the same strengthened to oversee customer to provide investment advisory services day, testifying to the high level of investor relationships and facilitate a more for a number of development projects JVUÄKLUJLPU:HTWH[O)HUR73* customer-centric lending model. in South-East Asia and North Africa. >OPSLPTWYV]PUN[OL)HUR»ZWYVÄSLHZH regional offshore banker, these efforts also contributed to the fee-based income, which in turn helped ease the pressure on narrowing NIMs caused by low market interest rates.

In addition to generating fee-based income, the Corporate Finance Unit is also assigned to manage the funding needs of the Bank. The focus for 2015 was to explore low-cost debt alternatives with the dual aim of supporting balance sheet growth alongside improvements to the bottom line. Accordingly, the Corporate Finance unit was assigned the task of tapping in to the debt capital market to bolster Tier II capital of the TOKYO SuperMix Plant Bank and support future growth. The key activation in this regard was the

SAMPATH BANK PLC Annual Report 2015 87 6WLYH[PVUHS9L]PL^Z Corporate Banking

Commercial Credit division also sought to attract new customers from other mainstream and niche market segments. The business The focus for the year then shifted To complement this strategy a volume- [V^HYKZKL]LSVWPUN[OLL_WVY[ÄUHUJPUN based pricing model was employed to promotion campaign model, in response to the ailing export deliver organic and inorganic growth of for the year was sectors of Tea and Rubber, which the portfolio. continued to struggle amidst weakening strongly anchored to global demand. To address the issues Using this model, the business- the current service faced by these crisis-ridden industries, canvassing unit was able to tap into the Corporate Credit Unit focused on emerging opportunities in tourism, health, model, which structuring more sustainable facilities that education and property development assigns a relationship will strengthen the clients’ balance sheets sectors, in 2015. and augment their future earning potential manager (RM) to in the longer term. Meanwhile, the business promotion campaign for the year was strongly provide a fully- anchored to current service model, which (ZPKLMYVT[OLZLZWLJPÄJNYV^[O ÅLKNLK[YHKLZLY]PJL strategies, a conscious effort was assigns a relationship manager (RM) made to strengthen relationships with [VWYV]PKLHM\SS`ÅLKNLK[YHKLZLY]PJL package, in line with package, in line with the needs of each all corporate customers. All of these individual client. RMs are also expected the needs of each strategies delivered good results in driving to strengthen relationships with their individual client. up the performance of the Corporate Credit division, which accounted for JSPLU[IHZLI`WYV]PKPUNÄUHUJPHSHK]PZVY` services that will help improve the client’s 13.1% of the Bank’s revenue and 14.6% ÄUHUJPHSWVZP[PVUPU[OLSVUN[LYT VM[OLWYVÄ[HZH[Z[+LJLTILY

This prompted the launch of an ongoing &RPPHUFLDO&UHGLW skills development programme to develop As lower interest rates began to the capabilities of RMs, not only as brand erode NIMs, many banks and lending ambassadors for Sampath Bank but also institutions were seen pursuing volume- as preemptive animators of progress for driven growth to compensate for the client. depleting margins. Not only did this heighten the level of competition in the market, it also created a strong Sector-wise Commercial Credit Loan Portfolio The growing focus on such long-term buyers market accompanied by distinct facilities was also seen as the best way movements in buyer preferences. % to ensure that the quality of the portfolio 3.0 2.5 is maintained. Towards this end, despite Working cognizant to this highly 5.8 competitive environment, the main a YoY growth of 22.8% in the Corporate 6.7 29.4 Credit loan book, the NPA ratio stood at strategic thrust for Sampath Bank’s 1.3% as at 31st December 2015. Commercial Credit unit was to secure 6.9 a larger market share through visible

As always, growing CASA too remained product differentiation. A series of 8.0 priority for the Corporate Credit Division. HKKP[PVUHS]HS\L[PLYZHUKZWLJPÄJ)) developments were then introduced in In order to achieve this goal, aggressive 8.8 efforts were made to grow the corporate order to upgrade existing commercial 28.9 credit offerings. This cross-selling CASA base and secure a larger volume Manufacturing Traders exercise was also aimed at providing of the main collection accounts of Construction Telecommunication & IT corporates, a move that led to a YoY a cohesive, cost-effective solution to Health Agriculture and related the diverse needs of existing clients. Other Services Transport growth of 36.5% in the CASA base. Financial & Business 3L]LYHNPUNVU[OPZ\UPÄLKWSH[MVYT[OL

88 SAMPATH BANK PLC Annual Report 2015 )RUHLJQ&XUUHQF\%DQNLQJ8QLW The dedicated business development unit For Sampath Bank’s FCBU division, set up in the previous year also proved to at the top of the agenda for 2015, be a wise investment, with the unit being was the realignment of the business YLZWVUZPISLMVYNLULYH[PUNHZPNUPÄJHU[ mix in response to underlying market volume of business from SMEs in the mechanisms. In this regard, the highly apparel, agriculture and non-traditional liquid global markets made it possible to export sectors. secure low-cost funding which fed the demand for corporate sector credit. This In yet another move to boost the overall pushed up the FCBU advances portfolio performance, the FCBU division stepped by 12.8% compared to the previous up efforts to grow the offshore lending year, with the asset portfolio witnessing portfolio. This included efforts to tap into a 10.4% increase for the year. The PKLU[PÄLKPU]LZ[TLU[ZPU[OL4HSKP]LZ sector-wise exposure however changed India and Bangladesh, as a means of somewhat, as traditional Tea and Rubber I\PSKPUN[OL)HUR»ZVMMZOVYLWYVÄSLMVY[OL industries continued to struggle amidst future. global market turmoil. 9LÅLJ[P]LVM[OPZ[YLUK[OL-*)< has contributed 16% to the overall WLYMVYTHUJLVM[OL)HUR»ZWYVÄ[PU[OL Sector-wise FCBU Loan Portfolio year 2015.

% 2.5 2.2 5.3 5.9 43.9

10.9

29.3

Manufacturing Agriculture and related Transport Infrastructure Tourism & Hotels Telecommunication & IT Other Services

SAMPATH BANK PLC Annual Report 2015 89 90 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Development 332 MSME* Facilities Granted Banking

Rs 2Bn MSME* Loans Disbursed

85 Branch Managers Trained on MSME*

470 *YLKP[6MÄJLYZ Trained on MSME*

Rs 4Bn Project Finance Loans Disbursed

Rs 14Bn Project Finance Advance Portfolio In a strategic move to reduce possible over-dependence on Sector-wise Refinance Base Loan Portfolio the NCRE sector, the division % continued to selectively deepen 2.9 0.6 the exposure to other sectors of 4.8 22% 6.7 Project Finance the economy as well, in particular 8.7 Advance Portfolio the Property Development and 49.3 Growth Leisure industries. In addition to

changing the conventional lending 11.3 mix, the move also delivered good results with the total project 15.7 ÄUHUJLWVY[MVSPVYLJVYKPUNH  growth as at 31st December Infrastructure Manufacturing Agriculture and related Traders 2015. Tourism & Hotels Other Services Construction Transport *Micro, Small and Medium Scale Enterprises

SAMPATH BANK PLC Annual Report 2015 91 6WLYH[PVUHS9L]PL^Z Development Banking

Having embraced #Future-friendly the millennium initiative development goals for poverty alleviation, &DVH6WXG\ it was a bold move for the Project “Sampath Saviya” In 2015, the Project Finance unit Finance Division, signalling a also began lending to Micro, Small departure from the conventional also mirrors the and Medium Scale business seeking project-lending parameters. national priority to to engage in the NCRE sector Nevertheless, the division made as part of a Rs 235 Mn, ADB- notable progress towards achieving promote inclusive funded pilot project. Carried out in [OLKLZPYLKNVHSZ\JJLZZM\SS`M\SÄSSPUN banking. collaboration with the Sustainable the project brief and committing Rs Energy Authority of Sri Lanka, this 3,268 Mn to fund 11 MSME ventures MSME lending manifesto is an in the NCRE sector. ambitious assignment aimed at promoting NCRE as a mainstream Meanwhile, given the renewed 3URMHFW)LQDQFH business opportunity. emphasis on the NCRE sector, the Continuing with the mandate to support Project Finance Unit also accelerated large-scale economic development Given Sampath Bank’s unmatched efforts to enhance the project projects, the Project Finance unit expertise and outstanding track advisory services provided to these embarked on a systematic growth record in nurturing Sri Lanka’s clients. Considerable resources were strategy to expand the 2015 project NCRE sector, a sum of allocated to build a pool of experts portfolio. Firstly, steps were taken to Rs 217.5 Mn, was allocated, the capable of advising clients regarding strengthen the exposure in already ÄYZ[L]LYHSSVJH[PVUI`[OL(+)[V project risks, developing their established market segments, mainly a private commercial bank to foster business skills and nurturing a credit to reinforce the stronghold in the Non- MSME’s participation in the NCRE plus culture among these MSME’s. Conventional Renewable Energy (NCRE) sector. From a business perspective, sector. Reputed for the pioneering role in developing Sri Lanka’s NCRE sector, [OLSL]LSVMPUK\Z[Y`ZWLJPÄJRUV^ how provided by the Project Finance Sector-wise Project Finance Division has now also become a visible Loan Portfolio differentiator, which has helped Sampath % 1.5 1.4 Bank to further consolidate its position as 1.0 4.2 the lead promoter in this business space. 4.7

8.5 However, in a strategic move to reduce possible over-dependence on the NCRE sector, the division continued 8.8 to selectively deepen the exposure to 55.2 other sectors of the economy as well, in particular the Property Development and 14.7 Leisure industries. In addition to changing Infrastructure Tourism & Hotels Agriculture and related Manufacturing Traders Construction Education Telecommunication & IT Other Services

92 SAMPATH BANK PLC Annual Report 2015 the conventional lending mix, the move also delivered good results with the total WYVQLJ[ÄUHUJLWVY[MVSPVYLJVYKPUNH  growth as at 31st December 2015.

060('HYHORSPHQW Having achieved greater economic stability, Sri Lanka’s economy has been subject to rapid change in the past Ä]L`LHYZ;YHKP[PVUHSS`HUHNYPJ\S[\YHS economy, lately the industry and service sectors have emerged as key drivers of economic growth, helping to boost Sri Lanka’s per capita to USD 3,625 as at 31st December 2014. Now in transition towards a middle-income economy, the country continues to gear itself to achieve Financing of Star Class First Hotel (Blue Waves) in Arugam Bay a much higher per-capita in the medium term. Having embraced the millennium would secure their livelihoods in the Amidst this backdrop, it was found that development goals for poverty alleviation, long term. Using the globally accepted the Micro, Small and Medium Scale “Sampath Saviya” also mirrors the “CEFE” (Competency-based Economies Enterprise (MSME) sector expanded national priority to promote inclusive through Formation of Enterprise) training in 2015, despite the uncertain political banking. It is hoped that expanding methodology, the programme scope JSPTH[LK\YPUN[OLÄYZ[[OYLLX\HY[LYZVM ÄUHUJPHSPUJS\ZPVUPU[OPZTHUULY^V\SK covers key aspects such as business the year. It has been found that MSMEs pave the way for organic and inorganic WSHUUPUN[VVSZIHZPJÄUHUJPHSWSHUUPUN play an important role in any economy business growth in the longer term. Since & record keeping, eco-friendly business through generation of employment, its inception, three years ago, “Sampath practices and good labour management contribution to GDP growth and Saviya” has delivered on its promise, by practices, while continuous counselling of stimulating other economic activities. uplifting the lives of hundreds of families WYVQLJ[ILULÄJPHYPLZLUZ\YL[OL`YLTHPU They also offer crucial support to large across the island. Moreover, stakeholders on track to achieve their commercial industries through sub-contracting, now perceive “Sampath Saviya” as one aspirations. thereby facilitating the linkage between of the most relevant, reliable and socially the formal and the informal sector. A well- responsive entrepreneur development organised SME sector would thus provide models currently available in the market. the foundation for the growth of the entire 6WDWLVWLFV industrial sector. 2L`HJ[P]P[PLZJHYYPLKV\[MVY" 1RRI3DUWLFLSDQWV

At Sampath Bank PLC, MSME 060(:RUNVKRSVIRU Development is underpinned by (QWUHSUHQHXUV “Sampath Saviya”, an Entrepreneur The MSME workshops conducted under Development Programme, launched in “Sampath Saviya” aim to inculcate key 2013 to offer both technical support and entrepreneurial competency and much ÄUHUJPHSHZZPZ[HUJL[VZ[HY[\WZHZ^LSS ULLKLKÄUHUJPHSKPZJPWSPULHTVUN[OL as existing business ventures that lack rural population, many of whom lack Kandy Kegalle Colombo the resources to commence/expand their the required business knowledge to own business. (Please refer Page 183 to conduct a sustainable enterprise that 45 94 23 185 of this report for further information in this regard).

SAMPATH BANK PLC Annual Report 2015 93 6WLYH[PVUHS9L]PL^Z Development Banking

6WUHQJWKHQLQJ6XSSRUW 5HVRXUFHV The Branch Managers and Credit Stakeholders now perceive “Sampath Saviya” as one 6MÄJLYZHYL[OLRL`WLYZVUULSHZZPNULK of the most relevant, reliable and socially responsive to evaluate the viability of Sampath entrepreneur development models currently available in Saviya MSMEs. These evaluations are the market. the baseline measurement used to extend credit facilities to MSME ventures. In addition to appraising business 060('HYHORSPHQWWKURXJK to succeed. For this purpose, the proposals, Branch Managers / Credit &UHGLW/LQHV Bank taps into the low-cost credit lines 6MÄJLYZHYLHSZVYLX\PYLK[VHZZLZZ Credit facilities are extended to those allocated by the Government, earmarked the entrepreneur on his entrepreneurial MSMEs who present a viable business ZWLJPÄJHSS`MVY4:4,KL]LSVWTLU[ competencies and the level of personal plan and demonstrate their commitment commitment in running the business.

It is therefore imperative that the 6WDWLVWLFV )YHUJO4HUHNLYHUK*YLKP[6MÄJLYZ District No of Facilities Value HYLJVU]LYZHU[PUZ\JOHYLHZHZ"IHZPJ Granted (Rs) JVZ[PUNÄUHUJLTHYRL[PUN0;WYVK\J[PVU Kandy 17 127,565,000 management, HRD, risk management etc. Matale 4 71,000,000

Ampara 5 8,796,000 In-house competency development Batticaloa 8 15,422,550 training for the Branch Manager and *YLKP[6MÄJLYZ[OLYLMVYLHPTZ[V! Trincomalee 7 3,089,018 Enhance skills, knowledge & Anuradhapura 7 44,036,800 competency of MSME project Polonnaruwa 7 20,350,000 PKLU[PÄJH[PVUL]HS\H[PVUHUK Kurunegala 15 69,550,000 ÄUHUJPUN Identify potential MSME customers Puttalam 9 97,500,000 HUK[OLPYÄUHUJPHSKL]LSVWTLU[ Jaffna 19 81,690,384 needs Mullaitivu 5 850,000 Assess systematically viability of any type of MSME business/ Vavuniya 8 6,218,000 WYVQLJ[MVYÄUHUJL Kegalle 5 60,500,000 Assist and advice MSME Ratnapura 3 37,000,000 customers in solving their business Galle 1 850,000 problems and investment decision making Hambantota 20 88,500,000 Matara 27 282,500,000 Badulla 7 30,200,000 Colombo 99 738,851,625 Gampaha 40 241,361,387 Kalutara 19 74,796,624 Total 332 2,100,627,388

94 SAMPATH BANK PLC Annual Report 2015 Sampath Saviya MSME Training Workshop

2015 Statistics No of Programmes No of Participants 4 programme (4 days) for Branch Managers 85 WYVNYHTTLMVY*YLKP[6MÄJLYZ 470

SAMPATH BANK PLC Annual Report 2015 95 96 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Global 25% Growth in Import Turnover Business 15% Growth in Export Turnover

26% Growth in Commission Income

46% Import TT Turnover Growth

19% Export TT Turnover Growth

22% Total TT Commission Income Growth Meanwhile, in what is essentially a relationship-based business Net Fee and Commision Income on Trade Services and model, much emphasis was also International Operations 17% placed on building relationships Rs Mn Remittance for the future, both with customers 1,500 Commission and other foreign correspondent Income Growth 1,200

banks. Leveraging on these 1,454.4

relationships, a concerted 900 effort was made to grow export 1,156.4 11% volumes and boost the export 600 Remittance portfolio. 631.9 Transactions 300 565.5 Growth 0 2012 2013 2014 2015

SAMPATH BANK PLC Annual Report 2015 97 6WLYH[PVUHS9L]PL^Z Global Business

These changes were seen as an important customer retention strategy, Sampath Bank PLC’s Bank Notes Operations (BNO) particularly as many customers continued to retain its position as the market leader discouraged by the procedural complexity in the business of importing and repatriation of of LCs, of late, were found instead opting foreign currency. for less cumbersome “Open Accounts” payment terms. Further efforts to improve customer service parameters resulted 7UDGH6HUYLFHV Interestingly, the branches accounted for in extended banking hours at the Trade The export and import sectors of the a sizeable share of this growth, which is Services Department. country recorded negative growths of the result of the strategic decision taken 4.4% and 2.1% respectively, during in 2014 to regionalise the import/export Meanwhile, in what is essentially a [OLÄYZ[LSL]LUTVU[OZVM[OL`LHY business and to use the branch network relationship-based business model, Imports were heavily affected by tax to tap into key trade pockets across the much emphasis was also placed on increases and restrictions imposed on island. The purpose here was to extend building relationships for the future, concessionary duty permits for vehicle mainstream trade solutions to facilitate both with customers and other foreign imports etc. The drop in oil prices the emerging needs of the SME sector. correspondent banks. Leveraging on contracted the purchasing power of Given the results achieved during the these relationships, a concerted effort Middle-East countries resulting in a lesser year, this goal appears to have been was made to grow export volumes and demand for tea exports. The demand for successfully met. boost the export portfolio. natural rubber exports too were affected due to a drop in synthetic rubber prices. Meanwhile, as import trade volumes ,QWHUQDWLRQDO2SHUDWLRQV continued to grow, our twelve Parallel to Sri Lanka’s continuous However, Sampath Bank PLC’s Import documentary collection counters trade volumes growth, the demand for and Export trade portfolios grew by are aimed at the convenience of the Telegraphic Transfers (TT) too showed 25% and 15% respectively in 2015. import customers and to assist them in an increase. Having already laid out an Consequently, fee income for the year completing the necessary paperwork. action plan to tap into this thriving market, also grew by 26%. the International Operations Division was able to record good results for 2015. A notable increase in volumes was observed owing to a branch led initiative to popularize TTs across a broader island- wide market.

Given the growth in Sri Lanka’s import volumes, the Bank’s import TT volumes also grew correspondingly by 46% in 2015. Meanwhile, the highly focused campaign to develop the export TT market led to a 19% growth for the year. Steps were also taken to boost the non- trade TT portfolio, particularly at branch level. This too delivered good results with a 46% and 27% of increases in the non- trade inward and outward TT volumes respectively for the year. Consequently, fee based income from TTs also rose by 22% for 2015. Cocktail Function for Trade Customers

98 SAMPATH BANK PLC Annual Report 2015 %DQN1RWHV2SHUDWLRQV %12 Currency volumes during the year remained strongly appended to movements in the exchange rate. Despite the challenges brought on by the ÅVH[PUNL_JOHUNLYH[L:HTWH[O)HUR PLC’s Bank Notes Operations (BNO) continued to retain its position as the market leader in the business of importing and repatriation of foreign currency. ;OPZPZZLLUHZHWHY[PJ\SHYS`ZPNUPÄJHU[ achievement and points to the success of the volume-driven strategies deployed to mobilise a higher volume of foreign currency exports and imports.

“2014 USD STP Excellence Award” from ” Export volumes for the year were affected I`[OLKPWPUMVYLPNUKPYLJ[PUÅV^Z^OPJO meant repatriations were lower than in From a customer perspective, a number faster TT turnaround time. In addition, the previous years. Amidst this backdrop, of strategies were initiated to improve the automation process would provide the BNO unit stepped up efforts to grow [OLLMÄJPLUJ`VM[OL;;WYVJLZZPUN Sampath Vishwa customers the added domestic sales by leveraging on the mechanism. Key among them was the ILULÄ[VMILPUNHISL[VKPYLJ[S`THRL CBSL’s decision to relax the carrying system improvements and introduction of an online TT request by completing the threshold allowing individuals to take out the daily online reconciliation of NOSTRO required documentation entirely through of the country, a maximum of accounts. The International Operations the Vishwa platform. USD 10,000 at a time. Needless to Division currently operates 36 NOSTRO say, the ruling encouraged many new accounts around the world and it was In recognition of the high success players to break into the business and felt that daily online reconciliations were rate maintained in the straight through competition remained stiff in this highly needed to ensure better monitoring process (STP) applied for the outward rate-sensitive business. To manage the and control over the growing volume of TT handling procedure during the year, competitive challenges emerging from transactions in each of these accounts. Sampath Bank PLC received the “2014 the market, the BNO unit realigned the Automating this process commenced in USD STP Excellence Award” from business mix followed by an aggressive October 2015 and is expected to go live Deutsche Bank. campaign to boost domestic volumes vis- in early 2016. à-vis the branch network. In other business developments, These efforts go hand in hand with Sampath Bank PLC was appointed by Consequently, the main collection the new sanction screening system to Lanka Clear (Pvt) Ltd, as the settlement centres in Colombo, Chatham Street and screen both Inward and Outward TTs. bank for online USD Payment System Negombo as well as the Katunayake Pay Strengthened by an extensive compliance for a period of 3 years, with effect from 6MÄJL276YLNPZ[LYLKHU\WZ\YNLPU[OL framework the new mechanism ensures 8th July 2015. Already authorised as the demand for movable currencies in 2015. that TTs are not held up during the settlement bank for the local clearing As the largest exporter of foreign currency operational process. This forms part process of USD Drafts/Cheques, this new in Sri Lanka, bulk exports from other VM[OLÄUHSWOHZLVM[OLH\[VTH[PVU appointment further adds to Sampath banks were also channelled through the process being put into place to improve Bank’s credentials. It is also seen as BNO unit, helping to boost volumes. LMÄJPLUJ`HUKJ\[KV^UWYVJLZZPUN[PTL an important value addition that would On the import side, the dearth in foreign Once completed, the entire automation not only expedite the local TT handling J\YYLUJ`PUÅV^ZJV\WSLK^P[OOPNO process is expected to bring down process, but also result in a considerably demand for movable currencies paved processing time by as much as 25%, lower customer charge in the future. the way for higher import volumes in providing customers with a considerably 2015. All foreign currency imported on

SAMPATH BANK PLC Annual Report 2015 99 6WLYH[PVUHS9L]PL^Z Global Business

Prompted by these changing dynamics, the Remittances unit, leveraged on its strong track record in this business Transaction volumes behalf of other banks also contributed space to step up efforts to penetrate towards increase in import volumes new overseas markets. Pre-emptive from all major source for the year. These measures drove up efforts to tap into potential new markets markets were up currency import volumes, which grew by saw tie-ups being negotiated to expand 1,100% over the previous year. the partner network in South East Asia and commission covering South Korea, Singapore and income showed a 5HPLWWDQFHV Malaysia, and on the European side, Although more or less a mature operating in France and Switzerland. Jordan, 17% YoY increase. environment, the year brought certain Lebanon and Israel were also added Nevertheless, to changes, mainly as a result of Telco’s to the partner network during the year, and smaller banks expanding their thereby extending the reach beyond the address the imminent activities and attempting to break into GCC countries. Meanwhile, efforts to challenges arising the remittance business. This heightened consolidate existing inward remittance the level of competition in the market. corridors also continued with partnerships from the highly However, the instability of the exchange in key GCC strongholds being competitive market rate caused a much bigger challenge and strengthened. OHKHULNH[P]LLMMLJ[VU[OLPUÅV^ZPU[V environment, the the country. Notably, while migrant worker Transaction volumes from all major Bank yet again remittances did grow by 11% in 2015, it source markets were up and commission did so at a much slower pace than in the income showed a 17% YoY increase as looked to widen the past two years. Interestingly, with a lesser at 31st December 2015. Nevertheless, choice of delivery number of female migrant workers taking to address the imminent challenges up employment overseas, this problem is arising from the highly competitive channels available for only likely to worsen in the coming years. market environment, the Bank yet again recipients. On the other hand, the number of skilled looked to widen the choice of delivery and unskilled male migrant workers channels available for recipients to access appeared to be on the rise, offering a potential opportunity for growth. Growth in Remittance Transaction Volume %

30

25 24 20 22

15

10 12 11

5

0 2012 2013 2014 2015

Sampath E-Remittance Transaction

100 SAMPATH BANK PLC Annual Report 2015 Sampath E-Remittance Cash Wasi amounts remitted to them. Currently, under-served communities. These efforts recipients have the option to access are also part of Sampath Bank PLC’s their funds through the Branch Network sustainable development agenda that which presents a logistical burden to promotes banking inclusion as the basis many remote rural communities. To of progressive nation-wide development. overcome these challenges, the Mobile Cash mechanism was introduced in 2013, allowing for 24/7, hassle-free cash Growth in Commission Income access through ATMs. Ongoing efforts to on Remittances secure a broader rural recipient base saw % the Bank leverage on this ever-popular 25 Mobile Cash offering as the core delivery medium. 20 20 20

It is hoped that this would also encourage 15 17 recipients to migrate towards formal channels thereby helping to curb the large 10 13 volume of inward remittances coming 5 PU[V[OLJV\U[Y`\UVMÄJPHSS`;V^HYKZ[OPZ end, the Bank also conducted a series 0 of awareness programmes to stress the importance of using formal channels and 2012 2013 2014 2015 promote the savings culture among these

SAMPATH BANK PLC Annual Report 2015 101 102 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Treasury Rs144.20 USD Rate 31st December 2015

22.05% Liquid Asset Ratio 31st December 2015

7.50% AWPLR (Weekly) 31st December 2015

6.20% AWDR (Monthly) 31st December 2015

7.11% 1 Year Treasury Bill 31st December 2015

For its part, the proactive strategies deployed by the Bank’s USD / LKR Movement

Treasury unit helped capture these Rs

precise movements, which led to 150 a 40% growth in revaluation gain 120

on the Bank’s foreign currency 144.20 131.20 reserves. 130.75 90 127.65

60

30

0 2012 2013 2014 2015

SAMPATH BANK PLC Annual Report 2015 103 6WLYH[PVUHS9L]PL^Z Treasury

The Treasury Bill market did not change ZPNUPÄJHU[S`PU[OLÄYZ[OHSMVM[OL`LHY but showed a clear upward movement in All in all a good year, the Treasury unit was able to the second half of 2015. This prompted make a 14% contribution to the Bank’s bottom line. It is the Treasury Department to accelerate expected that the strong performance registered during its investments in Treasury Bonds and the year would provide a good foundation for 2016. ;YLHZ\Y`)PSSZ;OL)HURHSZVKP]LYZPÄLK P[ZÄ_LKPUJVTLWVY[MVSPVI`PUJYLHZPUN[OL SLDB investments.

Meanwhile, as the long-awaited interest rate hikes in the US looked to become a reality, many foreign investors were looking to pull out of the local equity market from about May 2015. To safeguard the Bank’s bottom line, ahead of the inevitable drop in share price indices, the Treasury Department took steps to divest most of the Bank’s equity portfolio.

The CBSL benchmark Standing Deposit Facility (SDF) and Standing Lending Facility (SLF) rates were adjusted to 6.0% and 7.5% respectively in April 2015, Sophisticated Systems used at Treasury Department from 6.5% and 8.0%. Nevertheless, the banking system remained liquid Although the year started off with an for 2015. During this period, forward throughout 2015 and there was no uncertain political environment in the premiums on the one-year tenure also undue pressure on Sampath Bank’s country, this concern began to abate, experienced some swift movements, overall liquidity position. The Treasury towards mid-August 2015, followed by ranging from a low of Rs 6.75 to a high Department was thus able to achieve a an improvement in market conditions. of Rs 6.85. For its part, the proactive healthy rate of return by maintaining the Mandated to oversee the Bank’s core strategies deployed by the Bank’s required liquid assets in relatively high liquidity position, Sampath Bank Treasury Treasury unit helped capture these yielding investments. Department successfully managed precise movements, which led to a 40% these operating fundamentals to mark a growth in revaluation gain on the Bank’s successful conclusion to the year 2015. foreign currency reserves.

The CBSL’s decision to allow for greater The repatriation of the Currency Notes, ÅL_PIPSP[`PU[OLKL[LYTPUH[PVUVM[OL which comes under the purview of the exchange rate resulted in an immediate Treasury, also recorded steady growth depreciation in the Rupee. Since the throughout the year, reinforcing its move was sanctioned on 5th September position as the country’s largest importer 2015, the rupee fell from Rs 137.75 to and exporter of foreign currency once Rs 144.20 as at 31st December 2015, again. an unprecedented 4.7% depreciation for above period and 9.9% depreciation

104 SAMPATH BANK PLC Annual Report 2015 All in all a good year, the Treasury unit to manage the risk implications arising was able to make a 14% contribution to from uncertain market conditions in the the Bank’s bottom line. It is expected that year ahead. From a liquidity perspective the strong performance registered during however, the CBSL’s decision in late the year would provide a good foundation December to raise the Statutory Reserve for 2016, which at present appears to be Requirement (SRR) from 6.0% to 7.5% quite unpredictable, with no clear market remains a cause for concern, particularly signals emerging even by end December given the negative implications for the 2015. Therefore, diversifying the treasury Bank’s liquidity position in 2016. portfolio would likely be the best way

One Year Treasury Bill Rate Movement in 2015 %

7.80

7.55

7.30 7.18 7.06 7.11 7.05 6.97 6.80 6.80 6.92 6.50 6.55 6.48 6.29 6.28 6.30 6.00 6.13 6.05 6.05 5.80 Jul-15 Apr-15 Jan-15 Oct-15 Jun-15 Feb-15 Mar-15 Dec-14 Aug-15 Sep-15 Nov-15 Dec-15 May-15

USD / LKR Movement in 2015

Rs

146 144.20 144 143.15

142 141.23 140.95 140

138

136 134.52 133.73 134 133.20 133.13 133.93 133.63 133.10 132 131.20 132.25

130 Jul-15 Apr-15 Jan-15 Oct-15 Jun-15 Feb-15 Mar-15 Dec-14 Aug-15 Sep-15 Nov-15 Dec-15 May-15

SAMPATH BANK PLC Annual Report 2015 105 106 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Operational 1.6% NPL Ratio Support

New Delinquency Monitoring System for Recoveries Management

Expanding Digital Technologies

Moving to Cloud Technology

2.8% Cheque Return Ratio

Runner-up for Product Innovation Infosys Finacle Client Innovation Awards 2015 It was an outstanding year for Sampath Bank’s IT Cheque Return Ratio

Department, winning three %

prestigious accolades from 5 both well-recognised local and

4 4.5

foreign professional IT bodies. 4.3 Undoubtedly the result of the

3 3.5 broad-based IT strategies adopted 2.8 by the Bank over the past years, 2 [OLZLHJJVSHKLZYLÅLJ[[OLYVSL of the IT Department in providing 1 continuous support to ensure 0 smooth integration of all business 2012 2013 2014 2015 operations and improve overall VWLYH[PVUHSLMÄJPLUJ`VM[OL)HUR

SAMPATH BANK PLC Annual Report 2015 107 6WLYH[PVUHS9L]PL^Z Operational Support

The conventional recoveries model was strengthened, with a strong emphasis on improving the monitoring mechanism.

Signing the Agreement with Bimputh Finance

1HWZRUN6HUYLFHV&HQWUHDQG While most of the core-banking functions stringent monitoring of cheque returns as &HQWUDO&DVK'HSDUWPHQW are handled directly by the Department, per CBSL requirements has helped the Sampath Bank’s Network Service Centre certain aspects are outsourced, in order Bank to maintain a consistent low annual and Central Cash Department (NSC and [VPTWYV]L[OLV]LYHSSLMÄJPLUJ`HUK average return ratio, well below the CCD) are engaged in centralised back reduce costs. industry average. VMÄJLZ\WWVY[M\UJ[PVUZYLZWVUZPISL MVYLUZ\YPUN[OLZTVV[OÅV^VMRL` -HJPSP[H[PUNHULMÄJPLU[JOLX\LJSLHYPUN &KHTXH5HWXUQ5DWLR commercial banking operations. As the mechanism is one of the primary duties Sampath Bank 2.8% central operation and processing unit, a allocated to the Department. To provide Industry 3.3% number of core banking functions, as well a wider reach, the NSC leverages on as a few non-core banking operations SLIPS (Sri Lanka Inter-bank Payment 5HFRYHULHV comes under the purview of the NSC and System) partnering with 6 Non Banking Being an election year, the business CCD. Financial Institutions (NBFIs). Meanwhile, environment remained ambiguous for much of 2015, as pre and post election uncertainties prompted many to opt for a wait and see approach. Meanwhile, HTPKZ[[OLSHJRVMPKLU[PÄHISLNYV^[O trends, customers were unable to clarify Core-banking Functions Non-core Banking Operations [OLPYÄUHUJPHSWVZP[PVUHUKJVU[PU\LK[V 1 Cheque Clearing 1 Cheque Image Capturing MHJLKPMÄJ\S[PLZPUYHPZPUNM\UKZULLKLK[V 2 Standing Order Instructions 2 Document Management * make settlements. Industry-wide statistics 3 Bulk Payment Processing 3 Central Bank Reporting suggest that housing loan and leasing customers were the worst affected by 4 SLIPS Payments 4 Cheque & Data Printing (Customer this market downturn, bringing with it a Statements, Advices, Notices etc.) * number of fresh challenges for the Bank’s 5 EPF, ETF & Pension Payments recoveries division.

* Outsourced

108 SAMPATH BANK PLC Annual Report 2015 Industry NPL vs Bank NPL The strategies % 6 5.58

PTWSLTLU[LKPU 5 4.25 3.70 ^LYLHPTLK 4 3.20 at reinforcing the 3

+PNP[HSIHURPUN 2 2.68 2.07 1 1.93 MYHTL^VYR 1.64 0 2012 2013 2014 2015 Bank NPL Industry NPL

This called for a renewed effort to Aside from the efforts to improve the ratio was also much healthier than the maintain loan quality and control the central recoveries model, a series of industry average of 3.20% for 2015. volume of Non Performing Advances measures were also implemented to (NPAs). Towards this end, the offer support to the branch recovery ,7 conventional recoveries model was mechanism as well. This included more It was an outstanding year for Sampath strengthened, with a strong emphasis training sessions for branch and regional Bank’s IT Department, winning three on improving the monitoring mechanism. staff to educate them on the importance prestigious accolades from both well- The main aim here was to achieve a 25% of the recovery function. A number of recognised local and foreign professional reduction in the “two-months-in-arrears” knowledge sharing sessions were also IT bodies. Undoubtedly the result of position. Accordingly, steps were taken carried out to help identify gaps and the broad-based IT strategies adopted to enhance the early warning system and curtail the number of future mistakes. by the Bank over the past years, these curb the volume of new entrants to the HJJVSHKLZYLÅLJ[[OLYVSLVM[OL0; NPA bracket. This meant additional site A culmination of these efforts meant Department in providing continuous visits and more one-on-one interactions the Bank was able to restrict the NPA support to ensure smooth integration with likely default customers. portfolio to Rs 6,289.5 Mn as at 31st of all business operations and improve December 2015, only 6% more than the V]LYHSSVWLYH[PVUHSLMÄJPLUJ`VM[OL)HUR Meanwhile, a new Delinquency previous year. The 1.64% Bank-wide NPL It also points out how IT innovations Monitoring System (DMS) was implemented to strengthen the overall IHJRVMÄJLTVUP[VYPUNTLJOHUPZT Among other things, the new system is geared to automatically segregate NPLs in line with CBSL guidelines, facilitate real-time monitoring of NPLs together with online accessibility at branch and regional level.

Further, measures were taken to automate the existing manually operated Legal Trail Register for all stakeholders to easily monitor and take required procedures. This automation will expedite the recovery process parallel to court Infosys Finacle Innovation Awards Ceremony 2015 proceedings.

SAMPATH BANK PLC Annual Report 2015 109 6WLYH[PVUHS9L]PL^Z Operational Support

their systems into the portal via APIs. They can then take advantage of the full YHUNLVMILULÄ[Z\UKLY[OL:HTWH[O For Sampath Bank, stepping into cloud Bank Corporate Payment Portal including technology has been quite comfortable as the use of the 24/7/365 day facility to its own on premise IT resources have been perform direct B2C transactions. Since prepared during past years. the launch of the facility, a number of PUZ\YHUJLÄYTZHUKÄUHUJLJVTWHUPLZ have made use of it to transfer funds from their accounts, directly to recipients via the Mobile Cash facility.

 0RYLQJWR&ORXG7HFKQRORJ\ The cloud technology model is a dynamic tool that enables businesses to tap into multiple types of IT resources by operating on a global platform to meet their business requirements. Although a fairly new concept, cloud technology has become an immensely popular business tool, used by countless global corporations and small businesses alike. Cloud technology is seen as the best way to reduce the high cost and effort of purchasing and maintaining dedicated National Best Quality Software Awards (NBQSA) Ceremony 2015 IT resources. It would also help the Bank register considerable operational have enhanced the functionality and In order to continuously enhance the LMÄJPLUJPLZHUK[VYLHKPS`H]HPSP[Z]HYPV\Z performance of Sampath Bank’s digital customer service standards, the Bank platforms to both staff and customers. banking platform, with the ultimate goal reaches out to customers and welcomes of strengthening the customers’ banking their prompt feedback. Accordingly, over For Sampath Bank, stepping in to cloud experience. 600 electronic Customer Satisfaction technology has been a quite comfortable Evaluation terminals were installed as its own on-premise IT resources have In this regard, the strategies implemented at key customer interaction points in been prepared during past years. IT in 2015 were aimed at reinforcing the branch. These units are geared to help Department initially kicked off the use Digital banking framework and overall IT customers to rate the service they have VMJSV\KPUMYHZ[Y\J[\YLMVYUVUÄUHUJPHS Z[Y\J[\YL]PZn]PZ[OLMVSSV^PUNHYLHZ" just received. If customers are unhappy M\UJ[PVUZPUJS\KPUN"L3LHYUPUNL3PIYHY` with the service, they can use the terminal and Recruitment Module of the Human  %URDGHQLQJ&XVWRPHU7RXFK to convey to the Branch Manager, any Resources Information System. Initially Points issues that they may have. seen as the test-phase, it is planned One hundred units of touch-enabled that the knowledge gained from this self-services device termed as e-Hubs  ([SDQGLQJ'LJLWDO7HFKQRORJLHV experience, would serve as a platform to have been positioned at the branch lobby The main focus was to develop the extend the use of cloud technologies to area to empower customers to access digital platform, in particular, to enhance other operational areas as well. HUKILULÄ[MYVT]HYPV\ZPU[LYUL[IHZLK the functionality of the Sampath Bank ÄUHUJPHSZVS\[PVUZVMMLYLKI`[OL)HUR Corporate Payment Portal. New such as opening a virtual account through improvements brought in during the year, Sampath Vishwa, paying a utility bill permit corporates to seamlessly integrate through Sampath PayEasy etc.

110 SAMPATH BANK PLC Annual Report 2015  'HYHORSLQJ%XVLQHVV$QDO\WLFV %$ For some years now, the IT Department’s BA techniques have been instrumental in the new product development process. Aside from this, BA data mining techniques are also used to facilitate cross selling and up selling of various products. As part of the ongoing effort to extend its use to other areas, in 2015, BA data was used to as part of the customer acquisition strategy for Sampath cards. In yet another unconventional approach, BA was used to help reduce NPLs and improve the credit quality of the advances portfolio as at 31st December 2015.

 ,PSURYLQJ&RPSOLDQFHDQG5LVN 0DQDJHPHQW3DUDPHWHUV Sampath Bank’s IT systems have always been compliant with the CBSL baseline standard (BSS). Nevertheless, in addition to this, the IT Department commenced the process of obtaining the ISO 27001 Z[HUKHYKZJLY[PÄJH[PVU>P[O over 80% of the work already done, it is expected to be completed by early 2016, making Sampath Bank among the very few banks in Sri Lanka with this JLY[PÄJH[PVUMVYHSSIHUR^PKL0;Z`Z[LTZ

SAMPATH BANK PLC Annual Report 2015 111 112 SAMPATH BANK PLC(UU\HS9LWVY[ 6WLYH[PVUHS9L]PL^Z Subsidiaries 48% PAT Growth Siyapatha Finance PLC

Rs14.6Bn Total Assets Siyapatha Finance PLC

Installation of LED Motion Sensor Lights Sampath Centre Limited

New Electrical Panel Boards Sampath Centre Limited

*VYWVYH[L6MÄJL to a Spacious New Location SC Securities (Private) Limited

195% From a business perspective, PAT Growth Siyapatha Finance PLC would be Total Assets - Siyapatha Sampath Information Finance PLC Technology Solutions THRPUNKLÄUP[LWYVNYLZZ[V^HYKZ Rs Mn Limited reaching the long-term goal of 15,000 becoming a hybrid mini bank with 12,000

a view to expanding its product 14,639 breadth by adding on a broader 78% 9,000

Total Assets ZWLJ[Y\TVMÄUHUJPHSWYVK\J[Z 10,418 Growth [OH[HYLOP[OLY[VKLÄULKHZ 6,000 8,986 Sampath Information

Technology Solutions traditional banking products. 5,811 3,000 Limited

0 2012 2013 2014 2015

SAMPATH BANK PLC Annual Report 2015 113 6WLYH[PVUHS9L]PL^Z Subsidiaries

Sampath Information Technology Solutions Ltd (SITS), recorded a successful year with turnover crossing the Rs 266 Mn mark for [OLÄYZ[[PTL7YVÄ[ before Interest and Tax, reached

Rs 52.7 Mn, a 56% Introduction of “Siyapatha Loyalty” card increase compared to 6L\DSDWKD)LQDQFH3/& The following steps would be initiated the previous year. An extremely rewarding year for K\YPUN[OLMVY[OJVTPUN`LHYZ" Siyapatha Finance PLC, the company reached new heights to record the Ongoing efforts to realign the highest ever top line and bottom line, in business model led to a gradual [OLÄUHUJPHS`LHYLUKPUNZ[+LJLTILY shift in business focus. A 2015. conscious effort is being made to develop a wider range of banking From a business perspective, the solutions, including housing loans, *VTWHU`^V\SKILTHRPUNKLÄUP[L I\ZPULZZSVHUZ[YHKLÄUHUJL progress towards reaching the long-term educational loans etc., in addition goal of becoming a hybrid mini bank to the traditional leasing, pawning with a view to expanding its product and factoring products currently breadth by adding on a broader spectrum being offered. The move is being VMÄUHUJPHSWYVK\J[Z[OH[HYLOP[OLY[V aimed at capturing a broader KLÄULKHZ[YHKP[PVUHSIHURPUNWYVK\J[Z segment of the island-wide MSME market. Steps were taken to expand the island-wide geographical footprint, by leveraging on the “Sampath” brand value. The Company 3HUIRUPDQFH6L\DSDWKD)LQDQFH3/& commissioned 5 new branches 2015 (Rs Mn) 2014 (Rs Mn) Growth during the year, 4 of which were Total Operating 1,381.5 1,198.2 15.3% outside the western province. Income As at 31st December 2015, the 7YVÄ[ILMVYL;H_ 652.5 467.1 39.7% Siyapatha network consisted of a total of 22 branches across Sri 7YVÄ[HM[LY;H_ 384.5 260.2 47.8% Lanka. Asset Base 14,639.3 10,417.8 40.5% NPL Ratio 1.3% (Industry 6.4%) 3.2% (Industry 7.2%)

114 SAMPATH BANK PLC Annual Report 2015 year and is expected to go live in the ÄYZ[X\HY[LYVM

6DPSDWK&HQWUH/LPLWHG Sampath Centre Ltd owns and manages the building at No 110, Sir James Peiris Mawatha, Colombo 02, where Sampath )HUR»ZOLHKVMÄJLVJJ\WPLZ[OLLU[PYL space. In 2015, a rental income of Rs 260 Mn was earned for the 166,899 :XM[VMÅVVYZWHJLYLU[LKV\[[V[OL OLHKVMÄJL

The following maintenance activities 5L^6MÄJL7YLTPZLZ:*:LJ\YP[PLZ were conducted during the year not only to ensure the upkeep and safety of the Introduced the “Siyapatha Loyalty” discouraged trading activities especially building and premises but also to reduce card for all leasing customers, a among large-scale local investors. VWLYH[PVUHSJVZ[Z^OLYL]LYWVZZPISL" value added initiative where the Meanwhile the long-awaited rate hike in customer can avail themselves the US proved to be another blow, with Installation of LED motion sensor of discounts and special offers many foreign participants pulling out of lights in all newly refurbished from over 30 merchants across the local share market. sections of the building. This is part the island. These include vehicle of a continuous project to install merchants, vehicle service agents, Amidst these inactive market conditions, LULYN`LMÄJPLU[SPNO[PUNZVS\[PVUZ auto shops, vehicle insurance SC Securities recorded a turnover of throughout the building. At present companies and tire houses, among Rs 40 Mn for the twelve months ending 3,767 Sq ft of space has been others. 31st December 2015. The loss of covered resulting in a 3% saving in Rs 9.9 Mn recorded at the end of 2014 the monthly energy bill. These well-articulated strategies indicate increased to Rs 17.4 Mn by end 2015. A solenoid valve switch was that Siyapatha Finance PLC is well on its installed to cut off water supply ^H`[V^HYKZILJVTPUNHM\SS`ÅLKNLK On a more positive note however, the during off-peak hours. MSME bank capable of producing JVYWVYH[LVMÄJL^HZYLSVJH[LK[VH Installation of 2 new electrical panel cohesive synergies to complement the spacious new location at 26B Alwis boards using the latest state-of- long-term goals of Sampath Bank PLC. Place, Colombo 3. Following the move, the-art safety technology at a total ZL[[PUN\WVM[OLIHJRVMÄJLVWLYH[PUN cost of Rs 15.2 Mn. 6&6HFXULWLHV 3ULYDWH /LPLWHG system (post order execution system)  6USVJH[PVUÄYLL_[PUN\PZOLYZ^LYL It was a sluggish year for the country’s HSZVYLZ\TLKPU[OLÄUHSX\HY[LYVM[OL increased from 84 to 184 and share markets characterised by low market activity and passive market 3HUIRUPDQFH6DPSDWK&HQWUH/LPLWHG sentiments, which were the result of two successive elections. The transition 2015 (Rs Mn) 2014 (Rs Mn) Growth period between the elections also 7YVÄ[ILMVYL;H_ 180.8 160.4 12.7% brought a hiatus in market activity and 7YVÄ[HM[LY;H_ 169.6 151.2 12.2% Asset Base 3,398.3 3,320.5 2.3%

SAMPATH BANK PLC Annual Report 2015 115 6WLYH[PVUHS9L]PL^Z Subsidiaries

Grow the IT services outsourcing I\ZPULZZZWLJPÄJHSS`[VL_[LUK the hardware and infrastructure From an operational perspective, the management services to wider following steps were taken during the range of corporate clients. year, to boost business volumes and As part of the expansion strategy HJOPL]LVYNHUPJI\ZPULZZNYV^[O" for the outsourcing arm, the scanning unit was moved to a Rolled out a number of new new premises. The new 3500sqft+ software solutions, including building is equipped with the an internal audit solution and latest state-of-the-art scanning specialised Fixed Assets Registry technology solutions. for Banks. Introduced a locally manufactured Meanwhile, a series of measures were Cash Deposit Machines to the [HRLU[VPTWYV]L[OLV]LYHSSLMÄJPLUJ` banking sector in collaboration with of the business, key among them being a local partner. the implementation of ISO 9001 : 2008, 13 new emergency call points Signed business partnership Quality Management Standards. The were assigned, bringing the total agreements with three international process, which kicked off in 2014 was to 30 as at December 2015. partners, namely IBM, Oracle and nearing completion as at 31st December (UHKKP[PVUHSÄYLZLUZVYZ Cisco, where SITS will act as a 2015 and is expected to be completed in and smoke alarms were also business partner in marketing their [OLÄYZ[X\HY[LYVMUL_[`LHY commissioned across the building hardware and software products at a cost of Rs 0.8 Mn. in Sri Lanka. By leveraging on  ;OLHUU\HSÄYLKYPSSHUKZHML[` the partnership with IBM, SITS procedures were implemented as managed to market the high-end per the Bank’s mandate. Ongoing servers to Sampath Bank, an ÄYLZHML[`[YHPUPUNHSZVJVU[PU\LK activity previously handled by third as part of the Business Continuity party vendors. 7SHU;V[HSÄYL[YHPUPUNZLZZPVUZ have exceeded 16 man hours for the year) A special programme was carried out to offer paramedic training to the team. In 2015, 18 team members signed up for this programme conducted by the Red Cross Society.

6DPSDWK,QIRUPDWLRQ7HFKQRORJ\ 6ROXWLRQV/LPLWHG Sampath Information Technology Solutions Ltd (SITS), recorded a successful year with turnover crossing [OL9Z4UTHYRMVY[OLÄYZ[[PTL 7YVÄ[ILMVYL0U[LYLZ[HUK;H_YLHJOLK Expansion of IT Services Outsourcing Business of SITS Rs 52.7 Mn, a 56% increase compared 3HUIRUPDQFH6DPSDWK,QIRUPDWLRQ7HFKQRORJ\6ROXWLRQV/LPLWHG to the previous year. SITS also posted a 2015 (Rs Mn) 2014 (Rs Mn) Growth WVZ[[H_WYVÄ[VM9Z4UMVY[OL`LHY Revenue 266.9 149.1 79.0% ended 31st December 2015, a 195.2% PUJYLHZLV]LY[OLWYL]PV\Z`LHY»ZÄN\YLVM 7YVÄ[HM[LY;H_ 23.1 7.8 195.2% Rs 7.8 Mn. Asset Base 416.0 234.2 77.6%

116 SAMPATH BANK PLC Annual Report 2015 Branch Network

Sampath Bank presents a range of delivery channels that aim to strike a balance between 08 Jaffna Branches traditionalism and advances in District modern technology.

Kilinochchi District G4-08 01 Branch Mullaitivu District 01 Branch 01 02 Branches Branch Mannar Vavuniya Trincomalee District District District 04 Branches

Anuradhapura 06 District Branches

08 Polonnaruwa Branches District Puttalam District 03 Batticaloa Branches District

Kurunegala 03 Branches District 12 Matale 06 Branches District Branches

Kandy District 05 15 Branches Kegalle Branches 07 Branches 28 District 225 Branches Ampara Gampaha District Branches District District 06 Moneragala Branches Badulla District Colombo District 61 District 04 Branches Branches Ratnapura 10 District 04 Branches Branches Kalutara District 07 Branches

09 Hambantota Branches 06 District Galle 08 Branches District Branches Matara 370 District ATMs

SAMPATH BANK PLC Annual Report 2015 117 6WLYH[PVUHS9L]PL^Z Branch Network

&HQWUDO3URYLQFH

Branch Name Address Telephone No Fax No E-mail Branch Code Dambulla No 622, Anuradhapura Road, Dambulla (066) 2283085/87 (066) 2283067 [email protected] 90 Digana No 42, Mahiyangana Road, Digana, Rajawella (081) 2376765/ (081) 2376765 [email protected] 85 (081) 2375340/1 Galewela No 31C, Kurunegala Road, Galewela (066) 2287725/6 (066) 2287727 [email protected] 190 No 06, Panabokke Mawatha, Gampola (081) 2350564/5 (081) 2350571 [email protected] 101 Hatton No 173, Dimbula Road, Hatton (051) 2225403/5 (051) 2225405 [email protected] 80 Heerassagala No.12, William Gopallawa Mawatha, (081) 2221810/20 (081) 2221830 [email protected] 220 Heerassagala, Kandy Kandy - Super No 19, Dalada Veediya, Kandy (081) 2232778 (081) 2232779 [email protected] 7 (081) 2233838 Kandy City Centre Shop No L 1-6, Level One, Kandy City Centre (081) 2205825/6 (081) 2205827 [email protected] 123 Building, Dalada Veediya, Kandy Kandy - Metro No 29, Cross Street, Kandy (081) 2200096/7 (081) 2200058 [email protected] 100 Katugastota No 187, Madawala Road, Katugastota (081) 2498932/4 (081) 2499123 [email protected] 32 Kundasale No 232, Digana Road, Kundasale (081) 2421763/4 (081) 2421767 [email protected] 133 Matale No 184 - 186, Trincomalee Street, Matale (066) 2223861/2 (066) 2224094 [email protected] 25 Menikhinna No 54A, Madawala Road, Menikhinna (081) 2376547/8 (081) 2376549 [email protected] 184 Nawalapitiya No 92, Gampola Road, Nawalapitiya (054) 2223277 (054) 2223920 [email protected] 195 (054) 2223700 Nuwara Eliya No 01, Lawson Street, Nuwara Eliya (052) 2222946/7 (052) 2222948 [email protected] 84 Peradeniya No 676 A, Peradeniya Road, Kandy (081) 2387876/7 (081) 2384054 [email protected] 51 Poojapitiya No. 30, 32, 34, Main Street, Poojapitiya. (081) 2307 053/4 (081) 2307 055 [email protected] 221 Pilimatalawa No 246, Colombo Road, Pilimatalawa (081) 2577341 (081) 2577396 [email protected] 150 (081) 2577336 Pussellawa No 551, Nuwara Eliya Road, Pusselllawa (081) 2478034/5 (081) 2478036 [email protected] 152 Rikillagaskada No 120, Kandy Road, Rikillagaskada (081) 2365021/2 (081) 2365023 [email protected] 163 Thalawakele No 148,Nuwara Eliya Road, Thalawakele (052) 2258912/3 (052) 2258914 [email protected] 222 Wattegama No 134/A/1, Kandy Road, Wattegama (081) 2476876/7 (081) 2470600 [email protected] 105

(DVWHUQ3URYLQFH

Branch Name Address Telephone No Fax No E-mail Branch Code Akkaraipattu No 61, Sulaiman Shopping Complex, Main (067) 2279197/8 (067) 2279199 [email protected] 111 Street, Akkaraipattu Ampara No 9, D S Senanayake Road, Ampara (063) 2223840/1 (063) 2223444 [email protected] 62 Batticaloa No 32, Thamaraikeny Road, Batticaloa (065) 2227581/2 (065) 2227583 [email protected] 107 Batticaloa 02 No. 394, Trinco Road, Batticaloa (065) 2228240 (065)-2228242 [email protected] 139 (065) 2228241 Chenkalady Main Road, Chenkalady (065) 2241348/9 (065) 2241350 [email protected] 121

Dehiattakandiya No F 79, New Town, Dehiattakandiya (027) 2250418/9 (027) 2250420 [email protected] 167 Kalmunai No 18, Police Station Road, Kalmunai (067) 2220448/9 (067) 2222020 [email protected] 112 Kaluwanchikudy Hospital Road, Kaluwanchikudy (065) 2251177 (065) 2250208 [email protected] 125 (065) 2250807 Kantale No 70/1, Agrabodhi Road, Kantale (026) 2234490/1 (026) 2234492 [email protected] 172 Kattankudy No 57,59, Main Street, Kattankudy 03 (065) 2247930/2 (065) 2247932 [email protected] 115 Kinniya No 106, 108,110 Main Road [Right Side], (026) 2236348/9 (026) 2236350 [email protected] 177 Kinniya 03 Muttur No 67, Main Street, Muttur (026) 2238181/2 (026) 2238183 [email protected] 208 Ninthavur No 45/4A, Main Street, Ninthavur (067) 2251388/9 (067) 2251390 [email protected] 185 Oddamavady Colombo Road, Mavadichenai, Oddamavady (065) 2257372 (065) 2258211 [email protected] 124 (065) 2258210 Pottuvil Cassim Moulavi Building, Main Street, Pottuvil (063) 2248194/6 (063) 2248190 [email protected] 130

Sainthamaruthu Main Street, Sainthamaruthu - 16 (067) 2225310 (067) 2225330 [email protected] 126 (067) 2225320 Trincomalee No 262, Central Road, Trincomalee (026) 2225387/8 (026) 2225389 [email protected] 66

118 SAMPATH BANK PLC Annual Report 2015 1RUWKHUQ3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Chankanai Main Street, Chankanai (021) 2250072/3 (021) 2250072 [email protected] 164 Chavakachcheri Kandy Road, Chavakachcheri (021) 2270091/2 (021) 2270093 [email protected] 169 Chunnakam No 160, K K S Road, Chunnakam (021) 2240721/2 (021) 2240723 [email protected] 128 Jaffna No 56/16, Link Road, Off Stanley Road, Jaffna (021) 2221025/6 (021) 2221027 [email protected] 120 Kayts Suruvil Road, Kayts (021) 2211611/2/3 (021) 3215428 [email protected] 171 Kilinochchi Unit 1-4, Antonipillai Building, Kilinochchi (021) 2285340/1 (021) 2285342 [email protected] 148 Manipay No 103, Jaffna Road, Manipay (021) 2255041/2 (021) 2255043 [email protected] 147 Mallavi Thunnukai Road, Mallavi (021) 3734802/3 (021) 3734804 [email protected] 174 Mannar No 28, Field Street, Ward No.06, Mannar (023) 2251320/1 (023) 2251322 [email protected] 119 Nelliady No. 169, Jaffna Road, Nelliady (021) 2262474 (021) 2264951 [email protected] 129 (021) 2264950 Thirunelveli Palaly Road, Thirunelveli North, Jaffna (021) 2224801/2 (021) 2224803 [email protected] 186 Vavuniya No. 25, Station Road, Vavuniya (024) 2222959 (024) 4589500 [email protected] 55 (024) 2226806 (024) 2225106 Vavuniya Super No:7A, Horowpatana Road, Vavuniya (024) 2226227/8 (024) 2226229 [email protected] 170

1RUWK&HQWUDO3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Anuradhapura Super 268, Maithripala Senanayake Mw, (025) 2235026 (025) 2235028 anuradhapurasuper.mgr@ 21 Anuradhapura (025) 2235027 sampath.lk Anuradhapura New No 521/19, Maithripala Senanayake Mawatha, (025) 2226190/1 (025) 2226192 anuradhapura_newt.mgr@ 168 Town New Town, Anuradhapura sampath.lk Aralaganwila No 113, New Town, Aralaganwila (027) 2257204/5 (027) 2257206 [email protected] 154 Hingurakgoda No 88, D S Senanayake Veediya, Hingurakgoda (027) 2245300/1 (027) 2245302 [email protected] 110 Kaduruwela No 626B, Dharmasiri Building, Main Street, (027) 2225567/8 (027) 2225569 [email protected] 38 Kaduruwela Kahatagasdigiliya No 67, Anuradhapura Road, Kahatagasdigiliya (025) 2247087 (025) 2247069 [email protected] 203 (025) 2247070 Kekirawa No 56, Main Street, Kekirawa (025) 2265266/7 (025) 2265268 [email protected] 149 Nochchiyagama No 62, Puttalam Road, Nochchiyagama (025) 2257332/3 (025) 2257334 [email protected] 138 Thambuththegama No 255 C, Anuradhapura Road, (025) 2276836 (025) 2275072 [email protected] 48 Thambuttegama (025) 2275072

1RUWK:HVWHUQ3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Alawwa No 9, 9/1 Giriulla Road, Alawwa (037) 2279209 (037) 2279209 [email protected] 53 (037) 2279463 Anamaduwa No 69, Galgamuwa Road, Anamaduwa (032) 2263042/3 (032) 2263044 [email protected] 143 Chilaw No 64, Colombo Road, Chilaw (032) 2222677/8 (032) 2222777 [email protected] 108 Dankotuwa No 63, Nattandiya Road, Dankotuwa (031) 2261361/2 (031) 2261360 [email protected] 196 Giriulla No 103/A, Negombo Road, Giriulla (037) 2289682 (037) 2289482 [email protected] 95 (037) 2289582 Hettipola Kurunegala Road, Hettipola (037) 2291082/3 (037) 2291084 [email protected] 187 Kuliyapitiya No 259, Madampe Road, Kuliyapitiya (037) 2281860/1 (037) 2281861 [email protected] 23 (037) 2281866 Kurunegala Metro No. 183A, Colombo Road, Kurunegala (037) 2056704/5 (037) 2056706 [email protected] 215 Kurunegala Super No 31, Negombo Road, Kurunegala (037) 2223500/2 (037) 2223509 [email protected] 6 Madampe No 16, New Town, Medagama Road, Madampe (032) 2249222 (032) 2249555 [email protected] 189 (032) 2249444 Maho No 112-114, Moragollagama Road, Maho (037) 2275170/1 (037) 2275172 [email protected] 197

SAMPATH BANK PLC Annual Report 2015 119 6WLYH[PVUHS9L]PL^Z Branch Network

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Branch Name Address Telephone No Fax No E-mail Branch Code Marawila No 87, Chilaw Road, Marawila (032) 2250862/3 (032) 2250861 [email protected] 194 Mawathagama No 95, Kurunegala Road, Mawathagama (037) 2296088 (037) 2296088 [email protected] 109 Narammala No 77 & 89 1/1, Kuliyapitiya Road, Narammala (037) 2248945/6 (037) 2248947 [email protected] 99 Nattandiya No 149, Kuliyapitiya Road, Nattandiya (032) 2250263/4 (032) 2250265 [email protected] 132 Nikaweratiya No 136, Kurunegala Road, Nikaweratiya (037) 2260918/9 (037) 2260920 [email protected] 102 Pannala No 100, Negombo Road, Pannala (037) 2246250 (037) 2245272 [email protected] 166 (037) 2245270 Puttalam No 114 A, Kurunegala Road,Puttalam (032) 2266312/3 (032) 2266314 [email protected] 156 Wariyapola 5H^PUUH6MÄJL :OVWWPUN*VTWSL_ (037) 2268707/8 (037) 2268144 [email protected] 44 Kalugamuwa Road, Wariyapola Wennappuwa No 191/A, Colombo Road, Wennappuwa (031) 2256925/7 (031) 2256926 [email protected] 30

6DEDUDJDPXZD3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Balangoda No 117, Barnes Ratwatta Mawatha, Balangoda (045) 2288793/5 (045) 2288795 [email protected] 97 Deraniyagala No 63, Noori Road, Deraniyagala. (036) 2249500 (036) 2249500 [email protected] 49 (036) 2249522 Eheliyagoda No 02, Ratnapura Road, Eheliyagoda (036) 2258031/2 (036) 2258031 [email protected] 20 Embilipitiya No 62, Main Street, Embilipitiya (047) 2261203/4 (047) 2261205 [email protected] 43 Godakawela No 204, Main Street, Godakawela (045) 2240617/8/9 (045) 2240619 [email protected] 225 Kalawana No 54/B, 54/C, Manana, Kalawana (045) 2255793/4 (045) 2255795 [email protected] 41 Kegalle No 142, 142A, Kandy Road, Kegalle (035) 2230597/8 (035) 2230519 [email protected] 64 Mawanella No 209, New Kandy Road, Mawanella (035) 2246961/2 (035) 2246963 [email protected] 160 Pelmadulla No 134, Main Street, Pelmadulla (045) 2275920/2 (045) 2275922 [email protected] 103 Rambukkana New Pradeshiya Sabha Building, Rambukkana (035) 2265641 (035) 2266244 [email protected] 188 (035) 2266466 Ratnapura No 180 – 82, Main Street, Ratnapura (045) 2232261/2 (045) 2224361 [email protected] 33 Ruwanwella No 4, Veyangoda Road, Ruwanwella (036) 2266971/2 (036) 2266973 [email protected] 201 Warakapola No 95, Kandy Road, Warakapola (035) 2267981/2 (035) 2267983 [email protected] 205

6RXWKHUQ3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Ahangama No 71A, Matara Road, Ahangama (091) 2282902/3 (091) 2282904 [email protected] 182 Akuressa No 14/16, Pitabeddara Road, Akuressa (041) 2284650/1 (041) 2284652 [email protected] 179 Ambalangoda No 118 A, New Road, Ambalangoda (091) 2255571/3 (091) 2255573 [email protected] 72 Ambalantota No 138 D, Tissa Road, Ambalantota (047) 2225506/8 (047) 2225508 [email protected] 104 Baddegama No 68, Galle-Baddegama Road,Baddegama (091) 2293230 (091) 2293232 [email protected] 118 (091) 2293231 Beliatta No 53/1, Dickwella Road, Beliatta (047) 2251551/2 (047) 2251553 [email protected] 180 Deniyaya No 69, Main Street, Deniyaya (041) 2273225 (041) 2273255 [email protected] 14 (041) 2273255 Dickwella No. 121, Main Street, Dickwella (041) 2256780/1/2 (041) 2256782 [email protected] 216 Elpitiya No 10,, Ambalangoda Road, Elpitiya (091) 2291961/2 (091) 2291963 [email protected] 204 Galle Super No 05, Wakwella Road, Galle (091) 2245646/7 (091) 2245645 [email protected] 35 Galle Bazaar ‘Krishna Building ‘, No:69, Old Matara Road, (091) 2248582/3 (091) 2248584 [email protected] 159 Pettigalawatte, Galle Habaraduwa No 1270, ‘Lanerolle’ Super Centre, Matara (091) 2282772/3 (091) 2282774 [email protected] 181 Road, Habaraduwa Kamburupitiya No 48, Mulatiyana Road, Kamburupitiya (041) 2294701/2 (041) 2294703 [email protected] 206 No 598F, Hirimbura Road, Karapitiya (091) 2248456/7 (091) 2248458 [email protected] 141 Matara Super No 3, Hakmana Road, Matara (041) 2223260/1 (041) 2223268 [email protected] 10 Matara Bazaar No 37, New Tangalle Road, Kotuwegoda, (041) 2234055/6 (041) 2234057 [email protected] 153 Matara

120 SAMPATH BANK PLC Annual Report 2015 6RXWKHUQ3URYLQFH&RQWG

Branch Name Address Telephone No Fax No E-mail Branch Code Middeniya ‘Abeysinghe Building’, Walasmulla Road, (047) 2248231/2 (047) 2248233 [email protected] 158 Middeniya Morawaka ‘Ranaweera Building’, Akuressa - Deniyaya (041) 2282310/1 (041) 2282312 [email protected] 15 Road, Morawaka

Neluwa Dellawa Road, Main Street, Neluwa (091) 3783010/11 (091) 5630690 [email protected] 54 Sooriyawewa No 6719, Ambalantota Road, Sooriyawewa (047) 2288155/6 (047) 2288157 [email protected] 157 Tangalle No 61, Muhudu Mawatha, Tangalle (047) 2241865/6 (047) 2241870 [email protected] 116 Tissamaharama No 25 – 27, Main Street, Tissamaharamaya (047) 2237056 (047) 2237058 [email protected] 28 (047) 2237058 Weligama No 253, Matara Road, Weligama (041) 2253003 (041) 2254003 [email protected] 209 (041) 2254002

8YD3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Badulla No 14, Dharmadutha Road, Badulla (055) 2225450/1 (055) 2225452 [email protected] 93 Bandarawela No 253, 255, Main Street, Bandarawela (057) 2223720/1 (057) 2223722 [email protected] 46 Bibile No 31, Mahiyangana Road, Bibile (055) 2265398/9 (055) 2265400 [email protected] 161 Buttala ‘Madurapperuma Building’, Kataragama Road, (055) 2273530/4 (055) 2273537 [email protected] 145 Buttala Mahiyangana No 28, 29, New Town, Mahiyangana (055) 2258180 (055) 2258181 [email protected] 56 Monaragala No 75, Pothuwil Road, Monaragala (055) 2277222 (055) 2277222 [email protected] 74 (055) 2277290/1 Passara No 187/1, Badulla Road, Passara (055) 2288311/2 (055) 2288313 [email protected] 146 Welimada No 54, Nuwara Eliya Road, Welimada (057) 2244466/7 (057) 2244468 [email protected] 81 Wellawaya No 70/D, Kumaradasa Mawatha, Wellawaya (055) 2274445 (055) 2274470 [email protected] 113 (055) 2274419 (055) 2274470

:HVWHUQ3URYLQFH Branch Name Address Telephone No Fax No E-mail Branch Code Aluthgama No 405, Galle Road, Aluthgama (034) 2290861/2 (034) 2290863 [email protected] 79 Athurugiriya No 106, Borella Road, Athurugiriya (011) 2563612 (011) 2156080 [email protected] 67 (011) 2156081 Attidiya No 202, Main Road, Attidiya (011) 2725668 (011) 2725668 [email protected] 89 Avissawella No 64, Yatiyanthota Road, Avissawella (036) 2222011/2 (036) 2222010 [email protected] 22 Bambalapitiya No 1-01, Majestic City, Station Road, (011) 2502686 (011) 2501829 [email protected] 11 Bambalapitiya, Colombo 04 (011) 2501829 Bandaragama No 61/A, Kalutara Road, Bandaragama (038) 2289898/9 (038) 2293056 [email protected] 59 Battaramulla No 157, Main Street, Battaramulla (011) 2861805/6 (011) 2861807 [email protected] 61 Boralesgamuwa No 192, Kesbewa Road, Boralesgamuwa (011) 2545245/6 (011) 2545248 [email protected] 142 Borella No 1022, Maradana Road, Borella, (011) 2691121-3 (011) 2686066 [email protected] 4 Colombo 08 (011) 2687222 Borella Super No. 50, Dudley Senanayake Mawatha, Colombo (011) 2695844 (011) 2695846 [email protected] 218 - 08 (011) 2695845 City No 55, D.R.Wijewardena Mawatha, (011) 2328569 (011) 2434217 [email protected] 1 Colombo 10 (011) 2434431 (011) 2447195 Colombo Super No 103, Dharmapala Mawatha, Colombo 07 (011) 2336112/3 (011) 2336115 [email protected] 175

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Branch Name Address Telephone No Fax No E-mail Branch Code Dehiwala No 155, Galle Road, Dehiwala (011) 2738481 (011) 2738461 [email protected] 17 (011) 2738422 Delgoda No 351/1, New Kandy Road, Delgoda (011) 2403383/4 (011) 2403385 [email protected] 202 Divulapitiya No 69, Kurunegala Road, Divulapitiya (031) 2243431/13 (031) 2243423 [email protected] 198 Embuldeniya No 282, Old Kottawa Road, Embuldeniya, (011) 2836410/1 (011) 2836412 [email protected] 114 Nugegoda No 98, Chatham Street, Colombo 01 (011) 2447231/2 (011) 2421453 [email protected] 12 (011) 2327379 (011) 2436889 Gampaha No 8, Mangala Road, Gampaha (033) 2226640/1 (033) 2226642 [email protected] 16 (033) 2222396

Gampaha Super No 150, Colombo Road, Gampaha (033) 2239771 (033) 2239773 [email protected] 212 (033) 2239772 Ganemulla No 367/E, Kadawatha Road, Ganemulla (033) 2264630 (033) 2265651 [email protected] 78 Gangodawila No 374, High Level Road, Gangodawila, (011) 2814147/8 (011) 2814149 [email protected] 135 Nugegoda Gothatuwa New Town No 55/4, Kotikawatta Road, Gothatuwa New (011) 2411609/10 (011) 2411612 [email protected] 173 Town Grandpass No 64, Jethawana Road, Colombo 14 (011) 2472390/1 (011) 2472392 [email protected] 127 Gregory’s Road No 106, Wijerama Mawatha, Colombo 07 (011) 2681144 (011) 2681145 [email protected] 70 Harbour View No 256, Srimath Ramanathan Mawatha, (011) 2393017 (011) 2331070 [email protected] 58 Colombo 15 Hanwella No 148/A, Pahala Hanwella, Hanwella (036) 2254445/6 (036) 2254447 [email protected] 137 Corporate Branch No 110, Sir James Peiris Mw, Colombo 02 (011) 4730305/7 (011) 5331485 [email protected] 29 (011) 2358358 Hendala No 210, Hendala Road, Hendala, Wattala (011) 2933098 (011) 2981644 [email protected] 96 (011) 2931021 Homagama No 46, 1st Lane, Station Road, Homagama (011) 2855975/6 (011) 2855985 [email protected] 69 Horana No 114, Sri Somananda Mawatha, Horana (034) 2260345/6 (034) 2260377 [email protected] 57 Ingiriya No 68D, Panadura Road, Ingiriya (034) 2268288 (034) 2268588 [email protected] 140 (034) 2268488 Ja-ela No 165, Realty Plaza, Negombo Road, Ja-ela (011) 2245896/7 (011) 2245895 [email protected] 98 Kadawatha No 174/3, Ragama Road, Kadawatha (011) 2921001/2/5 (011) 2921001 [email protected] 60 Kalutara No 312/A, Galle Road, Kalutara South, Kalutara (034) 2235600/1 (034) 2235602 [email protected] 50 Kandana No 72, Colombo Road, Kandana (011) 2229218/9 (011) 2229249 [email protected] 76 Kaduwela No 510/1 & 510/2, Avissawella Road, Kaduwela (011) 2537539/40 (011) 2537541 [email protected] 162 Karagampitiya No 182/A, Hill Street, Dehiwela (011) 2710462 (011) 2710492 [email protected] 210 (011) 2710472 Kesbewa No 76, BandaragamaRoad, Kesbewa (011)2702177 (011)2702431 [email protected] 224 (011)2702018 Keselwatta No 41A, Galle Road, Keselwatta, Panadura (038) 2299633 (038) 2299550 [email protected] 151 (038) 2299566 Kiribathgoda No 259, Kandy Road, Dalugama, Kelaniya (011) 2910457 (011) 2910515 [email protected] 5 (011) 2910514 Kiribathgoda Super No 139, Kandy Road, Kiribathgoda (011) 2910368/9 (011) 2910367 kiribathgodasuper.mgr@sampath. 200 lk Kirindiwela No 91, Gampaha Road, Kirindiwela (033) 2247150 (033) 2247150 [email protected] 83 Kirulapone No 136,138 & 140, High Level Road, Kirulapone (011) 2513828/9 (011) 2513830 [email protected] 117 Kochchikade No 163, Chilaw Road, Kochchikade (031) 2279647/8 (031) 2279522 [email protected] 165 Kohuwala No 81, S De S Jayasinghe Mawatha, Kohuwala (011) 2814480 (011) 2814480 [email protected] 94 (011) 2814455 Kollupitiya Ground Floor, Platinum Residencies Building, (011) 2590682/3 (011) 2590684 [email protected] 134 No 01, Bagatale Road, Colombo 03 Kotahena No 165, George R De Silva Mw, Colombo 13 (011) 2384010/1 (011) 2384012 [email protected] 37

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Branch Name Address Telephone No Fax No E-mail Branch Code

Kottawa No 948, High Level Road, Kottawa (011) 2782684/6 (011) 2782684 [email protected] 52 (011) 2782690 Pannipitiya No 568, High Level Road, Pannipitiya (011) 2783100 (011) 2839298 [email protected] 87 (011) 2839298 (011) 2839299 Maharagama No 81, High Level Road, Maharagama (011) 2840950-3 (011) 2851352 [email protected] 13 Maharagama Super No 200, High Level Rd, Maharagama (011) 2160381 (011) 2842442 [email protected] 92 (011) 2160380 (011) 2842442 Main Street No 84, Main Street, Colombo 11 (011) 2386732/3 (011) 2386734 [email protected] 42 Makola No 94/3A, Makola South, Makola (011) 2964978/9 (011) 2964980 [email protected] 207 Malabe No 895, Athurugiriya Road, Malabe (011) 2762222/3 (011) 2762224 [email protected] 39 Maligawatte No 65, Maligawatte Road, Colombo 10 (011) 2672507/8 (011) 2672509 [email protected] 191 Maradana No 657, Kularathne Mawatha, Maradana Road, (011) 2678541/2 (011) 2678543 [email protected] 144 Colombo 10 Marandagahamula No 86/A, Mirigama Road, Marandagahamula (031) 2243515 (031) 2243518 [email protected] 183 (031) 2243517 Mattegoda No 102/40, Salgas Junction, Mattegoda (011) 2178444/5 (011) 2178446 [email protected] 176 Matugama No 214 A, Aluthgama Road, Matugama (034) 2247233/4 (034) 2247235 [email protected] 106 Minuwangoda No 31/1, Negombo Road, Minuwangoda (011) 2299131/2 (011) 2299133 [email protected] 65 Mirigama No 54, Giriulla Road, Mirigama (033) 2276901/3 (033) 2276903 [email protected] 86 Moratumulla No 38, Sri Premarathne Mawatha,Moratumulla (011) 2654040 (011) 2654048 [email protected] 155 (011) 2654075 Moratuwa No 653, Galle Road, Rawatawatta, Moratuwa (011) 2644737/8 (011) 2644739 [email protected] 31 Mount Lavinia No 294, Galle Road, Mount Lavinia (011) 2719581/7 (011) 2719582 [email protected] 199 Mutwal No 811, Aluthmawatha Road, Colombo 15 (011) 2540575/6 (011) 2540577 [email protected] 193 Narahenpita No 475, Elvitigala Mawatha, Colombo - 05 (011) 2552820 (011) 2552822 [email protected] 40 (011) 2552821 Nawala No 143, Nawala Road, Nugegoda (011) 2812331/2 (011) 2812333 [email protected] 82 Nawala Koswatta No 49/A, Nawala Road, Koswatta (011) 2887862/3 (011) 2887864 [email protected] 223 Nawam Mawatha No 46/38, Nawam Mawatha, Colombo 02 (011) 2305025/7 (011) 2305028 [email protected] 9 Negombo No 293, Main Street, Negombo (031) 2224344/6 (031) 2224347 [email protected] 24 Negombo 02 No 203D, Telwatte Junction, Colombo Road, (031) 2221930/1 (031) 2227282 [email protected] 88 Negombo Nittambuwa ‘Sri Ramya Building’, Kandy Road, Nittambuwa (033) 2295905/6 (033) 2295907 [email protected] 71

Nugegoda No 79 A, Stanley Thillekeratne Mw, Nugegoda (011) 2856907-9 (011) 2856908 [email protected] 3 (011) 2816288 Old Moor Street No 371, Old Moor Street, Colombo 12 (011) 2452490/2, (011) 2424074 [email protected] 27 (011) 2424075 Orugodawatte 760 B, Dr Danister de Silva Mawatha, (011) 268295/6 011-2682698 [email protected] 214 Colombo 09 (011) 268298 Padukka No 15, Horana Road, Padukka (011) 2757731/2 (011) 2757733 [email protected] 192 Panadura Super No 373, Galle Road, Panadura (038) 2235100 (038) 2235101 [email protected] 26 Panadura - Wekada No 111B & 111C, Horana Road, Wekada, (038) 2244545 (038) 2244457 [email protected] 47 Panadura (038) 2244534 Pelawatte No 452, Pannipitiya Road, Pelawatta, (011) 2787209 (011) 2786118 [email protected] 63 Battaramulla (011) 2786119 Peliyagoda No 304, Negombo Road, Peliyagoda (011) 2940279 (011) 2940156 [email protected] 136 (011) 2938797 Pettah No 999, People’s Park, Bodhiraja Mw, (011) 2432324 (011) 2432303 [email protected] 2 Colombo 11 (011) 2432262 (011) 2394596

SAMPATH BANK PLC Annual Report 2015 123 6WLYH[PVUHS9L]PL^Z Branch Network

:HVWHUQ3URYLQFH&RQWG

Branch Name Address Telephone No Fax No E-mail Branch Code Piliyandala No 61, Moratuwa Road, Piliyandala (011) 2614664/5 (011) 2614664 [email protected] 19 Pitakotte No 463, Kotte Road, Pitakotte (011) 2874574 (011) 2874574 [email protected] 91 (011) 2874577 Platinum Plus No 18, Cambridge Place, Colombo 07 (011) 2695073 (011) 2695196 [email protected] 131 (011) 2695237 Prince Street No 25, Prince Street, Colombo 11 (011) 2339860 (011) 2339862 [email protected] 217 (011) 2339861 (011) 2339862 Ragama No 44/A/1, Kadawatha Road, Ragama (011) 2960659 (011) 2960659 [email protected] 73 (011) 2960629 Rajagiriya No 1596, Kotte Road, Rajagiriya (011) 2864922 (011) 2864988 [email protected] 122 (011) 2864944 Ratmalana No 261, Galle Road, Ratmalana (011) 2730820/1 (011) 2730819 [email protected] 18 Seeduwa 499, Negombo Road, Seeduwa (011) 2253553 (011) 2253555 [email protected] 213 (011) 2253554 (011) 2253555 Talahena No 557, Talangama North, Talangama (011) 2790457 (011) 2790459 [email protected] 211 (011) 2790458 Thalawathugoda No 244/4, Pannipitiya Road, Thalawathugoda (011) 2796670/1 (011) 2796672 [email protected] 178 Thimbirigasyaya No 154, Havelock Road, Colombo 05 (011) 2505001/2 (011) 2505003 [email protected] 34 Veyangoda No 121, Negombo Road, Veyangoda (033) 2296330 (033) 2296330 [email protected] 77 (033) 2293937 Wadduwa No 555, Galle Road, Wadduwa (038) 2284960 (038) 2284505 [email protected] 75 (038) 2285132 Wattala No 280, 280/1, Negombo Road, Wattala (011) 2931569/70 (011) 2931568 [email protected] 8 (011) 2941526/7 Wellampitiya No 268, Kolonnawa Road, Wellampitiya (011) 2533498 (011) 2533498 [email protected] 45 Wellawatta Super No 591A, Galle Road, Colombo 06 (011) 2507607/8 (011) 2507609 [email protected] 36 World Trade Centre Unit L03/EB/01, Level 03, East Block, World (011) 2339863 (011) 2339865 [email protected] 219 Trade Centre, Echelon Square, Colombo 01 (011) 2339864 (011) 2339865 Yakkala No 88, Kandy Road, Yakkala (033) 2232670 (033) 4674602 [email protected] 68 (033) 2234230

124 SAMPATH BANK PLC Annual Report 2015 Nostro Accounts

G4-06

Country / Name of the Bank & SWIFT Code CCY Country / Name of the Bank & SWIFT Code CCY Address Address

$XVWUDOLD +RQJNRQJ NATIONAL AUSTRALIA BANK NATAAU33 AUD SCBLHKHH HKD 800 Bourke Street, Docklands, BANK (HONG KONG) LTD Melbourne, PO Box 21, 32/F, VIC 3008, Australia Standard Chartered Bank Building, 4-4A Des Voeux Road %DQJODGHVK Central, Hong Kong, Hong Kong STANDARD CHARTERED SCBLBDDX ACU- DOLLAR BANK ,QGLD PO Box 420, Dhaka 1000 Bangladesh BANK OF CEYLON BCEYIN5M ACU- DOLLAR 1090, Poonamallee High Road, &DQDGD Chennai 600084 India BANK OF MONTREAL BOFMCAT2 CAD BANK OF CEYLON BCEYIN5M ACU- EURO 147 Laird Dr Unit 700, 1090, Poonamallee High Road, Toronto, M4G 4K1 Canada, Chennai 600084 India China STANDARD CHARTERED SCBLINBB ACU- DOLLAR BANK CITI BANK (CHINA) CO LTD CITICNSX CNY Mumbai Main -23/25, Citigroup Tower, Mahatma Gandhi Road, No 33 Hua Yuan Shi Qiao Fort, Mumbai 400001 India Road, Pudong, Shanghai 200120,China ,WDO\ 'HQPDUN UNICREDIT SPA UNCRITMM EUR Piazza Cordusio, DANSKE BANK A/S DABADKKK DKK 20123 Milan, MI, Italy Holmens Kanal 2-12, 1092 Copenhagen, BANCO.POPOLARE SOC BAPPIT22 EUR Hovedstaden, Denmark COOP Piazza Nogara 2, *HUPDQ\ 37121 Verona, VR, Italy DEUTSCHE BANK AG Japan 60262 Frankfurt am Main, DEUTDEFF EUR Germany BANK OF TOKYO MITSUBISHI BOTKJPJT JPY UFJ LTD COMMERZ BANK AG COBADEFF EUR 2-7-1 Marunouchi, 60261, Frankfurt am Main, Chiyoda-ku, Germany Tokyo 100-8388, Tokyo, Japan UNICREDIT BANK AG HYVEDEMM EUR (HYPOVEREINSBANK) STANDARD CHARTERED Postfach 100101, BANK SCBLJPJT JPY 80311 Munich, PO Box 7, Sanno Park, Germany Tokyo 100-6155 Japan

SAMPATH BANK PLC Annual Report 2015 125 6WLYH[PVUHS9L]PL^Z Nostro Accounts

Country / Name of the Bank & SWIFT Code CCY Country / Name of the Bank & SWIFT Code CCY Address Address

SUMITOMO MITSUI BANKING 6ZLW]HUODQG CORPORATION SMBCJPJT JPY 1-1-2, Marunouchi, ZUERCHER KANTONAL BANK ZKBKCHZZ80A CHF Chiyoda-ku, Bahnhofstrasse 9, Tokyo 100-0005, 8010 Zürich, Tokyo, Japan Switzerland .RUHD 8QLWHG$UDE(PLUDWHV Kookmin Bank CZNBKRSEXXX USD MASHREQ BANK PSC BOMLAEAD AED 9-1 Namdaemunno 2-ga, PO Box 1250, Jung-Gu, Seoul 100-703, Omer Bin Al Khattab Street, Korea Deira, Dubai City, UAE 1HZ=HDODQG EMIRATES NBD PJSC BANK OF NEW ZEALAND BKNZNZ22985 NZD PO Box 777, EBILAEAD AED BNZ Harbour Quays, Dubai City, UAE L5.P1, 60 Waterloo Quay, Wellington, New Zealand 8QLWHG.LQJGRP 1RUZD\ BANK OF CEYLON (UK) LTD BCEYGB2L GBP 1 Devonshire Square, DNB BANK ASA DNBANOKK NOK London, EC2M 4WD, Dronning Eufemias gate 30, UK 0191 Oslo, Oslo, Norway BARCLAYS BANK PLC BARCGB22 GBP 3DNLVWDQ 1 Churchill Place, London, E14 5HP, STANDARD CHARTERED SCBLPKKX ACU- DOLLAR UK BANK (PAKISTAN) LTD PO Box 5556, 8QLWHG6WDWHVRI$PHULFD I.I Chundrigar Road, Karachi 74000, Sindh DEUTSCHE BANK TRUST BKTRUS33 USD Pakistan COMPANY AMERICAS 60 Wall St, 6RXWK$IULFD Mail Stop NYC 60-2710, New York, NY 10005, FIRSTRAND BANK LTD FIRNZAJJ ZAR USA Alexandra Plaza, 3rd St, Alexandra, CITI BANK NA CITIUS33 USD Johannesburg South Africa 111 Wall St, New York, 10005 USA 6LQJDSRUH HSBC BANK USA NA MRMDUS33 USD UNITED OVERSEAS BANK UOVBSGSG SGD 452, Fifth Avenue, New York, LTD NY 10018, USA <6)7SHaH 9HMÅLZ7SHJL Singapore 048624 JP MORGAN CHASE BANK CHASUS33DDA USD NA OVERSEA CHINESE BANKING OCBCSGSG SGD 270 Park Avenue, CORP LTD New York, NY 10017, 65 Chulia Street, USA # 26-00, OCBC Centre, Singapore 049513, MASHREQ BANK PSC MSHQUS33 USD Singapore 50, Broadway, Suite 1500, New York, NY 10004, USA 6ZHGHQ WELLS FARGO BANK NA PNBPUS3NNYC USD SKANDINAVISKA ESSESESS SEK 375, Park Avenue, ENSKILDA BANKEN AB New Youk 10152, USA Kungsträdgårdsgatan 8, 10640 Stockholm, Sweden

126 SAMPATH BANK PLC Annual Report 2015 Correspondent Banks and Exchange Companies

230 Correspondent Banks

103 Exchange Companies

Country SWIFT Code Country SWIFT Code  $XVWUDOLD  %DQJODGHVK Australia and New Zealand Banking Group Ltd ANZBAU2S Dhaka Bank Ltd DHBLBDDH Citigroup Pty Ltd Sydney CITIAU2X Standard Chartered Bank SCBLBDDX JP Morgan Chase Bank NA CHASAU2X  %HOJLXP National Australia Bank Ltd NATAAU33 Commerzbank AG COBABEBX 2 Austria ING Belgium NV/SA BBRUBEBB Raiffeisenlandesbank RVVGAT2B KBC Bank NV KREDBEBB Unicredit Bank Austria AG BKAUATWW  %UD]LO Citibank Europe PLC CITIIE2X Deutsche Bank SA DEUTBRSP  %DKUDLQ  %XOJDULD Mashreq Bank PSC BOMLBHBM UnicreditBulbank AD UNCRBGSF

SAMPATH BANK PLC Annual Report 2015 127 6WLYH[PVUHS9L]PL^Z Correspondent Banks and Exchange Companies

Country SWIFT Code Country SWIFT Code  &DQDGD 16 France The Bank of Montreal BOFMCAT2 BNP Paribas SA BNPAFRPP HSBC Bank Canada HKBCCATT Union de BanquesArabes et Francaises (UBAF) UBAFFRPP Royal Bank of Canada ROYCCAT2 Deutsche Bank AG DEUTFRPP Bank of Nova Scotia NOSCCATT Commerzebank AG COBAFRPX  &KLOH Credit Lyonnais CRLYFRPP Banco del Estado de Chile BECHCLRM  *HUPDQ\ Banco de Chile CITICLRS Unicredit Bank AG (Hypovereinsbank) HYVEDEMM 10 China Commerzbank AG COBADEFF Industrial and Commercial ICBKCNBJ Deutsche Bank AG DEUTDEMM Bank of China DNB Bank ASA DNBADEHX Bank of China BKCHCNBJ 18 Greece Citibank (China) Co Ltd CITICNSX National Bank of Greece SA ETHNGRAA Commerzbank AG COBACNSX  +RQJ.RQJ Deutsche Bank (China) Co Ltd DEUTCNSH BNP Paribas BNPAHKHH HSBC Bank (China) Co Ltd HSBCCNSH Citibank NA CITIHKHX JP Morgan Chase Bank CHASCNSH (China) Co Ltd Commerzbank AG COBAHKHX Standard Chartered Bank SCBLCNSX Deutsche Bank AG DEUTHKHH (China) Ltd Hongkong & Shanghai Banking Corporation Ltd HSBCHKHH Wells Fargo Bank NA PNBPCNSH JP Morgan Chase Bank NA CHASHKHH  &\SUXV Standard Chartered Bank (Hong Kong) Ltd SCBLHKHH Societe Generale Cyprus Ltd SOGECY2N UBAF (Hong Kong) Ltd UBAFHKHX Wells Fargo Bank NA PNBPHKHH  &]HFK5HSXEOLF Shinhan Bank SHBKHKHX Commerzbank AG COBACZPX Bank of America N A BOFAHKHX Unicredit Bank Czech Republic And Slovakia BACXCZPP AS Woori Bank Hong Kong HVBKHKHH  'HQPDUN  +XQJDU\ Danske Bank A/S DABADKKK CIB Bank Ltd CIBHHUHB DNB Bank ASA DNBADKKX Commerzbank Budapest RT COBAHUHX Nordea Bank Denmark A/S NDEADKKK  ,QGLD  (J\SW Bank of Ceylon BCEYIN5M Arab International Bank ARIBEGCX Citibank NA CITIINBX Mashreq Bank MSHQEGCA Deutsche Bank AG DEUTINBB  )LQODQG The Hongkong& Shanghai Banking Corporation HSBCINBB Ltd Nordea Bank Finland PLC NDEAFIHH ICICI Bank Ltd ICICINBBCTS Danske Bank DABAFIHX Mashreq Bank MSHQINBB DNB Bank ASA DNBAFIHX Standard Chartered Bank SCBLINBB SkandinAvinska Enskilda Banken ESSEFIHX SBININBB

128 SAMPATH BANK PLC Annual Report 2015 Country SWIFT Code Country SWIFT Code AxisBankTradeFinance Ctr AXISINBBTFC Wells Fargo Bank NA PNBPJPJX Karur Vysya Bank Ltd KVBLINBB Okazaki Shinkin Bank OKSBJPJZ Punjab National Bank PUNBINBB Sumitomo Mitsui Banking Corp, Osaka SMBCJPJTOSA IDIBINBB Resona Bank Ltd DIWAJPJT Tamilnad Mercantile Bank LTD TMBLINBB Saitama Resona Bank SAIBJPJT HDFC Bank Ltd HDFCINBB Yokohama Shinkin Bank YOKOJPJM  ,QGRQHVLD  .XZDLW Citibank NA CITIIDJX Citibank NA CITIKWKW Deutsche Bank AG DEUTIDJA National Bank of Kuwait NBOKKWKW The Hongkong and Shanghai Banking HSBCIDJA  0DOD\VLD Corporation Ltd Citibank Berhad CITIMYKL Bank Mandiri (Persero) PT BMRIIDJA Deutsche Bank (Malaysia) Bhd DEUTMYKL Standard Chartered Bank SCBLIDJX HSBC Bank Malaysia Berhad HBMBMYKL Bank Negara Indonesia PT BNINIDJA Persero Standard Chartered Bank Malaysia Bhd SCBLMYKX  ,UHODQG Malayan Banking Berhad MBBEMYKL Bank of Ireland BOFIIE2D 29 Mauritius Citibank Europe PLC CITIIE2X Mauritius Commercial Bank Ltd MCBLMUMU  ,VUDHO Barclays Bank Mauritius Ltd BARCMUMU Banco Santander Mexicano BMSXMXMM Bank Leumi le – Israel BM LUMIILIT  ,WDO\  0DOGLYHV Bank of Ceylon BCEYMVMV BancaNazionale del LavoroSPA BNLIITRR Bank of Maldives PLC MALBMVMV Banca UBAE SPA UBAIITRR Commerzbank AG COBAITMM  1HSDO UnicreditSPA UNCRITMM Standard Chartered Bank Nepal Ltd SCBLNPKA BancaPopolareSoc Coop BAPPIT22  1HWKHUODQGV 26 Japan Commerzbank AG COBANL2X Australia and New Zealand Banking Group ANZBJPJX Deutsche Bank AG DEUTNL2A Ltd ING Bank NV INGBNL2A Citibank Japan Ltd CITIJPJT  1HZ=HDODQG Commerzbank AG, Tokyo COBAJPJX ANZ Bank New Zealand Ltd ANZBNZ22 Deutsche Bank AG DEUTJPJT Bank of New Zealand BKNZNZ22 The Hongkong and Shanghai Banking HSBCJPJT Citibank NA CITINZ2X Corporation Ltd Standard Chartered Bank SCBLJPJT The Hongkong& Shanghai Banking Corporation Ltd HSBCNZ2A Mizuho Bank Ltd MHCBJPJT  1RUZD\ Sumitomo Mitsui Banking Corporation SMBCJPJT DNB Bank ASA DNBANOKK The Bank of Tokyo – BOTKJPJT Nordea Bank Norge ASA NDEANOKK Mitsubishi UFJ Ltd ScandinAviska Enskilda Banken ESSENOKX JP Morgan Chase Bank NA CHASJPJT

SAMPATH BANK PLC Annual Report 2015 129 6WLYH[PVUHS9L]PL^Z Correspondent Banks and Exchange Companies

Country SWIFT Code Country SWIFT Code  2PDQ Union de BanquesArabes et Francaises (UBAF) UBAFSGSX HSBC Bank Oman S.A.O.G BBMEOMRX United Overseas Bank Ltd UOVBSGSG Standard Chartered Bank SCBLOMRX  6RXWK$IULFD  3DNLVWDQ ABSA Bank Ltd ABSAZAJJ SCB Pakistan Ltd SCBLPKKX FirstRand Bank Ltd FIRNZAJJ  3KLOLSSLQHV Ned Bank Ltd NEDSZAJJ Citibank NA CITIPHMX  6RXWK.RUHD Deutsche Bank AG DEUTPHMM Citibank Korea Inc CITIKRSX The Hongkong & Shanghai Banking HSBCPHMM Deutsche Bank AG DEUTKRSE Corporation Ltd The Hongkong & Shanghai Banking Corporation HSBCKRSE  3RODQG Ltd Bank Handlowy w Warszawie SA CITIPLPX JP Morgan Chase Bank NA CHASKRSX Pko Bank Polski SA NDEAPLP2 Standard Chartered Bank Korea Ltd SCBLKRSE Union de BanquesArabes ET Francaises UBAFKRSX  3RUWXJDO (UBAF) BNP Paribas Sucursal EM Portugal BNPAPTPL Wells Fargo Bank NA PNBPKRSX  4DWDU Kookmin Bank CZNBKRSE HSBC Bank Middle East Ltd BBMEQAQX Industrial Bank of Korea IBKOKRSE Mashreq Bank MSHQQAQA Korea Exchange Bank KOEXKRSE  5RPDQLD Shinhan Bank SHBKKRSE Banca Comerciala Romana SA RNCBROBU Woori Bank HVBKKRSE  6DXGL$UDELD  6SDLQ Saudi Hollandi Bank AAALSARI Banco Bilbao VizcayaArgentaria SA BBVAESMM The National Commercial Bank NCBKSAJE Banco Santander SA BSCHESMM The Saudi British Bank SABBSARI Commerzbank AG COBAESMX Al Ra jhi Bank RJHISARI  6ZHGHQ Al Inma Bank INMASARI Danske Bank DABASESX  6LQJDSRUH Skandinaviska Enskilda Banken ESSESESG The Bank of Tokyo- Mitsubishi BOTKSGSX Svenska Handelsbanken HANDSESS UFJ Ltd  6ZLW]HUODQG Citibank NA CITISGSG Credit Suisse AG CRESCHZZ Commerzbank AG COBASGSX  7DLZDQ DBS Bank Ltd DBSSSGSG Citibank Taiwan Ltd CITITWTX Deutsche Bank AG DEUTSGSG Deutsche Bank AG DEUTTWTP The Hongkong & Shanghai Banking Corporation HSBCSGSG Ltd HSBC Bank (Taiwan) Ltd HSBCTWTP JP Morgan Chase Bank NA CHASSGSG JP Morgan Chase Bank NA CHASTWTX Mizuho Bank Ltd MHCBSGSG Mizuho Bank Ltd MHCBTWTP Oversea-Chinese Banking Corporation Ltd OCBCSGSG Standard Chartered Bank (Taiwan) Ltd SCBLTWTP Standard Chartered Bank SCBLSGSG Wells Fargo Bank NA PNBPTWTP

130 SAMPATH BANK PLC Annual Report 2015 Country SWIFT Code Country SWIFT Code  7KDLODQG  8QLWHG.LQJGRP Citi Bank NA CITITHBX Bank of Ceylon(UK) Ltd BCEYGB2L Deutsche Bank AG DEUTTHBK Barclays Bank PLC BARCGB22 The Hongkong & Shanghai Banking HSBCTHBK Citibank NA CITIGB2L Corporation Ltd HSBC Bank PLC MIDLGB22 Kasikornbank Public Company Ltd KASITHBK JP Morgan Chase Bank NA CHASGB2L Standard Chartered Bank (Thai) PCL SCBLTHBX Standard Chartered Bank SCBLGB2L Ltd BHOBTHBK Wells Fargo Bank NA PNBPGB2L Export Import Bank of Thailand EXTHTHBK  8QLWHG6WDWHVRI$PHULFD Bank of Ayudhya Public co ltd AYUDTHBK Citibank NA CITIUS33 Siam Commercial Bank PCL SICOTHBK Deutsche Bank AG DEUTUS33  7XUNH\ Deutsche Bank Trust Company Americas BKTRUS33 HSBC Bank AS HSBCTRIX HSBC Bank USA NA MRMDUS33 Turk EkonomiBankasi AS TEBUTRIS JP Morgan Chase Bank NA CHASUS33 ING BANK AS INGBTRIS MashreqBank PSC MSHQUS33 Asya Katilim Bankasi AS ASYATRIS Standard Chartered Bank SCBLUS33  8QLWHG$UDE(PLUDWHV Wells Fargo Bank NA PNBPUS3NNYC Citibank NA CITIAEAD Bank of America NA BOFAUS3M HSBC Bank Middle East Ltd BBMEAEAD Bank of New York Mellon IRVTUS3N MashreqBank PSC BOMLAEAD Wells Fargo Bank NA PNBPUS33 Standard Chartered Bank SCBLAEAD Wells Fargo Bank NA PNBPUS33PHL Habib Bank AG Zurich HBZUAEAD  9LHWQDP Emirates NBD bank PJSC EBILAEAD Citi Bank NA CITIVNVX

Country Name of Exchange Company Country Name of Exchange Company

Colombo Money Transfer Turbo Cash HCH Holdings Travelex Bahrain WLL Kingdom of Bahrain Kapruka PTY LTD Lulu International Exchange B S C Bahrain Lanka Currency Converter Bahrain Finance Company CO WLL Loga International PTY LTD H S Communication Canada Remittance Plus G S Cash Line Australia Sri Cash Remittance Sigue Money Transfer Cyprus T S S World Wide Money Transfer PTY LTD Masari Payment Services LTD Trans Cash International ARY Speed Remit National Finance & Exchange Co Wall Street Exchange Aust Forex & Finance UAE Habib Exchange Foreign Exchange Central UAE Exchange PNG Lanka Management Services Leela Megh Exchange

SAMPATH BANK PLC Annual Report 2015 131 6WLYH[PVUHS9L]PL^Z Correspondent Banks and Exchange Companies

Country Name of Exchange Company Country Name of Exchange Company Emirates India International Exchange City Exchange Al Rostamani International Exchange Islamic Exchange Al Ahalia Exchange Al Zaman Exchange Al Ansari Exchange Lari Exchange U Remit International Gulf Exchange Lulu Exchange Al Mana Exchange Co WLL Sharaf Exchange Al Dar For Exchange Works Prabhu Group INC Qatar Al Saad Exchange Co WLL Delma Exchange Habib Qatar UAE Trans Fast Remittance LLC Doha Exchange Al Hamed Exchange Travelex Qatar Mawrid Exchange Al Mirqab Alfalah Exchange Al Jazeera Exchange Qatar Multinet Trust Exchange LLC Eastern Exchange Arab Link National Exchange CO WLL Qatar Joalukkas - UAE Al Raji E pay Progoti Exchange Company Tahweel KSA GCC Exchange UK Limited Alinma Bank Saudi Arabia Instant Cash Enjaz Bank Al Bilad Israel Nero Transfer LTD Arab National Bank NEC Money Transfer SA Spain Italy Samba Bank National Exchange Company Money Exchange SA Spain Al Falah Exchange NEC Money Transfer SA Spain Jordan ARY Speed Remit H S Communication Al Awneh Exchange United Kingdom Thilina Sri Lanka Al Mulla Exchange Aftab Currency Exchange Limited Bahrain Finance Company Co.WLL (EZ Korea Kookmin Bank Remit) USA Xoon Corporation Kuwait Bahrain Exchange Company WLL France Tempo France Dollarco Exchange Aman Exchange 6DPSDWK%DQN3/&DOVRDFWVDVDQDJHQWRI Joalukkas - Kuwait IROORZLQJ*OREDO&RPSDQLHV IME (M) SDN BHD Malaysia Moneygram International Prabhu Group INC Sigue Money Transfer New Zealand Kapruka New Zealand Xpress Money Oman & UAE Exchange Centre Ez-Remit Travelex Oman Instant Cash Global Money Transfer Oman Purshottam Kanji Exchange Ria Financial Services Al Jadeed Exchange Prabhu Group INC Doha Bank Placid Express Qatar Al Fardan Exchange

132 SAMPATH BANK PLC Annual Report 2015 Investor Information

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2015 2014 Change % Net assets per share (Rs) 203.85 179.39 13.64 Group earnings per share - Basic (Rs) 38.44 30.55 25.83 Dividend per share (Rs) 13.00 11.00 18.18 Market price per share as at 31st December 248.00 236.30 4.95

G4-09

Bank’s Market Capitalisation Rank Dividend per Share Earnings and Highest Rs Market Price per Share Rs Rs

50 280 300 20 15 13 252 17 242 16 12 40 240 12 11 216 15

15 30 38.4 180 13 9 8 32.6 10 30.6 20 120 6 21.7

5 10 60 3

0 0 0 0 2012 2013 2014 2015 2012 2013 2014 2015 2012 2013 2014 2015 Earnings per Share - Group Highest Market Price per Share - Bank

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2015 2014 2013 2012 2011 Sampath Bank market capitalisation (Rs Mn) 42,734 39,677 28,843 32,628 30,587 Increase / (decrease) % in market capitalisation 8% 38% (12%) 7% (26%) CSE market capitalisation (Rs Mn) 2,938,000 3,104,860 2,459,900 2,167,581 2,213,873 As a % of CSE market capitalisation 1.45% 1.28% 1.17% 1.50% 1.38% Market capitalisation rank 15 17 16 13 16

SAMPATH BANK PLC Annual Report 2015 133 6WLYH[PVUHS9L]PL^Z Investor Information

Shareholders’ Fund Composition of Bank’s ROE and Share Ownership - 2015 Market Interest Rates Rs Mn (No of Shareholders) % % 25 40,000 22.3 5.0 35,000 4.7 20 18.4 30,000 16.4

35,125 15 12.9 25,000 51.1 30,912

20,000 28,418 25,644

10 13.1

15,000 12.0 11.1 10.6 9.1 10,000 39.2 5 7.2 6.7 6.6 5,000 0 0 2012 2013 2014 2015 2012 2013 2014 2015 Shares 500 & Less Shares 5,001-10,000 Average of 12 Months AWFDR Shares 501-5,000 More than 10,000 Shares Average of 12 Months T.B. Rate ROE

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31st December 2015 31st December 2014 No of No of % No of No of % Shareholders Shares Shareholders Shares Resident shareholders 17,177 141,053,133 81.86 17,364 138,232,554 82.33 Non resident shareholders 338 31,259,522 18.14 324 29,677,699 17.67 17,515 172,312,655 100.00 17,688 167,910,253 100.00

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31st December 2015 31st December 2014 No of No of % No of No of % Shareholders Shares Shareholders Shares Individuals 16,933 58,173,217 33.76 17,152 59,630,792 35.51 Institutions 582 114,139,438 66.24 536 108,279,461 64.49 17,515 172,312,655 100.00 17,688 167,910,253 100.00

134 SAMPATH BANK PLC Annual Report 2015 &RPSRVLWLRQRI6KDUH2ZQHUVKLS 

31st December 2015 31st December 2014 No of % No of % No of % No of % Shareholders Shares Shareholders Shares Shares 500 & less 8,947 51.08 1,701,151 0.98 8,725 49.33 1,697,166 1.01 Shares 501-5,000 6,861 39.17 11,125,275 6.46 7,198 40.69 12,253,292 7.30 Shares 5,001-10,000 820 4.68 5,755,486 3.34 878 4.96 6,154,091 3.66 More than 10,000 shares 887 5.07 153,730,743 89.22 887 5.02 147,805,704 88.03 17,515 100.00 172,312,655 100.00 17,688 100.00 167,910,253 100.00

Bank’s Market Composition of Share Trading - Sampath Bank PLC Capitalisation Share Ownership - 2015 No of Shares Traded Rs Mn (No of Shares) Mn % 50,000 50 48 1.0 6.5 3.3 40,000 40

30,000 42,734 30 39,677 29 28 27 20,000 32,628 20 28,843

10,000 10 89.2 0 0

Shares 500 & Less Shares 5,001-10,000 2012 2013 2014 2015 2012 2013 2014 2015 Shares 501-5,000 More than 10,000 Shares

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2015 2014 2013 2012 2011 No of transactions 1,506,790 1,982,709 1,421,303 1,857,384 4,579,352 No of shares traded 9,414,661,048 16,721,524,209 9,054,193,822 9,691,236,634 24,543,700,782 Value of shares traded (Rs Mn) 253,251 340,917 200,468 213,827 546,255

SAMPATH BANK PLC Annual Report 2015 135 6WLYH[PVUHS9L]PL^Z Investor Information

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2015 2014 2013 2012 2011 No of transactions 14,460 18,403 19,212 13,473 15,335 No of shares traded 26,898,512 27,712,319 47,891,453 28,871,254 26,951,903 As a % of total shares in issue 15.61 16.50 28.54 17.74 17.18 Average daily turnover (Rs Mn) 29.22 24.34 39.75 22.55 30.23 Value of shares traded (Rs Mn) 6,982.39 5,866.37 9,620.18 5,457.94 7,225.70

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2015 2014 2013 2012 2011 Lowest market price (Rs) 235.20 164.20 161.60 148.50 191.00 Highest market price (Rs) 279.90 252.00 242.00 216.00 307.00 Closing Price as at 248.00 236.30 171.90 200.50 195.00 31st December (Rs)

Gross Dividend Shareholding of Rs Mn Individuals and Institutions %

2,500 100 93 65 64 66

2,000 80 2,240.0 1,500 60 1,954.1 1,847.0

1,000 40 1,342.6 35 36 34 500 20 7 0 0 2012 2013 2014 2015 2012 2013 2014 2015 Individuals Institutions

136 SAMPATH BANK PLC Annual Report 2015 Bank’s Share Price Share Trading - Sampath Bank PLC Fluctuation Rs

300 279.9 2,000 20

252.0 242.0 16 250 1,500 216.0 235.2 12 200 1,000 8

150 164.2 500 161.6 4 148.5

100 0 0 2012 2013 2014 2015

Lowest Market Price Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Highest Market Price Turnover (Rs Mn) Volume Traded (No Mn) Closing Price as at 31st December

6DPSDWK%DQN3/&2UGLQDU\6KDUHV   Frequency Distribution of Shareholders as at 31st December 2015

Resident Non-Resident Total Share Range Share No of Shareholders % No of Shares % No of Shareholders % No of Shares % No of Shareholders % No of Shares %

1-250 4,729 27.00 352,353 0.2045 69 0.39 6,356 0.0037 4,798 27.39 358,709 0.2082

251-500 4,102 23.42 1,326,478 0.7698 47 0.27 15,964 0.0093 4,149 23.69 1,342,442 0.7791

501-1,000 2,789 15.92 1,924,988 1.1171 46 0.26 32,629 0.0189 2,835 16.18 1,957,617 1.1361

1,001-2,000 2,105 12.02 3,035,952 1.7619 43 0.25 60,417 0.0351 2,148 12.27 3,096,369 1.7969

2,001-5,000 1,834 10.47 5,929,673 3.4412 44 0.25 141,616 0.0822 1,878 10.72 6,071,289 3.5234

5,001-10,000 795 4.54 5,594,167 3.2465 25 0.14 161,319 0.0936 820 4.68 5,755,486 3.3401

10,001-20,000 434 2.48 6,031,333 3.5002 21 0.12 309,470 0.1796 455 2.60 6,340,803 3.6798

20,001-30,000 149 0.85 3,571,982 2.0730 9 0.05 223,732 0.1298 158 0.90 3,795,714 2.2028

30,001-40,000 63 0.36 2,175,926 1.2628 4 0.02 145,909 0.0847 67 0.38 2,321,835 1.3475

40,001-50,000 26 0.15 1,176,825 0.6830 2 0.01 85,708 0.0497 28 0.16 1,262,533 0.7327

50,001-100,000 71 0.41 4,853,141 2.8165 5 0.03 308,302 0.1789 76 0.44 5,161,443 2.9954

100,001-1,000,000 69 0.39 20,740,479 12.0365 15 0.09 6,005,207 3.4851 84 0.48 26,745,686 15.5216

1,000,001-over 11 0.06 84,339,836 48.9458 8 0.05 23,762,893 13.7906 19 0.11 108,102,729 62.7364

Total 17,177 98.07 141,053,133 81.8588 338 1.93 31,259,522 18.1412 17,515 100.00 172,312,655 100.0000

SAMPATH BANK PLC Annual Report 2015 137 6WLYH[PVUHS9L]PL^Z Investor Information

6DPSDWK%DQN3/& 2UGLQDU\6KDUHV  Top 20 Shareholders as at 31st December 2015

No Shareholder Name 31st December 2015 31st December 2014* No of Shares Ratio (%) No of Shares Ratio (%) 1 VALLIBEL ONE PLC 25,765,740 14.95 25,107,454 14.95 2 MR Y S H I SILVA 17,194,764 9.98 16,750,207 9.98 3 EMPLOYEES PROVIDENT FUND 17,184,045 9.97 16,745,012 9.97 4 ROSEWOOD (PVT) LIMITED-ACCOUNT NO 1 11,697,866 6.79 11,789,746 7.02 5 HSBC INTL NOM LTD-BBH-MATTHEWS INTERNATIONAL FUNDS- 7,897,235 4.58 7,166,493 4.27 MATTHEWS ASIA GROWTH FUND 6 HSBC INTL NOM LTD-STATE STREET LUXEMBOURG C/O SSBT-ABN AMRO 4,490,278 2.61 4,375,557 2.60 MULTI-MANAGER FUNDS 7 NORTHERN TRUST CO S/A CARAVEL FUND ( INTERNATIONAL ) LTD 3,890,000 2.26 5,536,155 3.30 8 SAMPATH BANK PLC ACCOUNT NO 04 (SAMPATH BANK PENSION FUND) 2,806,857 1.63 2,735,145 1.63 9 HSBC INTL NOM LTD-BBH-MATTHEWS EMERGING ASIA FUND 2,483,749 1.44 1,938,144 1.15 10 AKBAR BROTHERS PVT LTD A/C NO 1 2,166,038 1.26 1,555,914 0.93 11 MR B A MAHIPALA 1,707,215 0.99 1,663,598 0.99 12 EMPLOYEES TRUST FUND BOARD 1,595,032 0.93 4,268,091 2.54 13 SRI LANKA INSURANCE CORPORATION LTD-LIFE FUND 1,595,024 0.93 287,487 0.17 14 KEYSTONE (PRIVATE) LIMITED 1,473,738 0.86 1,436,086 0.86 15 MELLON BANK N A-UPS GROUP TRUST 1,395,502 0.81 1,359,849 0.81 16 HINL-JPMCB-BUTTERFIELD TRUST (BERMUDA) LIMITED 1,345,690 0.78 1,311,310 0.78 17 NORTHERN TRUST COMPANY S/A ASHMORE EMERGING MARKETS 1,220,958 0.71 166,389 0.10 FRONTIER EQUITY FUND 18 NATIONAL SAVINGS BANK 1,153,517 0.67 - - 19 CITIBANK NEW YORK S/A NORGES BANK ACCOUNT 2 1,039,481 0.60 - - 20 NORTHERN TRUST GLOBAL SERVICES ASHMORE SICAV EMERGING 920,352 0.53 464,957 0.28 MARKETS FRONTIER EQUITY FUND A SUB FUND OF ASHMORE SICAV 109,023,081 63.28 104,657,594 62.33

Total No of shares registered 172,312,655 100.00 167,910,253 100.00 Total No of shares unregistered - - - - Total No of shares issued 172,312,655 100.00 167,910,253 100.00

Shares held by Directors ** 105,250 0.06 102,563 0.06 Shares held by Institutions 114,139,438 66.24 108,279,461 64.49 Balance held by Public 58,067,967 33.70 59,528,229 35.45 Total No of shares issued 172,312,655 100.00 167,910,253 100.00

% Shares held by Public - 83.33 - 83.31 % Shares held by Directors and Related Parties - 16.67 - 16.69

* Shareholding as at 31st December 2014 of the top twenty shareholders as at 31st December 2015. ** Mr Dhammika Perera is the Chairman of Vallibel One PLC as well as Sampath Bank PLC, total shares held by Vallibel One PLC is categorised under institutions.

138 SAMPATH BANK PLC Annual Report 2015 'LYLGHQG3D\PHQW'HWDLOV  Year Total Dividend Paid Dividend per Share 7YVÄ[MVY[OL@LHY Dividend Payout Rs Mn Rs Rs Mn Ratio 2000 58.70 1.75 402 14.60% 2001 52.14 1.75 322 16.19% 2002 88.57 2.00 441 20.08% 2003 (Interim) 59.78 2.00 561 14.58% 2003 (Final) 21.99 2004 (Interim) 65.98 2.00 621 16.15% 2004 (Final) 34.30 2005 (Interim) 87.14 2.00 821 14.54% 2005 (Final) 32.21 2006 155.47 2.50 1,028 15.12% 2007 206.66 3.00 1,052 19.64% 2008 256.65 4.00 1,414 18.15% 2009 436.19 6.25 2,098 20.79% 2010 1,235.86 8.09 3,303 37.42% 2011 1,426.98 9.00 3,819 37.37% 2012 1,954.10 12.00 5,230 37.36% 2013 1,342.63 8.00 3,430 39.13% 2014 1,847.01 11.00 4,914 37.59% 2015 (Proposed) 2,240.06 13.00 6,134 36.52%

5HFRUGRI6FULS,VVXHV  Capitalized Year Issue Basis New No of Shares Stated Capital Reason for Issue (Rs Mn) 2010 Interim Scrip dividend for 2010 1 for 120.74 627,596 1,786.25 Increase stated capital 2011 Final Scrip dividend for 2010 1 for 43.39 3,521,294 2,701.79 Increase stated capital 2012 Final Scrip dividend for 2011 1 for 43.06 3,682,039 3,523.87 Increase stated capital 2013 Final Scrip dividend for 2012 1 for 33.12 4,916,007 4,457.89 Increase stated capital 2015 Final Scrip dividend for 2014 1 for 38.14 4,402,402 5,381.40 Increase stated capital 2016 (Proposed) Final Scrip dividend for 2015 1 for 36.91 4,668,414 6,471.19 Increase stated capital

SAMPATH BANK PLC Annual Report 2015 139 6WLYH[PVUHS9L]PL^Z Investor Information

5HFRUGRI6XEGLYLVLRQV  Year Issue Basis New No of Stated Capital Reason for Issue Shares (Rs Mn) 2010 Consolidation and subdivision 11 for 10 6,888,762 1,581.65 Increase in liquidity 2010 Subdivision 1 for 1 76,403,986 1,786.25 .PM[ILULÄ[[VZOHYLOVSKLYZ

(PSOR\HH6KDUH2SWLRQ3ODQ  Year Issue Basis New No of Stated Capital Reason for Issue Shares (Rs Mn) 2011 ESOP 2% of issued shares 524,924 2,743.78 )LULÄ[MVYZ[HMMTLTILYZ 2012 ESOP 2% of issued shares 2,200,436 3,564.17 )LULÄ[MVYZ[HMMTLTILYZ 2013 ESOP 2% of issued shares 134,933 4,460.34 )LULÄ[MVYZ[HMMTLTILYZ 2014 ESOP 2% of issued shares 122,648 4,470.15 )LULÄ[MVYZ[HMMTLTILYZ

'HEHQWXUH,QIRUPDWLRQ  $  0DUNHW9DOXHV  Debentures - 2012/2017 Highest (Rs) Lowest (Rs) Year End (Rs) 2015 2014 2015 2014 2015 2014 Fixed - 16.5% 110.00 114.32 100.00 100.00 107.00 114.32 Fixed - 15.0% 121.00 108.13 106.00 100.10 106.00 107.00 Floating rate NT 100.00 NT 100.00 NT 100.00

NT - Not Traded

Debentures - 2013/2018 Highest (Rs) Lowest (Rs) Year End (Rs) 2015 2014 2015 2014 2015 2014 Fixed - 13.4% NT 110.02 NT 102.80 NT 110.02 Fixed - 13.0% 107.85 118.84 107.85 101.00 107.85 118.84

NT - Not Traded

140 SAMPATH BANK PLC Annual Report 2015 'HEHQWXUH,QIRUPDWLRQ&RQWG

Debentures - 2014/2019 Highest (Rs) Lowest (Rs) Year End (Rs) 2015 2014 2015 2014 2015 2014 Fixed - 8.25% 100.95 100.40 94.66 100.40 94.66 100.40 Fixed - 8.10% 94.08 100.00 94.08 100.00 94.08 100.00

Debentures - 2015/2020 Highest (Rs) Lowest (Rs) Year End (Rs) 2015 2014 2015 2014 2015 2014 Fixed - 9.90% 99.87 NA 99.87 NA 99.87 NA Floating NT NA NT NA NT NA

NA - Not Applicable NT - Not Traded

% ,QWHUHVW5DWHV

Debentures - 2012/2017 2015 2014 Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 16.5% 16.50% 16.50% 16.50% 16.50% Fixed - 15.0% 15.00% 16.08% 15.00% 16.08% Floating rate * * * *

* Floating rate is equivalent to the six month treasury bill rate (gross) plus 2.0 % p.a. payable half yearly

Debentures - 2013/2018 2015 2014 Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 13.4% 13.40% 13.40% 13.40% 13.40% Fixed - 13.0% 13.00% 13.42% 13.00% 13.42%

Debentures - 2014/2019 2015 2014 Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 8.25% 8.25% 8.25% 8.25% 8.25% Fixed - 8.10% 8.10% 8.26% 8.10% 8.26%

Debentures - 2015/2020 2015 2014 Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 9.90% 8.25% 8.25% NA NA Floating * * NA NA

NA - Not Applicable

*Floating rate is equivalent to the six month net treasury bill rate plus 1.25% p.a. payable half yearly.

SAMPATH BANK PLC Annual Report 2015 141 6WLYH[PVUHS9L]PL^Z Investor Information

&  ,QWHUHVW5DWHRI&RPSDUDEOH*RYHUQPHQW6HFXULWLHV*URVV5DWHV

2015 2014

3 Month Treasury Bill 7.09% 6.38% 6 Month Treasury Bill 7.43% 6.49%

'  &XUUHQW

NT - Not Traded

Debentures - 2013/2018 Fixed Fixed 13.40% 13.00% 2015 2014 2015 2014 Current yield NT 12.17% 12.44% 10.94% Yield to maturity of last trade NT 11.72% 9.91% 7.51%

Debentures - 2014/2019 Fixed Fixed 8.25% 8.10% 2015 2014 2015 2014 Current yield 8.72% 8.25% 9.78% 8.10% Yield to maturity of last trade 9.92% 8.25% 9.92% 8.10%

Debentures - 2015/2020 Fixed Floating 9.90% 2015 2014 2015 2014 Current yield 10.16% NA NT NA Yield to maturity of last trade 9.93% NA NT NA

NT - Not Traded and NA - Not Applicable

(  5DWLRV%DQN 2015 2014 Debt to equity ratio (%) 104.84 76.52 Interest cover (Times) 6.02 6.60 Quick asset ratio (%) 78.64 84.56

142 SAMPATH BANK PLC Annual Report 2015 Our commitment towards corporate sustainability is absolute

Corporate Citizenship

What Corporate Citizenship Means to Us Caring for Our People Supporting Our Clients Informing Our Investors Collaborating with Our Partners Strengthening Our Communities Preserving Our Environment

SAMPATH BANK PLC Annual Report 2015 143 *VYWVYH[L*P[PaLUZOPW

What Multi – Channel Corporate Distribution Strategy Citizenship

Means to Us Empower the Community through Sampath Saviya Programme As a bank, our goal is to respond to the emerging needs of the people, businesses, and communities we serve today, as well as those we will serve tomorrow.

We live in an era of never-before seen sector and support the evolving lifestyles economic, social and environmental of individual consumers. Even as we gear change. The depletion of natural V\YZLS]LZ[VM\SÄSS[OLZLKLTHUKZ^L 5E CSR Platform resources, rise of youth unemployment, remain cautious about the impact on the ageing population and increased urban environment. This has inspired us to work migration are some of the more pressing towards becoming a truly “Green” bank. global issues that will have profound To carry out these goals, we rely heavily consequences on generations to come. on our team of 3,993 dynamic individuals We believe, the time has come for who are the driving force behind our private citizens, the business community, success. Over the years we have worked governments and civil society to join hard to build an empowered workforce by forces in meeting these challenges and investing in our people so that they may, seizing new opportunities that would in turn, serve the needs of our customers, Strengthening the Transformative lay the foundation for progressive clients, investors, and communities. CSR Model development in the future.

We feel it is our duty to lead by example in delivering sustainable economic, social and environmental advancement for Sri Lanka. As a bank, our goal is to respond to the emerging needs of the people, businesses, and communities we serve today, as well as those we will serve tomorrow. To this end, we are always Strengthening Green pursuing fresh ideas on how to reach Banking Initiatives out to the unbanked, empower new entrepreneurs, strengthen the corporate

144 SAMPATH BANK PLC Annual Report 2015 6WDNHKROGHU6WUDWHJLHV G4-24,26,27

(03/2<((6 Strategies *2$/ &DULQJIRU2XU3HRSOH Attraction of best talents from the market Development within through training & development Develop a culture where people can Employee engagement make a difference both as individuals and  )LULÄ[ZJOLTLZ as a team Rewards & recognition Grievance Handling Occupational health & safety and employee welfare

&86720(56 Strategies 3/$1 Product innovation *2$/ 6XSSRUWLQJ2XU&OLHQWV Service excellence Create a stable and progressive banking Technology-driven banking solutions environment, which renders high quality Promoting island-wide customer inclusiveness banking solutions together with adequate Promoting bankability among an island-wide customer information for the customer to make an network informed decision Establishing of a broader based SME lending across the country Ethical lending practices  ,UOHUJPUNÄUHUJPHSTHYRL[H^HYLULZZVM[OLJ\Z[VTLY Complaint resolution Maintaining customer privacy

6+$5(+2/'(56

Strategies *2$/,QIRUPLQJ2XU,QYHVWRUV Consistent bottom line Ensuring sustainable return on investment Support shareholder wealth creation Transparency and responsible stewardship and generate sustainable growth 0$1$*( Maintaining the Bank's reputation and credibility Compliant with good governance Safeguard asset quality

6833/,(56

675$7(*<(;(&87,213/$7)250 Strategies *2$/&ROODERUDWLQJZLWKRXU3DUWQHUV Laid down supplier selection policy Tender procedure that optimises the level of competition To adopt a transparent sourcing throughout the supplier selection process mechanism that would ensure fair and Ethical sourcing practices equitable purchasing practices Local sourcing and inclusive sourcing policy Effective dispute resolution mechanism

62&,(7< Strategies *2$/6WUHQJWKHQLQJ2XU&RPPXQLWLHV Community development and capacity building Education and literacy Lend a helping hand to resolve ,03529( Health and nutritional development of society community-based socio-economic issues Ethical sourcing in line with national priorities

(19,5210(17 Strategies *2$/3UHVHUYLQJ2XU(QYLURQPHQW Reduction of the Bank's carbon footprint Adopt green management practices and Managing the impact on the environment  9LZV\YJLLMÄJPLUJ` operational procedures to mitigate the environmental impact of the business

SAMPATH BANK PLC Annual Report 2015 145 *VYWVYH[L*P[PaLUZOPW

Caring for Our G4-EC 05 0DQDJHPHQW$SSURDFK Today’s challenging business environment and increased complexity People require us to take a proactive approach in order to derive a dynamic, people-driven organization. It is hoped that by building a sound HR framework in this And so we believe that by respecting, manner, we will be able to keep pace with the growing caring for and nurturing each and ZVWOPZ[PJH[PVUVM:YP3HURH»ZÄUHUJPHSZ`Z[LTHUKHKKYLZZ every one of our 3,993 employees, the challenges arising from the business evolution process. we are helping them to become ambassadors of progress for the future of Sampath Bank PLC and -24,26,27 0DQDJHPHQW3KLORVRSK\ G4 indeed the nation as a whole. Commitment to create an environment conducive for the employees to develop and reach their potential, both professionally and personally We have always been passionate Primary Engagement Frequency of Matters of Relevance about our employees and have Mechanisms Engagement continued to work tirelessly to create a solid Human Resources (HR) “Open door” policy R Ethical employment model that will lay the foundation for Employee forums P practices sustainable growth in the years to Employee wellbeing Employee suggestions schemes R come. And so we continue to follow Work-life balance Grievance Handling procedure R policies and practices that are in Career development Employee social committees R strict conformity with all relevant local Rewards / recognition Feedback forms A labour statues, and internationally Talent development Business unit level meetings R recognized best practices and good Employee governance mechanisms for fair and Intranet 24/7 communications Memorandums R equitable workforce management. Circulars R It is hoped that by building a sound News letters Q HR framework in this manner, we will Training R be able to keep pace with the growing Get-together / Events R ZVWOPZ[PJH[PVUVM:YP3HURH»ZÄUHUJPHS :HTWH[O,TWSV`LL5V[PÄJH[PVU 24/7 system and address the challenges System (SENS) arising from the business evolution CSR projects R process. A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 - 7 days 24 hrs

&KDOOHQJHVDQG6WUDWHJLHV over the past few years. Meanwhile, the us now as well as in the longer term. Of late, the changing demographics of ever-changing economic and regulatory Summarized below are some of these Sri Lanka’s banking sector has not only environment in the country alongside key challenges and the steps taken to PU[LUZPÄLK[OLSL]LSVMJVTWL[P[PVUHTVUN advancements in technology have also counteract these issues in order to help the established players but also freely NP]LUYPZL[VHU\TILYVMZWLJPÄJ/9 minimize the downside risks to both the encouraged new entrants to the market challenges, which are likely to affect LTWSV`LLHZ^LSSHZ[OL)HUR"

Key Challenge Strategic Focus Issues resulting from business “Consolidation” as opposed to Further strengthen HR as a strategic business partner to cater to “Expansion” changing business model Enhancing Employee Productivity, in response to declining Re-assessing manpower requirements in line with Strategic Net Interest Margin and growing market competition Business Objectives

146 SAMPATH BANK PLC Annual Report 2015 Key Challenge Strategic Focus Risk of Manual Skill obsolence due to greater automation / Improve employee sustainability through reskilling and cross- digitization functional development together with the realignment of business functions in order to provide potential new opportunities for reskilled talent Demand for high-quality competent personnel to facilitate a Encourage “Develop from within” philosophy to develop team sustainable HR pipeline for the future members for the future Become an “Employer of Choice” by encouraging employees Create a safe and secure work environment that promotes to serve in a diverse, multi-cultural work environment equality and diversity together with a healthy work-life balance

+5DVD6WUDWHJLF%XVLQHVV3DUWQHU 5HFUXLWPHQW3ROLF\ Subsequent to our rapid expansion Sampath Bank’s recruitment policy is phase, we now expect to move onto structured to attract the best talent and a chapter of consolidation in the next in order to do so, we continue to make >LOH]LHS^H`Z few years. It is therefore critical, that we improvements to our existing model in been passionate improve the overall competitiveness and order to complement the demands of the LMÄJPLUJ`VM[OLI\ZPULZZTVKLS0U market and response to the emerging HIV\[V\Y we further strengthened the HR function needs of the generation “Y” as a strategic business partner and a key LTWSV`LLZHUK participant in the overall business strategy %HQHðWVDQG5HZDUGV of Sampath Bank PLC. Employees are the lifeblood of our OH]LJVU[PU\LK business, which is why it is vital that we [V^VYR[PYLSLZZS` To achieve this, we realized it is essential retain a strong and committed team at that we reconsider the way in which we all times. It is why we have made sure to create a manage the following components of our [OH[V\YILULÄ[Z[Y\J[\YLWYV]PKLZTHYRL[ ZVSPK/\THU HR framework. 9LZV\YJLZ/9 TVKLS

To better navigate the current environment and contribute to the overall sustainability Inter Branch/Department Quiz Competition GOAL of our business

SAMPATH BANK PLC Annual Report 2015 147 *VYWVYH[L*P[PaLUZOPW Caring for Our People

G4-LA 02

6DPSDWK%DQN%HQHðW6WUXFWXUH

Permanent Contract Differently-abled Employees Employees Employees

7YVÄ[)VU\Z © © ©

Salary Increments © On renewal of © agreement Allowances (As applicable) ©©©

Reimbursement of course fees / Examination fees © - © 4VUL[HY`)LULÄ[Z Medical Facilities (Staff & Family) © - ©

Insurance Facilities (24 hour) ©©© Holiday Bungalow Facilities ©©©

Special Non-technical Training on Meditation, Yoga, First Aid, Life ©©© Skills, etc

)LULÄ[Z Special Programs for Children of Team Sampath (i.e. Daru ©©©

Non-monetary Daskam, Rewards for Children and Yong Leadership Development Program)

Employees are the lifeblood of our business, which is why it is vital that we retain a strong and committed team at all times. It is why we have made sure that V\YILULÄ[Z[Y\J[\YL provides market Athletic Meet 2015 competitive pay and rewards, in order to motivate and retain the highest quality people for our team.

148 SAMPATH BANK PLC Annual Report 2015 competitive pay and rewards, in order to exchange ideas with team members at to this, employees by prior appointment motivate and retain the highest quality all levels of the business. In this regard, can, meet the Managing Director, people for our team. we work with Sampath Bank Employee members of the Corporate Management Association (SBEA), which comprises of or any other member of the senior Moreover, we review salaries once in nearly 98% of our team. Regarded as management to discuss matters relevant two years and salary increments are a key stakeholder of the business, the to business or otherwise. determined based on related factors . For SBEA is held equally accountable for the year 2015, we have increased salaries of Bank’s overall performance. Although no The formal employee grievance handling HSSJVUÄYTLK[LHTTLTILYZI`  formal agreement exists between the two mechanism also provides a platform for parties, the understanding between the employees to resolve grievances, if any. Furthermore, a comprehensive review Bank and the SBEA has always been a The review of the process conducted in VM[OLILULÄ[Z[Y\J[\YLPZHSZVJHYYPLK productive one. We continue to leverage 2015 did not necessitate any changes out by the HR Department, to assess on the strength of this relationship to to the existing model and 39 employee the need for improvements, if any that achieve our corporate goals and broader grievances were successfully resolved may be deemed necessary in line with strategic vision. using the current employee grievance current market expectations. Revisions mechanism. [V[OLILULÄ[Z[Y\J[\YLZH^[OLMVSSV^PUN With regard to operational changes, they JOHUNLZJVTLPU[VLMMLJ[K\YPUN[OL`LHY" are planned and developed with the (IIHFWLYH3HRSOH0DQDJHPHQW active participation of all team members Practices The Eligibility Criteria for Staff concerned. As they are fully aware of With the decline of Net Interest Margin Housing Loans was revised, and any potential changes that are likely to (NIM), our priority for 2015 was to therefore in addition to employees affect them, no additional notice period is improve the cost to income ratio, with 05 years service in the Bank, required to provide to the team members which largely underpinned our people [OLJVUÄYTLKLTWSV`LLZ^OV prior to the implementation of such management approach for the year. Re- reach 28 years of age also can changes. assessing our manpower requirements now apply for a housing loan. in line with our business priorities, we  *VUÄYTLKLTWSV`LLZ^OVOH]L Meanwhile, to increase the effectiveness ZV\NO[[VIVVZ[WYVÄ[WLYLTWSV`LLI` been in service for more than of our internal communications and to improving employee productivity, but 03 years will now be eligible for facilitate access to more information, without reducing the existing cadre. “Customer Rate Vehicle Loans”. we continue to improve other channels Employees with 5 years experience of communication as well. The intranet Among the key developments were, is considered for Vehicle Loans. facility is one of the main access points the introduction of “Deposit Kiosks” at Introduced a Special Staff Vehicle available for employees to receive branches, to relieve frontline employees Loan scheme for Operations corporate information. Further, Sampath of many routine tasks. This together with Assistants, Drivers and Electricians ,TWSV`LL5V[PÄJH[PVU:`Z[LT:,5: certain process improvements, helped to who have completed 10 years of JVU[PU\LZ[VILHWYVTW[HUKLMÄJPLU[ contain the staff cadre and improve the JVUÄYTLKZLY]PJL tool to send important information to productivity levels of the branch teams. employees, via SMS. G4-11/LA 04/LA 08/HR 04

(PSOR\HH5HODWLRQV3ROLF\ The “In – Business Forum” is another Develop Employee In the current challenging economic unique initiative, conducted regularly Productivity in environment, we believe that constructive by the Bank to provide employees with order to counteract dialogue plays a crucial role in the the opportunity to discuss matters of declining NIM and progress of our business. We do not have business interest with the Managing growing market any collective bargaining agreements Director one-to-one basis. In addition GOAL competition with the trade union. Over the years, we have worked to build a strong rapport through regular communication and

SAMPATH BANK PLC Annual Report 2015 149 *VYWVYH[L*P[PaLUZOPW Caring for Our People

Among the key Seeking Alternative developments were, Solutions the introduction of “Deposit Kiosks” at From a HR perspective, we strive an improvement in overall employee to encourage team members to productivity. Given these obvious branches, to relieve concentrate more on developing ILULÄ[Z^LKLJPKLK[VL_WHUK[OL frontline employees their competencies in banking number of non-banking functions activities rather than performing that we outsource. In 2015, the of many routine mundane non-banking Wharf handling service of the Bank tasks. This together operations. Through experience, Notes Operations department, cash we have found this can be sorting operations of Central Cash with certain process achieved through outsourcing Department and the stationary these non-banking functions. distribution process handled improvements, helped A highly cost-effective solution, by Logistics Department were to contain the staff outsourcing helps to release staff outsourced, releasing team members from performing non-banking to be engaged in more productive cadre and improve the functions thereby contributing to tasks. productivity levels of

the branch teams. the opportunity for survey participants to receive evaluations from their immediate work cycle. +\YPUN[OL We then looked at streamlining Further, a comprehensive reward the current employee performance `LHY^LOH]L scheme “Special Thanks And management model, in order to improve invested Recognition Scheme” (STARS) was the people productivity. Introduced during year 2015 in order 9Z4U to motivate and drive team Sampath to As an initial step towards performance- achieve higher level of performance. based incentive scheme we launched the VU/\THU performance-based bonus scheme for ,PSURYLQJ(PSOR\HH members of the Corporate Management. 9LZV\YJL 6XVWDLQDELOLW\ +L]LSVWTLU[ We have come to realize that our Steps were taken to revamp the growing reliance on automation performance evaluation mechanism would likely result in a degree of and embrace a more inclusive appraisal counterproductive manpower, as strategy. Towards this end, we made automation replaces certain every-day a concerted effort to enhance the manual tasks. Counteracting these feedback skills of our people, as we challenges, while improving manpower believe that a reliable feedback culture could become an effective tool in the employee performance evaluation To respond to the process. Accordingly, in 2015 we initiated obsolescence of the 3600 evaluation mechanism for Average Training manual skills due to members of the Corporate Management Hours greater automation/ and Chief Managers. It is a multi-source digitization assessment technique, which provides 35.4 GOAL Per Employee per Annum

150 SAMPATH BANK PLC Annual Report 2015 productivity levels, would require the deployment of extensive training and development to reskill employees. We have understood that this could only be achieved by a systematic, long-term strategy aimed at regenerating the skills of our workforce in line with new job responsibilities.

7UDLQLQJDQG'HYHORSPHQW3ROLF\ >P[OYLZWLJ[[VMVYTHSQVIZWLJPÄJ training, we deploy targeted people strategies aimed at motivating and retaining people by providing compelling opportunities for both personal and Inter Department Regional Cricket & Netball Carnival professional development.

'HYHORSLQJ(PSOR\HHVIURP:LWKLQ Assessing “Branch We believe, that in order to achieve sustainable results it is critical to create a Bench Strength” (BBS) high quality leadership pipeline within the Bank, while raising self-awareness among In 2015, we conducted a This in turn points to better working our people so that they can better plan comprehensive review of conditions and higher overall quality their careers. our overall workforce, their of employment. Starting with a review of our leadership- competency levels and the learning model, we have put in place relevance of their skills in the In the event a branch recorded a low a number of initiatives to promote the modern business context. BBS reading, we then concentrated “Develop from Within” rationale. Key our efforts on developing critical among them is the Executive Talent We used the BBS index, as a skills, offering mixed solutions for Development Programme, a progressive baseline to measure the cross- both technical and behavioural new approach that seeks to produce a functional capabilities of branch training. Alternating between on- vital leadership pipeline from candidates employees. The BBS seeks to the-job learning with traditional assess the degree of job rotation classroom training, we then offered who are currently serving within the senior and multi skill level of employees. alternative plans to manage job- executive to senior manager grades (both Measured on a scale of 0-4, a rotations. Further, we initiated PUJS\ZP]L;OLZWLJPÄJVIQLJ[P]LZVM[OL high BBS score indicates strong special knowledge sharing sessions WYVNYHTTLHYL" cross-functional capabilities of and branch level training sessions to Identify, select and develop a pool the staff, resulting in a healthy help team members sharpen their of talented Senior Executives job-rotation index at the branch. cross-functional capabilities. It is / Senior Managers capable of A high BBS index also means hoped that these experiences would supporting the Bank’s current and that certain members of the enable an exchange of expertise future business requirements branch team can be released and perspectives that improves  *SHZZPM`PKLU[PÄLKJHUKPKH[LZ for training or leave allocations, the ability of our people to analyse, based on their potential / without any disruption to the discuss and more important things performance and introduce core activities of the branch. they encounter on daily basis. development interventions coupled with business strategy of the Bank Integrate dynamic learning tools into the employee development processes

SAMPATH BANK PLC Annual Report 2015 151 *VYWVYH[L*P[PaLUZOPW Caring for Our People

To ensure a As in the past, in this year too, we continuous Talent have continued to invest in providing Pipeline to feed the additional development opportunities HR needs of the to help our people unlock their full Bank potential. The Harvard Business School, GOAL USA, scholarship programme is one such initiative that has been in place for Industrial Disputes the past few years. In 2015, 5 Senior Managers were fully sponsored by the Bank to attend this prestigious 6 Day Candidates are then developed Zero course. To complement this initiative through a strategic career mapping and a new e-learning module, was also planning process. Further, we focused While we may on occasion counsel, and PU[YVK\JLKPU(MÄSPH[LK[V[OL on increasing the accountability of our Management curriculum of the Harvard if necessary, discipline employees who managers so that they may be better Business School, this new e-learning tool act contrary to the Bank’s accepted equipped to foster the development of was extended to 30 Senior Managers in policies and procedures, we believe that their people and promote the behaviours 2015. no punishment should violate the human that we consider critical to achieving rights of the individual. Also physical business objectives. A total of 232 team G4-HR 03,05,06,08,09 punishment is strictly prohibited under members across the Bank, were selected any circumstances. 3URYLGLQJD)XOO\ñHGJHG:RUN for the Executive Talent Development (QYLURQPHQW programme in 2015, of which 57 were Further, we do not accept or condone +XPDQ5LJKWV women. any aspect of forced labour as we Sampath Bank PLC has always been believe, employees choose to work for committed to maintain a workplace Mentoring and coaching to hone the us at their own volition. We have always environment which is safe and necessary skills of team members is yet adhered to and strictly enforced laws comfortable to work in. To achieve this another key aspect of the programme. against child labour. goal, we remain committed to respect In this regard “Sampath Mentoring” the human rights of each and every programme has proven to be an Given this strict code of ethics, during employee on our team as well as all invaluable tool in aligning team members the reporting period, there have been no our business operations. Our non- to the Bank’s value culture and helping reported incidents of discrimination or discriminatory approach prevents us them to understand the importance of violation of human rights of any member from discriminating against any employee making a positive impact on the Bank’s of our team or any person or group in based on their ideological views, race, triple bottom line. These mentoring society including, the rights of indigenous colour, religion, gender, sexual orientation sessions are meant to help future leaders people. or any other status protected by law. map their personal career development plans. 'LYHUVLW\DQG,QFOXVLRQ >LILSPL]LHKP]LYZPÄLK^VYRMVYJL Given the growing reliance on mentoring, enables us to better understand the local To be branded as we took steps to expand the framework cultures, business opportunities and client an “Employer of by appointing 199 new mentors in 2015 needs. We therefore strive to promote Choice” from the Branch network. These mentors diversity at all levels in our organization are expected to provide necessary in an effort to generate value for all support to team members, including Z[HRLOVSKLYZVMV\YI\ZPULZZPUJS\KPUN" trainees who seek special assistance in GOAL employees, customers, communities and resolving work-related issues. shareholders.

152 SAMPATH BANK PLC Annual Report 2015 Our non-discriminatory approach is one that promotes equal opportunities HUKJYLH[LZHSL]LSWSH`PUNÄLSKMVYHSS employees. To follow through on this promise we have established clear guidelines for all our HR processes and practices. Meanwhile we rely on our communication framework to raise awareness regarding the value of diversity and to imbue a culture of inclusion at all levels of the business.

*HQGHU(TXDOLW\ Promoting gender balance at all levels of our organization has become a Bank- Annual Dinner Dance-Sampath Nite 2015 wide priority and we aim to ensure that each business unit maintains an G4-LA 06 carried out on 26th August 2015. During appropriate gender ratio. the year, we also appointed 52 “Floor 3LHKLYZ¹H[[OL/LHK6MÄJLI\PSKPUN Moreover, we have worked to increase to provide assistance in a disaster the percentage of women in leadership situation. This was followed by a special positions by making a concerted effort to training session, conducted by the “Fire increase female representation in senior Brigade” to create awareness regarding management positions. [OLWYVWLY\ZLVMÄYLL_[PUN\PZOLYZHUK related equipment. We also introduced a 6XSSRUWLQJWKH'LIIHUHQWO\DEOHG paramedic-training programme, for which As always, we remain committed 52 employees voluntarily participated. to building a culture of inclusion that facilitates collaboration across Zero Injuries We extend our safety culture beyond generations and supports people Related to occupational health and safety our own team and strive to inculcate who are differently abled. In working best practices among security service to minimize the barriers faced by the G4-LA 05,07,08/HR 07 personnel deployed to our premises, differently abled, our goal is to provide by our outsource partners. As at 31st 2FFXSDWLRQDO+HDOWKDQG6DIHW\ them with opportunities to help them December 2015, we had 745 security Being a bank, there is a very low risk unlock their potential and become persons working in Sampath Bank of accidents arising directly from our productive members of society. They are premises across the Island. Of this, a total operations. Nevertheless, creating a considered to be no different from any of 527 (71%) persons participated in the hazard free environment has always other team member and are entitled to two half-day training sessions, which we been a key priority for Sampath Bank [OLM\SSYHUNLVMILULÄ[ZSLHYUPUNHUK conducted to highlight the importance of PLC underpinned by our Zero accident career development opportunities that [OLMVSSV^PUN" accompany their pay grade. policy. Even though we do not have and occupational health and safety Roles and responsibilities of committee, we have set-out clear We currently engage 9 differently-abled professional security guards guidelines to ensure the safety of all those PUKP]PK\HSZH[PKLU[PÄLKWVZP[PVUZ^P[OPU Precautionary steps to be taken by within our premises at any given time the Bank. the security personnel, in the event of an emergency We have in place a strict emergency WYVJLK\YLPUJS\KPUN[OLHUU\HSÄYL drill. In 2015, approximately 1,130 Being a Bank our employees do not LTWSV`LLZWHY[PJPWH[LKPU[OLÄYLKYPSS involve in activities which adversely impact their health and safety

SAMPATH BANK PLC Annual Report 2015 153 *VYWVYH[L*P[PaLUZOPW Caring for Our People

>LZ[YVUNS` ILSPL]LH^VYR LU]PYVUTLU[ [OH[MHJPSP[H[LZH OLHS[O`^VYRSPML IHSHUJLOHZH WVZP[P]LPTWHJ[

VULTWSV`LL Sampath Service Awards 2015 ^LSSILPUN Safety aspects pertaining to the :RUNOLIH%DODQFH TV[P]H[PVUHUK electrical power system We strongly believe a work environment Safety and maintenance of the that facilitates a healthy work-life WYVK\J[P]P[` generator equipment balance has a positive impact on  7YVWLY\ZLVMÄYLÄNO[PUN employee wellbeing, motivation and equipment productivity. Investing in services to help our colleagues to better manage their personal and family needs has become a crucial part of our HR framework.

Sampath “Daru Daskam” 2015

154 SAMPATH BANK PLC Annual Report 2015 The special stress-management training and yoga sessions conducted by the Bank were found to be popular among employees, with over 41 team members participating in each of the 2 sessions conducted during the year. Meanwhile, the holiday bungalow facility was upgraded and a new corporate bungalow in Nuwara Eliya, was added to the existing portfolio, expanding the number of holiday bungalows to 6.

In an ongoing effort to provide multiple engagement opportunities, we have Rewards for Children 2015 implemented a robust activity calendar. :VTLVM[OLRL`L]LU[ZMVY^LYL" Extending the The Inter-department quiz competition: The event which “Sampath Family” Concept was held on 26th April 2015, saw the participation of 196 Teams We have always understood that “Rewards for Children” - This representing Sampath Bank’s the long term commitment of our is a special award scheme branches and/or departments employees will depend not only to recognize achievements Athletic Meet: The largest sports on the direct engagement facilities of children of team members event in the annual Sampath event offered to them, but also on the who have excelled in calendar. Conducted for the 03rd opportunities provided to their competitive examinations consecutive year, the 2015 event families as well. In this regard our and/or sports, in a given year. recorded the largest-ever number focus has mainly been on the In 2015 a total of 34 children of participants with over 1,200 health, safety and education of the were felicitated, being those athletes of the Sampath Family children of our employees. And so who excelled in year-05 Inter Department/Region Cricket we continue to invest in a broad Scholarship examination, and Netball Carnival, held on range of initiatives aimed at building Ordinary Level Examination, 22nd November 2015, with the a solid foundation for these future Advanced Level candidates participation of 29 cricket teams leaders of our country. Among the accepted to local Universities and 10 mixed Netball teams from key initiatives for the year are: and achievements in sports. across the branch network Annual Dinner Dance – “Sampath Sampath Daru Daskam – An “Yong Leadership Night”, held on 7th November annual competitive event Development Program” 2015 organized by Sampath Bank – A unique leadership “Service Awards” – The “Sampath to recognize special talents of development program Service Awards – 2015” was children of Team Members, conducted for children of organized to felicitate 64 members PUJS\KPUN":WLLJO:PUNPUN Sampath team members of team Sampath who have Instrumental Music, Art etc. by Sampath Bank in-house completed 25 years of service with In 2015, more than 400 Toastmasters Club. 40 the Bank. contestants between the children between the ages of ages of 4 and 17 competed 13 and 16, participated in this in 4 age groups, with 195 23 hour, special program held winners being recognized at on 4 and 5 July 2015. the awards ceremony held on 30th May 2015.

SAMPATH BANK PLC Annual Report 2015 155 *VYWVYH[L*P[PaLUZOPW Caring for Our People

1HZ5HFUXLWV G4-LA 01 New Recruits - Age Group & Gender Male Female Total Above 55 - - - 51 - 55 - - - 41 - 50 - 01 01 31 - 40 01 01 02 21 - 30 43 62 105 18 - 20 16 16 32 Total 60 80 140 Percentage 43% 57%

New Recruits - Region & Gender Male Female Total Central 020204 Eastern 06 01 07 Northern 01 - 01 North Central 01 02 03 North Western 07 02 09 Sabaragamuwa 03 02 05 Southern - 04 04 Uva 010102 Western 39 66 105 Total 60 80 140 Percentage 43% 57% 7XUQRYHU Turnover - Age Group & Gender Male Female Total Above 55 01 - 01 51 - 55 08 05 13 41 - 50 01 05 06 31 - 40 16 09 25 21 - 30 69 31 100 18 - 20 01 01 02 Total 96 51 147 Percentage 65% 35%

Turnover - Region & Gender Male Female Total Central 040206 Eastern 10 01 11 Northern 03 02 05 North Central 02 - 02 North Western 03 02 05 Sabaragamuwa 04 - 04 Southern 03 02 05 Uva 030104 Western 64 41 105 Total 96 51 147 Percentage 65% 35%

156 SAMPATH BANK PLC Annual Report 2015 Reason for Turnover Male Female Total Join with Other Competitive Organizations 17 - 17 Join with Other Organizations 12 06 18 Migration 19 16 35 Higher Studies 13 02 15 Personal Reasons 10 19 29 Retirement 07 05 12 Other 18 03 21 Total 96 51 147

G4-LA 03 5HWXUQWR:RUNDQG5HWHQWLRQ5DWHVDIWHU3DUHQWDO/HDYH

Description 2015 2014 Employees Entitled for Maternity Leave 1398 1369 Employees Taking Maternity Leave 121 131 Employees returning to Work after Maternity Leave 121 131 Employees still Employed 12 Months after Taking Maternity Leave 107 125 Return to Work after Maternity Leave 100% 100% Retention Rate 89% 95%

/RVW'D\V $EVHQWHHLVPGXHWR+HDOWKDQG6DIHW\,VVXHV1RQH G4-LA 06

$YHUDJH+RXUVRI7UDLQLQJSHU

Training Program Gender Wise Employee Category (Average Training Hours) Corporate Senior Executive Middle Junior Operational Participants Man Hours Management Management Management Management Management Staff Male Female Male Female Human Rights 33 28 327 278 2 41 241 179 118 24 Branch Banking 19,586 16,683 69,632 59,317 583 2,792 5,807 17,148 18,257 83,529 Legal & Good Governance 45 39 332 283 16 22 46 473 18 40 Risk & Compliance 59 49 663 565 387 24 121 164 156 352 Audit, Finance & Accounting 33 29 555 473 27 117 216 393 106 169 Procedures Customer Service, Selling & 629 535 3,379 2,879 10 50 353 360 505 4,958 Marketing Leadership & Skills 68 58 797 679 206 570 402 281 8 8 IT Skills 54 47 553 471 90 297 197 387 26 27 Total 20,507 17,468 76,238 64,944 1,321 3,912 7,384 19,385 19,194 89,106 Percentage 54% 46% 54% 46% 1% 3% 5% 14% 14% 63%

SAMPATH BANK PLC Annual Report 2015 157 *VYWVYH[L*P[PaLUZOPW Caring for Our People

Programs for Skills Management and Lifelong Learning that Support the Continued Employability of Employees and Assist Them in Managing Career Endings

G4-LA 10 &RPSHWHQF\$UHDZLVH6XPPDU\

Competency Area Participants Man Hours Customer Service Excellence 778 4,470 Advance Human Resources Management 49 472 Accounting and Audit Procedures 642 Development of Managerial and Leadership Competencies 106 1,154 Logistics Management 447 Procedural Aspects in Branch Operations 1,780 17,588 Legal and good Corporate Governance 82 607 Advance Information Communication Technology Systems 57 794 Banking Internal Systems, Processes and Related Procedures on Banking 317 2,379 Buildings and Maintenance 544 Corporate Banking 2 120 Basic IT Skills 25 100 Credit Card Operations 988 Critical skills Development 702 9,452 Import and Export Transactions 249 2,498 Investments and Treasury Operations 19 272 Business Continuity 42 657 Advanced Marketing Skills 211 896 Systems Audit Aspects 35 Financial Budgeting and Forecasting 23 160 Familiarization on Banking and Other Environments 499 8,018 Procedural Aspects on Risk Management and Compliance 25 213 Procedural Aspects on Local and Foreign Currency Management 88 676 Procedural Aspects on Credit / Recovery Operations 1,280 14,393 Seminars and Conferences 163 1,665 Others 1,275 12,652 Total 7,799 79,462

G4-LA 11 Percentage of Employees Receiving Regular Performance Reviews and Career Development Reviews, by Gender and by Employee Category

Employee Category Male Female Total Percentage (Covered) Corporate Management 79% 21% 24 100% Senior Management 84% 16% 82 100% Executive Management 72% 28% 173 100% Middle Management 68% 29% 550 97% Junior Management 61% 38% 777 99% Operational Staff** 65% 35% 2,369 100% Total 2,617 1,358 3,975 Percentage 66% 34%

Note: All employees are covered under Regular Performance Reviews

158 SAMPATH BANK PLC Annual Report 2015 Composition of Governance Bodies and Breakdown of Employees per Employee Category According to Gender, Age Group, Minority Group Membership, and Other Indicators of Diversity G4-09,10/LA 12/EC 06

Note: Composition of Corporate Management and Senior Management positions are held by Sri Lankans

Governance Bodies Composition – by Employee Category and Age Corporate Management Senior Management Executive Management Middle Management Junior Management Operational Staff Other Total

MFMFMFMFMFMFMF 18-20------1206 18 21-30----02-34072061101,2695292212,177 31-40 - - 05 02 32 06 275 104 263 165 157 187 9 39 1,244 41-50 12 02 58 11 89 39 101 54 12 31 - 03 17 50 479 51-55 05 02 09 04 05 01 07 04 - 01 - - 8 23 69 Above 55 02 - 02------2 6 Total 19 04 74 17 128 46 417 169 481 307 1,438 722 38 133 3,993 % 8317811974267129613967332278

Type of Employment 2015 2014 Male Female Male Female Permanent Employees 2,196 1,278 1,981 1,272 Trainees 376 73 631 65 Probationers 11 28 11 20 Fixed Term Contract employees 12 19 08 12 Total 2,595 1,398 2,631 1,369

Region 2015 2014 No of No of Employees No of No of Employees Branches / Male Female TotalBranches / Male Female Total Units Units Central 24 178 94 272 22 175 94 269 Eastern 19 134 26 160 19 138 25 163 Northern 15 89 28 117 15 99 33 132 North Central 10 92 20 112 10 95 17 112 North Western 21 161 78 239 21 157 73 230 Sabaragamuwa 14 104 41 145 13 104 36 140 Southern 25 184 88 272 25 193 84 277 Uva 10 79 14 93 10 79 19 98 Western 156 1,574 1,009 2,583 150 1,591 988 2,579 Total 294 2,595 1,398 3,993 285 2,631 1,369 4,000

SAMPATH BANK PLC Annual Report 2015 159 *VYWVYH[L*P[PaLUZOPW Caring for Our People

G4-LA 16/HR 12

Number of Grievances about Labour Practices and Human Rights Impacts Filed, Addressed, and Resolved through Formal Grievance Mechanisms - None

%DVLF6DODU\DQG5HPXQHUDWLRQ5DWLR%\*HQGHUDQG(PSOR\HH&DWHJRU\ G4-LA 13

Employee Category Male Female Corporate Management 1 0.25 Senior Management 1 0.98 Executive Management 1 1.04 Middle Management 1 1.03 Junior Management 1 1.01 Operational Staff 1 1.18 Average Salary Ratio 1 1.03

Note: Remuneration Ratios does not differ with Gender. The changes of the ratio is due to the number of years of service of the employees / Gender Composition.

160 SAMPATH BANK PLC Annual Report 2015 &KDOOHQJHVDQG6WUDWHJLHV Supporting Our The stability of Sri Lanka’s current ÄUHUJPHSZ`Z[LTPZ[OLYLZ\S[VMZ`Z[LTH[PJ KL]LSVWTLU[ZPU[OLJV\U[Y`»ZÄUHUJPHS Clients services sector over the past decade or so. Never before has the country’s banking sector seen change of such A contributory factor towards the growth of the magnitude, where the demographics VMÄUHUJPHSPUZ[P[\[PVUZTHYRL[ZHUK SVJHSÄUHUJPHSZLY]PJLZZLJ[VYPZ[OLOPNOSL]LSVM instruments have all evolved so fast. competition prevalent among the key banking 0TWYV]LTLU[ZPU[OLX\HSP[`VMÄUHUJPHS institutions in the country. WYVK\J[ZHUKPUUV]H[PVUZLMÄJPLUJ`PU services and application of technology in addition to the proactive and timely 0DQDJHPHQW3KLORVRSK\ G4-24,26,27 interventions by the Central Bank of Uphold the customers’ right to demand a stable and progressive Sri Lanka, all of which have resulted banking environment which provides a superior service platform and promotes customer choice / convenience PUH]PZPIS`OPNOLYSL]LSVMÄUHUJPHS sophistication comparatively to many Primary Engagement Frequency of Matters of Relevance other emerging economies. Mechanisms Engagement

One-to-one feedback from R Customer satisfaction on Another contributory factor towards the customers who visit the Bank existing products NYV^[OVM[OLSVJHSÄUHUJPHSZLY]PJLZ Customer surveys conducted via P Customer opinion on sector is the high level of competition traditional communication methods special promotions prevalent among the key banking or electronic mediums To analyse the pulse of institutions in the country. This has not Social media interactions 24/7 the customers towards only increased the complexity of the Customer complaint handling 24/7 the bank mechanism Customer feel for new L_PZ[PUNÄUHUJPHSZ`Z[LTI\[HSZVPUZWPYLK Feedback forms-paper based / R, 24/7 innovations a more responsible banking phenomenon electronic mediums Customer communication that reiterates the importance of Correspondence R methods customer-centricity at every level of the Demand for customised SMS alerts 24/7 business. solutions 6MÄJPHS^LIZP[L 24/7 Speedy transactions Working cognizant to these challenges, Sampath Vishwa (Internet banking) 24/7 Information on products Sampath Bank PLC continues to leverage Call centre 24/7 and services Superior customer service on its position as a top-tier bank in Sri CSR projects R Financial inclusion Lanka, to produce customer-driven solutions that add value to the country’s P – Periodically R – Regularly 24/7 - 7 days 24 hrs banking model.

0DQDJHPHQW$SSURDFK To address this new reality, a few years WYVK\J[ZHUKZLY]PJLZ[OH[M\SÄSS[OLPY We recognize that today’s customers ago we at Sampath Bank PLC began changing expectations and needs. have less and less time to go to the to transform our business model. This branch, even though their needs are also called for a rethink of our customer This has also given birth to a new greater than ever. Rapidly coming fundamentals and so we looked at appreciation for customer rights and as of age, modern consumers have establishing stronger customer ties such, we work with the understanding been found to be moving away from through all our customer touch points. that every customer has the right conventional Bricks and Mortar Banking to expect a stable and progressive concepts and demanding greater We communicate more regularly with environment, which renders sound and convenience, better service quality and current and prospective customers. superior banking solutions, backed high-tech ways to access their bank at This has helped us to better understand by the latest technology and excellent any time, in any place. the needs of the customer and deliver customer service.

SAMPATH BANK PLC Annual Report 2015 161 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

Key Challenge Strategic Focus Understanding the evolving needs of the customer in order to Gauge the pulse of the customer in order to deliver concrete convey a meaningful value proposition solutions that cater to every stage of the customer’s life Facilitating a robust delivery mechanism that would offer greater Working to “Bring the Bank closer to the customer”, by convenience to the customer developing a more dynamic branch model and increasing digital presence Meeting the demand for more proactive communication Harnessing the power of digital mediums to increase exposure and promote greater engagement between the Bank and the customer 0UJYLHZLJ\Z[VTLYM\SÄSTLU[ Strengthen the professional skills of frontline staff and reinforce the call centre operations, to maintain service assurance parameters

Our goal is to create /LVWHQDQG/HDUQ &RQYH\LQJD'\QDPLF9DOXH The more time we spend with our Proposition an immediate rapport customers, the more we learn about their Our retail portfolio consists of an array of with the new clients habits and their needs. When we meet products and services that are tailored new customers, we start off by laying the [VHZWLJPÄJZ[HNLVMSPML)LP[[OLPYHNL and urge them to foundation for a long-lasting relationship. life goals, technological competency, risk choose Sampath Hence, our onboarding programmes preferences, frequency of travel or need are geared to assess their needs and MVYZOVY[[LYTÄUHUJPUN^LHYLJHWHISL Bank as their primary expectations right from the beginning, of providing what suits them best. bank right from the enabling us to begin our relationship on the right footing. We have put in place Sampath Bank’s Minor savings products start. a standardized process for welcoming aim to inspire a new generation of young new clients. Our goal is to create an savers, while our offerings for Young immediate rapport with the new clients Adults and Career Starters, seek to and urge them to choose Sampath Bank complement the lifestyle of this upwardly as their primary bank right from the start. mobile customer segment. We also help Meanwhile, our listening practices help us Adults and Middle-Agers to realize their to understand our customers’ needs and life goals by addressing their exact needs. respond promptly to any concerns that We support Professionals to reach for they may have, including any problems greater heights and accomplish their Understand for which we may be responsible. career ambitions. We also encourage customers’ evolving women to become independent and needs so we can In 2015, we also continued our regular adapt promptly to monitoring of customer satisfaction their expectations To provide concrete across our network, which helped us to solutions that will GOAL achieve post better performance scores cater every stage of than our competitors. a customer’s life

GOAL

162 SAMPATH BANK PLC Annual Report 2015 productive members of society. In procedures, directives and guidelines of 3URGXFW0DLQWHQDQFH addition to meeting the needs of our Sampath Bank. Summarized below are Regular monitoring to assess Senior Citizens with products and the key aspects of our Product Policy. market responsiveness to the services tailored to them, we provide product facilities to vulnerable groups facing 3URGXFW,QWURGXFWLRQ  )PHUU\HSWYVÄ[HIPSP[`HUHS`ZPZHUK ÄUHUJPHSKPMÄJ\S[PLZ^P[OTVYLZ\Z[HPUHISL Shall not adversely affect the risk target measurement WYVK\J[Z[OH[OLSW[VL_WHUKÄUHUJPHS appetite of the Bank. Annual review to establish product inclusion in the country. In line with Shall not breach any law or relevance and suitability to current market demand V\YJVTTP[TLU[PUMVZ[LYPUNÄUHUJPHS regulation in any manner inclusion, we also engage in non- Changes should be completed 3URGXFW'LVFRQWLQXDWLRQ commercial activities that promotes through prevailing procedures as Obtain reviews from relevant NYLH[LYÄUHUJPHSSP[LYHJ`HUKNLULYHS per the directives of the Bank authorised parties such as wellbeing among the masses. Each product should have a Risk, Compliance, Internal product manager, product sponsor Audit, Systems Audit and Legal 3URGXFW5HVSRQVLELOLW\ and a proper business ownership Departments To ensure that all our offerings are Suitable employee training and Discontinuation should be capable of meeting market expectations, awareness building should be performed as per the procedure we have in place a documented Product carried out prior to launch stipulated by the Bank Policy, which sets out guidelines for Approval should be obtained from All customers should be the introduction, maintenance, and corporate management made aware regarding the discontinuation of products and outlines discontinuation the duties and responsibilities for G4-PR 06,07 WYVK\J[SLHKLYZ;OLWVSPJ`ZWLJPÄJHSS` states that the Managing Director shall Status be responsible for implementing and Products or services banned in certain market No ensuring compliance with the product Products or services subjected to stakeholder questions or publicly No policy, and any other relevant standards, debated 5VUJVTWSPHUJL^P[OYLN\SH[PVUZHUK]VS\U[HY`JVKLZYLZ\S[PUN[VHÄULVY No penalty

1HZ3URGXFW'HYHORSPHQWVIRU 2015 &KLOGUHQâV6DYLQJV$FFRXQWò A series of new value additions were introduced, to enhance both the “Sampath Pubudu” and “Sampath Sapiri” Minor Savings WYVWVZP[PVU;OLTVZ[ZPNUPÄJHU[ development was the introduction of a JHZOYL^HYKZZJOLTLZWLJPÄJHSS`[V recognize account holders who gained high scores at the annual Grade 5 Scholarship examination. A total of 9Z ^HZJYLKP[LK[V[OLÄYZ[ batch of recipients comprising of 35 “Sampath Pubudu” and “Sampath Sapiri” minor savings account holders, who had Thrift Month Message excelled at the August 2015 examination. Further, the Bank rewarded schools of

SAMPATH BANK PLC Annual Report 2015 163 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

only credit card in Sri Lanka to offer a year round “Cash Back” feature. ;VWWLK\W^P[OILULÄ[ZHUKZH]PUNZVU transactions made, the card is designed to complement the lifestyles of young, upwardly mobile individuals who seek to strike a balance between savings and spending. This “Cash Back” feature is a direct reward program that entitles Cardmembers to have a percentage of their spend on goods and services credited back to their card in monetary terms. As a part of the onboarding strategy, the card also entitles its Cardmembers to a welcome offer that WYV]PKLZ[OLT[OLILULÄ[VMOH]PUN 5% of their expenditure on goods and services cashed back to their account for [OLÄYZ[TVU[OZVMTLTILYZOPW-YVT the 4th month onwards Cardmembers Selection Process-”Ithurum Siththam” Competition will receive a ‘Cash Back’ of up to 1% based on the value of goods and services the top high scorers of the island with Those who earn a pension of Rs 15,000/- purchased per month. Rs 270,000/-. The ‘Ithurum Siththam’ or more are entitled to a loan of up to Rs - a competition aimed at nurturing the 1,000,000/-, with no further collateral or Sampath Bank American Express® savings habit at a very young age, was guarantors. Everyday Credit was launched during also launched in September 2015. the last weekend in November 2015 Opened to both “Pubudu” and “Sapiri” ì6DPSDWK%DQN$PHULFDQ([SUHVVė at a novel event held at the Arcade account holders, the competition drew (YHU\GD\&UHGLW&DUGú Launched in Independence Square, where customers a large number of participants from partnership with American Express®, were able to obtain their Sampath Bank across the island and was successfully the Sampath Bank American Express® American Express® Everyday Credit concluded in line with the Children’s day Everyday Credit Card is currently the Card, on the spot at the venue itself on celebrations in October 2015. In another any one of the two days. value added initiative, a free medical camp was organized exclusively for “Sapiri” and “Pubudu” account holders. Part of the Children’s day celebrations, the medical camp was held on 3rd October 2015, at the Matara Shariputhra Secondary School, with over 150 participants being offered free general health, dental, ophthalmic screening in addition to nutritional and dietary advice.

ì6DPSDWK6DPDFKDUDú6SHFLDO/RDQ 6FKHPHIRU6WDWH3HQVLRQHUVò A special loan scheme tailored especially for state sector retirees, the scheme is based on the monthly pension earned.

Launch of Sampath Bank American Express® Everyday Credit Card

164 SAMPATH BANK PLC Annual Report 2015 ([SDQGLQJWKH6DPSDWK%DQN $QDO\WLFVRIWKH(YHQW HFRPPHUFH3ODWIRUPò In response to the growing popularity of e-commerce, a conscious effort was made to expand the online partner network, providing the mass market with access to a wide range of B2B and B2C solutions.

6SHFLDO'LVFRXQW ,QVWDOOPHQW3ODQVRQZZZUHWDLOJHQLXV FRP Under this promotion, Sampath Bank, MasterCard and Visa Credit Cardholders were offered a 15% discount on the total bill together with a 0% interest-free installment plan, when purchasing products from retailgenius. com, Sri Lanka’s premier online market offering leading international brands of electronics, mobile phones, phone accessories, TV appliances and cameras, Cardmembers were also able to 6WUHQJWKHQLQJWKH$OOLDQFHEHWZHHQ clothing, fashion accessories, home improvement and lifestyle products. PTTLKPH[LS`L_WLYPLUJL[OLILULÄ[ZVM 6DPSDWK&DUGVDQG&DUJLOOV)RRG&LW\ the Sampath Bank American Express® 6XSHUPDUNHW&KDLQ In addition to the Everyday Credit Card while shopping special seasonal proposition offered in ,QWURGXFWLRQRI6DPSDWK9LVD3ODWLQXP at merchant outlets at the Arcade, the past, the new discount offering is 'HELW&DUGò (M\SS`ÅLKNLKWYVK\J[ that offers international recognition Independence Square including a range aimed at mapping the regular needs together with a host of special offers & of lifestyle brands, restaurants, cafés and of the consumer by offering a range of entertainment options. weekend discounts on fresh produce. ]HS\LHKKLKILULÄ[ZHZZVJPH[LK^P[O Visa International. Geared to support the The programme was extended at all 293 dynamic lifestyles of today’s customer, 6DPSDWK&DUGV7RZQ2Q6DOHLQ-DIIQD Cargills Food City outlets island-wide. the Sampath Visa Platinum Debit Card A unique experience that combines NP]LZ[OL\ZLYT\JOULLKLKÅL_PIPSP[` ZOVWWPUNZH]PUNZHUKM\UÄSSLK ã(DV\,QVWDOOPHQW6FKHPHIRU through a higher ATM withdrawal limit weekends, the ‘Town On Sale’ promotion 6DPSDWK&DUGV Under their exclusive (Rs125,000/- per day) and up to was extended to the people of Jaffna ‘Easy Installment Scheme’, Sampath Rs 300,000/- per POS transaction. on the 12th and 13th of September MasterCard and Visa Credit Cardholders Further, as a chip-enabled offering, the 0UP[ZÄM[O`LHY[OLº;V^UVU:HSL» are able to purchase high-value products Sampath Visa Platinum Debit Card is offer, is an extravagant promotion which from over 2,000 partner merchants on an equipped with multiple security protocols gives Sampath Credit Cardholders the installment plan of their choice ranging to prevent / detect unauthorized access. privilege of purchasing at selected local from 12, 18, 24 or 36 months, with one partner outlets and availing themselves installment waived off from the chosen 5HDOLJQLQJWKH'LVWULEXWLRQ0RGHO of exclusive discounts on a wide range of installment plan. Aside from the obvious Our Multichannel Distribution Strategy goods and services. The Jaffna Town on cash savings, this payment plan allows provides customers with a complete Sale promotion offered Cardholders an them to match the installment with their suite of products and services across attractive 25% discount at 24 selected payment capacity over the next few all channels. Our aim is to increase the local partner outlets ranging from years. Cardholders made use of the effectiveness of our branch networks as supermarkets, restaurants, consumer plan to purchase among other things, well as improve our digital services, so durables, clothing, entertainment and electronics, household items, travel that our customers can enjoy a consistent hotels. packages, jewellery from a wide range of banking experience on their preferred renowned local and international brands. channel.

SAMPATH BANK PLC Annual Report 2015 165 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

All 225 Sampath Bank branches are equipped with a minimum of one on-site ATM while 40 branches are equipped pawning and remittances related services with cash deposit kiosks. Integrating all on Saturdays and Sundays as well. In channels to create addition to this, the 12 Super Branches &XVWRPHU 6DIHW\ a superior customer remain open, on all 365-days of the year, Structural safety of each branch in line experience, while from 8.00 am to 8.00 pm. with the Bank’s safety guidelines. leveraging on global GOAL trends to bring innovative services to the market more quickly and upgrade our services as a multi-channel bank

&UHDWLQJD'LVWLQFWLYH%UDQFK%OXHSULQW Starting from our innovative new layouts, all Sampath Bank branches seek to provide customers with an exceptional service that is both distinct and different from our peers. We make it a point to ensure that all Sampath Bank branches are situated in easily accessible central Assist a customer to use Cash Deposit KIOSK locations in order to offer the widest possible reach to the people of the area. With a minimum of 2,500 square feet A beacon of hope ÅVVYZWHJL[OLHYJOP[LJ[\YLVMLHJO branch conforms to the Bank’s design for Godakawela guidelines for exteriors and interiors. This not only helps to retain the unique visual appeal of the Sampath brand identity, but Located in the Ratnapura District a 20 Km radius of the Godakawela HSZVWYPVYP[PaLZ[OLMVSSV^PUN" and approximately 45 Kms town. In fact those who seeking southeast of Ratnapura town, banking facilities had to travel over $FFHVVLELOLW\ Godakawela lies at the heart of 1½ hours to Ratnapura. In addition to its central location, each the Sabaragamuwa province. branch is equipped with the minimum Surrounded by small agricultural Commissioning of Sampath Bank’s number of parking slots. Moving forward communities, Godakawela, has Godakawela branch in December we are seriously looking at introducing of late, shown signs of strong OHZM\SÄSSLKHSVUNMLS[ULLK disability access facilities at branches growth. However, despite gaining PU[OPZ[V^UHUKHZHM\SS`ÅLKNLK across the island. In the case of older prominence as emerging township offering, the new branch provides branches, efforts are being continued to in the region, a study of the area the full range of products and introduce the necessary facilities. revealed that nearly 50% of the services to support the needs of population of Godakawela and businesses and communities in &XVWRPHU&RQYHQLHQFH surrounding areas were not attached the area. Most notably the vehicle (SSM\SS`ÅLKNLKIYHUJOLZHJYVZZ[OL to the formal banking system. The leasing facilities have proven to be island are open for business from 8.30 main reason for the large number of a strong entry-level platform from am to 3.00 pm on all working days. Of unbanked, was found to be the lack ^OPJO[VWYVTV[LNYLH[LYÄUHUJPHS these, a few selected branches offer of suitable banking facilities within inclusion in the region.

166 SAMPATH BANK PLC Annual Report 2015 CostHIðFLHQF\ (SSM\SS`ÅLKNLKIYHUJOLZVWLYH[L^P[O a team of 6, all of whom perform cross functional roles.

Meanwhile, as we strive towards becoming a multi-channel bank, many of our key branches have been equipped with a special counter to assist customers to make the move towards digital banking. The services offered here include, sign up and use of Sampath Vishwa Internet Banking, download and use of the Sampath Mobile App etc. To complement these efforts and ease Sampath Vishwa Internet Banking Solution for Hand-Held Devices customers into the process, touch-pad enabled self-service sign-up facilities were also introduced. implementing self-assigned daily transfer Mobile banking remains at the core of limits, streamlined payment templates our multichannel strategy. Our goal is to ,PSURYLQJ'LJLWDO6HUYLFHV enable all of our customers, regardless We know that at present, our customers and diverse bill payment options among use a mix of channels, but they appear others. VM[OLPY[LJOUVSVNPJHSWYVÄJPLUJ`[V easily access our services via tablets and to be turning more and more to non- smart phones. As such, we continue branch options for many of their banking Enhancements to the Sampath Vishwa to strengthen our mobile banking needs. Our goal is thus to enhance our Corporate Internet Banking module, now capabilities to cater to the anytime, digital capabilities to provide a more allow business corporates to use the anywhere attitude of today’s smart personalized, streamlined and robust Sampath Vishwa portal to perform B2B phone users. In 2015, we upgraded online banking experience. operations using the World Wide Web. This new feature also allows complete our smart phone app and introduced version 2 of the Sampath Mobile Banking Therefore, the decision to focus on digital control over their collection function and app. Available on the iOS and Android delivery channels was an obvious one. facilitates better management of trade platforms the app now offers direct It is a bank-wide initiative to transform related operations, monitoring supply and connectivity through all key social media the manual banking function into a value chains and administering statutory platforms including facebook, twitter and self-service digitized operation. The goal payments. linked-in. here was to digitalize the entire gamut of banking services and special emphasis The Mobile Cash concept was also The app has proved to be immensely was given to create an environment integrated with Sampath Vishwa, Corporate Internet Banking suite, popular among our customers and as VMJVU]LUPLUJLHUKLMÄJPLUJ`MVY[OL at 31st December 2015 our mobile app customer. allowing corporates to make transfers to customers who are non-Sampath has been downloaded more than 85,000 times since its launch in 2013. .H\'HYHORSPHQWVLQ account holders as well. This new Catering to ever-growing mobile development has enabled Business The introduction of the “online loan generation who prefer the mobility and Corporates to expand their reach to a application” tool was another ground- convenience associated with hand-held wider island-wide demographic. Among breaking move aimed at expanding devices, the Sampath Vishwa Internet the key developments for corporate the number of online access channels banking model seeks to provide a clients was the launch of a fully integrated available to customers to submit their one-stop-shop for all banking needs. ÄUHUJPHSI\ZPULZZZVS\[PVU^OPJOHSSV^Z loan requests. Security protocols were With this goal in mind, a number of corporates to completely automate their also tightened to ensure the safety, changes were introduced in 2015, to ÄUHUJLM\UJ[PVUPTWYV]L[OLPYV]LYHSS security and maintenance of customer \WNYHKL[OLJ\YYLU[TVKLS"PUJS\KPUN VWLYH[PVUHSLMÄJPLUJ`HUKILULÄ[MYVT privacy across all e-banking platforms. simplifying the online sign-up process, lower administrative costs.

SAMPATH BANK PLC Annual Report 2015 167 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

)HHGEDFNò Encouraging regular feedback from the customer regarding brand perception and 3UHVHQWLQJ2XUVHOYHVWRWKH WV^LY[VHWWLHS[V[OLPKLU[PÄLK relevance of communication &XVWRPHU target market by making a distinct strategy Our approach is set out in the Sampath impression Bank PLC’s communication policy, 7UDQVSDUHQF\ To maintain a 0DUNHWLQJ&RPPXQLFDWLRQV ^OPJOKLÄULZOV^ILZ[[OL)HURZOV\SK greater level of accountability, As a rule, we ensure that all advertising present itself to selected target markets. the Bank strives to make all content and promotional material It also underpins the overall marketing communication as transparent released under the Sampath Bank PLC and branding strategy, which is then and open as possible, without banner complies with the legal disclosure cascaded down to each promotional disclosing sensitive information and requirements issued by the CBSL, campaign and across all mediums, trade secrets CSE, SEC, CA Sri Lanka or any other NV]LYULKI`[OLMVSSV^PUNWYPUJPWSLZ" 3URDFWLYLW\To embrace new YLN\SH[VY`IVK`YLSH[LK[V[OLÄUHUJPHS technologies and explore unique services sector in Sri Lanka. Additionally, (IðFLHQF\ The timely use ways in which to use existing the impact of industry benchmarks and of modern communication mediums to connect with [OLPUÅ\LUJLVMJ\YYLU[ZVJPHS[YLUKZHYL technologies in order to create a customers also deemed to be vital, particularly when successful campaign that has the &ODULW\ To send a clear and formulating localized branch campaigns. uniform message that is free of unnecessary jargon 0XOWLOLQJXDOAll communications Supporting the are structured on a trilingual format “Customer’s Right to Know” by providing clear, concise GOAL and unbiased information regarding Sampath Bank PLC’s products and Brochures and services Traditional Pamphlets Advertising

E-Channels

24 Hour Call 6DPSDWK%DQN Centre 3URGXFW,QIRUPDWLRQ DQG$FFHVVLELOLW\

Corporate Website Branch Merchandising

Specific Product Related Social Media Information Accompanied by Application Forms

168 SAMPATH BANK PLC Annual Report 2015 Scope: Island-wide and Branch-level Campaigns Key Thrust: Thematic / Tactical Campaign Title Geographical Area No of Campaigns Target Market Product Category Sampath Bank Sri Lanka 01 All Sri Lankans Savings Avurudu Offer Sampath Leasing Sri Lanka 01 All Potential Customers Lending Quarter

Scope: Island-wide, Localized and Branch-level Campaigns Key Thrust: Thematic/Tactical Campaign Title Geographical Area No of Campaigns Target Market Product Category Sampath Bank Sri Lanka 01 All Sri Lankans Corporate Corporate Sampath Bank Town Jaffna 01 Sampath Bank credit Credit Cards On Sale - Jaffna cardholders, all potential customers in Jaffna

Other Communication Programmes for the year 2015

Indicator No of Programmes Target Market Sponsorships 240 Sri Lankan Community (considering requests)

Sampath Avurudu Udawa 2015 Sponsoring of COYLE Sampath Bank Entrepreneurial Forum

First commissioned in 2014, this is the %UDQG7UDFNLQJ G4-PR 05 second consecutive year that we are &DVH6WXG\  Customer Survey – Brand Tracking conducting the brand tracking exercise to map customer perceptions regarding 5HVHDUFK$JHQF\  The Nielsen Company Lanka (Pvt) Ltd the “Sampath” brand. Conducted by 3HULRGRI5HVHDUFK January to December 2015 The Nielsen Company Lanka (Pvt) Ltd, 7\SHRI5HVHDUFK  Quantitative Sampling the 2015 study involved the random 3URFHGXUHV  Random sampling of over 1,000 members of 6DPSOH6L]H  1,000 per quarter the general public per quarter, some of &RYHUDJH  Colombo, Galle, Kandy and Kurunegala (Urban and Rural)

SAMPATH BANK PLC Annual Report 2015 169 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

who may or may not be customers of notwithstanding industry challenges, [OL)HUR;OLÄUKPUNZMYVT[OPZZ[\K` ^OPJO\UKV\I[LKS`[LZ[PÄLZ[V[OL have revealed that the “Sampath” brand success of our advertising and branding retains a consistently high brand value, strategies.

Harnessing the Power of Social Media

At Sampath Bank, we believe our In 2015, we carried out a social media presence is a powerful number of social media initiatives means to establish and leverage our primarily to strengthen customer Dedicated brand promise. Our emphasis on engagement and gauge the Social Media social media does not stem from a usability of each platform. Our goal Monitoring simple need to have a presence, but was to differentiate ourselves by Unit rather from our aspiration to change focusing on the engagement of the way we communicate, exchange the customers rather than mere ideas and collect feedback on our association based on likes. This products and services. Keeping helped us to conduct a micro More than abreast of customer needs serves analysis of customer satisfaction 176,000 5 Social Media as a constant reminder that we can and address key areas of concern, fans joined in Platforms \WNYHKLV\YZLY]PJLZMVY[OLILULÄ[ thereby improving our offerings and facebook of the customer. raising overall service standards.

G4-PR 03,04 “Since 2013, Pyxle has been actively involved in cultivating Sampath Bank’s social TLKPHWYLZLUJL(TVUN[OLÄYZ[[VLU[LYZVJPHSTLKPHZWHJL[OL)HURSH\UJOLK 3URGXFWDQG6HUYLFH/DEHOOLQJ www.facebook.com/Sampathbankplc, in January 2014, followed soon after by Our goal has always been to provide the @V\[\ILHUK3PURLKPUWSH[MVYTZ:HTWH[O)HUR^HZHSZVVULVM[OLÄYZ[IHURZPU J\Z[VTLY^P[OZ\MÄJPLU[PUMVYTH[PVUVU Sri Lanka to establish an active Twitter handle in May 2014. These efforts indicate a each Sampath Bank product or service, strong commitment to create a robust social media presence. so that they may fully understand our value proposition and be able to make It is encouraging to note how Sampath Bank’s social media presence has grown an informed decision. To do this we use over the years, with a strong follower base across all platforms. I believe this is HYHUNLVMTLKP\TZPUJS\KPUN"IYHUJO mainly due to the timeliness and relevance of the content provided which has network, media (press, TV, radio), resulted in greater customer engagement across multiple social media channels. In ^LIZP[LZVJPHSTLKPHSLHÅL[ZL[J fact, the recent live streaming of the Sampath Bank American Express® Everyday Credit Card launch received an unprecedented number of live views on Youtube, :HTWH[O)HUR»ZÄUHUJPHSWYVK\J[ZHUK ^OPJOZPNUPÄLZ:HTWH[O)HUR»ZZOPM[[VILPUNH[Y\S`KPNP[HSS`LUHISLKIHUR¹ banking solutions have been developed in strict conformity with the product policy Oshada Senanayake outlined above, which mirrors the national Director regulations for banking products. Pyxle (Pvt) Ltd (Sri Lanka’s premier Social Media Monitoring company)

170 SAMPATH BANK PLC Annual Report 2015 As such, there are no reported in relation to disclosure of product regulatory violations or any incidents of information and labelling for any of our non-compliance with voluntary codes products or services. (^LHS[O Compliance with GRI requirements for Product and Service Labelling information THUHNLTLU[ Type of Information YES NO The sourcing of components of the product or service © JLU[LY^HZ Content, particularly with regard to substance that might N/A ZL[\WH[[OL produce an environmental or social impact Safe use of the product or service © WSH[PU\TJLU[LY Disposal of the product and environmental /social impact N/A

G4-PR 01,02 G4-PR 08

&XVWRPHU+HDOWKDQG6DIHW\ &XVWRPHU3ULYDF\ Meanwhile, the Internet payment gateway Given the nature of our business as a As a responsible banking institution in was upgraded with the introduction bank, the impact of health and safety the country, we have always upheld of multi-layer security protocols (both aspects cannot be assessed with regard the customers’ right to privacy. In this vertical and horizontal), improvements to our products and services. However, regard, we are guided by our anti-fraud [V[OLIHJRVMÄJLPU[LNYH[PVUZVM[^HYL our determination to ensure customer policy, whereby, the following measures YLÄUPUN[OLWH`TLU[ZLY]PJLZTLJOHUPZT wellbeing has led us to formulate have been integrated into our day-to- and reducing procedural complexity and products and services that do not in any day operations in order to ensure that paperwork. way impair or harm the health and safety customer privacy is upheld at all times. Terminal Line Encryption (TLE) at of our customers. Given the strict measures taken to assure POS terminals located island wide customer privacy at all times, there have with the intention of preventing risk In 2015, there have been no complaints been no complaints reported regarding reported regarding any adverse health of counterfeit credit card any breach of customer privacy or loss and safety impacts arising from our Additional security for credit card of customer data during the reporting products or services. Further, there were holders via added encryption for period. no reported incidents of non-compliance chip enabled cards with regulations or voluntary codes, and SMS alerts to notify each 2QJRLQJ3URFHVV8SJUDGHV hence the Bank has not been subjected transaction Among other things, in 2015 we launched [VHU`ÄULZVYSP[PNH[PVUPU[OPZYLNHYK Direct call-outs to customer to the Central Credit Processing Unit during the reporting period. verify the authenticity of high-value transactions (CCPU), a dedicated credit evaluation unit operated under the authority of Head 6MÄJL)YHUJO)HURPUN+P]PZPVU;OL CCPU is an innovative mechanism set up [VVMMLYHZWLLK`ÄUHUJPHSZVS\[PVU[V[OL large volume of direct loan requests that come in from various sources including web, print mediums and on the 24-hour call centre hotline. Once loan requests / applications have been scrutinized and processed by the CCPU, the branch nearest to the client is appointed as the liaison to follow through on the next stage of the loan facility. During the 11 months

6MÄJPHS)HURLY[V*VSVTIV0U[LYUH[PVUHS)VVR-HPY

SAMPATH BANK PLC Annual Report 2015 171 *VYWVYH[L*P[PaLUZOPW Supporting Our Clients

our network managers should be able to adapt and transform into true multichannel coordinators. This means period since its launch in February 2015, the manner of doing so. The respective that for the foreseeable future, banking the CCPU has successfully served 1,330 manager-in-charge should then launch will require a special blend of soft and customers. a collective team effort to resolve the hard skills needed to improve customer issue within the stipulated maximum of satisfaction. A wealth management centre was set ^VYRPUNKH`ZMYVT[OLKH[LVM[OLÄYZ[ G4-PR 09 up at the platinum centre. Aimed at complaint. &RPSOLDQFH expanding the corporate client portfolio, We have always strictly complied with all the wealth management centre is a Continuous training mandatory laws and governing standards dedicated unit that is geared for the of Relationship and legislations relating to the advertising needs of corporates and high net-worth Managers so that and branding of banking products and individuals. they may offer services. Moreover, it is mandatory that high-quality services all employees work within the customer 6HUYLFH$VVXUDQFH GOAL and solutions rights framework at all times. Given these We believe, all employees should make that will meet our rules, no incidents on non-compliance a conscious effort to assist a customer customers’ exact with laws and regulations or breach of PUÄUKPUNV\[^OH[OLVYZOLULLKZ needs. customer privacy were reported within the reporting period. Further, there have been no reports of a breach of laws and To make our As part of the post-solution follow-up regulations concerning the provision processes more procedure, the manager-in-charge is and use of products and services. ÅL_PISLHUK[V also expected to personally reach out Accordingly, the Bank has NOT been create products to the customer to ascertain if they are Z\IQLJ[LK[VHU`ÄULZTVUL[HY`VYUVU and services that ZH[PZÄLK^P[O[OLZVS\[PVUWYV]PKLK monetary) on account of non-compliance. GOAL HYLHWLYMLJ[Ä[MVY Customers are then invited to share their the expectations experience and encouraged to rate our of both retail performance. and corporate G4-50 customers An operational guide book was also There have been no complaints introduced as a quick reference guide of any unresolved critical issues for all staff. It has been uploaded to and in resolving any problem, if there VYZPNUPÄJHU[Z\Z[HPUHIPSP[` [OLPU[YHUL[[VPTWYV]L[OLLMÄJPLUJ` is one. As per our normal procedure, concerns during the reporting of use. Right now directives are on the when a customer initiates contact with period. All customer inquiries intranet and can be searched using a frontline colleagues in our branches or regarding business operations key word. But the quick reference guide call centres regarding a complaint, we have been successfully is expected to reduce the time spent on strive to provide an immediate solution resolved at the respective unit- searching. for these complaints. However, if more level itself. time is needed to resolve a problem, We realize that cultivating a strong we feel it is vital that we “Go that extra rapport with our customers in today’s mile for the customer” and provide a increasingly complex, multichannel concrete solution to the issue in question. IHURPUNLU]PYVUTLU[PZPUMHJ[HÄUL Having determined the nature of the art. As new banking channels become issue, frontline staff shall, to the best increasingly important to our operations, of their knowledge and capacity, direct the customer to the person / authority to be approached for resolution and

172 SAMPATH BANK PLC Annual Report 2015 “Maximizing YES” Programme

2EMHFWLYH of the response, the chain of command Rule 2: A special programme carried out followed etc. All participants were then If the front line staff member does in fact in 2015, to improve the level of instructed on how best to safeguard say “NO” to the customer, the following customer satisfaction by directly customer satisfaction in a high-pressure WYVJLK\YLZOV\SKILZ[YPJ[S`MVSSV^LK" targeting Assistant Managers of situation. The respective Assistant branches who are directly involved Manager should be informed with handling daily operational 2XWFRPH immediately and solutions should work. The initiative was primarily Upon conclusion of the training then be provided promptly aimed at training frontline staff on sessions, a formalized reporting Each Assistant Manager should how to be more proactive when structure was created to assist frontline maintain a weekly record of all addressing needs of customers staff in providing the best possible such incidents where front liners and minimize number of times they customer service. It is hoped that the under their supervision, have said say “No” to a customer. learning experiences gained through “NO” to the customer this process would help minimize At the end of the week, The 6FRSH the need for such occurrences and DGM-Operations should be ;OLÄYZ[WOHZLVM[OLWYVQLJ[ZH^ guarantee a new level of customer provided with a report indicating 225 Assistant Managers being satisfaction. all incidents that have taken assigned to series of practical place over the week scenarios, which required them to )RUPDO5HSRUWLQJ6WUXFWXUH The DGM – Operations think out-of-the-box and make a Rule 1: would then decide if current spontaneous decision that would Front line staff will always strive to operational guidelines need to be keep the customer happy. Each say, “YES” to the customer (thereby strengthened in order to avoid participant was assessed on the minimizing the number of times the such occurrences in the future to time taken to respond, the nature customer receives a “NO” response) ensure adherence to the “YES” maximization principle at all times

%XVLQHVV&RQWLQXLW\3ODQQLQJ -14 G4 Identify all business processes within each business unit  +L[LYTPULÄUHUJPHSJ\Z[VTLY %XVLQHVV %XVLQHVV 'LVDVWHU operational, legal and/or regulatory &RQWLQXLW\3ODQ ,PSDFW 5HFRYHU\3ODQ impacts of each process %&3 $QDO\VLV %,$ '53  +LÄULRL`PU[LYUHSHUKL_[LYUHS GOAL: To ensure GOAL: To GOAL: To relationships and ascertain inter- the uninterrupted quantify adverse ensure the swift dependencies between processes course of impacts to recovery of IT Establish a time frame to recover business, the business systems following business and technology processes in the event caused by loss a disastrous Assign necessary resources required critical business of capacity to interruption to the for the recovery of each process within functions are conduct business business the predetermined recovery time frame disrupted operations Provide a foundation for the Risk (functions / Assessment and Control Process processors) Carryout regular disaster recovery drills to ensure the business continuity in case of a disaster

SAMPATH BANK PLC Annual Report 2015 173 *VYWVYH[L*P[PaLUZOPW Informing Our Investors

Our goal is to provide shareholders with a timely, accurate and balanced disclosure of all material information about Sampath Bank PLC.

0DQDJHPHQW3KLORVRSK\ G4-24,26,27 Ensuring long term shareholder value and upholding the rights of the shareholder >LLUJV\YHNL and supporting a broader shareholder constituency to ensure their Wealth Maximisation V\Y Primary Engagement Frequency of Matters of Relevance Mechanisms Engagement ZOHYLOVSKLYZ

Shareholder relations forums P Shareholder satisfaction to share their General meetings A/P regarding the Bank’s ]PL^Z[OYV\NO Annual Report A ÄUHUJPHSWLYMVYTHUJL and position 0U[LYPTÄUHUJPHSZ[H[LTLU[Z Q LUNHNLTLU[ Shareholder views on Disclosures and announcements P key governance and HJYVZZT\S[PWSL on CSE policy matters 6MÄJPHS^LIZP[L R Development JOHUULSZ of shareholder Correspondence R communication channels CSR projects R Financial results Return on equity Strategy and continuity A – Annually P – Periodically Q – Quarterly R – Regularly

Dividend per Share and We have always worked to build strong To add further value, we encourage our Dividend Pay Out Ratio bonds with our shareholders and in doing shareholders to share their views through Rs % so, recognize the importance of being up- engagement across multiple channels. 14 40 37.4 37.6 36.5 front and transparent about our activities. This means continuous monitoring of 39.1 12 12 Our goal is to provide shareholders shareholders’ needs and the provision 13 34 with a timely, accurate and balanced of timely, information in response to 10 11 disclosure of all material information these external inquiries. Also refer pages 8 28 about Sampath Bank PLC. At the same 133 to 142 of this report for “Investor 8 6 22 time, we strive to offer fair and equal Information” information. 4 access to such information including, the 16 SH[LZ[ÄUHUJPHSYLZ\S[ZTHYRL[Z[YH[LNPLZ 2 key achievements, long-term goals and 0 10 regulatory disclosures, among others. 2012 2013 2014 2015 Dividend per Share (DPS) Dividend Pay Out (DPO)

174 SAMPATH BANK PLC Annual Report 2015 7KH3URFXUHPHQW&RPPLWWHH Collaborating All outsourcing activities come under the purview of the Bank’s procurement committee, headed by the Managing with Our Partners Director. The Procurement Committee is responsible for the evaluation and selection of suitable suppliers, service As our business evolves, so do our business partners and providers as well as premises to be taken by the Bank on lease and also for over the years, we have come to rely on the products and approving certain high value payments. services of a wide range of suppliers and service providers During the evaluation and selection and outsource partners process, the Procurement Committee is always guided by the principle of “Five Basic Rights” namely Right Quality, Right 0DQDJHPHQW3KLORVRSK\ G4-24,26,27 Source, Right Time, Right Quantity and Striking the right balance between cost and quality and promoting ethical and Right Price, in approving suitable parties transparent sourcing practices as service providers and suppliers to the Primary Engagement Frequency of Matters of Relevance Bank. Mechanisms Engagement

Interactions supported by the R Developing strategic purchasing policy partnerships Feedback forms P Promoting transparent Meetings R and ethically We strive to responsible business Visits to suppliers’ workshops / P practices WYVTV[LSVJHS VMÄJLZ P – Periodically R – Regularly ZV\YJPUN ^OLYL]LY 0DQDJHPHQW$SSURDFK In doing so, we have always sought WVZZPISLHUK Being in the business of banking, to ensure that these relationships are many of our products, services and sustainable and in line with standard WYHJ[PJHSHZWHY[ processes are developed in-house. social and environmental parameters. However, in order to be able to Towards this end, we strive to promote VMV\YPUJS\ZP]L maintain the highest overall quality, local sourcing, wherever possible WYVJ\YLTLU[ we do seek the assistance of third and practical, as part of our inclusive party service providers, as and when procurement strategy. In the long Z[YH[LN` needed. As our business evolves, so run, we believe these measures will do our business partners, and over not only lead to greater cost savings, the years, we have come to rely on the V]LYHSSWYVJLZZLMÄJPLUJ`HUKNYLH[LY products and services of a wide range internal control for the Bank, but of suppliers and service providers and also trigger a positive social and outsource partners in order to carry out environmental impact as well. certain core-banking functions and other non-banking operations.

SAMPATH BANK PLC Annual Report 2015 175 *VYWVYH[L*P[PaLUZOPW Collaborating with Our Partners

6DPSDWK%DQN6XSSOLHU(YDOXDWLRQ0RGHO G4-12

Industrial Safety Financial Stability and Environmental Market / Dependability Protection Availability / Delivery Capability Human Resources

Industrial Safety Quality Schedule / Volume Effectiveness Supplier Risk Technical Handling Registry Categories Packing Assessment On Time Delivery Resources and Product / Know-how Criteria Innovative Power Innovation Co-operation Logistics Mechanism

Commercial Viability Supply Chain Management After Sales Services and Availability of Price Qualified Technical Staff Quotation Behaviour Documentation Supplier Quality Contract Co-operation Management Processes Quality Management Co-operation ManagementChain SupplyRisk

Supplier

Performance Management

The goal here is to promote a transparent level of competition. It is comprehensively Ethical responsibility to ensure procurement mechanism that would structured to cover all aspects of sourcing compliance with ILO (International ensure fair and equitable purchasing and procurement, including following Labour Organisation) standards practices. Accordingly, our procurement critical areas, among others. relating to fundamental human policy spells out in detail, the guidelines rights, child labour, working by which all procurement activities Supplier selection guidelines in conditions, equal pay and health & at Sampath Bank PLC are done. conformity with international best safety parameters Underpinned by strict professional ethics practices for anti-corruption, anti-  *SLHYS`KLÄULKHWWYV]HSSPTP[Z at all times, the policy is based on a competitive behaviour and good Promoting open dialogue as tender procedure that creates a healthy business ethics the basis of an effective dispute resolution mechanism

176 SAMPATH BANK PLC Annual Report 2015 As a part of the aforementioned procurement policy, we maintain a registry Other Sustainability G4-SO 09,10/EC 09/ of reputed and reliable suppliers / service HR 04,05,06,10,11/ LA 14,15/EN 32,33 providers, with a minimum of two potential Disclosures candidates each, for core-banking functions as well as a range of non- Nevertheless, in an ongoing effort practices, rights and risk associate banking operations. to improve our sustainability with collective bargaining adopted parameters, in the future we by new and existing suppliers and In the case of new activities to be expect to map the impact of business partners. Our goal is to outsourced, it is deemed that the the supply chain on each of our guide them towards full disclosure member of corporate management operations individually. regarding potentially hazardous responsible for that function should work conditions, cases of human ensure that the new activity to be This will help us screen and rights violations, incidents of child outsourced, is well within the guidelines measure the actual and potential labour and forced or compulsory issued by the Central Bank of Sri Lanka negative impact to the society labour, among other things. and conforms with the Outsourcing or community resulting from Policy of the Bank. Once this has been the supply chain. We will then These measures also call for JVUÄYTLKHWWYV]HSVM[OL6\[ZV\YJPUN need to work on expanding our broader policy-level changes on Committee , Procurement Committee supplier screening and evaluation our part, to enforce suppliers or the Board of Directors, should be criteria to carry out ongoing to be more transparent. This obtained on a case by case basis. impact assessments and identify includes maintaining a human right suppliers whose core business grievances record system, based 0DWHULDO$VSHFW6XSSOLHU$VVHVVPHQW is likely to have actual and / on which we can then encourage IRU6RFLDODQG(QYLURQPHQWDO,PSDFWV or potential negative social / suppliers to take corrective action Given the comprehensive supplier environmental impacts. when needed and thereby improve assessment mechanism that we adhere their overall track record. The [V[OLYLOH]LILLUUVZPNUPÄJHU[ This includes establishing a partnerships we then choose to actual and potential negative social mechanism to assess and screen develop based on this process, or environmental impacts reported new suppliers for impacts on will be truly sustainable as it would with regard to any of our procurement society or community. Further, we YLZ\S[PUT\S[PWSLILULÄ[ZMVY[OL partners. also hope to introduce a system environment, society and its people. to continuously review the labour

G4-12

We allocate a separate amount purchasing. The main aim here is to annually as part of the ongoing effort develop a sustainable network of local to expand our procurement practices. suppliers by creating viable business In this regard, improvements to the opportunities and increasing the wealth record keeping process and supplier creation capacity of local communities monitoring mechanism have helped that we serve. us to increase the proportion of local

SAMPATH BANK PLC Annual Report 2015 177 *VYWVYH[L*P[PaLUZOPW

Strengthening 0DQDJHPHQW$SSURDFK We realize that social development is an ongoing process, which has a monumental impact on individuals Our Communities and the communities they live in. For our part, we work cognizant to both individual and collective needs We believe it is our duty to ensure that our of communities, even as we strive actions extend far beyond our day-to-day lives to help them recognize the core and continue to enrich the lives of all Sri Lankans economic barriers that they face. in the future as well. We believe it is our duty to ensure that our actions extend far beyond 0DQDJHPHQW3KLORVRSK\ G4-24,26,27 our day-to-day lives and continue to Working in tandem with global and local mandates that safeguard the environment enrich the lives of our people in the and promote community empowerment future as well. It is this philosophy Primary Engagement Frequency of Matters of Relevance that underpins all Corporate Social Mechanisms Engagement Responsibility (CSR) activities of Ground level interactions with R Branch level / Regional :HTWH[O)HUR73*HUKYLÅLJ[ZV\Y community leaders at branch level level activities desire to care for all stakeholders of Media based forums R Engagement in capacity the business. Interactions with social groups and R building and community empowerment activities volunteer organisations Feedback forms R SME development forums 6RFLDOO\5HVSRQVLYH&650RGHO Discussions with local government R Workshops / Seminars From the inception, CSR has been representatives Environmental Projects an integral part of our DNA. Having Discussions with other R Religious activities initially adopted a purely charity-driven organisations / religious and (philanthropic) approach, our CSR model opinion leaders on community has changed considerably over the development efforts years, with the fragmented approach R – Regularly used in the past now being replaced by a transformative CSR approach aimed G4-SO 01/EN 34 at producing a more socially responsive CSR framework. The move towards the 1XPEHURI3URMHFWV,QLWLDWHG transformational CSR strategy has also provided us with a fresh perspective on Empowerment of Education for Entrepreneur how our social and environment initiatives Community - 18 Development - 20 Development -12 JHUPTWHJ[V\YÄUHUJPHSWLYMVYTHUJL

Employee Environment Protection & Ethics & Values Stemming from this broader systemic Conservation - 07 - 03 Engagement – 841 Team Members view, we have decided to reinvest back into areas that need it the most. Our G4-SO 11 actions are underpinned by Sampath *ULHYDQFHV$GGUHVVHG'XULQJWKH

178 SAMPATH BANK PLC Annual Report 2015

All thematic CSR projects undertaken national burden issues and bring about 6WHZDUGVKLSDQG*RYHUQDQFH by us, therefore seek to address these positive change across a broader The Bank adopts a comprehensive, community demographic. top-down approach towards CSR governance, to validate the integrity 6RFLDOO\5HVSRQVLYH&650RGHO of each stage of the process. As such, all CSR activities are carried out CSR Governance by Sampath Bank CSR fund, which receives an allocation of 1% of the t men lop Et HUU\HSWVZ[[H_WYVÄ[Z;OLV]LYHSS ve hic e s D an stewardship of the fund is listed under ur d e V n Ali a re g n lu the Managing Director with designated p in e e g s r t s w n e appointees to identify and implement c it E n h t a n v N P projects under each CSR pillar. e e i K a r r o m Goal: e t j s i y G y e o t s i E c

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G4-35,36 0DQDJLQJ'LUHFWRU

Overall CSR Leader (DGM - Marketing & Business Development)

/HDGHU /HDGHU /HDGHU /HDGHU /HDGHU Education for Empowerment of Entrepreneurship Ethics and Values Environment Protection Development Community Development (AGM - Branch Banking) and Conservation (DGM - Human Resources) (AGM - Recoveries) (DGM - Marketing & (Chief Manager - Human Business Development) Resources)

Brand Manager-CSR (Senior Executive Level)

&65 6XVWDLQDELOLW\2IðFHU -XQLRU([HFXWLYH/HYHO

Assistant – CSR Projects Assistant – CSR Reporting

6DPSDWK7HDP0HPEHUV Encouraging each employee to embrace the role of a CSR ambassador

SAMPATH BANK PLC Annual Report 2015 179 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

*:9*VTTP[[LL;OLN\PKLSPULZWLJPÄLZ the measures to be adopted in order to maintain quality and consistency of all 3URMHFW0DQDJHPHQW success and all CSR activities conducted CSR projects, be it at a national level or at Sampath Bank PLC’s reputation by the Bank are standardized and strategic business unit level. for integrity has always been a key NV]LYULKI`JSLHYS`KLÄULK*:9 component of the Bank’s business guidelines formulated by the dedicated

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Education Empowerment Entrepreneurship Ethics and Environment for of Community Development Values Protection and Development Conservation

Project Evaluation, Implementation, Monitoring & Stakeholder Engagement

Assigning a Unit Level CSR Committee, comprising of Sampath team Step 1 members, Community leaders and Customers / Social (non-political) interest parties representing the area

7YLWHYH[PVUVMHWYPVYP[`SPZ[IHZLKVUV\YZ[\K`ÄUKPUNZVIZLY]H[PVUZHUK Step 2 community members' views

Assigning project objectives, key actions, resource requirements, time frame and Step 3 involvement of Sampath team members

Assessment of the project against Corporate CSR guidelines, resource Step 4 requirements and team involvement

Step 5 Implementing the project in line with a detailed action plan and timeline

Step 6 Continuous monitoring and evaluation of project credentials

Impact Assessment Grievance Solved? NO

YES

Reporting and Record Keeping

180 SAMPATH BANK PLC Annual Report 2015 We know that our CSR vision can only become a reality through the continued commitment, energy and passion of our people. Employee Volunteerism is therefore deemed to be the lifeblood Encouraging Employee Volunteerism of Sampath Bank PLC’s inclusive CSR Political Contributions As a socially responsible bank, we are As an independent service provider to eager to create meaningful relationships strategy. the nation, the Bank has not granted with the society, not only through our nor accepted any political contributions, customer offerings but also through either monetary or non monetary, during direct and indirect contact to reach out to the reporting period. community stakeholders. These strong 6WUDWHJLF$OOLDQFHV G4-SO 06 As and when needed, the Bank leverages social ties have inspired a collaborative on ongoing strategic partnership with (QFRXUDJLQJ(PSOR\HH9ROXQWHHUVLP corporate culture, which has helped us public sector bodies, private sector We know that our CSR vision can only to transmit change exactly where it is PUZ[P[\[PVUZHUKUVUWYVÄ[VYNHUPaH[PVUZ become a reality through the continued needed. We believe it is also the best way in the execution of its CSR initiatives. commitment, energy and passion of to gauge the pulse of each stakeholder These strategic partnerships encompass our people. Employee volunteerism is cluster, address any possible grievances grass root level relationships as well as therefore deemed to be the lifeblood and determine what projects to invest-in. IYVHKLYUH[PVUHSSL]LSHMÄSPH[PVUZHSSVM of Sampath Bank PLC’s inclusive which contribute positively towards each CSR strategy. We always promoted ,PSDFW$VVHVVPHQW CSR project. the concept of integrity among our We strongly believe that in order employees by encouraging them to go to maintain good relations with the Further, we depend on our suppliers beyond the call of duty and volunteer communities impacted by our work, we for access to reliable and cost effective not only as an obligatory responsibility, need to be forthcoming about our plans products and services that will help to but also as their own choice. It is how and transparent about our actions. Hence ensure the quality of our CSR projects we hope to foster a new breed of CSR we follow a set of policies and practices outcomes. As such, we encourage our ambassadors who will work for the that dictate how we conduct our suppliers to become partners in our greater good of the communities that business responsibly and ethically while projects over a longer time frame. they represent. serving the best interest of stakeholders. G4-EC 07

Moreover, in order to meet the &RPPXQLW\(QJDJHPHQW necessary regulatory requirements for Customer feedback is seen as a our CSR projects and to facilitate the vital component that nourishes the G4-SO 02 smooth functioning of programs and progressive growth of the Bank. No VWLYH[PVUZ^P[OZPNUPÄJHU[ processes, we also seek the support and Stakeholder engagement is therefore actual and potential negative authorization of government regulators, an essential part of the Bank’s CSR impact on local communities on a case-by-case basis. philosophy, where the customer remains a key focus.

SAMPATH BANK PLC Annual Report 2015 181 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

G4-SO 01/EC 07 .H\*ULHYDQFHV 2EMHFWLYH ,PSDFW $GGUHVVHG

Investment Employee Man hours (Rs Mn) Engagement spent as a % of Total man hours spent

Bridge the social and economic inequality, provide livelihoods to (GXFDWLRQIRU No: 180 those at the base of promoting 5.17 29% 'HYHORSPHQW Improving of basic Hrs: 2,089 education and the dissemination education facilities of knowledge within the country

Competency / Skills development Address grass root level issues (PSRZHUPHQW by providing basic infrastructure No: 301 7.07 26% RI&RPPXQLW\ or necessities to enable the Hrs: 1,860 Development of community to improve its lifespan infrastructure facilities

Upgrading national Educate entrepreneurs to facilitate health facilities their development and pave the (QWUHSUHQHXUVKLS No: 109 way for wealth creation than 0.41 34% 'HYHORSPHQW Hrs: 2,488 to increase dependency on Livelihood borrowings development

Accomplishment of prospective Contribution to principles, values, integrity, ethical improve community (WKLFVDQG No: 48 behaviour and professional value system 0.58 2% 9DOXHV Hrs: 158 advancement

Reduction of environmental Minimize environmental issues footprint (QYLURQPHQW based on social priorities, extend the message to a large captive 3URWHFWLRQDQG No: 203 audience of stakeholders and 2.03 9% &RQVHUYDWLRQ Hrs: 689 thereby create knowledge on environment conservation

182 SAMPATH BANK PLC Annual Report 2015 )RFXVIRU G4-EC 08 play a pivotal role in any economy, G4-SO 03,05 (QWUHSUHQHXUVKLS'HYHORSPHQW by generating employment, inspiring $QWLFRUUXSWLRQ (JJLZZ[VÄUHUJPHSZLY]PJLZPZ[OL innovation and contributing to the ;OL)HURMHJLZUVZPNUPÄJHU[ mainstay of socio-economic progress growth of GDP. This has inspired us risk related to corruption since of any country. However in Sri Lanka, a [VWYVTV[LNYLH[LYÄUHUJPHSPUJS\ZPVU all the employees perform larger number of people still do not have in rural and semi-urban regions of Sri [OLPY^VYRLMÄJPLU[S`HUKHJ[PU HJJLZZ[VTHPUZ[YLHTÄUHUJPHSZLY]PJLZ Lanka by supporting MSME businesses accordance with the code of HUKÄUKP[KPMÄJ\S[VYPTWVZZPISL[VVWLU and organizations that provide services conduct stipulated by the Bank. a bank account, or get a loan to start or MVY[OLILULÄ[VMSVJHSJVTT\UP[PLZ Meanwhile, adherence to laws and grow a business. 9LJLU[ÄN\YLZYLSLHZLKI`[OL regulations of the country including Department of Census and Statistics anti-corruption regulations, are It is therefore, in everyone’s interests to reveal that an average of 45% of seen as an unconditional priority. enable as many people as possible to Micro entrepreneurs and 10% of Small Compliance to these laws, rules ZOHYL[OLILULÄ[Z[OH[TVKLYUÄUHUJPHS business establishments country-wide and regulations are well monitored services bring. Stemming from this JVUK\J[LJVUVTPJHJ[P]P[PLZ\UVMÄJPHSS` and no incidents of corruption broader economic context, we believe were reported in 2015. that the livelihood and well-being of the Working with like-minded organizations, G4-SO 07,08 people, businesses, and communities we including community groups, serve today, as well as those we will serve government bodies and private $QWLFRPSHWLWLYH%HKDYLRXU tomorrow, will undoubtedly depend on institutions, we initiated the “Sampath Sampath Bank PLC does not access to critical resources. Saviya” programme, which is the basis engage in or promote any kind of VMV\YÄUHUJPHSPUJS\ZPVUZ[YH[LN` anti-competitive behaviour, anti- Emblematic of this goal, Sampath Bank Formulated in cognizance with the trust and monopoly practices and PLC has initiated numerous efforts national MSME development agenda, therefore has not been subject to to reach out the vast rural unbanked the ”Sampath Saviya” scheme mirrors any litigation in this regard, during WVW\SH[PVUHUKL_WHUKÄUHUJPHSPUJS\ZPVU the national priority to promote the reporting period. in Sri Lanka. inclusive banking by encouraging the vast number of unbanked local Initiative 1: “Sampath Saviya” businesses across the country, to embrace mainstream-banking channels. G4-SO 04/HR 01,02 Entrepreneurship Development Scheme We are aware that Micro, Small and Launched in 2013, “Sampath Saviya” 7UDLQLQJRQ$QWLFRUUXSWLRQ Medium Scale Entrepreneurs (MSMEs) To raise awareness on such topics as anti-corruption and Human Rights, a total of 42 training programmes were conducted in 2015, for 111 members of the Bank’s senior management. A key feature of the agenda was the special session for suppliers and service providers.

Moving forward, steps will be taken to expand this initiative and introduce regular training at a regional level so as to reach a broader demographic.

Sampath Saviya MSME Workshop

SAMPATH BANK PLC Annual Report 2015 183 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

We initiated [OL¸:HTWH[O Saviya” WYVNYHTTL ^OPJOPZ[OL IHZPZVMV\Y ÄUHUJPHSPUJS\ZPVU Z[YH[LN`

Sampath Saviya MSME Workshop

6DPSDWK6DYL\D&XVWRPHU9DOXH3URSRVLWLRQ is an ongoing livelihood development initiative, that focuses on identifying and addressing the broader systemic issues faced by rural and semi-urban communities in Sri Lanka, including the Motivation lack of job opportunities, limited access [VÄUHUJPHSJHWP[HSHUKZVJPHSPULX\HSP[PLZ Business that arise as a result. Recognition Market Reach The vision of “Sampath Saviya” is [OLYLMVYL[VKL]LSVWM\SS`ÅLKNLKJVYL business communities who would champion the movement for nation- wide development and doing so, boost 6DPSDWK6DYL\D the country’s GDP, increase per-capita Personal Development income, reduce national unemployment Livelihood and alleviate national poverty levels. Development A powerful community empowerment

G4-HR 01 Business Income Growth No ZPNUPÄJHU[PU]LZ[TLU[ Generation HNYLLTLU[ZHUKJVU[YHJ[ZÄUHSPaLK during the reporting period that moved the organization into a position of ownership in another entity.

184 SAMPATH BANK PLC Annual Report 2015 Progress of the “Sampath Saviya” Programme

Core Programme – 1 Core Programme – 2 Core Programme – 3 Core Programme – 4 2013 2013 2014 2015 Strategic Objective Developing Vulnerable Supporting War Supporting MSMEs & Provide Training on Communities Widows Business Initiators Entrepreneurship for Branch Managers Inclusive Banking Goals Capacity Building Women’s Capacity Building Capacity Building Empowerment Geographical Coverage North and East North and East Island wide Island wide

)LULÄJPHYPLZ War-affected War Widows Business Initiators and Branch Managers Communities Start-ups 5\TILYVM)LULÄJPHYPLZ 214 100 449 85 mechanism that seeks to address ,QLWLDWLYH*UDGH6FKRODUVKLS programme embraces key stakeholders the rural unemployment problem in 6XSSRUW3URJUDPPH of the primary education sector, namely the country, “Sampath Saviya” strives We have for the past few years focused the student and the parents, bringing to develop the entrepreneurial skills on uplifting the standard of primary forth a new dimension in stakeholder of women, youth and war affected education in the country, with the Grade value and securing the commitment of communities, in addition to MSMEs. 5 scholarship support programme being future generations. We believe, this would instrumental in realizing this desired also trigger the expansion of long-term The scheme also strives to trigger a objective. A strategic undertaking that corporate goals in tandem with national broader systemic change by instilling hopes to bridge the knowledge gap, the priorities. a “Credit Plus Culture” through an introduction to cash management and IHZPJÄUHUJPHSKPZJPWSPULH[[OLNYHZZYVV[ Year Number of Number of level. Locations Participants 2012 06 6,500 (GXFDWLRQIRU'HYHORSPHQW A key indicator of social progress, 2013 10 9,100 education continues to play an 2014 10 10,520 increasingly decisive role in realizing 2015 08 7,576 ZLSMώZ\Z[HPUHISLHUKLX\HSKL]LSVWTLU[ across a wider nation-wide populace. Recognizing the importance of this changing status quo for education, Sampath Bank PLC remains committed to support the broader educational needs of underserved segments of the society. Focusing primarily on uplifting the standard of community education across the country, all CSR undertakings are aimed at eliminating the persistent knowledge disparity that exists in Sri Lanka. Extending beyond the mere ÄUHUJPHSJVTTP[TLU[^LHSZVPU]LZ[ considerable time and effort in mentoring [OLILULÄJPHYPLZ^P[O[OLHWWYVWYPH[L knowledge and skills to ensure the full Grade 5 Scholarship Seminar in Matara ILULÄ[PZ[YHUZMLYYLK[V[OLYLJPWPLU[Z

SAMPATH BANK PLC Annual Report 2015 185 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

&RPPRQ*RDOVDQG2EMHFWLYHV %DVHOLQH0HDVXUHV 7DUJHW

Improving the arithmetical Number of students who Increase by 10%, the number knowledge and development have successfully passed the of students who have passed of overall IQ of 10 year olds examination in each area the exam each year Exposure to critical analysis Number of students who have and quick thinking techniques received an island ranking Motivate and build self- JVUÄKLUJL Encourage parents to provide a supportive role Recognition of high- performers Inculcate the savings habit at a young age

Conducted in succession for the past of the vast number of underprivileged Sampath Bank Ä]L`LHYZ[OLWYVNYHTTLZJVWL[HYNL[Z rural schools in Sri Lanka. It is a long children from rural communities, in term CSR commitment by Sampath PLC remains particular those who lack the basic Bank PLC, where the Bank would select committed to resources to prepare for an examination a deserving school from each province of this magnitude. and engage in developing the required support the broader infrastructure, providing necessary educational needs ,QLWLDWLYH6DPSDWK3DVDOD equipment and training the teaching staff A new initiative was launched in 2015, to adapt to modern teaching methods. of underserved entitled “Sampath Pasala”, primarily segments of the aimed at uplifting educational standards society.

Sampath Pasala

186 SAMPATH BANK PLC Annual Report 2015 Case Study

3URðOH PLC employees to contribute Grade 5 Scholarship exam in To inaugurate the “Sampath Pasala”, towards providing a balanced August 2015. The programme programme, we selected the Ba/ breakfast for students, partly was designed in line with the Kandegama Kanishta Vidyalaya, M\SÄSSPUN[OLKHPS`U\[YP[PVUHS “Grade 5 Scholarship Support in the Rideemaliyadda area in the needs of these students. This Programme”. Uva province. The school provides strategy also helped reduce education to about 182 students from absenteeism. 6. “Teaching – From school Year 01- 12 and is steered by a group children’s perspective”- A of dedicated teachers and a visionary 3. Health Camp - To provide free special three hour training principal who remain committed and general health screening for session to provide teachers eager to provide the best education the entire village. Those who with an insight into modern to the students in order to build a were found to be suffering teaching practices, stressing better future for the students and the from physical ailments were on the numerous ways in school itself. provided with further treatment which a teacher can help to and those diagnosed with KL]LSVWHUKWVZP[P]LS`PUÅ\LUJL ,QLWLDOðQGLQJV non-communicable diseases the character of a student 6UV\YÄYZ[]PZP[[V[OPZNLVNYHWOPJHSS` such as high blood pressure, and socially isolated area, we found diabetes and cholesterol. 7. Handwork and origami that the school faced the following were given medical advice to workshop - The Sampath JY\JPHSWYVISLTZ" manage their disorders. The team worked together with Poor sanitation facilities health camp further served as students from Grade 1-5 to Lack of clean drinking water a platform to create awareness demonstrate different ways of High absenteeism caused by among parents and students designing “Origami” artwork frequent illnesses resulting regarding the importance of and rewarded the best designs from exposure to an unhealthy a balanced diet and healthy produced by the students environment meals. Moreover, with the Low Body Mass Index (BMI) Z\WWVY[VM[OL4LKPJHS6MÄJL 8. Mock Debate – As a special among 70% of the student in the Uva Province”, students training initiative to expose population at the school were also provided with free students to professional High probability of individuals dental screening, medical debating and develop in that area being affected by treatment and advice on the leadership qualities and Chronic Kidney Disease due importance of dental health. communication skills, the to the lack of access to clean Sampath team also engaged water and improper nutrition 4. Monthly Monitoring System in a joint debate conducted – Method to monitor student between a team of senior .H\8QGHUWDNLQJV performance, enabling students vs the Sampath Bank 1. Water Project – Rebuilding of teachers to identify students team. infrastructure to provide school who are falling behind in class children with clean water for and therefore provide them 7RWDO,QYHVWPHQWRs 0.4 Mn drinking and facilitate sanitation with extra assistance. 0DQ+RXUV 364 requirements. 5. Grade 5 Scholarship Support 2. Foster Parent Program – Programme - A special Volunteers were called for session was conducted for the from among Sampath Bank students who were to sit for the

SAMPATH BANK PLC Annual Report 2015 187 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

(PSRZHUPHQWRI&RPPXQLW\ future. As a systematic and structured longer term and create a comparative We believe that strong communities are intervention, these capacity building platform for progress, which we hope the backbone of sustainable economic initiatives empower communities with the that will minimize societal inequalities and progress for all citizens of Sri Lanka. tools required to help sustain livelihoods open the gateway for continuous growth Hence our efforts in this regard aim to and improve living conditions. Such in the future. facilitate societal development that will measures also seek to indemnify these translate into tangible results for the communities from social exclusion in the

Initiative 1: Installation of Water 7\YPÄJH[PVU\UP[PU7VVUL^H

The “Hope for Life” Project is a Anuradhapura District, appear to have To ensure the sustainability of the capacity building initiative that aims the highest density of CKD patients, project, it was felt that community to address key health issues of as much as 15%. Poonewa, a village involvement would be vital. Therefore, communities across the island. Being of Medawachchiya has been found to the RO Plant was handed over to closely linked to these communities be among the worst affected areas in “Randiya Dahara”, a community- as a result of our work, we are able the North Central Province, As ground based organization in Poonewa. This to gain valuable insights into the water sources appeared to be highly organization is now fully in charge of limitations faced by these vulnerable contaminated, the lack of clean water operating the RO plant and they have groups. We have thus been able to facilities remained a dire problem for been generating an average income focus on areas that need it the most. the people of this area. Hence there of almost Rs 57,000/- per month was an urgent requirement for a [OYV\NO[OLZHSLVMW\YPÄLK^H[LY[V In 2015, we undertook to construct clean, safe drinking water supply to the community at an affordable price. H96>H[LY7\YPÄJH[PVU7SHU[PU M\SÄSS[OLULLKZVM[OLZL]PSSHNLYZPU[OL The income so generated is then Poonewa, in the Anuradhapura immediate vicinity of the Poonewa, utilized to maintain the plant, making District, in an effort to help combat Anaketiya and Nagadaranawewa it a fully sustainable project, in the Chronic Kidney Disease (CKD), which areas. long term. has become a widespread health problem mainly in the North Central To overcome this alarming health ,QYHVWPHQW Rs 2 Mn Province. Different from the traditional hazard, Sampath Bank PLC took 0DQKRXUV 203 form of kidney disease associated the initiative, in commissioning a with conventional factors, CKD, is Reverse Osmosis Drinking Water caused by consumption of unsafe Plant (RO Plant) in collaboration water that has been contaminated with the National Water Supply and with industrial chemicals and other Drainage Board. By offering a steady toxins. source of clean, safe drinking water for residents in the area, we hope that As per the data received from the project would drastically reduce the Anuradhapura Hospital, the incidence of CKD in and around Medawachchiya, Padaviya, the area, as the community would Kebethigollewa and Rambewa ILULÄ[MYVTHYLHK`ZV\YJLVMJSLHU Divisional Secretariats in the drinking water.

188 SAMPATH BANK PLC Annual Report 2015 improvements to the school. Rather than L_[LUKPUNKPYLJ[ÄUHUJPHSHZZPZ[HUJL under the “Trees for Life” programme, we undertook to supply fruit bearing plants to be planted in the school garden. Students were asked to nurture and care for these plants to ensure that they bear fruit. The school would then be able to sell the entire yield and raise the funds needed to improve the facilities of the school. This is seen as a powerful community engagement initiative to encourage both staff and students to work towards a common goal. Our involvement in the WYVQLJ[PUJS\KLK[OLMVSSV^PUN"

0UZ[HSSH[PVUVM>H[LY7\YPÄJH[PVU

,QLWLDWLYH6XSSRUWLQJWKH9LVLRQ WKHQDWLRQDOSURJUDPPHIRUSUHYHQWLRQ RIDYRLGDEOHEOLQGQHVV The Vision 2020 Programme is an ongoing effort by the Health Ministry to address the issue of preventable blindness among Sri Lankans. Given our ageing population, this is a grave issue that is likely to affect the country in the next 5 to 10 years. Accordingly, the main goals of the Vision 2020 programme are early detection and preventive care.

Supporting such national health priorities has always been important to us and Supporting the Vision 2020 Programme over the years, we have done so through our “Hope for a Life” project. Under the “Hope for a Life” project agenda for 2015, we extended our support to the Vision 2020 initiative, as we also believe that early detection is the key to avoiding premature blindness. Therefore for the ÄYZ[WOHZLVMV\YPU]VS]LTLU[^P[O[OL Vision 2020 project, we sponsored three eye camps in Poththapitiya (), Kal Eliya (Gampaha District) and Padiyathalawa (Ampara District).

,QLWLDWLYHì7UHHVIRU/LIHú A unique CSR project launched in 2014 with the aim of supporting the needs of Trees for Life Sirisamanpura Vidyalaya, Karandana, in the Ratnapura District, by providing them a source of funding needed for ongoing

SAMPATH BANK PLC Annual Report 2015 189 *VYWVYH[L*P[PaLUZOPW Strengthening Our Communities

>LILSPL]L that strong JVTT\UP[PLZHYL [OLIHJRIVUL VMZ\Z[HPUHISL LJVUVTPJWYVNYLZZ MVYHSSJP[PaLUZVM :YP3HURH “ Access for Success” another initiative under Sampath Pasala Programme

An initial investment of Rs 100,000/- spent to prepare the ground and on the 100 Rambutan saplings donated for the purpose

Team members involved: 30 Man hours spent: 324

([SHFWHG2XWFRPH ;OLÄYZ[JYVWPZL_WLJ[LKPUHUKP[ is expected that the school will earn an income of nearly Rs 500,000/-, as it was found that on average each Rambutan tree could generate an income of over 9Z;OPZÄN\YLPZSPRLS`[VPUJYLHZL greatly as the tree matures over time, assuring the school of a steady annual income for the foreseeable future.

190 SAMPATH BANK PLC Annual Report 2015 Preserving Our 6\Y\UPX\L Environment position as a IHURHSZVNP]LZ We appreciate the importance of identifying and \ZHUVWWVY[\UP[` measuring the environmental impacts of our activities, and understand it is our responsibility to mitigate these [VPUKPYLJ[S` direct impacts as much as possible. WYVTV[LIYVHKLY LU]PYVUTLU[HS Z\Z[HPUHIPSP[`

Tree Planting Project at Ratnapura Rs3.49Mn 0DQDJHPHQW$SSURDFK preserve the natural composition of air, Total Investment for Green (ZHÄUHUJPHSPUZ[P[\[PVUV\YI\ZPULZZ water, energy and biodiversity in order to has very little direct impact on the nurture a greener planet so that the earth Initiatives environment. However, we believe may become a better place to live, now that environmental protection and and in the future. conservation is the responsibility of each Our unique position as a bank also gives ,QYHVWPHQWRQ(QYLURQPHQWDO and every one of us, regardless of who us an opportunity to indirectly promote 3URWHFWLRQDQG&RQVHUYDWLRQ we are or what we do. broader environmental sustainability ,QLWLDWLYHV G4-EN 31 through the entities with which we We also appreciate the importance do business. By developing more of identifying and measuring the Investment environmentally sustainable products environmental impacts of our activities, (Rs Mn) and services, we strive to encourage our and understand it is our responsibility to clients to subscribe to “Greener” business Green initiatives 2.05 mitigate these direct impacts as much ethics and become agents of change for as possible. Above all, our goal is to Contribution to Wild 1.14 a greener tomorrow. Life and Nature Protection Society G4- EN 01,19 Paper Recycling Savings Reduction Carbon Footprint 0.30 calculation Total Investment 3.49 1,204 2,250,024 212 283,200 124,254 70,804 Number of Water 3HUKÄSS Electricity Oil Greenhouse fully (Litres) (Cubic metres) (kWh) (Litres) Gas (Kg) grown trees

SAMPATH BANK PLC Annual Report 2015 191 *VYWVYH[L*P[PaLUZOPW Preserving Our Environment

Address critical environment related issues through a tripartite involvement between the Bank, )XOO\ñHGJHG(QYLURQPHQWDO0DQDJHPHQW0RGHO employee and the community Ensure compliance with ,03$&7 675$7(*< )2&86 environmental regulations in all our business transactions 'LUHFW Integrated Lean Resource Facilitate green enterprises, Management Management through special incentives, grants, Practices loans and guidance

G4-EN 03,05,06,07 Paperless (QHUJ\ Processes Electricity Given the nature of our business, electricity remains the primary source of energy needed for the day-to-day Carbon Footprint operations. To minimize the number of Calculation electricity units consumed during the course of our operations, we have always sought energy saving alternatives that Encourage “Green” would control usage and help manage Ethics among our impact on the environment. Employees As part of our ongoing initiatives, in 2015, we looked at ways to reduce our dependence on non-renewable energy. Environmental CSR Our goal is to migrate towards solar via SNaPC energy in the long term. Accordingly, we initiated a pilot project to commission a solar net-metering mechanism at the Colombo Super branch which is the ,QGLUHFW single largest solar energy project carried Product Investing in the V\[PU[OLÄUHUJPHSPUK\Z[Y`(S[OV\NOZ[PSS Responsibility NCRE sector in its initial stage, we currently enjoy a 42% reduction in the monthly electricity bill of the branch.

Green Lending

,QWHJUDWHG0DQDJHPHQW3UDFWLFHV Adopt lean resource consumption Lean Resource Management practices across our operations, 4,200 kWh We have integrated environmental to reduce the use of paper, energy concerns into all aspects of the business and non-biodegradable material. as part of our operational framework. Ensure proper disposal of waste, Colombo Super Branch electricity Moreover, we have implemented the to minimize harmful environmental consumption (After installation of the principles of Lean Resource Management impacts Solar Net Metering System) HZWLY[OLMVSSV^PUNLJVN\PKLSPULZ" Create awareness of protecting National Grid 6,000 kWh per month and conserving the environment (average) Self Generated 4,200 kWh per among employees, customers and month (average) other stakeholders

192 SAMPATH BANK PLC Annual Report 2015 Unlike in a manufacturing organization, we as a bank are unable to directly correlate changes in energy consumption [VHZWLJPÄJWYVK\J[VYZLY]PJL Nevertheless, in line with our lean resources management principles, we do keep track of the total electricity consumed on a monthly basis. At present, we monitor direct electricity JVUZ\TW[PVUMVY[OLOLHKVMÄJLVUS`I\[ our goal is to extend the process to cover the entire branch network by 2017.

Introduction of Solar Energy System at Colombo Super Branch

Given the nature of our business, any reductions in the energy requirements on >LSVVRLK products and services provided cannot be assessed. However, following steps were H[^H`Z[V HSZV[HRLU[VPTWYV]L)HUR^PKLLULYN`LMÄJPLUJ`SL]LSZ" Scope of Activity Current Progress YLK\JLV\Y LED lighting to replace CFL bulbs for Implemented in newly commissioned dependence on interior lighting branches and all super branches Implemented in all newly commissioned LED Lighting for hoardings UVUYLUL^HISL branches Nearly 80% of the branch network is LULYN` LED lighting for branch exterior covered

SAMPATH BANK PLC Annual Report 2015 193 *VYWVYH[L*P[PaLUZOPW Preserving Our Environment

Ten employees were 5HODXQFKRIì%XUQ&DORULHV routine, eg: more frequent use of rewarded for their 1RW(OHFWULFLW\ú the stairs rather than the elevator. A An initiative aimed not only at special competition was arranged extensive use of the reducing energy consumption levels to identify the frequent users of the stair way during the H[[OL/LHK6MÄJLI\[HSZV[V stairway, within a 8 week time frame. inspire a health-conscious corporate stipulated time period culture. The campaign sought to Ten employees were rewarded for at the Green Awards encourage more than 1,000 Head their extensive use of the stair way 6MÄJLLTWSV`LLZ[VPTWYV]L[OLPY during the stipulated time period at ceremony held on health and wellbeing by making the Green Awards ceremony held on 23rd June 2015 simple changes to their daily work 23rd June 2015.

Fuel G4-EN 04 G4-EN 08,09,10,22,26 More importantly however, we feel Water the only sustainable solution is to shift Compared to other industries that towards paperless alternatives for as depend heavily on water usage, our Total Fuel many processes as possible. Consumption operations have no direct impact to MVY/LHK6MÄJL or from water. The little water we do Operations - 2015 E-waste recycled Qty use is mainly for our daily cleaning and (Hazardous Waste) sanitation needs. The water so used Total Number of kg 167 is then discharged directly to the local 277,419 litres Total Number of Units 643 sewerage system. (There is no need to recycle the water we use, since our water We do not have a mechanism to KPZJOHYNLZHYLPUZPNUPÄJHU[JVTWHYLK Paper waste recycled Qty compute indirect energy consumed. We to other industries). Further, we make (Non Hazardous Waste) sure that such discharges do not affect do however calculate our fuel usage in Total Number of kg 70,804 any water bodies, bio diversity areas, litres, but as of now, this is not converted protected areas and habitats anywhere in as an energy indicator. Given the nature of our business as a Sri Lanka. G4- EN 02,23,24,25,28 bank, the transport, import, export or Waste treatment of hazardous waste is not Although our management systems Water Consumption per HWWSPJHISL[V\ZHZ[OLYLPZUVPKLU[PÄHISL are designed to minimize waste as Employee per Annum direct or indirect impact from hazardous /LHK6MÄJL much as possible, we do still generate waste or chemical spills arising from our a considerable volume of paper waste operations. and to a lesser extent of e-waste, as a 3 40 m result of our day-to-day operations. We Further, as a purely service-based therefore habitually promote reuse and business our products and services Total Water recycling opportunities, whenever and do not require any form of physical Consumption (HO) wherever possible and practical during P3 packaging. Recycling of packaging the course of business. materials is therefore not applicable to Sampath Bank PLC.

194 SAMPATH BANK PLC Annual Report 2015 G4- EN 01,27 G4- EN 15,16,17,18,19,21 3DSHUOHVV3URFHVVHV As part of our plan to go “Paperless” we have come to increasingly rely on e-mediums &DUERQ)RRWSULQW&DOFXODWLRQ HZPSS\Z[YH[LKILSV^" Being a bank, our Carbon Footprint )520 is decidedly low. However, we do realize that our business does have Paper-based E-statements some impact on the environment due To E-communications Communication to the consumption of energy, water and fuel along with the material waste we generate as a result of day-to- SMS Alerts day operations. These are the main components of our carbon footprint.

Social Media We realize that in order to become a more sustainable business, we would )520 need to reduce our carbon footprint as T\JOHZWVZZPISL0U[OPZYLNHYK^LÄYZ[ Sampath Vishwa Conventional Cash- Virtual Banking need to measure the direct environmental To Online Banking based Banking Model Model impact resulting from the core business. Therefore, the carbon footprint calculation Sampath Vishwa process was introduced in 2013 to help Mobile App establish a measure of environmental accountability. It is now an ongoing )520 process that helps to benchmark an environmentally sound business Cash-based Online Shopping via Cashless framework that is based on continuous Commerce To Credit Card Transactions monitoring and system improvements.

Although, in the course of our business Scope of Activity :WLJPÄJ0TWYV]LTLU[ZMVY activities we do not release any direct air emissions or ozone depleting substances Procedural Improvements Introduction of e-Vault application in order to eliminate to the atmosphere, our carbon footprint [OL\UULJLZZHY`KVJ\TLU[H[PVUHUKPULMÄJPLU[THU\HS calculation process is based on the processes handled by branches. This converts the guidelines issued under the Corporate physical vault book into a system based register which Accounting and Reporting Standard shows all entries with regard to cash operations in (GHG Protocol), an internationally Branches recognized benchmark for accounting 0U[YVK\J[PVUVM*LY[PÄJH[LVM+LWVZP[*+9LNPZ[Y` and reporting on corporate greenhouse system to replace the manual data registers which gas emissions. In addition to the GHG were maintained by branches to keep CD account protocol we also comply with the Carbon holders’ information. The system operates as a Disclosure Project (CDP), which offers centralized repository guidelines regarding organizational and Introduction of e-Statements and Combined VWLYH[PVUHSIV\UKHYPLZX\HU[PÄJH[PVUHUK Statements for customers which reduce stationary standard reporting practices. usage Introduction of just in time printing of trilingual personal mandates/applications and forms at branches Supporting HR Systems Introduction of new modules in e-learning portal for employees Introduction of HR form management system for employees

SAMPATH BANK PLC Annual Report 2015 195 *VYWVYH[L*P[PaLUZOPW Preserving Our Environment

(ZZLZZTLU[7YVÄSL!

Site Location 110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka Assessment Type Organizational Greenhouse Gas Assessment Applied Standards WBCSD/WRI GHG Protocol, ISO 14064-1 Consolidation Approach Operational Control Assessment Scope Purchased Electricity, Waste Disposal, On Site Energy, Employee Commuting, Third-party Deliveries, Fugitive Emissions, Electricity Transmission and Distribution Losses Reporting Period 1st October 2013 – 30th September 2014 (Completed in 2015) Intended User Management and Stakeholders of Sampath Bank Base Year `LHYPU^OPJO[OLHZZLZZTLU[^HZÄYZ[JVUK\J[LK

,TPZZPVUZI`:JVWL)HZLKVU/LHK6MÄJL6WLYH[PVUZ GHG Summary by Scope for Sampath Bank PLC Scope 1 Direct emissions released from sources that are owned or controlled by the company. Such % sources include among others, corporate car ÅLL[ZJHW[P]LWV^LYNLULYH[PVUMHJPSP[PLZVYM\LS 41 19 combustion for heat. Scope 2 Indirect emissions associated from the generation of imported energy carriers such as electricity, heat and steam. Scope 3 All other indirect emissions that are not released from sources mentioned under Scope 2. Typical Scope 3 emissions include business travel, 40 waste disposal and outsourced activities.

Scope 01 Scope 02 Scope 03

GHG Protocol Scope Emission Source Data Quality Scope 1 – Direct Emissions Company Owned Vehicles Complete On Site Energy - Generators, LP Gas Complete Fugitive Emissions - Refrigerants, Fire Extinguishers Complete Leased Vehicles Complete Scope 2 – Purchased Energy Purchased Electricity Complete Scope 3 – Indirect Emissions Electricity Transmission and Distribution Losses Estimated Hired Vehicles Complete Air Travel Complete Third-party Deliveries Complete Employee Commuting Complete Waste Disposal Complete

196 SAMPATH BANK PLC Annual Report 2015 +L[HPSLK,TPZZPVUZI`>)*:+>90:JVWL

Source Emissions (tonnes CO2e)

CO2 CH4 N2O Total 6FRSH  Total: On Site Energy 6.0130 0.0007 0.0019 6.0504 Total: Company Owned Vehicles 104.3634 0.1172 0.3763 104.8568 Total: Leased Vehicles 582.7946 0.3527 3.6232 586.7705 6FRSH  Purchased Electricity 1446.1521 0.9277 63.4774 1510.5573 6FRSH  Total: Electricity Transmission & Distribution Loss 175.7075 0.1127 7.7125 183.5327 Total: Hired Vehicles 9.3603 0.0082 0.0328 9.4013 Total: Third-party Deliveries 13.4411 0.0007 0.1335 13.5752 Total: Air Travel 19.4169 0.0005 0.1915 24.0977 Total: Employee Commuting 1300.8413 1.9974 7.5561 1310.3948 Total Waste Disposal 3.9275

:WLJPÄJ2L`7LYMVYTHUJL0UKPJH[VYMVY:HTWH[O)HUR! “The results of our Carbon Footprint calculation for the Emissions per employee - 3.5241 tCO e 2 YLWVY[PUN`LHYZOV^HZPNUPÄJHU[PUJYLHZLJVTWHYLK[V Emissions per unit area (square foot of space) - 22.6106 kgCO e 2 [OLÄN\YLMVY[OLIHZL`LHY;OPZPZHKPYLJ[JVUZLX\LUJL Total Carbon footprint for the year - 3,753.25 tCO e 2 of the substantial increase in business volumes for the Total Carbon footprint (2012/13 - base year) - 2,753.20 tCO e 2 twelve months ending 31st December 2015.”

G4- EN 11,20,29,30/EC 02 GHG Inventory 2WKHU6XVWDLQDELOLW\,QGLFDWRUV sanctions for non compliance with Bio Diversity: environmental laws and regulations. % 0.16 Sampath Bank PLC does not own, 0.26 4.89 2.79 lease or manage any business Transport: 0.10 15.63 activity that is located within a ;OLYLHYLUVZPNUPÄJHU[ protected area and/or areas of high environmental impacts relating to bio diversity value outside protected the transport of products and other 34.91 areas. goods and materials used during the course of our operations. Emissions: Emissions of Ozone Depleting Climate Changes: 40.25 0.64 :\IZ[HUJLZ6+:HYLPUZPNUPÄJHU[ Our business operations do not in 0.37 considering the nature of our any way depend or have an effect On Site Energy business. on climate change and therefore, Company Owned Vehicles no risks or opportunities arise as a Leased Vehicles Purchased Electricity Compliance: result of climate change. Third-party Deliveries The bank has not been subject Air Travel Employee Commuting [VHU`ÄULZHUKVYTVUL[HY` Waste Disposal Electricity Transmission and Distribution Loss Hired Vehicles

SAMPATH BANK PLC Annual Report 2015 197 *VYWVYH[L*P[PaLUZOPW Preserving Our Environment

As we strive *UHHQ$ZDUGV to inculcate an An ongoing move to align team Out of 40 teams (Out of 75 registered members with the Bank’s Green teams) who completed the projects, a environmentally mission, establish an eco-friendly total of 23 teams were shortlisted at the conscious mindset social culture and promote Outstanding Eco Teams Competition “Greener” lifestyles among 2014 and 8 most outstanding teams among all employees, employees. First introduced in were felicitated at the ceremony held on we request them 2013 and now an annual event, this 23rd June 2015. The winners were also year’s Green Awards recognized H^HYKLK\UKLY[OLMVSSV^PUNJH[LNVYPLZ" to subscribe to outstanding contributions made Most Innovative Project the Sampath Bank by team Sampath in promoting Most Sustainable Project widespread environmental protection Best Energy Saving Team “Environmental and conservation through greater Pledge”. community involvement.

(QFRXUDJHì*UHHQú(WKLFVDPRQJ (PSOR\HHV We realize that in order to carry out our environmental programmes effectively, it is vital that our team stays aligned to these goals. As we strive to inculcate an environmentally conscious mindset among all employees, we request them to subscribe to the Sampath Bank “Environmental Pledge”.

(QYLURQPHQWDO&65&RQGXFWHGE\ 61D3& Employees who wish to commit themselves as “Green” champions can do so by joining the Sampath Bank Nature Protection Club (SNaPC) and getting Environmental Pledge involved in their work. The environmental arm of the Bank, the SNaPC has been More recently, SNaPC has also played an to express their views, exchange ideas, highly active in promoting environmental active role to raise awareness regarding thereby increasing employee interaction protection and conservation, carrying the importance of environmental and creating awareness on the Bank’s out a number of focused projects across sustainability among employees and the green activities. the country. Over the years the thematic communities they serve. To support this projects undertaken by SNaPC have goal, the SNaPC website was been selected for their ability to deliver re-launched in June 2015. The previous a direct and measurable impact on the static website was re-designed as a environment and bring about lasting dynamic portal where employees are able change for all associated stakeholders.

198 SAMPATH BANK PLC Annual Report 2015 G4- EN 12,13,14 :PNUPÄJHU[7YVQLJ[ZMVY I. 3URMHFW 1DWLRQDO7KUHDWHQHG6SHFLHV5HVHDUFK,QLWLDWLYH 6DPSDWK1D765, 2EMHFWLYH To preserve and protect critically endangered or Red-listed animal and bird species in Sri Lanka.

'HVFULSWLRQ The current project (Initiated in 2013) is an on going partnership with the Field Ornithology Group of Sri 3HURH-6.:3[VWYV]PKLÄUHUJPHSHZZPZ[HUJLMVY[OLYLZLHYJOHUKJVUZLY]H[PVUVM[OL¸)S\L,HYLK 2PUNÄZOLY¹ ([SHFWHG In progress 2XWFRPH II. 3URMHFW %ROJRGD:HWODQG3URMHFW3KDVH 2EMHFWLYH To assist in restoring the degraded areas of the Bolgoda Wetland Complex in order to conserve biodiversity, maintain watershed services and increase its resilience to climate change. 'HVFULSWLRQ The Bolgoda Wetland Complex (BWC) is the largest natural freshwater lake in the country. The lake, which covers 400 Km2, comprises of two vast fresh water bodies, namely, the Bolgoda North Lake and the Bolgoda South Lake, which are connected by the river Weras. ([SHFWHG Habitat conservation, reduction of pollution, support for community agriculture and local industries eg: 2XWFRPH eco-tourism. III. 3URMHFW 7UHH3ODQWLQJ3KDVH 2EMHFWLYH Promote reforestation through employee engagement. 'HVFULSWLRQ A competition was organized to select the most outstanding eco-team in recognition of their commitment towards reforestation. Of the 40 eco-teams who completed their projects, 8 eco-teams were selected and felicitated at the ceremony held on 23rd June 2015. 2XWFRPH 5,735 trees have been planted in 58 locations Island wide. IV. 3URMHFW &RUDO5HVWRUDWLRQ3URMHFW3KDVH 6XUDNLPX6XQGDUD3ROKHQD 2EMHFWLYH To maintain the rich bio-diversity and marine eco-systems surrounding the coral reef located off the coast of the Polhena Beach in Matara. 'HVFULSWLRQ A partnership with the Department of Oceanography and Marine Geology of the University of Ruhuna, the WYVQLJ[ZLLRZ[VYLWHPYULHYS`2TVMKHTHNLKYLLMÅVVY^P[OTPUPT\TKHTHNL[VL_PZ[PUNJVYHSZWLJPLZ and marine life. The effort will also result in the improvement of the overall structure in order to prevent further degradation. ([SHFWHG Habitat conservation, reduction of pollution and community awareness and development of eco - tourism. 2XWFRPH The environmental arm of the Bank, the SNaPC has been highly active in promoting environmental protection and conservation, carrying out a number of focused projects across the country. Sampath Green Awards

SAMPATH BANK PLC Annual Report 2015 199 *VYWVYH[L*P[PaLUZOPW Preserving Our Environment

G4-EN 01,02,28

3URGXFW5HVSRQVLELOLW\ Since we are in the business of banking, minimal amount of materials are used to produce and package primary products and services. However, our goal is to support a greener society by promoting environmentally sustainable products and services.

We have thus developed a “Green” lending framework, whereby funding is extended to those projects or businesses that promote earth-friendly concepts using modern technology and Exchanging Documents for project - Surakimu Sundara Polhena support the principles of lean-resource consumption while strictly complying with Investment in Non Conventional Renewable Energy (NCRE) Sector all mandatory environment protection regulations. Project No of Projects Capacity (MW) Investment (Rs Mn)

Mini Hydro 11 21.43 3,268 ,QYHVWLQJLQ1RQ&RQYHQWLRQDO Power 5HQHZDEOH(QHUJ\ 1&5( 6HFWRU We have been investing in the projects development of renewable energy Solar Power 83 0.45 86 sources taking into consideration, the recent changes in the energy industry. >LOH]LÄUHUJLKTHU`SHYNLYLUL^HISL *UHHQ/HQGLQJ energy projects and our portfolio has doubled over the past four years.

However, our involvement goes beyond W\YLÄUHUJPUN>L\ZL[OLSLUKPUN We have process to encourage clients to adopt and improve their environmental ÄUHUJLKTHU` credentials. Clients seeking approval for SHYNLYLUL^HISL renewable energy projects are requested [VVI[HPUHSSULJLZZHY`PUK\Z[Y`ZWLJPÄJ LULYN`WYVQLJ[Z environmental approvals. Moreover, as part of the green lending process, our HUKV\YWVY[MVSPV WYVQLJ[ÄUHUJL[LHTJVUK\J[ZZP[L]PZP[Z OHZKV\ISLK to monitor conformity with environmental parameters. We believe these steps over the past have helped to lay the foundation for environmentally sustainable businesses in MV\Y`LHYZ the longer term.

Sampath Green Energy Loan Scheme

200 SAMPATH BANK PLC Annual Report 2015 Pursuing good governance and sustainable business, always

Governance

Risk Management Compliance Review Corporate Governance Board Audit Committee Report Board Human Resources and Remuneration Committee Report Board Nomination Committee Report Board Integrated Risk Management Committee Report Board Related Party Transactions Review Committee Report Board Credit Committee Report Board Strategic Planning Committee Report Board Shareholder Relations Committee Report Board Treasury Committee Report Board Marketing Committee Report

SAMPATH BANK PLC Annual Report 2015 201 Governance

changing regulatory requirements such as Risk implementation of advanced approaches of Basel II and III. Its overall approach to risk management is supported by a Management ^LSSKLÄULKYPZRHWWL[P[LJVTWYLOLUZP]L policy framework, effective governance structures and appropriate tools and Sampath Bank’s overall approach to risk management techniques to identify, measure and manage risk. Today, risk considerations PZZ\WWVY[LKI`H^LSSKLÄULKYPZRHWWL[P[L form a pivotal input in all business, comprehensive policy framework, effective governance strategic and operational decisions of the structures and appropriate tools and techniques to Bank. identify, measure and manage risk.

Sampath Bank’s sustained growth The Bank has been very focussed in assets and earnings have been and successful in nurturing its risk underpinned by its comprehensive and management frameworks and culture effective risk management framework. to balance growth and risk amidst ever

&5(',75,6. 0$5.(75,6.

Moving to Basel II Internal Ratings Based Addition of new Stress Testing scenarios Focus Areas in Foundation Approach Enhancement of Limit Framework 2015 Risk Based Pricing Treasury Monitoring System upgrade

2015 Stress Testing Post Credit Monitoring Focus Areas in Focus Areas

Growth in Loans and Advances: 24% Introduction of Limit Framework for Interest Rate 3HUIRUPDQFH +LJKOLJKWV Risk Rating/Scoring model review Risk Total Impairment/Gross Total Advances: 1.81% Introduction of Value at Risk Limits / Monitoring Implementation of Risk Based Pricing, and Fine tuning integrated Market Risk Stress Testing +LJKOLJKWV with Board Approved Limits, Assumptions & 3HUIRUPDQFH Stress Testing on Fall in Value of Security Parameters

5,6.3(5)250$1&(+,*+/,*+762)

23(5$7,21$/5,6. 675$7(*,&$1'5(387$7,21$/5,6.

Risk & Control Self Assessments, and Key Supporting to manage wider presence over Focus Areas in

Risk Indicators Digital/Electronic Channels, Payment Channels 2015 Moving to Basel higher approaches in and Social Media

2015 Operational Risk Enhancing Strategic Planning and R&D functions Focus Areas in Focus Areas

Enhancements in Key Risk Indicators/Limits Working with multiple Rating Agencies 3HUIRUPDQFH Bank-wide coverage of Risk & Control Self continued further. +LJKOLJKWV Assessments Awards: The most awarded Commercial Bank Capacity Building and Concurrence of in Sri Lanka in 2015

+LJKOLJKWV the Board to move to Basel Alternative  6WLUPUNH9LWYLZLU[H[P]L6MÄJLPU4`HUTHY 3HUIRUPDQFH Standardised Approach

202 SAMPATH BANK PLC Annual Report 2015 5LVN*RYHUQDQFH governance committees, at both Board reviewed during the year and Board The Bank’s approach to risk management and Executive level which operate with approval was obtained. In addition, the is embedded in its Risk Governance JSLHYS`KLÄULKTHUKH[LZYVSLZHUK Bank maintains over 40 different policies Framework approved by the Board responsibilities and a Board approved to cover governance, risk/compliance Integrated Risk Management Committee policy framework. Terms of References management, and all operational and (BIRMC). The framework consists of of all key management committees were administrative aspects of its business.

5LVN*RYHUQDQFH&RPPLWWHHV

6DPSDWK%DQN

Board Integrated Risk Credit Policy, Risk and Portfolio Management Committee Review Committee ([HFXWLYH/HYHO&RPPLWWHHV Board Audit Committee Executive Advances Committee

Board Treasury Committee Advances Committee

Asset & Liability Management Board Credit Committee Committee (ALCO)

Board Related Party Transactions %RDUG/HYHO&RPPLWWHHV Investment Committee Review Committee

Board Strategic Planning IT Steering Committee Committee

Internal Capital Adequacy Assessment Process (ICAAP) Committee

Outsourcing Committee

Procurement Committee

Sri Lanka Financial Reporting Standards (SLFRS) Committee

Management Committee

SAMPATH BANK PLC Annual Report 2015 203 Governance

Risk Management

G4-58

Committee Composition Role and responsibilities %RDUG/HYHO&RPPLWWHHV %RDUG,QWHJUDWHG5LVN Three Non Executive Directors Identify, monitor and measure the overall risk 0DQDJHPHQW&RPPLWWHH Managing Director WYVÄSLVM[OL)HURPUHUPU[LNYH[LKTHUULY The apex committee for risk Group CFO/Executive Director  +L]LSVWYLJVTTLUKWVSPJPLZHUKWYVJLK\YLZ" management within the Bank, set .YV\W9PZR6MÄJLY verify models that are used for assigning all up in compliance with the Central Head of Compliance material risks under Basel Framework and other Bank Directive No 11 of 2007. best practices / regulations Key management personnel  :L[YLJVTTLUKSPTP[ZI`KLÄUPUN[OL)HUR»ZYPZR representing the functions of Credit, HWWL[P[LHUKTVUP[VY[OLYPZRWYVÄSLHNHPUZ[[OL Market, Liquidity, Operational and parameters set in the Risk Appetite Strategic Risks are also invited Examine risk scenarios to measure the impact of to the committee meetings as unusual market conditions necessary. Monitor compliance of various risk parameters of business lines Regularly report to the Board of Directors on the Risk Management and Compliance status of the Bank %RDUG$XGLW&RPPLWWHH Five Non Executive Directors Review integrity of accounting and reporting Roles and functions are regulated supported by Managing Director systems by the Banking Act Direction No Review internal audit reports and liaise with 11 of 2007, Rules on Corporate Group CFO/Executive Director corporate management (Managing Director/ Governance as per section DGM - Finance, Head of Internal Group CFO/Executive Director, and all DGMs/ 7.10 of the Listing Rules of the Audit, Chief Manager-Systems AGMs) in taking precautionary measures to Colombo Stock Exchange and Audit, External Auditors minimise control weaknesses, procedure the Code of Best Practices on violations, frauds and errors. Corporate Governance issued Review internal audit programme and make by the SEC and the Institute of appropriate changes. Chartered Accountants of Sri Assessing the independence and monitoring the Lanka performance and functions of the Internal Audit Appointment/Discontinuation of External Auditor Investigate any activity, including matters raised under whistle-blowing (Refer to pages 282 & 283 for detailed roles and responsibilities of the Board Audit Committee) %RDUG7UHDVXU\&RPPLWWHH Three Non Executive Directors and Provide guidance to the Treasury in carrying out two Executive Directors its functions and to monitor its performance Establish Treasury Management Policies Key management personnel Monitor the liquidity position, foreign exchange representing the functions of risk and interest rate risk of the Bank Treasury, Risk and Finance are also (Refer to page 299 for detailed roles and invited to the committee meetings responsibilities of the Board Treasury Committee) as necessary.

204 SAMPATH BANK PLC Annual Report 2015 Committee Composition Role and responsibilities %RDUG&UHGLW&RPPLWWHH Four Non Executive Directors and Approve credit facilities as delegated by the two Executive Directors Board of Directors. Recommending to the Board on credit Policy Management personnel of the Bank, inclusive of the maximum limits on representing the functions of Credit exposure to each major sector of the economy. and Risk Management are invited Recommending Credit policy changes to the for the committee meetings Board. %RDUG5HODWHG3DUW\ Three Non Executive Directors and Developing and maintaining Related Party 7UDQVDFWLRQV5HYLHZ one Executive Director Transaction policy in line with the applicable &RPPLWWHH regulations. Making Related Party disclosures as required by regulations. %RDUG6WUDWHJLF3ODQQLQJ Five Non Executive Directors Examine the Bank’s current mission, strategic &RPPLWWHH including Chairman, and two positioning and the strategic vision, and provide Executive Directors guidelines to Strategic Planning Process. Examine the external challenges and opportunities relevant to the strategic vision and key goals. Review internal strengths and weaknesses of the Bank and provide guidance to management. Oversee and monitor strategic planning process Examine effectiveness of key strategies. Review Bank’s resource capabilities, capital composition/structure needed to achieve the strategic goals. Make recommendations to Board on Strategic Decisions. ([HFXWLYH/HYHO&RPPLWWHHV &UHGLW3ROLF\5LVNDQG Chair- Managing Director DGMs Responsible for reviewing the credit policy, 3RUWIROLR5HYLHZ&RPPLWWHH and AGMs in Lending, Recoveries, procedures and performance of the Bank. .YV\W9PZR6MÄJLY/LHKZVM Monitor indicators such as delinquent exposure, Credit Departments, Credit Risk cross border exposure etc. Management and Head of Treasury Deciding prudential limits on lending and are also invited for the meetings providing suggestions for capital allocation in line with the set Risk Appetite. ([HFXWLYH$GYDQFHV Chair- Managing Director Approval of credit facilities as delegated by the &RPPLWWHH *OPLM6WLYH[PUN6MÄJLYHUK+.4 Board Credit Committee. Credit $GYDQFHV&RPPLWWHH *OPLM6WLYH[PUN6MÄJLY+.4 Approval of credit facilities as delegated by the Credit, Line Assistant General Board Credit Committee. Manager/Chief Managers of Credit $VVHWDQG/LDELOLW\ Chair- Managing Director, GCFO, Overall responsibility for managing the Bank’s 0DQDJHPHQW&RPPLWWHH +.4*YLKP[*OPLM6WLYH[PUN6MÄJLY balance sheet within the performance and risk $/&2 Head of Treasury, DGM-Marketing WHYHTL[LYZKLÄULKI`[OL)VHYK and Business Development, Group 9PZR6MÄJLY+.4-PUHUJL AGM-Finance, Head of Deposits

SAMPATH BANK PLC Annual Report 2015 205 Governance

Risk Management

Committee Composition Role and responsibilities ,QYHVWPHQW&RPPLWWHH Chair- Managing Director, Overall responsibility pertaining to decisions Executive Director/GCFO, Head of on investment activities such as investments in ;YLHZ\Y`*OPLM6WLYH[PUN6MÄJLY stocks, debt instruments etc. +.4*YLKP[.YV\W9PZR6MÄJLY ,76WHHULQJ&RPPLWWHH Chair- Managing Director Responsibility for all aspects related to the Senior management representatives Bank’s information technology infrastructure from IT, Operations, Risk, Marketing, including automation, security, and procurement. Systems Audit and Finance ,&$$3&RPPLWWHH Chair- Group CFO/Executive Responsibility to ensure that the Bank meets the Director requirements of ICAAP in timely and accurate Senior management representatives manner. from Finance, Risk, ALCO, Planning, IT and Internal Audit 2XWVRXUFLQJ&RPPLWWHH Chair-Managing Director, Group The committee is responsible for the supervision CFO/Executive Director, DGM of all the Bank’s outsourced activities including Operations, Head of Compliance, the setting the criteria for selection, approving /LHKVM0;.YV\W9PZR6MÄJLY the selection of service providers and other Chief Manager NSC related decisions. 3URFXUHPHQW&RPPLWWHH Chair- Managing Director, Responsibility to ensure that the Bank meets the Group CFO/Executive Director, requirements of Regulations and Bank’s Policies/ Respective line AGM/DGM of the Procedures in handling procurements. relevant business/functional area 6/)56&RPPLWWHH Chair- Managing Director, Responsibility for ensuring that policies Group CFO/Executive Director, and procedures are in place for SLFRS +.4-PUHUJL.YV\W9PZR6MÄJLY implementation, planning/execution and Heads of key departments in SLFRS reporting functions. implementation 0DQDJHPHQW&RPPLWWHH Chair- Managing Director Recommending Corporate objectives, Strategic Group CFO/Executive Director, Plans and Budgets to the Board. *OPLM6WLYH[PUN6MÄJLYHSS+.4Z Provide Leadership to develop, plan and execute and AGMs strategic and operational plans. Ensure that all Legal/Regulatory compliance .YV\W9PZR6MÄJLY/LHKVM requirements of the Bank are duly met. Compliance & Head of Treasury on Make operational decisions. Invitation Decide and assume responsibility on action MVYLUZ\YPUNZV\UKHUKLMÄJPLU[6WLYH[PVUZ Managing Risk, Business Continuity, achieving set targets, managing the Bank’s reputation and ensuring regulatory/legal compliance and any other area related to the Bank coming under its purview. Ensure customer service standards of the Bank are maintained at a high level and customer grievances are duly addressed. Appoint internal Project Teams/Committees and set terms of reference.

206 SAMPATH BANK PLC Annual Report 2015 Independent monitoring of Treasury Three Lines of Defence Model provides operations, adherence to Treasury simple but comprehensive clarity on roles and limits, exposure to Liquidity, responsibilities, thereby managing risks through a Foreign Exchange Rate, Interest clear and transparent governance model. Rate, Equity Price Risks and implementing or recommending appropriate actions to mitigate 7KUHH/LQHVRI'HIHQFH0RGHO in Risk Management across all areas of Market / Liquidity Risks. DGRSWHGIRU5LVN0DQDJHPHQW the Bank. The Centralised oversight is Group-wide oversight of Risk )UDPHZRUN WYV]PKLK[OYV\NO" Management, reporting and The Bank’s Risk Management framework Ongoing Formulation and providing recommendations to is based on the Three Lines of Defence implementation of the Integrated BIRMC Governance model, which ensures Risk Management framework JSLHYPKLU[PÄJH[PVUHUKZLNYLNH[PVUVM Review and reporting of risks Third Line of Defence: Audit/ duties with respect to Risk Management of the business units, products, compliance functions providing and Governance activities. The model processes, systems and Key Risk independent and objective assurance provides simple but comprehensive clarity Indicators to the relevant business on the Risk Management processes and on roles and responsibilities, thereby units, management committees practices in place. These functions have managing risks through a clear and and BIRMC, as required. the authority to communicate with the transparent governance model. Challenging the Risk & Control External Auditors, Board Audit Committee Self Assessments, inherent risks and BIRMC. Assurance is provided First Line of Defence:0KLU[PÄJH[PVU HUKPU[LYUHSJVU[YVSZPKLU[PÄLKI` [OYV\NO" management and reporting of both business units current and potential risks at business Independently identifying and Internal Compliance, regulatory \UP[SL]LS[VLUZ\YLZWLJPÄJYPZRZ assessing the risks the Bank is compliance, regulatory reporting, are managed effectively as close as exposed to, also considering the Internal Audit, Anti-Fraud possible to the source of risk. Key Risk Board approved Risk Appetite and monitoring and Anti-Money Management responsibilities for the recommending action to mitigate Laundering measures I\ZPULZZ\UP[ZPUJS\KL" risks above the appetite levels. Monitoring compliance with the Self-assessment and reporting of Overseeing the development of a Bank’s overall Risk Management risks and control effectiveness risk-culture and its links with the framework Compliance with all policies and anti-fraud framework. Assessment of the robustness of procedures Issuing an independent ‘Risk the Risk Management tools and Promoting a strong risk culture Opinion’ for all Credit appraisals techniques in place. and awareness of risk elements V]LYHZWLJPÄLK[OYLZOVSK7VSPJPLZ through effective communication Operational Processes, Legal and training. Agreements and New Products/ Emphasis on both proactive and Systems. reactive risk evaluation, monitoring, Conducting reviews on loan and and controls other credit facilities to ascertain the compliance to covenants and Second Line of Defence: Centralised ensuring the maintenance of credit oversight by the Risk Management quality. function and the implementation of  7YV]PKPUNPUKLWLUKLU[]LYPÄJH[PVU governance standards, frameworks and on the process and level of policies for each type of risk that the Bank impairment carried out by the is exposed to, while ensuring consistency business units for individually ZPNUPÄJHU[IVYYV^LYZ

SAMPATH BANK PLC Annual Report 2015 207 Governance

Risk Management

)XQFWLRQDO6WUXFWXUHRI5LVN0DQDJHPHQW)UDPHZRUNRIWKH%DQN*URXS

%RDUGRI'LUHFWRUV

Managing Director BIRMC

Head of Compliance .YV\W9PZR6MÄJLY

Integrated Risk AML and Compliance Unit Management Unit

Credit Risk Market Risk Operational Risk Management Unit Management Unit Management Unit

Credit Risk Management Credit Risk Review Function Function

Head of Risk & Compliance - Chief Accountant CEO - Sampath Information Manager - Siyapatha Finance PLC SC Securities (Pvt) Ltd Technology Solutions Ltd Sampath Centre Ltd

The Integrated Risk Management Unit units have been established within the and risk appetite triggers across a range (IRMU) holds the overall responsibility IRMU for managing Operational, Market VM]HYPHISLZYLÅLJ[P]LVMHSSRL`YPZRZ[OL for the Risk Management function of and Credit Risks. )HURPZL_WVZLK[V;OLYPZRWYVÄSLPZ the Bank and the Group under the monitored against the parameters set out Z\WLY]PZPVUVM[OL.YV\W9PZR6MÄJLY 5LVN$SSHWLWH in the risk appetite on a consistent basis, 094<VWLYH[LZPUKLWLUKLU[S`MYVTWYVÄ[ The Bank’s Risk appetite, playing a through regular reviews, reporting and and volume targets and formulates the crucial element in the formulation of the related controls. During the year under overall policy framework for measuring, Bank’s strategies and policy framework is review, risk appetite parameters for all monitoring and mitigating the risk KLÄULKI`[OL)VHYKVM+PYLJ[VYZHUKPZ HYLHZVMYPZRZ^LYLYL]PL^LKYLÄULKHUK exposures of the Bank. Three separate expressed in the form of tolerance limits updated.

208 SAMPATH BANK PLC Annual Report 2015 Risk Appetite-Criteria Limit/Range 6WUHVV7HVWLQJ Stress testing calculates the potential &UHGLW4XDOLW\DQG&RQFHQWUDWLRQ impact on the Capital Adequacy Ratio Single Borrower Exposure (Individual) 25% of the Capital Base of the Bank (CAR) as a result of extreme but plausible Single Borrower Exposure (Group) 35% of the Capital Base of the Bank JOHUNLZPUKLÄULK]HYPHISLZSPURLK[V the various types of Risks. Stress testing Aggregate exposure (funded + non funded) 55% maximum is carried out on all major risks the Bank to large borrowers/Total exposure (funded + is exposed to, with multiple variables non funded) (%) being sensitized in order to gauge the (Large borrowers: Having a credit exposure PTWHJ[VU*(97VY[MVSPVZWLJPÄJZ[YLZZ of more than 15% of Bank’s Capital Base) testing is also conducted quarterly, or Lending to Agriculture (%) – mandatory 10% - 12% earlier as required. The Bank’s stress requirement 10% testing policy, assumptions, limitations, Exposure Against Shares/Credit Portfolio (%) 7.5% maximum parameters, methodology and limit Sector-wise Concentration (HHI Score *) Below 1,400 framework is approved by the Board and reviewed annually, or earlier based Product-wise Concentration(HHI Score) Below 1,400 on the requirement. During the year 0DUNHWDQG/LTXLGLW\5LVNV under review, Fall in Forced Sale Value Net Open Position USD 11 Mn maximum (+or-) of Security has been added to the framework, and Operational / Market / Liquid Assets Ratio 21% minimum Liquidity Risk Stress Tests have been Net Loans to Total Assets Less than 75% further expanded. Total Loans to Customer Deposits 85% - 95% The BIRMC conducts regular reviews of Liquid Assets to Short Term Liabilities 30% - 35% the stress testing outcomes including Bulk Deposits (over Rs 50 Mn) to Total Less than 15% major assumptions that underpin them, Deposits including stress testing behaviour against Purchased Funds to Total Assets Less than 12% the Board approved Stress Testing Commitments to Total Loans Less than 45% Limits. Further, the outcome of the stress testing provides very important inputs for ** 2SHUDWLRQDO5LVN processes including assessing changes Internal Fraud Rs 10 Mn maximum PUYPZRWYVÄSLKLÄUPUNYPZRHWWL[P[LHUK External Fraud Rs 25 Mn maximum tolerance levels as well as establishing strategic plans and contingency plans. Employment Practices and Workplace Rs 5 Mn maximum Safety Clients, Products & Business Practices Rs 5 Mn maximum Damage to Physical Assets Rs 5 Mn maximum Business Disruption and System Failures Rs 5 Mn maximum Execution, Delivery & Process Management Rs 30 Mn maximum

/LYÄUKHOS/PYZJOTHU0UKL_//00UKL_ZJVYLZYHUNLMYVT[V>LT\S[PWS`[OLZJVYLZI` 10,000 for easy readability. The scores below 1,000 are considered un-concentrated while over 1,800 is considered highly concentrated. Our computations have been carried-out on lending products and sectors ** All limits are annual limits based on Basel categories. Overall Cumulative Operational Risk Appetite Limit is Rs 50 Mn a year.

SAMPATH BANK PLC Annual Report 2015 209 Governance

Risk Management

Default Concentration Security Value Liquidity Interest Rate Equity Risk Foreign Operational Risk Risk Risk Risk Risk Exchange Risk Risk

Large Increase in Fall in Forced Large Interest Price shock Exchange Increase in exposure HHI score Sale Value of Deposit Rate shocks on equity Rate shock Operational default Mortgaged withdrawals on interest portfolio on net open Losses Collateral prior to sensitive position Maturity assets Asset Loan roll- Interest quality overs Rate shocks

Stressed scenarios Stressed downgrade on interest Low, Medium and High Low, sensitive liabilities

&$3,7$/$'(48$&<5$7,2 Impact Assessment

&UHGLW5LVN business lines and is responsible for Credit Risk is the potential for loss driving all credit risk management efforts due to the failure of a customer or of the Bank at functional level. 2L`WYPUJPWSLZ counterparty to meet its obligations to pay in accordance with agreed terms Policy Framework: VM[OL)HUR»Z and conditions. Credit Risk can arise The Bank’s credit risk policy framework *YLKP[9PZR7VSPJ` from default risk, concentration of is approved by the Board of Directors, counterparties, business sectors or and it is reviewed and updated annually HYLMVJ\ZZLKVU geographical regions and country risk. or more frequently based on the need considering both business requirements LUZ\YPUNZ[YPUNLU[ +RZ:H0DQDJH&UHGLW5LVN and the need to manage Credit Risk WYLWVZ[*YLKP[ Credit Risk Governance adequately. The Credit Policy, Risk and Portfolio 9PZR4HUHNLTLU[ Review committee functions as The Key principles of the Bank’s the steering committee with overall Credit Risk Policy are focussed on PUSPUL^P[O9PZR responsibility for implementing the credit ensuring stringent pre/post Credit Risk Appetite of the risk management framework of the Bank. Management in line with Risk Appetite of Meanwhile, the Credit Risk Management the Bank, Regulations of Central Bank of )HUR Unit (CRMU), which functions within the Sri Lanka and Basel guidelines. RMU, operates independently from the

210 SAMPATH BANK PLC Annual Report 2015 &UHGLW5LVN &UHGLW*UDQWLQJ &UHGLW &UHGLW5LVN (QYLURQPHQW Process $GPLQLVWUDWLRQ 0LWLJDWLRQDQG 0HDVXUHPHQW &RQWURO DQG3RVW&UHGLW 0RQLWRULQJ3URFHVV

Nurture a culture of Delegated approval  >LSSKLÄULK Consistently responsibility risk awareness and authority at multiple applied Credit risk for Post Credit management levels (Board mitigation policies Monitoring with Regular and Credit Committee, and procedures emphasis on comprehensive Executive Advances Collateral is valued internal and training Committee, appropriately and external early programmes for all Managing Director updated regularly. warning signals credit handling staff etc) Other risk mitigants Stress testing and Segregation of Comprehensively (credit insurance, scenario analysis duties in credit structured and guarantees) conducted by approval/credit risk KLÄULKJYLKP[ are evaluated CRMU to assess management/credit evaluation and carefully taking the possible administration approval criteria/ into consideration impact of multiple Effective risk processes the counterparty internal and governance limits Robust, internal risks, and legal external variables. and structures credit rating/ implications scoring models Comprehensive Periodic reporting linked to quality of interim reviews by CRMU to borrower/facility in of selected large GRO, Corporate line with industry exposures Management, standards and Effective Credit Policy, Basel II Advanced management Risk and Portfolio approaches of credit Review Committee, Prudential limits concentration risk BIRMC and Board set in line with risk through analytical Credit Committee appetite (counter tools such as party, sector, region /LYÄUKHOS exposure limits) Hirschmann Index Independent pre- (HHI) and periodic credit review by reporting to the CRMU BIRMC.

&UHGLW5LVN)RFXV$UHDVLQ Implementing Risk Based Pricing Evaluating Internal risk rating In 2015, the Bank maintained focus Collection and processing of data models and scorecards by on improving its analytics, models and relating to risk ratings and defaults an external consultant to overall data quality in order to enhance its as the Bank moves forward in the verify conformity with Basel II capabilities in credit risk management. adoption of Internal Rating Based requirements. In pre-credit assessment/risk Foundation Approach for credit risk Enhancing the quality of reporting management Sampath Bank focused on management in accordance with I`KL]LSVWPUNYPZRZWLJPÄJ/LH[ the Basel II guidelines. Maps/Dashboards submitted to the Board on a monthly basis

SAMPATH BANK PLC Annual Report 2015 211 Governance

Risk Management

Despite the rapid growth, Sampath Bank continued to maintain the health of its portfolio above industry average, with Adopting the Internal Ratings Based Foundation the gross non-performing-loans ratio Approach, prescribed in Basel II guidelines subject to clocking in at 1.64%, which is well below 9LN\SH[VY`HWWYV]HS^V\SKIL[[LYYLÅLJ[[OLYPZRSL]LSVM the industry average. This is underpinned our portfolio. by the continued focus placed on strengthening the Bank’s pre-and post-credit evaluations and monitoring Meanwhile, post-credit monitoring was IHZLKVU[OLZWLJPÄJJYLKP[WYVÄSLVM[OL mechanisms. strengthened by - individual borrowers in homogeneous The Credit Risk Review pools, thus providing a more accurate Default Risk Function (CRRF) increasing its measure of the portfolio credit risk. Default risk is the key component of review capability and oversight Adopting this method is also anticipated credit risk and comprises of potential through visits to branches/credit [VLUHISL[OL)HUR[VILULÄ[MYVT[OL losses arising from the default of a departments for loan reviews. relatively superior health of its portfolio for borrower or counterparty. Default risk can Increased scope and coverage capital allocation purposes. arise through both on balance sheet and of portfolio evaluations, which are off balance sheet exposures. Stringent now carried out on a monthly basis Resultantly, the Capital Adequacy Ratio pre-credit evaluation and post credit at Bank level as well as Regional/ of the Bank is expected to improve monitoring has enabled the Bank to Credit Department levels. notably under Internal Rating Based maintain healthy credit portfolio quality CRMU conducting quarterly, Foundation Approach of Basel II, which during the year under purview. PUKLWLUKLU[]LYPÄJH[PVUZVM is primarily driven by the Bank’s healthy impairment on all individually credit quality. Concentration Risk ZPNUPÄJHU[L_WVZ\YLZ Concentration risk stems from high Consistent evaluation and &UHGLW3RUWIROLR&KDUDFWHULVWLFVLQ lending exposure to a particular monitoring of trends in selected The Bank achieved a strong credit growth customer/group, sector, product industries to identify potential areas of 24% during the year, compared to the or region. The Bank consistently of risk and recommend mitigating preceding year’s growth levels of 14.6%. monitors multiple indicators related action.

&DSLWDO&KDUJH&DOFXODWLRQIRU&UHGLW Sector-wise Breakdown of Sector-wise Breakdown of 5LVNXVLQJ,QWHUQDO5DWLQJ%DVHG Loan Protfolio 2015 Loan Protfolio 2014 )RXQGDWLRQ$SSURDFK % % The capital charge computation for credit 0.10 2 2 2 risk in ascertaining the Bank’s capital 3 3 2 3 21 3 21 adequacy levels is currently based on the 3 5 Standardised Approach which evaluates 4 6 the credit quality of the portfolio based 6 primarily on the external credit ratings of 6 borrowers. However, given the relatively 7 14.9 14 limited externally rated portfolio of 7 borrowers in Sri Lanka, this approach will 10 7 UV[HJJ\YH[LS`YLÅLJ[[OLYPZRWYVÄSLVM[OL 15 13 Bank’s portfolio. Accordingly, we opine 10 11 that adopting the Internal Rating Based Traders Manufacturing Traders Manufacturing Other customers - Agriculture & Related Other customers - Agriculture & Related Foundation Approach, prescribed in Personal Construction Personal Financial & Business Basel II guidelines subject to Regulatory Financial & Business Other Services(Edu/Health/- Other Customers Services Services Media ,Oth) -Pawning Construction HWWYV]HS^V\SKIL[[LYYLÅLJ[[OLYPZR Tourism Other Customers -Pawning Tourism Other Services(Edu/Health level of our portfolio. In this approach, Infrastructure Transport Infrastructure /Media ,Oth) New Economy individual risk weights are determined Government Sector New Economy Transport Other Customers Other Customers -Credit Card -Credit Card

212 SAMPATH BANK PLC Annual Report 2015 to concentration, such as name In addition, the Bank’s Pawning portfolio concentration, sector breakdowns, is being very closely monitored and product and regional exposures. Board assessed to ascertain the impact of approved prudential limits for well Å\J[\H[PVUVMNVSKWYPJLZ *VSSH[LYHS managing credit concentration are KLÄULKHUKYL]PL^LKHUU\HSS`;OL obtained by Bank’s lending portfolio continues to be Collateral-wise Exposure 2015 [OL)HURPUP[Z KP]LYZPÄLK^P[OL_WVZ\YLZWYLHKHJYVZZ multiple sectors, geographical regions 0.29 % 0.06 SLUKPUNHJ[P]P[PLZ and customer segments. 0.05 2 3 3 PZ\[PSPZLKHZH 3 33.5 Large Exposures % of Total Portfolio 4.1 (Cumulative) ZLJVUKHY`ZV\YJL 5 Top 5 9 VMYLJV]LY` 5 Top 10 14

Top 20 22 8 Other 78

11 22 Stress Testing is carried out at least Concentration risk is measured using Immov.property, Other Securities (Corp Gte, quarterly or earlier and also presented to [OL/LYÄUKHOS/PYZOTHU0UKL_//0 Plant & Machinery Undertaking to Mortg., Stock In Trade Assig over Receivables etc.) BIRMC for necessary guidance. >LSSKP]LYZPÄLKWVY[MVSPVZOH]L//0 FDs,CDs & Other Deposits Tractors & Motor values close to zero, whilst relatively Vehicles Unsecured Loans Shares,Bonds,Life Hire Purchase Agreements 0DUNHW5LVN concentrated portfolios have higher HHI Policies Documentary Bills Person.guarant & Market risk is the potential loss of values. The Bank’s HHI score for name RFC,NRFC & RNNFC Pronotes Accounts earnings that could arise from the concentration was very low compared Trust Receipts Govt. Securities possible fall in value of a portfolio, either to the Bank’s risk appetite, which is a Gold (Pawning) key strength of our advances portfolio. investment or trading due to changes in (Please refer to explanatory notes market variables such as interest rates, 6WUHVV7HVWLQJ&UHGLW5LVN provided for Risk Appetite – Criteria equity prices and foreign exchange rates. Stress testing was carried out during the details on page 209 for more information year to gauge the potential impact of VU//0ZJVYLKLÄUP[PVUZ The key market risks that the Bank is the following hypothetical Stress Testing exposed to are interest rate risk, equity ZJLUHYPVZ" Collateral Management risk, foreign exchange risk and liquidity Deterioration of the quality of the Collateral obtained by the Bank in its risk. Bank’s advances as determined lending activities is utilised as a secondary by a decline in quality of lending source of recovery, in the event that +RZ:H0DQDJH0DUNHW5LVN assets, assuming further delays in [OLJHZOÅV^ZVM[OLIVYYV^LYHYLUV[ Market Risk Governance repayments by borrowers. Z\MÄJPLU[VY[PTLS`[VTLL[[OLYLWH`TLU[ The primary governance committee Defaults by the large borrowers (Eg obligations. overseeing market risk is the Asset top borrower, top 3 borrowers, top Liability Management Committee (ALCO), 5 borrowers etc) Collateral accepted by the Bank include chaired by the Managing Director. ALCO Increased credit concentration JHZOWYVWLY[`Ä_LKHZZL[ZZ\JOHZWSHU[ assumes the overall responsibility for to lending product and borrower and machinery, inventories, tradable monitoring the Bank’s interest rate, sectors. HHI score was used to securities, guarantees, bills and standby foreign exchange rate, liquidity and gauge the level of concentration. letters of credit. The Bank adopts a equity risk. As Treasury Operations can Fall in Forced Sale Value of cautious and stringent approach towards NP]LYPZL[VZPNUPÄJHU[YPZRZ[OL;YLHZ\Y` Collateral taken as security collateral valuation, and frequently reviews Limit Management Framework and day and updates such values in order to to day operations are monitored by LUZ\YL[OH[[OL`HYLYLÅLJ[P]LVM[OL [OL4HYRL[9PZR4PKKSL6MÄJL^OPJO market value. operates independently from the Treasury

SAMPATH BANK PLC Annual Report 2015 213 Governance

Risk Management

evaluates liquidity in terms of key ratios which demonstrate the liquid assets stored at the balance sheet date. These The policy framework the mismatch between the maturities of ratios include: net loans to assets, loans the Bank’s assets and liabilities. The to customer deposits, liquid assets to governing the Bank’s management of liquidity risk is the most short-term liabilities and statutory liquidity market risk consists crucial element of the Bank’s day-to-day asset ratio among others. Meanwhile, operations. [OLJHZOÅV^IHZLKHWWYVHJOHUHS`ZLZ of the Market Risk WV[LU[PHSJHZOPUÅV^ZHUKV\[ÅV^Z Management Policy, 0DQDJLQJ2XU/LTXLGLW\5LVN in varying time buckets based on the As the main governance committee maturity of assets and liabilities. Asset and Liability overseeing liquidity, the ALCO is Management Policy, responsible for ensuring that the Bank )XQGLQJ6RXUFHVThe Bank adopts THPU[HPUZZ\MÄJPLU[SPX\PKP[`SL]LSZ[V HKP]LYZPÄLKM\UKPUNZ[YH[LN`ZV\YJPUN Investment Policy and meet its regulatory requirements and liquidity from multiple sources. Key Treasury Policy. contractual obligations. The Committee considerations when determining sources consistently monitors the Bank’s liquidity of funding include the competitive position in order to ensure that it is in line environment, market conditions and with the Bank’s internal targets, Board regulatory considerations. Retail deposits Dealing Room. It monitors treasury Approved Liquidity Gap Limits, as well are the Bank’s largest funding source. operating limits such as open position as Central Bank regulatory requirements. Within its deposit portfolio, depositor limits, counterparty limits, dealer limits, In addition, ALCO also determines concentration is low. Value at Risk Limits on Foreign Exchange preventive and proactive action to avoid Positions and Treasury Bill/Bond an event of non-compliance. Maturity &RQWLQJHQF\)XQGLQJ3ODQThe Bank Portfolios, Limits related to Liquidity and Gaps in all major currencies is also has in place a contingency funding plan also Interest Rates which are periodically reported to the ALCO, for due evaluation to protect stakeholder interests and to reviewed and updated. and taking relevant decisions. THPU[HPUHOPNOSL]LSVMTHYRL[JVUÄKLUJL in the event of a liquidity crisis. The plan 3ROLF\)UDPHZRUN /LTXLGLW\0HDVXUHPHQW Liquidity is incorporates early warning signals and The policy framework governing the measured through the dual approaches HZWLJPÄLKVYKLYVMZV\YJLZ[VHJJLZZ Bank’s market risk consists of the Market VMZ[VJRHUKÅV^;OLZ[VJRHWWYVHJO liquidity in the event of a liquidity shortfall. Risk Management Policy, Asset and Liability Management Policy, Investment Policy and Treasury Policy. These policies collectively provide guidance on the procedures and tools and techniques for assessing, managing, monitoring and reporting all aspects related to market risk, which are detailed in the Treasury Operations Manual of the Bank. This framework is in line with Basel II Repricing Risk requirements, Central Bank regulations Yield Curve Risk - Arises from the varying and industry best practises. Arises from shifts in the maturities of the Bank’s yield curve that have a ,QWHUHVW assets and liabilities negative impact on the 5DWH5LVN which results in repricing /LTXLGLW\5LVN Bank’s earnings/asset timing differences values Liquidity risk is the potential risk arising from the inability to meet the Bank’s obligations in a timely manner as and when they become due, as a result of

214 SAMPATH BANK PLC Annual Report 2015 6WUHVV7HVWLQJStress testing is carried 0DQDJLQJ2XU(TXLW\5LVN )RUHLJQ([FKDQJH5DWH0RYHPHQWV out regularly to evaluate the impact of The Investment Committee holds overall 2015 factors such as deposit runs and loan responsibility for the management and roll-overs on the asset liability mismatches monitoring of the Bank’s investments. The that could lead to challenging Liquidity PU]LZ[TLU[N\PKLSPULZHYLZWLJPÄLKPU[OL positions. Board approved Investment Policy.

,QWHUHVW5DWH5LVN The return on the equity portfolio, Interest rate risk is the potential for movements in stock market prices as 131.20 to 1.0979 to loss resulting from the Bank’s assets well as broader economic conditions 144.20 1.1980 and liabilities having different re-pricing which could potentially have an impact USD Rate JPY Rate characteristics. The Bank is exposed to on share prices are monitored by the interest rate risk through its lending assets, Investment Committee on a regular basis, deposit liabilities and trading securities etc. and appropriate Risk mitigation decisions )RFXV$UHDVLQ0DUNHW5LVN are made. Meanwhile, stress testing 0DQDJHPHQWLQ 0DQDJLQJ2XU,QWHUHVW5DWH5LVN on the equity portfolio is carried out on Enhanced the stress testing The Bank’s interest rate risk management a quarterly basis and reported to the mechanisms by implementing MYHTL^VYRPZKLÄULKPUP[Z)VHYK )094*I`4HYRL[9PZR4PKKSL6MÄJL an integrated market risk stress HWWYV]LKWVSPJPLZHUKPZPUÅ\LUJLKI` testing framework. This framework the competitive industry it operates in. The equity portfolio held by the Bank was takes into account all market Decisions pertaining to the re-pricing of gradually reduced through conscious risk factors and a wider range of the portfolios held by the Bank are made decision making process during the year, scenarios, as opposed to a silo by the ALCO, also in consultation with the and as at year end the market value of approach. These enhancements Investment Committee where necessary. the Bank’s equity portfolio was LUHISLX\HU[PÄJH[PVUVML_WVZ\YL ALCO regularly monitors the movements Rs 121.74 Mn at the year-end, to multiple market and risk factors. in the market interest rates together accounting for a mere 0.0232% of its The Treasury System upgrade is in with the Bank’s asset / liability maturity total assets. progress, and it is expected that mismatches as well as results of periodic the upgraded system to go live stress testing and scenario analysis. )RUHLJQ([FKDQJH5DWH5LVN ^P[OPULUOHUJPUNLMÄJPLUJ` Foreign exchange rate risk arises due of treasury related functions and The techniques used to measure the to mismatches in assets and liabilities in the addition of several new features Bank’s interest rate risk consist of both ZWLJPÄJMVYLPNUJ\YYLUJPLZ;OL]HS\LZ facilitating improved market and earnings and valuation based tools. VMZ\JOUL[L_WVZ\YLZ^PSSÅ\J[\H[L^P[O liquidity risk management and ;OL4VKPÄLKK\YH[PVUNHWPZ\ZLK[V exchange rate movements. The Bank’s monitoring functions. evaluate changes in the Economic Value foreign exchange rate risk management Increased focus was placed on of Equity (EVE). Rate sensitive assets and is guided by its Board approved policy enhancing the mechanisms in liabilities are mapped into time buckets and limit framework. The limits set in the place to assess, measure and based on their maturity period, in order framework are persistently monitored monitor interest rate risks including to gauge the duration gap of equity. This and updated as required, in line with limits and regular monitoring. approach is also used to assess the market conditions. Meanwhile, in order to Daily Value at Risk (VAR) Limits capital charge applicable for interest rate ensure the adequacy of internal controls have been established to assess risk arising from interest sensitive assets in treasury management, there is a clear the impact of Foreign Exchange and liabilities. segregation of duties and responsibilities and Interest Rate Risks on Open between the Front, Middle and Back Positions and Treasury Bill/Bond (TXLW\5LVN 6MÄJLZ6WLUMVYLPNUL_JOHUNLWVZP[PVUZ portfolios. This is the risk of loss arising from the are regularly revalued, whilst asset / adverse movement in the value of equity liability maturities and foreign exchange investments held by the Bank due to exposures are continuously monitored. various reasons such as deterioration Value at Risk calculations, as well as in performance or net asset value of stress testing is carried out regularly on respective business ventures. the portfolios subject to foreign exchange rate risk.

SAMPATH BANK PLC Annual Report 2015 215 Governance

Risk Management

The Bank’s IT framework is governed by its IT policies and procedures, which is reviewed and monitored by the Bank’s IT with the Bank’s strategic plan in order to Steering Committee and IT Department. 2SHUDWLRQDO5LVN ensure the adequacy of human resources Determining the required upgrades in Operational risk is the direct or indirect for the Bank’s business plans for coming technology is a crucial element of the loss resulting from inadequate or failed year. Strategic Planning process. The IT internal processes, people and systems Department consistently reviews the need or from external events. According to 7HFKQRORJ\5LVN MVYZ`Z[LTPU[LNYH[PVUZTVKPÄJH[PVUZHUK )HZLS00KLÄUP[PVUZ3LNHS9PZRPZPUJS\KLK ;LJOUVSVN`YPZRPZKLÄULKHZ[OLYPZRZ the use of new software and hardware. as a component of Operational Risk. associated with the ownership, use, Continued research and development operation, involvement and adoption efforts are ongoing to improve the 3HRSOH5LVN of IT within the Bank. This includes LMÄJPLUJ`HUKKLSP]LY`VM[OL)HUR»Z People risk consists of the potential breakdowns and failures in IT systems, key operations by utilising advances in losses arising from human resource technological obsolescence, and technology. System Audits are conducted related aspects such as lack of inadequate infrastructure to support for each system, based on which appropriate human resources, business volumes among others. adequate controls are implemented. inappropriate employee activity and failure to comply with employee related The Banking sector continues to depend In addition, the IT Department, during requirements. The Bank manages heavily on innovative technologies in the year initiated a project to obtain risks attached to its workforce delivery of products and services. Hence 0:6JLY[PÄJH[PVUMVYP[Z through comprehensive HR policies technology emerge as a key source core processes, thereby simultaneously and processes, effective recruitment of competitive edge, with increased complying with Baseline Security practices, employee relations emphasis placed on internet/mobile Standards Directive by CBSL. This management, performance management connectivity based digitalised services, has contributed to improved IT related programmes and investment in training thus underscoring the importance of policies and procedures which will and development. Meanwhile, manpower effective IT Risk Management. notably improve many areas in IT Risk requirements for each year are aligned Management as well.

/HJDO5LVN This is the risk arising from non- compliance with regulatory/statutory provisions, uncertainty due to legal actions or uncertainty in the applicability Risk of or interpretation of relevant laws Inadequate or People Risk applicable to the Bank. Failed Internal Processes The Bank’s legal risk management is implemented in line with Legal Risk Management Policy, through its comprehensive framework of internal 2SHUDWLRQDO procedures and directives. Business 5LVN Lines/Units are responsible for ensuring Risk of IT that the exposure to legal risk is Legal Risk Systems TPUPTPZLK"HSSSLNHSS`IPUKPUNHNYLLTLU[Z Issues are approved and signed off by risk, JVTWSPHUJLHUK*OPLM3LNHS6MÄJLYVM[OL Bank and internal procedures are in place Risk from to duly discharge responsibilities under External such contracts. Events

216 SAMPATH BANK PLC Annual Report 2015 ,GHQWLðFDWLRQDQG$VVHVVPHQW reporting lines, robust internal controls >LSSKLÄULK 0KLU[PÄJH[PVUVMWV[LU[PHSYPZRHYLHZPU together with a policy and procedure segregation of duties, key operations is done through Risk framework used by the Bank can be clear management and Control Self Assessments (RCSA), considered as pillars of sound Operational which are carried out by all key business Risk Management. reporting lines, robust units at least on an annual basis. The internal controls assessments entail the evaluation of the .H\5LVN,QGLFDWRUV exposure level on each key Risk based The Key Risk Indicator (KRI) framework together with a VUKLÄULKWHYHTL[LYZZL[V\[PU[OL has helped us over the years to policy and procedure Assessment procedures, for both inherent ZPTWSPM`[OLYPZRPKLU[PÄJH[PVUWYVJLZZ and residual risks. Meanwhile, the ORMU and business friendly presentation of framework used by engages with all business units through them across all key business units and the Bank can be periodic small group workshops in functions. Board approved thresholds order to assess the residual risks and MVY290ZOH]LILLUYL]PL^LKHUKYLÄULK considered as pillars determine appropriate corrective action K\YPUN[OL`LHY;OLMYHTL^VYRJSHZZPÄLZ of sound Operational and controls. Other sources for risk the key risks the Bank is exposed to in PKLU[PÄJH[PVUPUJS\KLPU[LYUHSSVZZKH[H a non-technical manner, so that both Risk Management. reports sent by business or functional technical and non technical audiences units, and relevant external operational can understand the risks evident from loss experiences if available. indicators. The KRI exposure results are updated quarterly, and submitted to 0DQDJLQJ2XU2SHUDWLRQDO5LVN 0RQLWRULQJ Most of the monitoring Management Committee and BIRMC Processes activities of Operational Risks are for information and directions where The Operational Risk Management conducted online through the Operational ULJLZZHY`4P[PNH[P]LHJ[PVUZMVYPKLU[PÄLK framework and processes are conducted Risk Management IT system. The system Risk areas are regularly initiated by the according to the Operational Risk includes a comprehensive operational ORMU in concurrence with the Corporate Management Policy of the Bank, and the loss database which allows branches and Management and BIRMC. other related policies approved by the departments to report internal loss events Board and the applicable regulations. on a day to day basis. Operational loss reports are monitored with an analysis of *RYHUQDQFH As detailed in the three each occurrence and description of the lines of Defence model adopted by nature and cause of loss, while events the Bank, business/functional units are rated based on severity and impact. hold overall responsibility for managing The Operational Risk Management 6WLYH[PVUHS9PZRPUSPUL^P[O[OLKLÄULK Unit evaluates the reported events and parameters. The Operational Risk takes necessary action to integrate the Management Unit (ORMU) functions required internal controls and/or process within the Integrated Risk Management improvements into the Bank’s operations, Unit and constantly reviews the adequacy while the Corporate Management and of policies and processes in place to BIRMC are regularly updated on the loss manage Operational Risk as well as events, and appropriate remedial and mitigation strategies. A comprehensive preventive decisions/actions are taken. Operational Risk policy framework approved by the Board of Directors &RQWURODQG0LWLJDWLRQThe Bank’s risk and the internal procedures which are mitigation practices and response plans in line with the Bank’s Policies provide are designed in line with industry best ZWLJPÄJN\PKHUJLVUTHUHNPUN[OLYPZRZ practises, and are in compliance with associated with people, processes and YLN\SH[VY`YLX\PYLTLU[Z>LSSKLÄULK technology whilst achieving organisational segregation of duties, clear management objectives.

SAMPATH BANK PLC Annual Report 2015 217 Governance

Risk Management

Key Risk Indicator Framework

Area Indicator Threshold (Quarterly) Retail Banking: Adequacy of HR Staff turnover in executive grades Warning 1.0% Z[HMÄUNSL]LSZ[VTLL[^VYRSVHKWSHUZ Critical 1.5% Retail Banking: Compliance and Number of internal frauds per business/ Warning 0.009 Legal - Staff breaches of code of functional unit Critical 0.012 conduct including ethical standards, PU[LNYP[`HUKJVUÄKLU[PHSP[` Total fraud value reported during the quarter, Warning Rs 7,500 per business/functional unit Critical Rs 9,000 Retail Banking: Technology Total number of breakdowns per ATM Branches Cause Warning Critical Hardware 0.652 0.685 Software 0.019 0.020 Cash low 0.019 0.020 Communication 0.021 0.022 Power 0.049 0.051

Off-site Cause Warning Critical Hardware 2.150 2.365 Software 0.069 0.076 Cash low 0.356 0.392 Communication 0.241 0.266 Power 1.345 1.480 Retail Banking: Credit Operations Value of Dud and Stolen pawned articles Warning Rs 1.0 Mn including Pawning reported Critical Rs 1.5 Mn

Value of Dud and Stolen articles reported Warning 0.005% compared to total Pawning Advances as a Critical 0.010% percentage

Number of credit defaults handed over to Warning 0.72 recoveries for recovery and legal action per Critical 0.90 Branch/Credit Department

Value of the credit defaults handed over to Warning 0.175% recoveries for recovery and legal action as a Critical 0.35% percentage of Advance Portfolio Retail Banking: Credit Card Reported total number of credit cards lost/ Warning 0.009% Operations stolen compared to total number of credit Critical 0.010% cards

Value of counterfeit and CNP (card not Warning 0.04% presented) credit card frauds compared to Critical 0.05% total credit card advances.

Reported total number of counterfeit credit Warning 0.043% cards compared to total credit card base Critical 0.058%

218 SAMPATH BANK PLC Annual Report 2015 ,QWHUQDO/RVV(YHQW5HSRUWV 2SHUDWLRQDO5LVN&DSLWDO&KDUJH &RPSOLDQFH5LVN Internal loss data collection is one of &DOFXODWLRQIRU2SHUDWLRQDO5LVNXQGHU Compliance Risk is managed by the the key elements of Capital Calculation 'LIIHUHQW$SSURDFKHV Compliance Unit of the Bank, headed under Basel II Advanced Measurement We have conducted an assessment by the Head of Compliance. More (WWYVHJO;OLSVZZKH[HHYLJSHZZPÄLK of the Bank’s readiness with Basel II information on Compliance Management into seven Basel loss event types advanced approaches in Operational Risk is elaborated on pages 226 and 227. and eight Basel business lines in this year in line with the CBSL Directives order to identify them by causes and on Operational Risk Capital Calculation 6WUDWHJLFDQG5HSXWDWLRQDO5LVNV various business segments within the under The Standardised and Alternative Strategic risks are the potential losses organisation. Standardised Approaches. arising from the possibility of the Bank’s future business plans and strategies Our Internal Loss Data collection of over Our test computations indicate that being inadequate. seven years in a single database has the Bank’s Capital Adequacy can be become a valuable source of information improved through migrating to The Reputational risks impact the Bank’s for management of operational risks. Standardised Approach (TSA) or current or prospective earnings These data bring out an objective, Alternative Standardised Approach (ASA) capacity, resulting from damage to its X\HU[PÄLK]PL^VMPUJ\YYLKYPZRZ under Operational Risk, and therefore PTHNL[OYV\NO[OLSVZZVMJVUÄKLUJL losses. Majority of the events reported we are currently looking into the avenues and breakdown in relationships with are recovered during the year and are of obtaining the regulatory approval to transactional stakeholders. categorised as Near Misses, once move on to such advanced approaches recovery is complete. under Basel II Operational Risk Capital 0DQDJLQJ2XU6WUDWHJLFDQG Calculation. 5HSXWDWLRQDO5LVNV 2SHUDWLRQDO5LVN5HYLHZV The Bank manages its strategic and The Bank’s polices, processes, new .H\)RFXV$UHDVLQ2SHUDWLRQDO5LVN reputational risks in a cohesive manner products, systems and contracts/service 0DQDJHPHQWLQ encapsulating all business units and level agreements entered in to with third During the year under review, the employees. All strategies and business parties for obtaining various services etc. Bank effected the policies, systems plans are initiated at respective business are reviewed prior to execution by the and procedures required to migrate lines, discussed extensively and approved operational risk function in order to ensure to the Alternative Standardised by the Board and the Corporate that the operational risks are adequately Approach (ASA) for Operational Management. Actual performance is managed. Risk capital charge calculations, monitored against the set strategic in accordance with CBSL/Basel II objectives on a continuous basis. guidelines. The scope of the Bank’s Risk Bank’s code of ethics and a culture which Risk Reviews during the year 2015 and Control Self-Assessment upholds values of honesty and integrity, framework was widened to as well as the Bank’s well-articulated % encompass all departments. policy framework play a crucial role in 1 Developed and implemented 10 the organisation’s Reputational Risk 25 several new policies, primarily Management. 10 addressing technology and IT systems related risks. 3ROLF\)UDPHZRUN The Strategic Enhanced the quality and Risk Management Policy outlines the frequency of risk reporting, with structures and processes to manage the the Operational Risk dashboard strategic risks faced by the Bank. The reviewed by the BIRMC and Board Customer Grievance Handling Policy on a quarterly basis. enables customers to communicate 54 Terms of Reference for all their grievances, facilitated by a 24-hour

Policies,Procedures, Service Level Management Committees were hotline. All such reported grievances are Directives Agreements/MOU/NDA reviewed with necessary updates, attended to and followed up in line with Sign-Off for Products/ System Requirement Concept Papers Specifications/RFP and Board approval was obtained JSLHYS`KLÄULKWYVJLK\YLZ:PNUPÄJHU[ Product / Customer Applications

SAMPATH BANK PLC Annual Report 2015 219 Governance

Risk Management

This year, in further enhancing the Group Risk Management framework, ^LYL]PL^LKHUKYLÄULK[OL.YV\W Each entity within the Group has in place an appropriate stress testing and scenario analysis YPZRTHUHNLTLU[WOPSVZVWO`ZWLJPÄJ[VP[ZV^U mechanisms. operations, also aligned with the risk framework of the parent entity, the Bank. &RPSOLDQFHZLWKWKH%DVHO )UDPHZRUN The Bank has complied with the grievances are submitted to Corporate *URXS5LVN0DQDJHPHQW regulatory requirements of Basel II, and Management for appropriate action and Given the varying business lines of the will continue to comply with industry best also reviewed by the BIRMC based on Bank’s subsidiaries, we recognise that practices and regulatory guidelines as the severity. Meanwhile, the Bank also each of the group entity has a different per the national implementation plan of has in place a Whistle Blowing Policy, YPZRWYVÄSL;O\ZLHJOLU[P[`^P[OPU[OL the CBSL, including building expertise, allowing any Team Member who has Group has in place an appropriate risk technical skills, and IT/Data requirements. a legitimate concern on an existing or THUHNLTLU[WOPSVZVWO`ZWLJPÄJ[VP[Z The Bank has already performed potential “wrongdoing” by any person own operations, also aligned with the test calculations for meeting Basel III within the Bank, to come forward risk framework of the parent entity, the requirements as directed by the CBSL, voluntarily, and bring such concerns to Bank. The Parent persistently exercises and adequate changes have been the notice of the Board Audit Committee oversight on the risk management incorporated into the Bank’s 3 year Chairman through the Company framework of the group entities through Strategic Plan in order to fully comply with Secretary. [OLMVSSV^PUN" the requirements.

0HDVXULQJ6WUDWHJLFDQG5HSXWDWLRQDO  ;OL.YV\W9PZR6MÄJLYPZ ,QWHUQDO&DSLWDO$GHTXDF\ 5LVNV responsible for the coordination of $VVHVVPHQW3URFHVV ,&$$3 We adopt comprehensive scorecards to risk management mechanisms with The Bank completed its ICAAP measure the exposure to Strategic and the subsidiaries. documentation for the Bank/Group as Reputational Risks. The parent entity nominates at 2014 year end into a consolidated Directors to the Boards of the document in 2015, and submitted the The Strategic Risk Scorecard has been group entities depending on the same to CBSL within the stipulated developed taking into consideration required level of oversight. timeline given. This submission included the size, sophistication, nature and The BIRMC periodically reviews the responses and necessary improvements complexity of the Bank’s operations. YPZRWYVÄSLVM[OLNYV\WLU[P[PLZHUK to the previous year (2013) ICAAP The Scorecard is administered at least makes recommendations to the document, including the improvements annually. Board. for addressing recommendations Siyapatha Finance PLC, being provided by the regulator. A similar scorecard is administered for the largest subsidiary in the Reputational Risk. The scorecard takes Group has its own Integrated Risk into consideration a comprehensive range Management Committee, where of factors which could potentially affect .YV\W9PZR6MÄJLYPZPU]P[LKMVY the Bank’s image and reputation. meetings. The Bank’s Board of Directors have All such Scorecards were reviewed access to the Board minutes of the and updated based on the extensive Group Companies. discussion and recommendations by the )094*K\YPUN[OL`LHY[VIL[[LYYLÅLJ[ changes within the Bank as well as industry and competitive dynamics.

220 SAMPATH BANK PLC Annual Report 2015 5LVN5HJLVWHU Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating CREDIT RISK Risk of borrower High 1. Key Committees: BIRMC, Credit 1. Board approved credit policies/ Medium default Committees, Credit Policy Risk & procedures, framework, annual Portfolio Review Committees review exercise 2. Credit Risk Management Unit 2. Delegated authority levels, (CRMU) reviewed regulations, Segregation 3. Structured & standardised credit of duties between loan originator, sanction process. Administration & Risk. 4. Internal Risk Rating 3. Key input from the Risk Department 5. Pre-Credit Risk Evaluation for pre/post granting credit risk by specialised staff at Credit 4. Independent Pre-credit Risk +LWHY[TLU[Z 9LNPVUHS6MÄJLZ evaluation by CRMU for exposures 6. Post-Credit monitoring and Loan over Rs 100 Mn Review Mechanism 5. Watch listing, Early Warning Signals (EWS) 6. Portfolio Risk assessment, Risk management and reporting CONCENTRATION RISK Credit exposure High 1. Review the Bank’s concentration in 1. Board approved limits on maximum Low being concentrated a number of areas, such as Top 30 exposure on one or few exposures as a % of total portfolio, 2. Setting of prudential limits, on lending sectors, product-wise, sector wise region- maximum exposure, reviewed groups, and / wise, collateral - wise etc. annually. VYPUZ\MÄJPLU[ 2. Identify principal Risk factors which 3. CBSL guidelines - single borrower/ KP]LYZPÄJH[PVU affect the portfolio and required to group / related party be stressed.  *SHZZPÄJH[PVUVMIVYYV^LY¶ZLJ[VY 3. Concentration risk assessed based subsector VU/LYÄUKHOS/PYZOTHU0UKL_//0 5. Monitoring of exposure against the limits and NPAs on MoM & YoY basis. 6. Trend analysis reported to BIRMC. 7. Stress testing/Sensitivity analysis results reported to Management / BIRMC on quarterly basis for necessary action. COUNTRY RISK A collection of risks Low 1. Sovereign Risk rating 1. Limitations on lending/caps on Low associated with  4VUP[VYPUNVMZWLJPÄJZHUJ[PVUZVU lending. investing or lending countries 2. Monitoring of country-wise exposure to a foreign country. 3. Assessment of the political & These risks include economic conditions of such political risk, countries exchange rate risk, economic risk, sovereign risk and transfer risk.

SAMPATH BANK PLC Annual Report 2015 221 Governance

Risk Management

Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating MARKET RISK LIQUIDITY RISK Inability to meet the High 1. Board Approved Policies 1. Monitoring of Board Approved Medium Bank’s obligations 2. Measurement through key ratios Liquidity Risk Appetite Limits in a timely manner such as Net Loans to Assets, Loans 2. Measurement of liquidity in all major as and when they to Customer Deposits, Liquid Assets currencies reported to ALCO, become due. to Short Term Liabilities etc. analysed and decisions taken at 3. Preparation of maturities of assets ALCO. and liabilities statement into time 3. Stress Testing results on Liquidity bands Risk are reported to BIRMC and 4. Measurement of liquidity in all major appropriate risk mitigation decisions currencies made. 5. Assessment of Liquidity Risk during 4. Board approved Liquidity Economic Capital Calculation Contingency plan. under Internal Capital Adequacy Assessment Process (ICAAP) INTEREST RATE RISK Potential for loss Medium 1. Board approved Policies 1 Maturity gap analysis (various time Medium resulting from the 2. Prudential limits i.e. maximum bands) – residual term maturity Bank’s assets and maturity, duration etc. (Fixed Rate) / or next re- pricing liabilities having 3. Assessment of Interest Rate Risk ÅVH[PUNYH[L different re-pricing during Economic Capital Calculation 2. Interest rate risk related reporting characteristics. under Internal Capital Adequacy and analysis at ALCO and BIRMC Assessment Process (ICAAP) 3. Stress Testing and Scenario Analysis, and the results are reported to BIRMC and appropriate decisions are made to mitigate risks. 4. VAR calculations on Treasury Bill/Bond portfolios and related monitoring against BOD approved Limits

EQUITY RISK Impact to the Medium 1. Board Approved Policies 1. Return of equity portfolio / Low value of the Bank’s 2. Equity Portfolio Performance Review movements in stock market Equity Portfolio 3. Investment Committee monitored by Investment Committee (investments in 4. Mark to market of the investment and risk mitigation decisions made Share Market) portfolio 2. Stress Testing on a regular basis, due to adverse 5. Assessment of Equity Risk during and reported/decisions made at movements in Economic Capital Calculation BIRMC stock market prices under Internal Capital Adequacy Assessment Process (ICAAP)

222 SAMPATH BANK PLC Annual Report 2015 Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating FOREIGN EXCHANGE RATE RISK Foreign exchange High 1. Board Approved Policies 1. Continuous Monitoring of Board Medium rate risk arises 2. Assessment of Foreign Exchange approved limit framework as per due to mismatches Rate Risk considered in setting CBSL requirements depending on in assets and Treasury Limits and Products the capital requirements & Risk SPHIPSP[PLZPUZWLJPÄJ 3. Regular revaluation of open positions Management capability. foreign currencies. 4. Assessment of Foreign Exchange 2. Regular stress testing for key The values of such Rate Risk during Economic Capital variables, reporting to BIRMC, and net exposures Calculation under Internal Capital appropriate decisions are made. ^PSSÅ\J[\H[L^P[O Adequacy Assessment Process 3. Segregation of responsibilities exchange rate (ICAAP) IL[^LLU-YVU[6MÄJL4PKKSL6MÄJL movements. 5. Value at Risk (VAR) calculation on )HJR6MÄJL Foreign Exchange Rate Sensitive 4. Treasury and Core Banking IT portfolios through IT Systems. Systems in place enable tracking and monitoring of exposures 5. Monitoring of forex exposures and maturity gaps of assets & liabilities 6. Monitoring of Risk Appetite Limits for Foreign Exchange Rate Risk and BOD approved VAR limits CAPITAL RISK 9PZRVMPUZ\MÄJPLU[ High 1. Capital adequacy ratios computed 1. Fluctuation in capital Adequacy Medium capital resources, regularly. ratios are monitored regularly to ensure the Bank 2. Stress testing under various (Finance) is well capitalised adverse/challenging scenarios 2. Capital augmentation measures relative to the are put in place depending on the minimum regulatory outcome of monitoring (Finance/ requirements ALCO) 3. Regular Economic Capital Calculation under Internal Capital Adequacy Assessment Process (ICAAP) as per CBSL Guidelines

SAMPATH BANK PLC Annual Report 2015 223 Governance

Risk Management

Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating OPERATIONAL RISK The risk of loss High 1. Adequacy & effectiveness of 1. Operational Risk Policies reviewed Medium resulting from Operational Risk Policies are annually or more frequently based inadequate or regularly assessed by IRMU and at on the need. failed internal BIRMC meetings 2. Risk Management monitoring processes, people 2. Operational Risk is managed by through Operational Risk IT System. and systems or business units in accordance with Comprehensive operational loss from external internal control requirements database is maintained in the events. This 3. Risk and Control Self Assessments System to track losses by Event KLÄUP[PVUPUJS\KLZ provided by the respective business Type and Business Line as per Basel legal risk, but units, and Key Risk Indicators II excludes strategic 3. Material losses regularly analysed by and reputational cause, and action taken to improve risks system and controls to prevent future recurrence 4. Risk review on new products, processes, external suppliers/ outsourced service providers. 5. Operational Risk Appetite Limits, and monthly monitoring / reporting . PEOPLE RISK Lack of appropriate High 1. Manpower planning in line with 1. Robust HR policies, governance Medium human resources, expansion & changes in business structures, programmes and failure to manage requirements. processes in place and policies are performance 

224 SAMPATH BANK PLC Annual Report 2015 Risk Factor Impact Risk Management/Assessment Risk Mitigating Factors Risk Rating TECHNOLOGY RISK Risk arising from High 1. Technology planning is conducted 1. Technology planning as a part of Medium non-availability of IT during the annual strategic planning. annual strategic planning process systems, systems 2. Performing systems audits for each which covers a 3 year period break downs and & every system before deploying into 2. Systems audits are performed disruptions, or production environment for each and every system not keeping in line 3. External/Internal vulnerability before deploying into production with the trends in assessment with Risk Management. environment technology and Process of identifying and assessing 3. External/Internal vulnerability delivery channels. risk. assessment with Risk Management. 4. IT and Systems Audit continuously Process of identifying and assessing review and analyse new cost risk LMÄJPLU[KLSP]LY`JOHUULSZ 4. Bank’s IT Department/ IT Steering 5. IT Steering Committee Committee together with the 6. Risk reviews on new / amended business lines, continuously review systems during requirement HUKHUHS`ZLUL^JVZ[LMÄJPLU[ ZWLJPÄJH[PVUVYWYVJ\YLTLU[Z[HNL delivery channels. 5. Based on the outcome of the systems audit, necessary controls are implemented before live implementation 6. External vulnerability assessment carried out by external consultants based on the need 7. IT Policies/ procedures investment in latest technology, IT systems, in line with ISO standards to ensure competitive advantage. 8. Back up & disaster recovery, Planning & testing in place. (BCP) LEGAL RISK Risk arising from High 1. Independent Legal Department 1. Board Approved Legal Risk Low litigation against 2. Specialized legal advice obtained Management Policy being applied the Bank, faulty from external consultants on a need in all legal matters documentation or basis. 2. Adequacy & effectiveness of business not being 3. Adequacy & effectiveness of the controls reviewed by Legal conducted as per the controls reviewed by Legal Department the applicable laws Department. 3. Policies & procedures in place to ensure that business activities with legal impact are properly risk assessed and executed. 4. All legal documents/ Service 3L]LS(NYLLTLU[ZHYLZWLJPÄJHSS` HWWYV]LKI`*OPLM3LNHS6MÄJLY & also signed off by Risk & Compliance Departments 5. Company Secretary function/ compliance to ensure compliance ^P[OZWLJPÄJYLN\SH[VY`YLX\PYLTLU[Z

SAMPATH BANK PLC Annual Report 2015 225 Governance

Bank has established a Compliance Compliance unit, which holds the responsibility for monitoring the Bank’s overall compliance risks. The Unit consistently assesses the Review Bank’s compliance with laws, regulations, statutory guidelines as well as internal controls and policies. The Compliance We strive to achieve higher standard of compliance \UP[M\UJ[PVUZPUKLWLUKLU[S`MYVTWYVÄ[ by broadening the dimensions of existing regulatory targets and is headed by a dedicated Head of Compliance (HOC), who reports framework through high standard of integrity and ethical directly to the Board Integrated Risk conduct. Management Committee. The Unit’s staff cadre was further strengthened Compliance risk is the risk arising out of of the Bank’s defence together with the during the year and currently consists non-compliance with applicable laws, Risk Management Unit are responsible for of 16 employees. Compliance sub-units regulations, codes of conduct and providing overall assurance to the Board monitor Regulatory Compliance, Anti standards of good practice culminating on the Bank’s level of compliance with Money Laundering (AML) Compliance PUÄUHUJPHSSVZZVYSVZZ[V[OL)HUR»Z the relevant laws, regulations and other and Exchange Control Compliance. reputation. The relevant compliance applicable standards, procedures and laws could arise from multiple sources practices. The primary responsibilities of the including primary legislations, rules *VTWSPHUJL

7KH&RPSOLDQFH6WUXFWXUH Formulating Compliance Policies The Bank’s three lines of defence structure facilitates the effective management and monitoring of +LÄUPUN*VTWSPHUJL;HYNL[Z compliance risk. At the apex level, the Board of Directors monitor the Bank’s compliance through the Board Audit Facilitating Compliance through Effective Communication, Training Committee and the Board Integrated Risk and Awareness Management Committee (BIRMC). The Compliance Unit as the 2nd line of defence and Internal Audit as the 3rd line *YLH[PUN*VTWSPHUJL>VYRÅV^Z of defence, which form crucial elements

Monitoring and Reporting Status of Compliance

226 SAMPATH BANK PLC Annual Report 2015 Dissemination of information to 3ROLF\)UDPHZRUN Focus Areas in 2015 business units regarding regulatory The Bank’s Compliance procedures and The Compliance Unit widened requirements and guidelines guidelines are clearly set out in its Board the scope and coverage of Ensuring that operational approved Compliance Policy. The Policy its oversight on the Bank’s procedures are aligned with the KL[HPSZ[OLYPZRPKLU[PÄJH[PVUYVSLZHUK subsidiaries during the year. All regulatory requirements responsibilities, structure and processes, subsidiaries are now required to Ensuring compliance with the reporting lines and methods for risk complete a compliance report on a Financial Transactions Reporting mitigation among others. The Policy monthly basis. Act. This includes monitoring and is reviewed by the Board periodically, Implemented a Risk-based reporting suspicious transactions and updated as and when necessary. Compliance Assessment Periodic reporting to the Board Meanwhile, the Group Compliance Policy mechanism, inclusive of key Integrated Risk Management outlines group-wide compliance risk performance indicators and Committee management, encapsulating the overall tolerance limits. This mechanism compliance principles adopted by the enables the Unit to monitor the &RPSOLDQFH5HSRUWLQJ Bank and its subsidiaries. Bank’s Compliance performance The Compliance Unit’s periodic reporting HNHPUZ[KLÄULKWHYHTL[LYZHUK is two-fold. A detailed report, inclusive &RPSOLDQFH&XOWXUH recommend corrective actions if of sign-offs from the Heads of Business The Compliance Unit strives to instil an required. Units on statutory and mandatory organisation-wide compliance culture The Compliance Unit’s reporting requirements and the Bank’s emphasising standards of honesty responsibilities were broadened to level of compliance is provided to the HUKPU[LNYP[`>VYRÅV^PZHUHS`ZLK include exchange control, which Board of Directors on a quarterly basis. and responsibility for compliance risk previously functioned separately. Additionally, a monthly compliance THUHNLTLU[PZJSLHYS`KLÄULKHUK The Compliance Unit now serves JLY[PÄJH[LPZWYV]PKLK[V[OL)094*VUH documented. Training and awareness as an intermediary function monthly basis. The monthly Compliance programmes are carried out for staff between the branches and the *LY[PÄJH[LPUJS\KLZ frequently to ensure that employees OLHKVMÄJLPUL_JOHUNLJVU[YVS are adequately aware of the Bank’s functions. Compliance on statutory/regulatory compliance requirements, structures Emphasis on increasing awareness reporting requirements and procedures. Meanwhile, all newly on the Bank’s Anti Money  :PNUPÄJHU[UL^YLN\SH[PVUZ recruited staff members are introduced Laundering framework through on- directions issued by the regulators to the Bank’s audit and compliance site and off-site training. Events of non-compliance processes during induction. The  ;YHPUPUNULLKZPKLU[PÄLKYLSH[PUN[V Compliance Unit takes a proactive the compliance function approach in promoting a culture of Monitoring of compliance on compliance, and operates as a strategic regulatory/anti-money laundering partner to all business units. Level of compliance reported by the subsidiary companies

SAMPATH BANK PLC Annual Report 2015 227 Governance

G4-42

Corporate compliance to all regulatory and mandatory requirements. The Board has appointed several Sub Committees to Governance assist in the discharge of its duties and Chairpersons of these Sub Committees provide feedback to the Board. Roles and Commitment to the highest standards of transparency, responsibilities for all Sub Committees reliability and ethical business conduct are well-established OH]LILLUJSLHYS`KLÄULK;OL)VHYK guiding principles within the Bank and are articulated in a and Sub Committees convene regularly comprehensive policy framework and a Code of Conduct and receive regular reports on the Bank’s performance, credit quality, asset and which is communicated to and understood by all employees. liability management, risk management, strategy and compliance from Key continuity of strategy and direction is &KDLUPDQâV6WDWHPHQW  Management Personnel, whilst being ensured. Directors bring together a Dear stakeholders, kept abreast of changes in the macro variety of perspectives to the Board, As an Organisation, we are cognisant of economic and industry landscapes. including professional, academic and the value of sound corporate governance Directors have full and timely access entrepreneurial insights which enhance practices in providing a fundamental to all relevant information and have the quality and depth of discussions. base for ensuring sustainable growth open access to employees at all levels. Directors are also diverse in terms of and developing trusted relationships Directors are also given the opportunity gender and age representation with three with key stakeholders. Commitment to to attend external training sessions, female professionals on the Board and the highest standards of transparency, conferences, and seminars and have two Directors below 35 years of age. reliability and ethical business conduct access to independent professional are well-established guiding principles advice to ensure that they are kept within the Bank and are articulated in a 6WDNHKROGHU(QJDJHPHQW abreast of all external developments that The feedback obtained from our robust comprehensive policy framework and a could potentially impact the Bank and its stakeholder engagement mechanisms Code of Conduct which is communicated operating context. to and understood by all employees. In form a key input in strategy formulation, ensuring that the Bank’s growth is addition to legal requirements, the Bank’s 6HWWLQJ6WUDWHJLF'LUHFWLRQ responsible and sustainable. Our policy framework embraces international The Bank has a three year revolving stakeholder engagement mechanisms are best practices and comply with voluntary Strategic Planning model which has structured and comprehensive, providing frameworks, providing a solid foundation been in force since 2009 and is revised valuable insights into stakeholder for performance as well as effective risk every quarter with a comprehensive concerns and enabling us to provide management of our economic, social review done annually. The Strategic appropriate responses whilst balancing and environmental performance. Formal Plan is founded upon emerging interests. governance structures serve to ensure economic and industry trends, as well judicious empowerment and create an as competitive strengths in the Bank’s appropriate balance of power within the +RZWKH%RDUG2SHUDWHV value creation process. Strategic priorities Organisation. The primary responsibilities of the Board HYLZ\IZLX\LU[S`ZL[^P[OKLÄULK includes setting the Bank’s strategic performance parameters for ensuing year direction with the objective of delivering 7KH%RDUGRI'LUHFWRUV covering earnings, stability, credit quality, Sampath Bank’s Board consists of Z\Z[HPUHISLZ[HRLOVSKLY]HS\LKLÄUPUN VWLYH[PVUHSLMÄJPLUJ`HUKJHWP[HSPZH[PVU the Risk Appetite, governance structures 11 Directors, 9 of whom are Non among others. During the year under and formulating comprehensive Executive Directors. 11 Directors review, the Board monitored progress policy frameworks. The Board is also remained with the Bank, increasing against Strategic Plan 2014-2016 and the responsible for regularly reviewing the [OLLMÄJPLUJ`VM[OL)VHYKHZ+PYLJ[VYZ Plan for 2015-2017 has been reviewed Bank’s performance, internal controls, have a deeper understanding of the and approved by the Board along with policies and procedures whilst ensuring material issues affecting the Bank and the Budget for 2016 using the same model.

228 SAMPATH BANK PLC Annual Report 2015 5LVN0DQDJHPHQW %RDUG)RFXV$UHDVIRUWKH

SAMPATH BANK PLC Annual Report 2015 229 Governance

Corporate Governance

*RYHUQDQFH6WUXFWXUH G4-34,36 Shareholders External Auditors Board Audit Committee

6XEVLGLDULHV Board HR & Remuneration Committee

Siyapatha Finance PLC Board of Directors - Board of Directors - Board Committees Board Nomination Committee Leasing, factoring, pawning & Subsidiaries accepting deposits Bank Board Integrated Risk Management Committee

Sampath Centre Ltd - Board Related Party Transactions Review Committee Renting of Commercial Property Board Credit Committee Managing Director Board Strategic Planning Committee SC Securities (Pvt) Ltd - Stock Broking Board Shareholder Relations Committee

Sampath Information Technology Board Treasury Committee Solutions Ltd - Developing Software Solutions & Maintenance of Hardware Board Marketing Committee

Executive Director / Group Chief Financial Officer

Cheif Operating Officer

DGM - Marketing DGM - Branch DGM - DGM - Corporate and Business Head of Internal DGM - Finance DGM - Operations Banking Head of IT DGM - Credit HR Banking Development Audit

AGM - AGM - AGM - AGM - AGM - AGM - AGM - Finance Research Operations Card Centre Card AGM - New IT Global Business Branch Banking 2 Chief Legal Officer Branch Banking 1 Strategic Planning & Company Secretary Business Development

Group Chief Risk Manager Officer System Audit Chief Dealer Card Centre

Legal Risk Management Head of Strategic Planning Compliance & Research Corporate Treasury Administration & Finance Middle Office Engineering

Finance FCBU Commercial Compliance Department Credit/ Branch IT City Branch Network Wealth Treasury Management Back Office Company Secretary's Marketing Treasury Office Planning & Human Resources Operations Recoveries Remittances Budgeting & Training System Audit Treasury Development Banking Investment Trade Services/ International Ops. Business Development Corporate Credit/ Corporate Branch Deposit Mobilisation New IT System Development Internal Audit EBU

Functional Reporting Management Committees Administrative Reporting (1) Asset & Liability Management (5) Credit Policy, Risk and Portfolio (9) Corporate Management Financial Reporting Committee Review Committee Committee

Department / Unit (2) Deposit Mobilisation Committee (6) Procurement Committee (3) Investments Committee (7) SLFRS Steering Committee (4) IT Steering Committee (8) Internal Control Steering Committee

230 SAMPATH BANK PLC Annual Report 2015 &RUSRUDWH*RYHUQDQFH+LJKOLJKWVLQ

%RDUGRI'LUHFWRUV Re-election of the following Directors at the Annual General Meeting: Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe Mrs Dhara Wijayatilake Mr Sanjiva Senanayake

&RPSDQ\6HFUHWDU\ Appointment of Mrs Anuja Goonetilleke as Company Secretary with effect from the 1st October 2015 after the retirement of Group Company Secretary Mr S Sudarshan.

3ROLF\)UDPHZRUN Under the Bank’s policy framework 34 policies were reviewed/updated during the year.

$XGLW Re-appointment of Messrs Ernst & Young, Chartered Accountants, as Auditors of the Bank, to assess compliance with the Banking Act Direction No 11 of 2007 on Corporate Governance for Licensed Commercial Banks and subsequent amendments thereto and to provide assurance on the Directors’ Statement on Internal Control Over Financial Reporting.

5LVN0DQDJHPHQW Introduction of integrated market risk stress testing mechanism

SAMPATH BANK PLC Annual Report 2015 231 Governance

Corporate Governance

*RYHUQDQFH)UDPHZRUN G4-34 Standards and Principles Sampath Bank’s Corporate Governance framework has been developed to Internal External comply with the requirements of the Vision and Values Companies Act No 7 of 2007 Central Bank of Sri Lanka, the Colombo Stock Exchange and other relevant laws Articles of Association Banking Act No 30 of 1988 as amended, Anti Money and regulations. In addition, the Bank Laundering Laws and Regulations. has voluntarily adopted the Code of Best Code of Conduct Banking Act Direction No11 on Corporate Practice on Corporate Governance 2013 Governance for Licensed Commercial Banks issued jointly by the Institute of Chartered Code of Ethics Listing Rules of the Colombo Stock Exchange Accountants of Sri Lanka (ICASL) and the Securities & Exchange Commission Board and Board Sub Code of Best Practice on Corporate Governance of Sri Lanka (SEC), the G4 standards Committee Charters issued by the ICASL and the SEC for Sustainability Reporting issued by Policies Integrated Reporting Framework issued by the the Global Reporting Initiatives and the Procedures International Integrating Reporting Council (IIRC) Integrated Reporting Framework issued Directives by the International Integrated Reporting G4 Standards for Sustainability reporting issued by Council (IIRC). the Global Reporting Initiative

*RYHUQDQFH6WUXFWXUH the Board until the next Annual General of reference to assist in the discharge Directors are elected by shareholders Meeting in accordance with the Articles of their collective duties. Members of at the Annual General Meeting except of Association. The Board determines these sub committees focus on their JHZ\HS]HJHUJPLZ^OPJOHYLÄSSLKI` the strategic direction of the Bank and designated areas of responsibility, provides guidance to the Corporate providing oversight in their respective areas of expertise. Shareholders External Management Team in delivering Auditors sustainable value to our stakeholders over the short, medium and long term. The Corporate Management Team led by the Governance Systems Board of Board Sub- Managing Director who is responsible for Directors Committees Stakeholder Engagement and implementation of strategy and managing Management the performance of the Bank on a day Managing to day basis. The Board approves Strategic Planning Director strategic plans, governance structures, Shareholder Relations risk appetite, policies and procedures Corporate and delegation of authority, providing Talent Management Management Team a framework for decision making. Risk Management and Compliance Stakeholder engagement processes Company Head of Internal to identify and address needs of other IT Governance Secretary Audit ZPNUPÄJHU[Z[HRLOVSKLYZHYLLTILKKLK Sustainability Reporting Senior into the organisation policy framework Management to ensure that there is long term value Team created for all stakeholders. .YV\W9PZR6MÄJLY The Board has appointed and delegated ZWLJPÄJYLZWVUZPIPSP[PLZ[VZL]LYHS)VHYK Head of Compliance Z\IJVTTP[[LLZ[OYV\NOZWLJPÄJ[LYTZ

Employees

232 SAMPATH BANK PLC Annual Report 2015 G4-34,38

Board Audit Committee The Committee consists entirely of 5 Independent Non Executive 0U5DQLO3DWKLUDQDChairman IND/NED Directors. The Chairman is a Fellow Member of the Chartered Institute of Mr Sanjiva Senanayake IND/NED 4HUHNLTLU[(JJV\U[HU[ZHUKOVSKZZPNUPÄJHU[HUKYLSL]HU[L_WLYPLUJL Mr Deepal Sooriyaarachchi IND/NED PU[OLÄUHUJPHSZLY]PJLZPUK\Z[Y` Prof Malik Ranasinghe IND/NED Mrs Dhara Wijayatilake IND/NED

Mandate: ;VWYV]PKLHUPUKLWLUKLU[HUKVIQLJ[P]LYL]PL^VM[OLÄUHUJPHSYLWVY[PUNWYVJLZZPU[LYUHSJVU[YVSZHUK[OLH\KP[M\UJ[PVUPULUZ\YPUN" Adequacy and fairness of disclosure. Transparency, integrity and quality of Financial Reporting.

Board Human Resources and Remuneration Committee The Committee consists of 4 Directors out of whom, 3 are Non Executive 0U'HHSDO6RRUL\DDUDFKFKL - Chairman IND/NED Directors and 1 is an Executive Director. Mr Channa Palansuriya NID/NED (Director until 12th November 2015) Miss Annika Senanayake IND/NED Mr Deshal De Mel NID/NED Mr Aravinda Perera ED

Mandate: Establish and review the Human Resources (HR) and Remuneration policies, determine the quantum of compensation of Key Management Personnel and succession planning.

Board Nomination Committee The Committee consists of 4 Non Executive Directors, the Chairperson is 0LVV$QQLND6HQDQD\DNHChairperson IND/NED an Independent Director. Mr Dhammika Perera NID/NED Mr Channa Palansuriya NID/NED (Director until 12th November 2015) Mrs Dhara Wijayatilake IND/NED Mrs Saumya Amarasekera NID/NED

Mandate: +LÄULHUKLZ[HISPZOUVTPUH[PVUWYVJLZZMVYKPYLJ[VYZYLJVTTLUKKPYLJ[VYZMVYYLLSLJ[PVUKL]LSVWHZ\JJLZZPVUWSHUMVYKPYLJ[VYZ HUKKLÄULLSPNPIPSP[`JYP[LYPHMVY[OLZLSLJ[PVUWYVTV[PVUVM2L`4HUHNLTLU[7LYZVUULS

Board Integrated Risk Management Committee (BIRMC) The BIRMC was set up in compliance with the Banking Act Direction 0UV'KDUD:LMD\DWLODNHChairperson IND/NED No 11 of 2007 for Licensed Commercial Banks and consists of 3 Non Mr Channa Palansuriya NID/NED Executive Directors and 2 Executive Directors. (Director until 12th November 2015) Mr Sanjiva Senanayake IND/NED Prof Malik Ranasinghe IND/NED Mr Aravinda Perera ED Mr Ranjith Samaranayake ED

Mandate: Review and update risk management policies, ensure effective design and implementation of risk management framework, review levels and direction of major risks, report and recommend to Board on Risk and Compliance related matters.

(ED – Executive Director, NED – Non Executive Director, IND – Independent Director and NID – Non Independent Director)

SAMPATH BANK PLC Annual Report 2015 233 Governance

Corporate Governance

G4-38,39

Board Related Party Transaction Review Committee The Committee consists of 3 Non Executive Independent Directors and 1 0UV'KDUD:LMD\DWLODNHChairperson IND/NED Executive Director. Mr Sanjiva Senanayake IND/NED Prof Malik Ranasinghe IND/NED Mr Ranjith Samaranayake ED

Mandate: The Committee is derived from the Code of Best Practice issued by the Securities & Exchange Commission of Sri Lanka and the Listing Rules of the Colombo Stock Exchange. Board Related Party Transactions Review Committee is responsible for Developing a Related Party Transaction Policy, Reviewing in advance all proposed Related Party Transactions and Advising the Boards on making Immediate Market Disclosures.

Board Credit Committee The Committee consists of 6 Directors out of whom, 4 are Non Executive 3URI0DOLN5DQDVLQJKHChairman IND/NED Directors and 2 are Non Executive Independent Directors. Mr Channa Palansuriya NID/NED (Director until 12th November 2015) Mr Sanjiva Senanayake IND/NED Miss Annika Senanayake IND/NED Mr Deshal De Mel NID/NED Mr Aravinda Perera ED Mr Ranjith Samaranayake ED

Mandate: The Committee is to oversee the credit and lending strategies and objectives of the Bank and operate a sound credit granting process.

Board Strategic Planning Committee The Committee is headed by the Chairman of the Board and consists 0U'KDPPLND3HUHUDChairman NID/NED of 9 Directors out of whom, 2 are Non Executive Directors, 5 are Non Mr Channa Palansuriya NID/NED Executive Independent Directors and 2 are Executive Directors. (Director until 12th November 2015) Mr Sanjiva Senanayake IND/NED Prof Malik Ranasinghe IND/NED Mr Deshal De Mel NID/NED Mr Ranil Pathirana IND/NED Mrs Dhara Wijayatilake IND/NED Miss Annika Senanayake IND/NED Mr Aravinda Perera ED Mr Ranjith Samaranayake ED Mandate: The Board Strategic Planning Committee is responsible to the Board of Directors and reports on its activities regularly and assists the Board in its general oversight of setting Strategic Direction, Budgeting and Monitoring.

(ED – Executive Director, NED – Non Executive Director, IND – Independent Director and NID – Non Independent Director)

234 SAMPATH BANK PLC Annual Report 2015 G4-34,38

Board Shareholder Relations Committee The Committee consists of 2 Non Executive Directors. 3URI0DOLN5DQDVLQJKHChairman IND/NED (appointed w.e.f. 16.02.2016) Mr Deshal De Mel NID/NED Mr Channa Palansuriya - Chairman NID/NED (Director until 12th November 2015)

Mandate: Provide oversight on shareholder/investor relations.

Board Treasury Committee The Committee consists of 5 Directors, out of whom, 3 are Non Executive 0U6DQMLYD6HQDQD\DNHChairman IND/NED Directors. 2 Committee members including the Chairman are Independent Prof Malik Ranasinghe IND/NED Directors. Mr Deshal De Mel NID/NED Mr Aravinda Perera ED Mr Ranjith Samaranayake ED

Mandate: Provide oversight for treasury management processes and performance, treasury related risks and review and update treasury related policies.

Board Marketing Committee The Committee consists of 4 Non Executive Directors, the Chairman 0U'HHSDO6RRUL\DDUDFKFKLChairman IND/NED being an Independent Director. Miss Annika Senanayake IND/NED Mr Deshal De Mel NID/NED Mrs Saumya Amarasekera NID/NED

Mandate: Responsible for formulating the Bank’s Customer strategy, Brand strategy and community engagement activities

(ED – Executive Director, NED – Non Executive Director, IND – Independent Director and NID – Non Independent Director)

SAMPATH BANK PLC Annual Report 2015 235 Governance

Corporate Governance

G4-56

of IT with the Bank’s policies, standards, procedures, and overall &RGHRI&RQGXFW objectives. All employees including the Board of Resource management - Regular Directors are bound to abide by the assessments ensures that IT has ethics, values and expectations set out (SSLTWSV`LLZ Z\MÄJPLU[JVTWL[LU[HUKLMÄJPLU[ in the Employee Code of Conduct. The resources to meet the Bank’s Code of Conduct addresses a range of PUJS\KPUN demands. RL`PZZ\LZPUJS\KPUNJVUÅPJ[VMPU[LYLZ[ the Board of Risk management - Risk IYPILY`HUKJVYY\W[PVUJVUÄKLU[PHSP[` Management principles embedded fair dealing and compliance, among Directors are in the responsibilities of the Bank, others. The Code is made available to ensures that the Bank and IT all employees to ensure that the highest IV\UK[VHIPKL regularly assess and report IT standards of integrity and conduct are by the ethics, related risks and organisational maintained in dealings and interactions impacts. with all stakeholders. ]HS\LZHUK Strategic alignment - A shared understanding between the :KLVWOH%ORZLQJ3ROLF\ expectations Bank’s management and the IT The Bank has a Whistle Blowing Policy Department, enables the Board in place, which serves as a channel for ZL[V\[PU[OL and senior management to LHYS`PKLU[PÄJH[PVUVMJVYWVYH[LMYH\K ,TWSV`LL*VKL understand strategic IT issues. or risk by ensuring that employees  =HS\LKLSP]LY`;OLILULÄ[Z reporting legitimate concerns on potential VM*VUK\J[ achieved from each IT investment wrongdoings occurring within the Bank is assessed prior to and after HYLN\HYHU[LLKJVTWSL[LJVUÄKLU[PHSP[` implementation to ensure that Such complaints are investigated expected value has been delivered. and addressed through a formalised and decision making. The Bank has thus Performance management procedure and brought to the notice PKLU[PÄLK[OLJVTWL[P[P]LHK]HU[HNL reporting - Accurate, timely, and of the Chairman of the Board Audit stemming from the appropriate relevant portfolio, programme, Committee. The procedure is made alignment of IT objectives with overall and IT project reports to senior available through the intranet to ensure business objectives. The IT governance management provides a thorough awareness by all employees. framework of the Bank is designed to review of the progress being made avoid failures and mitigate IT associated [V^HYKZ[OLPKLU[PÄLKVIQLJ[P]LZVM &XVWRPHU&KDUWHU YPZRZI`LUZ\YPUN^LSSKLÄULKYVSLZ the IT project. The Bank adopts the Customer Charter and responsibilities for IT stakeholders, prescribed by the Central Bank of Sri comprehensive policy frameworks, Lanka, which forms the foundation for its business processes and infrastructure. approach to managing customer needs. Best practices implemented by the Bank in IT Governance include, ,7*RYHUQDQFH The Bank has led the industry by  /PNOSL]LSMYHTL^VYR+LÄULZ embracing emerging technologies and leadership, processes, roles the role of IT in delivering customer value and responsibilities, information has continued to gain prominence as requirements and organisational the Bank drives migration to e-based structures WSH[MVYTZ;OLYLSPHIPSP[`HUKLMÄJPLUJ`VM Independent assurance - Internal / IT systems also has a direct impact on external audits (or reviews), provide the quality and timeliness of information timely feedback about compliance that is generated for regulatory reporting

236 SAMPATH BANK PLC Annual Report 2015 0HPEHUVKLSRI%RDUG6XE&RPPLWWHHV Directors Audit Committee Board HR & Remuneration Board Committee Nomination Committee Board Integrated Risk Board Management Committee Related Party Board Review Transaction Committee Committee Credit Board Strategic Planning Board Committee Relations Shareholder Board Committee Committee Treasury Board Marketing Committee Board

Mr Dhammika Perera 9 Chairman

Mr Channa Palansuriya 99 9 999 (Director until 12th November 2015) Mr Sanjiva Senanayake 99999Chairman

Mr Deepal Sooriyaarachchi 9 Chairman Chairman

Prof Malik Ranasinghe 999Chairman 9 Chairman** 9

Mrs Dhara Wijayatilake 99Chairperson Chairperson 9

Miss Annika Senanayake 9 Chairperson 99 9

Mr Deshal De Mel 999999 Mr Ranil Pathirana Chairman 9 Mrs Saumya Amarasekera 9 9 Mr Aravinda Perera 99999 Mr Ranjith Samaranayake 9999 9

Terms of Reference Available Available Available Available To be Available Available Available Available Available formulated Planned Frequency of Quarterly Need basis Need basis Once in two Quarterly Need basis Bi-Annual Annually Once Once Meetings months in two in two months months Actual No of Meetings 9 4 13 9 3 17 6 1 5 2

Circulation of agenda and 7 days 7 days 7 days prior 7 days prior 7 days prior 7 days 7 days 7 days 7 days 7 days papers prior prior prior prior prior prior prior

** Board Shareholder Relations Committee Chairman w.e.f 16th February 2016.

The Bank has led The Company Secretary Mrs Anuja Focus Area % Goonetilleke is the Secretary for all Main Banking Operations 28 the industry by the Board Sub Committees and the embracing emerging minutes of meetings are available in her Performance Review 10 custody. Written Terms of Reference that Strategy and Budget 20 technologies and the comply with the Corporate Governance Risk Related Items 12 role of IT in delivering requirements of Central Bank of Sri Lanka are available for the Sub Committees with Governance 10 customer value has the Company Secretary. Succession Planning 16

continued to gain G4-47 Shareholder Matters 2 %RDUG0HHWLQJV Others 2 prominence as the The Board of Directors held 19 Board Bank drives migration meetings during the year and its Sub Committees held a total of 69 meetings. to e-based platforms. Their main focus areas and attendance at meetings are given below.

SAMPATH BANK PLC Annual Report 2015 237 Governance

Corporate Governance

%RDUGDQG6XE&RPPLWWHH$WWHQGDQFH Directors Board Meetings Audit Board Committee HR and Board Remuneration Committee Nomination Board Committee Integrated Board Risk Management Committee Related Party Board Review Transaction Committee Credit Board Committee Strategic Board Planning Committee Shareholder Board Relations Committee Treasury Board Committee Marketing Board Committee

Mr Dhammika Perera 16 2 4 Mr Channa Palansuriya 13 3 4 2 9 4 1 (Director until 12th November 2015) Mr Sanjiva Senanayake 19 9 9 17 6 5 Mr Deepal Sooriyaarachchi 18 9 3 2 Prof Malik Ranasinghe 19 9 9 3 17 6 5 Mrs Dhara Wijayatilake 19 9 13 9 3 6 Miss Annika Senanayake 18 4 13 12 6 2 Mr Deshal De Mel 19 2 16 6 1 4 2 Mr Ranil Pathirana 15 6 1 Mrs Saumya Amarasekera 17 13 2 Mr Aravinda Perera 18 4 9 13 5 5 Mr Ranjith Samaranayake 18 8 3 15 6 5 Total No of Meetings 19 9 4 13 9 3 17 6 1 5 2

6WDNHKROGHUVâ5LJKWV)UDPHZRUN 6SHFLDO5HVROXWLRQV3DVVHGDW The Board recognises the rights of WKH/DVW$QQXDO*HQHUDO0HHWLQJ all stakeholders, established by law $*0 or through mutual agreements and There were no matters that required 19 have placed a Corporate Governance passing of special resolutions at the AGM Number of framework which encourages active held on 31st March 2015. Board Meetings co-operation between Bank and stakeholders. The commitment of the Bank towards this aspect, are as follows:

Stakeholder Bank’s Commitment Shareholders The Bank is committed to enhance long term shareholder value and facilitate the exercise of shareholders’ rights. Customers The Bank is committed to maintain and enhance its public image as a sound, high quality and friendly place to conduct banking at. Employees The Bank is committed to build a work environment where people can make a difference both as individuals and as part of a team. Community The Bank is committed to meet its corporate responsibility and decisions on social and economic issues concerning activities of the Bank are developed and adopted by its governance bodies with the participation of Bank personnel.

238 SAMPATH BANK PLC Annual Report 2015 0HDQVRI&RPPXQLFDWLRQ 'HFODUDWLRQ The Bank communicates with its I Aravinda Perera, Managing Director of stakeholders through the following Sampath Bank PLC, hereby declare that mechanisms: all the members of the Board of Directors and the Senior Management personnel The quarterly results are published OH]LHMÄYTLKJVTWSPHUJL^P[O[OL*VKL in the Newspapers in all three of Conduct applicable to them as laid languages and released to the down by the Board of Directors in terms Colombo Stock Exchange (CSE). of Section 3(8) (ii) (g) of the Banking Act  ;OLÄUHUJPHSYLZ\S[ZHYLKPZWSH`LK Direction No 11 of 2007, for the year on www.sampath.lk in an area of ended 31st December 2015. the website devoted to Investor Relations. Financial results and business strategies of the Bank are explained to investors, Business Aravinda Perera leaders and media personnel Managing Director through Investor Forums and press releases. Colombo, Sri Lanka Operational Reviews (pages 63 to 16th February 2016 142 of this Annual Report).

6WDWXWRU\&RPSOLDQFHDQG 3HQDOWLHV The Company has complied with the requirements of the Colombo Stock Exchange on all matters related to capital markets during the year. No penalties have been imposed on the Company by the authorities.

SAMPATH BANK PLC Annual Report 2015 239 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS A.1 THE BOARD (1) Effective Board A.1 The Board of Sampath Bank comprises 11 Directors, of whom 9 operate in Complied a Non Executive capacity, including the Chairman. Of the 9 Non Executive Directors, 6 are Independent. The Managing Director and the Group Chief -PUHUJPHS6MÄJLYHYL[OLVUS`,_LJ\[P]L+PYLJ[VYZVU[OL)VHYK;OL+PYLJ[VYZ HYL" 1. Mr Dhammika Perera (Chairman/Non Executive Director) 2. Mr Channa Palansuriya (Deputy Chairman/Non Executive Director) (Director until 12th November 2015)** 3. Mr Sanjiva Senanayake (Senior Independent Director/Non Executive Director) 4. Mr Deepal Sooriyaarachchi (Independent Non Executive Director) 5. Prof Malik Ranasinghe (Independent Non Executive Director) 6. Mrs Dhara Wijayatilake (Independent Non Executive Director) 7. Miss Annika Senanayake (Independent Non Executive Director) 8. Mr Deshal De Mel (Non Executive Director) 9. Mr Ranil Pathirana (Independent Non Executive Director) 10. Mrs Saumya Amarasekera (Non Executive Director) 11. Mr Aravinda Perera (Managing Director/Executive Director)  4Y9HUQP[O:HTHYHUH`HRL.YV\W*OPLM-PUHUJPHS6MÄJLY,_LJ\[P]L+PYLJ[VY

** Mr Channa Prabodha Palansuriya, the Deputy Chairman of the Bank ceased to be a Director of the Bank with effect from the 12th of November 2015 in terms of Section 3 (1) (vi) of the Banking Act Direction No 11 of 2007 having been unable to attend three (03) consecutive meetings of the Board.

Attendance at Board Meetings during 2015

19 1. Mr Dhammika Perera 18 2. Mr Channa Palansuriya 17 (Director until 12th November 2015) 16 15 3. Mr Sanjiva Senanayake 14 4. Mr Deepal Sooriyaarachchi 13 5. Prof Malik Ranasinghe 12 11 6. Mrs Dhara Wijayatilake 10 7. Miss Annika Senanayake 9 8. Mr Deshal De Mel 8 9. Mr Ranil Pathirana 7 6 10. Mrs Saumya Amarasekera 5 11. Mr Aravinda Perera 4 12. Mr Ranjith Samaranayake 3 2 1 Meetings Attended 0 132456789101112 Meetings Not Attended

240 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (1) Effective Board A.1 The Board combines a diverse mix of skills and experience bringing together Complied (Contd.) academic, professional and entrepreneurial perspectives. There is also a high level female representation, with three prominent female professionals OVSKPUNIVHYKWVZP[PVUZ;OL)VHYKPZHSZVZ\MÄJPLU[S`KP]LYZPÄLKPUP[ZHNL representation, with two Directors below 35 years of age. The collective insights and acumen have generated discussion and debate on key aspects, which have led to enhancing the overall effectiveness of the Board. (2) Regular meetings A.1.1 Board meetings are held regularly whilst special Board meetings are Complied convened as the need arises. During 2015 the Board held 18 pre-scheduled meetings, one additional meeting and 6 meetings devoted to discuss strategies. The following Board Sub Committees met during the year:

Board Audit Committee Board Human Resources and Remuneration Committee Board Nomination Committee Board Integrated Risk Management Committee Board Related Party Transaction Review Committee Board Credit Committee Board Strategic Planning Committee Board Shareholder Relations Committee Board Treasury Committee Board Marketing Committee

The Board uses ipads to access Board papers via secure connections and Directors are able to join meetings even through remote access. Details of Board meetings, Sub Committee Meetings and attendance are given on page 238 of this report. %RDUGâV5HVSRQVLELOLWLHV7KH)ROORZLQJ3URFHGXUHVDUHFDUULHGRXWWR6WUHQJWKHQWKH6DIHW\DQG6RXQGQHVVRIWKH%DQN (3) Ensure the A.1.2 The Board is responsible for setting strategy, policies and for monitoring Complied formulation and performance against agreed goals and KPIs. During the year, the Board implementation of had 6 Strategic Planning sessions, where it reviewed the proposals of the sound business Corporate Management and re-aligned strategy and approved the medium strategy term strategy for the period 2016 to 2018. (4) Ensure that the A.1.2 The Board Nomination Committee ensures that the Board Members and Key Complied Chief Executive Management Personnel have the required skills, experience and knowledge 6MÄJLY*,6 to implement approved strategy. / Managing Director (MD) and management team possess the skills, experience and knowledge to implement the strategy

SAMPATH BANK PLC Annual Report 2015 241 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS (5) Ensure effective A.1.2 A succession Strategy has been recommended by the Board Nomination Complied CEO/MD and senior Committee. management succession strategy (6) (a) Ensure A.1.2 Board Audit Committee reviews Internal Audit reports submitted by the Complied effective systems Internal Audit Department and monitors follow up action. Further, based to secure integrity on the assessment of Internal Control Over Financial Reporting (ICOFR), of information and Directors concluded that the Bank’s Internal Control Over Financial Reporting ensure internal is effective. Refer also Board Integrated Risk Management Committee Report controls and risk given on pages 289 to 291. management (7) Ensure A.1.2 There is a separate Compliance function reporting directly to the Board Complied compliance with Integrated Risk Management Committee which has responsibility for laws, regulations and compliance. Head of Compliance reports directly to the Board Integrated Risk ethical standards Management Committee (BIRMC) and followed by the Board. (8) Ensure all A.1.2 The Articles of the Bank require the Directors to take decisions taking into Complied stakeholder interests account the interests of the customers, shareholders, employees and the are considered in community. Additionally there is a Customer Charter, a Board Shareholder corporate decisions Relations Committee and HR Policy in order to uphold the interests of these key stakeholders. (9) Ensure that the A.1.2 Board Audit Committee and Board review accounting policies annually to Complied company’s values ensure that they are in line with the business model of the Bank and evolving and standards are international and local accounting standards and industry best practice. set with emphasis on adopting appropriate accounting policies and fostering compliance with ÄUHUJPHSYLN\SH[PVUZ -\SÄSSZ\JOV[OLY A.1.2 ;OL)VHYKPZJVTTP[[LK[VM\SÄSSPUNP[ZM\UJ[PVUZPUSPUL^P[O[OLSH^ Complied Board functions as regulations and good governance practices adopted by the Bank. are vital, given the scale, nature and complexity of the business concerned

242 SAMPATH BANK PLC Annual Report 2015 G4-43,44

Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (11) Act in A.1.3 The Board has put in place a framework of policies, procedures and a risk Complied accordance with management framework to ensure compliance with relevant laws, Central laws relevant to Bank of Sri Lanka (CBSL) guidelines and international best practice with the organisation regard to the operations of the Bank. The Board obtains independent and procedure professional advice as and when necessary in accordance with the Board for Directors to approved policy on independent professional advice and these functions are obtain independent co-ordinated through the Company Secretary. Independent professional professional advice services were sought on matters during the year in accordance with the at company expense above provision in 2015. (12) Access to and A.1.4 All Directors have the opportunity to obtain the advice and services of the Complied appointment or Company Secretary, Mrs A Goonetilleke, who is an Attorney-at-Law which removal of Company PZHUHWWYV]LKX\HSPÄJH[PVU\UKLY[OL*VTWHUPLZ(J[5VVM:OLPZ Secretary responsible for ensuring follow up of Board procedures, compliance with rules and regulations, directions and statutes, keeping and maintaining minutes and relevant records of the Bank.

The Articles of the company specify that the appointment and removal of the Company Secretary should be by resolution involving the whole Board. (13) Independent A.1.5 The Directors of the Bank have no vested interests and take decisions on Complied judgement matters before them using independent judgement. (14) Dedicate A.1.6 Dates of regular Board meetings and Board Sub Committee meetings are Complied adequate time and usually scheduled well in advance and the relevant papers are circulated a effort to matters of week prior to the meeting. There is provision to circulate papers closer to the the Board and the meeting on an exceptional basis. Company, It is estimated that Non Executive Directors dedicated not less than 80 hours during the year for the affairs of the Bank and those Directors who are also on Sub Committees dedicate not less than 175 hours for the affairs of the Bank. The attendance at meetings for the Board and its Sub Committees are given in page 238. (15) Training for A.1.7 The Company Secretary in consultation with the Chairman recommends Complied Directors Directors to attend training sessions/seminars. During 2015 the following areas was covered: State of the economy and future outlook Additionally, the Board encourages knowledge sharing amongst the Directors. They also participate in the sessions organised by professional bodies and Sri Lanka Institute of Directors. The annual self-assessment by Directors also covers aspects on training to identify training needs.

SAMPATH BANK PLC Annual Report 2015 243 Governance

Corporate Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS A.2 DIVISION OF RESPONSIBILITIES BETWEEN CHAIRMAN AND CEO/MD (16) Conducting A.2 The positions of the Chairman and the CEO/MD have been separated in line Complied the business of the with best practice in order to maintain a balance of power and authority. The )VHYKZLWHYH[LS`" Chairman is a Non Executive Director whilst the CEO/MD is an Executive to the executive Director. responsibilities of the management of the Company A.3 CHAIRMAN’S ROLE (17) Chairman’s A.3 The Bank has developed a formal terms of reference for the Chairman which Complied role in preserving PUJS\KLZHSSHZWLJ[ZZWLJPÄLKPU[OL*VKL[OLJVU[PU\PUNSPZ[PUNYLX\PYLTLU[Z good corporate of the CSE and the Banking Act Direction No11 of 2007 on Corporate governance Governance for Licensed Commercial Banks in Sri Lanka.

(18) Conduct Board proceedings in a proper manner

A.4 FINANCIAL ACUMEN (19) Availability of A.4 Financial acumen has been a key attribute of successful careers of the Complied ÄUHUJPHSHJ\TLUHUK following Directors who have held senior management positions related to knowledge to offer ÄUHUJLPUV[OLYSLHKPUNÄUHUJPHSPUZ[P[\[PVUZ! guidance on matters Mr Sanjiva Senanayake VMÄUHUJL Mr Deepal Sooriyaarachchi Mr Ranil Pathirana Mr Aravinda Perera Mr Ranjith Samaranayake Additionally the Chairman, Mr Dhammika Perera has served on the Boards of HU\TILYVMÄUHUJPHSPUZ[P[\[PVUZ

Two Directors, including the CEO/MD, have MBAs and two Directors are Fellow Members of the Chartered Institute of Management Accountants, UK.

244 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A.5 BOARD BALANCE (20) Non Executive A.5.1 & The Board comprises 9 Non Executive Directors including the Chairman. The Complied +PYLJ[VYZVMZ\MÄJPLU[ A.5.2 2 Executive Directors are the CEO/MD and the GCFO. The Non Executive calibre and Number Directors are professionals/academics/business leaders, holding senior WVZP[PVUZPU[OLPYYLZWLJ[P]LÄLSKZHUK[OLYLMVYLKLLTLK[VILVMHWWYVWYPH[L calibre. As the majority of the Board comprises Non Executive Directors, their VWPUPVUZHUK]PL^ZJHYY`ZPNUPÄJHU[^LPNO[PU[OL)VHYKKLJPZPVUZ

Executive Directors vs Non Executive Directors

2

9

Non - Executive Directors Executive Directors

(21) Independence A.5.3 6 Non Executive Directors are independent of management and free of any Complied of Non Executive business or other relationship that could materially interfere with or could Directors reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement.

Independent Directors vs Non - Independent Directors

5 6

Independent Directors Non - Independent Directors

SAMPATH BANK PLC Annual Report 2015 245 Governance

Corporate Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS A.5 BOARD BALANCE (22) Annual A.5.4 Annual declarations of independence or non-independence are to be Not declarations of obtained from the Directors. Complied independence from Directors (23) Annual A.5.5 The Board makes an annual evaluation of independence of the Directors Complied evaluation of based on the submission of the annual declarations. Based on these, the independence following Directors are deemed to be independent: Mr Sanjiva Senanayake Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe Ms Dhara Wijayatilake Mr Ranil Pathirana Miss Annika Senanayake There were no Directors deemed Independent where all criteria were not met. (24) Senior A.5.6 Mr Sanjiva Senanayake has been appointed as Senior Independent Director Complied Independent Director & in view of the requirements of the Banking Act Direction No 11 of 2007. A.5.7 (25) Senior A.5.8 The Directors met Senior Independent Director during the year, though not Not Independent Director formally. Complied (SID) meeting with other Directors (26) Chairman to A.5.9 Chairman meets with Non Executive Directors without the presence of the Complied hold meetings with Executive Directors, on a need basis. The Non Executive Directors met twice Non Executive without the presence of the Executive Directors during the year 2015. Directors, without Executive Directors being present

246 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (27) Recording of A.5.10 Board minutes are prepared in order to record any concerns of the Board Complied Directors’ concerns as a whole or those of individual Directors regarding matters placed for in Board Minutes their approval/guidance/action. These minutes are circulated and formally approved at the subsequent Board meeting, Additionally, Directors have access to the past Board papers and minutes in case of need at all times.

If a Director resigns over an unresolved issue, the Chairman will bring the issue to the attention of the Board. The Director concerned is also required to provide a written statement to the Chairman for circulation to the Board. A.6 SUPPLY OF RELEVANT INFORMATION (28) Provision of A.6.1 The management provides comprehensive information including both Complied appropriate and quantitative and qualitative information for the monthly Board Meetings timely information generally 7 days prior to the Board/Sub Committee meetings. The Directors also have free and open access to Management at all levels to obtain further information or clarify any concerns they may have. As described above, they also have the right to seek independent professional advice at the Company’s expense and copies of advice obtained in this manner are circulated to other Directors who request it. (29) Chairman to A.6.1 All Directors are adequately briefed on matters arising at Board meetings Complied ensure all Directors through comprehensive Board papers. Additionally, the relevant members of are properly briefed the Management team will make presentations at Board meetings and are on on issues arising at Z[HUKI`HZM\Y[OLYJSHYPÄJH[PVUZTH`ILYLX\PYLKI`+PYLJ[VYZ Board meetings Any Director who does not attend a meeting is updated on proceedings prior to the next meeting through: Formally documented minutes of meetings A separate Board paper highlighting the items which need to be completed and need follow-up action of the previous meetings is Z\ITP[[LK;OPZPZ[HRLU\WPTTLKPH[LS`HM[LYJVUÄYTH[PVUVMTPU\[LZ Archived minutes and Board papers accessible electronically at the convenience of the Directors. (30) Board papers A.6.2 As described above, Board papers are generally circulated 7 days before the Complied and agenda to be meeting. There is provision for circulation of urgent papers within a shorter circulated 7 days [PTLMYHTLHUKHSZVMVYHWWYV]HSVMTH[[LYZI`JPYJ\SH[PVU"OV^L]LYZ\JO prior to meetings. instances are the exception and not the rule.

SAMPATH BANK PLC Annual Report 2015 247 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS A.7 APPOINTMENTS TO THE BOARD (31) Formal and A.7.1 The Board has established a Board Nomination Committee whose Terms Complied transparent of Reference comply with the Code and CBSL Direction on Corporate procedure for new Governance. Appointments through an Membership of this important Board Sub Committee is given on page 237 established of the Annual Report. Accordingly, new Directors including Executive and Nomination Non Executive Directors are appointed by the Board upon consideration of Committee recommendations by the Board Nomination Committee. (32) Annually assess A.7.2 The Board annually assesses its composition to ascertain whether the Complied Board composition combined knowledge and experience of the Board match the strategic KLTHUKZMHJPUN[OL*VTWHU`HUKPZZH[PZÄLK[OH[P[JVTWSPLZ^P[O[OLJYP[LYPH (33) Disclosure A.7.3 All new appointments are communicated to the shareholders via the Colombo Complied of information to :[VJR,_JOHUNL;OLWYVÄSLZVM[OLJ\YYLU[+PYLJ[VYZHYLNP]LUVUWHNLZ [V shareholders upon 17 in this report. appointment of new Directors A.8 RE-ELECTION (34) All Directors A.8 As per the Articles of Association, 1/3rd of the Directors should retire at each Complied should submit Annual General Meeting and be subject to re-election. Such Directors who themselves for re- YL[PYLHYL[OVZL^OVOLSKVMÄJLMVY[OLSVUNLZ[[PTLWLYPVKZPUJL[OLLSLJ[PVU election at regular re-appointment. In accordance with this provision, the following Directors intervals retire and offer themselves for re-election: Mr Dhammika Perera Mr Deshal De Mel Miss Annika Senanayake Mrs Saumya Amarasekera A brief resume of Directors standing for re-election is provided in English and Sinhala to enable shareholders to make an informed decision.

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

248 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (35) Non Executive A.8.1 Non Executive Directors are appointed with approval of the Central Bank of Complied Directors are Sri Lanka (CBSL) and stands for re-election at Annual General Meetings in appointed for terms of Articles of Association. ZWLJPÄLK[LYTZ subject to re-election (36) All Directors A.8.2 Please refer A8 above. Complied including Chairman excluding Executive Directors to be subject to re-election H[ÄYZ[VWWVY[\UP[` after appointment and re-election at least every 3 years thereafter A.9 APPRAISAL OF BOARD PERFORMANCE (37) Appraisal of A.9.1 The Board annually appraises its own performance to ensure that it is Complied Board Performance discharging its responsibilities satisfactorily. This process requires each +PYLJ[VY[VÄSSH)VHYK7LYMVYTHUJL,]HS\H[PVU-VYTPUSPUL^P[O[OLWYV]PZPVUZ of this Section of the Code. The responses are reviewed by the Company Secretary who compiles a report which is submitted to the Board for information. (38) Appraisal A.9.2 The appraisal of the performance of Board Sub Committees have to be re- Not of Board Sub implemented. Complied Committees (39) (a) Disclosure A.9.3 Please refer A.9.1 above Complied of the method of appraisal of the Board (39) (b) Disclosure Please refer A.9.2 above Not of the method Complied of appraisal of the Board Sub Committee performance A.10 DISCLOSURE OF INFORMATION IN RESPECT OF DIRECTORS (40) Annual Report A.10.1 0UMVYTH[PVUZWLJPÄLKPU[OL*VKL^P[OYLNHYK[V+PYLJ[VYZHYLKPZJSVZLK^P[OPU Complied [VKPZJSVZLZWLJPÄLK this Annual Report as follows: information regarding  5HTLX\HSPÄJH[PVUZL_WLY[PZLTH[LYPHSI\ZPULZZPU[LYLZ[ZHUKIYPLM Directors WYVÄSLZHYLNP]LUVUWHNLZ [V Details whether a Director is Executive, Non Executive or Independent, Non Independent are given on pages 8 to 17. Related Party Transactions are given on pages 405 to 409. Membership of Board Sub Committees and attendance at Board Meetings and Board Sub Committee meetings are given on pages 237 and 238 respectively.

SAMPATH BANK PLC Annual Report 2015 249 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference A. DIRECTORS A.11 APPRAISAL OF CHIEF EXECUTIVE OFFICER/MANAGING DIRECTOR (41) Set reasonable A.11.1 ;OL)VHYKKPZJ\ZZLKHUKZL[ÄUHUJPHSHUKUVUÄUHUJPHS[HYNL[Z[VIL Complied ÄUHUJPHSHUKUVU achieved during the year by the CEO/MD with reference to the short, medium ÄUHUJPHS[HYNL[Z[V and long term objectives of the Bank at the beginning of 2015. The targets be met by the CEO/ for 2016 have also been set at the end of 2015. MD (42) Evaluate A.11.2 The Managing Director’s performance is evaluated by the Board Human Complied performance of Resources & Remuneration Committee with reference to targets and goals the CEO/MD with achieved by the Bank. This is reported to the Board. reference to targets B. DIRECTORS’ REMUNERATION (43) Appointment B.1.1 The Board has established a Board Human Resources & Remuneration Complied of a Remuneration Committee to develop a policy and determine remuneration for the Directors, Committee Management and Executive Staff. No Director is involved in deciding his own remuneration. The Terms of Reference complies with Schedule C of the Code, other investor guidelines and requires the Committee to ensure that the Company adopts a remuneration policy which rewards Executive Directors, Management and Executive Staff for their contribution to sustainably and responsibly towards enhancing shareholder value.

Further information regarding the Board Human Resources & Remuneration Committee is given in the Board Human Resources & Remuneration Committee Report on pages 285 & 286. (44) Remuneration B.1.2 & The Board Human Resources & Remuneration Committee comprises the Not Committee to B.1.3 following Directors who are all Non Executives Directors except Mr Aravinda Complied comprise exclusively Perera, the Managing Director: Non Executive Mr Deepal Sooriyaarachchi (Chairman) Directors Mr Channa Palansuriya (Director until 12th November 2015) Miss Annika Senanayake Mr Deshal De Mel Mr Aravinda Perera (45) Remuneration B.1.4 Remuneration of Non Executive Directors is recommended by the Board Complied for Non Executive Human Resources & Remuneration Committee for approval of the Board in Directors line with market practice.

250 SAMPATH BANK PLC Annual Report 2015 G4-51,52

Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (46) Remuneration of B.1.5 Remuneration of Executive Directors is determined by the Board Human Complied Executive Directors Resources & Remuneration Committee which has access to professional advice from within or outside the company in formulating its proposals which then are discussed with the Chairman. B.2 THE LEVEL AND MAKE UP OF REMUNERATION (47) Remuneration B.2.1 & Remuneration for Executive Directors is designed to attract, retain and Complied for Executive B.2.2 motivate the Executive Directors as determined by the Board Human Directors should Resources & Remuneration Committee. Their remuneration comprises a attract, retain and Ä_LKZHSHY`JVTWVULU[^OPJOPUJS\KLZWLYX\PZP[LZHUKHSSV^HUJLZ;OL motivate Remuneration Committee takes into account market practices and seeks professional advice when required in order to discharge its responsibilities. (48) Positioning B.2.3 The Board Human Resources & Remuneration Committee reviews the Bank’s Complied company remuneration levels annually in relation to other Banks in the country. remuneration levels relative to other companies (49) Performance B.2.4 There are performance related elements of remuneration for Executive Complied related elements of Directors. remuneration for Executive Directors (50) Share option B.2.5 There were no Share Option schemes during 2015. Not schemes Applicable (51) Designing B.2.6 Performance related remuneration is in place for 2015. Complied schemes of performance related remuneration (52) Compensation B.2.7 There are no provisions for compensation for early termination contained in Complied commitments in the Letters of Contract/Appointment. However, the Directors would determine the event of early this on a case by case basis. termination (53) Dealing with B.2.8 Directors determine this on a case by case basis. Complied early termination (54) Levels of B.2.9 The Board Human Resources & Remuneration Committee determines the Complied remuneration for Non levels of remuneration for Non Executive Directors taking into account the Executive time commitment and responsibilities of their role and market practices. Directors Remuneration for Non Executive Directors does not include share options.

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference B. DIRECTORS’ REMUNERATION B.3 DISCLOSURE OF REMUNERATION (55) Composition B.3.1 The composition of the Board Human Resources and Remuneration Complied of Board HR & Committee and its policy is given on pages 285 & 286. Remuneration Committee, The aggregate remuneration to Executive and Non Executive Directors are Remuneration Policy given in Note No 49.3.1 to the Financial Statements on page 405. and disclosure of aggregate Names of the Directors of the Board Human Resources & Remuneration remuneration paid to Committee are disclosed on pages 285 & 286 in the Annual Report. Directors C. RELATIONS WITH SHAREHOLDERS C.1 CONSTRUCTIVE USE OF THE ANNUAL GENERAL MEETING (AGM) AND CONDUCT OF GENERAL MEETINGS (56) Constructive use C.1 The Annual General Meeting is the main forum of contact between small Complied of the AGM & Other shareholders and the Board. A separate Sub Committee of the Board, General Meetings Board Shareholder Relations Committee, has been set up for the purpose of building up relations with the shareholders and addressing their concerns. This Committee conducts an open session with the shareholders immediately after the AGM each year.

The Annual Report is circulated to all shareholders 15 working days prior to the AGM and a Sinhala version is published each year to meet the needs of diverse groups of shareholders. Additionally, the Chairman’s and CEO/MD’s messages are translated into Tamil each year.

In line with market practice, the CEO/MD has regular contact with the major shareholders. (57) Count of all C.1.1 All proxy votes lodged together with the votes of shareholders present at the Complied proxy votes lodged AGM are considered for each resolution. (58) Separate C.1.2 A separate resolution is proposed at the AGM for each substantially separate Complied resolutions for each issue. The adoption of the report and accounts is proposed as a separate substantially resolution. separate issue

(59) Availability C.1.3 All Board Sub Committee Chairpersons are present at the AGM to answer Complied of Board Sub any questions raised at the AGM and will respond when requested to do so Committee by the Chairman. Chairpersons at AGM

252 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (60) Circulation of C.1.4 Notice of the AGM and related papers are sent to shareholders at least 15 Complied Notice of AGM and working days prior to the meeting in accordance with the regulations. related documents to shareholders (61) Summary C.1.5 A summary of the procedures governing voting at the AGM is provided in the Complied of procedures proxy form, which is circulated to shareholders15 working days prior to the governing voting AGM. at the AGM C.2 COMMUNICATION WITH SHAREHOLDERS (62) Channel to reach C.2.1 The Board has appointed a Sub Committee on Shareholder Relations tasked Complied all shareholders of ^P[OPKLU[PM`PUNHUKHKKYLZZPUN[OLZOHYLOVSKLYZJVUJLYUZ0[PZ[OLÄYZ[SPZ[LK the company company in Sri Lanka to have such a Committee. This Committee conducts an annual Shareholder Relations Forum to identify shareholder concerns. Additionally, the AGM is also a key forum for contact with shareholders and the Bank has a proud history of well attended AGMs where shareholders take an active role in exercising their rights. The Annual Report is translated into Sinhala and the Chairman’s and CEO/MD’s messages are translated into Tamil as well to facilitate greater communication with shareholders.

The Bank posts on its website (www.sampath.lk) copies of annual reports, interim reports etc. These are posted on the website as soon as practicable after they have been released to the Colombo Stock Exchange. (63) Policy and C.2.2 The Bank provides fair disclosure with emphasis on the integrity, accuracy, Complied methodology for timeliness and relevance of the information provided. communication with shareholders (64) implementation C.2.3 Shareholders are consulted on their preference to receive the Annual Report Complied of the Policy and from the Bank either by means of a Compact Disk or in printed form. methodology for Shareholders may at anytime elect to receive Annual Report from the Bank in communication with printed form free of charge. shareholders Interim Reports are published in all three languages (English, Sinhala and Tamil) in leading news papers within 60 days of the quarter end. (65) Contact C.2.4 & Shareholders may, at anytime, direct questions and request for publicly Complied person in relation to C.2.6 available information at the Directors or management of the Bank. They shareholder matters may also provide their comments and suggestions to the Directors or management, addressed to the Company Secretary.

SAMPATH BANK PLC Annual Report 2015 253 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference C. RELATIONS WITH SHAREHOLDERS C.2 COMMUNICATION WITH SHAREHOLDERS (66) Process to make C.2.5 The Company Secretary maintains a record of all correspondence received. Complied all Directors aware She directs as soon as practicable such correspondence to the Board, of major issues PUKP]PK\HS+PYLJ[VYZVY[OLYLSL]HU[VMÄJLYZHZHWWSPJHISL and concerns of shareholders (67) Process C.2.7 Please refer C.2.5 above. Complied responding to shareholder matters C.3 MAJOR AND MATERIAL TRANSACTIONS (68) Disclosure of C.3.1 During the year 2015, the Bank did not engage in or commit any “Major Complied major transactions Transaction” which materially affected the Bank’s net asset base. D. ACCOUNTABILITY AND AUDIT (69) Present a D.1 The Bank’s position and prospects have been discussed in detail in the Complied balanced and following sections of this Annual Report. understandable Chairman’s Message given on pages 44 & 45. assessment of the Managing Director’s Review given on pages 46 to 51 Company’s Operational Reviews given on pages 63 to 142. ÄUHUJPHSWVZP[PVU performance and prospects (70) Interim reports, D.1.1 Interim reports were circulated within 45 days of each quarter end which Complied price-sensitive public includes information to assist shareholders gain an understanding of the state reports, regulatory of affairs of the Bank. reports and statutory information Price sensitive information was disclosed in a comprehensive but concise requirements manner to the Colombo Stock Exchange on a timely basis.

Reports required by the regulators including Central Bank, Inland Revenue, 9LNPZ[YHYVM*VTWHUPLZHUK*VSVTIV:[VJR,_JOHUNL^LYLHSSÄSLKPUH timely manner in compliance with relevant requirements and these provided Z\MÄJPLU[PUMVYTH[PVUMVY[OL\ZLY[VVI[HPUHIHSHUJLKHZZLZZTLU[VM[OL Bank`s operations. (71) Declaration in D.1.2 The Annual Report of the Board of Directors on the Affairs of the Company on Complied Directors Report pages 303 to 312 contains the declarations as required by the Code.

254 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (72) Responsibilities D.1.3 The Statement of Directors’ Responsibility for Financial Reporting and Report Complied of the Board for of the Auditors which include a statement about their reporting responsibilities the preparation are provided on pages 317 & 318 and on page 319 respectively. and presentation of ÄUHUJPHS:[H[LTLU[Z and statement by the Auditors about their reporting responsibilities (73) Include a D.1.4 The Operational Reviews are set out on pages 63 to 142 and covers the Complied Management PUMVYTH[PVUZWLJPÄLKPU[OL*VKLHZNP]LUILSV^ Discussion & Industry structure and developments Analysis Opportunities and threats Risks and concerns Internal controls systems and their adequacy Social and environmental protection activities carried out by the Company Financial performance Material developments in human resource/industrial relations and Prospects for the future. (74) Declaration of D.1.5 This information is provided in the Annual Report of the Board of Directors on Complied the Directors that the the Affairs of the Company given on pages 303 to 312. business is a going concern (75) Notify D.1.6 This situation has not arisen. Not shareholders in case Applicable net assets of the company fall below 50% (76) Related Party D.1.7 There is a documented process approved by the Board, identifying related Complied Transactions parties, type of Related Party Transactions and favourable treatment granted [VZHPKWHY[PLZPUVYKLYMVY)VHYKTLTILYZHUK247Z[VH]VPKHU`JVUÅPJ[ of interest in this regard. There is an effective and comprehensive system of internal control for identifying, recording and disclosure of related party transactions.

SAMPATH BANK PLC Annual Report 2015 255 Governance

Corporate Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference D. ACCOUNTABILITY AND AUDIT (76) Related Party D.1.7 A procedure is in place for granting accommodation to Directors or to Complied Transactions close relations of Directors. Such accommodation requires approval at a (Contd.) meeting of the Board of Directors, by not less than 2/3rds of the number of Directors other than the Director concerned voting in favour of granting such accommodation. The terms and conditions of the facility include a proviso that it will be secured by such security as may from time to time be determined by the Monetary Board as well.

Directors and KMPs submit declarations declaring their transactions with the Bank on a quarterly and on annual basis.

(SS9LSH[LK7HY[`;YHUZHJ[PVUZHZKLÄULKPU:YP3HURH(JJV\U[PUN:[HUKHYKZ - LKAS 24 (Related Party Transactions) are disclosed in Note No 49 to the Financial Statements on pages 405 to 409. D.2 INTERNAL CONTROL (77) Maintain a D.2.1 The Board is responsible for formulating and implementing appropriate Complied sound system of and adequate internal control systems. The Board Audit Committee has internal control responsibility to the Board to ensure that the system of Internal Controls is to safeguard Z\MÄJPLU[HUKLMMLJ[P]L9L]PL^ZVM[OLHKLX\HJ`HUKLMMLJ[P]LULZZVM[OLZL shareholders’ internal control systems are carried out by the Internal Audit Department who investments and the report on a regular basis to the Board Audit Committee. Company’s assets (78) Review need D.2.2 Bank has an Internal Audit function. Complied for Internal Audit Function D.3 AUDIT COMMITTEE (79) Establish D.3 The Bank has established Board Audit Committee in keeping with good Complied arrangements governance since 1997. The principal responsibility of the Board Audit for selection and *VTTP[[LLPZ[VOH]LV]LYZPNO[V]LYÄUHUJPHSYLWVY[PUNPU[LYUHSJVU[YVSZHUK application of monitoring auditor independence. Its duties include gaining assurance on accounting policies, [OLJVU[YVSV]LYÄUHUJPHSWYVJLZZLZHUK[OLPU[LNYP[`VM[OL)HUR»ZÄUHUJPHS ÄUHUJPHSYLWVY[PUN reports, monitoring the performance, objectivity and independence of the and internal control External Auditor and reviewing work of the Internal Auditor. The Board Audit principles Committee Report is given on pages 282 to 284 of the Annual Report.

256 SAMPATH BANK PLC Annual Report 2015 G4-57

Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference (80) Composition D.3.1 The Board Audit Committee consists of Non Executive Directors and chaired Complied and Terms of by a Non Executive Independent Director. Members are selected to provide a Reference for Board IYVHKZL[VMÄUHUJPHSJVTTLYJPHSHUKV[OLYYLSL]HU[L_WLYPLUJL[VTLL[[OL Audit Committee Committee’s objectives. CEO/MD, GCFO, DGM -Finance, Head of Internal Audit, Senior Manager Systems Audit and representatives of the External Auditors are invited to attend the meetings. (81) Review of D.3.2 The Committee has a key oversight role in relation to the External Auditor Complied External Audit Ernst & Young, whose primary relationship is with the Committee. The function and Bank’s Auditor Independence Policy ensures that the independence and relationship with objectivity of the Auditor is not impaired. The Committee has responsibility for External Auditors recommending to the Board the appointment/re-appointment of the External Auditors and reviewing the nature, scope and results of the annual External Audit. The audit fee is determined by the Board Audit Committee who also assesses the effectiveness and the independence of the External Auditors. (82) Terms of D.3.3 The Terms of Reference for the Board Audit Committee complies with the Complied Reference Code of Best Practice on Corporate Governance issued by the ICASL and SEC and the Code of Best Practice on Board Audit Committees issued by ICASL. Terms of Reference also complies with the Banking Act Direction No 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by CBSL and relevant Colombo Stock Exchange Regulations. These documents are available with the Company Secretary. (83) Disclosures D.3.4 The Annual Report of the Board of Directors on the Affairs of the Company Complied regarding Board given on pages 303 to 312 provides the following disclosures: Audit Committee The composition of the Board Audit Committee A statement regarding the independence of the Auditors D.4 CODE OF BUSINESS CONDUCT AND ETHICS (84) Code of D.4.1 Codes of Conduct and Ethics are in place as per the Employee Hand Book. Complied business conduct and ethics for Directors and staff D.5 CORPORATE GOVERNANCE DISCLOSURES (85) Corporate D.5.1 The Corporate Governance Report is given on pages 228 to 281. This report Complied Governance Report provides information regarding Corporate Governance practices in the Bank which are in compliance with: The Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities & Exchange Commission of Sri Lanka The Banking Act Direction No 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by CBSL

SAMPATH BANK PLC Annual Report 2015 257 Governance

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Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference E. SHAREHOLDERS – INSTITUTIONAL INVESTORS E.1 SHAREHOLDER VOTING (86) Encourage E.1 The Bank has a history of active shareholder involvement at general meetings Complied voting at AGM and all shareholders are regularly encouraged to state their intentions to vote and translate it into practice.

(87) Regular E.1.1 The CEO/MD has structured meetings with institutional shareholders. Board Complied structured dialogues members are briefed about the matters discussed at such meetings. with institutional investors E.2 EVALUATION OF GOVERNANCE DISCLOSURES (88) Encourage E.2 Institutional investors are kept apprised of the Bank’s governance practices Complied institutional investors through the Annual Report and any new initiatives are highlighted at to give due weight to regular meetings to ensure that due weightage is given to good Corporate relevant governance Governance. arrangements F. SHAREHOLDER RELATIONS – INDIVIDUAL SHAREHOLDERS F.1 INVESTING / DIVESTING DECISION (89) Individual F.1 ;OL(UU\HS9LWVY[JVU[HPUZZ\MÄJPLU[PUMVYTH[PVUMVYHWV[LU[PHSPU]LZ[VY[V Complied shareholders are carry out their own analysis. The Annual Report is published in both Sinhala encouraged to do and English to facilitate understanding by more investors. This, together with their own analysis or [OLPU[LYPTÄUHUJPHSZ[H[LTLU[ZWYV]PKLKLHJOX\HY[LYWYV]PKLZ\MÄJPLU[ seek independent information to enable retail investors make informed judgements regarding the advice performance of the Bank.

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

Shareholders have the liberty to contact, the Company Secretary for further information. F.2 SHAREHOLDER VOTING (90) Encourage F.2 It is a tradition at Sampath Bank to encourage retail investors to participate Complied shareholders to and vote at the AGM. Additionally, they are encouraged to participate in participate and vote Bank’s affairs through submitting proposals at the Shareholder Relations at the AGM forums.

258 SAMPATH BANK PLC Annual Report 2015 Principle CA Sri Compliance & Implementation Status Lanka and SEC Code Reference G. SUSTAINABILITY REPORTING G.1 PRINCIPLES OF SUSTAINABILITY Sustainability is a business approach that creates long term stakeholder value by embracing opportunities and managing risks derived from economic, environmental and social developments and their potential implications and impacts on the business activities of the entity.

Sustainability reporting is the practice of recognising, measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goals of sustainable development in the context of the overall business activities and strategy of the entity and be directed to the target stakeholders, usually shareholders, employees, consumers, society and government. (91) Economic G.1.1 Please refer pages 63 to 68 and 320 to 452. Complied Sustainability (92) The Environment G.1.2 Please refer pages 191 to 200. Complied (93) Labour Practice G.1.3 Please refer pages 146 to 160. Complied (94) Society G.1.4 Please refer pages 178 to 190. Complied (95) Product G.1.5 Please refer pages 161 to 177. Complied & Service Responsibility (96) Stakeholder G.1.6 Please refer pages 57 to 58 and 145 to 190. Complied PKLU[PÄJH[PVU engagement & effective communication (97) Sustainable G.1.7 Please refer GRI Index from pages 468 to 477. Complied reporting and disclosure

SAMPATH BANK PLC Annual Report 2015 259 Governance

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(1) Responsibilities of the Board (1) Strategic objectives and 3(1)(i)(a) The Bank’s strategic objectives and corporate values are determined Complied corporate values by the Board and are given on pages 52 & 53. These are JVTT\UPJH[LK[VHSSSL]LSZVMZ[HMM[OYV\NOYLN\SHYIYPLÄUNZLZZPVUZ and reinforced by the Corporate Management Team. Additionally the values are included in the Employee Code of Conduct (Blue Book) which is also available on the intranet. (2) Overall Business Strategy 3(1)(i)(b) The Bank strategy is set by the Board in consultation with the Complied including Risk Policy and Corporate Management and the Strategic Plan for the period 2015 Management -2017 has been approved by the Board. The risk appetite, policy, management framework and mechanisms have also been approved by the Board in line with the strategic plan. Measurable goals for the Bank as a whole have been set and performance is measured in line with these goals regularly at Board Meetings. (3) Risk Management 3(1)(i)(c) The Board has appointed a Board Integrated Risk Management Not *VTTP[[LL[HZRLK^P[OHWWYV]PUN[OL)HUR»Z9PZR7VSPJ`KLÄUPUN Complied the risk appetite, identifying principal risks, setting governance structures and implementing systems to measure, monitor and manage the principal risks. The following reports provide further insights in this regard. Risk Management Report on pages 202 to 227. Board Integrated Risk Management Committee Report on pages 289 to 291. A mechanism / process to identify and mitigate the risks arising out of new strategies to be in place at the Board level.

260 SAMPATH BANK PLC Annual Report 2015 G4-49

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (4) Communication with all 3(1)(i)(d) There is a Board approved communication policy with all Complied stakeholders stakeholders, including depositors, creditors, shareholders and borrowers in place.

The Board has approved and implemented the following communication policies:

6KDUHKROGHUVòThe Board has appointed a Sub Committee on Shareholder Relations tasked with identifying and HKKYLZZPUN[OLZOHYLOVSKLYZ»JVUJLYUZ0[PZ[OLÄYZ[SPZ[LK company in Sri Lanka to have such a Committee. This Committee conducts an annual Shareholder Relations Forum to identify shareholder concerns. Additionally, the AGM is also a key forum for contact with shareholders and the Bank has a proud history of well attended AGMs where shareholders take an active role in exercising their rights. The Annual Report is translated in to Sinhala and the Chairman’s and CEO/MD’s messages are translated into Tamil as well to facilitate greater communication with shareholders.

&XVWRPHUVòCustomers include depositors, creditors and borrowers. The Bank has a Customer Complaint Handling Policy. The Customer Complaint handling procedure which has been printed in all three languages and disseminated to all customer contact points of the Bank. This document outlines the complaints handling Policy of the Bank, provides contact numbers of the Bank for this purpose and also of the Financial Ombudsman. There is a 24 hour trilingual customer hotline set up for this purpose and reports are reviewed by the Board Integrated Risk Management Committee. Additionally, a customer satisfaction survey is carried out by External consultants to evaluate service levels provided by the Bank.

6WDIIòStaff members are given access to the management to voice their concerns. (5) (a) Internal Control System 3(1)(i)(e) The Board is tasked with reviewing the adequacy and the integrity Complied of the Bank’s internal control systems and management information systems. Accordingly the Board Audit Committee reviews Internal Audit reports submitted by the Internal Audit Department and monitors follow up action further based on the assessment of Internal Control Over Financial Reporting (ICOFR). Directors concluded that the Bank’s Internal Control Over Financial Reporting is effective.

SAMPATH BANK PLC Annual Report 2015 261 Governance

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(1) Responsibilities of the Board (5) (b) Management 3(1)(i)(e) The Bank will have to establish a valid process to review the Not Information Systems HKLX\HJ`HUKHJJ\YHJ`VMHSSÄUHUJPHSHUKUVUÄUHUJPHSPUMVYTH[PVU Complied (Contd.) (6) Key Management 3(1)(i)(f) ;OL)VHYKOHZPKLU[PÄLKTLTILYZVM[OL*VYWVYH[L4HUHNLTLU[ Complied Personnel .YV\W9PZR6MÄJLY/LHKVM;YLHZ\Y`HUK/LHKVM*VTWSPHUJL HZ2L`4HUHNLTLU[7LYZVUULSHZ6MÄJLYZ7LYMVYTPUN,_LJ\[P]L Functions of Licensed Commercial Banks (LCB) as required by CBSL Guideline dated 02 December 2015.

All appointments of designated Key Management Personnel are recommended by the Board Nomination Committee and approved by the Board. +LÄULHYLHZVMH\[OVYP[` 3(1)(i)(g) (YLHZVMH\[OVYP[`HUKRL`YLZWVUZPIPSP[PLZOH]LILLUKLÄULKMVY[OL Complied and Key Responsibilities Directors and Key Management Personnel. for Directors and Key Management Personnel (8) Oversight of affairs of the 3(1)(i)(h) Key Management Personnel make regular presentations to the Complied Bank by Key Management Board on matters under their purview and are also called in by the Personnel Board to explain matters relating to their areas. (9) Assess effectiveness of 3(1)(i)(i) Selection, nomination and election of Directors are made by the Complied own Governance practices )VHYK5VTPUH[PVU*VTTP[[LLIHZLKVU[OLPYÄLSKVML_WLY[PZL including selection and Directors’ interests are disclosed to the Board at the start of every nomination of Directors and meeting. A Director who has a particular interest abstains from 247Z4HUHNLTLU[VMJVUÅPJ[ voting in such a situation and he/she is not counted in the quorum. of interest and determination of weaknesses ;OL)VHYKHWWYHPZLZP[ZV^UWLYMVYTHUJLI`ÄSSPUN[OL)VHYK ,]HS\H[PVU-VYT^OPJOPZÄSSLKI`LHJO+PYLJ[VYPUYLSH[PVU[V business strategy and contributions of Board members based on [OLPYÄLSKVML_WLY[PZL;OLYLZWVUZLZHYLJVSSH[LKI`[OL*VTWHU` Secretary and submitted to the Board Nomination Committee for their review. Matters of concern are brought to the attention of the Board by the same Committee.

262 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (10) Succession plan for Key 3(1)(i)(j) The structure of the Bank which was recommended by the Board Not Management Personnel Nominations Committee has been approved by the Board in Complied principle.

Succession plan is being implemented based on the said structure. (11) Regular meetings with 3(1)(i)(k) Key Management Personnel regularly present or are called in for Complied Key Management Personnel discussions at the meetings of the Board and its Sub Committees on policy and other matters relating to their areas. Progress towards corporate objectives is a regular agenda item for the Board and the Key Management Personnel are regularly involved in the Board level discussions on the same. (12) Regulatory environment 3(1)(i)(l) Directors are briefed about developments in the regulatory Complied and maintaining an effective environment at Board Meetings to ensure that their knowledge relationship with regulator is updated regularly to facilitate effective discharge of their responsibilities.

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

The CEO/MD attended all CEO/MD forums on Governance organised by CBSL and briefed the Board. (13) Hiring External Auditors 3(1)(i)(m) The Board Audit Committee carries out the necessary due Complied diligence regarding the hiring of the External Auditor and makes recommendations to the Board. The appointment of the External auditor is made at the Annual General Meeting. Oversight of the External Auditor is carried out by the Board Audit Committee and the Board is briefed of any concerns in this regard if a necessity arises. (14) Appointment of Chairman (3)(1)(ii) The Board has appointed the Chairman and the Chief Executive Complied HUK*,6HUKKLÄUPUNHUK 6MÄJLY4HUHNPUN+PYLJ[VYHUKHSZVHWWYV]LK[OLPYM\UJ[PVUZHUK approving their functions and responsibilities maintaining the balance of power between the two responsibilities roles.

(15) Regular Board Meetings (3)(1)(iii) Regular Board Meetings are held and special meetings are Complied scheduled as and when the need arises. The Board met 19 times during 2015. We have minimised obtaining approval via circular resolutions and it is done only on an exceptional basis and such YLZVS\[PVUZHYLYH[PÄLKI`[OL)VHYKH[[OLUL_[TLL[PUN

SAMPATH BANK PLC Annual Report 2015 263 Governance

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(1) Responsibilities of the Board (16) Arrangements for (3)(1)(iv) Board approved procedure is in place to enable all Directors to Complied Directors to include proposals include matters and proposals in the agenda. in the agenda Monthly meetings are scheduled and informed to the Board at the beginning of each calendar year to enable submission of proposals in the agenda for regular meetings where such matters and proposals relate to the promotion of business and the management of risk of the Bank. (17) Notice of Meetings (3)(1)(v) Notice of Meetings, agenda for the Board Meetings are circulated Complied to the Directors 7 days prior to the meeting giving Directors time to attend and submit any urgent proposals.

Additionally Notice, Agenda and all related Board papers are loaded through a secure line to the ipad for Directors to access. (18) Directors Attendance (3)(1)(vi) The Directors are apprised of their attendance in accordance Complied with the Articles of Association the Company and the Corporate Governance Code. Details of the Directors’ attendance is set out on page 238.

One Director was absent for three consecutive meetings during the year and ceased to be a Director with effect from 12th November 2015. All Directors have attended at least 2/3rds of the meetings during the year. (19) Company Secretary (3)(1)(vii) Consequent to the retirement of the Group Company Secretary Complied the Board has appointed the Company Secretary of the Bank, who is an Attorney-at-Law of the Supreme Court of Sri Lanka, with effect from 1st October 2015 as successor to the Group Company :LJYL[HY`:OLZH[PZÄLZ[OLWYV]PZPVUZVMZLJ[PVUVM[OL)HURPUN Act No 30 of 1988, whose primary responsibilities shall be to handle the secretarial services to the Board and Shareholder meetings HUKJHYY`V\[V[OLYM\UJ[PVUZZWLJPÄLKPU[OLZ[H[\[LZHUKV[OLY regulations.

264 SAMPATH BANK PLC Annual Report 2015 G4-41

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (20) Directors access to advice (3)(1)(viii) All members of the Board have opportunity to obtain advice and Complied and services of Company services of the Company Secretary who is an Attorney-at-Law and Secretary who is responsible to the Board for follow up of Board Procedures, Compliance with Rules and Regulations, Directions and Statutes and keeping and maintaining Minutes and relevant records of the Bank. (21) Maintenance of Board (3)(1)(ix) Company Secretary maintains the minutes of the Board Meetings Complied Minutes and circulates same to all Board Members. The minutes are approved at the subsequent Board Meeting. Additionally, the Directors have access to the past Board papers and Minutes through a secure electronic link. 4PU\[LZ[VILVMZ\MÄJPLU[ (3)(1)(x) The detailed Minutes of the meetings include: Complied detail and serve as a reference A summary of data and information used by the Board in its for regulators and supervisory KLSPILYH[PVUZ" authorities  ;OLTH[[LYZJVUZPKLYLKI`[OL)VHYK"  ;OLMHJ[ÄUKPUNKPZJ\ZZPVUZHUK[OLPZZ\LZVMJVU[LU[PVUVY dissent  ;OL[LZ[PTVUPLZHUKJVUÄYTH[PVUZVMYLSL]HU[L_LJ\[P]LZ^P[O regard to the Board’s strategies and policies and adherence to YLSL]HU[SH^ZHUKYLN\SH[PVUZ" Matters regarding the risks to which the Bank is exposed and an overview of the risk management measures including YLWVY[ZVM[OL)VHYK0U[LNYH[LK9PZR4HUHNLTLU[*VTTP[[LL" and The decisions and Board resolutions including reports of all Board Sub Committees. (23) Directors ability to seek (3)(1)(xi) Bank has adopted a Board approved Policy for “Directors Access Complied independent professional to Independent Professional Advice” and the Board resorts to such advice advice when deemed necessary.

The Board Sub Committees and various professionals in Corporate and Senior Management advice the Board on various matters relevant to them. In addition, Directors are able to obtain independent professional advice, as and when necessary, in discharging their responsibilities. These functions are co-ordinated by the Company Secretary.

SAMPATH BANK PLC Annual Report 2015 265 Governance

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference +LHSPUN^P[O*VUÅPJ[ZVM (3)(1)(xii) The Directors are conscious of their obligation to deal with situations Complied Interest ^OLYL[OLYLPZHJVUÅPJ[VMPU[LYLZ[PUHJJVYKHUJL^P[O[OL(Y[PJSLZ of Association of the Bank and the Banking Act Direction No 11 of 2007. The Bank maintains a register of Directors’ and Key Management Personnel Interests which is regularly updated and includes interests of the spouse, children under 18 years of age and their business concerns. Directors abstain from participating in the discussions, voicing their opinion or approving in situations where [OLYLPZHJVUÅPJ[VMPU[LYLZ[(KKP[PVUHSS`OLZOLPZUV[JV\U[LKPU the quorum in such instances.

(25) Schedule of matters (3)(1)(xiii) ;OL)VHYKOHZHZJOLK\SLVMTH[[LYZZWLJPÄJHSS`YLZLY]LKMVYP[Z Complied reserved for Board decision decision to ensure that the direction and control of the Bank is within its authority in line with regulatory codes, guidelines and international best practice. (26) Inform Central Bank if (3)(1)(xiv) The Board is aware of the need to inform the Director of Banking Complied there are solvency issues Supervision prior to taking any decision or action if the Bank is about to become insolvent or about to suspend payments to its depositors and other creditors and such a situation has not arisen during the year 2015.

3(1) Responsibilities of the Board (27) Compliance with Capital (3)(1)(xv) The Board monitors capital adequacy and other prudential Complied Adequacy TLHZ\YLZ]PaH]PaYLN\SH[VY`YLX\PYLTLU[[OL)HUR»ZKLÄULKYPZR appetite and industry benchmarks on a quarterly basis. The Bank is in compliance with the minimum capital requirements. (28) Publish Corporate (3)(1)(xvi) The Board publishes the Corporate Governance Report in the Complied Governance Report in Annual Bank’s Annual Report. This report is given on pages 228 to 281. Report (29) Self-assessment of (3)(1)(xvii) The Board has adopted a scheme of self-assessment to be Complied Directors undertaken by each Director annually and records of these assessments are maintained with the Company Secretary. The Chairman discusses these with the Directors at Board level.

266 SAMPATH BANK PLC Annual Report 2015 G4-40

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(2) The Boards’ Composition (30) Number of Directors 3(2)(i) As per CBSL Governance direction, the number of Directors should Complied not be less than 07 or more than 13. The Bank’s Board comprised 11 Directors as at 31st December 2015. (31) Period of service of a 3(2)(ii) The period of services of a Director excluding the Managing Director Complied Director and Executive Director is limited to 9 years as per the Direction on Corporate Governance. There are no Directors whose tenure of service has exceeded 09 years on the Board. Details of their tenures of service are given on pages 8 to 17. (32) Board Balance 3(2)(iii) There are 2 Executive Directors and 9 Non Executive Directors Complied which is well within the requirement to limit the number of Executive Directors to 1/3rd of the total. (33) Independent Non 3(2)(iv) The Board has six Independent Non Executive Directors which Complied Executive Directors comply with the requirement. (34) Alternate Directors 3(2)(v) There were no alternate Directors as at 31st December 2015. Complied

(35) Criteria for Non Executive 3(2)(vi) Non Executive Directors are persons with credible track records Not Directors and have necessary skills and experience to bring an independent Complied judgment to bear on issues of strategy, performance and resources. ;OLWYVÄSLZVM[OL5VU,_LJ\[P]L+PYLJ[VYZHYLKL[HPSLKVUWHNLZ  to 17.

The Bank has not documented Board approved process in place for appointing Independent Directors.

Directors nominate names of eminent professionals or academics from various disciplines to the Board Nomination Committee who WLY\ZL[OLWYVÄSLZHUKYLJVTTLUKZ\P[HISLJHUKPKH[LZ[V[OL Board. (36) Quorum for the Board 3(2)(vii) This requirement is strictly observed and it is noteworthy that the Complied meeting is more than 50% of majority are Non Executive Directors. Directors and more than half the quorum to comprise Non Executive Directors

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (37) Identify Independent 3(2)(viii) ;OL0UKLWLUKLU[5VU,_LJ\[P]L+PYLJ[VYZHYLL_WYLZZS`PKLU[PÄLK Complied Non Executive Directors in as such in all corporate communications that disclose the names of communications disclose Directors of the Bank. The composition of the Board, by category of categories of Directors in Directors, including the names of the Chairman, Executive Directors, Annual Report Non Executive Directors and Independent Non Executive Directors are given on page 240 of the Corporate Governance Report. (38) Succession planning and 3(2)(ix) The Board has established a Board Nomination Committee whose Complied appointments to the Board Terms of Reference comply with the Code of Best Practice on Corporate Governance. Accordingly, new Directors including the CEO/MD and GCFO are appointed by the Board upon consideration of recommendations by the Board Nomination Committee. (39) Re-election of Directors 3(2)(x) Directors appointed to the Board since the AGM will stand for Complied ÄSSPUNJHZ\HS]HJHUJPLZ LSLJ[PVUH[[OLÄYZ[(.4PUHJJVYKHUJL^P[O[OLWYV]PZPVUZPU[OL Articles of Association. This situation has not arisen during the year. (40) Communication of 3(2)(xi) Resignations of Directors and the reasons are informed to the Complied reasons for removal or regulatory authorities and shareholders as per CSE requirements resignation of Director [VNL[OLY^P[OHZ[H[LTLU[JVUÄYTPUN^OL[OLYVYUV[[OLYLHYLHU` matters that need to be brought to the attention of shareholders. (41) Prohibition of Directors 3(2)(xii) The Board and the Board Nomination Committee take into Complied or Employees of a bank account this requirement in their deliberations when considering becoming a Director at appointments of Directors. The Employee Code of Conduct (Blue another bank Book) prohibits employees to be elected/nominated as a director of another bank.

3(3) Criteria to Assess Fitness and Propriety of Directors (42) Age of Director should not 3(3)(i) There are no Directors who are over 70 years of age. Complied exceed 70 (43) Directors should not be 3(3)(ii) 5VULVM[OL+PYLJ[VYZOVSKVMÄJLHZHKPYLJ[VYVMTVYL[OHU Complied Directors of more than 20 companies. companies

268 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(4) Management Functions Delegated by the Board

(44) Understand and study 3(4)(i) The Board periodically reviews and approves the delegation Complied delegation arrangements arrangements in place and ensures that the extent of delegation (45) Extent of delegation 3(4)(ii) addresses the needs of the Bank whilst enabling the Board to should not hinder Board ability discharge their functions effectively. to discharge its functions (46) Review delegation 3(4)(iii) arrangements periodically to ensure relevance to operations of the Bank ;OL*OHPYTHUHUK*OPLM,_LJ\[P]L6MÄJLY4HUHNPUN+PYLJ[VY (47) Separation of roles 3(5)(i) The roles of the Chairman and CEO/MD are separate. Complied (48) Non Executive Chairman 3(5)(ii) The Chairman is a Non Executive Director but not an Independent Complied and appointment of a Senior Director as he holds more than 1% of the share capital indirectly. Independent Director The Board has appointed Mr Sanjiva Senanayake as Senior Independent Director to ensure the independent element which has been disclosed in the Annual Report. (49) Disclosure of identity of 3(5)(iii) The identity of the Chairman and CEO/MD are disclosed in the Complied Chairman and CEO/MD and Annual Report on pages 8 to 17 and there are many references to any relationships with the these roles throughout. Board members ;OLYLPZUVTH[LYPHSÄUHUJPHSI\ZPULZZVYMHTPS`YLSH[PVUZOPWZ between the Chairman, CEO/MD and other members of the Board other than those disclosed on pages 8 to 17 and in Note No 49 to the Financial Statements given on pages 405 to 409 as per annual declarations and the register of Directors Interests which is updated regularly.

(50) Chairman to: 3(5)(iv) The Board approved the key responsibilities of the Chairman and Complied (a) Provide leadership to the [OPZKVJ\TLU[PUJS\KLZ[OLTH[[LYZPKLU[PÄLKPUYLSL]HU[N\PKLSPULZ )VHYK" and codes. Self-evaluation process ensures that Chairman provides (b) Ensure that the Board leadership to the Board. The Board works effectively and discharges works effectively its responsibilities and all key and appropriate issues are discussed and discharges its by the Board in a timely manner. YLZWVUZPIPSP[PLZ" (c) Ensure that all key and appropriate issues are discussed by the Board in a timely manner. (51) Responsibility for agenda 3(5)(v) The Company Secretary draws up the agenda for the meetings in Complied lies with Chairman but may consultation with the Chairman. be delegated to the Company Secretary

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (52) Ensure that Directors are 3(5)(vi) The Chairman ensures that the Board is adequately briefed and Complied properly briefed and provided informed regarding the matters arising at Board. The following adequate information procedures are in place to ensure this: Agenda and Board papers are circulated 7 days prior to the Board Meetings. Relevant members of the Management team are available for L_WSHUH[PVUZHUKJSHYPÄJH[PVUZPMYLX\PYLK Management information is provided in agreed formats on a regular basis to enable Directors to assess the performance and stability of the Bank. (53) Encourage active 3(5)(vii) The Board has a self-evaluation process that encourages all Complied participation by all Directors Directors to make a full and active contribution. This is evident by and lead in acting in the the self-evaluation forms submitted by each Director at the year end. interests of the Bank. (54) Encourage participation 3(5)(viii) 9 of the 11 members of the Board are Non Executive Directors Complied of Non Executive Directors which creates a conducive environment for active participation by and relationships between the Non Executive Directors. All Non Executive Directors participate Non Executive and Executive in Sub Committees of the Board providing further opportunity Directors for active participation. The Bank has also appointed a Senior Independent Directors which supports the participation of the Non Executive Directors. (55) Refrain from direct 3(5)(ix) The Chairman does not get involved in the supervision of Key Complied supervision of Key Management Personnel or any other executive duties. Management Personnel and executive duties (56) Ensure effective 3(5)(x) The Bank historically has active shareholder participation at the Complied communication with Annual General Meeting and at the Shareholder Relations Meeting shareholders which is held immediately after the AGM where shareholder issues are discussed. A Board Sub Committee has been appointed to ensure that there is effective communication with shareholders. (57) CEO/MD functions as the 3(5)(xi) The day to day operations of the Bank has been delegated to the Complied apex executive in charge of CEO/MD. the day to day operations

270 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(6) Board Appointed Committees (58) Establishing Board Sub 3(6)(i) Ten Sub Committees have been established by the Board with Complied Committees, their functions written terms of reference for each. The Company Secretary serves and reporting as the Secretary for all Sub Committees and maintains minutes and records with oversight by the respective Chairpersons. The reports of the Sub Committees are included in the Annual Report Board Audit Committee on pages 282 to 284. Board Human Resources & Remuneration Committee on pages 285 & 286. Board Nomination Committee on pages 287 & 288. Board Integrated Risk Management Committee on pages 289 to 291. Board Related Party Transaction Review Committee on pages 292 & 293. Board Credit Committee on pages 294 & 295. Board Strategic Planning Committee on page 296. Board Shareholder Relations Committee on pages 297 & 298. Board Treasury Committee on page 299. Board Marketing Committee on page 300. The Chairpersons of the Sub Committees are present at the AGM to clarify any matters that may be referred to them by the Chairman. 3(6)(ii) Board Audit Committee (59) Chairman to be an 3(6)(ii)(a) The Chairman of the Board Audit Committee is an Independent Non Complied Independent Non Executive Executive Director who is a fellow member of the Chartered Institute +PYLJ[VY^P[OX\HSPÄJH[PVUZHUK of Management Accountants, UK. experience in accountancy and/or audit (60) Committee to comprise 3(6)(ii)(b) All members of the Board Audit Committee are Non Executive Complied solely of Non Executive Directors. Directors (61) Audit Committee 3(6)(ii)(c) In accordance with the Terms of Reference, the Board Audit Complied functions Committee has made the following recommendations: The appointment of the External Auditor for audit services to be WYV]PKLKPUJVTWSPHUJL^P[O[OLYLSL]HU[Z[H[\[LZ" The implementation of the Central Bank guidelines issued to (\KP[VYZMYVT[PTL[V[PTL"  ;OLHWWSPJH[PVUVM[OLYLSL]HU[HJJV\U[PUNZ[HUKHYKZ"HUK The service period, audit fee and any resignation or dismissal of the Auditor The Board Audit Committee ensures that the service period of the LUNHNLTLU[VM[OL,_[LYUHS(\KP[WHY[ULYZOHSSUV[L_JLLKÄ]L 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.

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (62) Review and monitor 3(6)(ii)(d) The Board Audit Committee (BAC) obtains representations from the Complied External Auditor’s External Auditor on their independence and that the audit is carried independence and objectivity out in accordance with the Sri Lanka Accounting Standards. and the effectiveness of the audit processes (63) Provision of non-audit 3(6)(ii)(e) When such services are obtained from External Auditors prior Complied services by External Auditor approval is obtained from the Board Audit Committee in accordance with regulations. Further, there is a policy in place approved by the Board in this regard. (64) Determines scope of audit 3(6)(ii)(f) ;OL*VTTP[[LLKPZJ\ZZLKHUKÄUHSPZLK^P[O[OL,_[LYUHS(\KP[VYZ Complied the nature and scope of the audit to ensure that it includes: An assessment of the Bank’s compliance with the relevant Directions in relation to Corporate Governance and Internal *VU[YVSZ6]LY-PUHUJPHS9LWVY[PUN"  ;OLWYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[ZMVY,_[LYUHSW\YWVZLZPU accordance with relevant accounting principles and reporting VISPNH[PVUZ" As all audits within the group are carried out by the same External Auditor, there was no requirement to discuss arrangements for co- ordinating activities with other auditors.

3(6) Board Appointed Committees 3(6)(ii) Board Audit Committee 9L]PL^ÄUHUJPHS 3(6)(ii)(g) ;OL)VHYK(\KP[*VTTP[[LLYL]PL^Z[OLÄUHUJPHSPUMVYTH[PVUVM[OL Complied information of the Bank Bank, in order to monitor the integrity of the Financial Statements of the Bank, its Annual Report, accounts and quarterly reports WYLWHYLKMVYKPZJSVZ\YLHUK[OLZPNUPÄJHU[ÄUHUJPHSYLWVY[PUN judgments contained therein. The review focuses on the following:  4HQVYQ\KNLTLU[HSHYLHZ" Any changes in accounting policies and practices  :PNUPÄJHU[HKQ\Z[TLU[ZHYPZPUNMYVT[OLH\KP[ The going concern assumption The compliance with relevant accounting standards and other legal requirements. The Board Audit Committee makes their recommendations to the Board on the above on a quarterly basis.

272 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (66) Discussions with External 3(6)(ii)(h) The Board Audit Committee discusses issues, problems and Complied Auditor without the executive YLZLY]H[PVUZHYPZPUNMYVT[OLPU[LYPTHUKÄUHSH\KP[Z^P[O[OL,_[LYUHS management on interim and Auditor. The Committee met the External Auditors in the absence of ÄUHSH\KP[Z executive management of the Bank. (67) Review of Management 3(6)(ii)(i) The Board Audit Committee has reviewed the External Auditor’s Complied Letter and Bank’s response management letter and the management’s response thereto. (68) Review of Internal Audit 3(6)(ii)(j) The Board Audit Committee has oversight of the Internal Audit Complied function function and has following responsibilities with regard to the same: Reviews the adequacy of the scope, functions and resources of the Internal Audit Department, and ensures that the +LWHY[TLU[OHZ[OLULJLZZHY`H\[OVYP[`[VJHYY`V\[P[Z^VYR" Reviews the Internal Audit programme and results of the audits and ensures that appropriate actions are taken on the YLJVTTLUKH[PVUZVM[OL0U[LYUHS(\KP[+LWHY[TLU[" Reviews appraisals of the performance of the head and senior Z[HMMTLTILYZVM[OL0U[LYUHS(\KP[+LWHY[TLU[" Recommends any appointment or termination of the head, senior staff members Ensures that the Committee is appraised of resignations of senior staff members of the Internal Audit Department including the Chief Internal Auditor, and provides an opportunity to the resigning senior staff members to submit YLHZVUZMVYYLZPNUPUN" Ensures that the Internal Audit function is independent of the activities it audits and that it is performed with impartiality, WYVÄJPLUJ`HUKK\LWYVMLZZPVUHSJHYL There are no outsourced functions of Internal Audit at present and provisions in this regard are not applicable. (69) Internal Investigations 3(6)(ii)(k) ;OL)VHYK(\KP[*VTTP[[LLOHZYL]PL^LK[OLTHQVYÄUKPUNZVM Complied internal investigations during the year and management’s responses thereto. It has also ensured that the recommendations of such investigations are implemented. (70) Attendees at Audit 3(6)(ii)(l) The CEO/MD, GCFO, DGM - Finance, Head of Internal Audit and Complied Committee Meetings a representative of the External Auditors normally attend meetings. Other Board members may also attend meetings upon the invitation of the Committee. The Committee met the External Auditors without the Executive Directors being present in terms of the Corporate Governance Code.

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (71) Explicit authority, 3(6)(ii)(m) The Board Audit Committee has: Complied resources and access to Explicit authority to investigate into any matter within its terms information VMYLMLYLUJL"  ;OLYLZV\YJLZ^OPJOP[ULLKZ[VKVZV"  -\SSHJJLZZ[VPUMVYTH[PVU"HUK Authority to obtain External professional advice and to invite outsiders with relevant experience to attend, if necessary. (72) Regular meetings 3(6)(ii)(n) The Board Audit Committee has scheduled regular quarterly Complied meetings and additional meetings are scheduled when required. Accordingly, the Committee met 9 times during the year. Members of the Board Audit Committee are served with due notice of issues to be discussed and the conclusions in discharging its duties and responsibilities are recorded in the Minutes of the meetings maintained by the Company Secretary. (73) Disclosure in Annual 3(6)(ii)(o) The Report of the Board Audit Committee on pages 282 to 284 Complied Report includes the following:  +L[HPSZVM[OLHJ[P]P[PLZVM[OL)VHYK(\KP[*VTTP[[LL" The number of Board Audit Committee meetings held in the `LHY"HUK Details of attendance of each individual Director at such meetings (on page 238) (74) Maintain Minutes of 3(6)(ii)(p) The Company Secretary serves as the Secretary to the Board Audit Complied meetings Committee and maintains minutes of the Committee meetings.

3(6) Board Appointed Committees 3(6)(ii) Board Audit Committee (75) Whistle blowing policy 3(6)(ii)(q) The Bank has a Board approved Whistle Blowing Policy whereby Complied and relationship with External HULTWSV`LLVM[OL)HURTH`PUJVUÄKLUJLYHPZLJVUJLYUZHIV\[ Auditor WVZZPISLPTWYVWYPL[PLZPUÄUHUJPHSYLWVY[PUNPU[LYUHSJVU[YVSVYV[OLY matters. Company Secretary forwards all communications received in this regard, including anonymous communications, to the Chairman of the Board Audit Committee who takes addresses the issue in an appropriate manner. This policy is annually reviewed by the Board Audit Committee.

The Board Audit Committee is the key representative body for overseeing the Bank’s relations with the External Auditor and meets the Auditor on a regular basis to discharge this function.

274 SAMPATH BANK PLC Annual Report 2015 G4-40

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference 3(6)(iii) Board Human Resources and Remuneration Committee (BHR&RC) (76) (a) Policy to determine 3(6)(iii) (a) As per the Terms of reference the Committee has to implement a Complied the remuneration of Directors, policy to determine the remuneration (salaries, allowances and other CEO/MD and KMPs. ÄUHUJPHSWH`TLU[ZYLSH[PUN[V+PYLJ[VYZ

The Committee will develop a policy to determine the remuneration Not relating to CEO/MD and KMPs. Complied

(76) (b) Policy to determine the Board Human Resources and Remuneration Committee has to Not remuneration KMPs. develop a policy to determine the remuneration (salaries, allowances Complied HUKV[OLYÄUHUJPHSWH`TLU[ZMVY[OL247Z 77) Goals and targets for the 3(6)(iii) (b) Goals and targets for the MD/CEO and the KMPs are documented Complied Directors, MD and KMPs under the Board approved Strategic Plan / Action Plan for the year.

There are no targets set for the Non Executive Directors since they are not expected to get involved in executive functions. (78) Evaluation of the 3(6)(iii) (c) Performance of the CEO/MD for the year 2014 will be reviewed by Not performance of the MD. the Committee. Complied

Evaluation of performance of Performance of the KMPs for the year ended 31st December Complied KMPs against the set targets 2015 against their set targets and goals has to be reviewed by the and goals. BHR&RC.

(79) “Terms of Reference” 3(6)(iii) (d) Terms Of Reference of the Committee provides that the MD/CEO Complied provides MD is not present should not be present at meetings of the Committee, when matters at meetings when matters relating to him are being discussed. MD/CEO was not present when relating to the MD are being matters relating to him were discussed during the year. discussed 3(6)(iv) Board Nomination Committee (80) (a) Procedure to appoint 3(6)(iv)(a) The Board Nomination Committee has developed and implemented Complied Directors. a procedure to appoint new Directors. (80) (b) Procedure to appoint A procedure is to be documented and implemented to select CEO/ Not CEO and Key Management MD and Key Management Personnel. Complied Personnel. (81) Re-election of Directors 3(6)(iv)(b) The Committee makes recommendations regarding the re-election Complied of current Directors, taking into account the performance and contribution made by the Director concerned towards the overall discharge of the Board’s responsibilities.

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (82) Eligibility criteria for 3(6)(iv)(c) The Committee sets the eligibility criteria to be considered, including Complied appointments to key X\HSPÄJH[PVUZL_WLYPLUJLHUKRL`H[[YPI\[LZMVYHWWVPU[TLU[VY managerial positions including promotion to key managerial positions and the CEO/MD. The CEO Committee considers the applicable statutes and guidelines in setting the criteria.

These have been documented and included in the job descriptions completed for the CEO/MD and Key Management Personnel. (83) Fit & Proper criteria for 3(6)(iv)(d) The Committee obtains annual declarations from Directors, CEO/ Complied Directors, CEO and KMPs MD and HR Department obtains annual declarations from Key 4HUHNLTLU[7LYZVUULS[VLUZ\YL[OH[[OL`HYLÄ[HUKWYVWLY WLYZVUZ[VOVSKVMÄJLHZZWLJPÄLKPU[OLJYP[LYPHNP]LUPU+PYLJ[PVU 3(3) and as set out in the Statutes. (84) Succession Plan for 3(6)(iv)(e) Structural changes of the Bank recommended by the Board Complied retiring Directors, CEO/MD Nomination Committee has been approved by the Board. and KMPs The Committee will have to establish a succession plan for retiring Not Directors CEO/MD and KMPs. Complied (85) Committee Chairperson 3(6)(iv)(f) Committee is chaired by an Independent Director. Among the other Complied and other members members, 2 members are Independent and other 2 members are not Independent. The Committee will initiate action to appoint more Independent Directors to the Committee during the year 2016. MD attends meetings by invitation.

3(6) Board Appointed Committees 3(6)(v) Board Integrated Risk Management Committee (BIRMC) (86) Composition of Risk 3(6)(v)(a) The Board Integrated Risk Management Committee comprises 3 Complied Management Committee 5VU,_LJ\[P]L+PYLJ[VYZ*,64+.YV\W9PZR6MÄJLY /LHKVM Compliance and other Key Management Personnel supervising credit, market, liquidity, operational and strategic risk. The Committee works closely with Key Management Personnel within the framework of authority and responsibility assigned to the Committee

276 SAMPATH BANK PLC Annual Report 2015 G4-41

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (87) Risk Assessment of the 3(6)(v)(b) Credit Risk, Market Risk, Liquidity and the Operational Risks are Complied bank, subsidiary companies assessed and the reports submitted to the BIRMC through the and associate companies .YV\W9PZR6MÄJLY9PZRZHYLHZZLZZLKH[[OL)094*HUK[OL relevant reports are submitted by the Risk Management Function to the BIRMC.

The Committee has approved the policies on Credit Risk Management, Market Risk Management and Operational Risk Management which provides a framework for management and assessment of risks. Accordingly, quarterly information on pre- established risk indicators is reviewed by the Committee.

The Committee has a process to assess and evaluate all risks of [OL)HURHUK[OLÄUKPUNZHUKPZZ\LZHYLZ\ITP[[LK[V[OL)VHYKMVY their review and action if any. The Committee will initiate action to evaluate the risk management of Subsidiary companies both on a Bank basis and Group basis. (88) Review the adequacy and 3(6)(v)(c) The Committee reviews the reports of the management level Credit Complied effectiveness of management Policy, Risk and Portfolio Review Committees and the Asset and level Committees Liability Management Committee (ALCO). The Committee needs to review the adequacy and the effectiveness Not of all the management level committees such as the Board Credit Complied *VTTP[[LLHUK[OL(3*6[VHKKYLZZZWLJPÄJYPZRZHUK[VTHUHNL [OVZLYPZRZ^P[OPU[OLSHPKKV^USPTP[ZZWLJPÄLKI`[OL*VTTP[[LLHZ required by the direction. (89) Corrective action to 3(6)(v)(d) The Committee takes prompt corrective action to mitigate the Complied mitigate risks exceeding LMMLJ[ZVMZWLJPÄJYPZRZPU[OLJHZLZ\JOYPZRZHYLH[SL]LSZIL`VUK prudential levels the prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements. The key risk indicators designed by the Committee will be approved by the Committee and the Board. (90) Frequency of meetings 3(6)(v)(e) The Committee has regular meetings and schedules additional Complied meetings when required. The agenda covers matters assessing all aspects of risk management including updated business continuity plans.  (J[PVUZHNHPUZ[VMÄJLYZ 3(6)(v)(f) :PUJLHSSKLJPZPVUZVUYPZRPKLU[PÄJH[PVUHYL[HRLUJVSSLJ[P]LS`[HRPUN Complied responsible for failure to HJ[PVUHNHPUZ[PUKP]PK\HSVMÄJLYZKVLZUV[HYPZL PKLU[PM`ZWLJPÄJYPZRZVY implement corrective action (92) Risk assessment report 3(6)(v)(g) A detailed report of the meeting is submitted to the Board after each Complied to Board Committee meeting by the Secretary of the Committee for their PUMVYTH[PVU]PL^ZJVUJ\YYLUJLVYZWLJPÄJKPYLJ[PVUZ

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Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (93) Compliance function 3(6)(v)(h) A compliance function established assesses the Bank’s compliance Complied with laws, regulations, and regulatory guidelines. Compliance unit will have to assess the Bank’s compliance with internal controls and approved policies on all areas of business operations. This functions is headed by a dedicated Head of Compliance who reports to the Board Integrated Risk Management Committee (BIRMC) and is responsible for providing the following:

A detailed quarterly report on statutory and mandatory reporting requirements indicating the status of compliance to the Board (TVU[OS`JVTWSPHUJLJLY[PÄJH[L^P[OZPNUVMMMYVTHSSI\ZPULZZ\UP[ heads to the Committee. 3(7) Related Party Transactions (94) Categories of related 3(7)(i) A Board approved documented process is in place on categories of Complied WHY[PLZHUKH]VPKJVUÅPJ[VM YLSH[LKWHY[PLZPUVYKLYMVY[OL)HUR[VH]VPKHU`JVUÅPJ[ZVMPU[LYLZ[ interest that may arise from any transaction with the relevant parties. Further, Directors are individually requested to declare their transactions with the Bank on a quarterly and annual basis and the Bank’s Corporate web is updated with the information obtained.

3(7) Related Party Transactions (95) Related Party 3(7)(ii) +LÄUP[PVUZVM9LSH[LK7HY[`;YHUZHJ[PVUZJV]LYLKI`[OLHIV]L Complied Transactions covered by Board process and declarations by Directors and Key Management direction Personnel include:  ;OLNYHU[VMHU`[`WLVMHJJVTTVKH[PVUHZKLÄULKPU the Monetary Board’s Directions on maximum amount of accommodation. The creation of any liabilities of the Bank in the form of deposits, borrowings and investments.  ;OLWYV]PZPVUVMHU`ZLY]PJLZVMHÄUHUJPHSVYUVUÄUHUJPHS nature provided to the Bank or received from the Bank. The creation or maintenance of reporting lines and information ÅV^ZIL[^LLU[OL)HURHUKHU`YLSH[LKWHY[PLZ^OPJOTH` SLHK[V[OLZOHYPUNVMWV[LU[PHSS`WYVWYPL[HY`JVUÄKLU[PHSVY V[OLY^PZLZLUZP[P]LPUMVYTH[PVU[OH[TH`NP]LILULÄ[Z[VZ\JO related parties. (96) Monitoring of Related 3(7)(iii) The Bank has to implement either a preventive or a detective system Not 7HY[`;YHUZHJ[PVUZKLÄULKHZ to ensure that no favourable treatment is offered to related parties Complied more favourable treatment noted in 3(7(j)) above

278 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (97) Granting accommodation 3(7)(iv) A procedure is in place for granting accommodation to Directors Complied to a Director or close relation or to close relations of Directors. Such accommodation requires to a Director approval at a meeting of the Board of Directors, by not less than 2/3rds of the number of Directors other than the Director concerned, voting in favour of such accommodation. The terms and conditions of the facility include a proviso that it will be secured by such security as may from time to time be determined by the Monetary Board as well. (98) Accommodation granted 3(7)(v) ;OL*VTWHU`:LJYL[HY`VI[HPUZKLJSHYH[PVUZHMÄKH]P[ZMYVTHSS Complied to persons, or concerns of Directors prior to their appointment and they are requested to persons, or close relations of declare any further transactions. persons, who subsequently are appointed as Directors of Employees of the Bank are aware of the requirement to obtain the Bank ULJLZZHY`ZLJ\YP[`HZKLÄULKI`[OL4VUL[HY`)VHYKPM[OLULLK arises.

Processes for compliance with this regulation are also monitored by the Compliance Unit. (99) Favourable treatment 3(7)(vi) No favourable treatment / accommodation are provided to Bank Complied or accommodation to Bank LTWSV`LLZV[OLY[OHUZ[HMMILULÄ[Z,TWSV`LLZVM[OL)HURHYL employees or their close informed through operational circulars to refrain from granting relations favourable treatment to other employees or their close relations or to any concern in which an employee or close relation has a substantial interest. (100) Remission of 3(7)(vii) The situation has not arisen in the Bank to date. Complied accommodation subject to Monetary Board approval 3(8)(i) Disclosures (101) Publish annual and 3(8)(i) Annual audited Financial Statements and quarterly Financial Complied quarterly Financial Statements Statements are prepared and published in accordance with the formats prescribed by the supervisory and regulatory authorities and applicable Accounting Standards. 3(8)(ii) Disclosures in Annual Report (102) A statement to the 3(8)(ii)(a) A statement to this effect is included in the following: Complied effect that the annual audited Statement of Directors Responsibility to Financial Reporting ÄUHUJPHSZ[H[LTLU[ZOH]L given on pages 317 & 318. been prepared in line with Annual Report of the Board of Directors on the Affairs of the applicable accounting Company given on pages 303 to 312. standards and regulatory  4HUHNPUN+PYLJ[VYZHUK.YV\W*OPLM-PUHUJPHS6MÄJLYZ requirements, inclusive of Responsibility Statement given on page 316. ZWLJPÄJKPZJSVZ\YLZ

SAMPATH BANK PLC Annual Report 2015 279 Governance

Corporate Governance

7KH%DQNLQJ$FW'LUHFWLRQ1RRIDQG6XEVHTXHQW$PHQGPHQWVWKHUHWRRQ&RUSRUDWH*RYHUQDQFHIRU /LFHQVHG&RPPHUFLDO%DQNVLQ6UL/DQND,VVXHGE\WKH&HQWUDO%DQN&RQWG

Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (103) Report by the Board 3(8)(ii)(b) The Annual Report includes the following reports where the Board Complied on the Bank’s internal control JVUÄYTZ[OH[[OLÄUHUJPHSYLWVY[PUNZ`Z[LTOHZILLUKLZPNULK[V mechanism WYV]PKLYLHZVUHISLHZZ\YHUJLYLNHYKPUN[OLYLSPHIPSP[`VMÄUHUJPHS YLWVY[PUNHUK[OH[[OLWYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[ZMVY External purposes has been done in accordance with relevant accounting principles and regulatory requirements: Statement of Directors Responsibility on Financial Reporting given on pages 317 & 318. Annual Report of the Board of Directors on the Affairs of the Company given on pages 303 to 312. (104) Assurance Report issued 3(8)(ii)(c) The Board has obtained an assurance report on the effectiveness Complied by the Auditors under ‘Sri of Internal Controls Over Financial Reporting which is published on Lanka Standard on Assurance page 315. Engagements SLSAE 3050 (105) Details of Directors 3(8)(ii)(d) Details of Directors are given on pages 8 to 17. Complied Directors interests in contracts with the company are given ILSV^"

Category Amount (Rs Mn) Deposits 221.872 Credit cards 0.816 Interest income 0.049 Interest expense 11.677

Share Based Payments Cash dividend (Rs Mn) 0.513 Scrip dividend - number of shares 2,687

Aggregate value of remuneration paid by the Bank for the year is Rs 97.97 Mn.

280 SAMPATH BANK PLC Annual Report 2015 Corporate Governance CBSL Compliance and Implementation Status Principle Direction Reference (106) Total accommodation 3(8)(ii)(e) Related Party Transactions are given in Note No 49 to the Financial Complied granted to each category Statement on pages 405 to 409. of related parties and as a percentage of the Bank’s 5L[(JJVTVKH[PVUNYHU[LK[V9LSH[LK7HY[PLZHYLNP]LUILSV^" regulatory capital Category of related party % Amount (Rs 000) transaction Directors & close relations Immaterial 539 KMPs & close relations 0.1 48,159 Subsidiaries 6.4 3,099,858 Entities controlled by Directors, 9.0 4,346,736 KMPs and their close relations

(107) Aggregate values 3(8)(ii)(f) The aggregate values of remuneration paid to KMP (as per CBSL Complied of remuneration paid to, N\PKLSPULZMVY[OL`LHYHYLHZMVSSV^Z!:OVY[[LYTLTWSV`LLILULÄ[Z and transactions with Key 9Z4U[LYTPUHSILULÄ[Z9Z4UWVZ[LTWSV`TLU[9Z Management Personnel 19.27 Mn and directors’ fees and expenses Rs 8.78 Mn.

The aggregate value of transactions of the Bank as at year end with KMP (as per CBSL guidelines) are as follows: Loans, advances & credit card balances Rs 48.48 Mn, Deposits & investments Rs 157.50 Mn, cash dividend paid Rs 2.62 Mn and scrip dividend paid: 13,707 shares.  *VUÄYTH[PVUI` 3(8)(ii)(g) ;OL)HUROHZVI[HPULKJLY[PÄJH[PVUMYVT[OL,_[LYUHS(\KP[VYZVM Complied the Board on the annual compliance with Corporate Governance Directions Corporate Governance report  9LWVY[JVUÄYTPUN 3(8)(ii)(h) The Statement of Directors’ Responsibility on Financial Reporting Complied compliance with prudential given on pages 317 & 318 clearly sets out details regarding requirements, regulations, compliance with prudential requirements, regulations, laws and laws and internal controls internal controls. There were no instances of material non- compliance to report on corrective action taken during the year. (110) Measures taken to rectify 3(8)(ii)(i) There were no supervisory concern lapses in the Bank’s Risk Not non-compliance Issues Management Systems or non-compliance with these directions that applicable have been pointed out by the Director -Bank Supervision required to be disclosed by the Bank

Dhammika Perera Aravinda Perera Chairman Managing Director

Colombo, Sri Lanka 16th February 2016

SAMPATH BANK PLC Annual Report 2015 281 Governance

5ROHDQG5HVSRQVLELOLWLHV Board Audit The Committee is responsible for:  9L]PL^PUNÄUHUJPHSPUMVYTH[PVU of the Bank, in order to monitor Committee the integrity of the Financial Statements of the Bank, its Annual Report, accounts and quarterly reports prepared for disclosure. Report 2. Reporting to the Board on the quality and acceptability of the Bank’s accounting policies and &RPSRVLWLRQRIWKH%RDUG$XGLW the Annual Report. The Managing practices. &RPPLWWHH Director, Executive Director/Group  9L]PL^PUNHJJV\U[PUNHUKÄUHUJPHS The Board Audit Committee (“the *OPLM-PUHUJPHS6MÄJLY+LW\[`.LULYHS reporting, risk management Committee”) which was established Manager – Finance, Head of Internal processes and regulatory on 10th April 1997, appointed by and Audit, Senior Manager - Systems Audit compliance. responsible to the Board of Directors. The and the External Auditors also attended 4. Reviewing of the Financial Committee comprises of 5 Non Executive these meetings by invitation. 4 of these Statements (including quarterly Directors, who conduct Committee meetings were held to consider and interim statements) prior to proceedings in accordance with the recommend to the Board of Directors publication to ensure compliance Terms of Reference approved by the the Bank’s quarterly and Annual Financial with statutory provisions, Board. The following members serve in Statements. accounting standards and the Committee: accounting policies which are 7HUPVRI5HIHUHQFH consistently applied. Mr Ranil Pathirana (Chairman) - (IND/NED) The Charter of the Board Audit 5. Reviewing internal audit reports Mr Sanjiva Senanayake - (IND/NED) *VTTP[[LLJSLHYS`KLÄULZ[OL;LYTZVM and liaising with Corporate Reference of the Committee. The Board Mr Deepal Sooriyaarachchi - (IND/NED) Management in taking periodically reviews the Committee precautionary measures to Prof Malik Ranasinghe - (IND/NED) Charter. The Committee is responsible minimize control weaknesses, Mrs Dhara Wijayatilake - (IND/NED) to the Board of Directors and reports on procedure violations, frauds, and (IND - Independent Director, NED - Non its activities regularly. The Board Audit errors. Executive Director and ED - Executive Director) Committee also assists the Board in its 6. Assessing the independence NLULYHSV]LYZPNO[VMÄUHUJPHSYLWVY[PUN and monitoring the performance )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LU internal controls and functions relating to and functions of Internal Audit, on pages 8 to 17 of the Annual Report. internal and external audits. including overseeing the The Company Secretary functions as the appointment of the Head of Secretary to the Board Audit Committee. 5HJXODWRU\&RPSOLDQFH Internal Audit. The roles and functions of the 7. Overseeing the appointment, The Chairman of the Committee, Mr Ranil Committee are regulated by the compensation, resignation, Pathirana who is an Independent Non Banking Act Direction No 11 of 2007, dismissal of the External Auditor, Executive Director, is a Fellow Member of on the mandatory Code of Corporate including review of the external the Chartered Institute of Management Governance for Licensed Commercial audit, its cost and effectiveness Accountants, UK and counts many years Banks in Sri Lanka, issued by the and monitoring of the External of experience in the Financial Services Central Bank of Sri Lanka, the Rules on Auditor’s independence. industry. Corporate Governance as per section 8. Reviewing effectiveness of the 7.10 of Listing Rules issued by the Bank’s systems of Internal Control 0HHWLQJV Colombo Stock Exchange and the Over Financial Reporting to provide The Committee met on 9 occasions Code of Best Practice on Corporate reasonable assurance regarding during the year. Attendance by the Governance issued jointly by the [OLYLSPHIPSP[`VMÄUHUJPHSYLWVY[PUN Committee members of these meetings Securities and Exchange Commission is given in the table on page 238 of (SEC) and the Institute of Chartered Accountants of Sri Lanka (CASL).

282 SAMPATH BANK PLC Annual Report 2015 and the preparation of Financial Reporting as of 31st December 2015 $QQXDO&RUSRUDWH*RYHUQDQFH Statements for external purposes based on the criteria set out in the 5HSRUW have been done in accordance Guidance for Directors of Banks on ‘The As required by Section 3(8)(ii)(g) of the with applicable accounting Directors’ Statement of Internal Control’, Banking Act Direction No 11 of 2007, standards and regulatory issued by the Institute of Chartered on Corporate Governance for Licensed requirements. Accountants of Sri Lanka (ICASL) in Commercial Banks issued by the Central 9. Engaging independent advisors 2010. Bank of Sri Lanka, the Annual Corporate on specialized functions where it is Governance Report for 2015 is provided deemed necessary. The Bank’s assessment was based on on pages 228 to 281. The External processes documented by the respective Auditors of the Bank have performed )LQDQFLDO5HSRUWLQJ process owners. For the successful procedures set out in Sri Lanka Related The Committee, as part of its implementation of this task a steering Services Practice Statement 4750 issued responsibility to oversee the Bank’s committee headed by the Executive by the Institute of Chartered Accountants ÄUHUJPHSYLWVY[PUNWYVJLZZVUILOHSMVM +PYLJ[VY.YV\W*OPLM-PUHUJPHS6MÄJLY of Sri Lanka (SLRSPS 4750), to meet the Board of Directors, has reviewed and comprising of Corporate Management the compliance requirement of the discussed with the Management and and other relevant Department Heads Corporate Governance directive. Their the External Auditors the quarterly and was formulated in 2010 with the guidance ÄUKPUNZWYLZLU[LKPU[OLPYYLWVY[KH[LK the Annual Financial Statements prior of the Bank’s External Auditor (Ernst 16th February 2016 addressed to the to their release. The review included the & Young) which continued to function Board are consistent with the matters quality and acceptability of accounting in 2015 as well. The Internal Audit disclosed above and did not identify any policies and practices, the clarity of the Department carried out walk through inconsistencies to those reported by the disclosures and the extent of compliance tests on the documented processes to Board on pages 260 to 281. ^P[OÄUHUJPHSYLWVY[PUNZ[HUKHYKZ establish their adequacy and commented the Companies Act No 7 of 2007, where necessary. ,QWHUQDO$XGLW the Banking Act No 30 of 1988 and The Board Audit Committee monitored amendments thereto and other relevant Based on Internal Auditors’ and External and reviewed the scope, extent and ÄUHUJPHSHUKNV]LYUHUJLYLWVY[PUN Auditors’ assessments, the Board has effectiveness of the activity of the requirements. To facilitate their review, concluded that, as of 31st December Bank’s Internal Audit Department. This the Board Audit Committee considered 2015, the Bank’s Internal Control Over included reviewing of updates on audit reports from the Executive Director/ Financial Reporting is effective. Directors’ activities and achievements against the .YV\W*OPLM-PUHUJPHS6MÄJLYHUKHSZV Report on the Bank’s Internal Control Bank’s audit plan, advising corporate reports from the External Auditors on the Over Financial Reporting is provided on management to take precautionary outcome of their half-year review and pages 313 & 314. The Bank’s External TLHZ\YLZVUZPNUPÄJHU[H\KP[ÄUKPUNZHUK annual audit. Auditors have audited the effectiveness assessment of resource requirements of the Bank’s Internal Control Over of the Internal Audit Department. The 3HUIRUPDQFH Financial Reporting and have reported Committee had necessary interactions ,QWHUQDO&RQWURO2YHU)LQDQFLDO to the Board that nothing has come to with the Head of Internal Audit throughout 5HSRUWLQJ ,&2)5 their attention that causes them to believe the year. The Bank is required to comply with [OH[[OLÄUHUJPHSYLWVY[PUNPZPUJVUZPZ[LU[ Section 3(8)(ii)(b) of the Banking Act with their understanding of the processes During the year, the Committee reviewed Direction No 11 of 2007 on Corporate adopted by the Board in the review of the the internal audit plan and monitored the Governance for Licensed Commercial design and effectiveness of the internal implementation of it on a regular basis. Banks issued by the Central Bank of Sri control system of the Bank. The External The sections covered and the regularity of Lanka and assess the effectiveness of Auditor’s Report on the Bank’s Internal audits depends on the risk level of each Internal Control Over Financial Reporting Control Over Financial Reporting is section, with higher risk sections being as of 31st December 2015. provided on page 315. audited more frequently.

The Bank assessed the effectiveness of its Internal Control Over Financial

SAMPATH BANK PLC Annual Report 2015 283 Governance

Board Audit Committee Report

G4-57,58

The Committee has recommended to the Board of Directors that Messrs Ernst The Internal Audit Department comprises 4. Reviewed the Management and Young, Chartered Accountants, three broad areas namely: Letters issued by the External [VILYLHWWVPU[LKMVY[OLÄUHUJPHS`LHY  )YHUJO9LNPVUHSVMÄJL(\KP[Z" Auditor together with management ending 31st December 2016 subject to 2. Departments including Trade responses thereto. the approval of shareholders at the next -PUHUJLHUK;YLHZ\Y`(\KP[Z"HUK 5. Met the External Auditors on 3 Annual General Meeting. 3. Forensic and Fraud Investigations. occasions during the year without the Executive Directors and the :KLVWOH%ORZLQJ In 2015 the Board Audit Committee Corporate Management to ensure Sampath Bank’s Whistle Blowing Policy reviewed internal audit reports of 119 that there was no limitation of is intended to serve as a channel of Branches, 43 Departments and 03 scope in relation to the Audit corporate fraud risk management. The :\IZPKPHYPLZ(\KP[ÄUKPUNZWYLZLU[LKPU and to allow for full disclosure of policy allows any team member who the reports are prioritised based on the any incidents which could have has a legitimate concern on an existing level of risk. The Committee followed up had a negative impact on the or potential “wrong doing”, done by any on Internal Audit recommendations with effectiveness of the external audit. person within the Bank, to come forward the Corporate Management. Internal It was concluded that there was no voluntarily, and bring such concern to the Audit reports are made available to cause for concern. notice of the Audit Committee Chairman External Auditors as well. 6. Reviewed the Non-Audit Services through Company Secretary. Concerns provided by the External Auditor raised are investigated and the identity The Internal Audit Department has and was of the view that such of the person raising the concern is maintained an average audit cycle of services were not within the RLW[JVUÄKLU[PHSHZL]LUHUVU`TV\Z approximately one audit every 19 months. JH[LNVY`VMZLY]PJLZPKLU[PÄLKHZ complaints are looked at. This procedure prohibited under: is being monitored by the Board Audit Trade Finance and Treasury Audits are The guidelines issued by the Committee. assigned with equal prominence and Central Bank of Sri Lanka, for emphasis considering its complexities External Auditors, relating to their 3URIHVVLRQDO$GYLFH and importance in the context of current statutory duties in terms of Section The Committee has the authority to seek economic environment. 39 of the Banking Act No 30 of external professional advice on matters 1988 and amendments thereto. ^P[OPUP[ZW\Y]PL^"HUKMYVT[PTL[V[PTL ([WHUQDO$XGLWRUV The Guideline for Listed during the year consultations were done With regard to the external audit function Companies on Audit and with various parties. of the Bank, the role played by the Audit Committees issued by Committee is as follows: the Securities and Exchange %RDUG$XGLW&RPPLWWHH(YDOXDWLRQ 1. Undertook the annual evaluation of Commission of Sri Lanka. The annual evaluation of the Committee the independence and objectivity 7. Reviewed the Letter of was conducted by the Board Audit of the External Auditor and the Representation issued to the Committee during the year and effectiveness of the audit process. External Auditors by the Board. concluded that its performance was 2. Met with the External Auditors 8. Reviewed the Letter of effective. to discuss their audit approach 0UKLWLUKLUJL*VUÄYTH[PVUPZZ\LK and procedure, including matters by the External Auditor as required On behalf of the Board Audit Committee relating to the scope of the audit by the Companies Act No 7 of and Auditor’s independence. JVUÄYTPUN[OH[[OL`KVUV[ 3. Reviewed the audited Financial have any relationship or interest Statements with the External in the company, which may have Auditor who is responsible for a bearing on their independence Ranil Pathirana expressing an opinion on its within the meaning of the Code of Chairman - Board Audit Committee conformity with the Sri Lanka Conduct and Ethics of the Institute Accounting Standards. of Chartered Accountants of Sri Colombo, Sri Lanka Lanka. 16th February 2016

284 SAMPATH BANK PLC Annual Report 2015 Board Human G4-51,52 6FRSH 1. The Committee shall determine the remuneration policies (salaries, Resources and HSSV^HUJLZHUKV[OLYÄUHUJPHS payments) relating to Directors, Managing Director (MD) and Key Remuneration Management Personnel of the Bank. 2. The Committee shall set goals and targets for Directors, MD and Key Committee Management Personnel. 3. The Committee shall evaluate the performance of the MD and Key Report Management Personnel against set targets and goals periodically and determine the basis for revising &RPSRVLWLRQRIWKH%RDUG+XPDQ of the Annual Report. The Group Chief YLT\ULYH[PVUILULÄ[ZHUKV[OLY 5HVRXUFHVDQG5HPXQHUDWLRQ -PUHUJPHS6MÄJLYHUK+LW\[`.LULYHS payments of performance based &RPPLWWHH Manager - Human Resources as well as incentives. The Board Salary Revision Committee other executive staff attend meetings by 4. The Committee shall take on any was established on 18th May 1988 and invitation and assist in their deliberations other areas and enlarge its scope was re-titled as Board Human Resources by providing relevant information and which in its view or in the Board’s and Remuneration Committee on 12th participating in the analysis of information, view is desirable if it were handled December 2002. This Committee except when their own compensation by the Committee. comprises of 3 Non Executive Directors packages or other matters relating to 5. The Committee reviews them are reviewed. and 1 Executive Director. The Directors recommendations from Deputy who serve on the Committee are: 7HUPVRI5HIHUHQFH General Manager, Human Mr Deepal Sooriyaarachchi The roles and functions of the Board Resources of the Bank with regard - Chairman - (IND/NED) Human Resources and Remuneration to revision of salaries of Bank Mr Channa Palansuriya - (NID/NED) Committee are regulated by the staff and subsequently make (Director until 12th November 2015) Banking Act Direction No 11 of 2007, recommendations to the Board of any major organizational changes Miss Annika Senanayake - (IND/NED) the mandatory Code of Corporate needed for the Bank’s purpose. Mr Deshal De Mel - (NID/NED) Governance for Licensed Commercial Mr Aravinda Perera - (ED) Banks issued by the Central Bank of Sri (NID - Non Independent Director, IND - Lanka. 3HUIRUPDQFHGXULQJWKH

SAMPATH BANK PLC Annual Report 2015 285 Governance

Board Human Resources and Remuneration Committee Report

(QKDQFH&RPSHWHQF\'HYHORSPHQW G4-51 Vast array of initiatives were taken to enhance overall capabilities (technical and 5HSRUWLQJWRWKH%RDUG non-technical) of team Sampath in order The Minutes of the Board Human to drive business objectives successfully. Resources and Remuneration Committee Focus was on “Develop Within” Concept. meetings are tabled at Board meetings enabling all Board members to have 5HZDUGVIRULQQRYDWLRQDQG access to them. SHUIRUPDQFH Introduced a comprehensive reward 3URIHVVLRQDO$GYLFH mechanism (Sampath Special Thanks The Committee has the authority to seek and Recognition Scheme) to motivate external professional advice on matters and drive the team Sampath to achieve within its purview. higher level of performance, progress beyond set targets and to recognize team On behalf of the Board Human Resources members who undertake special projects and Remuneration Committee on cost reduction/income generation.

3HUIRUPDQFH0DQDJHPHQW6\VWHP Steps were taken to embrace a more inclusive appraisal strategy by introducing Deepal Sooriyaarachchi 360 degree feedback evaluation system Chairman – Board Human Resources and for Chief Managers and Members of the Remuneration Committee Corporate Management. Colombo, Sri Lanka 6SHFLDO5HFRJQLWLRQV 16th February 2016 1. Sampath Bank was adjudged as the “Overall Best Corporate Citizen 2015” at the Best Corporate Citizen Sustainability Awards presented by the Ceylon Chamber of Commerce. 2. Runners-up in the “Great HR Debate” – organized by IPM, Sri Lanka 3. Runners-up (Banking Sector) in the “Great HR Quiz” – organized by IPM, Sri Lanka

286 SAMPATH BANK PLC Annual Report 2015 4. Carefully reviews management Board progression and succession planning for the top management. The Committee ensures that Nomination management personnel of high calibre are appointed to guide the Bank to achieve greater heights. 5. The Committee sets criteria such Committee HZX\HSPÄJH[PVUZL_WLYPLUJLHUK key attributes required for eligibility to be considered for appointment Report or promotion to the post of MD and other Key Management Personnel (KMPs). &RPSRVLWLRQRIWKH%RDUG 7HUPVRI5HIHUHQFH 6. The Committee is also responsible 1RPLQDWLRQ&RPPLWWHH The roles and functions of the Board for selecting Directors, MD and The Board Nomination Committee which Nomination Committee are regulated KMPs and when a Board vacancy was established on 10th January 2002, by the Banking Act Direction No 11 of occurs. It is mandatory for the comprises of 4 Non Executive Directors 2007, the mandatory Code of Corporate Committee to evaluate the balance as at 31st December 2015. The following Governance for Licensed Commercial of skill, knowledge and experience Directors serve on the Board Nomination Banks issued by the Central Bank of Sri on the Board before such Committee: Lanka. appointment. The Committee is accountable to make a description Miss Annika Senanayake 5ROHDQG5HVSRQVLELOLWLHV VM[OLYVSL[OH[PZ]HJH[LK"P[ZOV\SK Chairperson - (IND/NED) 1. Continuously review the structure clearly analyse the capabilities Mr Dhammika Perera - (NID/NED) and composition of the Board. and skills required for a particular Mr Channa Palansuriya - (NID/NED) The Committee also reviews appointment. (Director until 12th November 2015) the skills, knowledge, expertise 7. The Committee is accountable Mrs Dhara Wijayatilake - (IND/NED) and experience of the Board of to make recommendations Mrs Saumya Amarasekera - (NID/NED) Directors required in comparison to after review to re-appoint Non (NID - Non Independent Director, IND - the current banking environment. Executive Directors annually as Independent Director and NED - Non Executive The committee also makes recommended by CBSL guidelines Director) recommendations to the Board and when they are due for with regard to any changes they re-appointment as per the Articles The Managing Director (MD) attends consider appropriate for the of the Bank. meetings by invitation. progress and success of the Bank. 8. The Committee must report to the 2. Recommends suitable persons Board of Directors on the activities )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LUVU after careful consideration based of the Committee meetings and pages 8 to 17 of the Annual Report. The on the competencies required for such minutes should be available Company Secretary of the Bank functions a particular job and the Bank’s to the main Board Members. as the Secretary to the Board Nomination business need. 9. The Committee shall ensure that Committee. 3. Considers and recommends the +PYLJ[VYZ4+HUK247ZHYLÄ[ requirements of additional/new HUKWYVWLYWLYZVUZ[VOVSKVMÄJL 0HHWLQJV expertise of existing Directors and in compliance with the regulatory During 2015 the Committee held 13 to create succession plans for and statutory provisions. meetings. Attendance by the Committee Directors resigning or relinquishing members at each of these meetings is their positions. given in the table on page 238 of the Annual Report.

SAMPATH BANK PLC Annual Report 2015 287 Governance

Board Nomination Committee Report

10. The Committee shall be chaired 5HSRUWLQJWRWKH%RDUG by an Independent Director and The Minutes of the Board Nomination preferably be constituted with a Committee meetings are tabled at Board majority of Independent Directors. meetings enabling all Board members to The MD may be present at have access to them. meetings by invitations. 11. To make recommendations on 3URIHVVLRQDO$GYLFH any other matter delegated by the The Committee has the authority to seek Board of Directors. external professional advice on matters under its purview. 3HUIRUPDQFH The members of the Board Nomination On behalf of the Board Nomination Committee work closely with the Board Committee of Directors, in reviewing the structure and skills needed for a steadfast, strong and successful organisation. Further, the Committee also reviews its own performance, constitution and terms of Annika Senanayake reference to ensure that it is operating Chairperson - Board Nomination effectively, and if required recommends Committee necessary changes. Colombo, Sri Lanka Over the last year, the Board Nomination 16th February 2016 Committee has continued focusing on a progressive organisational plan in keeping with the forward and evolutionary momentum of the Sri Lankan Banking industry.

288 SAMPATH BANK PLC Annual Report 2015 5. Report and recommend to Board Board of Directors on Risk Management and Compliance related matters. 6. Ensure compliance with all laws Integrated Risk and regulations. *RYHUQDQFH The governance structure for the Management management of Risk at the Bank, is set out on page 203.

Committee )YPLMWYVÄSLZVM[OL+PYLJ[VYZYLWYLZLU[PUN the Committee are given on pages 8 to 17 of the Annual Report. The Company Secretary functions as the Secretary to Report the Board Integrated Risk Management Committee.

The Board Integrated Risk Management 7HUPVRI5HIHUHQFH 5ROHDQG5HVSRQVLELOLWLHV Committee (BIRMC) has been established The responsibilities of the Board The Committee received periodic reports on 27th March 2008 as a sub-committee Integrated Risk Management Committee on the Bank’s performance against of the Board of Directors in compliance as mandated by the Board of Directors Key Risk Indicators from the Risk and with the Banking Act Direction No. 11 are as follows: Compliance Units. The reports and the of 2007 on Corporate Governance for 1. Review and update Risk relevant background information have Licensed Commercial Banks in Sri Lanka. Management policies of the been reviewed in depth, and necessary Bank pertaining to Credit, Risk Mitigation measures have been Market, Liquidity, Operational, 0HHWLQJV initiated where necessary, in order to BIRMC held 9 meetings during the year Outsourcing and Reputational maintain the Bank’s exposure to Risk 2015. The attendance of the Committee Risks, Compliance Risks, Business within its Risk Appetite and to facilitate members at each of these meetings is Continuity Plan and Disaster compliance with regulatory requirements, given in the table on page 238 of this Recovery plan. while facilitating achievement of sound Report. 2. Ensure effective design and Business Results. implementation of a Risk The Minutes of the BIRMC were recorded Management Framework with The BIRMC is supported by the by the Company Secretary and circulated respect to Integrated Risk Integrated Risk Management and among the members of the Committee. Management, Risk Appetite, Compliance Units of the Bank, headed by Internal Capital Adequacy [OL.YV\W9PZR6MÄJLYHUK[OL/LHKVM Key Management Personnel supervising Assessment Process (ICAAP) and Compliance respectively, in discharging the Credit, Market, Liquidity, Operational, Stress Testing. its responsibilities. Strategic and Reputational Risks also 3. Review migration to the advanced attended meetings of the BIRMC, by approaches under Basel II, 5LVN$SSHWLWH invitation. 9PZR9L[\YUWYVÄSLVM[OL)HUR The Risk Appetite of the Bank in all key outsourcing activities, compliance risk areas, namely, Credit Risk, Market A review of the Integrated Risk with CBSL guidelines pertaining Risk, and Operational Risk have been Management process of the Bank has to Credit, Market and Operational KLÄULKHUKHWWYV]LKI`[OL)VHYKVM been detailed in pages 202 to 227 of this Risk Management Systems. Directors on the recommendation of Report. 4. Review the level and direction of the BIRMC. Regular reports have been major Risks pertaining to Credit, provided to the Committee on the actual Market, Liquidity, Operational, WLYMVYTHUJLVMPKLU[PÄLKYPZRHYLHZ Compliance and Capital at Risk as WHY[VM9PZRWYVÄSL[LTWSH[LZ

SAMPATH BANK PLC Annual Report 2015 289 Governance

Board Integrated Risk Management Committee Report  5LVN0DQDJHPHQW3ROLFLHV Policies related to Risk Management and Compliance areas were reviewed during 3HUIRUPDQFH  5LVN$SSHWLWH the year, and amendments as appropriate The BIRMC undertook the following Risk Appetite limits and Key Risk have been incorporated. activities in discharging its responsibilities Indicators for all key risk areas were set during the year. and periodically monitored.

Authority Membership Responsibilities Board of Directors (BOD) All members of the Board Determine risk appetite.  ,UZ\YL[OH[ZPNUPÄJHU[YPZRZHYL competently managed. Board Integrated Risk Mrs Dhara Wijayatilake As above Management Committee (Chairperson) (BIRMC) Independent, Non Executive Director Mr Channa Palansuriya As above Non Executive Director (Director until 12th November 2015) Mr Sanjiva Senanayake As above Independent, Senior Non Executive Director Prof Malik Ranasinghe As above Independent, Non Executive Director Mr Aravinda Perera As above Executive Director/Managing Director Mr Ranjith Samaranayake As above ,_LJ\[P]L+PYLJ[VY.YV\W*OPLM-PUHUJPHS6MÄJLY Mr Priam Kasturiratna As above .YV\W9PZR6MÄJLY Mrs Anuja Goonetilleke As above .YV\W*VTWSPHUJL6MÄJLY\W[V  Mr Lasantha Senaratne As above /LHKVM*VTWSPHUJL:PUJL  Integrated Risk Management .YV\W9PZR6MÄJLY Formulate the policy framework Unit addressing multiple and inter- dependent risks and recommend such policies to Board Integrated Risk Management Committee. Measure and monitor risk. Ensure benchmarking with international best practices. Compliance Unit Head of Compliance Formulate compliance related policy framework and recommend to BIRMC. Ensure compliance with regulatory and supervisory requirements. Ensure benchmarking with international best practices.

290 SAMPATH BANK PLC Annual Report 2015  6WUHVV7HVWLQJ  ,QWHUQDO&RQWUROV The overall Stress Testing Framework was Internal loss event reports and the reviewed during the year and the results adequacy of internal control and of the tests were monitored. Necessary procedures (except Internal Controls recommendations to improve the Bank’s Over Financial Reporting) were reviewed Stress tolerance levels were discussed regularly and recommendations for and implemented as required. improvements were made. Progress on implementation of recommendations was  3URJUHVVRQ%DVHO,, also monitored. &RPSOLDQFH Progress on the implementation of key  &XVWRPHU&RPSODLQWV components of Basel II against targets The implementation of the Customer set was reviewed and monitored to Complaints Policy was monitored. ensure that the Bank is able to meet the timelines set by the Central Bank of Sri  2XWVRXUFHG$FWLYLWLHV Lanka. The implementation of the Outsourcing Policy was monitored to ensure  ,76\VWHPV6XSSRUW compliance with CBSL directives and The implementation of IT Systems to guidelines. support Credit and Operational Risk Management in the Bank was monitored, 5HSRUWLQJWRWKH%RDUG and recommendations were made to Minutes were submitted to the Board for LUOHUJLLMÄJPLUJ`[VYLK\JLHUKH]VPK JVUÄYTH[PVUHUKHKVW[PVUHZHUHJJ\YH[L risks. record of its proceedings.

 ,QWHUQDO&DSLWDO$GHTXDF\ On behalf of the Board Integrated Risk $VVHVVPHQW3URFHVV ,&$$3  Management Committee ICAAP document for both the Bank and the Group was developed for 2013 year end position, and was reviewed and approved by the BIRMC and the Board. The document was forwarded to the Dhara Wijayatilake Regulator in 2014. Chairperson - Board Integrated Risk Management Committee  &RPSOLDQFH The Committee received compliance Colombo, Sri Lanka reports from the Head of Compliance 16th February 2016 and reviewed same to assess the extent of compliance with the regulatory requirements.

SAMPATH BANK PLC Annual Report 2015 291 Governance

Board G4-41 2. Reviewing in advance all proposed Related Party Transactions (“RPTs”) in compliance with the provisions Related Party of the Code. 3. Advising the Boards on making Immediate Market Disclosures Transactions and Disclosures in the Annual Report where necessary, in respect of RPTs, in compliance with the provisions of the Code and the Review Rules.

3ROLFLHV 3URFHGXUHV$GRSWHG Committee E\WKH%5375&IRU5HYLHZLQJ 5HODWHG3DUW\7UDQVDFWLRQV 537V 1. Relevant information to capture Report RPTs is fed into the Banks data collection system.  (SSVMÄJLYZJVUJLYULKHYLPUMVYTLK of the applicable regulatory &RPSRVLWLRQRIWKH%RDUG5HODWHG The above composition is in compliance requirements relating to the 3DUW\7UDQVDFWLRQV5HYLHZ with the provisions of the Code regarding reporting of RPTs. &RPPLWWHH the composition of the Board Related 3. Key Management Personnel The Board established the Board Related Party Transactions Review Committee. (KMPs) and their Close Family Party Transactions Review Committee )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LU 4LTILYZ*-4ZHYLPKLU[PÄLK (BRPTRC) with effect from 30th July 2015 on pages 8 to 17 of the Annual Report. quarterly together with their NIC in terms of the Code of Best Practice The Company Secretary functions as numbers and business registration on Related Party Transactions issued by the Secretary to the Board Related Party numbers. This information is in the the Securities & Exchange Commission Transactions Review Committee. system. of Sri Lanka (the “Code”) and Section 4. Systems are updated with KMP 9 of the Listing Rules of the Colombo 0HHWLQJV and their CFM details on a Stock Exchange (the “Rules”). The During 2015 the committee held 3 quarterly basis or as and when establishment of a BRPTRC with effect meetings. Attendance by the Committee the need arises in the event of a from 1st January 2016 is mandatory in members at each of these meetings is material change. terms of the Code. The Board Related given in the table on page 238 of the 5. Data is extracted from the system, Party Transactions Review Committee Annual Report. ]LYPÄLKHUK]HSPKH[LK comprises of 3 Non Executive Directors 6. All Managers are advised to report and 1 Executive Director. The following 5ROHDQG5HVSRQVLELOLWLHV RPTs to the Company Secretary Directors serve on the Committee. The mandate of the Committee is derived from the Code and the Rules and ^OVOHZILLUPKLU[PÄLKHZ[OL Focal Point, for this purpose. Mrs Dhara Wijayatilake - PUJS\KLZ[OLMVSSV^PUN" 7. Data is shared with the Company Chairperson - (IND/NED) 1. Developing a Related Party Secretary to meet the regulatory Mr Sanjiva Senanayake - (IND/NED) Transaction Policy consistent with requirements if required Prof Malik Ranasinghe - (IND/NED) the provisions of the Code and the Mr Ranjith Samaranayake - (ED) Rules for adoption by the Board of (IND - Independent Director, NED - Non Directors of the Bank and its listed Executive Director and ED - Executive Director) subsidiaries.

292 SAMPATH BANK PLC Annual Report 2015 5HYLHZ)XQFWLRQRIWKH&RPPLWWHH Review of the relevant related party transactions was done commencing 29th September 2015. Further it has communicated its observations to the Board on the RPTs published in the Note 49 to the Financial Statements.

5HSRUWLQJWRWKH%RDUG The Minutes of the BRPTRC meetings are tabled at Board meetings enabling all Board members to have access to same.

On behalf of the Board Related Party Transactions Review Committee

Dhara Wijayatilake Chairperson - Board Related Party Transactions Review Committee

Colombo, Sri Lanka 16th February 2016

SAMPATH BANK PLC Annual Report 2015 293 Governance

Review credit policy changes Board Credit initiated by the management of the Bank and recommend them ^P[OVY^P[OV\[TVKPÄJH[PVUZ[V[OL Committee Board of Directors for its approval. Ensure compliance by the Bank’s credit policies with the statutory requirements prescribed by the Report regulatory/supervisory authorities. Request rapid portfolio reviews or sector/industry reviews, where &RPSRVLWLRQRIWKH%RDUG&UHGLW 7HUPVRI5HIHUHQFH deemed appropriate. &RPPLWWHH The Charter of the Board Credit The Credit Committee was established *VTTP[[LLJSLHYS`KLÄULZ[OL[LYTZHUK 2. Maintain adequate controls over on 9th December 1987 and was re-titled reference of the Committee. The Board credit risk as Board Credit Committee on 22nd periodically reviews the Committee Monitor capital allocation and October 2008 and Prof Malik Ranasinghe Charter as and when required. The KLÄULSPTP[ZPUSPUL^P[O[OLYPZR (Independent Non Executive Director) Committee is responsible to the Board appetite. was appointed as the Chairman of the of Directors and reports on its activities Ensure credit risk exposure is Committee w.e.f. 30th January 2012. This regularly. The Board Credit Committee kept within acceptable limits to Committee comprises of 4 Non Executive also assists the Board in its general over maximise the Bank’s risk adjusted Directors and 2 Executive Director. The sight of recommending Credit Policy rate of return. Directors who serve on the Committee of the Bank, reviewing single borrower Ensure stress tests are conducted, are: limits and recommending Credit Policy where deemed appropriate. changes. Prof Malik Ranasinghe 3. Maintain appropriate credit - Chairman - (IND/NED) 5ROHDQG5HVSRQVLELOLWLHV administration, measuring and Mr Channa Palansuriya - (NID/NED) The purpose of the Committee is to (Director until 12th November 2015) monitoring process oversee the credit and lending strategies Review credit approval framework Mr Sanjiva Senanayake - (IND/NED) and objectives of the Bank. This includes: and assign credit delegated limits Miss Annika Senanayake - (IND/NED) (i) Overseeing the credit management in line with the Bank’s policy. Mr Deshal De Mel - (NID/NED) of the Bank, including reviewing internal Review and recommend to the Mr Aravinda Perera - (ED) credit policies and establishing portfolio Board, facilities that they believe Mr Ranjith Samaranayake - (ED) limits. should have Board approval. (NID - Non Independent Director, IND - Independent Director, NED - Non Executive (ii) Reviewing the quality and performance Director and ED - Executive Director)  0KLU[PÄJH[PVUHUKHKTPUPZ[YH[PVUVM of the Bank’s credit portfolio. In addition, problem credits )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LUVU the Committee is responsible for any Monitor on an ongoing basis pages 8 to 17 of the Annual Report. The other matters delegated to it by the the Bank’s credit quality, review Company Secretary of the Bank functions Board. Hence, it is the responsibility of periodic credit portfolio reports and as the Secretary to the Board Credit the Committee to: assess portfolio performance. Committee. Ensure post-credit monitoring 1. Operate a sound credit granting and postmortem reviews are 0HHWLQJV process performed, where deemed During the year the Committee met on Review and approve credit appropriate. 17 occasions. The attendance of the proposals in accordance with Committee members is stated in the Board approved credit policies Corporate Governance Report on page and standards. Where required, 238 of the Annual Report. Members of submit credit requests beyond the the senior management of the Bank are Committee’s scope to the Board invited to participate at the meetings as for a decision. and when required.

294 SAMPATH BANK PLC Annual Report 2015 5. Aware of the cyclical aspects of the economy (both internal and external) Monitor the resulting shifts in the composition and quality of the loan portfolio.

6. Proper evaluation of new business opportunities Ensure all new credit risk related products are reviewed from a credit risk management perspective.

5HSRUWLQJWRWKH%RDUG The minutes of the meetings of the Committee are circulated to the members I`[OL:LJYL[HY`HUK[OLJVUÄYTLK minutes are reported to the Board of +PYLJ[VYZMVYJVUJ\YYLUJL;OLJVUÄYTLK minutes are available for review by any regulatory agency having jurisdiction over the affairs of the Bank.

5HYLHZRIWKH&RPPLWWHH Members of the Committee work closely with the Board of Directors to maintain proper credit standards for the Bank. The Board undertakes a review of the Committee’s performance, objectives and responsibilities according to its terms of reference to ensure that it is operating effectively.

On behalf of the Board Credit Committee

Malik Ranasinghe Chairman – Board Credit Committee

Colombo, Sri Lanka 16th February 2016

SAMPATH BANK PLC Annual Report 2015 295 Governance

G4-42

composition of the Bank’s capital Board Strategic structure in the context of the growth targets. 8. Make recommendations to the Board on key strategic decisions Planning and investments.

5HSRUWLQJWRWKH%RDUG Committee Minutes of the Committee meetings are circulated to the Committee members by [OL:LJYL[HY`HUK[OLJVUÄYTLKTPU\[LZ are reported to the Board of Directors Report YLN\SHYS`MVYJVUJ\YYLUJL;OLJVUÄYTLK minutes are available for review by any regulatory agency having jurisdiction over &RPSRVLWLRQRIWKH%RDUG 7HUPV2I5HIHUHQFH the affairs of the Bank.

6WUDWHJLF3ODQQLQJ&RPPLWWHH The Charter of the Board Strategic 3HUIRUPDQFH At the Board meeting held on 30th 7SHUUPUN*VTTP[[LLJSLHYS`KLÄULZ[OL The Committee engaged in discussions January 1997, it was decided to form terms and reference of the Committee. with the Corporate Management and a Strategic Planning Committee. The The Board periodically reviews the Strategic Planning Team to determine Committee comprises of 7 Non Executive Committee Charter as and when the strategic direction of the Bank for the Directors and 2 Executive Directors. The required. The Committee is responsible period 2016 to 2019 and this formed the Chairman of the Committee is a Non to the Board of Directors and reports on basis for the development of the Strategic Executive Director. The following Directors its activities regularly. The Board Strategic Plan for this period. The Committee serve in the Board Strategic Planning Planning Committee also assists the reviewed performance of the Bank during Committee. Board in its general oversight of setting the year against the three year rolling plan Mr Dhammika Perera Strategic Direction, Budgeting and and annual budget for 2016 to identify - Chairman - (NID/NED) Monitoring. areas of concern which needed changes Mr Channa Palansuriya - (NID/NED) 5ROHDQG5HVSRQVLELOLWLHV in strategic direction. The three year (Director until 12th November 2015) 1. Strategic Vision and Mission of the rolling plan was submitted to the Board of Mr Sanjiva Senanayake - (IND/NED) Bank: Examine the Bank’s current Directors for its information and approval Prof Malik Ranasinghe - (IND/NED) mission, strategic positioning and was obtained for the annual budget for Mr Deshal De Mel - (NID/NED) the strategic vision and provide 2016 which was developed in line with Mr Ranil Pathirana - (IND/NED) guidelines to the Bank’s Strategic the strategy document. Mrs Dhara Wijayatilake Planning process. (appointed w.e.f. 28th May 2015) - (IND/NED) 2. Review the impact of external The Committee reviews its own Miss Annika Senanayake trends and issues: Examine performance, constitution and scope (appointed w.e.f. 28th May 2015) - (IND/NED) of work to ensure that it is operating Mr Aravinda Perera - (ED) the external challenges and ZTVV[OS`HUKLMÄJPLU[S`0[ZZJVWLHSZV Mr Ranjith Samaranayake - (ED) opportunities relevant to the extends to making recommendations to (NID - Non Independent Director, IND - strategic vision and key goals of the Board when the need arises. Independent Director, NED - Non Executive the Bank. Director and ED - Executive Director) 3. Review the internal strengths and weaknesses of the Bank and give On behalf of the Board Strategic Planning )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LUVU guidelines to the Management. Committee pages 8 to 17 of the Annual Report. The 4. Oversee and monitor the planning Company Secretary of the Bank functions process that leads to the as the Secretary to the Board Strategic formulation of the Strategic Plan. Planning Committee. Dhammika Perera 5. Examine the effectiveness of key 0HHWLQJV strategies for achieving agreed Chairman – Board Strategic Planning During the year the Committee met on goals and objectives. Committee 6 occasions and the attendance of the 6. Review the Bank’s resources Colombo, Sri Lanka Committee members is stated in the and capabilities in the context of 16th February 2016 Corporate Governance Report on page achieving its strategic objectives. 238 of the Annual Report. 7. Review the adequacy and

296 SAMPATH BANK PLC Annual Report 2015 2. Organising forums that encourage Board dialogue between the Board of Directors and Shareholders/ Investors. Shareholder 3. Perform such other functions as expressly delegated to it from time to time by the Board relating to shareholder relations matters. Relations 4. Providing guidance to the Board on matters of investor relations. Committee $FWLYLWLHVRIWKH&RPPLWWHH This is an advisory and consultative Committee that, when necessary, considers proposals of shareholders on Report improvement of the Bank’s corporate governance, as well as requirements and needs of shareholders. It provides Our shareholders have always been a Executive Directors join the meetings on recommendations to the Bank’s Board monumental strength to us and it is their invitation when necessary. The following on enforcement and protection of continued patronage that has been the Directors serve on the Board Shareholder rights and legitimate interests of the basis on which we have built our banking Relations Committee. Bank’s shareholders. The Committee legacy. At Sampath Bank, shareholder contributes to clarify the Bank’s policy value creation means so much more than Prof Malik Ranasinghe and development strategy on shareholder the mere obligatory response, indeed it - Chairman - (IND/NED) relations matters. is a non-negotiable item on the business (appointed w.e.f. 16.02.2016) agenda. Mr Deshal De Mel - (NID/NED) The Committee ensures that the Bank’s Mr Channa Palansuriya SH[LZ[PUMVYTH[PVUHUKÄUHUJPHSYLZ\S[ZHYL :HTWH[O)HURPZ[OLÄYZ[SPZ[LK*VTWHU` - Chairman - (NID/NED) swiftly communicated to the shareholders in Sri Lanka to setup a Board Shareholder (Director until 12th November 2015) through Interim and Annual Reports, Relations Committee to identify and (NID - Non Independent Director, NED - Non UV[PÄJH[PVUZ[V[OL*VSVTIV:[VJR address shareholders’ concerns. Executive Director) Exchange and timely press releases. In Shareholders voice their opinions and addition to these avenues of information, suggestions as deemed appropriate )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LU our shareholders have easy access to improve the relations between on pages 8 to 17 of the Annual Report. through our corporate website, shareholders/investors and the Bank. It is The Company Secretary functions as www.sampath.lk to all relevant a vital Board Sub Committee to facilitate the Secretary to the Board Shareholder information, which also gives our a smooth and continuous dialogue Relations Committee. Mr W M P L de shareholders access to the Bank for any between the Board and the shareholders. Alwis, a former Director acts as advisor to query. Shareholders can freely raise any The Committee concentrates on the Committee. questions to the Board of Directors at developing and preserving a good the Shareholder Relations Forums. These rapport with the shareholders. 0HHWLQJV forums also encourage our shareholders Meetings are held when deemed to openly voice concerns and make &RPSRVLWLRQRIWKH%RDUG appropriate. suggestions and requests. 6KDUHKROGHU5HODWLRQV&RPPLWWHH Pursuant to the Board meeting held on 5ROHDQG5HVSRQVLELOLWLHV Shareholders have been afforded further 28th August 2008 Bank Shareholders 1. Providing suggestions to the Board access to the Chairman or any Director Relations Committee comprising 2 Non to improve Shareholder/Investor VM:HTWH[O)HUR"[OL`JHUL_WYLZZ Executive Directors was established. The relations of the Bank.

SAMPATH BANK PLC Annual Report 2015 297 Governance

Board Shareholder Relations Committee Report

any concern or view regarding the Bank 50% on the annual fee charged for through written communication as well. VISA credit cards will be waived off. The Committee supports shareholders to On opening of current accounts, enhance their investment attractiveness. the initial deposit will be 50% of the The Committee’s activities aim at usual initial deposit requirement. protecting the Bank’s shareholders’ rights SET cards are issued free of and interests. charge. However, this does not include the per transaction fee. Two-way dialogue between the shareholders and the Board of Directors 5HSRUWLQJWRWKH%RDUG has taken place this year too. The The Minutes of the Shareholder Relations Company Secretary has kept the Board Committee meetings are tabled at Board of Directors informed of shareholder meetings enabling all Board members to outlook through regular reports. have access to them.

Shareholders can also write to the On behalf of the Shareholder Relations Chairman or any Director of Sampath Committee Bank, they can express any concern or view regarding the Bank which gives another avenue to the shareholders to express their opinion in person. Malik Ranasinghe 3HUIRUPDQFH Chairman - Board Shareholder Relations The Committee meets as and when Committee necessary and reports on its activities to the Board. Shareholders’ Forum was held Colombo, Sri Lanka soon after the Annual General Meeting on 16th February 2016 31st March 2015.

1. The following concessions are given to shareholders on banking transactions. All commissions to be on actual cost basis, waiving off all internal commission charges. However, in the case of foreign bank charges and other local bank charges, the actual cost will be collected. This excludes cheque return commissions and postage charges.

298 SAMPATH BANK PLC Annual Report 2015 Exchange market during the latter part Board Treasury of the year posed challenges in meeting the requirements of customers and the )HUR/V^L]LY[OL;YLHZ\Y`WYVÄ[HIS` Committee managed Foreign Exchange Risks in these volatile market conditions, further exacerbated by increasing economic and policy uncertainties arising local political Report events as well as external developments. 4\JOOLHK^H`^HZTHKLPUYLÄUPUN a comprehensive model for analysis of &RPSRVLWLRQRIWKH%RDUG7UHDVXU\ The main responsibilities of the committee the Bank’s revenue by products and &RPPLWWHH are: customers, which will be used to guide The Board Treasury Committee which 1. Establish Treasury Management future asset growth. was established on 31st May 2012 policies on behalf of the Board of comprises 3 Non Executive Directors Directors. 5HSRUWLQJWRWKH%RDUG and 2 Executive Directors. The following 2. Ensure Treasury Dealing Room Minutes of the Board Treasury Committee Directors serve in the Board Treasury operations are carried out in were regularly reported to the Board of Committee. accordance with those policies. Directors and approval sought for policies 3. Monitor the liquidity position of recommended and other matters. Mr Sanjiva Senanayake the Bank and advise Treasury - Chairman - (IND/NED) accordingly. On behalf of the Board Treasury Prof Malik Ranasinghe - (IND/NED) 4. Monitor the management of Committee Mr Deshal De Mel - (NID/NED) Foreign Exchange and Interest rate Mr Aravinda Perera - (ED) Risks by the Bank. Mr Ranjith Samaranayake - (ED) 5. Monitor compliance with Central (NID - Non Independent Director, IND - Bank regulations managed by Independent Director, NED - Non Executive the Treasury including capital Director and ED - Executive Director) Sanjiva Senanayake adequacy, statutory reserve ratios, Chairman - Board Treasury Committee )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LUVU and statutory liquid assets. pages 8 to 17 of the Annual Report. 6. Provide guidance to the Asset and Colombo, Sri Lanka Mr Manjula Ekanayake of the Bank’s Liability Management Committee 16th February 2016 Treasury Department serves as the (ALCO), consisting of Corporate Secretary to the Board Treasury Management, to optimise Committee. performance. 7. Establish internal pricing of funds 0HHWLQJV to provide desired incentives During the year, the Committee met internally and better evaluate on 5 occasions. The attendance of the performance of business units. Committee members is stated in the 8. Development of new treasury Corporate Governance Report on page related products.  VM[OL(UU\HS9LWVY[6[OLYVMÄJPHSZ of the Bank too were invited to attend as During 2015 efforts were focused on deemed necessary. responses the Treasury had to implement to adjust to the lower 5ROHDQG5HVSRQVLELOLWLHV interest rate environment and managing The Board Treasury Committee is the excess liquidity that the Bank instituted to provide guidance to the experienced along with most banks. In Treasury in carrying out its functions and addition, the decline of the Sri Lankan to monitor its performance with a view to Rupee and illiquidity in the Foreign optimising earnings, stability and growth of the Bank.

SAMPATH BANK PLC Annual Report 2015 299 Governance

5HSRUWLQJWRWKH%RDUG Board The Minutes of the Board Marketing Committee meetings are tabled at Board meetings enabling all Board members to Marketing have access to them. On behalf of the Board Marketing Committee Committee Report Deepal Sooriyaarachchi &RPSRVLWLRQRIWKH%RDUG The Key Terms of Reference of the Chairman - Board Marketing Committee 0DUNHWLQJ&RPPLWWHH *VTTP[[LLHYL[V" The Board Marketing Committee was Review the customer strategy Colombo, Sri Lanka set up with effective from 28th June and performance against set 16th February 2016 2012 to have a closer focus on the objectives. Marketing Strategies of the Bank and to Review Brand strategy and its monitor their effectiveness. The Board performance. Marketing Committee comprises of 4 Non Monitor customer service and Executive Directors. The members of the customer service strategies in line Committee are given below. with the customer charter. Monitor the CSR policy of the Bank Mr Deepal Sooriyaarachchi and progress of same. - Chairman - (IND/NED) Miss Annika Senanayake - (IND/NED) 5ROHDQG5HVSRQVLELOLWLHV Mr Deshal De Mel - (NID/NED) The committee functions more as a Mrs Saumya Amarasekera - (NID/NED) facilitating and a guiding body to the (NID - Non Independent Director, IND - management in an effort to strongly align Independent Director, NED - Non Executive the activities of the marketing function Director and ED - Executive Director) towards the strategic focus of the Bank, following best practices. The Board The Managing Director (MD) attends Marketing Committee acts as a conduit meetings by invitation. to the main Board in providing updates on various consumer behaviour trends )YPLMWYVÄSLZVM[OLTLTILYZHYLNP]LUVU and their implications to the Bank. pages 8 to 17 of the Annual Report. The Company Secretary of the Bank functions During the year Committee provided as the Secretary to the Board Marketing oversight for the following: Committee. Establishment of a regular brand equity tracking process. 0HHWLQJV Commencement of a The Committee met on 2 occasions comprehensive brand identity during the year. Attendance by the management process. Committee members at each of these Formulation of an e-commerce meetings is given in the table on page strategy. 238 of the Annual Report.

300 SAMPATH BANK PLC Annual Report 2015 By serving our stakeholders well we serve our nation well...

Financial Statements

Financial Calendar Annual Report of the Board of Directors on the Affairs of the Company Directors’ Statement on Internal Control Over Financial Reporting Independent Assurance Report to the Board of Directors of Sampath Bank PLC 4HUHNPUN+PYLJ[VY»ZHUK.YV\W*OPLM-PUHUJPHS6MÄJLY»Z9LZWVUZPIPSP[`:[H[LTLU[ :[H[LTLU[VM+PYLJ[VYZ»9LZWVUZPIPSP[`MVY-PUHUJPHS9LWVY[PUN Independent Auditors’ Report to the Shareholders of Sampath Bank PLC :[H[LTLU[VM7YVÄ[VY3VZZ Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flow Statement of Changes in Equity Notes to the Financial Statements

SAMPATH BANK PLC Annual Report 2015 301 Financial Calendar

Financial Calendar - 2015 2014 Annual Report and Audited Financial Statements signed on 19th February 2015 29th Annual General Meeting held on 31st March 2015 Rs 5.00 per share Cash Dividend for 2014 paid on 9th April 2015 Rs 6.00 per share Scrip Dividend for 2014 paid on 9th April 2015 2015 Annual Report and Audited Financial Statements signed on 16th February 2016 30th Annual General Meeting to be held on 31st March 2016 Rs 6.00 per share Cash Dividend for 2015 payable in 11th April 2016* Rs 7.00 per share Scrip Dividend for 2015 payable in 11th April 2016*

Interim Financial Statements published in terms of Rule 8.3 of the Colombo Stock Exchange (CSE) and as per the requirements of the Central Bank of Sri Lanka:

Colombo Stock News Papers (as required by CBSL) Exchange English Sinhala Tamil

2014 4th Quarter interim results released on 20th February 2015 27th February 2015 4th March 2015 4th March 2015 2015 1st Quarter interim results released on 15th May 2015 22nd May 2015 27th May 2015 27th May 2015 2015 2nd Quarter interim results released on 14th August 2015 21st August 2015 24th August 2015 24th August 2015 2015 3rd Quarter interim results released on 13th November 2015 20th November 2015 20th November 2015 20th November 2015

Proposed Financial Calendar - 2016 2016 Annual Report and Audited Financial Statements to be signed in February 2017 31st Annual General Meeting to be held in March 2017 Dividend for 2016 to be payable in April 2017**

Interim Financial Statements to be published in terms of Rule 8.3 of the Colombo Stock Exchange and as per the requirements of the Central Bank of Sri Lanka:

Colombo Stock News Papers (as required by CBSL) Exchange English Sinhala Tamil

2015 4th Quarter interim results to be released on or before 29th February 2016 31st March 2016 31st March 2016 31st March 2016 1st Quarter interim results to be released on or before 13th May 2016 31st May 2016 31st May 2016 31st May 2016 2nd Quarter interim results to be released on or before 15th August 2016 31st August 2016 31st August 2016 31st August 2016 3rd Quarter interim results to be released on or before 15th November 2016 30th November 2016 30th November 2016 30th November 2016 4th Quarter interim results to be released on or before 28th February 2017 31st March 2017 31st March 2017 31st March 2017

:\IQLJ[[VJVUÄYTH[PVUI`:OHYLOVSKLYZ :\IQLJ[[VJVUÄYTH[PVUI`+PYLJ[VYZHUK:OHYLOVSKLYZ

302 SAMPATH BANK PLC Annual Report 2015 Annual Report of the Board of Directors on the (ɈHPYZVM[OL*VTWHU`

1. General with a Stable Outlook and subordinated 4. Changes to the Group The Board of Directors of Sampath Bank debentures at ‘A(lka)’. Structure PLC has pleasure in presenting their The Bank invested a further sum of Rs Annual Report on the State of Affairs ;OL9LNPZ[LYLK6MÄJLHZ^LSSHZ[OL/LHK 20 Mn in the equity of its fully owned of the Company to the members of 6MÄJLVM[OL)HURPZSVJH[LKH[5V Subsidiary, Sampath Information :HTWH[O)HUR73*MVY[OLÄUHUJPHS`LHY Sir James Peiris Mawatha, Colombo 02, Technology Solutions Ltd, during the ended 31st December 2015, together Sri Lanka. year increasing its total investment in with the audited Financial Statements that company from Rs 9 Mn to Rs 29 of the Bank, Consolidated Financial 2. Vision, Values and Mn. Other than the above there were no Statements of the Group for that year Corporate Conduct changes made to the Group structure The Bank’s Vision and Values are given and the Auditors’ Report on those during the year under review. Financial Statements, conforming to the in page 52 of the Annual Report. The requirements of the Companies Act No business activities of the Bank are 5. Review of Operations conducted at a high level of ethical 7 of 2007 and the Banking Act No 30 (YL]PL^VM[OLÄUHUJPHSHUKVWLYH[PVUHS standard in achieving its Vision. of 1988. The Financial Statements were performance of the Bank and the Group reviewed and approved by the Board of together with important events that took Directors on 16th February 2016. 3. Principal Business Activities place during the year 2015 as required by the Section 168 (1) (a) of the Companies The principal business activities of the This report includes the information Act are contained in the Chairman’s Bank and the Group during the year are required by the Companies Act No 7 Message (pages 44 & 45), the Managing given below as required by the Section of 2007, Banking Act Direction No 11 Director’s Review (pages 46 to 51), and 168 (1) (a) of the Companies Act. of 2007 on Corporate Governance the Operational Reviews (pages 63 to for Licensed Commercial Banks and 142). These reports form an integral part 3.1 Bank subsequent amendments thereto, Listing The principal activities of the Bank of the Annual Report of the Board of Rules of the Colombo Stock Exchange include accepting deposits, corporate Directors. and is also guided by the recommended HUKYL[HPSIHURPUNWYVQLJ[ÄUHUJPUN best practices on Corporate Governance. 6. Future Developments [YHKLÄUHUJPUN[YLHZ\Y`HUKPU]LZ[TLU[ [Section 168 (1) (a)] services, issuing of local and international Sampath Bank PLC (“the Bank”) is a The Bank focuses on a business credit and debit cards, off-shore banking, Licensed Commercial Bank registered expansion drive through the existing resident and non-resident foreign under the Banking Act No 30 of 1988 Branch Network, concentrating mainly on currency operations, electronic banking (“Banking Act”) and was incorporated its core banking operations to increase services: such as telephone banking, as a public limited liability company in internet banking, mobile banking, P[ZTHYRL[ZOHYLHUKWYVÄ[HIPSP[`;OPZ Sri Lanka on 10th March 1986 under payment gateway, money remittance will be further supplemented by a more the Companies Act No 17 of 1982. The facilities etc, pawning, leasing, factoring, vigorous drive on innovative product Company was re-registered as per the travel related services and dealing in development, process improvements requirements of the Companies Act No Government Securities. HUKZ[HMMKL]LSVWTLU[HPTLKH[M\SÄSSPUN 7 of 2007 (“Companies Act”) on 28th the rapidly changing customer needs in April 2008 under the name Sampath 3.2 Subsidiaries the challenging market conditions and Bank PLC with the Registrar General of The Bank has four Subsidiaries as at maximizing the value that we create for Companies. The re-registration number of 31st December 2015. Names of the all the stakeholders. 5 new branches the Bank is PQ 144. Subsidiaries and their principal business activities are as tabulated below: The ordinary shares of the Bank are listed on the main board of the Colombo Stock Exchange in Sri Lanka. The Bank’s Entity Principal Business Activities unsecured subordinated redeemable debentures are also listed on the Siyapatha Finance PLC Leasing, factoring, pawning & accepting deposits Colombo Stock Exchange. Sampath Centre Ltd Renting of commercial property S C Securities (Pvt) Ltd Stock broking -P[JO9H[PUN3HURHOHZHMÄYTLK)HUR»Z Sampath Information Technology Developing software solutions National Long Term rating at ‘A+(lka)’ Solutions Ltd and maintenance of hardware

Annual Report 2015 SAMPATH BANK PLC 303 Annual Report of the Board of Directors on the Affairs of the Company were opened during the year and a Financial Statements appearing on 11. Financial Results and 9LWYLZLU[H[P]LVMÄJLVM[OL)HUR^HZ pages 320 to 452 have been prepared Appropriations opened on 7th October 2015 in Yangon, in conformity with the requirements of 11.1 Income Myanmar with a view to establishing the Sri Lanka Accounting Standards, The Income of the Group for 2015 Bank’s regional presence. Further as Companies Act, Sri Lanka Accounting was Rs 49,101,837,000/- (2014: Rs required under Section 168 (1) (a) of the and Auditing Standards Act No 15 of 46,394,406,000/-) while the Bank’s Companies Act, an overview of the future 1995, the Banking Act and amendments income was Rs 47,031,516,000/- (2014: development of the Bank and the Group thereto, the Listing Rules of the Colombo Rs 44,597,081,000/-). An analysis of the is given in the Chairman’s Message Stock Exchange and the Corporate income is given in Note 6 to the Financial (pages 44 & 45), the Managing Director’s Governance Code for Licensed Statements. Review (pages 46 to 51), Operational Commercial Banks issued by the Central Reviews (pages 63 to 142). These reports Bank of Sri Lanka (CBSL). The Statement  3URðWDQG$SSURSULDWLRQV form an integral part of the Annual Report of Directors’ Responsibility for Financial The Group has recorded a growth in of the Board of Directors. Reporting is given on pages 317 & 318 WYVÄ[ILMVYL[H_HUKWYVÄ[HM[LY[H_ and forms an integral part of the Annual of 35.1% and 25.8% respectively in 7. Financial Statements Report of the Board of Directors. ;OL)HUR»ZWYVÄ[ILMVYL[H_ The Financial Statements of the Group HUKWYVÄ[HM[LY[H_MVY[OL`LHY[VV and the Bank have been prepared 9. Auditors’ Report recorded a growth of 35.3% and 24.8% in accordance with the Sri Lanka The Auditors of the Bank are Messrs respectively over 2014. Group’s Total Accounting Standards (SLFRSs & LKASs) Ernst & Young, Chartered Accountants. Comprehensive Income (net of tax) for laid down by the Institute of Chartered Messrs Ernst & Young carried out the the year is Rs 6,319,668,000/- (2014: Accountants of Sri Lanka, and comply audit on the Financial Statements of Rs 4,177,895,000/-) while the Bank has with the requirements of the Companies the Group and the Bank for the year recorded a total comprehensive income Act No 7 of 2007 and the Banking Act ended 31st December 2015 and their (net of tax) of Rs 5,825,708,000/- (2014: No 30 of 1988. The aforementioned report on those Financial Statements, as Rs 3,826,566,000/). A detailed breakup Financial Statements for the year ended required by the Section 168 (1) (c) of the VM[OLWYVÄ[Z HWWYVWYPH[PVUZVM[OL)HUR 31st December 2015 duly signed by Companies Act is given on page 319. is given below: [OL.YV\W*OPLM-PUHUJPHS6MÄJLY[OYLL Directors of the Bank and the Company  6LJQLðFDQW$FFRXQWLQJ 12. Taxation Secretary are given on pages 320 to 452 Policies Income tax rate applicable on the Bank’s which form an integral part of this Annual ;OLZPNUPÄJHU[HJJV\U[PUNWVSPJPLZ domestic operations and on-shore and Report of the Board of Directors (as per adopted in the preparation of the off-shore operations of the off-shore the Section 168 (1) (b) of the Companies Financial Statements are given on pages Banking Centre is 28% (2014: 28%). Act). 327 to 452 which comply with Section 168 (1) (d) of the Companies Act.

8. Directors’ Responsibility 2015 2014 for Financial Reporting Rs 000 Rs 000 The Directors are responsible for the preparation of Financial Statements 7YVÄ[MVY[OL`LHYHM[LYWH`TLU[VMHSSVWLYH[PUNL_WLUZLZ VM[OL.YV\WHUK[OL)HUR[VYLÅLJ[H and provision for depreciation and contingencies 9,100,873 6,726,507 true and fair view of its state of affairs. Less: Taxation (2,966,932) (1,812,717) The Directors are of the view that these 5L[WYVÄ[HM[LY[H_H[PVU      Other comprehensive income (OCI) (J[\HYPHSNHPUZ SVZZLZVUKLÄULKILULÄ[WSHUZ     Deferred tax effect on above (32,463) 216,390 6,217,418 4,357,359 Unappropriated balance brought forward from previous year 3,182,746 2,500,411 Less : Super Gain Tax (676,765) - Balance available before appropriation / adjustments 8,723,399 6,857,770

304 SAMPATH BANK PLC Annual Report 2015 2015 2014 Rs 884,374,000/- respectively (2014 Rs 000 Rs 000 Group: Rs 1,022,307,000/- and Bank: Rs 821,449,000/-). Details are given in Notes Appropriations 32 and 33 to the Financial Statements. Transfer to Statutory Reserve Fund (310,000) (245,851) Transfer from Investment Fund Account - 2,439,494 16. Capital Commitments Transfer to General Reserve (3,500,090) (4,526,036) The capital expenditure approved and contracted for, as at the reporting date Dividend is given in Note 47.2 to the Financial Final cash dividend paid - 2013 (Rs 8.00 per share) - (1,342,631) Final cash dividend paid - 2014 (Rs 5.00 per share) (839,551) - Statements. Final scrip dividend paid - 2014 (Rs 6.00 per share) (1,007,461) - Unappropriated balance carried forward 3,066,297 3,182,746 17. Property, Plant and Equipment (PPE) Proposed dividend Details of property, plant and equipment Final cash dividend - 2015 (Rs 6.00 per share) 1,033,876 - are given on Note 32 to the Financial Final scrip dividend - 2015 (Rs 7.00 per share) 1,206,188 - Statements. Final cash dividend - 2014 (Rs 5.00 per share) - 839,551 Final scrip dividend - 2014 (Rs 6.00 per share) - 1,007,461 18. Market Value of Freehold Properties All freehold land and buildings of the The Bank is also liable for VAT and NBT Statement of Solvency to the Auditors Group and the Bank were revalued as at VUÄUHUJPHS]HS\LHKKP[PVUH[ ! HUKVI[HPULK*LY[PÄJH[LVM:VS]LUJ`MYVT 30th November 2013 by professionally 12%) and 2% (2014: 2%) respectively. the Auditors in respect of the dividend X\HSPÄLKPUKLWLUKLU[]HS\LYZHUK payment conforming to the statutory brought into the Financial Statements. The Group has also provided deferred provision. With this dividend payment, the The Directors are of the opinion that the taxation on all known temporary )HURPZHSZVM\SÄSSPUN[OLKLLTLKKP]PKLUK revalued amounts are not in excess of the differences under the liability method, as requirement according to the provisions current market values of such properties. permitted by the Sri Lanka Accounting of Inland Revenue Act. The details of freehold properties owned Standard - LKAS 12 (Income Taxes). by the Bank are given in Note 32.4 to the Further details are given in Note 17 to the Financial Statements. 13. Dividend Financial Statements. ;OL+PYLJ[VYZYLJVTTLUK[OH[HÄUHS 19. Stated Capital, dividend of Rs 13.00 per share (2014: Rs 14. Reserves Debentures and Bonds WLYZOHYLILWHPKMVY[OLÄUHUJPHS A summary of the Group’s Reserves is 19.1 Stated Capital year ended 31st December 2015. This given below: The Stated Capital of the Bank as will be paid by Rs 6.00 in the form of at 31st December 2015 amounted cash dividend and balance Rs 7.00 in the 15. Capital Expenditure to Rs 5,381,405,000/- consisting of The total capital expenditure on form of scrip dividend (2014: Rs 5.00 in 172,312,655 ordinary shares (2014: acquisition of property, plant and the form of cash dividend and balance Rs Rs 4,470,151,000/- consisting of equipment and intangible assets of the 6.00 in the form of scrip dividend). 167,910,253 ordinary shares). Group and the Bank amounted to Rs The dividend is subject to Shareholder 1,190,589,000/- and approval at the Annual General Meeting. 2015 2014 ;OL)VHYKVM+PYLJ[VYZ^HZZH[PZÄLK Rs 000 Rs 000 that the Bank would meet the solvency [LZ[PTTLKPH[LS`HM[LY[OLÄUHSKP]PKLUK Statutory Reserve Fund 1,860,058 1,530,831 proposed, which will be paid in April Revaluation Reserve 4,202,261 4,202,261 2016 in terms of the Section 31 (3) of the Available for Sale Reserve 875,723 1,267,433 General Reserve 22,165,001 18,665,001 Companies Act. The Board provided the 9L[HPULK7YVÄ[    Total 33,727,131 30,041,193

Annual Report 2015 SAMPATH BANK PLC 305 Annual Report of the Board of Directors on the Affairs of the Company

The number of shares in issue of the on pages 134,135 and 137 of the Governance Rules of Colombo Stock Bank increased from 167,910,253 Annual Report. Details of top twenty Exchange and Banking Act Direction No ordinary shares to 172,312,655 ordinary shareholders, percentages of their 11 of 2007 issued by the Central Bank of ZOHYLZHZHYLZ\S[VM[OLWH`TLU[VMÄUHS holdings and percentage holding of Sri Lanka. Scrip Dividend for 2014. the public too are given in the Investor Information section on page 138. 24. Changes in Directorate The details of the shares issued are given The Bank has disclosed the names of in Note 42.2 to the Financial Statements. 22. Equitable Treatment to [OLWLYZVUZOVSKPUNVMÄJLHZ+PYLJ[VYZVM Shareholders the Bank as at the end of the accounting 19.2 Debt Capital The Bank has at all times ensured that all period and the names of any persons The Bank had issued unsecured, shareholders are treated equitably. ^OVJLHZLK[VOVSKVMÄJLHZ+PYLJ[VYZVM subordinated, redeemable debentures the Bank during the accounting period to the value of Rs 20,500,000,000/- 23. The Board of Directors in terms of Section 168 (1) (h) of the as at 31st December 2015 (2014: Rs The Board of Directors of the Bank Companies Act. 13,500,000,000/-), which are listed in the consists of eleven (2014: twelve) Colombo Stock Exchange. +PYLJ[VYZ^P[O^PKLÄUHUJPHSHUK There were no new appointments to the commercial knowledge and experience. Board of Directors during the year. None The details of the unsecured, The names of the Directors of the Bank of the Directors resigned from the Board subordinated, redeemable debentures during the period 1st January 2015 during the year. outstanding as at 31st December 2015 to 31st December 2015 are given are given in Note 38.1 to the Financial below as per Section 168 (1) (h) of the Mr Channa Prabodha Palansuriya, the Statements. These debentures are eligible *VTWHUPLZ(J[;OLPYIYPLMWYVÄSLZHYL Deputy Chairman of the Bank ceased for the Tier II Capital of the Bank. given on pages 8 to 17 of the Annual to be a Director of the Bank with effect 9LWVY[;OLJSHZZPÄJH[PVUVM+PYLJ[VYZ from 12th of November 2015 in terms The Bank had issued a deep discounted into Executive (ED), Non Executive (NED) of Section 3 (1) (vi) of the Banking Act zero coupon bond with a maturity and Independent (IND), Non Independent Direction No 11 of 2007 having been value of Rs 3,458,108,968/- for 20 Directors (NID) is given against the names unable to attend three (03) consecutive years. The present paid up value of this as per Listing Rules and Corporate meetings of the Board. bond is Rs 1,780,008,000/- (2014: Rs 1,630,747,000/-) and this forms part of the Tier II Capital. The above Bond was 5HTLVM+PYLJ[VY *SHZZPÄJH[PVU 9LTHYRZ issued in August 2003 and will mature Mr Dhammika Perera NED/NID Director since 01.08.2007; in August 2023. The details are given in Chairman since 01.01.2012 Note 38.2 to the Financial Statements. Mr Channa Palansuriya NED/NID Director from 01.01.2012 to 12.11.2015 Deputy Chairman from 26.01.2012 to 20. Share Information 12.11.2015 Information relating to earnings, dividend, Mr Sanjiva Senanayake NED/IND Director since 01.01.2012; net assets and market value per share is Senior Director since 26.01.2012 NP]LUPU[OL-PUHUJPHS/PNOSPNO[ZVUWHNL Mr Deepal Sooriyaarachchi NED/IND Director since 05.08.2010 36. Information on the trading of the Prof Malik Ranasinghe NED/IND Director since 30.08.2011 shares and movement in the number of Mrs Dhara Wijayatilake NED/IND Director since 30.08.2011 shares of the Bank is given in the Investor Miss Annika Senanayake NED/IND Director since 01.01.2012 Information section on pages 133 to 142. Mr Deshal De Mel NED/NID Director since 01.01.2012 Mr Ranil Pathirana NED/IND Director since 01.01.2012, Independent 21. Shareholding Director since 31.01.2015 Mrs Saumya Amarasekera NED/NID Director since 01.06.2012 There were 17,515 registered ordinary Mr Aravinda Perera ED Executive Director since 25.11.2008; shareholders as at 31st December Managing Director since 01.01.2012 2015 (2014: 17,688). Information on Mr Ranjith Samaranayake ED Executive Director since 01.01.2009 the distribution of shareholding and the respective percentages are given (ED - Executive Director, NED - Non Executive Director, IND - Independent Director and NID - Non Independent Director)

306 SAMPATH BANK PLC Annual Report 2015 25. Retirement and 26.3 Siyapatha Finance PLC 28.1 Board Audit Committee Re-election / Mr Channa Palansuriya (Chairman) Mr Ranil Pathirana (Chairman) Re-appointment of Mr M A Abeynaike (Deputy Chairman) Mr Sanjiva Senanayake Directors Mr S G Wijesinha Mr Deepal Sooriyaarachchi In terms of Article No 86 and 87 of the Mr P M A Sirimane Prof Malik Ranasinghe Articles of Association of the Company, +Y/:+:V`ZH Mrs Dhara Wijayatilake Mr Dhammika Perera, Mr Deshal De Mel, Mr W M P L De Alwis Miss Annika Senanayake and Mr Aravinda Perera The Report of the Board Audit Committee Mrs Saumya Amarasekera retire Mr Ranjith Samaranayake is given on pages 282 to 284 which forms by rotation and being eligible, offer Mr Tharaka Ranwala (appointed w.e.f. an integral part of the Annual Report of themselves for re-election on the 28.07.2015) the Board of Directors. unanimous recommendation of the Board Nomination Committee and the Board of 26.4 Sampath Information 28.2 Board Human Resources and Directors. Technology Solutions Ltd Remuneration Committee 4Y312/L[[PHYH[JOP*OHPYTHU Mr Deepal Sooriyaarachchi (Chairman) No existing Director has reached the Mr D J Gunaratne Mr Channa Palansuriya age of 70 years and therefore re-election Mr M V Indrasoma (Director until 12th November 2015) under Sections 210 and 211 of the 4Y24:7/LYH[OYL[PYLK^LM Miss Annika Senanayake Companies Act does not apply this year. 03.08.2015) Mr Deshal De Mel Mr M A Salgado (appointed w.e.f. Mr Aravinda Perera 26. List of Directors of the 30.07.2015) Subsidiaries of the Bank ;OL9LWVY[VM[OL)VHYK/\THU Names of the Directors of Subsidiary 27. Register of Directors Resources and Remuneration Committee companies are as follows: and Secretaries is given on pages 285 & 286 which forms As required under Section 223 (1) of the an integral part of the Annual Report of 26.1 Sampath Centre Ltd Companies Act, the Bank maintains a the Board of Directors. Mr I W Senanayake (Chairman) Register of Directors and Secretaries Mr S G Wijesinha which contain the name, surname, 28.3 Board Nomination Committee Mr S P Kannangara former name (if any), residential Miss Annika Senanayake (Chairperson) Mr Wije Dambawinne (resigned w.e.f. address, business, occupation, dates Mr Dhammika Perera 12.10.2015) of appointment and dates of resignation Mr Channa Palansuriya Mr D Ihalalanda (appointed w.e.f. (if applicable) of each Director and the (Director until 12th November 2015) 03.12.2015) Secretary. Mrs Dhara Wijayatilake Mr R Silva (appointed w.e.f. 03.12.2015) Mrs Saumya Amarasekera 28. Board Sub Committees 26.2 S C Securities (Pvt) Ltd The Board, while assuming the overall The Report of the Board Nominations Mr D J Gunaratne (Chairman) responsibility and accountability for the Committee is given on pages 287 & 288 4Y5/2-LYUHUKV,_LJ\[P]L+PYLJ[VY management oversight of the Bank, has which forms an integral part of the Annual CEO) also appointed Board Sub Committees Report of the Board of Directors. Dr S Kelegama to ensure that the activities of the Bank Mr Deshal De Mel at all times are conducted with the 28.4 Board Integrated Risk Mr Aravinda Perera highest ethical standards and the best Management Committee Mr M N R Fernando interests of all its stakeholders. The Mrs Dhara Wijayatilake (Chairperson) Board formed many Sub Committees Mr Channa Palansuriya including the following four mandatory (Director until 12th November 2015) Board Sub Committees as required by Mr Sanjiva Senanayake the Banking Act Direction No 11 of 2007. Prof Malik Ranasinghe The compositions of these four Sub Mr Aravinda Perera Committees as at 31st December 2015 Mr Ranjith Samaranayake were as follows:

Annual Report 2015 SAMPATH BANK PLC 307 Annual Report of the Board of Directors on the Affairs of the Company

The Report of the Board Integrated Risk 28.7 Board Strategic Planning 28.10 Board Marketing Committee Management Committee is given on Committee Mr Deepal Sooriyaarachchi (Chairman) pages 289 to 291 which forms an integral Mr Dhammika Perera (Chairman) Miss Annika Senanayake part of the Annual Report of the Board of Mr Channa Palansuriya Mr Deshal De Mel Directors. (Director until 12th November 2015) Mrs Saumya Amarasekera Mr Sanjiva Senanayake Further, in order to comply with the Prof Malik Ranasinghe The Report of the Board Marketing Section 9 of the Colombo Stock Mr Deshal De Mel Committee is given on page 300 which Exchange Listing Rules, the Bank formed Mr Ranil Pathirana forms an integral part of the Annual a new Board Sub Committee, Board Mrs Dhara Wijayatilake Report of the Board of Directors. Related Party Transactions Review (appointed w.e.f. 28th May 2015) Committee, on 30th July 2015. Miss Annika Senanayake The duties, responsibilities and (appointed w.e.f. 28th May 2015) performance of the above Board Sub 28.5 Board Related Party Mr Aravinda Perera Committees are discussed in the Transactions Review Committee Mr Ranjith Samaranayake respective Board Sub Committee reports. Mrs Dhara Wijayatilake (Chairperson) Mr Sanjiva Senanayake The Report of the Board Strategic 29. Directors’ Meetings Prof Malik Ranasinghe Planning Committee is given on page 296 The details of Directors meetings which Mr Ranjith Samaranayake which forms an integral part of the Annual comprise Board meetings and the Report of the Board of Directors. Board Sub Committee meetings and the The Report of the Board Related Party attendance of Directors at these meetings Transactions Review Committee is given 28.8 Board Shareholder Relations are given in the Corporate Governance on pages 292 & 293 which forms an Committee Report on page 238 of the Annual integral part of the Annual Report of the Prof Malik Ranasinghe (Chairman) Report. Board of Directors. (appointed w.e.f. 16th February 2016) Mr Deshal De Mel 30. Directors’ Interest (WHY[MYVT[OLHIV]LÄ]LTHUKH[VY` Mr Channa Palansuriya (Chairman) Register and Directors’ Board Sub Committees, the Board has (Director until 12th November 2015) Interest in Contracts or HSZVHWWVPU[LK[OLMVSSV^PUNÄ]LUVU The Report of the Board Shareholder Proposed Contracts mandatory Board Sub Committees: Relations Committee is given on pages The Bank maintains the Directors’ Interest 297 & 298 which forms an integral part Register as required under the provisions 28.6 Board Credit Committee of the Annual Report of the Board of of Section 168 (1) (e) of the Companies Prof Malik Ranasinghe (Chairman) Directors. Act. Directors of the Bank have made Mr Channa Palansuriya necessary declarations of their interest (Director until 12th November 2015) 28.9 Board Treasury Committee in contracts or proposed contracts, in Mr Sanjiva Senanayake Mr Sanjiva Senanayake (Chairman) terms of the Sections 192 (1) and 192 (2) Miss Annika Senanayake Prof Malik Ranasinghe of the Companies Act. These interests Mr Deshal De Mel Mr Deshal De Mel have been recorded in the Interest Mr Aravinda Perera Mr Aravinda Perera Register which is available for inspection Mr Ranjith Samaranayake Mr Ranjith Samaranayake in terms of the Act. The particulars of the Directors’ Interest in Contracts are given The Report of the Board Credit The Report of the Board Treasury on page 312 of the Annual Report and Committee is given on pages 294 & 295 Committee is given on page 299 and form an integral part of the Annual Report which forms an integral part of the Annual forms an integral part of the Annual of the Board of Directors. Report of the Board of Directors. Report of the Board of Directors. As a practice and in terms of Corporate Governance, Directors have refrained

308 SAMPATH BANK PLC Annual Report 2015 from voting on matters in which they were its team members in a rapidly changing materially interested. The Directors have 33. Directors’ Interest in environment. All efforts are directed at no direct or indirect interest in a contract Shares and Debentures having a motivated and competent team or a proposed contract with the Bank of Subsidiaries in order to grow and achieve results as other than those disclosed. Mr Aravinda Perera and Mr Ranjith projected in the Strategic Plan and the Samaranayake hold one share each in Budget. 31. Related Party Siyapatha Finance PLC and one share Transactions each in Sampath Information Technology As at 31st December 2015, the number Directors have also disclosed Solutions Ltd, as subscribers. These of employees on the payroll of the Bank transactions if any, that could be shares are held in trust for Sampath was 3,993 (2014: 4,000). JSHZZPÄLKHZYLSH[LKWHY[`[YHUZHJ[PVUZPU Bank. Mr Aravinda Perera also holds one terms of Sri Lanka Accounting Standard - share each in S C Securities (Pvt) Ltd and 36. ESOPs LKAS 24 (Related Party Disclosure) which Sampath Centre Ltd for and on behalf of The Bank did not have any Employee is adopted in preparation of the Financial the Bank. Share Ownership/Option Plans during the Statements. Those transactions disclosed year. by the Directors are given in Note 49 to 34. Directors’ Remuneration the Financial Statements which form an As required under the Section 168 (1) 37. Environmental integral part of the Annual Report of the (f), details of Directors’ emoluments and Protection Board of Directors. V[OLYILULÄ[ZWHPKPUYLZWLJ[VM[OL To the best knowledge of the Board, the .YV\WHUK[OL)HURK\YPUN[OLÄUHUJPHS Bank has not engaged in any activity 32. Directors’ Interest in year under review are given in Note that is harmful or hazardous to the Ordinary Shares and 49.3.1 to the Financial Statements. LU]PYVUTLU[;OL+PYLJ[VYZHSZVJVUÄYT Debentures that to the best of their knowledge The shareholdings of Directors were as 35. Our Team Members and belief the Bank has complied with follows: The Bank believes that its real potential the relevant environmental laws and rests on the strength and capabilities of regulations.

38. Statutory Payments The Directors, to the best of their No of Shares No of Shares RUV^SLKNLHUKILSPLMHYLZH[PZÄLK as at 31st as at 31st that all statutory payments due to the December December Government, other regulatory bodies and 2015 2014 related to the employees have been paid

Mr Dhammika Perera* - - on a timely basis. Mr Channa Palansuriya - - (Director until 12th November 2015) 39. Outstanding Litigation Mr Sanjiva Senanayake - - In the opinion of the Directors and in Mr Deepal Sooriyaarachchi - - consultation with the Bank’s lawyers, Prof Malik Ranasinghe - - litigation currently pending against the Mrs Dhara Wijayatilake - - Bank will not have a material impact Ms Annika Senanayake - - VU[OLYLWVY[LKÄUHUJPHSYLZ\S[ZVM Mr Deshal De Mel - - future operations of the Bank. Details Mr Ranil Pathirana 9,668 9,422 of litigation pending against the Bank Mrs Saumya Amarasekera - - are given in Note 47.3 to the Financial Mr Aravinda Perera 73,710 71,827 Statements. Mr Ranjith Samaranayake 21,872 21,314 * Following Company is controlled by Mr Dhammika Perera Vallibel One PLC 25,765,740 25,107,454

None of the Directors directly hold any debentures issued by the Bank.

Annual Report 2015 SAMPATH BANK PLC 309 Annual Report of the Board of Directors on the Affairs of the Company

40. Events after the  6LJQLðFDQW 45. Corporate Governance Reporting Period Shareholdings in Other The Directors of the Bank are committed No circumstances have arisen since Organisations towards maintaining an effective the Statement of Financial Position date The Bank continues to hold 9.47% Corporate Governance Framework which would require adjustments to, or shareholding in LankaBangla Finance and implementing processes required disclosure in, the accounts, except those Limited in Bangladesh. Details are given to ensure that the Bank is compliant disclosed in Note 51 to the Financial in Note 28.3 to the Financial Statements. with the Code of Best Practices on Statements. Corporate Governance issued jointly by 44. Risk Management and the Institute of Chartered Accountants 41. Going Concern Internal Control of Sri Lanka and the Securities and 44.1 Material Foreseeable Risk The Directors after making necessary Exchange Commission of Sri Lanka and Factors inquiries and reviews including reviews the Direction on Corporate Governance The Bank has an ongoing process in of the budget for the ensuing year, issued by the CBSL. Details are given on place to identify, evaluate and manage capital expenditure requirements, Corporate Governance Report on pages the risks that are faced by the Bank. M\[\YLWYVZWLJ[ZHUKYPZRZJHZOÅV^Z 228 to 281 of this Annual Report. and such other matters required to be This process is detailed in the Risk Management Report on pages 202 to addressed in the Code of Best Practice As required by Section 3(8)(ii)(g) of the 227. The Directors, on a regular basis on Corporate Governance issued jointly Direction No 11 of 2007 of the Banking review the above mentioned process by the Institute of Chartered Accountants Act on Corporate Governance for through the Board Integrated Risk of Sri Lanka and the Securities and Licensed Commercial Banks, issued Management Committee. Exchange Commission of Sri Lanka and by the CBSL, the Board of Directors the Direction on Corporate Governance JVUÄYTZ[OH[HSS[OLÄUKPUNZVM[OL 44.2 Internal Controls PZZ\LKI`[OL*):3HYLZH[PZÄLK[OH[[OL “Factual Findings Reports” of auditors The Directors of the Bank have taken Bank has adequate resources to continue issued under “Sri Lanka Related Services reasonable steps open to them to operations into the foreseeable future. Practice Statement 4750” have been safeguard the assets of the Group and Accordingly, they continue to adopt the incorporated in the annual Corporate the Bank and to prevent and detect going concern basis in preparing the Governance Report on pages 260 to 281 frauds and any other irregularities. For Financial Statements. of this Annual Report. this purpose the Directors have instituted 42. Donations effective and comprehensive systems of 46. Auditors internal controls for identifying, recording, As required by the Section 168 (1) (g) The Auditors of the Bank during the year L]HS\H[PUNHUKTHUHNPUN[OLZPNUPÄJHU[ of the Companies Act, information were Messrs Ernst & Young, Chartered risks faced by the Bank throughout pertaining to donations made by the Accountants. They also function as the year and it is being regularly Bank during the year is given below. the Auditors for the Bank’s Subsidiary reviewed by the Board of Directors. During the year the Bank made donations companies namely, Sampath Centre This comprises internal reviews, internal to the value of Rs 2,487,000 (2014: Rs Ltd, SC Securities (Pvt) Ltd, Siyapatha H\KP[HUK[OL^OVSLZ`Z[LTVMÄUHUJPHS 49,148,000/-) in terms of the resolution Finance PLC and Sampath Information and other controls required to carry on passed at the last Annual General Technology Solutions Ltd. Audit fees the operations in an orderly manner, Meeting. Donations made by the paid to Messrs Ernst & Young for the safeguard the assets, prevent and detect Group during the year amounted to Rs year ended 31st December 2015 by the frauds and other irregularities and secure, 2,487,000/- (2014: 49,153,000/-). Out of Group and the Bank amounted to Rs as far as practicable, the accuracy and the aforementioned sum, the donations 14,798,000/- (2014: Rs 13,418,000/-) and reliability of the records. made by the Bank to Government Rs 11,299,000/- (2014: Rs 10,470,000/-) approved charities amounted to Rs Nil/- respectively. (2014: 40,100,000/). The Bank does not make donations for political purposes.

310 SAMPATH BANK PLC Annual Report 2015 Further the Group and the Bank paid the Bank that in their judgments, may 47. Notice of Meeting Rs 5,379,000/- (2014: Rs 6,541,000/-) and reasonably be thought to have a bearing The 30th Annual General Meeting of the Rs 4,997,000/- (2014: Rs 6,541,000/-) on their independence within the meaning Bank will be held at ¸)HSTVYHS¹/HSS, the respectively to Messrs Ernst & Young of the Code of Professional Conduct and Kingsbury, Colombo 1 on 31st March as Audit related fees and expenses. In Ethics issued by the Institute of Chartered 2016. The Notice of Meeting is given on addition, they were paid Rs 8,113,000/- Accountants of Sri Lanka, applicable on page 488 of the Annual Report. (2014: the date of this report. Rs 12,055,000/-) and Rs 4,969,000/- As required by Section 168 (1) (k) of the (2014: Rs 11,092,000/-) by the Group The retiring Auditors, Messrs Ernst & Companies Act the Board of Directors and the Bank respectively for permitted Young, have expressed their willingness hereby acknowledge the contents of this non-audit related services including tax [VJVU[PU\LPUVMÄJL;OL`JVTL\W report. consultancy services. Details of the Audit for re-election at the Annual General fees paid are given on Note 13.1 to the Meeting, with the recommendation of the For and on behalf of the Board of Financial Statements. Board Audit Committee and the Board Directors. of Directors. In accordance with the Based on the declaration provided by Companies Act, a resolution proposing Messrs Ernst & Young, and as far as the the re-appointment of Messrs Ernst Directors are aware, the Auditors do not & Young, Chartered Accountants, as have any relationship with or interest with Auditors is being proposed at the Annual General Meeting.

Dhammika Perera Sanjiva Senanayake Aravinda Perera Anuja Goonetilleke Chairman Senior Director Managing Director Company Secretary

Colombo, Sri Lanka 16th February 2016

Annual Report 2015 SAMPATH BANK PLC 311 Annual Report of the Board of Directors on the Affairs of the Company

Directors’ Interest in Contracts with the Bank Related party disclosures as required by Sri Lanka Accounting Standard LKAS 24 (Related Party Disclosures) are detailed in Note 49 to Financial Statements. In Addition, the Bank carries out transactions in the ordinary course of business in an arm’s length basis with entities where the Chairman or Director of the Bank is the Chairman or a Director of such entities as detailed below.

Company Relationship Nature of the Facility Current Balance Balance Limit Outstanding Outstanding as at as at 31.12.2015 31.12.2014 Rs 000 Rs 000 Rs 000

Prof Malik Ranasinghe Access Engineering PLC Independent Non Indirect Facilities 3,100,000 1,132,962 1,828,967 Executive Director Deposits 619,946 13,525

Mr Ranil Pathirana Ceylon Knit Trend (Pvt) Ltd Director Deposits 156 439,522 CKT Apparel (Pvt) Ltd Director Deposits 12 4 Esna Power (Pvt) Ltd Non Executive Director Loan & Receivables - 100,000 Indirect Facilities - 984 Deposits 5,005 58,169 /PYKHYHTHUP0UK\Z[YPLZ3[K Director Deposits 497 343 /PYKHYHTHUP7][3[K Director Deposits 17 444 /PYKHYHTHUP0U[LYUH[PVUHS Director Loan & Receivables - 656,000 Exports (Pvt) Ltd Deposits 73,281 466 Rosewood (Pvt) Ltd Director Deposits 396 956 Star Packaging (Pvt) Ltd Non Executive Director Loan & Receivables 207,895 105,247 151,893 Indirect Facilities - 2,451 Deposits 198 39 Windforce (Pvt) Ltd Non Executive Director Deposits 1,417 1,341 Odel PLC Director Loan & Receivables 75,000 - - Deposits 2,123 -

Mr Aravinda Perera Colombo Stock Exchange Director Deposits 30,006 21,980 Institute of Bankers of Sri Director Deposits 8,346 14,621 Lanka

Mr Deepal Sooriyaarachchi Pan Asia Power PLC Independent Non Loan & Receivables 635,000 635,000 635,082 Executive Director Indirect Facilities - 1,467 Deposits 25,483 92,828

312 SAMPATH BANK PLC Annual Report 2015 Directors’ Statement on Internal Control Over Financial Reporting

Responsibility The Management assists the Board in the The Board Audit Committee of In line with the Banking Act Direction No implementation of the Board’s policies and the Bank reviews internal control 11 of 2007, section 3 (8)(ii)(b), the Board of procedures on risk and control by identifying PZZ\LZPKLU[PÄLKI`[OL0U[LYUHS Directors presents this report on Internal and assessing the risks faced, and in the Audit Department, the External Control Over Financial Reporting. design, operation and monitoring of suitable Auditors, regulatory authorities and internal controls to mitigate and control the Management; and evaluates The Board of Directors (“the Board”) these risks. the adequacy and effectiveness of is responsible for the adequacy and the risk management and internal effectiveness of the internal control Key Features of the Process control systems. They also review the mechanism in place at Sampath Bank PLC, Adopted in Applying and internal audit functions with particular (“the Bank”). In considering such adequacy Reviewing the Design and emphasis on the scope of audits and and effectiveness, the Board recognises that Effectiveness of the Internal quality of the same. The minutes of the business of banking requires reward to Control System Over the Board Audit Committee meetings be balanced with risk on a managed basis Financial Reporting are forwarded to the Board on a and as such the internal control systems are The key processes that have been periodic basis. Further details of the primarily designed with a view to highlighting established in reviewing the adequacy and activities undertaken by the Board any deviations from the limits and indicators integrity of the system of internal controls Audit Committee of the Bank are set which comprise the risk appetite of the ^P[OYLZWLJ[[VÄUHUJPHSYLWVY[PUNPUJS\KL out in the Board Audit Committee Bank. In this light, the system of internal the following: Report on pages 282 to 284. controls can only provide reasonable, but Various Committees are established not absolute assurance, against material by the Board to assist the Board in In assessing the internal control TPZZ[H[LTLU[VMÄUHUJPHSPUMVYTH[PVUHUK ensuring the effectiveness of Bank’s Z`Z[LTV]LYÄUHUJPHSYLWVY[PUN YLJVYKZVYHNHPUZ[ÄUHUJPHSSVZZLZVYMYH\K daily operations and that the Bank’s PKLU[PÄLKVMÄJLYZVM[OL)HUR operations are in accordance with collated all procedures and controls The Board has established an ongoing the corporate objectives, strategies [OH[HYLJVUULJ[LK^P[OZPNUPÄJHU[ process for identifying, evaluating and and the annual budget as well as the accounts and disclosures of the THUHNPUN[OLZPNUPÄJHU[YPZRZMHJLKI`[OL policies and business directions that ÄUHUJPHSZ[H[LTLU[ZVM[OL)HUR Bank and this process includes enhancing have been approved. These in turn were observed and the system of Internal Control Over Financial checked by the internal audit Reporting as and when there are changes The Internal Audit Division of the department for suitability of design to business environment or regulatory Bank checks for compliance with and effectiveness on an ongoing guidelines. The process is regularly policies and procedures and the basis. The Bank adopted the new reviewed by the Board and accords with effectiveness of the internal control Sri Lanka Accounting Standards the “Guidance for Directors of Banks systems on an ongoing basis using comprising LKAS and SLFRS on the Directors’ Statement on Internal samples and rotational procedures in 2012. The processes and Control” issued by the Institute of Chartered HUKOPNOSPNO[ZZPNUPÄJHU[ÄUKPUNZ procedures initially applied to adopt Accountants of Sri Lanka. The Board has in respect of any non-compliance. the aforementioned Accounting assessed the Internal Control Over Financial Audits are carried out on all units and Standards were further strengthened Reporting taking into account principles for branches, the frequency of which during the years 2013, 2014 and the assessment of internal control system is determined by the level of risk 2015 based on the feedback as given in that guidance. assessed, to provide an independent received from the external auditors, and objective report. The annual internal audit department, regulators The Board is of the view that the system of audit plan is reviewed and approved and the Board Audit Committee. The Internal Controls Over Financial Reporting by the Board Audit Committee. Bank has documented procedures in place is sound and adequate to provide Findings of the Internal Audit pertaining to these new requirements reasonable assurance regarding the Department are submitted to the and updates the relevant procedure YLSPHIPSP[`VMÄUHUJPHSYLWVY[PUNHUK[OH[ Board Audit Committee for review at manuals as and when necessary. [OLWYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[Z their periodic meetings. The Board has also recognised the for external purposes is in accordance need to introduce an automated with relevant accounting principles and ÄUHUJPHSYLWVY[PUNWYVJLZZPUVYKLY regulatory requirements. to comply with the requirements

Annual Report 2015 SAMPATH BANK PLC 313 Directors’ Statement on Internal Control Over Financial Reporting

of recognition, measurement, &RQðUPDWLRQ nothing has come to their attention that JSHZZPÄJH[PVUHUKKPZJSVZ\YLVM[OL Based on the above processes, the Board causes them to believe that the statement ÄUHUJPHSPUZ[Y\TLU[ZTVYLLMMLJ[P]LS` JVUÄYTZ[OH[[OLÄUHUJPHSYLWVY[PUNZ`Z[LT is inconsistent with their understanding of HUKLMÄJPLU[S`;OL4HUHNLTLU[PZ of the Bank has been designed to provide the process adopted by the Board in the currently reviewing various options a reasonable assurance regarding the review of the design and effectiveness of the H]HPSHISL[VH\[VTH[L[OLÄUHUJPHS YLSPHIPSP[`VMÄUHUJPHSYLWVY[PUNHUK[OL PU[LYUHSJVU[YVSV]LYÄUHUJPHSYLWVY[PUNVM reporting process. The assessment WYLWHYH[PVUVMÄUHUJPHSZ[H[LTLU[ZMVY the Bank. Their Report on the Statement of did not include subsidiary companies external purposes and has been done in Internal Control over Financial Reporting is of the Bank. accordance with Sri Lanka Accounting given on page 315 of this Annual Report. Standards and regulatory requirements of The comments made by the the Central Bank of Sri Lanka. By order of the Board External Auditors in connection with internal control system over Review of the Statement by ÄUHUJPHSYLWVY[PUNPUWYL]PV\Z`LHYZ External Auditors were reviewed during the year and The External Auditors, Messrs Ernst & appropriate steps have been taken to Young, have reviewed the above Directors rectify them. The recommendations Statement on Internal Control over Financial made by the External Auditors Reporting included in the Annual Report of in 2015 in connection with the the Bank for the year ended 31st December PU[LYUHSJVU[YVSZ`Z[LTV]LYÄUHUJPHS 2015 and reported to the Board that reporting will be dealt with in the future.

Ranil Pathirana Dhammika Perera Sanjiva Senanayake Chairman – Board Audit Committee Chairman Senior Director

Aravinda Perera Anuja Goonetilleke Managing Director Company Secretary

Colombo, Sri Lanka 16th February 2016

314 SAMPATH BANK PLC Annual Report 2015 Independent Assurance Report to the Board of Directors of Sampath Bank PLC

Introduction The procedures performed were limited We were engaged by the Board of Directors primarily to inquiries of bank personnel and of Sampath Bank PLC (the “Bank”) to the existence of documentation on a sample provide assurance on the Directors’ basis that supported the process adopted Statement on Internal Control over Financial by the Board of Directors. Reporting (the “Statement”) included in the annual report for the year ended 31 SLSAE 3050 does not require us to December 2015. consider whether the Statement covers all risks and controls or to form an opinion Management’s Responsibility on the effectiveness of the Bank’s risk and Management is responsible for the control procedures. SLSAE 3050 also does preparation and presentation of the not require us to consider whether the Statement in accordance with the processes described to deal with material “Guidance for Directors of Banks on the PU[LYUHSJVU[YVSHZWLJ[ZVMHU`ZPNUPÄJHU[ Directors’ Statement on Internal Control” problems disclosed in the annual report will, issued in compliance with section 3(8)(ii)(b) in fact, remedy the problems. of the Banking Act Direction No. 11 of 2007, by the Institute of Chartered Accountants of Our Conclusion Sri Lanka. Based on the procedures performed, nothing has come to our attention that Our Responsibilities and causes us to believe that the Statement Compliance with SLSAE 3050 included in the annual report is inconsistent Our responsibility is to issue a report to the with our understanding of the process board on the Statement based on the work the Board of Directors has adopted in the performed. We conducted our engagement review of the design and effectiveness of in accordance with Sri Lanka Standard on PU[LYUHSJVU[YVSV]LYÄUHUJPHSYLWVY[PUNVM[OL Assurance Engagements SLSAE 3050 – Bank. Assurance Report for Banks on Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. Ernst & Young Summary of Work Performed Chartered Accountants We conducted our engagement to assess whether the Statement is supported by the 16 February 2016 documentation prepared by or for Directors; Colombo HUKHWWYVWYPH[LS`YLÅLJ[LK[OLWYVJLZZ the Directors have adopted in reviewing [OLZ`Z[LTVMPU[LYUHSJVU[YVSV]LYÄUHUJPHS reporting of the Bank.

Annual Report 2015 SAMPATH BANK PLC 315 Managing Director’s and Group Chief Financial 6ɉJLY»Z9LZWVUZPIPSP[`:[H[LTLU[

The Financial Statement of Sampath Bank position, results of the operations and The Financial Statements of the Group PLC (the Bank) and the Consolidated [OLJHZOÅV^ZVM[OL.YV\W>LOH]L were audited by Messrs Ernst & Young, Financial Statements of the Bank and reasonable grounds to believe that the Chartered Accountants, the independent its Subsidiaries (the Group) as at 31st Bank and its Subsidiaries have adequate External Auditors. Their report is given on December 2015 are prepared in compliance resources to continue in operational page 319 of this Annual Report. with the requirements of the following: existence for the foreseeable future. Accordingly, we continue to adopt the going The Board Audit Committee of the Bank Sri Lanka Accounting Standards concern basis in preparing the Financial meets periodically with the Internal Auditors issued by the Institute of Chartered Statements. and the independent External Auditors to Accountants of Sri Lanka; review the manner in which these auditors Companies Act No 7 of 2007 The estimates and judgments relating to are performing their responsibilities and to (Companies Act); the Financial Statements were made on a discuss issues relating to auditing, internal Sri Lanka Accounting and Auditing prudent and reasonable basis; in order that JVU[YVSZHUKÄUHUJPHSYLWVY[PUNPZZ\LZ Standards Act No 15 of 1995; [OL-PUHUJPHS:[H[LTLU[ZYLÅLJ[PUH[Y\L To ensure complete independence, the Banking Act No 30 of 1988 and and fair manner, the form and substance External Auditors and the Internal Auditors amendments thereto; of transactions and that the Bank’s state of have full and free access to the members The Listing Rules of the Colombo affairs is reasonably presented. To ensure of the Board Audit Committee to discuss Stock Exchange; this, the Bank and all of its Subsidiaries any matter of substance. The Board Audit The Code of Best Practice on OH]L[HRLUWYVWLYHUKZ\MÄJPLU[JHYLPU Committee report is given on pages 282 to Corporate Governance issued installing a system of internal controls 284. jointly by the Institute of Chartered and procedures for safeguarding assets, Accountants of Sri Lanka, preventing and detecting frauds and / or The Board Audit Committee approves the Securities and Exchange errors as well as other irregularities which the audit and non-audit services provided Commission of Sri Lanka; and are reviewed, evaluated and updated on by Messrs Ernst & Young, in order to Section 3(8)(ii)(g) of the Banking an ongoing basis. Our Internal Auditors ensure that the provision of such services Act Direction No 11 of 2007 on have conducted periodic audits to provide does not impair Messrs Ernst & Young’s Corporate Governance issued by the reasonable assurance that the established independence. Central Bank of Sri Lanka. policies and procedures were consistently MVSSV^LK/V^L]LY[OLYLHYLPUOLYLU[ >LJVUÄYT[OH[[V[OLILZ[VMV\Y The formats used in the preparation of the limitations that should be recognised in knowledge: Financial Statements and disclosures made weighing the assurances provided by any The Group has complied with all comply with the formats prescribed by the system of internal controls and accounting. applicable laws, regulations and Central Bank of Sri Lanka, which is also in prudential requirements; compliance with the disclosure requirements >LJVUÄYTJVTWSPHUJL^P[OZLJ[PVU  There are no material non of the Sri Lanka Accounting Standard (LKAS (ii)(b) of the Banking Act Direction No 11 of compliances; and 1) “Presentation of Financial Statements”. 2007 on Corporate Governance (Internal There are no material litigations that Control Over Financial Reporting - ICOFR) are pending against the Group other The Accounting Policies used in the issued by the Central Bank of Sri Lanka than those disclosed in Note No 47.3 preparation of the Financial Statements are as of 31st December 2015 and that the to the Financial Statements in the appropriate and are consistently applied Bank’s Internal Controls Over Financial Annual Report. I`[OL.YV\W;OLZPNUPÄJHU[HJJV\U[PUN Reporting is adequate and effective. The policies and estimates that involve a high Annual Report of the Directors on pages degree of judgment and complexity were [VOHZIYPLÅ`JV]LYLK[OL.YV\W»Z discussed with the Board Audit Committee Internal Control Over Financial Reporting. Aravinda Perera and External Auditors. Comparative In addition, Directors’ Statement on Internal Managing Director information has been restated wherever Control Over Financial Reporting is provided necessary to comply with the current on pages 313 & 314. The Bank’s External presentation and material departures, if Auditors, Messrs Ernst & Young, have any, have been disclosed and explained in audited the effectiveness of the Bank’s Ranjith Samaranayake the notes to the Financial Statements. We Internal Controls Over Financial Reporting Executive Director/Group Chief Financial JVUÄYT[OH[[V[OLILZ[VMV\YRUV^SLKNL HUKOH]LNP]LUHU\UX\HSPÄLKVWPUPVUVU 6MÄJLY the Financial Statements give a true and page 315 of this Annual Report. MHPY]PL^VM[OLHZZL[ZSPHIPSP[PLZÄUHUJPHS Colombo, Sri Lanka. 16th February 2016

316 SAMPATH BANK PLC Annual Report 2015 Statement of Directors’ Responsibility for Financial Reporting

The responsibilities of the Directors in In preparing these Financial Statements, the annual Financial Statements of licensed relation to the Financial Statements of Directors are required to ensure that: commercial banks. The Directors accept Sampath Bank PLC (the Bank) and the 1. the appropriate accounting policies responsibility for the integrity and objectivity Consolidated Financial Statements of the have been selected and applied in of the Financial Statements published in Bank and its Subsidiaries (the Group) are a consistent manner and material [OPZ(UU\HS9LWVY[;OL+PYLJ[VYZJVUÄYT set out in the following Statement. The departures, if any, have been that in preparing the Financial Statements responsibility of the Auditors in relation to disclosed and explained; given on pages 320 to 452, appropriate the Financial Statements is set out in the 2. the Financial Statements are accounting policies have been selected and Report of the Auditors given on page 319. presented in accordance with HWWSPLKIHZLKVU[OLUL^ÄUHUJPHSYLWVY[PUN Sri Lanka Accounting Standards framework on a consistent basis, while As per the provisions of the Companies Act (SLFRS/LKAS) and are consistent reasonable and prudent judgments have No 7 of 2007 (Companies Act), the Directors with the underlying books of been made so that the form and substance of the Bank are responsible for ensuring account; VM[YHUZHJ[PVUZHYLWYVWLYS`YLÅLJ[LK that the Bank and the Group keep proper 3. reasonable and prudent judgments books of account of all the transactions and estimates have been made The Directors have taken appropriate steps and they are required to prepare Financial so that the form and substance of to ensure that the Bank and the Group Statements that give a true and fair view [YHUZHJ[PVUZHYLWYVWLYS`YLÅLJ[LK" maintain proper books of account and VM[OLÄUHUJPHSWVZP[PVUVM[OL)HURHUK 4. the Financial Statements provide YL]PL^[OLÄUHUJPHSYLWVY[PUNZ`Z[LTKPYLJ[S` [OL.YV\WHZH[LUKVMLHJOÄUHUJPHS`LHY the information required by the by them at their regular meetings and also and place them before a general meeting. Companies Act, Banking Act No through the Board Audit Committee. The The Financial Statements comprise of the 30 of 1988 (Banking Act) and the Report of the Board Audit Committee is Statement of Financial Position as at end of Listing Rules of the Colombo Stock given on pages 282 to 284. The Board of [OLÄUHUJPHS`LHY[OL:[H[LTLU[VM7YVÄ[VY Exchange. Directors also approves the Interim Financial Loss, Statement of Comprehensive Income, 5. the companies within the Group Statements prior to their release, following Statement of Changes in Equity, Statement THPU[HPUZ\MÄJPLU[HJJV\U[PUN a review and recommendation by the Board VM*HZO-SV^MVY[OLÄUHUJPHS`LHYLUKLK YLJVYKZ[VKPZJSVZL[OLÄUHUJPHS Audit Committee. and notes thereto. position of the Group with reasonable accuracy. The Directors have taken all reasonable The Financial Statements are prepared steps open to them to safeguard the under the supervision of the Group Chief The Directors are also required to ensure assets of the Bank and the Group and to -PUHUJPHS6MÄJLY^OVPZHU,_LJ\[P]L that the Bank and the Group have adequate prevent and detect frauds and any other +PYLJ[VYVM[OL)HUR;OL+PYLJ[VYZJVUÄYT resources to continue in operation and to irregularities. For this purpose the Directors that the Financial Statements of the Bank justify applying the going concern basis in have instituted effective and comprehensive and the Group give a true and fair view of: preparing these Financial Statements. systems of internal controls for identifying, 1. The state of affairs of the Bank and recording, evaluating and managing the Group as at 31st December Financial Statements for the year 2015, [OLZPNUPÄJHU[YPZRZMHJLKI`[OL)HUR 2015: and prepared and presented in this Annual throughout the year and it is being under  ;OLÄUHUJPHSWLYMVYTHUJLZVM[OL Report are consistent with the underlying regular review of the Board of Directors. This )HURHUK[OL.YV\WMVY[OLÄUHUJPHS books of account and are in conformity with comprises internal reviews, internal audit year ended 31st December 2015 the requirements of Sri Lanka Accounting HUK[OL^OVSLZ`Z[LTVMÄUHUJPHSHUKV[OLY Standards, Companies Act, Sri Lanka controls required to carry on the operations The Financial Statements of the Bank Accounting and Auditing Standards Act No in an orderly manner, safeguard the assets, HUK[OL.YV\WOH]LILLUJLY[PÄLKI`[OL 15 of 1995, Banking Act and amendments prevent and detect frauds and other .YV\W*OPLM-PUHUJPHS6MÄJLY[OLVMÄJLY thereto, the continuing Listing Rules of irregularities and secure as far as practicable responsible for their preparation, as required the Colombo Stock Exchange (CSE) and the accuracy and reliability of the records. by the Companies Act. The accounts have the Code of Best Practice on Corporate been circulated and reviewed by the Board Governance issued jointly by the Institute of Based on their assessment of Internal Audit Committee and Board of Directors. Chartered Accountants of Sri Lanka (ICASL) Control Over Financial Reporting (ICOFR), Further, the Financial Statements of the & the Securities and Exchange Commission in compliance with section 3(8)(ii)(b) of the Bank and the Group have been signed by of Sri Lanka (SEC). Further these Financial Banking Act Direction No 11 of 2007 on three Directors and the Company Secretary Statements comply with the prescribed Corporate Governance, the Directors have in conformity with the requirements of the format issued by the Central Bank of concluded that, as of 31st December 2015, Companies Act. Sri Lanka (CBSL) for the preparation of [OL.YV\W»ZPU[LYUHSJVU[YVSZV]LYÄUHUJPHS

Annual Report 2015 SAMPATH BANK PLC 317 Statement of Directors’ Responsibility for Financial Reporting

reporting are effective. The Directors’ adequate and nothing has come to their Statement on Internal Control Over Financial attention to indicate that any breakdown in Reporting and Annual Report of the Board the functioning of these controls, resulting in of Directors on the Affairs of the Company material loss to the Bank. The Directors also are provided on pages 313 & 314 and JVUÄYT[OH[[OL)HUR^PSSOH]LHKLX\H[L pages 303 to 312 respectively of this Annual resources to continue in operational Report. The External Auditors’ Independent existence and as a going concern for the Assurance Report on the “Directors’ foreseeable future. Statement on Internal Control Over Financial Reporting” is given on page 315 of this The Directors are of the view that they have Annual Report. discharged their responsibilities as set out in the above statement. As required by section 56(2) of the Companies Act, the Directors have made By order of the Board, an assessment of the Solvency of the Bank, immediately after the proposed dividend HUKJVUÄYT[OH[[OL)HURZH[PZÄLZ[OL Solvency Test required by the Section 57 of Companies Act. The Directors have also Anuja Goonetilleke VI[HPULK[OL*LY[PÄJH[LVM:VS]LUJ`MYVT[OL Company Secretary External Auditors of the Bank, Messrs Ernst & Young. Colombo, Sri Lanka 16th February 2016 Messrs Ernst & Young, Chartered Accountants, the External Auditors of the Bank were provided with every opportunity to undertake the inspections they considered appropriate. They have examined the Financial Statements made available to them by the Directors together ^P[OHSSÄUHUJPHSYLJVYKZYLSH[LKKH[H minutes of the Shareholders’ meetings, Directors’ meetings, Board Audit Committee meetings and other Board Sub Committee meetings and expressed their opinion as reported by them in the Annual Report on page 319.

Compliance Report ;OL+PYLJ[VYZJVUÄYT[OH[[V[OLILZ[VM their knowledge, all taxes, duties and levies payable by the Bank and its Subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Bank and its Subsidiaries and all other known statutory dues as were due and payable by the Bank and its Subsidiaries as at reporting date have been paid or, where relevant, provided for, except as ZWLJPÄLKPU5V[L[V[OL-PUHUJPHS Statements covering contingent liabilities. ;OL+PYLJ[VYZJVUÄYT[OH[IHZLKVU[OLPY assessment, the accounting controls are

318 SAMPATH BANK PLC Annual Report 2015 Independent Auditors’ Report to the Shareholders of Sampath Bank PLC

Report on the Financial An audit involves performing procedures Report on Other Legal and Statements to obtain audit evidence about the Regulatory Requirements We have audited the accompanying HTV\U[ZHUKKPZJSVZ\YLZPU[OLÄUHUJPHS As required by Section 163(2) of the ÄUHUJPHSZ[H[LTLU[ZVM:HTWH[O)HUR73* statements. The procedures selected Companies Act No. 7 of 2007, we state the [OL¸)HUR¹HUK[OLJVUZVSPKH[LKÄUHUJPHS depend on the auditor’s judgment, following: statements of the Bank and its subsidiaries including the assessment of the risks of a) The basis of opinion and scope and (the “Group”), which comprise the statement TH[LYPHSTPZZ[H[LTLU[VM[OLÄUHUJPHS limitations of the audit are as stated VMÄUHUJPHSWVZP[PVUHZH[+LJLTILY statements, whether due to fraud or error. above. HUK[OLZ[H[LTLU[VMWYVÄ[VYSVZZ In making those risk assessments, the b) In our opinion : and comprehensive income, statement auditor considers internal control relevant We have obtained all the information of changes in equity and, statement of [V[OLIHUR»ZWYLWHYH[PVUVM[OLÄUHUJPHS and explanations that were required JHZOÅV^MVY[OL`LHY[OLULUKLKHUKH statements that give a true and fair view in for the audit and, as far as appears Z\TTHY`VMZPNUPÄJHU[HJJV\U[PUNWVSPJPLZ order to design audit procedures that are from our examination, proper and other explanatory information set out on appropriate in the circumstances, but not accounting records have been kept pages 320 to 452. for the purpose of expressing an opinion by the Bank, on the effectiveness of the bank’s internal  ;OLÄUHUJPHSZ[H[LTLU[ZVM[OL)HUR control. An audit also includes evaluating NP]L[Y\LHUKMHPY]PL^VM[OLÄUHUJPHS Board’s Responsibility for the appropriateness of accounting policies position as at 31 December 2015, the Financial Statements used and the reasonableness of accounting HUKVMP[ZÄUHUJPHSWLYMVYTHUJL The Board of Directors (the “Board”) is estimates made by Board, as well as HUKJHZOÅV^ZMVY[OL`LHY[OLU responsible for the preparation of these evaluating the overall presentation of the ended in accordance with Sri Lanka ÄUHUJPHSZ[H[LTLU[Z[OH[NP]LH[Y\LHUK ÄUHUJPHSZ[H[LTLU[Z Accounting Standards, and fair view in accordance with Sri Lanka  ;OLÄUHUJPHSZ[H[LTLU[ZVM[OL)HUR Accounting Standards, and for such internal We believe that the audit evidence we have and the Group, comply with the controls as Board determines is necessary VI[HPULKPZZ\MÄJPLU[HUKHWWYVWYPH[L[V requirements of Section 151 and 153 [VLUHISL[OLWYLWHYH[PVUVMÄUHUJPHS provide a basis for our audit opinion. of the Companies Act No. 7 of 2007. statements that are free from material misstatement, whether due to fraud or error. Opinion 0UV\YVWPUPVU[OLJVUZVSPKH[LKÄUHUJPHS statements give a true and fair view of Auditors’ Responsibility [OLÄUHUJPHSWVZP[PVUVM[OL.YV\WHZH[ Our responsibility is to express an opinion +LJLTILYHUKVMP[ZÄUHUJPHS Ernst & Young VU[OLZLÄUHUJPHSZ[H[LTLU[ZIHZLK WLYMVYTHUJLHUKJHZOÅV^ZMVY[OL`LHY Chartered Accountants on our audit. We conducted our audit then ended in accordance with Sri Lanka in accordance with Sri Lanka Auditing Accounting Standards. 16 February 2016 Standards. Those standards require that Colombo we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the ÄUHUJPHSZ[H[LTLU[ZHYLMYLLMYVTTH[LYPHS misstatement.

Annual Report 2015 SAMPATH BANK PLC 319 :[H[LTLU[VM7YVÄ[VY3VZZ

Bank Group For the year ended 31st December Note 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Gross income 6 47,031,516 44,597,081 49,101,837 46,394,406

Interest income 37,943,691 38,058,607 39,706,286 39,695,507 Less: Interest expense 20,541,894 22,334,974 21,155,900 22,914,717 Net interest income 7 17,401,797 15,723,633 18,550,386 16,780,790

Fee & commission income 6,487,873 5,055,618 6,620,894 5,132,720 Less: Fee & commission expense 1,201,320 868,212 1,203,683 873,362 Net fee & commission income 8 5,286,553 4,187,406 5,417,211 4,259,358

Net trading income 9 (341,316) 413,387 (341,316) 413,387 Other operating income 10 2,941,268 1,069,469 3,115,973 1,152,792 Total operating income 25,288,302 21,393,895 26,742,254 22,606,327

Less: Net impairment charge / (reversal) for loans & other losses 11 943,569 1,401,399 992,844 1,580,792 Net operating income 24,344,733 19,992,496 25,749,410 21,025,535

Less: Operating expenses Personnel expenses 12 6,141,259 5,060,919 6,524,403 5,341,076 Other operating expenses 13 7,198,177 6,668,211 7,437,635 6,839,150 Total operating expenses 13,339,436 11,729,130 13,962,038 12,180,226

2SHUDWLQJSURðWEHIRUHYDOXHDGGHGWD[ 9$7 DQG  QDWLRQEXLOGLQJWD[ 1%7 RQðQDQFLDOVHUYLFHV 11,005,297 8,263,366 11,787,372 8,845,309

3LZZ!=(; 5);VUÄUHUJPHSZLY]PJLZ             3URðWEHIRUHLQFRPHWD[ 9,100,873 6,726,507 9,789,643 7,246,914

Less: Income tax expense 15 2,966,932 1,812,717 3,161,453 1,979,359 3URðWIRUWKH\HDU 6,133,941 4,913,790 6,628,190 5,267,555

Attributable to: Equity holders of the Bank 6,133,941 4,913,790 6,623,346 5,263,235 Non controlling interest - - 4,844 4,320 6,133,941 4,913,790 6,628,190 5,267,555

Earnings per share (Rs) 16 Earnings per share: Basic (Rs) 38.44 30.55 Earnings per share: Diluted (Rs) 38.44 30.54

Dividend per share (Rs) 17 Dividend per share: Gross (Rs) 13.00* 11.00 Dividend per share: Net (Rs) 11.75* 9.95

The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements.

* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.

320 SAMPATH BANK PLC Annual Report 2015 Statement of Comprehensive Income

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

3URðWIRUWKH\HDU 6,133,941 4,913,790 6,628,190 5,267,555

Other comprehensive income 6[OLYJVTWYLOLUZP]LPUJVTL[VILYLJSHZZPÄLK[VWYVÄ[VYSVZZ!

(Loss) / Gain arising on re-measuring available for  ZHSLÄUHUJPHSHZZL[Z         Exchange difference in translation 32,061 993 32,061 993 (391,710) (698,807) (391,710) (698,807)

.HPU3VZZHYPZPUNMYVTJHZOÅV^OLKNL       1HWRWKHUFRPSUHKHQVLYHLQFRPHWREHUHFODVVLðHG  WRSURðWRUORVV (391,710) (530,793) (391,710) (530,793)

6[OLYJVTWYLOLUZP]LPUJVTLUV[[VILYLJSHZZPÄLK[VWYVÄ[VYSVZZ!

(J[\HYPHSNHPUSVZZVUKLÄULKILULÄ[WSHUZ         Deferred tax effect on above (32,463) 216,390 (32,027) 217,042 83,477 (556,431) 83,188 (558,867) 1HWRWKHUFRPSUHKHQVLYHLQFRPHQRWWREHUHFODVVLðHG  WRSURðWRUORVV 83,477 (556,431) 83,188 (558,867)

Other comprehensive income net of tax (308,233) (1,087,224) (308,522) (1,089,660) Total comprehensive income for the year net of tax 5,825,708 3,826,566 6,319,668 4,177,895

Attributable to: Equity holders of the Bank 5,825,708 3,826,566 6,314,800 4,173,595 Non controlling interest - - 4,868 4,300 5,825,708 3,826,566 6,319,668 4,177,895

The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements.

Annual Report 2015 SAMPATH BANK PLC 321 Statement of Financial Position

Bank Group As at 31st December 2015 2014 2015 2014 Note Rs 000 Rs 000 Rs 000 Rs 000

ASSETS Cash & cash equivalents 19 13,588,075 11,556,620 13,713,456 11,645,326 Balances with Central Bank of Sri Lanka 20 21,341,882 17,607,251 21,341,882 17,607,251 Placements with banks 21 5,193,369 1,791,698 5,193,369 1,791,698 Reverse repurchase agreements - 31,285,348 - 31,285,348 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Financial assets - held for trading 23 1,889,058 17,024,253 1,898,074 17,024,253 Financial assets - held for trading pledged as collaterals 24 2,702,785 13,205,359 2,693,769 13,205,359 Loans to & receivables from banks 25 1,651,205 934,976 1,651,205 934,976 Loans to & receivables from other customers 26 375,696,530 301,434,602 386,277,744 309,569,370 Other loans & receivables 27 33,368,274 24,026,116 33,368,274 24,026,116 Financial assets - available for sale 28 51,250,411 1,581,622 51,941,479 1,581,678 Financial assets - available for sale pledged as collaterals 29 7,210,585 - 6,519,573 - Financial assets - held to maturity 30 - 980,165 63,121 984,363 Investment in subsidiaries 31 1,079,921 1,059,921 - - Property, plant & equipment 32 5,313,491 5,141,848 8,696,577 8,388,598 Intangible assets 33 342,193 368,162 368,369 394,332 Current tax receivables 39 - - 2,249 - Deferred tax assets 34 - - 23,368 23,473 Other assets 35 4,329,933 3,851,087 4,575,482 4,150,607 Total Assets 525,277,173 432,026,252 538,647,452 442,789,972

LIABILITIES Due to banks 36 3,418,499 2,486,747 3,418,499 2,508,869 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z         Securities sold under repurchase agreements 9,316,122 13,001,462 8,662,930 12,500,414 Due to other customers 37 406,323,019 339,969,141 407,163,665 339,678,722 Debt issued & other borrowed funds 38 57,016,284 36,335,599 65,170,977 43,610,816 Dividend payable 90,969 79,284 90,969 79,284 Current tax liabilities 39 4,939,539 2,319,645 5,021,362 2,436,034 Deferred tax liabilities 34 313,181 143,577 433,175 223,750 Other liabilities 40 7,216,643 5,689,541 7,932,992 6,034,668 Other provisions 41 1,060,785 1,037,098 1,092,626 1,061,607 Total Liabilities 490,152,099 401,114,273 499,444,253 408,186,343

EQUITY Stated capital 42 5,381,405 4,470,151 5,381,405 4,470,151 Reserves Statutory reserves 43 1,790,000 1,480,000 1,860,058 1,530,831 Other reserves 44 24,887,372 21,779,082 27,242,985 24,134,695 Retained earnings 45 3,066,297 3,182,746 4,624,088 4,375,667 Total equity attributable to equity holders of the Bank 35,125,074 30,911,979 39,108,536 34,511,344 Non controlling interest 46 - - 94,663 92,285 Total Equity 35,125,074 30,911,979 39,203,199 34,603,629 Total Liabilities & Equity 525,277,173 432,026,252 538,647,452 442,789,972

Net asset value per share (Rs) 203.85 179.39 226.96 200.28 Commitments & contingencies 47 214,992,883 170,165,658 215,214,977 170,406,976

The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements. I certify that these Financial Statements are presented in compliance with the requirements of the Companies Act No 07 of 2007.

Ranjith Samaranayake ,_LJ\[P]L+PYLJ[VY.YV\W*OPLM-PUHUJPHS6MÄJLY

The Board of Directors is responsible for the preparation & presentation of these Financial Statements

Dhammika Perera Sanjiva Senanayake Aravinda Perera Anuja Goonetilleke Chairman Senior Director Managing Director Company Secretary

16th February 2016 Colombo, Sri Lanka

322 SAMPATH BANK PLC Annual Report 2015 Statement of Cash Flow

Bank Group For the year ended 31st December 2015 2014 2015 2014 Note Rs 000 Rs 000 Rs 000 Rs 000

CasKñRZVIURPRSHUDWLQJDFWLYLWLHV Interest receipts 37,700,779 38,496,849 39,476,071 40,133,240 Net commission receipts 5,393,014 4,207,516 5,523,670 4,279,467 Interest payments (18,487,346) (24,826,755) (19,054,339) (25,406,498) Receipts from other operating activities 2,796,738 951,097 3,030,137 1,084,164 Cash payments to employees (5,193,685) (4,616,304) (5,569,494) (4,890,450) =(; 5);VUÄUHUJPHSZLY]PJLZ            Cash payments to other operating activities (6,274,449) (5,863,262) (6,344,200) (5,903,580) 2SHUDWLQJSURðWEHIRUHFKDQJHVLQRSHUDWLQJ assets & liabilities (Note a) 14,116,247 6,817,419 15,149,736 7,703,085

(Increase) / decrease in operating assets Balances with Central Bank of Sri Lanka (3,734,631) (1,840,284) (3,734,631) (1,840,284) Loans to & receivables from other customers (75,306,945) (44,246,690) (77,815,363) (46,052,329) Loans to & receivables from banks (716,229) (296,732) (716,229) (296,732) Other assets (1,044,839) 222,264 (991,178) 463,781 (80,802,644) (46,161,442) (83,257,401) (47,725,564)

Increase / (decrease) in operating liabilities Due to other customers 64,698,283 42,026,920 65,802,936 41,904,065 Due to banks 1,111,503 96,858 1,111,503 96,858 Other liabilities 1,170,695 372,039 1,541,506 361,578 66,980,481 42,495,817 68,455,945 42,362,501

Net cash generated from / (used in) operating activities before income tax 294,084 3,151,794 348,280 2,340,022 Income tax & super gain tax paid (1,136,662) (1,516,154) (1,434,121) (1,605,429) Net cash (used in) / generated from operating activities (842,578) 1,635,640 (1,085,841) 734,593

&DVKñRZVIURPLQYHVWLQJDFWLYLWLHV Net proceeds from reverse repurchase agreements 31,045,000 (13,045,000) 31,045,000 (13,045,000) Net proceeds from securities sold under re -purchase agreements (3,697,910) 9,624,269 (3,850,060) 9,457,654 5L[WYVJLLKZMYVTÄUHUJPHSHZZL[ZOLSKMVY[YHKPUN             5L[WYVJLLKZMYVTÄUHUJPHSHZZL[Z held for trading pledged as collaterals 10,502,574 (9,709,219) 10,511,589 (9,709,219) 5L[WYVJLLKZMYVTÄUHUJPHSHZZL[ZOLSK[VTH[\YP[`          Net proceeds from other loans & receivables (8,965,690) (11,664,369) (8,965,690) (11,664,369) 5L[WYVJLLKZMYVTÄUHUJPHSHZZL[ZH]HPSHISLMVYZHSL           5L[WYVJLLKZMYVTÄUHUJPHSHZZL[Z available for sale pledged as collaterals (7,149,954) - (6,458,396) - +P]PKLUKYLJLP]LKMYVTÄUHUJPHSHZZL[Z       Dividend received from Subsidiaries 10 58,950 49,972 - - Investment in Subsidiary (20,000) - - - Purchase of property, plant & equipment 32 (815,127) (670,632) (1,113,213) (855,326) Purchase of intangible assets 33 (69,247) (150,817) (77,376) (166,981) Proceeds from disposal of property plant & equipment 14,322 14,708 14,747 16,795 Net cash (used in) / generated from investing activities (12,903,089) 5,427,557 (13,458,903) 5,008,000

&DVKñRZVIURPðQDQFLQJDFWLYLWLHV Dividend paid to non controlling interest 46 - - (1,000) (1,000) Increase / (decrease) in debentures 38.1 7,000,000 7,000,000 6,732,670 7,914,500 Increase / (decrease) in commercial papers - - (648,116) 37,081 Increase / (decrease) in other borrowed funds 13,294,302 (9,654,573) 15,068,622 (9,217,137) Shares issued 42.1 - 9,812 - 9,812 Dividend paid (935,758) (1,342,631) (935,758) (1,342,631) 1HWFDVKJHQHUDWHGIURP XVHGLQ ðQDQFLQJDFWLYLWLHV 19,358,544 (3,987,392) 20,216,418 (2,599,375)

Net cash generated / (used) during the year 5,612,877 3,075,805 5,671,674 3,143,218 Cash & cash equivalents at the beginning of the year 12,837,960 9,762,155 12,904,544 9,761,326 Cash & cash equivalents at the end of the year (Note b) 18,450,837 12,837,960 18,576,218 12,904,544

The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements.

Annual Report 2015 SAMPATH BANK PLC 323 Statement of Cash Flow

RECONCILIATION STATEMENT

Bank Group For the year ended 31st December 2015 2014 2015 2014 Note Rs 000 Rs 000 Rs 000 Rs 000

Note (a) 5HFRQFLOLDWLRQRIRSHUDWLQJSURðWEHIRUH changes in operating assets and liabilities 7YVÄ[ILMVYLPUJVTL[H_           Interest income accrued on impaired loans & receivables 7.1 (212,711) (158,333) (212,873) (158,841) Net trading income 9 Forward exchange contract revaluation loss / (gain) 262,642 (365,238) 262,642 (365,238) Capital (gain) / loss (76,249) (287,776) (76,249) (287,776) Dividend income (15,505) (27,385) (15,505) (27,385) Net mark to market loss / (gain) 170,428 267,012 170,428 267,012 Other operating income 10 +P]PKLUKPUJVTLMYVTH]HPSHISLMVYÄUHUJPHSHZZL[Z          *HWP[HSNHPUSVZZMYVTH]HPSHISLMVYZHSLÄUHUJPHSHZZL[Z       Dividend income from Subsidiaries (58,950) (49,972) - - 7YVÄ[VUKPZWVZHSVMWYVWLY[`WSHU[ LX\PWTLU[          Net impairment charge / (reversal) for loans & other losses 11 943,569 1,401,399 992,844 1,580,792 Other operating expenses 13 Depreciation of property, plant & equipment 604,945 615,881 766,527 740,562 Amortisation of intangible assets 95,216 80,014 103,339 85,954 Accrual for interest and commission income (88,121) 621,823 (75,262) 621,823 Accrual for interest expense 2,054,548 (2,491,781) 2,101,622 (2,491,781) Accrual on personnel and other expenses 1,438,561 553,668 1,445,895 559,677 6WLYH[PUNWYVÄ[ILMVYLJOHUNLZPUVWLYH[PUNHZZL[ZSPHIPSP[PLZ        

Note (b) Reconciliation of cash & cash equivalents Local currency in hand 19 7,499,502 6,126,067 7,582,388 6,138,602 Foreign currency in hand 19 1,454,651 2,046,683 1,454,651 2,046,683 Balances with local banks 19 61,267 63,209 103,762 139,380 Balances with foreign banks 19 1,642,172 1,312,448 1,642,172 1,312,448 Money at call and short notice 19 2,930,483 2,008,213 2,930,483 2,008,213 Placements with banks 21 5,193,369 1,791,698 5,193,369 1,791,698 Unfavourable balances with local & foreign banks 36 (330,607) (510,358) (330,607) (532,480) Cash & cash equivalents at the end of the year 18,450,837 12,837,960 18,576,218 12,904,544

The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements.

324 SAMPATH BANK PLC Annual Report 2015 Statement of Changes in Equity Fund 44.4) 44.1) 44.3) (Note Account (Note Reserve (Note (Note 43.1) (Note 43.2) (Note 44.2) (Note 43.2) (Note 43.1) (Note 911,254 - - - - - (90) (1,847,012) (935,848) (1,847,012) (90) 911,254 - 9,812 - - - - - (20) (1,342,631) (1,332,839) (1,342,631) (20) 9,812 - - - - - (391,710) - - 6,217,418 5,825,708 6,217,418 - (391,710) - - - - - (698,807) 168,014 - 4,357,359 3,826,566 4,357,359 168,014 - (698,807) - 5,381,405 1,790,000 - 1,846,649 875,723 35,125,074 22,165,000 3,066,297 - 4,470,151 1,480,000 - 1,846,649 1,267,433 30,911,979 18,665,000 3,182,746 - 28,418,252 14,138,984 2,500,411 4,460,339 1,234,149 2,439,494 1,846,649 1,966,240 (168,014) 4,470,151 1,480,000 - 1,846,649 1,267,433 30,911,979 18,665,000 3,182,746 - 4,470,151 1,480,000 - 1,846,649 1,267,433 30,235,214 18,665,000 2,505,981 - contributions by and distributions to equity holders contributions by and distributions to equity holders Bank Cash : (839,551) Stated 2014 Statutory Reserves (839,551) Capital Statutory Revaluation Investment - for Available Hedge General dividend Other Reserves Earnings in equity, directly with equity holders, recognised Transactions Equity Final Retained Total pages 327 to 452 form an integral part of these Financial Statements. The Notes to the Financial Statements from Final dividend for 2014 : Scrip (96,207) : (1,007,461) 2014 911,254 - for dividend Final Unclaimed dividend adjustment dividend Unclaimed (90) - (90) - (Note 42) Reserve Fund Reserve for Sale Reserve Reserve (Note 45) Total contributions by and distributions to equity holders Total Transfer to reserves during the year to reserves Transfer - 310,000 - - - - 3,500,090 (3,810,090) -

Balance as at 31st December 2015

Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Balance as at 1st January 2014 Total comprehensive income for the year 2014 comprehensive Total 7YVÄ[MVY[OL`LHY              Other comprehensive income (1,087,224) comprehensive (556,431) 168,014 - Other (698,807) - Total comprehensive income for the year 2014 comprehensive Total Final dividend for 2013 : Cash : (1,342,631) 2013 (1,342,631) - for dividend in equity, directly with equity holders, recognised Transactions ESOP-2010 Final 9,812 9,812 - Unclaimed dividend adjustment dividend Unclaimed (20) - (20) - Total contributions by and distributions to equity holders Total Transfer to reserves during the year to reserves Transfer - 245,851 (2,439,494) - - - 4,526,036 (2,332,393) - Balance as at 31st December 2014 Balance as at 1st January 2015 Super gain tax (Note 39.2) (Note (676,765) tax (676,765) gain - Super Balance after super gain tax Total comprehensive income for the year 2015 comprehensive Total 7YVÄ[MVY[OL`LHY            Other comprehensive income comprehensive (308,233) 83,477 Other - (391,710) - Total comprehensive income for the year 2015 comprehensive Total

Annual Report 2015 SAMPATH BANK PLC 325 Statement of Changes in Equity

   Non Total Total Non Shareholders’

(Note 43.1) (Note 43.2) (Note 44.2) (Note 43.2) (Note 43.1) (Note Fund Account (Note 44.1) Reserve (Note 44.3) (Note 44.4) (Note 46) Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Capital Statutory Investment Revaluation Available Hedge General Earnings Fund Controlling Equity 9,812 - - - - - (20) (1,342,631) (1,332,839) (1,000) (1,333,839) (1,000) (1,332,839) (1,342,631) (20) 9,812 - 911,254 - - - - - (90) (1,847,012) (935,848) (1,000) (936,848) (1,000) (935,848) (1,847,012) (90) 911,254 - - - - - (698,807) 168,014 - 4,704,388 4,173,595 4,300 4,177,895 4,300 4,173,595 4,704,388 168,014 - (698,807) - - - - - (391,710) - - 6,706,510 6,314,800 4,868 6,319,668 4,868 6,314,800 6,706,510 (391,710) - - 4,470,151 1,530,831 - 4,202,261 1,267,433 34,511,344 18,665,001 4,375,667 34,603,629 - 92,285 5,381,405 1,860,058 - 4,202,261 875,723 39,108,536 22,165,001 4,624,088 39,203,199 - 94,663 31,670,588 14,138,985 3,300,881 4,460,339 1,271,913 2,497,983 4,202,261 1,966,240 31,759,573 (168,014) 88,985 4,470,151 1,530,831 - 4,202,261 1,267,433 34,511,344 18,665,001 4,375,667 34,603,629 - 92,285 (20) - (20) (20) - - 4,470,151 1,530,831 - 4,202,261 1,267,433 33,729,584 18,665,001 3,593,907 33,820,379 - 90,795 adjustment contributions by and distributions to equity holders contributions by and distributions to equity holders

(Note 42) Reserve Fund Reserve for Sale Reserve Reserve (Note 45) Interest Group Group Balance as at 1st January 2014 Stated Statutory Reserves Other Reserves Retained

Total contributions by and distributions to equity holders Total Total comprehensive income for the year 2014 comprehensive Total 7YVÄ[MVY[OL`LHY            Transfer to reserves during the year to reserves Transfer - 258,918 (2,497,983) - - - 4,526,036 (2,286,971) - - - Other comprehensive income - - - - (698,807) 168,014 - (558,847) (1,089,640) (20) (1,089,660) (20) income (1,089,640) (558,847) comprehensive 168,014 - Other (698,807) - Balance as at 31st December 2014 Total comprehensive income for the year 2014 comprehensive Total Balance as at 1st January 2015 Transactions with equity holders, recognised directly in equity, directly with equity holders, recognised Transactions ESOP-2010 9,812 - 9,812 9,812 - Super gain tax (Note 39.2) (783,250) (Note (1,490) (781,760) tax (781,760) - gain Super Balance after super gain tax Final dividend for 2013 : Cash ------(1,342,631) (1,342,631) (1,000) (1,343,631) Cash (1,000) : (1,342,631) (1,342,631) 2013 - for dividend Final Unclaimed dividend Total comprehensive income for the year 2015 comprehensive Total 7YVÄ[MVY[OL`LHY             Final dividend for 2014 : Cash (840,551) Scrip (96,207) (1,000) - : (96,207) : (839,551) (1,007,461) income (308,522) (839,551) 2014 2014 911,254 - 24 - (308,546) comprehensive for 83,164 for adjustment Other (391,710) - dividend income for the year 2015 comprehensive Total dividend in equity, directly with equity holders, recognised Transactions - dividend Final Final (90) Unclaimed - (90) (90) - - Total contributions by and distributions to equity holders Total Transfer to reserves during the year to reserves Transfer - 329,227 - - - - 3,500,090 (3,829,317) - - - Balance as at 31st December 2015 The Notes to the Financial Statements from pages 327 to 452 form an integral part of these Financial Statements. The Notes to the Financial Statements from

326 SAMPATH BANK PLC Annual Report 2015 Notes to the Financial Statements

1. REPORTING ENTITY 1.3 Principal Activities and Nature of the Statement of Financial Position, 1.1 General Operations :[H[LTLU[VM7YVÄ[VY3VZZ:[H[LTLU[ Sampath Bank PLC (‘The Bank’), is a 1.3.1 Bank of Comprehensive Income, Statement of domiciled, public limited liability company The Bank provides a comprehensive Changes in Equity, Statement of Cash Flow incorporated in Sri Lanka on 10th March YHUNLVMÄUHUJPHSZLY]PJLZLUJVTWHZZPUN and Notes to the Financial Statements 1986 under the Companies Act No 17 of accepting deposits, corporate and retail have been prepared and presented in 1982. It is a Licensed Commercial Bank IHURPUNWYVQLJ[ÄUHUJPUN[YHKLÄUHUJL accordance with Sri Lanka Accounting registered under the Banking Act No 30 treasury and investment services, issuing Standards (SLFRSs and LKASs) laid down of 1988 (Banking Act) and amendments of credit cards and debit cards, off shore by the Institute of Chartered Accountants thereto. The Bank was re-registered with the banking, resident and non-resident foreign of Sri Lanka and in compliance with the Registrar General of Companies as per the currency operations, electronic banking requirements of the Companies Act No 7 requirements of the Companies Act No 7 of services such as: telephone banking, of 2007. The presentation of the Financial 2007 (Companies Act) on 28th April 2008 internet banking and money remittance Statements is also in compliance with the under the name of Sampath Bank PLC. The facilities, pawning, leasing, factoring, hire requirements of the Banking Act No 30 of YLNPZ[LYLKVMÄJLVM[OL)HURPZSVJH[LKH[5V purchase, travel related services and dealing 1988 and amendments thereto. 110, Sir James Peiris Mawatha, Colombo in government securities etc. 02. The shares of the Bank have a primary 2.2 Responsibility for Financial listing on the Colombo Stock Exchange. 1.3.2 Subsidiaries Statements The staff strength of the Bank as at 31st Ownership of Subsidiaries as of 31st The Board of Directors is responsible for the December 2015 was 3,993 (2014: 4,000). December 2015 and 31st December 2014 preparation and presentation of Financial is given in the below table. Statements of the Group and the Bank as 1.2 Consolidated Financial per Sri Lanka Accounting Standards and Statements The Bank invested further Rs 20 Mn in the provisions of the Companies Act No 7 The Consolidated Financial Statements of Sampath Information Technology Solutions of 2007. the Bank as at and for the year ended 31st Ltd (SITS) during the year ended 31st December 2015 comprise the Bank (Parent December 2015. SITS continues as a fully 2.3 Approval of Financial Company) and its Subsidiaries (together owned Subsidiary of the Bank subsequent Statements by Directors referred to as the “Group” and individually to the above investment. The Financial Statements of the Group as as “Group entities”). The Subsidiaries of at and for the year ended 31st December the Bank as at 31st December 2015 were ;OLYL^LYLUVZPNUPÄJHU[JOHUNLZPU[OL 2015 were authorized for issue by the Sampath Centre Ltd, S C Securities (Pvt) nature of the principal activities of the Group Board of Directors in accordance with the Ltd, Siyapatha Finance PLC and Sampath K\YPUN[OLÄUHUJPHS`LHY\UKLYYL]PL^ resolution of the Directors on 16th February Information Technology Solutions Ltd. 2016.

Sampath Bank PLC is the ultimate parent of 2. BASIS OF 2.4 Basis of Measurement the Group. PREPARATION The Financial Statements of the Group have 2.1 Statement of Compliance been prepared on the historical cost basis, The Financial Statements of all companies The Consolidated Financial Statements except for the following material items in the PU[OL.YV\WOH]LHJVTTVUÄUHUJPHS`LHY of the Group and the Separate Financial Statement of Financial Position: which ends on 31st December. Statements of the Bank, which comprise  +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZHYL measured at fair value (Note 22) Available for sale investments are Ownership and Principal Activities of Subsidiaries measured at fair value (Note 28 & Note 29) Subsidiary Principal Activities 31st December 31st December  -PUHUJPHSPUZ[Y\TLU[ZJSHZZPÄLKHZ 2015 2014 MHPY]HS\L[OYV\NOWYVÄ[VYSVZZHYL measured at fair value (Note 23 & Siyapatha Finance PLC Leasing, factoring, pawning Note 24) & accepting deposits 100.00% 100.00% Land and buildings which are Sampath Centre Ltd Renting of commercial measured at cost at the time of property 97.14% 97.14% acquisition subsequently measured S C Securities (Pvt) Ltd Share broking 100.00% 100.00% at revalued amounts, which are the Sampath Information Developing software 100.00% 100.00% fair values at the date of revaluation Technology Solutions Ltd solutions and maintenance (Note 32) of hardware

Annual Report 2015 SAMPATH BANK PLC 327 Notes to the Financial Statements

 3PHIPSP[PLZMVYKLÄULKILULÄ[ 2.8 Comparative Information 2.10.1 Going Concern obligations are recognised at the ;OLJVTWHYH[P]LPUMVYTH[PVUPZYLJSHZZPÄLK The Directors have made an assessment WYLZLU[]HS\LVM[OLKLÄULKILULÄ[ wherever necessary to conform to the of the Group’s ability to continue as a going obligation less the fair value of the current year’s presentation the details of JVUJLYUHUKHYLZH[PZÄLK[OH[P[OHZ[OL plan assets (Note 41) which are given in Note 48 to the Financial resources to continue in business for the Statements. foreseeable future. Furthermore, Board is 2.5 Functional and Presentation not aware of any material uncertainties that Currency 2.9 Statement of Cash Flow TH`JHZ[ZPNUPÄJHU[KV\I[\WVU[OL.YV\W»Z The Financial Statements of the Group ;OLJHZOÅV^Z[H[LTLU[OHZILLUWYLWHYLK ability to continue as a going concern and are presented in Sri Lankan Rupees by using the direct method in accordance they do not intend either to liquidate or to (Rs), which is the currency of the primary with the Sri Lanka Accounting Standard - cease operations of the Group. Therefore, economic environment in which Sampath LKAS 7 (Statement of Cash Flows), whereby the Financial Statements continue to be Bank PLC operates. Financial information gross cash receipts and gross cash prepared on the going concern basis. presented in Sri Lankan Rupees has been WH`TLU[ZVMVWLYH[PUNHJ[P]P[PLZÄUHUJL rounded to the nearest thousand unless activities and investing activities have been 2.10.2 Impairment Losses on Loans and indicated otherwise. There was no change recognised. Cash and cash equivalents Advances in the Group’s presentation and functional comprise short term, highly liquid ;OL.YV\WYL]PL^ZP[ZPUKP]PK\HSS`ZPNUPÄJHU[ currency during the year under review. investments that are readily convertible to loans and advances at each reporting date known amounts of cash and are subject to to assess whether an impairment loss 2.6 Presentation of Financial HUPUZPNUPÄJHU[YPZRVMJOHUNLZPU]HS\L should be recorded in the Statement of Statements 7YVÄ[VY3VZZ0UWHY[PJ\SHYTHUHNLTLU[»Z The assets and liabilities of the Group Cash and cash equivalents include cash in judgment is required in the estimation of presented in the Statement of Financial hand, balances with banks, placements with [OLHTV\U[HUK[PTPUNVMM\[\YLJHZOÅV^Z Position are grouped by nature and listed in banks, money at call and short notice net of when determining the impairment loss. HUVYKLY[OH[YLÅLJ[Z[OLPYYLSH[P]LSPX\PKP[` unfavourable local & foreign bank balances. and maturity pattern. No adjustments have These estimates are based on assumptions ILLUTHKLMVYPUÅH[PVUHY`MHJ[VYZHMMLJ[PUN  6LJQLðFDQW$FFRXQWLQJ about a number of factors and actual results the Financial Statements. An analysis on Judgments, Estimates and may differ, resulting in future changes to the recovery or settlement within 12 months Assumptions impairment allowance made. after the reporting date (current) and more The preparation of Financial Statements than 12 months after the reporting date of the Group in conformity with Sri Lanka Loans and advances that have been (non-current) is presented in the Note 54. Accounting Standards requires the assessed individually and found to be not management to make judgments, estimates PTWHPYLKHUKHSSPUKP]PK\HSS`PUZPNUPÄJHU[ 2.7 Materiality and Aggregation and assumptions that affect the application loans and advances are then assessed In compliance with Sri Lanka Accounting of accounting policies and the reported collectively, by categorising them Standard - LKAS 01 (Presentation of amounts of assets, liabilities, income and into groups of assets with similar risk Financial Statements), each material class expenses. Actual results may differ from characteristics, to determine whether a of similar items is presented separately in these estimates. provision should be made due to incurred the Financial Statements. Items of dissimilar loss events for which there is objective nature or functions too are presented Estimates and underlying assumptions are evidence, but the effects of which are not separately unless they are immaterial. reviewed on an ongoing basis. Revisions to yet evident. The collective assessment takes -PUHUJPHSHZZL[ZHUKÄUHUJPHSSPHIPSP[PLZ accounting estimates are recognised in the account of data from the loan portfolio such are offset and the net amount reported in period in which the estimate is revised and as credit quality, portfolio size, concentration the Statement of Financial Position only in any future periods affected. etc. as well as judgments based on current when there is a legally enforceable right to economic conditions. Impairment of loans offset the recognised amounts and there ;OLTVZ[ZPNUPÄJHU[HYLHZVMLZ[PTH[PVU and advances is discussed in detail under is an intention to settle on a net basis, or uncertainty and critical judgments in Note 3.3.8 (a) to the Financial Statements. to realise the assets and settle the liability applying accounting policies that have most simultaneously. Income and expenses ZPNUPÄJHU[LMMLJ[VU[OLHTV\U[ZYLJVNUPZLK 2.10.3 Impairment of Available for Sale HYLUV[VMMZL[PU[OL:[H[LTLU[VM7YVÄ[VY in the Financial Statements of the Group are Investments Loss unless required or permitted by an as follows: The Group review its debt securities Accounting Standard. JSHZZPÄLKHZH]HPSHISLMVYZHSLH[LHJO reporting date to assess whether they are impaired. Objective evidence that an

328 SAMPATH BANK PLC Annual Report 2015 available for sale debt security is impaired +LÄULK)LULÄ[7SHUZ liabilities. Contingent liabilities are possible PUJS\KLZHTVUNV[OLY[OPUNZZPNUPÄJHU[ ;OLJVZ[VM[OLKLÄULKILULÄ[WSHUZHUK obligations whose existence will be ÄUHUJPHSKPMÄJ\S[`VM[OLPZZ\LYHIYLHJOVM the present value of their obligations are JVUÄYTLKVUS`I`\UJLY[HPUM\[\YLL]LU[Z contract such as a default or delinquency determined using actuarial valuations. or present obligations where the transfer of in interest or principal payments etc. The LJVUVTPJILULÄ[PZUV[WYVIHISLVYJHUUV[ Group also record impairment charges The actuarial valuation involves making be reliably measured. Contingent liabilities on available for sale equity investments assumptions about discount rates, future are not recognised in the Statement of ^OLU[OLYLPZHZPNUPÄJHU[VYWYVSVUNLK salary increases, mortality rates and Financial Position but are disclosed unless decline in fair value below their cost. The possible future pension increases if any. they are remote. KL[LYTPUH[PVUVM^OH[PZºZPNUPÄJHU[»VY Due to the long term nature of these plans, ‘prolonged’ requires judgment. The Group Z\JOLZ[PTH[LZHYLZ\IQLJ[[VZPNUPÄJHU[ *SHZZPÄJH[PVUVM0U]LZ[TLU[ NLULYHSS`[YLH[ZºZPNUPÄJHU[»HZ VY uncertainty. All assumptions are reviewed at Properties more and ‘prolonged’ as greater than six each reporting date. Management requires using its judgment months. In addition, the Group evaluates, [VKL[LYTPUL^OL[OLYHWYVWLY[`X\HSPÄLZ among other factors, historical share price In determining the appropriate discount rate, as an investment property. The Group movements, duration and extent up to management considers the interest rates of has developed criteria so it can exercise which the fair value of an investment is less Sri Lanka government bonds with maturities its judgment consistently. A property than its cost. corresponding to the expected duration of that is held to earn rentals or for capital [OLKLÄULKILULÄ[VISPNH[PVU;OLTVY[HSP[` appreciation or both and which generates 2.10.4 Fair Value of Financial Instruments rate is based on publicly available mortality JHZOÅV^ZSHYNLS`PUKLWLUKLU[S`VM[OLV[OLY ;OLKL[LYTPUH[PVUVMMHPY]HS\LZVMÄUHUJPHS tables. Future salary increases and pension assets held by the Group are accounted HZZL[ZHUKÄUHUJPHSSPHIPSP[PLZYLJVYKLK increases are based on expected future for as investment properties. On the other on the Statement of Financial Position PUÅH[PVUYH[LHUKL_WLJ[LKM\[\YLZHSHY` hand, a property that is used for operations for which there is no observable market increase rates of the Group. or in the process of providing services or for price are determined using a variety of administrative purposes and which do not valuation techniques that include the use 2.10.8 Fair Value of Property, Plant and KPYLJ[S`NLULYH[LJHZOÅV^ZHZHZ[HUKHSVUL of mathematical models. The valuation of Equipment asset are accounted for as property, plant ÄUHUJPHSPUZ[Y\TLU[ZPZKLZJYPILKPUTVYL The freehold land and buildings of the and equipment. The Group assesses on an detail in Note 3.3.11. .YV\WHYLYLÅLJ[LKH[MHPY]HS\LH[[OL HUU\HSIHZPZ[OLHJJV\U[PUNJSHZZPÄJH[PVUVM date of revaluation less any accumulated its properties taking into consideration the The Group measures fair value using the fair depreciation and impairment losses. The current use of such properties. Currently ]HS\LOPLYHYJO`[OH[YLÅLJ[Z[OLZPNUPÄJHUJL Group engages independent valuation the Group does not have any investment of input used in making measurements. The specialists to determine fair value of freehold property. fair value hierarchy is given in Note 52. lands and buildings in terms of the Sri Lanka Accounting Standard -SLFRS 13, (Fair Value 2.10.5 Financial Assets and Liabilities Measurement). The details of freehold land 3. GENERAL *SHZZPÄJH[PVU and buildings including methods of valuation ACCOUNTING The Group’s accounting policies provide are given in Note 32 to the Financial POLICIES scope for assets and liabilities to be Statements. The accounting policies set out below have JSHZZPÄLKH[PUJLW[PVUPU[VKPMMLYLU[ been applied consistently to all periods HJJV\U[PUNJH[LNVYPLZ;OLJSHZZPÄJH[PVU 2.10.9 Useful Life-time of the Property, presented in these Financial Statements, VMÄUHUJPHSPUZ[Y\TLU[ZPZNP]LUPU5V[L Plant and Equipment unless otherwise indicated. 18, ‘Analysis of Financial Instruments by The Group reviews the residual values, Measurement Basis’. useful lives and methods of depreciation 3.1 Basis of Consolidation of property, plant and equipment at The Group’s Financial Statements comprise 2.10.6 Taxation each reporting date. Judgment of the consolidation of the Financial Statements of The Group is subject to income tax and management is exercised in the estimation the Bank and its Subsidiaries in terms of the judgment is required to determine the of these values, rates, methods and hence Sri Lanka Accounting Standard - SLFRS 10 total provision for current, deferred and they are subject to uncertainty. (Consolidated Financial Statements). The other taxes due to the uncertainties that Bank’s Financial Statements comprise the exist with respect to the interpretation 2.10.10 Commitments and Contingencies amalgamation of the Financial Statements of the applicable tax laws, at the time of All discernible risks are accounted for of the Domestic Banking Unit and the Off- preparation of these Financial Statements. in determining the amount of all known Shore Banking Unit.

Annual Report 2015 SAMPATH BANK PLC 329 Notes to the Financial Statements

3.1.1 Business Combinations and currency translated at the rates of exchange Notes 3.3.3 & Notes 3.3.4 respectively. All Goodwill prevailing at the end of the reporting period. ÄUHUJPHSPUZ[Y\TLU[ZHYLTLHZ\YLKPUP[PHSS` Business combinations are accounted at their fair value plus transaction costs that for using the acquisition method as per Non monetary items in a foreign currency are directly attributable to acquisition or the requirements of Sri Lanka Accounting that are measured in terms of historical cost PZZ\LVMZ\JOÄUHUJPHSPUZ[Y\TLU[ZL_JLW[ Standard - SLFRS 03 (Business are translated using the exchange rates PU[OLJHZLVMÄUHUJPHSHZZL[ZHUKÄUHUJPHS Combinations). as at the dates of the initial transactions. SPHIPSP[PLZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ Non monetary items in foreign currency as per the Sri Lanka Accounting Standard - The Group measures goodwill as the fair measured at fair value are translated using LKAS 39 (Financial Instruments: Recognition value of the consideration transferred the exchange rates at the date when the fair and Measurement). Transaction cost in including the recognised amount of any value was determined. YLSH[PVU[VÄUHUJPHSHZZL[ZHUKÄUHUJPHS non-controlling interest in the acquiree, less SPHIPSP[PLZH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ the net recognised amount (generally fair Foreign exchange differences arising on HYLKLHS[^P[OPU[OL:[H[LTLU[VM7YVÄ[VY ]HS\LVM[OLPKLU[PÄHISLHZZL[ZHJX\PYLK the settlement or reporting of monetary Loss. and liabilities assumed, all measured as items at rates different from those which of the acquisition date. When the excess were initially recorded are dealt with in the Hº+H`»7YVÄ[VY3VZZ is negative, a bargain purchase gain is :[H[LTLU[VM7YVÄ[VY3VZZ/V^L]LYMVYLPNU When the transaction price differs from YLJVNUPZLKPTTLKPH[LS`PUWYVÄ[VYSVZZ currency differences arising on available-for- the fair value of other observable current ZHSLLX\P[`PUZ[Y\TLU[ZÄUHUJPHSSPHIPSP[PLZ market transactions in the same instrument, The Group elects on a transaction-by- designated as a hedge of a net investment or based on a valuation technique whose transaction basis whether to measure in a foreign operation, or qualifying cash variables include only data from observable non-controlling interest at its fair value, or ÅV^OLKNLZHYLYLJVNUPZLKPUV[OLY markets, the Group recognises the at its proportionate share of the recognised comprehensive income. difference between the transaction price HTV\U[VM[OLPKLU[PÄHISLUL[HZZL[ZH[ HUKMHPY]HS\LHº+H`»WYVÄ[VYSVZZPU[OL the acquisition date. The consideration Forward exchange contracts are valued :[H[LTLU[VM7YVÄ[VY3VZZV]LY[OL[LUVYVM transferred does not include amounts at the forward market rates ruling on the [OLÄUHUJPHSPUZ[Y\TLU[\ZPUN[OLLMMLJ[P]L related to the settlement of pre-existing reporting date. Resulting net unrealised interest rate method. In cases where fair relationships. Such amounts are generally gains or losses are dealt within the value is determined using data which is YLJVNUPZLKPUWYVÄ[VYSVZZ;YHUZHJ[PVU :[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº5L[ not observable, the difference between the costs, other than those associated with the Trading Income’. transaction price and model value is only issue of debt or equity securities, that the YLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY Group incurs in connection with a business 3.3 Financial Instruments - Initial Loss when the inputs become observable, combination are expensed as incurred. 5HFRJQLWLRQ&ODVVLðFDWLRQDQG or when the instrument is derecognised. Subsequent Measurement 3.2 Foreign Currency Transactions 3.3.1 Date of Recognition  *SHZZPÄJH[PVUHUK:\IZLX\LU[ and Balances (SSÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZHYLPUP[PHSS` Measurement of Financial Assets All foreign currency transactions are recognised on the trade date, i.e. the date ([[OLPUJLW[PVUHÄUHUJPHSHZZL[PZ translated into the functional currency, that the Group becomes a party to the JSHZZPÄLKPU[VVULVM[OLMVSSV^PUN! which is Sri Lankan Rupees, using the contractual provisions of the instrument. exchange rates prevailing at the dates of the This includes ‘regular way trades’. Regular a. Financial assets at fair value through transactions were affected. way trade means purchases or sales of WYVÄ[VYSVZZ ÄUHUJPHSHZZL[Z[OH[YLX\PYLKLSP]LY`VM i. Financial assets held for Monetary assets and liabilities denominated assets within the time frame generally trading in foreign currencies at the reporting date established by regulation or convention in ii. Financial assets designated at are translated to Sri Lanka Rupees using the market place. MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ the spot foreign exchange rate ruling at I /LSK[VTH[\YP[`ÄUHUJPHSHZZL[Z that date and all differences arising on 3.3.2 Recognition and Initial c. Loans and receivables non-trading activities are taken to ‘Other Measurement of Financial d. Financial assets available for sale VWLYH[PUNPUJVTL»PU[OL:[H[LTLU[VM7YVÄ[ Instruments or Loss. The foreign currency gain or loss ;OLJSHZZPÄJH[PVUVMÄUHUJPHSPUZ[Y\TLU[Z ;OLZ\IZLX\LU[TLHZ\YLTLU[VMÄUHUJPHS on monetary items is the difference between at the initial recognition depends on their HZZL[ZKLWLUKZVU[OLPYJSHZZPÄJH[PVU amortised cost in the functional currency purpose and characteristics and the at the beginning of the period, adjusted for management’s intention in acquiring them. effective interest and payments during the -\Y[OLYKL[HPSZVUJSHZZPÄJH[PVUVMÄUHUJPHS period, and the amortised cost in foreign HZZL[ZHUKÄUHUJPHSSPHIPSP[PLZHYLNP]LU\UKLY

330 SAMPATH BANK PLC Annual Report 2015 H-PUHUJPHS(ZZL[ZH[-HPY=HS\L +L[HPSZVMºÄUHUJPHSHZZL[ZOLSKMVY[YHKPUN» is included in ‘Interest income’ in the  [OYV\NO7YVÄ[VY3VZZ are given in Notes 23 & 24 to the Financial :[H[LTLU[VM7YVÄ[VY3VZZ;OLSVZZLZ (ÄUHUJPHSHZZL[PZJSHZZPÄLKHZMHPY]HS\L Statements. arising from impairment of such investments [OYV\NOWYVÄ[VYSVZZPMP[PZOLSKMVY[YHKPUN HYLYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY VYPZKLZPNUH[LKH[MHPY]HS\L[OYV\NOWYVÄ[ HPP-PUHUJPHS(ZZL[Z+LZPNUH[LKH[ Loss. or loss.  -HPY=HS\L[OYV\NO7YVÄ[VY3VZZ ;OL.YV\WKLZPNUH[LZÄUHUJPHSHZZL[ZH[MHPY Details of ‘Financial investments - held HP-PUHUJPHS(ZZL[Z/LSKMVY ]HS\L[OYV\NOWYVÄ[VYSVZZPU[OLMVSSV^PUN to maturity’ are given in Note 30 to the   ;YHKPUN circumstances: Financial Statements. -PUHUJPHSHZZL[ZHYLJSHZZPÄLKHZOLSKMVY Such designation eliminates or trading if they are acquired principally for ZPNUPÄJHU[S`YLK\JLZTLHZ\YLTLU[VY J3VHUZHUK9LJLP]HISLZ the purpose of selling or repurchasing recognition inconsistency that would Loans and receivables include non in the near term or holds as a part of a otherwise arise from measuring the KLYP]H[P]LÄUHUJPHSHZZL[Z^P[OÄ_LKVY portfolio that is managed together for assets determinable payments that are not quoted ZOVY[[LYTWYVÄ[VYWVZP[PVU[HRPUN;OPZ The assets are part of a group of in an active market, other than: JH[LNVY`HSZVPUJS\KLZKLYP]H[P]LÄUHUJPHS ÄUHUJPHSHZZL[ZÄUHUJPHSSPHIPSP[PLZ Those that the Group intends to sell instruments entered into by the Group that or both, which are managed and immediately or in the near term and are not designated as hedging instruments their performance evaluated on a those that the Group, upon initial PUOLKNLYLSH[PVUZOPWZHZKLÄULKI`:YP fair value basis, in accordance with recognition, designates as fair value Lanka Accounting Standard - LKAS 39 a documented risk management or [OYV\NOWYVÄ[VYSVZZ (Financial Instruments: Recognition and investment strategy Those that the Group, upon initial Measurement). The asset contains one or more recognition, designates as available embedded derivatives that for sale Financial assets held for trading are ZPNUPÄJHU[S`TVKPM`[OLJHZOÅV^Z Those for which the Group may not recorded in the Statement of Financial that would otherwise have been recover substantially all of its initial Position at fair value. Changes in fair value required under the contract investment through contractual cash are recognised in ‘Net trading income’. ÅV^ZV[OLY[OHUILJH\ZLVMJYLKP[ Dividend income is recorded in ‘Net trading Financial assets designated at fair value deterioration income’ when the right to receive the [OYV\NOWYVÄ[VYSVZZHYLYLJVYKLKPU[OL payment has been established. Interest Statement of Financial Position at fair After initial measurement, loans and PUJVTLLHYULKMYVTÄUHUJPHSHZZL[ZOLSKMVY value. Changes in fair value are recorded receivables are subsequently measured trading is recorded under ‘Interest income: PUº5L[NHPUVYSVZZVUÄUHUJPHSPUZ[Y\TLU[Z at amortised cost using the effective Financial assets held for trading’ using the KLZPNUH[LKH[MHPY]HS\L[OYV\NOWYVÄ[VY interest rate, less allowance for impairment. effective interest rate. SVZZ»PU[OL:[H[LTLU[VM7YVÄ[VY3VZZ The amortisation is included in ‘Interest Interest earned is accrued under ‘Interest PUJVTL»PU[OL:[H[LTLU[VM7YVÄ[VY3VZZ The Group evaluates its held for trading income’, using the effective interest rate The losses arising from impairment are asset portfolio, other than derivatives, to method, while dividend income is recorded recognised in ‘Impairment charge / reversal determine whether the intention to sell under ‘Other operating income’ when the for loans and other losses’ in the Statement them in the near future is still appropriate. right to receive the payment has been VM7YVÄ[VY3VZZ When the Group is unable to trade these established. ÄUHUJPHSHZZL[ZK\L[VPUHJ[P]LTHYRL[ZHUK Loans and receivables include cash & cash management’s intention to sell them in the ;OL.YV\WOHZUV[KLZPNUH[LKHU`ÄUHUJPHS equivalents, balances with Central Bank, MVYLZLLHISLM\[\YLZPNUPÄJHU[S`JOHUNLZ[OL assets upon initial recognition as designated placement with banks, reverse repurchase .YV\WTH`LSLJ[[VYLJSHZZPM`[OLZLÄUHUJPHS H[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ agreements, loans to & receivables from assets. banks and other customers etc. I/LSK[V4H[\YP[`-PUHUJPHS(ZZL[Z Financial assets held for trading include /LSK[VTH[\YP[`ÄUHUJPHSHZZL[ZHYLUVU K-PUHUJPHS(ZZL[Z(]HPSHISLMVY:HSL instruments such as government securities KLYP]H[P]LÄUHUJPHSHZZL[Z^P[OÄ_LKVY (]HPSHISLMVYZHSLÄUHUJPHSHZZL[ZPUJS\KL and equity instruments that have been KL[LYTPUHISLWH`TLU[ZHUKÄ_LKTH[\YP[PLZ equity and debt securities. Equity acquired principally for the purpose of which the Group has the intention and PU]LZ[TLU[ZJSHZZPÄLKHZº(]HPSHISLMVYZHSL» selling or repurchasing in the near term and ability to hold to maturity. After the initial HYL[OVZL^OPJOHYLULP[OLYJSHZZPÄLKHZ derivatives, including separated embedded YLJVNUP[PVUOLSK[VTH[\YP[`ÄUHUJPHS º/LSKMVY[YHKPUN»UVYº+LZPNUH[LKH[MHPY derivatives unless they are designated as investments are subsequently measured at ]HS\L[OYV\NOWYVÄ[VYSVZZ»+LI[ZLJ\YP[PLZ effective hedging instruments. amortised cost using the effective interest in this category are intended to be held rate, less impairment. The amortisation MVYHUPUKLÄUP[LWLYPVKVM[PTLHUKTH`

Annual Report 2015 SAMPATH BANK PLC 331 Notes to the Financial Statements

be sold in response to needs for liquidity H-PUHUJPHS3PHIPSP[PLZH[-HPY=HS\L I-PUHUJPHS3PHIPSP[PLZH[(TVY[PZLK or in response to changes in the market  [OYV\NO7YVÄ[VY3VZZ  *VZ[ conditions. The Group has not designated -PUHUJPHSSPHIPSP[PLZH[MHPY]HS\L[OYV\NOWYVÄ[ Financial instruments issued by the Group any loans or receivables as available for VYSVZZPUJS\KLÄUHUJPHSSPHIPSP[PLZOLSKMVY [OH[HYLUV[JSHZZPÄLKHZMHPY]HS\L[OYV\NO sale. [YHKPUNHUKÄUHUJPHSSPHIPSP[PLZKLZPNUH[LK WYVÄ[VYSVZZHYLJSHZZPÄLKHZÄUHUJPHS upon initial recognition as fair value liabilities at amortised cost under ‘Due to After initial measurement, available for sale [OYV\NOWYVÄ[VYSVZZ:\IZLX\LU[[VPUP[PHS banks, ‘Due to other customers’, ‘Securities ÄUHUJPHSPU]LZ[TLU[ZHYLZ\IZLX\LU[S` YLJVNUP[PVUÄUHUJPHSSPHIPSP[PLZH[MHPY]HS\L sold under repurchase agreements’ and measured at fair value. Unrealised gains [OYV\NOWYVÄ[VYSVZZHYLTLHZ\YLKH[MHPY ‘Debt issued and other borrowed funds’ and losses are recognised directly in value and changes there in are recognised as appropriate, where the substance of equity through ‘Other comprehensive PUWYVÄ[VYSVZZ the contractual arrangement results in the income / expense’ in the ‘Available for sale Group having an obligation either to deliver reserve’. When the investment is disposed HP-PUHUJPHS3PHIPSP[PLZOLSKMVY JHZOVYHUV[OLYÄUHUJPHSHZZL[[VHUV[OLY of, the cumulative gain or loss previously  ;YHKPUN LU[P[`VY[VL_JOHUNLÄUHUJPHSHZZL[ZVY recognised in equity is recognised in the -PUHUJPHSSPHIPSP[PLZHYLJSHZZPÄLKHZOLSKMVY ÄUHUJPHSSPHIPSP[PLZ^P[OHUV[OLYLU[P[`\UKLY :[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº6[OLY trading if they are acquired principally for conditions that are potentially unfavourable operating income’. Where the Group holds the purpose of selling or repurchasing in the to the entity or settling the obligation by more than one investment in the same near term or holds as a part of a portfolio delivering variable number of entity’s own security, they are deemed to be disposed of that is managed together for short-term equity instruments. VUHÄYZ[PUÄYZ[V\[IHZPZ0U[LYLZ[LHYULK WYVÄ[VYWVZP[PVU[HRPUN;OPZJH[LNVY` ^OPSZ[OVSKPUNº(]HPSHISLMVYZHSLÄUHUJPHS PUJS\KLZKLYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z (M[LYPUP[PHSYLJVNUP[PVUZ\JOÄUHUJPHS investments’ is reported as ‘Interest income’ entered into by the Group that are not liabilities are subsequently measured at using the effective interest rate. Dividend designated as hedging instruments in amortised cost using the effective interest earned whilst holding ‘Available for sale OLKNLYLSH[PVUZOPWZHZKLÄULKI`[OL:YP rate method. Amortisation is included in ÄUHUJPHSPU]LZ[TLU[Z»HYLYLJVNUPZLKPU Lanka Accounting Standard - LKAS 39 º0U[LYLZ[L_WLUZLZ»PU[OL:[H[LTLU[VM7YVÄ[ [OL:[H[LTLU[VM7YVÄ[VY3VZZHZº6[OLY (Financial Instruments: Recognition and or Loss. Gains and losses are recognised operating income’ when the right to Measurement). PU[OL:[H[LTLU[VM7YVÄ[VY3VZZ^OLU[OL receive the payment has been established. liabilities are derecognised. The losses arising from impairment of HPP-PUHUJPHS3PHIPSP[PLZ+LZPNUH[LK such investments are recognised in  H[-HPY=HS\L[OYV\NO7YVÄ[VY ;OLKL[HPSZVM[OL.YV\W»ZÄUHUJPHSSPHIPSP[PLZ [OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLY  3VZZ at amortised cost are shown in Note 36 ‘Impairment charge for loans and other ;OL.YV\WKLZPNUH[LZÄUHUJPHSSPHIPSP[PLZ (Due to banks), Note 37 (Due to other losses’ and removed from the ‘Available for H[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZPU[OL customers) and Note 38 (Debt issued and sale reserve’. following circumstances: other borrowed funds) to the Financial Such designation eliminates or Statements. Details of ‘Financial assets - available for ZPNUPÄJHU[S`YLK\JLZTLHZ\YLTLU[VY sale’ are given in Note 28 & Note 29 to the recognition inconsistency that would  9LJSHZZPÄJH[PVUVM-PUHUJPHS Financial Statements. otherwise arise from measuring the Instruments liabilities H9LJSHZZPÄJH[PVUVM-PUHUJPHS  *SHZZPÄJH[PVUHUK:\IZLX\LU[ The liabilities are part of a group of  0UZ[Y\TLU[Zº([MHPY]HS\L[OYV\NO Measurement of Financial Liabilities ÄUHUJPHSSPHIPSP[PLZÄUHUJPHSHZZL[Z  WYVÄ[VYSVZZ» At the inception, the Group determines or both, which are managed and The Group does not reclassify derivative [OLJSHZZPÄJH[PVUVMP[ZÄUHUJPHSSPHIPSP[PLZ their performance evaluated on a ÄUHUJPHSPUZ[Y\TLU[ZV\[VM[OLMHPY]HS\L (JJVYKPUNS`ÄUHUJPHSSPHIPSP[PLZHYLJSHZZPÄLK fair value basis, in accordance with [OYV\NOWYVÄ[VYSVZZJH[LNVY`^OPSLP[PZ as: a documented risk management or held or issued. investment strategy a. Financial liabilities at fair value The liability contains one or 5VUKLYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z [OYV\NOWYVÄ[VYSVZZ more embedded derivatives that KLZPNUH[LKH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ i. Financial liabilities held for ZPNUPÄJHU[S`TVKPM`[OLJHZOÅV^Z \WVUPUP[PHSYLJVNUP[PVUHYLUV[YLJSHZZPÄLK trading that would otherwise have been Z\IZLX\LU[S`V\[VMMHPY]HS\L[OYV\NOWYVÄ[ ii. Financial liabilities designated required under the contract or loss category. H[MHPY]HS\L[OYV\NOWYVÄ[VY loss ;OL.YV\WOHZUV[KLZPNUH[LKHU`ÄUHUJPHS The Group may, in rare circumstances, b. Financial liabilities at amortised cost liabilities upon initial recognition as fair value YLJSHZZPM`ÄUHUJPHSPUZ[Y\TLU[ZV\[VMMHPY [OYV\NOWYVÄ[VYSVZZ ]HS\L[OYV\NOWYVÄ[VYSVZZJH[LNVY`PM

332 SAMPATH BANK PLC Annual Report 2015 such instruments are no longer held for ;OLMHPY]HS\LVMÄUHUJPHSPUZ[Y\TLU[ZH[ ÄUHUJPHSHZZL[ILMVYLYLJSHZZPÄJH[PVUHUKMHPY the purpose of selling or repurchasing in [OLKH[LVMYLJSHZZPÄJH[PVUPZ[YLH[LKHZ[OL value is recognised in equity through other the near term notwithstanding that such UL^JVZ[VYHTVY[PZLKJVZ[VM[OLÄUHUJPHS comprehensive income. ÄUHUJPHSPUZ[Y\TLU[ZTH`OH]LILLU PUZ[Y\TLU[HM[LYYLJSHZZPÄJH[PVU+PMMLYLUJL acquired principally for the purpose of between the new amortised cost and /V^L]LYPM[OL.YV\W^LYL[VZLSSVY selling or repurchasing in the near term. the maturity value is amortised over the YLJSHZZPM`TVYL[OHUHUPUZPNUPÄJHU[ -PUHUJPHSHZZL[ZJSHZZPÄLKHZMHPY]HS\L remaining life of the asset using the effective amount of held to maturity investments [OYV\NOWYVÄ[VYSVZZH[[OLPUP[PHSYLJVNUP[PVU interest rate. Any gain or loss already before maturity [other than in certain ^OPJO^V\SKOH]LHSZVTL[[OLKLÄUP[PVU recognised in Other Comprehensive Income ZWLJPÄJJPYJ\TZ[HUJLZWLYTP[[LKPU[OL of ‘loans and receivables’ as at that date PUYLZWLJ[VM[OLYLJSHZZPÄLKÄUHUJPHS Sri Lanka Accounting Standard - LKAS 39 PZYLJSHZZPÄLKV\[VM[OLMHPY]HS\L[OYV\NO PUZ[Y\TLU[\U[PS[OLKH[LVMYLJSHZZPÄJH[PVUPZ (Financial Instruments: Recognition and WYVÄ[VYSVZZJH[LNVY`VUS`PM[OL.YV\WOHZ accounted as follows. Measurement)], the entire category would the intention and ability to hold such asset L  )LQDQFLDODVVHWVZLWKð[HG IL[HPU[LKHUK^V\SKOH]L[VILYLJSHZZPÄLK for the foreseeable future or until maturity. maturity: Gain or loss recognised as ‘Available for sale’. Furthermore, the \W[V[OLKH[LVMYLJSHZZPÄJH[PVU Group would be prohibited from classifying ;OLMHPY]HS\LVMÄUHUJPHSPUZ[Y\TLU[ZH[ PZHTVY[PZLK[VWYVÄ[VYSVZZV]LY HU`ÄUHUJPHSHZZL[HZº/LSK[VTH[\YP[`» [OLKH[LVMYLJSHZZPÄJH[PVUPZ[YLH[LKHZ[OL the remaining life of the investment during the following two years UL^JVZ[VYHTVY[PZLKJVZ[VM[OLÄUHUJPHS using the effective interest rate. If PUZ[Y\TLU[HM[LYYLJSHZZPÄJH[PVU(U`NHPU [OLÄUHUJPHSHZZL[PZZ\IZLX\LU[S` (IV]LYLJSHZZPÄJH[PVUZHYLH[[OLLSLJ[PVU or loss already recognised in respect of the impaired, any previous gain or loss of management and determined on an YLJSHZZPÄLKÄUHUJPHSPUZ[Y\TLU[\U[PS[OL that has been recognised in other instrument by instrument basis. The Group KH[LVMYLJSHZZPÄJH[PVUPZUV[YL]LYZLK[V[OL JVTWYLOLUZP]LPUJVTLPZYLJSHZZPÄLK OHZUV[YLJSHZZPÄLKHU`ÄUHUJPHSPUZ[Y\TLU[ :[H[LTLU[VM7YVÄ[VY3VZZ MYVTLX\P[`[VWYVÄ[VYSVZZ during the year.

0MHÄUHUJPHSHZZL[PZYLJSHZZPÄLKHUKPM LL  )LQDQFLDODVVHWVZLWKRXWð[HG 3.3.6 Derecognition of Financial Assets the Group subsequently increases its maturity: Gain or loss recognised and Liabilities estimates of future cash receipts as a \W[V[OLKH[LVMYLJSHZZPÄJH[PVU H+LYLJVNUP[PVUVM-PUHUJPHS(ZZL[Z result of increased recoverability of those PZYLJVNUPZLKPUWYVÄ[VYSVZZVUS` ;OL.YV\WKLYLJVNUPZLZHÄUHUJPHSHZZL[ cash receipts, the effect of that increase is ^OLU[OLÄUHUJPHSHZZL[PZZVSKVY VY^OLYLHWWSPJHISLHWHY[VMHÄUHUJPHS recognised as an adjustment to the effective V[OLY^PZLKPZWVZLKVM0M[OLÄUHUJPHS HZZL[VYWHY[VMHNYV\WVMZPTPSHYÄUHUJPHS interest rate from the date of the change in asset is subsequently impaired, any assets) when: estimate rather than an adjustment to the previous gain or loss that has been  [OLYPNO[Z[VYLJLP]LJHZOÅV^ZMYVT carrying amount of the asset at the date of recognised in other comprehensive the asset have expired; or change in estimate. PUJVTLPZYLJSHZZPÄLKMYVTLX\P[`[V the Group has transferred its rights to WYVÄ[VYSVZZ YLJLP]LJHZOÅV^ZMYVT[OLHZZL[VY ;OL.YV\WKVLZUV[YLJSHZZPM`HU`ÄUHUJPHS has assumed an obligation to pay PUZ[Y\TLU[PU[V[OLº-HPY]HS\L[OYV\NOWYVÄ[ 0MHÄUHUJPHSHZZL[PZYLJSHZZPÄLKHUKPM [OLYLJLP]LKJHZOÅV^ZPUM\SS^P[OV\[ or loss’ category after initial recognition. the Group subsequently increases its material delay to a third party under estimates of future cash receipts as a a ‘pass-through’ arrangement and I9LJSHZZPÄJH[PVUVMº(]HPSHISLMVY result of increased recoverability of those either the Group has transferred  ZHSL»-PUHUJPHS0UZ[Y\TLU[Z cash receipts, the effect of that increase is substantially all the risks and rewards ;OL.YV\WTH`YLJSHZZPM`ÄUHUJPHSHZZL[Z recognised as an adjustment to the effective of the asset or the Group has neither out of available for sale category as a result interest rate from the date of the change in transferred nor retained substantially of change in intention or ability or in rare estimate rather than an adjustment to the all the risks and rewards of the asset, circumstances that a reliable measure of fair carrying amount of the asset at the date of but has transferred control of the value is no longer available. change in estimate. asset

(ÄUHUJPHSHZZL[JSHZZPÄLKHZH]HPSHISLMVY J9LJSHZZPÄJH[PVUVMº/LSK[V 6UKLYLJVNUP[PVUVMHÄUHUJPHSHZZL[[OL ZHSL[OH[^V\SKOH]LTL[[OLKLÄUP[PVU  TH[\YP[`»-PUHUJPHS0UZ[Y\TLU[Z difference between the carrying amount of of loans and receivables at the initial As a result of a change in intention or ability, the asset (or the carrying amount allocated YLJVNUP[PVUTH`ILYLJSHZZPÄLKV\[VM if it is no longer appropriate to classify an to the portion of the asset derecognised) available for sale category to the loans and investment as held to maturity, Group may and the sum of the consideration received receivables category if the Group has the YLJSHZZPM`Z\JOÄUHUJPHSHZZL[ZHZH]HPSHISL (including any new asset obtained less any intention and ability to hold such asset for for sale and re- measured at fair value. Any new liability assumed) and any cumulative the foreseeable future or until maturity. difference between the carrying value of the gain or loss that had been recognised in

Annual Report 2015 SAMPATH BANK PLC 333 Notes to the Financial Statements

other comprehensive income is recognised a corresponding obligation to return it, [OH[HÄUHUJPHSHZZL[VYHNYV\WVMÄUHUJPHS PUWYVÄ[VYSVZZ including accrued interest under ‘Securities assets not carried at fair value through sold under repurchase agreements’, WYVÄ[VYSVZZPZPTWHPYLK(ÄUHUJPHSHZZL[ When the Group has transferred its rights YLÅLJ[PUN[OL[YHUZHJ[PVU»ZLJVUVTPJ VYHNYV\WVMÄUHUJPHSHZZL[ZPZKLLTLK[V [VYLJLP]LJHZOÅV^ZMYVTHUHZZL[VYOHZ substance to the Group. The difference be impaired if and only if there is objective entered into a pass-through arrangement between the sale and repurchase prices is evidence of impairment as a result of one or and has neither transferred nor retained treated as interest expense and is accrued more events, that have occurred after the substantially all of the risks and rewards over the life of the agreement using the initial recognition of the asset (an ‘incurred of the asset nor transferred control of the effective interest rate. When the Group has loss event’) and that loss event (or events) asset, the asset is recognised to the extent the right to sell or repledge the securities, has an impact on the estimated future cash of the Group’s continuing involvement in [OL.YV\WYLJSHZZPÄLZ[OVZLZLJ\YP[PLZPUP[Z ÅV^ZVM[OLÄUHUJPHSHZZL[VY[OLNYV\W the asset. In that case, the Group also Statement of Financial Position as ‘Financial VMÄUHUJPHSHZZL[Z[OH[JHUILYLSPHIS` recognises an associated liability. The assets held for trading pledged as collateral estimated. transferred asset and the associated liability (Note 24)’ or ‘Financial assets available for HYLTLHZ\YLKVUHIHZPZ[OH[YLÅLJ[Z[OL sale pledged as collateral (Note 29)’, as  H0TWHPYTLU[VM-PUHUJPHS(ZZL[Z rights and obligations that the Group has appropriate.  JHYYPLKH[(TVY[PZLK*VZ[ retained. -VYÄUHUJPHSHZZL[ZJHYYPLKH[HTVY[PZLK Conversely, securities purchased under cost, such as amounts due from banks, When the Group’s continuing involvement HNYLLTLU[Z[VYLZLSSH[HZWLJPÄLKM\[\YL loans and advances taken by customers, that takes the form of guaranteeing date are not recognised in the Statement of held to maturity investments etc., the the transferred asset, the extent of the Financial Position. The consideration paid, .YV\WÄYZ[HZZLZZLZPUKP]PK\HSS`^OL[OLY continuing involvement is measured at including accrued interest, is recorded in objective evidence of impairment exists the lower of the original carrying amount the Statement of Financial Position, under MVYÄUHUJPHSHZZL[Z[OH[HYLPUKP]PK\HSS` of the asset and the maximum amount of º9L]LYZLYLW\YJOHZLHNYLLTLU[Z»YLÅLJ[PUN ZPNUPÄJHU[VYJVSSLJ[P]LS`MVYÄUHUJPHS consideration received by the Group that the transaction’s economic substance to HZZL[Z[OH[HYLUV[PUKP]PK\HSS`ZPNUPÄJHU[ the Group could be required to repay. the Group. The difference between the In the event the Group determines that no purchase and resale prices is recorded as objective evidence of impairment exists I+LYLJVNUP[PVUVM-PUHUJPHS ‘Interest income’ and is accrued over the MVYHUPUKP]PK\HSS`HZZLZZLKÄUHUJPHS  3PHIPSP[PLZ life of the agreement using the effective asset, it includes the asset in a group (ÄUHUJPHSSPHIPSP[`PZKLYLJVNUPZLK^OLU[OL interest rate. If securities purchased under VMÄUHUJPHSHZZL[Z^P[OZPTPSHYJYLKP[YPZR obligation under the liability is discharged agreement to resell are subsequently sold characteristics and collectively assesses or cancelled or expired. Where an existing to third parties, the obligation to return the [OLTMVYPTWHPYTLU[/V^L]LYHZZL[Z[OH[ ÄUHUJPHSSPHIPSP[`PZYLWSHJLKI`HUV[OLYMYVT securities is recorded as a short sale within are individually assessed for impairment and the same lender on substantially different ‘Financial liabilities held for trading’ and for which an impairment loss is or continues terms or the terms of an existing liability are measured at fair value with any gains or to be recognised are not included in a Z\IZ[HU[PHSS`TVKPÄLKZ\JOHUL_JOHUNLVY losses included in ‘Net trading income’. collective assessment of impairment. TVKPÄJH[PVUPZ[YLH[LKHZHKLYLJVNUP[PVUVM the original liability and the recognition of a  6ɈZL[[PUNVM-PUHUJPHS0UZ[Y\TLU[Z  HP0UKP]PK\HSS`(ZZLZZLK-PUHUJPHS new liability. -PUHUJPHSHZZL[ZHUKÄUHUJPHSSPHIPSP[PLZHYL  (ZZL[Z offset and the net amount presented in The criteria used to determine whether there The difference between the carrying value the Statement of Financial Position when is objective evidence of impairment include VM[OLVYPNPUHSÄUHUJPHSSPHIPSP[`HUK[OL and only when the Group has a legal right and not limited to: JVUZPKLYH[PVUWHPKPZYLJVNUPZLKPUWYVÄ[VY to set off the recognised amounts and it  2UV^UJHZOÅV^KPMÄJ\S[PLZ loss. intends either to settle on a net basis or experienced by the borrower; to realise the asset and settle the liability Past due contractual payments of J9LW\YJOHZLHUK9L]LYZL simultaneously. Income and expenses either principal or interest;  9LW\YJOHZL(NYLLTLU[Z are presented on a net basis only when Breach of loan covenants or Securities sold under agreement to permitted under LKASs / SLFRSs or for conditions; YLW\YJOHZLH[HZWLJPÄLKM\[\YLKH[LHYL gains and losses arising from a group of The probability that the borrower will not derecognised from the Statement of similar transactions such as in the Group’s LU[LYIHURY\W[J`VYV[OLYÄUHUJPHS Financial Position as the Group retains trading activity. reorganisation; and substantially all of the risks and rewards  (ZPNUPÄJHU[KV^UNYHKPUNPUJYLKP[ of ownership. The corresponding cash 3.3.8 Impairment of Financial Assets rating by an external credit rating received is recognised in the Statement The Group assesses at each reporting date, agency. of Financial Position as a liability with whether there is any objective evidence

334 SAMPATH BANK PLC Annual Report 2015 If there is objective evidence that an The likely dividend available on at which point they are removed from the impairment loss has been incurred, liquidation or bankruptcy; group. the amount of the loss is measured by KPZJV\U[PUN[OLL_WLJ[LKM\[\YLJHZOÅV^Z  HPP*VSSLJ[P]LS`(ZZLZZLK-PUHUJPHS Two alternative methods are used to VMHÄUHUJPHSHZZL[H[P[ZVYPNPUHSLMMLJ[P]L  (ZZL[Z calculate historical loss experience on a interest rate and comparing the resultant Impairment is assessed on a collective basis collective basis: WYLZLU[]HS\L^P[O[OLÄUHUJPHSHZZL[»Z in two circumstances:  >OLU[OLNYV\WVMÄUHUJPHSHZZL[Z current carrying amount. The impairment To cover losses which have been by nature long term, the Group uses HSSV^HUJLZVUPUKP]PK\HSS`ZPNUPÄJHU[ incurred but have not yet been migration analysis method. Under accounts are reviewed more regularly PKLU[PÄLKVUSVHUZZ\IQLJ[[V this methodology the movements when circumstances require. This normally individual assessment; and in number of customers into bad encompasses re-assessment of the For homogeneous groups of loans categories over the periods are used enforceability of any collateral held and the that are not considered individually [VLZ[PTH[L[OLHTV\U[VMÄUHUJPHS timing and amount of actual and anticipated ZPNUPÄJHU[ assets that will eventually be written receipts. Individually assessed impairment off as a result of the events occurring allowances are only released when there 0UJ\YYLKI\[UV[`L[PKLU[PÄLKPTWHPYTLU[ before the reporting date which the is reasonable and objective evidence of a 0UKP]PK\HSS`HZZLZZLKÄUHUJPHSHZZL[Z Group is not able to identify on an reduction in the established loss estimate. for which no evidence of loss has been PUKP]PK\HSÄUHUJPHSHZZL[IHZPZHUK Interest on impaired assets continues to be ZWLJPÄJHSS`PKLU[PÄLKVUHUPUKP]PK\HSIHZPZ that can be reliably estimated. recognised through the unwinding of the are grouped together according to their discount. credit risk characteristics for the purpose of When the group of loan by nature calculating an estimated collective loss. This ZOVY[[LYT[OL.YV\W\ZLZUL[ÅV^ When impairment losses are determined YLÅLJ[ZPTWHPYTLU[SVZZLZ[OH[[OL.YV\W rate method. Under this methodology MVY[OVZLÄUHUJPHSHZZL[Z^OLYLVIQLJ[P]L has incurred as a result of events occurring the movement in the outstanding evidence of impairment exists, the following before the reporting date, which the Group balance of customers into bad factors are considered: is not able to identify on an individual loan categories over the periods are used Bank’s aggregate exposure to the basis and that can be reliably estimated. [VLZ[PTH[L[OLHTV\U[VMÄUHUJPHS customer; assets that will eventually be written The viability of the customer’s These losses will only be individually off as a result of the events occurring business model and their capacity PKLU[PÄLKPU[OLM\[\YL(ZZVVUHZ before the reporting date which the [V[YHKLZ\JJLZZM\SS`V\[VMÄUHUJPHS information becomes available which Group is not able to identify on an KPMÄJ\S[PLZHUKNLULYH[LZ\MÄJPLU[ PKLU[PÄLZSVZZLZVUPUKP]PK\HSÄUHUJPHSHZZL[Z individual loan basis and that can be JHZOÅV^[VZLY]PJLKLI[VISPNH[PVUZ" ^P[OPU[OLNYV\W[OVZLÄUHUJPHSHZZL[ZHYL reliably estimated. The amount and timing of expected removed from the group and assessed on receipts and recoveries; an individual basis for impairment. Under both methodologies, loans are The extent of other creditors’ grouped into ranges according to the commitments ranking ahead of, The collective impairment allowance is number of days in arrears and statistical or pari-passu with the Bank and determined after taking into account: analysis is used to estimate the likelihood the likelihood of other creditors  /PZ[VYPJHSSVZZL_WLYPLUJLPU that loans in each range will progress continuing to support the company; portfolios of similar credit risk; and through the various stages of delinquency The complexity of determining the Management’s experienced and ultimately prove irrecoverable. aggregate amount and ranking of judgment as to whether current all creditor claims and the extent economic and credit conditions Current economic conditions and to which legal and insurance are such that the actual level of portfolio risk factors are also evaluated uncertainties are evident; inherent losses at the reporting date when calculating the appropriate level of The realisable value of security (or is like to be greater or less than that allowance required to cover inherent loss. other credit mitigants) and likelihood suggested by historical experience. These additional macro and portfolio risk of successful repossession; factors may include: The likely deduction of any costs /VTVNLULV\ZNYV\WZVMÄUHUJPHSHZZL[Z involved in recovery of amounts Statistical methods are used to determine Recent loan portfolio growth and outstanding; impairment losses on a collective basis for product mix The ability of the borrower to obtain OVTVNLULV\ZNYV\WZVMÄUHUJPHSHZZL[Z Unemployment rates and make payments in the currency 3VZZLZPU[OLZLNYV\WZVMÄUHUJPHSHZZL[Z Gross Domestic Production (GDP) of the loan if not denominated in local are recorded on an individual basis when growth currency; and PUKP]PK\HSÄUHUJPHSHZZL[ZHYL^YP[[LUVMM  0UÅH[PVU

Annual Report 2015 SAMPATH BANK PLC 335 Notes to the Financial Statements

Exchange rates of collateral is generally assessed, at a 0U[OLJHZLVMLX\P[`PU]LZ[TLU[ZJSHZZPÄLK Interest rates minimum, at inception and based on the as available for sale, objective evidence Changes in government laws and guidelines issued by the Central Bank of Sri ^V\SKHSZVPUJS\KLHºZPNUPÄJHU[»VY regulations Lanka. ‘prolonged’ decline in the fair value of the investment below its cost. The  HPPP9L]LYZHSVM0TWHPYTLU[ To the extent possible, the Group uses KL[LYTPUH[PVUVMºZPNUPÄJHU[»HUK If the amount of an impairment loss HJ[P]LTHYRL[KH[HMVY]HS\PUNÄUHUJPHS ‘prolonged’ is explained in Note 2.10.3 decreases in a subsequent period and the HZZL[ZOLSKHZJVSSH[LYHS6[OLYÄUHUJPHS Where there is evidence of impairment, the decrease can be related objectively to an assets which do not have readily cumulative loss measured as the difference event occurring after the impairment was determinable market value are valued using between the acquisition cost and the recognised, the excess is written back by TVKLSZ5VUÄUHUJPHSJVSSH[LYHSZ\JOHZYLHS current fair value, less any impairment loss YLK\JPUN[OLÄUHUJPHSHZZL[PTWHPYTLU[ estate, is valued based on data provided by on that investment previously recognised in allowance account accordingly. The write- third parties such as independent valuers, WYVÄ[VY3VZZPZYLTV]LKMYVTLX\P[`HUK IHJRPZYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[ Audited Financial Statements and other YLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY or Loss. independent sources. 3VZZ/V^L]LYHU`Z\IZLX\LU[PUJYLHZL in the fair value of an impaired available for  HP]>YP[LVMMVM-PUHUJPHS(ZZL[Z  H]PP*VSSH[LYHS9LWVZZLZZLK sale equity security is recognised in other   *HYYPLKH[(TVY[PZLK*VZ[ The Group’s policy is to determine whether comprehensive income. Financial assets (and the related impairment a repossessed asset is best used for its allowance accounts) are normally written internal operations or should be sold. The Group writes-off certain available for off either partially or in full, when there is Assets determined to be useful for the ZHSLÄUHUJPHSPU]LZ[TLU[Z^OLU[OL`HYL no realistic prospect of recovery. Where internal operations are transferred to the determined to be uncollectible. ÄUHUJPHSHZZL[ZHYLZLJ\YLK[OPZPZNLULYHSS` relevant asset category at the lower of the after receipt of any proceeds from the repossessed value or the carrying value of 3.3.9 Hedge Accounting realisation of security. the original secured asset. The Group designates certain derivatives as either:  H]0TWHPYTLU[VM9LZJOLK\SLK  I0TWHPYTLU[VM-PUHUJPHS(ZZL[Z  /LKNLZVM[OLMHPY]HS\LVM   3VHUZHUK(K]HUJLZ  (]HPSHISLMVY:HSL YLJVNUPZLKHZZL[ZSPHIPSP[PLZVYÄYT Where possible, the Group seeks to -VYH]HPSHISLMVYZHSLÄUHUJPHSPU]LZ[TLU[Z commitments (fair value hedge); restructure loans rather than to take the Group assesses at each reporting date  /LKNLZVMOPNOS`WYVIHISLM\[\YL possession of collateral. This may involve whether there is objective evidence that an JHZOÅV^ZH[[YPI\[HISL[VH extending the payment arrangements and investment is impaired. In the case of debt recognised asset or liability, or a the agreement of new loan conditions. Once PUZ[Y\TLU[ZJSHZZPÄLKHZH]HPSHISLMVYZHSL MVYLJHZ[[YHUZHJ[PVUJHZOÅV^ the terms have been renegotiated, any the Group assesses individually whether hedge); or impairment is measured using the original there is objective evidence of impairment  /LKNLZVM[OLUL[PU]LZ[TLU[VMH effective interest rate as calculated before IHZLKVU[OLZHTLJYP[LYPHHZÄUHUJPHS foreign operation (net investment [OLTVKPÄJH[PVUVM[LYTZHUK[OLSVHUPZUV HZZL[ZJHYYPLKH[HTVY[PZLKJVZ[/V^L]LY hedges) longer considered past due. Management the amount recorded for impairment is the continually reviews renegotiated loans to cumulative loss measured as the difference /LKNLHJJV\U[PUNPZ\ZLKMVYKLYP]H[P]LZ ensure that all criteria are met and that between the amortised cost and the current designated in this way provided certain future payments are likely to occur. The fair value, less any impairment loss on that criteria are met. The Group documents, loans continue to be subjected to individual investment previously recognised in the at the inception of the transaction, the or collective impairment assessment, :[H[LTLU[VM7YVÄ[VY3VZZ-\[\YLPU[LYLZ[ relationship between hedging instruments calculated using the loan’s original effective income is based on the reduced carrying and hedged items, as well as its risk interest rate. amount and is accrued using the rate of management objective and strategy for interest used to discount the future cash undertaking various hedge transactions.  H]P*VSSH[LYHS=HS\H[PVU ÅV^ZMVY[OLW\YWVZLVMTLHZ\YPUN[OL The Group also documents its assessment, The Group seeks to use collateral, where impairment loss. If, in a subsequent period, both at hedge inception and on an ongoing WVZZPISL[VTP[PNH[LP[ZYPZRZVUÄUHUJPHS the fair value of a debt instrument increases basis, of whether the derivatives that are assets. The collateral comes in various and the increase can be objectively used in hedging transactions are highly forms such as cash, gold, securities, related to a credit event occurring after effective in offsetting changes in fair values letters of credit/guarantees, real estate, the impairment loss was recognised, the VYJHZOÅV^ZVMOLKNLKP[LTZ YLJLP]HISLZPU]LU[VYPLZV[OLYUVUÄUHUJPHS impairment loss is reversed through the assets and credit enhancements such :[H[LTLU[VM7YVÄ[VY3VZZ as netting agreements. The fair value

336 SAMPATH BANK PLC Annual Report 2015 The Group did not designate any derivate as or, in its absence, the most advantageous The fair value of a demand deposit is not a hedging instrument during the year ended market to which the Group has access at less than the amount payable on demand, 31st December 2015. [OH[KH[L;OLMHPY]HS\LVMHSPHIPSP[`YLÅLJ[Z KPZJV\U[LKMYVT[OLÄYZ[KH[LVU^OPJO[OL its non-performance risk. When available, amount could be required to be paid.  H*HZO-SV^/LKNL the Group measures the fair value of an The effective portion of changes in the fair instrument using the quoted price in an A fair value measurement of a non value of derivatives that are designated and active market for that instrument (Level 01 ÄUHUJPHSHZZL[[HRLZPU[VHJJV\U[HTHYRL[ X\HSPÄLKHZJHZOÅV^OLKNLZPZYLJVNUPZLK valuation). A market is regarded as active participant’s ability to generate economic in equity. The gain or loss relating to the if transactions for the asset or liability take ILULÄ[ZI`\ZPUN[OLHZZL[PUP[ZOPNOLZ[HUK ineffective portion is recognised immediately WSHJL^P[OZ\MÄJPLU[MYLX\LUJ`HUK]VS\TL best use or by selling it to another market PU[OL:[H[LTLU[VM7YVÄ[VY3VZZ to provide pricing information on an ongoing participant that would use the asset in its basis. highest and best use. Amounts accumulated in equity are YLJSHZZPÄLK[V[OL:[H[LTLU[VM7YVÄ[VY If there is no quoted price in an active The Group recognises transfers between Loss in the periods in which the hedged market, then the Group uses valuation levels of the fair value hierarchy as of the P[LTHMMLJ[ZWYVÄ[VYSVZZ>OLUHOLKNPUN techniques that maximise the use of relevant end of the reporting period during which the instrument expires or is sold or when a observable inputs and minimise the use of change has occurred. hedge no longer meets the criteria for unobservable inputs. The chosen valuation hedge accounting, any cumulative gain or technique incorporates all of the factors that 3.4 Finance and Operating Leases loss existing in equity at that time remains in market participants would take into account The determination of whether an equity and is recognised when the forecast in pricing a transaction. arrangement is a lease, or it contains a transaction is ultimately recognised in the lease, is based on the substance of the :[H[LTLU[VM7YVÄ[VY3VZZ>OLUHMVYLJHZ[ The best evidence of the fair value of a arrangement and requires an assessment of transaction is no longer expected to ÄUHUJPHSPUZ[Y\TLU[H[PUP[PHSYLJVNUP[PVUPZ ^OL[OLY[OLM\SÄSTLU[VM[OLHYYHUNLTLU[PZ occur, the cumulative gain or loss that was normally the transaction price - i.e. the fair KLWLUKLU[VU[OL\ZLVMHZWLJPÄJHZZL[VY reported in equity is immediately transferred value of the consideration given or received. assets and the arrangement conveys a right [V[OL:[H[LTLU[VM7YVÄ[VY3VZZ If the Group determines that the fair value at to use the asset. initial recognition differs from the transaction The Group entered into a swap arrangement price and the fair value is evidenced neither 3.4.1 Finance Lease with the Central Bank of Sri Lanka during by a quoted price in an active market for an Agreements which transfer to counterparties the year ended 31st December 2013 to identical asset or liability (Level 01 valuation) substantially all the risks and rewards hedge the foreign borrowings amounted nor based on a valuation technique that incidental to the ownership of assets, but to USD 100 Mn. The Group designated uses only data from observable markets UV[ULJLZZHYPS`SLNHS[P[SLHYLJSHZZPÄLK [OLHIV]LZ^HWJVU[YHJ[HZHJHZOÅV^ 3L]LS]HS\H[PVU[OLU[OLÄUHUJPHS HZÄUHUJLSLHZLZ>OLU[OL.YV\WPZ[OL hedge and accounted accordingly. The instrument is initially measured at fair value, SLZZVY\UKLYÄUHUJLSLHZLZ[OLHTV\U[Z said contract was matured during the year adjusted to defer the difference between due under the leases, after deduction of ended 31st December 2014. the fair value at initial recognition and unearned interest income, are included the transaction price. Subsequently, that in Note 25, ‘Loans to & receivables from 3.3.10 Amortised Cost Measurement KPMMLYLUJLPZYLJVNUPZLKPUWYVÄ[VYSVZZ banks and Note 26, ‘Loans to & receivables ;OLHTVY[PZLKJVZ[VMHÄUHUJPHSHZZL[VY on an appropriate basis over the life of from other customers’, as appropriate. SPHIPSP[`PZ[OLHTV\U[H[^OPJO[OLÄUHUJPHS the instrument but not later than when the Interest income receivable is recognised in asset or liability is measured at initial valuation is wholly supported by observable ‘Net interest income’ over the periods of the recognition, minus principal repayments, market data or the transaction is closed out. leases so as to give a constant rate of return plus or minus the cumulative amortisation on the net investment in the leases. using the effective interest method of -HPY]HS\LZYLÅLJ[[OLJYLKP[YPZRVM[OL any difference between the initial amount instrument and include adjustments to take >OLU[OL.YV\WPZHSLZZLL\UKLYÄUHUJL recognised and the maturity amount, minus account of the credit risk of the Group entity leases, the leased assets are capitalised any reduction for impairment. and the counterparty where appropriate. and included in ‘Property, plant and Fair value estimates obtained from models equipment’ and the corresponding liability 3.3.11 Fair Value Measurement are adjusted for any other factors, such as to the lessor is included in ‘Other liabilities’. ‘Fair value’ is the price that would be liquidity risk or model uncertainties; to the (ÄUHUJLSLHZLHUKP[ZJVYYLZWVUKPUN received to sell an asset or paid to extent that the Group believes a third-party liability are recognised initially at the fair transfer a liability (exit price) in an orderly market participant would take them into value of the asset or if lower, the present transaction between market participants account in pricing a transaction. value of the minimum lease payments. at the measurement date in the principal Finance charges payable are recognised in

Annual Report 2015 SAMPATH BANK PLC 337 Notes to the Financial Statements

‘Interest expenses’ over the period of the are lower than the unavoidable cost of 3.9.2 Economic Service Charge (ESC) lease based on the interest rate implicit in meeting its obligations under the contract. As per provisions of the Economic Service the lease so as to give a constant rate of The provision is measured as the present Charge (ESC) Act No 13 of 2006 and interest on the remaining balance of the value of the lower of the expected cost of subsequent amendments thereto, ESC is liability. terminating the contract and the expected payable only on exempt turnover of the net cost of continuing with the contract. Bank at 0.25% and is deductible from 3.4.2 Operating Lease income tax payable. ESC is not payable on (SSV[OLYSLHZLZHYLJSHZZPÄLKHZVWLYH[PUN Before a provision is established, the turnover on which income tax is payable. leases. When acting as lessor, the Group Group recognises any impairment loss on includes the assets subject to operating the assets associated with that contract. 3.10 Regulatory Provisions leases in ‘Property, plant and equipment’ The expense relating to any provision is 3.10.1 Deposit Insurance and Liquidity and accounts for them accordingly. WYLZLU[LKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ Support Scheme Impairment losses are recognised to the net of any reimbursement. In terms of the Banking Act Direction No 5 extent that residual values are not fully of 2010 “Insurance of Deposit Liabilities” recoverable and the carrying value of the 3.7 Operational Risk Events issued on 27th September 2010 and assets is thereby impaired. Provisions for operational risk events subsequent amendments there to, all are recognised for losses incurred by Licensed Commercial Banks are required When the Group is the lessee, leased assets the Bank which do not relate directly to to insure their deposit liabilities in the are not recognised on the Statement of amounts of principal outstanding for loans Deposit Insurance Scheme operated by Financial Position. and advances. The amount recognised the Monetary Board in terms of Sri Lanka as a provision is the best estimate of the Deposit Insurance Scheme Regulations Rentals payable and receivable under expenditure required to settle the present No 1 of 2010 issued under Sections 32A operating leases are accounted for on a obligation as at the reporting date, taking to 32E of the Monetary Law Act with effect straight-line basis over the periods of the into account the risks and uncertainties that from 1st October 2010. The said scheme leases and are included in ‘Other operating surround the events and circumstances that was renamed as the “Sri Lanka Deposit expenses’ and ‘Other operating income’, affect the provision. Insurance and Liquidity Support Scheme” respectively. as per the Sri Lanka Deposit Insurance and 3.8 Recognition of Income Liquidity Support Scheme Regulation No 1 3.5 Fiduciary Assets Revenue is recognised to the extent that of 2013. ;OL.YV\WWYV]PKLZÄK\JPHY`ZLY]PJLZ[OH[ P[PZWYVIHISL[OH[[OLLJVUVTPJILULÄ[Z result in the holding of assets on behalf of its ^PSSÅV^[V[OL.YV\WHUK[OLYL]LU\LJHU Deposits to be insured include demand, J\Z[VTLYZ(ZZL[ZOLSKPUÄK\JPHY`JHWHJP[` ILYLSPHIS`TLHZ\YLK:WLJPÄJYLJVNUP[PVU time and savings deposit liabilities and are not reported in the Financial Statements, criteria that must be met before revenue exclude the following; as they are not assets of the Group. is recognised is discussed under Note 7-Net Interest Income, Note 8 – Net Fee a) deposit liabilities to member 3.6 Provisions and Commission Income and Note 9-Net institutions A provision is recognised if, as a result Trading Income. b) deposit liabilities to government of Sri of a past event, the Group has a present Lanka legal or constructive obligation that can be 3.9 Other Taxes c) deposit liabilities to Directors, key estimated reliably, and it is probable that 3.9.1 Withholding Tax (WHT) on Dividend management personnel and other HUV\[ÅV^VMLJVUVTPJILULÄ[Z^PSSIL +P]PKLUKKPZ[YPI\[LKV\[VM[H_HISLWYVÄ[ YLSH[LKWHY[PLZHZKLÄULKPU)HURPUN required to settle the obligation. The amount of the local Subsidiaries attracts a 10% Act Direction No 11 of 2007 on recognised is the best estimate of the deduction at source and is not available to Corporate Governance of Licensed consideration required to settle the present set off against the tax liability of the Bank. Commercial Banks obligation at the reporting date, taking ;O\Z[OL>/;KLK\J[LKH[ZV\YJLVU[OL d) deposit liabilities held as collateral in to account the risks and uncertainties dividends distributed by the Subsidiaries is against any accommodation granted surrounding the obligation at that date. charged to the Consolidated Statement of e) deposit liabilities falling within the Where a provision is measured using the 7YVÄ[VY3VZZHZHJVUZVSPKH[PVUHKQ\Z[TLU[ meaning of abandoned property JHZOÅV^ZLZ[PTH[LK[VZL[[SL[OLWYLZLU[ in terms of the Banking Act and obligation, its carrying amount is determined >/;[OH[HYPZLMYVT[OLKPZ[YPI\[PVUVM dormant deposits in terms of the based on the present value of those cash dividend by the Bank are recognised at the Finance Business Act, funds of which ÅV^Z(WYV]PZPVUMVYVULYV\ZJVU[YHJ[ZPZ same time as the liability to pay the related have been transferred to Central YLJVNUPZLK^OLU[OLL_WLJ[LKILULÄ[Z[V dividend is recognised. Bank of Sri Lanka be derived by the Group from a contract

338 SAMPATH BANK PLC Annual Report 2015 Licensed Commercial Banks are required to 4.2 SLFRS 15 - Revenue from Phase 3: Hedge accounting pay a premium of 0.10% on eligible deposit Contracts with Customers SLFRS 9 introduces a substantially- liabilities if the Bank maintains a capital The objective of this Standard is to establish reformed model for hedge accounting adequacy ratio of 14% or above as at the the principles that an entity shall apply with enhanced disclosures about risk LUKVM[OLPTTLKPH[LS`WYLJLKPUNÄUHUJPHS to report useful information to users of management activity. The new model year and a premium of 0.125% on eligible Financial Statements about the nature, represents a substantial overhaul of hedge deposit liabilities for all other Licensed amount, timing and uncertainty of revenue accounting that aligns the accounting Commercial Banks calculated on the total HUKJHZOÅV^ZHYPZPUNMYVTJVU[YHJ[Z^P[O treatment with risk management activities, amount of eligible deposits as at the end of customers. LUHISPUNLU[P[PLZ[VIL[[LYYLÅLJ[[OLZL the quarter within a period of 15 days from activities in their Financial Statements. In the end of the quarter. SLFRS 15 will become effective on addition, as a result of these changes, 01st January 2018. The impact on the users of the Financial Statements will be 3.10.2 Crop Insurance Levy implementation of the above Standard has provided with better information about In terms of the Finance Act No 12 of 2013, UV[ILLUX\HU[PÄLK`L[ risk management and the effect of hedge all institutions under the purview of Banking accounting on the Financial Statements. Act No 30 of 1988, Finance Business Act 4.3 SLFRS 9 - Financial Instruments No 42 of 2011 and Regulation of Insurance This standard will replace Sri Lanka SLFRS 9 will become effective on Industry Act No 43 of 2000 are required Accounting Standard - LKAS 39 01st January 2018. The impact on the [VWH` VM[OLWYVÄ[HM[LY[H_HZ*YVW (Financial Instruments : Recognition implementation of the above Standard has Insurance Levy to the National Insurance and Measurement). The improvements UV[ILLUX\HU[PÄLK`L[.P]LU[OLUH[\YL Trust Fund Board effective from 01st April introduced by SLFRS 9 includes a logical of the Group’s operations, this standard is 2013. TVKLSMVYJSHZZPÄJH[PVUHUKTLHZ\YLTLU[ expected to have a pervasive impact on a single, forward-looking ‘expected loss’ the Consolidated Financial Statements of impairment model and a substantially- the Group. In particular, an increase in the 4. STANDARDS ISSUED reformed approach to hedge accounting overall impairment allowance is expected BUT NOT YET which are detailed below. due to the introduction of the expected EFFECTIVE AS AT 31ST credit loss model. DECEMBER 2015 Phase 1: &ODVVLðFDWLRQDQG The following Sri Lanka Accounting measurement Standards have been issued by the *SHZZPÄJH[PVUKL[LYTPULZOV^ÄUHUJPHS 5. AMENDMENTS Institute of Chartered Accountants of Sri HZZL[ZHUKÄUHUJPHSSPHIPSP[PLZHYLHJJV\U[LK TO EXISTING Lanka which are not yet effective as at for in the Financial Statements and, in ACCOUNTING 31st December 2015. Accordingly these particular, how they are measured on an STANDARDS accounting standards have not been ongoing basis. SLFRS 9 introduces a logical EFFECTIVE FROM 01ST applied in the preparation of the Financial HWWYVHJOMVY[OLJSHZZPÄJH[PVUVMÄUHUJPHS JANUARY 2016 Statements for the year ended 31st HZZL[ZKYP]LUI`JHZOÅV^JOHYHJ[LYPZ[PJZ Amendments to existing Accounting December 2015. and the business model in which an asset is Standards with effect from 01st January held. This single, principle-based approach 2016 as published by the Institute of 4.1 SLFRS 14 - Regulatory Deferral replaces existing rule-based requirements Chartered Accountants of Sri Lanka are Accounts [OH[HYLJVTWSL_HUKKPMÄJ\S[[VHWWS` not expected to have an impact on the The objective of this Standard is to specify Consolidated Financial Statements of the [OLÄUHUJPHSYLWVY[PUNYLX\PYLTLU[ZMVY Phase 2: Impairment Group. regulatory deferral account balances that SLFRS 9 introduces a new, expected loss arise when an entity provides goods or impairment model that will require more services to customers at a price or rate that timely recognition of expected credit losses. is subject to rate regulation. :WLJPÄJHSS`[OLUL^:[HUKHYKYLX\PYLZ entities to account for expected credit losses SLFRS 14 will become effective on 01st MYVT^OLUÄUHUJPHSPUZ[Y\TLU[ZHYLÄYZ[ January 2016. Implementation of this recognised and it lowers the threshold for Standard is not expected to have an impact recognition of full lifetime expected losses. on the Consolidated Financial Statements.

Annual Report 2015 SAMPATH BANK PLC 339 Notes to the Financial Statements

6. GROSS INCOME

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Interest income (Note 7.1) 37,943,691 38,058,607 39,706,286 39,695,507 Fee & commission income 6,487,873 5,055,618 6,620,894 5,132,720 Net trading income (Note 9) (341,316) 413,387 (341,316) 413,387 Other operating income (Note 10) 2,941,268 1,069,469 3,115,973 1,152,792 47,031,516 44,597,081 49,101,837 46,394,406

7. NET INTEREST INCOME

Accounting Policy Recognition of Interest Income and Interest Expense -VYHSSÄUHUJPHSPUZ[Y\TLU[ZTLHZ\YLKH[HTVY[PZLKJVZ[PU[LYLZ[ILHYPUNÄUHUJPHSHZZL[ZJSHZZPÄLKHZH]HPSHISLMVYZHSLHUKÄUHUJPHS PUZ[Y\TLU[ZKLZPNUH[LKH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZPU[LYLZ[PUJVTLVYL_WLUZLPZYLJVYKLK\ZPUN[OLLMMLJ[P]LPU[LYLZ[YH[LTL[OVK Effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the ÄUHUJPHSPUZ[Y\TLU[VYHZOVY[LYWLYPVK^OLYLHWWYVWYPH[L[V[OLUL[JHYY`PUNHTV\U[VM[OLÄUHUJPHSHZZL[VYÄUHUJPHSSPHIPSP[`

;OLJHSJ\SH[PVUVMLMMLJ[P]LPU[LYLZ[YH[L[HRLZPU[VHJJV\U[HSSJVU[YHJ[\HS[LYTZVM[OLÄUHUJPHSPUZ[Y\TLU[MVYL_HTWSLWYLWH`TLU[VW[PVUZ and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses.

;OLJHYY`PUNHTV\U[VM[OLÄUHUJPHSHZZL[VYÄUHUJPHSSPHIPSP[`PZHKQ\Z[LKPM[OL.YV\WYL]PZLZP[ZLZ[PTH[LZVMWH`TLU[ZVYYLJLPW[Z;OL adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as PU[LYLZ[PUJVTLMVYÄUHUJPHSHZZL[ZHUKPU[LYLZ[L_WLUZLMVYÄUHUJPHSSPHIPSP[PLZ/V^L]LYMVYHYLJSHZZPÄLKÄUHUJPHSHZZL[MVY^OPJO[OL.YV\W subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment to the effective interest rate from the date of the change in estimate.

6UJL[OLYLJVYKLK]HS\LVMHÄUHUJPHSHZZL[VYHNYV\WVMZPTPSHYÄUHUJPHSHZZL[ZOHZILLUYLK\JLKK\L[VHUPTWHPYTLU[SVZZPU[LYLZ[ PUJVTLJVU[PU\LZ[VILYLJVNUPZLK\ZPUN[OLYH[LVMPU[LYLZ[\ZLK[VKPZJV\U[[OLM\[\YLJHZOÅV^ZMVY[OLW\YWVZLVMTLHZ\YPUN[OL impairment loss.

7.1 Interest Income Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Placements with other banks 298,022 91,360 298,202 91,360 Financial assets - held for trading 1,276,853 3,178,774 1,276,853 3,178,774 Loans to & receivables from other customers 31,997,675 31,395,282 33,755,908 33,031,047 Other loans & receivables 1,785,920 1,216,716 1,785,920 1,216,979 Interest income accrued on impaired loans & receivables 212,711 158,333 212,873 158,841 Reverse repurchase agreements 483,244 1,880,697 483,643 1,880,090 Financial assets - held to maturity 19,835 137,445 23,456 138,416 Financial assets - available for sale 1,869,431 - 1,869,431 - 37,943,691 38,058,607 39,706,286 39,695,507

340 SAMPATH BANK PLC Annual Report 2015 7.2 Interest Expense

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Due to other customers 17,255,719 20,087,727 17,274,714 20,073,650 Term borrowings 814,164 556,836 1,327,544 1,134,832 9LÄUHUJLIVYYV^PUNZ          Securities sold under repurchase agreements 532,334 314,824 491,426 278,906 Due to banks 149,261 136,745 149,780 136,858 Debentures 1,546,818 922,983 1,668,838 974,612 20,541,894 22,334,974 21,155,900 22,914,717 Net interest income 17,401,797 15,723,633 18,550,386 16,780,790

7.3 Net Interest Income from Sri Lanka Government Securities

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Interest income 4,512,112 5,762,376 4,516,132 5,763,347 Less: Interest expense 532,334 314,824 491,426 278,906 Net interest income from Sri Lanka government securities 3,979,778 5,447,552 4,024,706 5,484,441

7.4 Notional Tax Credit for Withholding Tax on Government Securities on Secondary Market Transactions Section 137 of the Inland Revenue Act No 10 of 2006 provides that a company which derives interest income from the secondary market transactions in government securities be entitled to a notional tax credit (being one ninth of the net interest income) provided such interest income forms part of the statutory income of the company for that year of assessment.

Accordingly, net income earned from secondary market transactions in government securities for the year by the Bank has been grossed up in the Financial Statements and the resulting notional tax credit amounted to Rs 25.70 Mn (2014 : Rs 196.78 Mn).

8. NET FEE AND COMMISSION INCOME

Accounting Policy Fee Income Earned from Services that are Provided over a Certain Period of Time Fees earned for the provision of services over a period of time are accrued over that period. These fees include professional fees, trade service fees, commission income and asset management fees etc. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment to the effective interest rate of the loan. When it is unlikely that a loan will be drawn down, the loan commitment fees are recognised over the commitment period on a straight line basis.

Fee Income from Providing Transaction Services Fees arising from negotiating or participating in the negotiation of a transaction for a third party, such as the arrangement of an acquisition of shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognised as the related services are performed.

Annual Report 2015 SAMPATH BANK PLC 341 Notes to the Financial Statements

8. NET FEE AND COMMISSION INCOME CONTD. Expenses on Account of Customer Loyalty Programmes (^HYKJYLKP[Z\UKLYJ\Z[VTLYSV`HS[`WYVNYHTTLZHYLHJJV\U[LKMVYHZHZLWHYH[LS`PKLU[PÄHISLJVTWVULU[VM[OL[YHUZHJ[PVUPU^OPJO[OL` are granted. The fair value of the consideration received in respect of the initial sale is allocated between the award credits and the other components of the sale. Expense incurred for customer loyalty programmes is accounted under ‘Net fee and commission expenses’.

Other Fee and Commission Expenses Other Fee and commission expenses relate mainly to transactions and services fees which are expensed as the services are received. Fee and commission expenses are recognised on an accrual basis.

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Trade related services 1,454,404 1,156,440 1,454,404 1,156,440 Foreign remittance related services 227,707 189,906 227,707 189,906 Credit & debit card services 1,332,715 1,121,513 1,332,715 1,121,513 6[OLYIHURPUN ÄUHUJPHSZLY]PJLZ        5,286,553 4,187,406 5,417,211 4,259,358

9. NET TRADING INCOME

Accounting Policy

5L[[YHKPUNPUJVTLPUJS\KLZHSSNHPUZHUKSVZZLZMYVTJOHUNLZPUMHPY]HS\LYLSH[LKJHWP[HSNHPUSVZZHUKKP]PKLUKMYVTÄUHUJPHSHZZL[Z º/LSKMVY[YHKPUN»+P]PKLUKPUJVTLPZYLJVNUPZLK^OLU[OL.YV\W»ZYPNO[[VYLJLP]L[OLWH`TLU[PZLZ[HISPZOLK;OPZJH[LNVY`HSZVPUJS\KLZ foreign exchange differences arising from derivative contracts which are not designated as hedging instruments.

Bank & Group For the year ended 31st December 2015 2014 Rs 000 Rs 000

Forward exchange contract revaluation (loss) / gain (262,642) 365,238 Capital gain / (loss) 76,249 287,776 Dividend income 15,505 27,385 Net mark to market (loss) / gain (170,428) (267,012) (341,316) 413,387

342 SAMPATH BANK PLC Annual Report 2015 10. OTHER OPERATING INCOME

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Exchange income 2,728,553 917,362 2,728,553 917,283 +P]PKLUKPUJVTLMYVTH]HPSHISLMVYZHSLÄUHUJPHSHZZL[Z       *HWP[HSNHPUSVZZMYVTH]HPSHISLMVYZHSLÄUHUJPHSHZZL[Z       Dividend income from Subsidiaries 58,950 49,972 - - 7YVÄ[VUKPZWVZHSVMWYVWLY[`WSHU[ LX\PWTLU[       Rental & other income 50,766 33,735 284,105 166,881 2,941,268 1,069,469 3,115,973 1,152,792

11. NET IMPAIRMENT CHARGE / (REVERSAL) FOR LOANS & OTHER LOSSES

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Banks - - - - Other customers  0UKP]PK\HSS`ZPNUPÄJHU[J\Z[VTLYSVHUPTWHPYTLU[         Collective loan impairment 427,832 1,447,559 389,536 1,533,639 Other debtors - - - (3,825) Financial assets - available for sale 2,389 29,105 2,389 29,105 943,569 1,401,399 992,844 1,580,792

12. PERSONNEL EXPENSES

Accounting Policy 6KRUW7HUP(PSOR\HH%HQHðWV :OVY[[LYTLTWSV`LLILULÄ[VISPNH[PVUZHYLTLHZ\YLKVUHU\UKPZJV\U[LKIHZPZHUKHYLL_WLUZLKHZ[OLYLSH[LKZLY]PJLPZWYV]PKLK( SPHIPSP[`PZYLJVNUPZLKMVY[OLHTV\U[L_WLJ[LK[VILWHPK\UKLYZOVY[[LYTJHZOIVU\ZVYWYVÄ[ZOHYPUNWSHUZPM[OL.YV\WOHZHWYLZLU[ legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

'HðQHG&RQWULEXWLRQ3ODQV (KLÄULKJVU[YPI\[PVUWSHUPZHWVZ[LTWSV`TLU[ILULÄ[WSHU\UKLY^OPJOHULU[P[`WH`ZÄ_LKJVU[YPI\[PVUZPU[VHZLWHYH[LLU[P[`HM\UK HUK^PSSOH]LUVSLNHSVYJVUZ[Y\J[P]LVISPNH[PVU[VWH`M\Y[OLYJVU[YPI\[PVUZPM[OLM\UKKVLZUV[OVSKZ\MÄJPLU[HZZL[Z[VWH`HSSLTWSV`LL ILULÄ[ZYLSH[PUN[VLTWSV`LLZLY]PJLZPU[OLJ\YYLU[HUKWYPVYWLYPVKZHZKLÄULKPU[OL:YP3HURH(JJV\U[PUN:[HUKHYK32(:  ,TWSV`LL)LULÄ[Z

;OLJVU[YPI\[PVUWH`HISLI`[OLLTWSV`LY[VHKLÄULKJVU[YPI\[PVUWSHUPZPUWYVWVY[PVU[V[OLZLY]PJLZYLUKLYLK[V[OL.YV\WI`[OL employees and is recorded as an expense under ‘Personnel expenses’ as and when they become due. Unpaid contributions are recorded as a liability under ‘Other liabilities’ in Note 40.

The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund. Further, the Subsidiary companies contribute  VU[OLZHSHY`VMLHJOLTWSV`LL[V[OL,TWSV`LLZ»7YV]PKLU[-\UK;OLHIV]LL_WLUZLZHYLPKLU[PÄLKHZJVU[YPI\[PVUZ[V¸+LÄULK *VU[YPI\[PVU7SHUZ¹HZKLÄULKPU[OL:YP3HURH(JJV\U[PUN:[HUKHYK32(: ,TWSV`LL)LULÄ[Z

Annual Report 2015 SAMPATH BANK PLC 343 Notes to the Financial Statements

12. PERSONNEL EXPENSES CONTD. 'HðQHG%HQHðW3ODQV (KLÄULKILULÄ[WSHUPZHWVZ[LTWSV`TLU[ILULÄ[WSHUV[OLY[OHUHKLÄULKJVU[YPI\[PVUWSHU(JJVYKPUNS`[OLWLUZPVUM\UKZ[HMMNYH[\P[` HUK[OL,TWSV`LLZ»7YV]PKLU[-\UKVM[OL)HUR^LYLJVUZPKLYLKHZKLÄULKILULÄ[WSHUZHZWLY:YP3HURH(JJV\U[PUN:[HUKHYK32(:  ,TWSV`LL)LULÄ[Z

Pension Fund The Bank has a pension fund for all members who joined the Bank for permanent employment before 1st June 2003. A member is eligible for a monthly pension after attainment of 55 years of age and completion of 10 years uninterrupted service. ;OL)HURTLHZ\YLZ[OLWYLZLU[]HS\LVM[OLWLUZPVUVISPNH[PVU^OPJOPZHKLÄULKILULÄ[WSHU^P[O[OLHK]PJLVMHUPUKLWLUKLU[ professional actuary using the Projected Unit Credit (PUC) method as required by Sri Lanka Accounting Standard - LKAS 19 (Employee )LULÄ[Z

An actuarial valuation is carried out at every year end to ascertain the full liability under the Fund.

;OL)HUR»ZVISPNH[PVUPUYLZWLJ[VMKLÄULKILULÄ[WLUZPVUWSHUPZJHSJ\SH[LKI`LZ[PTH[PUN[OLHTV\U[VMM\[\YLILULÄ[[OH[LTWSV`LLZ OH]LLHYULKPUYL[\YUMVY[OLPYZLY]PJLPU[OLJ\YYLU[HUKWYPVYWLYPVKZHUKKPZJV\U[PUN[OH[ILULÄ[[VKL[LYTPULP[ZWYLZLU[]HS\L[OLU deducting the fair value of any plan assets to determine the net amount to be shown in the Statement of Financial Position. The value of any KLÄULKILULÄ[HZZL[PZYLZ[YPJ[LK[V[OLWYLZLU[]HS\LVMHU`LJVUVTPJILULÄ[ZH]HPSHISLPU[OLMVYTVMYLM\UKZMYVT[OLWSHUVYYLK\J[PVUZ PU[OLM\[\YLJVU[YPI\[PVUZ[V[OLWSHU0UVYKLY[VJHSJ\SH[L[OLWYLZLU[]HS\LVMLJVUVTPJILULÄ[ZJVUZPKLYH[PVUPZNP]LU[VHU`TPUPT\T M\UKPUNYLX\PYLTLU[Z[OH[HWWS`[VHU`WSHUPU[OL)HUR(ULJVUVTPJILULÄ[PZH]HPSHISL[V[OL)HURPMP[PZYLHSPZHISLK\YPUN[OLSPMLVM[OL plan, or on settlement of the plan liabilities.

;OL)HURKL[LYTPULZ[OLUL[PU[LYLZ[L_WLUZLPUJVTLVU[OLUL[KLÄULKILULÄ[SPHIPSP[`HZZL[I`HWWS`PUN[OLKPZJV\U[YH[L\ZLK[V TLHZ\YL[OLKLÄULKILULÄ[VISPNH[PVUH[[OLILNPUUPUNVM[OLHUU\HSWLYPVK[V[OLUL[KLÄULKILULÄ[SPHIPSP[`HZZL[H[[OLILNPUUPUNVM[OL annual period. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating to the terms of the Bank’s obligations.

The increase in the pension fund liabilities attributable to the services provided by employees, who are members of the Fund, during the `LHYLUKLKZ[+LJLTILYJ\YYLU[ZLY]PJLJVZ[OHZILLUYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº7LYZVUULSL_WLUZLZ» together with the net interest income / expense.

The Bank recognises the total actuarial gain and loss that arise in calculating the Bank’s obligation in respect of a plan in other comprehensive income during the period in which it occurs.

The demographic assumptions underlying the valuation are retirement age (55 yrs), early withdrawals from service and retirement on medical grounds, death before and after retirement etc.

The assets of the fund are held separately from those of the Bank’s assets and are administered independently.

The Subsidiaries do not operate pension funds.

Gratuity 0UJVTWSPHUJL^P[O[OL.YH[\P[`(J[5VVM WYV]PZPVUPZTHKLPU[OLHJJV\U[ZMYVT[OLÄYZ[`LHYVMZLY]PJLMVYNYH[\P[`WH`HISL[V employees who joined the Bank on or after 1st June 2003, as they are not in pensionable service of the Bank.

7YV]PZPVUPZUV[THKLPU[OLHJJV\U[ZMVYNYH[\P[`WH`HISL[VLTWSV`LLZ^OVQVPULKWYPVY[VZ[1\ULHUKJVTWSL[LKÄ]LVYTVYL `LHYZVMJVU[PU\V\ZZLY]PJLHZ[OL)HUROHZP[ZV^UUVUJVU[YPI\[VY`WLUZPVUZJOLTLPUMVYJL/V^L]LYPMLTWSV`LLZ^OVHYLLSPNPISLMVY pension resign before retirement age, the Bank is liable to pay gratuity to such employees.

344 SAMPATH BANK PLC Annual Report 2015 An actuarial valuation is carried out at every year end to ascertain the full liability under gratuity.

The gratuity liability is not externally funded. All Subsidiary companies too carry out actuarial valuations to ascertain their respective gratuity liabilities.

;OL.YV\WKL[LYTPULZ[OLPU[LYLZ[L_WLUZLVU[OLKLÄULKILULÄ[SPHIPSP[`I`HWWS`PUN[OLKPZJV\U[YH[L\ZLK[VTLHZ\YL[OLKLÄULKILULÄ[ SPHIPSP[`H[[OLILNPUUPUNVM[OLHUU\HSWLYPVK[V[OLKLÄULKILULÄ[SPHIPSP[`H[[OLILNPUUPUNVM[OLHUU\HSWLYPVK;OLKPZJV\U[YH[LPZ[OL yield at the reporting date on government bonds that have maturity dates approximating to the terms of the Group’s obligations.

The increase in gratuity liabilities attributable to the services provided by employees during the year ended 31st December 2015 (current ZLY]PJLJVZ[OHZILLUYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº7LYZVUULSL_WLUZLZ»[VNL[OLY^P[O[OLUL[PU[LYLZ[L_WLUZL The Group recognises the total actuarial gain and loss that arise in calculating the Group’s obligation in respect of gratuity in other comprehensive income during the period in which it occurs.

The demographic assumptions underlying the valuation are retirement age (55 yrs), early withdrawals from service and retirement on medical grounds etc.

Employees’ Provident Fund - Bank Employees’ Provident Fund is an approved private provident fund which has been set up to meet the provident fund liabilities of the Bank to which the Bank and employees contribute 12% and 8% respectively on the salary of each employee. Employees who are members of [OLM\UKLU[P[SL[VYLJLP]LPU[LYLZ[H[HN\HYHU[LLKYH[LVM5H[PVUHS:H]PUNZ)HURVUL`LHYÄ_LKKLWVZP[YH[LUL[VM>/;VU[OLPYIHSHUJL L]LUPM[OLM\UKLHYUZHSV^LYYL[\YUMYVTP[ZPU]LZ[TLU[PUHNP]LUÄUHUJPHS`LHY(JJVYKPUNS`[OPZVISPNH[PVU^HZ[YLH[LKHZHKLÄULKILULÄ[ liability and an actuarial valuation was conducted to value the Bank’s obligation on the same.

Unutilised Accumulated Leave The Bank’s liability towards the accumulated leave which is expected to be utilised beyond one year from the end of the reporting period is [YLH[LKHZV[OLYSVUN[LYTLTWSV`LLILULÄ[Z;OL)HUR»ZUL[VISPNH[PVU[V^HYKZ\U\[PSPZLKHJJ\T\SH[LKSLH]LPZJHSJ\SH[LKI`KPZJV\U[PUN [OLHTV\U[VMM\[\YLILULÄ[[OH[LTWSV`LLZOH]LLHYULKPUYL[\YUMVY[OLPYZLY]PJLPU[OLJ\YYLU[HUKWYPVYWLYPVKZ[VKL[LYTPUL[OLWYLZLU[ ]HS\LVMZ\JOILULÄ[Z;OLKPZJV\U[YH[LPZ[OL`PLSKH[[OLYLWVY[PUNKH[LVUNV]LYUTLU[IVUKZ[OH[OH]LTH[\YP[`KH[LZHWWYV_PTH[PUN[V the terms of the Bank’s obligation. The calculation is performed using the Projected Unit Credit method. Net change in liability for unutilised HJJ\T\SH[LKSLH]LPUJS\KPUNHU`HJ[\HYPHSNHPUHUKSVZZHYLYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº7LYZVUULSL_WLUZLZ»PU[OL period in which they arise.

The Group’s net obligation to the pension fund, gratuity, EPF interest guarantee and unutilised accumulated annual leave is disclosed under Note 41 to the Financial Statements.

Share Based Payment Transactions The Bank does not have any share based payment transactions in force as at 31st December 2015. The Employee Share Option Plan 2010 (ESOP 2010) which was an equity settled share based payment transaction as per Sri Lanka Accounting Standard - SLFRS 2 (Share-based Payment), expired on 30th June 2014.

Sri Lanka Accounting Standard - SLFRS 2 (Share-based Payment) was not applied in respect of the ESOP 2010 as this was exempted under the transitional provisions of the said Standard.

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Salaries & bonus 4,761,458 3,959,720 5,076,036 4,193,601 Contributions to EPF & ETF 505,189 441,921 533,466 463,287 Provision for gratuity & pension 354,986 213,647 362,298 219,659 Others 519,626 445,631 552,603 464,529 6,141,259 5,060,919 6,524,403 5,341,076

Annual Report 2015 SAMPATH BANK PLC 345 Notes to the Financial Statements

13. OTHER OPERATING EXPENSES Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Directors’ fees & expenses 53,935 47,877 69,950 65,465 Auditors’ remuneration (Note 13.1) 21,265 28,103 28,290 32,014 Professional & legal expenses 75,940 41,420 92,757 67,079 Depreciation of property, plant & equipment 604,945 615,881 766,527 740,562 Amortisation of intangible assets 95,216 80,014 103,339 85,954 Deposit insurance premium 428,670 297,012 429,373 297,012 Donations 2,487 49,148 2,487 49,153 6MÄJLHKTPUPZ[YH[PVU LZ[HISPZOTLU[L_WLUZLZ            Other expenses 2,706,366 2,426,067 2,847,704 2,549,321 7,198,177 6,668,211 7,437,635 6,839,150

13.1 Auditors’ Remuneration

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Audit fees 11,299 10,470 14,798 13,418 Audit related fees & expenses 4,997 6,541 5,379 6,541 Non - audit expenses 4,969 11,092 8,113 12,055 21,265 28,103 28,290 32,014

14. VALUE ADDED TAX (VAT) AND NATION BUILDING TAX (NBT) ON FINANCIAL SERVICES

Accounting Policy Value Added Tax VAT on Financial Services is calculated in accordance with Value Added Tax Act No 14 of 2002 and subsequent amendments thereto. ;OLIHZLMVY[OLJVTW\[H[PVUVM]HS\LHKKLK[H_VUÄUHUJPHSZLY]PJLZPZ[OLHJJV\U[PUNWYVÄ[ILMVYL=(;HUKPUJVTL[H_HKQ\Z[LKMVY[OL LJVUVTPJKLWYLJPH[PVUHUKLTVS\TLU[ZWH`HISL[VLTWSV`LLZPUJS\KPUNJHZOILULÄ[ZUVUJHZOILULÄ[Z WYV]PZPVUZYLSH[PUN[V[LYTPUHS ILULÄ[Z

Nation Building Tax 5);VUÄUHUJPHSZLY]PJLZPZJHSJ\SH[LKPUHJJVYKHUJL^P[O5H[PVU)\PSKPUN;H_5);(J[5V VM HUKZ\IZLX\LU[HTLUKTLU[Z [OLYL[V^P[OLMMLJ[MYVTZ[1HU\HY`5);VUÄUHUJPHSZLY]PJLZPZJHSJ\SH[LKIHZLKVU[OL]HS\LHKKP[PVU\ZLKMVY[OLW\YWVZLVM=(; VUÄUHUJPHSZLY]PJLZ

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

=HS\LHKKLK[H_VUÄUHUJPHSZLY]PJLZ        5H[PVUI\PSKPUN[H_VUÄUHUJPHSZLY]PJLZ         1,904,424 1,536,859 1,997,729 1,598,395

15. INCOME TAX EXPENSE

Accounting Policy

(ZWLY:YP3HURH(JJV\U[PUN:[HUKHYK32(:0UJVTL;H_LZ[H_L_WLUZLPZ[OLHNNYLNH[LHTV\U[PUJS\KLKPUKL[LYTPUH[PVUVMWYVÄ[ VYSVZZMVY[OLWLYPVKPUYLZWLJ[VMJ\YYLU[HUKKLMLYYLK[H_H[PVU0UJVTL[H_L_WLUZLPZYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ except to the extent it relates to items recognised directly in equity or other comprehensive income in which case it is recognised in equity or in other comprehensive income.

346 SAMPATH BANK PLC Annual Report 2015 Current Taxation Current tax assets and liabilities consist of amounts expected to be recovered from or paid to the Commissioner General of Inland Revenue in respect of the current year, using the tax rates and tax laws enacted or substantively enacted on the reporting date and any adjustment to tax payable in respect of prior years.

(JJVYKPUNS`WYV]PZPVUMVY[H_H[PVUPZIHZLKVU[OLWYVÄ[MVY[OL`LHYHKQ\Z[LKMVY[H_H[PVUW\YWVZLZPUHJJVYKHUJL^P[O[OLWYV]PZPVUZVM[OL 0USHUK9L]LU\L(J[5VVMHUK[OLHTLUKTLU[Z[OLYL[VH[[OLYH[LZZWLJPÄLKPU5V[L[V[OL-PUHUJPHS:[H[LTLU[Z

Deferred Taxation Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying HTV\U[ZMVYÄUHUJPHSYLWVY[PUNW\YWVZLZMVYHSS.YV\WLU[P[PLZ+LMLYYLK[H_SPHIPSP[PLZHYLYLJVNUPZLKMVYHSS[H_HISL[LTWVYHY`KPMMLYLUJLZ except:

Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a I\ZPULZZJVTIPUH[PVUHUKH[[OL[PTLVM[OL[YHUZHJ[PVUHMMLJ[ZULP[OLY[OLHJJV\U[PUNWYVÄ[UVY[H_HISLWYVÄ[VYSVZZ

In respect of taxable temporary differences associated with investments in Subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carried forward unused tax credits and unused tax losses (if HU`[V[OLL_[LU[[OH[P[PZWYVIHISL[OH[[H_HISLWYVÄ[^PSSILH]HPSHISLHNHPUZ[^OPJO[OLKLK\J[PISL[LTWVYHY`KPMMLYLUJLZJHYYPLKMVY^HYK unused tax credits and unused tax losses can be utilised except:

Where the deferred tax asset relating to the deductible temporary differences arising from the initial recognition of an asset or liability PUH[YHUZHJ[PVU[OH[PZUV[HI\ZPULZZJVTIPUH[PVUHUKH[[OL[PTLVM[OL[YHUZHJ[PVUHMMLJ[ZULP[OLY[OLHJJV\U[PUNWYVÄ[UVY [H_HISLWYVÄ[VYSVZZ

In respect of deductible temporary differences associated with investments in Subsidiaries, deferred tax assets are recognised only [V[OLL_[LU[[OH[P[PZWYVIHISL[OH[[OL[LTWVYHY`KPMMLYLUJLZ^PSSYL]LYZLPU[OLMVYLZLLHISLM\[\YLHUK[H_HISLWYVÄ[^PSSILH]HPSHISL against which the temporary differences can be utilised.

;OLJHYY`PUNHTV\U[VMKLMLYYLK[H_HZZL[ZPZYL]PL^LKH[LHJOYLWVY[PUNKH[LHUKYLK\JLK[V[OLL_[LU[[OH[P[PZWYVIHISL[OH[Z\MÄJPLU[ [H_HISLWYVÄ[^PSSILH]HPSHISL[VHSSV^[OLKLMLYYLK[H_HZZL[[VIL\[PSPZLK

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Current and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same taxation authority, there is a legal right and intentions to settle on a net basis and it is allowed under the tax law of the relevant jurisdiction. Details of current tax liabilities / receivables and deferred tax assets / liabilities are given in Note 39 and Note 34 to the Financial Statements respectively.

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Current tax expense ;H_H[PVUIHZLKVUWYVÄ[MVY[OL`LHY            (Over) / under provision in respect of previous years - (365,000) 3,759 (365,000) Current tax expense (Note 15.1) 2,829,791 1,143,934 2,983,950 1,288,125 Deferred tax expense Transfers to / (from) deferred taxation (Note 34.3) 137,141 668,783 177,503 691,234 Income tax expense 2,966,932 1,812,717 3,161,453 1,979,359

Effective tax rate 32.6% 26.9% 32.3% 27.3% Effective tax rate (excluding deferred tax) 31.1% 17.0% 30.5% 17.8%

Annual Report 2015 SAMPATH BANK PLC 347 Notes to the Financial Statements

15. INCOME TAX EXPENSE CONTD.  5HFRQFLOLDWLRQRIWKH$FFRXQWLQJ3URðWWR&XUUHQW7D[([SHQVH (YLJVUJPSPH[PVUIL[^LLU[H_L_WLUZLHUK[OLWYVK\J[VMHJJV\U[PUNWYVÄ[T\S[PWSPLKI`HWWSPJHISL[H_YH[LZ^P[OHYLJVUJPSPH[PVUIL[^LLU average effective tax rate and applicable tax rate for the years ended 31st December 2015 and 2014 are given below.

Bank Group For the year ended 31st December 2015 2014 2015 2014 % Rs 000 % Rs 000 % Rs 000 % Rs 000

7YVÄ[ILMVYL[H_            ;H_LMMLJ[VUHJJV\U[PUNWYVÄ[ before tax from operation 28.0 2,548,244 28.0 1,883,422 28.0 2,741,100 28.0 2,029,136 Tax effect on turnover liable for income tax - - - - - 5,192 - 5,210 Tax effect on Disallowable expenses 13.0 1,185,408 14.2 954,227 12.8 1,255,056 14.0 1,014,956 Tax deductible expenses (4.3) (395,695) (13.9) (934,909) (4.8) (468,605) (13.1) (954,279) Exempt income (5.6) (508,166) (5.7) (382,578) (5.1) (508,166) (5.4) (389,841) Income from other sources - - - - - 273 - 341  ,SPTPUH[PVUVMWYVÄ[SPHISLMVY turnover based tax - - - - (0.4) (44,568) (0.6) (40,747) Qualifying payments - - (0.2) (11,228) - - (0.1) (11,228) Tax losses - - - - - (91) - (423) 31.1 2,829,791 22.4 1,508,934 30.5 2,980,191 22.8 1,653,125 (Over) / under provision in respect of previous years - - (5.4) (365,000) - 3,759 (5.0) (365,000) 31.1 2,829,791 17.0 1,143,934 30.5 2,983,950 17.8 1,288,125

15.1.1 Applicable Income Tax Rates

2015 2014

Income tax on Sampath Bank PLC 28% 28% Income tax on S C Securities (Pvt) Ltd 28% 28% Income tax on Siyapatha Finance PLC 28% 28% Income tax on Sampath Information Technology Solutions Ltd 28% 28%

15.1.2 Income Tax on Sampath Centre Ltd Sampath Centre Ltd is a company approved under BOI Law and the company was exempted from income tax for a period of seven years JVTTLUJPUNMYVT[OLÄYZ[`LHYVMHZZLZZTLU[;OLÄYZ[`LHYVMHZZLZZTLU[PZ[OL`LHYPU^OPJO[OLJVTWHU`JVTTLUJLKTHRPUNWYVÄ[Z PUYLSH[PVU[VP[Z[YHUZHJ[PVUZPU[OH[`LHYVYHU``LHYVMHZZLZZTLU[UV[SH[LY[OHUÄ]L`LHYZMYVT[OLKH[LVMP[ZÄYZ[JVTTLYJPHSVWLYH[PVUZ whichever is earlier. Accordingly, Sampath Centre Ltd is liable for income tax at the rate of 2.0% of the rental income commencing from the year of assessment 2006 / 2007. Income other than rental income is liable for tax at 28%.

348 SAMPATH BANK PLC Annual Report 2015 16. EARNINGS PER SHARE

Accounting Policy

;OL.YV\WWYLZLU[ZIHZPJHUKKPS\[LK,HYUPUNZWLY:OHYL,7:KH[HMVYP[ZVYKPUHY`ZOHYLZ)HZPJ,7:PZJHSJ\SH[LKI`KP]PKPUN[OLWYVÄ[VY loss attributable to ordinary equity holders of the Bank by the weighted average number of ordinary shares outstanding during the period. +PS\[LK,7:PZKL[LYTPULKI`HKQ\Z[PUNIV[O[OLWYVÄ[VYSVZZH[[YPI\[HISL[V[OLVYKPUHY`LX\P[`OVSKLYZHUK[OL^LPNO[LKH]LYHNLU\TILY of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares if any.

Details of earnings per share are given below.

16.1 Earnings per Share: Basic

2015 2014

Amount used as the numerator .YV\WWYVÄ[HM[LY[H_MVY[OL`LHYH[[YPI\[HISL[VLX\P[`OVSKLYZ9Z   

No of ordinary shares used as the denominator Weighted average number of ordinary shares (Note 16.1.1) 172,312,655 172,269,389 Basic earnings per ordinary share (Rs) 38.44 30.55

16.1.1 Weighted Average Number of Ordinary Shares for Basic EPS

2015 2014 Outstanding Weighted Outstanding Weighted Average Average

Number of shares held as at 1st January 167,910,253 167,910,253 167,787,605 167,787,605 (KK!5\TILYVMZOHYLZPZZ\LKK\L[VÄUHSZJYPWKP]PKLUK     172,312,655 172,312,655 172,190,007 172,190,007 Add : Number of shares issued under ESOP - - 122,648 79,382 Number of shares held as at 31st December 172,312,655 172,312,655 172,312,655 172,269,389

16.2 Earnings per Share: Diluted

2015 2014

Amount used as the numerator .YV\WWYVÄ[HM[LY[H_MVY[OL`LHYH[[YPI\[HISL[VLX\P[`OVSKLYZ9Z   

No of ordinary shares used as the denominator Weighted average number of ordinary shares (Note 16.2.1) 172,312,655 172,318,146 Diluted earnings per ordinary share (Rs) 38.44 30.54

Annual Report 2015 SAMPATH BANK PLC 349 Notes to the Financial Statements

16. EARNINGS PER SHARE CONTD. 16.2.1 Weighted Average Number of Ordinary Shares for Diluted EPS

2015 2014

Weighted average number of ordinary shares used for basic EPS 172,312,655 172,269,389 Weighted average number of potential ordinary shares outstanding under ESOP - 79,473 Weighted average number of potential ordinary shares that would have been issued at weighted average market price - (30,716) Weighted average number of potential ordinary shares that would have been issued for no consideration under ESOP - 48,757 Weighted average number of ordinary shares adjusted for the effect of dilution 172,312,655 172,318,146

17. DIVIDEND PAID AND PROPOSED

Accounting Policy

7YV]PZPVUMVYÄUHSKP]PKLUKPZYLJVNUPZLKH[[OL[PTL[OLKP]PKLUKPZYLJVTTLUKLKHUKKLJSHYLKI`[OL)VHYKVM+PYLJ[VYZHUKPZHWWYV]LK by the shareholders. Interim dividend payable is recognised when the Board approves such dividend in accordance with the Companies Act No 7 of 2007.

2015 2014 Gross Dividend Net Gross Dividend Net Dividend Tax Dividend Dividend Tax Dividend Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Final dividend paid for the years 2014 & 2013 respectively Out of dividend received - free of tax 83,194 - 83,194 131,818 - 131,818 6\[VMUVYTHSWYVÄ[              Scrip / cash dividend paid 1,847,012 176,382 1,670,630 1,342,631 121,081 1,221,550 Dividend per Ordinary Share (Rs) 11.00 9.95 8.00 7.28

Final dividend proposed for the years 2015 & 2014 respectively Out of dividend received - free of tax 78,465 - 78,465 83,194 - 83,194 6\[VMUVYTHSWYVÄ[              Scrip / cash dividend payable 2,240,064 216,160 2,023,904 1,847,012 176,382 1,670,630 Dividend per Ordinary Share (Rs) 13.00 11.75 11.00 9.95

;OL)VHYKVM+PYLJ[VYZVM[OL)HUROHZYLJVTTLUKLK[OLWH`TLU[VMHÄUHSKP]PKLUKVM9ZWLYZOHYLMVY[OL`LHYLUKLKZ[ December 2015, a distribution of approximately Rs 2,240.064 Mn. This will be paid Rs 6.00 in the form of cash dividend and the balance Rs 7.00 in the form of scrip dividend.

0UHJJVYKHUJL^P[O:YP3HURH(JJV\U[PUN:[HUKHYK32(:,]LU[ZHM[LY[OL9LWVY[PUN7LYPVKHIV]LWYVWVZLKÄUHSKP]PKLUKOHZ not been recognised as a liability as at the year end. Necessary disclosures have been made under Note 51 to the Financial Statements, “Events after the reporting period” as required by the said standard.

350 SAMPATH BANK PLC Annual Report 2015 18. ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS Financial instruments are measured on an ongoing basis either at fair value or at amortised cost. The Accounting Policies describe how LHJOJH[LNVY`VMÄUHUJPHSPUZ[Y\TLU[PZTLHZ\YLKHUKOV^PUJVTLHUKL_WLUZLZPUJS\KPUNMHPY]HS\LNHPUZHUKSVZZLZHYLYLJVNUPZLK;OL MVSSV^PUN[HISLHUHS`ZLZ[OLJHYY`PUNHTV\U[ZVM[OLÄUHUJPHSPUZ[Y\TLU[ZI`JH[LNVY`HZKLÄULKPU:YP3HURH(JJV\U[PUN:[HUKHYK32(: 39 (Financial Instruments: Recognition & Measurement) under headings of the Statement of Financial Position.

18.1 Analysis of Financial Instruments by Measurement Basis - Bank

As at 31st December 2015 Note Held for Amortised Held to Available Total Trading Cost Maturity for Sale Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 - 13,588,075 - - 13,588,075 Balances with Central Bank of Sri Lanka 20 - 21,341,882 - - 21,341,882 Placements with banks 21 - 5,193,369 - - 5,193,369 Reverse repurchase agreements - - - - - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z         Financial assets - held for trading 23 1,889,058 - - - 1,889,058 Financial assets - held for trading pledged as collaterals 24 2,702,785 - - - 2,702,785 Loans to & receivables from banks 25 - 1,651,205 - - 1,651,205 Loans to & receivables from other customers 26 - 375,696,530 - - 375,696,530 Other loans & receivables 27 - 33,368,274 - - 33,368,274 Financial assets - available for sale 28 - - - 51,250,411 51,250,411 Financial assets - available for sale pledged as collaterals 29 - - - 7,210,585 7,210,585 Financial assets - held to maturity 30 - - - - - Other assets - 1,964,787 - - 1,964,787 Total Financial Assets 4,911,304 452,804,122 - 58,460,996 516,176,422

Financial Liabilities Due to banks 36 - 3,418,499 - - 3,418,499 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Securities sold under repurchase agreements - 9,316,122 - - 9,316,122 Due to other customers 37 - 406,323,019 - - 406,323,019 Debt issued & other borrowed funds 38 - 57,016,284 - - 57,016,284 Dividend payable - 90,969 - - 90,969 Other liabilities - 5,083,897 - - 5,083,897 Total Financial Liabilities 457,058 481,248,790 - - 481,705,848

Annual Report 2015 SAMPATH BANK PLC 351 Notes to the Financial Statements

18. ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD. 18.2 Analysis of Financial Instruments by Measurement Basis - Bank

As at 31st December 2014 Note Held for Amortised Held to Available Total Trading Cost Maturity for Sale Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 - 11,556,620 - - 11,556,620 Balances with Central Bank of Sri Lanka 20 - 17,607,251 - - 17,607,251 Placements with banks 21 - 1,791,698 - - 1,791,698 Reverse repurchase agreements - 31,285,348 - - 31,285,348 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z       Financial assets - held for trading 23 17,024,253 - - - 17,024,253 Financial assets - held for trading pledged as collaterals 24 13,205,359 - - - 13,205,359 Loans to & receivables from banks 25 - 934,976 - - 934,976 Loans to & receivables from other customers 26 - 301,434,602 - - 301,434,602 Other loans & receivables 27 - 24,026,116 - - 24,026,116 Financial assets - available for sale 28 - - - 1,581,622 1,581,622 Financial assets - available for sale pledged as collaterals 29 - - - - - Financial assets - held to maturity 30 - - 980,165 - 980,165 Other assets - 1,157,226 - - 1,157,226 Total Financial Assets 30,406,836 389,793,837 980,165 1,581,622 422,762,460

Financial Liabilities Due to banks 36 - 2,486,747 - - 2,486,747 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Securities sold under repurchase agreements - 13,001,462 - - 13,001,462 Due to other customers 37 - 339,969,141 - - 339,969,141 Debt issued & other borrowed funds 38 - 36,335,599 - - 36,335,599 Dividend payable - 79,284 - - 79,284 Other liabilities - 3,854,603 - - 3,854,603 Total Financial Liabilities 52,179 395,726,836 - - 395,779,015

352 SAMPATH BANK PLC Annual Report 2015 18.3 Analysis of Financial Instruments by Measurement Basis - Group

As at 31st December 2015 Note Held for Amortised Held to Available Total Trading Cost Maturity for Sale Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 - 13,713,456 - - 13,713,456 Balances with Central Bank of Sri Lanka 20 - 21,341,882 - - 21,341,882 Placements with banks 21 - 5,193,369 - - 5,193,369 Reverse repurchase agreements - - - - - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z         Financial assets - held for trading 23 1,898,074 - - - 1,898,074 Financial assets - held for trading pledged as collaterals 24 2,693,769 - - - 2,693,769 Loans to & receivables from banks 25 - 1,651,205 - - 1,651,205 Loans to & receivables from other customers 26 - 386,277,744 - - 386,277,744 Other loans & receivables 27 - 33,368,274 - - 33,368,274 Financial assets - available for sale 28 - - - 51,941,479 51,941,479 Financial assets - available for sale pledged as collaterals 29 - - - 6,519,573 6,519,573 Financial assets - held to maturity 30 - - 63,121 - 63,121 Other assets - 2,099,327 - - 2,099,327 Total Financial Assets 4,911,304 463,645,257 63,121 58,461,052 527,080,734

Financial Liabilities Due to banks 36 - 3,418,499 - - 3,418,499 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Securities sold under repurchase agreements - 8,662,930 - - 8,662,930 Due to other customers 37 - 407,163,665 - - 407,163,665 Debt issued & other borrowed funds 38 - 65,170,977 - - 65,170,977 Dividend payable - 90,969 - - 90,969 Other liabilities - 5,391,243 - - 5,391,243 Total Financial Liabilities 457,058 489,898,283 - - 490,355,341

Annual Report 2015 SAMPATH BANK PLC 353 Notes to the Financial Statements

18. ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD. 18.4 Analysis of Financial Instruments by Measurement Basis - Group

As at 31st December 2014 Note Held for Amortised Held to Available Total Trading Cost Maturity for Sale Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 - 11,645,326 - - 11,645,326 Balances with Central Bank of Sri Lanka 20 - 17,607,251 - - 17,607,251 Placements with banks 21 - 1,791,698 - - 1,791,698 Reverse repurchase agreements - 31,285,348 - - 31,285,348 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z       Financial assets - held for trading 23 17,024,253 - - - 17,024,253 Financial assets - held for trading pledged as collaterals 24 13,205,359 - - - 13,205,359 Loans to & receivables from banks 25 - 934,976 - - 934,976 Loans to & receivables from other customers 26 - 309,569,370 - - 309,569,370 Other loans & receivables 27 - 24,026,116 - - 24,026,116 Financial assets - available for sale 28 - - - 1,581,678 1,581,678 Financial assets - available for sale pledged as collaterals 29 - - - - - Financial assets - held to maturity 30 - - 984,363 - 984,363 Other assets - 1,372,780 - - 1,372,780 Total Financial Assets 30,406,836 398,232,865 984,363 1,581,678 431,205,742

Financial Liabilities Due to banks 36 - 2,508,869 - - 2,508,869 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Securities sold under repurchase agreements - 12,500,414 - - 12,500,414 Due to other customers 37 - 339,678,722 - - 339,678,722 Debt issued & other borrowed funds 38 - 43,610,816 - - 43,610,816 Dividend payable - 79,284 - - 79,284 Other liabilities - 3,878,578 - - 3,878,578 Total Financial Liabilities 52,179 402,256,683 - - 402,308,862

354 SAMPATH BANK PLC Annual Report 2015 19. CASH & CASH EQUIVALENTS

Accounting Policy

*HZOHUKJHZOLX\P]HSLU[ZJVTWYPZLJHZOPUOHUKIHSHUJLZ^P[OIHURZTVUL`H[JHSSHUKZOVY[UV[PJL[OH[HYLZ\IQLJ[[VHUPUZPNUPÄJHU[ risk of changes in their value. Cash and cash equivalents are carried at amortised cost in the Statement of Financial Position.

-VY[OLW\YWVZLVM[OL:[H[LTLU[VM*HZO-SV^JHZOHUKJHZOLX\P]HSLU[ZJVUZPZ[VMJHZOHUKZOVY[[LYTKLWVZP[ZHZKLÄULKHIV]L placements with banks, net of unfavourable balances with local & foreign banks.

Details of cash and cash equivalents in the Statement of Financial Position are given below.

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Local currency in hand 7,499,502 6,126,067 7,582,388 6,138,602 Foreign currency in hand 1,454,651 2,046,683 1,454,651 2,046,683 Balances with local banks 61,267 63,209 103,762 139,380 Balances with foreign banks 1,642,172 1,312,448 1,642,172 1,312,448 Money at call & short notice 2,930,483 2,008,213 2,930,483 2,008,213 13,588,075 11,556,620 13,713,456 11,645,326

20. BALANCES WITH CENTRAL BANK OF SRI LANKA

Accounting Policy As required by the provisions of Section 93 of the Monetary Law Act, a cash balance is maintained with the Central Bank of Sri Lanka. As at 31st December 2015, the minimum cash reserve requirement was 6% (2014: 6%) of the rupee deposit liabilities. There is no reserve requirement for foreign currency deposit liabilities of the Domestic Banking Unit (DBU) and the deposit liabilities of the Foreign Currency Banking Unit (FCBU).

Balances with Central Bank of Sri Lanka are carried at amortised cost in the Statement of Financial Position.

Bank & Group As at 31st December 2015 2014 Rs 000 Rs 000

Statutory reserve requirement 21,341,882 17,607,251 21,341,882 17,607,251

Annual Report 2015 SAMPATH BANK PLC 355 Notes to the Financial Statements

21. PLACEMENTS WITH BANKS

Bank & Group As at 31st December 2015 2014 Rs 000 Rs 000

Placements - in Sri Lanka - - Placements - out side Sri Lanka 5,193,369 1,791,698 5,193,369 1,791,698

22. DERIVATIVE FINANCIAL INSTRUMENTS

Accounting Policy

+LYP]H[P]LZHYLÄUHUJPHSPUZ[Y\TLU[Z[OH[KLYP]L[OLPY]HS\LPUYLZWVUZL[VJOHUNLZPUPU[LYLZ[YH[LZÄUHUJPHSPUZ[Y\TLU[WYPJLZJVTTVKP[` prices, foreign exchange rates, credit risk and indices. Derivatives are categorised as trading unless they are designated as hedging instruments.

(SSKLYP]H[P]LZHYLPUP[PHSS`YLJVNUPZLKHUKZ\IZLX\LU[S`TLHZ\YLKH[MHPY]HS\L^P[OHSSYL]HS\H[PVUNHPUZYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[ VY3VZZL_JLW[^OLYLJHZOÅV^VYUL[PU]LZ[TLU[OLKNPUNOHZILLUHJOPL]LKPU^OPJOJHZL[OLLMMLJ[P]LWVY[PVUVMJOHUNLZPUMHPY]HS\L is recognised within other comprehensive income). Fair values may be obtained from quoted market prices in active markets, recent market [YHUZHJ[PVUZHUK]HS\H[PVU[LJOUPX\LZPUJS\KPUNKPZJV\U[LKJHZOÅV^TVKLSZHUKVW[PVUWYPJPUNTVKLSZHZHWWYVWYPH[L>OLYL[OLPUP[PHSS` recognised fair value of a derivative contract is based on a valuation model that uses inputs that are not observable in the market, it follows [OLZHTLPUP[PHSYLJVNUP[PVUHJJV\U[PUNWVSPJ`HZMVYV[OLYÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZ(SSKLYP]H[P]LZHYLJHYYPLKHZHZZL[Z^OLUMHPY]HS\LPZ positive and as liabilities when fair value is negative.

*LY[HPUKLYP]H[P]LZLTILKKLKPUV[OLYÄUHUJPHSPUZ[Y\TLU[ZZ\JOHZ[OLJVU]LYZPVUVW[PVUPUHJVU]LY[PISLIVUKOLSKHYL]HS\LKHZ separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host JVU[YHJ[PZUV[JHYYPLKH[MHPY]HS\L[OYV\NOWYVÄ[VYSVZZ;OLZLLTILKKLKKLYP]H[P]LZHYLTLHZ\YLKH[MHPY]HS\L^P[OJOHUNLZPU MHPY]HS\LYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ,TILKKLKKLYP]H[P]LZJVU[PU\L[VILWYLZLU[LK^P[O[OLOVZ[JVU[YHJ[HUKHYLUV[ separately disclosed or included within derivatives. The Group did not have separated embedded derivatives as at 31st December 2015.

;OL[HISLILSV^ZOV^Z[OLMHPY]HS\LZVMKLYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZVM[OL)HUR.YV\WYLJVYKLKHZHZZL[ZVYSPHIPSP[PLZ[VNL[OLY^P[O their notional amounts. The notional amounts indicate the volume of transactions outstanding at the year end and are indicative of neither the market risk nor the credit risk.

Bank & Group As at 31st December 2015 2014 Assets Liabilities Notional Assets Liabilities Notional Amount Amount Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Forward foreign exchange contracts - Sales 17,137 196,952 11,466,029 55,262 20,836 7,674,169 - Purchases 103,876 20,537 4,391,390 20,934 20,249 3,457,169 Currency SWAPS -Sales 358 239,256 14,967,515 95,138 3,804 12,889,382 -Purchases 198,090 313 13,421,768 5,890 7,290 7,005,445 319,461 457,058 44,246,702 177,224 52,179 31,026,165

356 SAMPATH BANK PLC Annual Report 2015 23. FINANCIAL ASSETS HELD FOR TRADING

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Government securities - treasury bills (Note 23.1) 1,767,317 16,331,920 1,776,333 16,331,920 Quoted equity securities (Note 23.2) 121,741 692,333 121,741 692,333 1,889,058 17,024,253 1,898,074 17,024,253

23.1 Government Securities - Treasury Bills

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Amortised cost 1,767,522 16,319,224 1,776,536 16,319,224

Gain / (loss) from mark to market valuation as at 1st January 12,696 332,397 12,696 332,397 Movement during the year (12,901) (319,701) (12,899) (319,701) Gain / (loss) from mark to market valuation as at 31st December (205) 12,696 (203) 12,696 Market value 1,767,317 16,331,920 1,776,333 16,331,920

Annual Report 2015 SAMPATH BANK PLC 357 Notes to the Financial Statements

23. FINANCIAL ASSETS HELD FOR TRADING CONTD. 23.2 Quoted Equity Securities Bank & Group

As at 31st December 2015 2014 No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Shares Shares Rs 000 Rs 000 Rs 000 Rs 000

Name of the company %DQNVðQDQFH LQVXUDQFH Commercial Bank of Ceylon PLC - - - 821,902 79,883 140,546 Pan Asia Banking Corporation PLC - - - 1,380,532 10,932 35,756 /H[[VU5H[PVUHS)HUR73*        National Development Bank PLC 600,000 107,943 116,460 600,000 107,943 150,000 DFCC Bank PLC - - - 39,000 7,559 8,541 107,943 116,460 242,139 369,076

'LYHUVLðHGKROGLQJV Aitken Spence PLC - - - 270,000 54,512 27,945 1VOU2LLSSZ/VSKPUNZ73*         1VOU2LLSSZ/VSKPUNZ73*>HYYHU[       1VOU2LLSSZ/VSKPUNZ73*>HYYHU[        :VM[SVNPJ/VSKPUNZ73*         Vallibel One PLC 245,600 6,140 5,281 245,600 6,140 5,870 6,140 5,281 282,034 266,771

Manufacturing Royal Ceramics Lanka PLC - - - 483,200 10,237 56,486 - - 10,237 56,486 Total 114,083 121,741 534,410 692,333

Gain / (loss) from mark to market valuation as at 1st January 157,923 113,244 Movement during the year (150,265) 44,679 Gain / (loss) from mark to market valuation as at 31st December 7,658 157,923 Market value 121,741 692,333

358 SAMPATH BANK PLC Annual Report 2015 24. FINANCIAL ASSETS HELD FOR TRADING PLEDGED AS COLLATERALS

The Bank pledges assets that are in its Statement of Financial Position in day to day transaction which are conducted under the usual terms and conditions applying such agreements. The Bank has pledged the investments in government securities held for trading purposes against securities hold under repurchase agreements. Market value of the pledged securities are given below.

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Amortised cost 2,702,335 13,197,647 2,693,321 13,197,647

Gain / (loss) from mark to market valuation as at 1st January 7,712 (298) 7,712 (298) Movement during the year (7,262) 8,010 (7,264) 8,010 Gain / (loss) from mark to market valuation as at 31st December 450 7,712 448 7,712 Market value 2,702,785 13,205,359 2,693,769 13,205,359

25. LOANS TO & RECEIVABLES FROM BANKS Bank & Group

As at 31st December 2015 2014 Rs 000 Rs 000

Gross loans & receivables (Note 25.1) 1,651,205 934,976 Less: Provision for impairment losses - - 1,651,205 934,976

25.1 At Amortised Cost:

As at 31st December 2015 2014 Rs 000 Rs 000

Leasing 8,265 9,062 Term loans 1,543,325 925,914 Overdraft 99,615 - 1,651,205 934,976

26. LOANS TO & RECEIVABLES FROM OTHER CUSTOMERS

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Gross loans & receivables 384,605,379 310,485,813 395,565,780 318,946,399 Staff loan fair value adjustment (Note 35.1) (1,911,559) (2,043,632) (1,911,559) (2,043,632) 382,693,820 308,442,181 393,654,221 316,902,767 0UKP]PK\HSS`ZPNUPÄJHU[J\Z[VTLYSVHUPTWHPYTLU[5V[L            Collective loan impairment (Note 26.2.2) (3,977,675) (4,128,681) (4,132,558) (4,321,659) Total impairment (Note 26.2) (6,997,290) (7,007,579) (7,376,477) (7,333,397) Net loans & receivables 375,696,530 301,434,602 386,277,744 309,569,370

Annual Report 2015 SAMPATH BANK PLC 359 Notes to the Financial Statements

26. LOANS TO & RECEIVABLES FROM OTHER CUSTOMERS CONTD. 26.1 At Amortised Cost:

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Bills of exchange 3,380,096 3,089,587 3,380,096 3,089,587 Leasing (Note 26.4) 18,674,969 8,309,654 27,984,868 11,785,593 /V\ZPUNSVHUZ         Export loans 16,851,433 14,077,805 16,851,433 14,077,805 Import loans 44,276,694 37,390,081 44,276,694 37,390,081 9LÄUHUJLSVHUZ           Term loans 156,978,522 107,853,318 154,054,403 107,004,243 /PYLW\YJOHZL5V[L        Loans against investment fund account (IFA) 1,240,321 1,993,647 1,252,356 2,020,084 Overdrafts 66,577,001 52,863,856 66,403,013 52,734,375 Staff loans 6,573,733 5,759,553 6,645,599 5,759,553 Pawning 13,471,959 24,588,444 14,262,043 25,061,548 Credit cards 7,852,432 6,677,703 7,852,432 6,677,703 Money market loans 18,211,645 24,194,339 18,211,645 23,654,339 Factoring 1,382,810 642,780 2,619,645 1,676,269 Others 236,863 129,109 737,236 786,820 384,605,379 310,485,813 395,565,780 318,946,399 Staff loan fair value adjustment (Note 35.1) (1,911,559) (2,043,632) (1,911,559) (2,043,632) 382,693,820 308,442,181 393,654,221 316,902,767 Provision for impairment losses (Note 26.2) (6,997,290) (7,007,579) (7,376,477) (7,333,397) 375,696,530 301,434,602 386,277,744 309,569,370

26.2 Provision for Impairment Losses

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

0UKP]PK\HSS`ZPNUPÄJHU[J\Z[VTLYSVHUPTWHPYTLU[5V[L           Collective loan impairment (Note 26.2.2) 3,977,675 4,128,681 4,132,558 4,321,659 Total impairment (Note 26.3) 6,997,290 7,007,579 7,376,477 7,333,397

360 SAMPATH BANK PLC Annual Report 2015 0UKP]PK\HSS`:PNUPÄJHU[*\Z[VTLY3VHU0TWHPYTLU[

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 2,878,898 3,152,348 3,011,738 3,192,766 5L[JOHYNLYL]LYZHS[VWYVÄ[VYSVZZ5V[L         Write-off during the year (260,357) (195,890) (260,357) (208,385) Interest accrued on impaired loans & receivables (Note 7.1) (212,711) (158,333) (212,873) (158,841) Other movements 100,437 156,038 104,492 164,325 Balance as at 31st December 3,019,615 2,878,898 3,243,919 3,011,738

Gross amount of loans individually determined to be impaired, before deducting the individually assessed impairment provision 4,919,097 4,816,164 5,506,819 4,987,894

26.2.2 Collective Loan Impairment

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 4,128,681 6,827,729 4,321,659 6,940,917 5L[JOHYNLYL]LYZHS[VWYVÄ[VYSVZZ5V[L        Write-off during the year (590,252) (4,146,381) (590,252) (4,152,328) Other movements 11,414 (226) 11,615 (569) Balance as at 31st December 3,977,675 4,128,681 4,132,558 4,321,659

26.3 Movement in Provision for Impairment Losses - by Product

Bank Pawning Leasing Loans & 2015 2014 & Hire Receivables Total Total Purchase Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 402,939 116,346 6,488,294 7,007,579 9,980,077 5L[JOHYNLYL]LYZHS[VWYVÄ[VYSVZZ         Write-off during the year (459,319) - (391,290) (850,609) (4,342,271) Interest accrued on impaired loans & receivables (Note 7.1) - - (212,711) (212,711) (158,333) Other movements - - 111,851 111,851 155,812 Balance as at 31st December 35,718 140,678 6,820,894 6,997,290 7,007,579

Annual Report 2015 SAMPATH BANK PLC 361 Notes to the Financial Statements

26. LOANS TO & RECEIVABLES FROM OTHER CUSTOMERS CONTD. 26.3 Movement in Provision for Impairment Losses - by Product Contd.

Group Pawning Leasing Loans & 2015 2014 & Hire Receivables Total Total Purchase Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 419,850 302,738 6,610,809 7,333,397 10,133,683 5L[JOHYNLYL]LYZHS[VWYVÄ[VYSVZZ        Write-off during the year (459,319) - (391,290) (850,609) (4,360,713) Interest accrued on impaired loans & receivables (Note 7.1) - - (212,873) (212,873) (158,841) Other movements - 202 115,905 116,107 163,756 Balance as at 31st December 54,963 286,681 7,034,833 7,376,477 7,333,397

26.4 Leasing

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total lease rentals receivable 22,443,211 10,229,716 34,436,790 14,676,006 Unearned lease interest income (3,768,242) (1,920,062) (6,451,922) (2,890,413) Gross lease receivable 18,674,969 8,309,654 27,984,868 11,785,593 Impairment allowance for lease receivable (134,998) (112,909) (227,155) (237,392) Net lease receivable 18,539,971 8,196,745 27,757,713 11,548,201

Gross lease receivable within one year (Note 26.4.1) 5,398,278 2,858,331 7,969,809 4,168,102 Gross lease receivable after one year (Note 26.4.2) 13,276,691 5,451,323 20,015,059 7,617,491 18,674,969 8,309,654 27,984,868 11,785,593

26.4.1 Gross Lease Receivable within One Year

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total lease rentals receivable within one year from reporting date 7,081,283 3,821,165 10,831,195 5,616,644 Unearned lease interest income (1,683,005) (962,834) (2,861,386) (1,448,542) Gross lease receivable within one year 5,398,278 2,858,331 7,969,809 4,168,102 Impairment allowance for lease receivable (39,023) (38,838) (67,770) (89,411) Net lease receivable within one year 5,359,255 2,819,493 7,902,039 4,078,691

362 SAMPATH BANK PLC Annual Report 2015 26.4.2 Gross Lease Receivable after One Year

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total lease rentals receivable after one year from reporting date 15,361,928 6,408,551 23,605,595 9,059,362 Unearned lease interest income (2,085,237) (957,228) (3,590,536) (1,441,871) Gross lease receivable after one year 13,276,691 5,451,323 20,015,059 7,617,491 Impairment allowance for lease receivable (95,975) (74,071) (159,385) (147,981) Net lease receivable after one year 13,180,716 5,377,252 19,855,674 7,469,510

26.5 Hire Purchase

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total hire purchase rentals receivable 1,000,204 1,060,033 3,642,230 6,745,360 Unearned hire purchase interest income (182,044) (233,787) (686,654) (1,606,652) Gross hire purchase receivable 818,160 826,246 2,955,576 5,138,708 Impairment allowance for hire purchase receivable (5,680) (3,437) (59,526) (65,346) Net hire purchase receivable 812,480 822,809 2,896,050 5,073,362

Gross hire purchase receivable within one year (Note 26.5.1) 260,619 211,670 1,191,985 1,685,197 Gross hire purchase receivable after one year (Note 26.5.2) 557,541 614,576 1,763,591 3,453,511 818,160 826,246 2,955,576 5,138,708

26.5.1 Gross Hire Purchase Receivable within One Year

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total hire purchase rentals receivable within one year from reporting date 351,504 313,219 1,597,529 2,502,503 Unearned hire purchase interest income (90,885) (101,549) (405,544) (817,306) Gross hire purchase receivable within one year 260,619 211,670 1,191,985 1,685,197 Impairment allowance for hire purchase receivable (1,810) (880) (27,036) (24,720) Net hire purchase receivable within one year 258,809 210,790 1,164,949 1,660,477

26.5.2 Gross Hire Purchase Receivable after One Year

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Total hire purchase rentals receivable after one year from reporting date 648,700 746,814 2,044,701 4,242,857 Unearned hire purchase interest income (91,159) (132,238) (281,110) (789,346) Gross hire purchase receivable after one year 557,541 614,576 1,763,591 3,453,511 Impairment allowance for hire purchase receivable (3,870) (2,557) (32,490) (40,626) Net hire purchase receivable after one year 553,671 612,019 1,731,101 3,412,885

Annual Report 2015 SAMPATH BANK PLC 363 Notes to the Financial Statements

26. LOANS TO & RECEIVABLES FROM OTHER CUSTOMERS CONTD. 26.6 Loans to & Receivables from Other Customers - by Currency

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Sri Lanka Rupee 336,021,611 267,457,370 346,982,012 275,917,956 United States Dollar 46,393,449 39,064,748 46,393,449 39,064,748 Euro 1,431,338 3,255,627 1,431,338 3,255,627 Great Britain Pounds 725,310 707,696 725,310 707,696 Australian Dollar 33,627 372 33,627 372 Swiss Franc 44 - 44 - 384,605,379 310,485,813 395,565,780 318,946,399

26.7 Loans to & Receivables from Other Customers - by Product

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

By Product - LKR Bills of exchange 602,014 479,659 602,014 479,659 Leasing 18,674,969 8,309,654 27,984,868 11,785,593 /V\ZPUNSVHUZ            Export loans 929,341 436,145 929,341 436,145 Import loans 40,114,922 30,880,518 40,114,922 30,880,518 9LÄUHUJLSVHUZ           Term loans 133,581,764 89,818,764 130,657,645 88,969,689 /PYLW\YJOHZL        Loans against investment fund account (IFA) 1,240,321 1,993,647 1,252,356 2,020,084 Overdrafts 64,580,408 50,863,149 64,406,420 50,733,668 Staff loans 6,573,733 5,759,553 6,645,599 5,759,553 Pawning 13,471,959 24,588,444 14,262,043 25,061,548 Credit cards 7,852,432 6,677,703 7,852,432 6,677,703 Money market loans 18,211,645 24,194,339 18,211,645 23,654,339 Factoring 1,382,810 642,780 2,619,645 1,676,269 Others 91,276 28,749 591,649 686,460 Sub total 336,021,611 267,457,370 346,982,012 275,917,956

By Product - Foreign Currency Bills of exchange 2,778,082 2,609,928 2,778,082 2,609,928 /V\ZPUNSVHUZ         Export loans 15,922,092 13,641,660 15,922,092 13,641,660 Import loans 4,161,772 6,509,563 4,161,772 6,509,563 Term loans 23,396,758 18,034,554 23,396,758 18,034,554 Overdrafts 1,996,593 2,000,707 1,996,593 2,000,707 Others 145,587 100,360 145,587 100,360 Sub total 48,583,768 43,028,443 48,583,768 43,028,443 Total 384,605,379 310,485,813 395,565,780 318,946,399

364 SAMPATH BANK PLC Annual Report 2015 26.8 Loans to & Receivables from Other Customers - by Industry

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Agriculture & related 39,028,789 36,588,318 39,806,376 37,272,480 Manufacturing 56,131,661 44,684,989 56,692,291 45,376,142 Tourism 23,906,626 18,563,405 24,026,527 18,563,405 Transport 9,333,403 5,525,194 9,582,623 5,756,247 Construction 53,484,404 35,233,551 53,823,140 35,554,309 Traders 95,369,936 75,853,270 97,410,518 77,760,625 Financial and business services 27,068,203 20,213,178 24,235,514 19,005,565 Government 495,801 269,729 495,801 269,729 Infrastructure 13,542,815 13,947,757 13,542,815 13,947,757 Other services 15,459,626 9,887,238 25,166,060 15,720,956 Consumers 50,784,115 49,719,184 50,784,115 49,719,184 384,605,379 310,485,813 395,565,780 318,946,399

27. OTHER LOANS & RECEIVABLES

Bank & Group As at 31st December 2015 2014 Rs 000 Rs 000

Debentures - quoted (Note 27.1) 7,182,407 4,543,481 Preference shares (Note 27.2) - - Sri Lanka Development Bonds (SLDBs) 22,642,983 17,201,320 3LHZLKIHJRLK[Y\Z[JLY[PÄJH[LZ5V[L       33,368,274 24,026,116

Annual Report 2015 SAMPATH BANK PLC 365 Notes to the Financial Statements

27. OTHER LOANS & RECEIVABLES CONTD. 27.1 Debentures - Quoted Bank & Group

As at 31st December 2015 2014 Amortised Amortised Cost Cost Rs 000 Rs 000

Name of the Company Banks, Finance & Insurance Alliance Finance PLC 254,447 242,102 Central Finance Company PLC 347,876 131,725 Commercial Leasing & Finance PLC 470,935 - DFCC Vardhana Bank 224,863 - /V\ZPUN+L]LSVWTLU[-PUHUJL*VYWVYH[PVU)HURVM:YP3HURH   Lanka Orix Leasing Company PLC 511,342 504,685 Orient Finance PLC 418,745 400,595 Pan Asia Banking Corporation PLC 49,790 - People’s Leasing & Finance PLC 742,520 596,382 Senkadagala Finance PLC 41,052 41,052 Singer Finance PLC 237,083 - Softlogic Finance PLC 425,248 424,851 Vanik Incorporation Ltd 750 750 4,071,712 2,487,173

Constructions & Engineering Access Engineering PLC 303,707 - MTD Walkers PLC 512,421 - 816,128 -

'LYHUVLðHG+ROGLQJV Abans PLC 731,072 711,972 /H`SL`Z73*    /LTHZ/VSKPUNZ73*   Singer Sri Lanka PLC 758,672 308,067 1,707,278 1,032,701

Others Kotagala Plantations PLC 78,146 78,146 Lion Brewery Ceylon PLC 509,893 502,580 Urban Development Authority - 443,631 588,039 1,024,357 7,183,157 4,544,231 Provision for impairment (750) (750) 7,182,407 4,543,481

366 SAMPATH BANK PLC Annual Report 2015 27.2 Preference Shares Bank & Group

As at 31st December 2015 2014 Amortised Amortised Cost Cost Rs 000 Rs 000

Texpro Industries Ltd (15% non cumulative redeemable preference shares of Rs 10/- each redeemable over a period of 6 years commencing from 30th June 2003) 12,604 12,604 12,604 12,604 Provision for impairment (12,604) (12,604) - -

 /HDVH%DFNHG7UXVW&HUWLðFDWHV Bank & Group

As at 31st December 2015 2014 Amortised Amortised Cost Cost Rs 000 Rs 000

Citizens Development Business Finance PLC 206,090 300,438 People’s Leasing & Finance PLC 2,834,301 1,924,869 Associated Motor Finance Company PLC 226,893 19,534 Mercantile Investment & Finance PLC - 36,474 UB Finance Co Ltd 275,600 - 3,542,884 2,281,315 Provision for impairment - - 3,542,884 2,281,315

28. FINANCIAL ASSETS AVAILABLE FOR SALE

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Government securities - treasury bills (Note 28.1) 44,649,558 - 45,340,570 - Government securities - treasury bonds (Note 28.2) 5,327,185 - 5,327,185 - Quoted equity securities (Note 28.3) 1,217,611 1,533,863 1,217,611 1,533,863 Unquoted equity securities (Note 28.4) 56,057 47,759 56,113 47,815 51,250,411 1,581,622 51,941,479 1,581,678

Annual Report 2015 SAMPATH BANK PLC 367 Notes to the Financial Statements

28. FINANCIAL ASSETS AVAILABLE FOR SALE CONTD. 28.1 Government Securities - Treasury Bills

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Amortised cost 44,653,195 - 45,344,754 -

Gain / (loss) from mark to market valuation as at 1st January - - - - Movement during the year (3,637) - (4,184) - (Loss) / gain from mark to market valuation as at 31st December (3,637) - (4,184) - Market value 44,649,558 - 45,340,570 -

28.2 Government Securities - Treasury Bonds

Bank & Group As at 31st December 2015 2014 Rs 000 Rs 000

Amortised cost 5,328,569 -

Gain / (loss) from mark to market valuation as at 1st January - - Movement during the year (1,384) - (Loss) / gain from mark to market valuation as at 31st December (1,384) - Market value 5,327,185 -

28.3 Quoted Equity Securities Quoted equity securities include the investment in ordinary shares of LankaBangla Finance Ltd in Bangladesh.

Bank & Group As at 31st December 2015 2014 No of No of Ordinary Ordinary Shares Rs 000 Shares Rs 000

Cost of the investment as at 1st January 20,720,700 289,628 19,734,000 272,065 Exchange gain / (loss) 32,061 993 Scrip dividend received during the year 2,072,070 33,855 986,700 16,570 Cost of the investment as at 31st December 22,792,770 355,544 20,720,700 289,628

Gain / (loss) from mark to market valuation as at 1st January 1,244,235 1,944,035 Movement during the year (382,168) (699,800) Gain / (loss) from mark to market valuation as at 31st December 862,067 1,244,235 Market Value 1,217,611 1,533,863

368 SAMPATH BANK PLC Annual Report 2015 28.4 Unquoted Equity Securities

As at 31st December 2015 2014 No of Cost of Market No of Cost of Market Ordinary Investment Value Ordinary Investment Value Shares Shares Rs 000 Rs 000 Rs 000 Rs 000

Bank Name of the company LankaBangla Securities Ltd 242,550 42,434 10,940 220,500 38,238 9,133 Credit Information Bureau 1,700 170 170 1,700 170 170 SWIFT 26 6,556 6,556 18 65 65 Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 Lanka Financial Services Bureau Ltd 225,000 2,250 2,250 225,000 2,250 2,250 Lanka Rating Agency Ltd 1,241,263 15,516 15,516 1,241,263 15,516 15,516 Total 87,551 56,057 76,864 47,759

Impairment provision as at 1st January (29,105) - Movement during the year (2,389) (29,105) Impairment provision as at 31st December (31,494) (29,105) Market value 56,057 47,759

Group Name of the company LankaBangla Securities Ltd 242,550 42,434 10,940 220,500 38,238 9,133 Credit Information Bureau 1,800 226 226 1,800 226 226 SWIFT 26 6,556 6,556 18 65 65 Fitch Rating Lanka Ltd 62,500 625 625 62,500 625 625 Lanka Clear (Pvt) Ltd 2,000,000 20,000 20,000 2,000,000 20,000 20,000 Lanka Financial Services Bureau Ltd 225,000 2,250 2,250 225,000 2,250 2,250 Lanka Rating Agency Ltd 1,241,263 15,516 15,516 1,241,263 15,516 15,516 Total 87,607 56,113 76,920 47,815

Impairment provision as at 1st January (29,105) - Movement during the year (2,389) (29,105) Impairment provision as at 31st December (31,494) (29,105) Market value 56,113 47,815

Directors carried out an impairment assessment of the unquoted share investments held by the Bank and concluded that a further impairment of Rs 2.389 Mn (Note 11) to be made against the investment in LankaBangala Securities Ltd since there is a permanent decline in value of the investment. The valuation technique and the assumptions used to determine the fair value of the said investment are disclosed in Note 52.5.2.

Other unquoted available for sale equity securities are recorded at cost since it is the most reasonable value available to represent the market value of these investments as at the reporting date.

Annual Report 2015 SAMPATH BANK PLC 369 Notes to the Financial Statements

29. FINANCIAL ASSETS AVAILABLE FOR SALE PLEDGED AS COLLATERALS

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Amortised cost 7,247,167 - 6,555,608 -

(Loss) /gain from mark to market valuation as at 1st January - - - - Movement during the year (36,582) - (36,035) - (Loss) / gain from mark to market valuation as at 31st December (36,582) - (36,035) - Market value 7,210,585 - 6,519,573 -

30. FINANCIAL ASSETS HELD TO MATURITY

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Government securities - treasury bills & bonds - 980,165 63,121 984,363 - 980,165 63,121 984,363

31. INVESTMENT IN SUBSIDIARIES

Accounting Policy Subsidiaries are entities that are controlled by the Bank. The Bank is presumed to control an investee when it is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. At each reporting date the Bank reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more elements of control mentioned above.

The Financial Statements of Subsidiaries are fully consolidated from the date on which control is transferred to the Bank and continue to be consolidated until the date when such control ceases. The Financial Statements of the Bank’s Subsidiaries are prepared for the same reporting year as per the Bank, using consistent accounting policies.

The cost of acquisition of a Subsidiary is measured as the fair value of the consideration, including contingent consideration, given on the KH[LVM[YHUZMLYVM[P[SL;OLHJX\PYLKPKLU[PÄHISLHZZL[ZSPHIPSP[PLZHUKJVU[PUNLU[SPHIPSP[PLZHYLTLHZ\YLKH[[OLPYMHPY]HS\LZH[[OLKH[LVM acquisition. Subsequent to the initial measurement, the Bank continues to recognise the investments in Subsidiaries at cost.

The total assets and liabilities of the Subsidiaries as at the reporting date are included in the Consolidated Statement of Financial Position. ;OL[V[HSWYVÄ[VYSVZZMVY[OL`LHYVM[OL:\IZPKPHYPLZPZPUJS\KLKPU[OL*VUZVSPKH[LK:[H[LTLU[VM7YVÄ[VY3VZZ;OLUVUJVU[YVSSPUNPU[LYLZ[ is presented in the Consolidated Statement of Financial Position within equity, separately from the equity attributable to the equity holders VM[OL)HUR5VUJVU[YVSSPUNPU[LYLZ[PU[OLWYVÄ[VYSVZZVM[OL.YV\WPZKPZJSVZLKPU[OL*VUZVSPKH[LK:[H[LTLU[VM*VTWYLOLUZP]L0UJVTL Total comprehensive income is allocated to the owners of the parent and to the non controlling interests even if this results in non controlling PU[LYLZ[ZOH]PUNHKLÄJP[IHSHUJL

Intra-group balances and any income and expenses arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements. Unrealised losses are eliminated in the same way as unrealised gains, except that they are only eliminated to the extent that there is no evidence of impairment. When a Subsidiary is acquired or sold during the year, operating results of such Subsidiary is included from the date of acquisition or to the

370 SAMPATH BANK PLC Annual Report 2015 date of disposal. Upon the loss of control, the Group derecognises the assets and liabilities of the Subsidiary, any non controlling interests HUK[OLV[OLYJVTWVULU[ZVMLX\P[`YLSH[LK[V[OL:\IZPKPHY`(U`Z\YWS\ZVYKLÄJP[HYPZPUNVU[OLSVZZVMJVU[YVSPZYLJVNUPZLKPU[OL Statement of Changes in Equity.

If the Group retains any interest in the previous Subsidiary, then such interest is measured at fair value at the date that control is lost. :\IZLX\LU[S`P[PZHJJV\U[LKMVYHZHULX\P[`HJJV\U[LKPU]LZ[LLVYPUHJJVYKHUJL^P[O[OL.YV\W»ZHJJV\U[PUNWVSPJ`MVYÄUHUJPHS PUZ[Y\TLU[ZKLWLUKPUNVU[OLSL]LSVMPUÅ\LUJLYL[HPULK

The Group did not acquire / dispose any Subsidiary during the years ended 31st December 2015 and 31st December 2014.

The Bank invested further Rs 20 Mn in Sampath Information Technology Solutions Ltd (SITS) during the year ended 31st December 2015. SITS continues as a fully owned Subsidiary of the Bank subsequent to the above investment.

;OLYLHYLUVZPNUPÄJHU[YLZ[YPJ[PVUZVU[OLHIPSP[`VM[OL:\IZPKPHYPLZ[V[YHUZMLYM\UKZ[V[OL)HURPU[OLMVYTVMJHZOKP]PKLUKZVYYLWH`TLU[ of loans and advances.

All Subsidiaries of the Bank have been incorporated in Sri Lanka.

Bank As at 31st December 2015 2014 Subsidiary Principal Cost Directors’ Cost Directors’ Activities Valuation Valuation Rs 000 Rs 000 Rs 000 Rs 000

Siyapatha Finance PLC Leasing, factoring, pawning & accepting deposits 525,000 1,548,750 525,000 1,215,375 Sampath Centre Ltd Renting of commercial property 447,000 3,231,700 447,000 3,099,100 S C Securities (Pvt) Ltd Share broking 78,921 145,928 78,921 153,163 Sampath Information Developing software solutions & Technology Solutions Ltd maintenance of hardware 29,000 85,028 9,000 52,587 1,079,921 5,011,406 1,059,921 4,520,225

Subsidiaries are not quoted in the Colombo Stock Exchange except Siyapatha Finance PLC. The Directors’ valuation of investments in subsidiaries has been carried out on net asset basis.

Summarised Financial Statements of Subsidiaries within the Group are given in Note 31.1.

Annual Report 2015 SAMPATH BANK PLC 371 Notes to the Financial Statements 2014 Rs 000 Rs 2014 Rs 000 Rs Rs 000 Rs 000 2015 2015           2014 Rs 000 Rs 2014 Rs 000 Rs 2015 2015 Rs 000 Rs 000 Rs 000 2014 Rs Rs 000 2014 Rs Rs 000 2015 Rs Rs 000 2015 Rs Rs 000 2014 Rs Rs 000 2014 Rs 2015 2015 Rs 000 Rs 000 382,545 259,269 170,387 150,497 (16,795) (10,334) 23,323 7,425 3,320,474 275,253 282,660 415,958 234,220 3,398,280 10,417,792 14,639,326 9,106,146 85,117 13,028,194 90,536 128,098 118,711 329,355 188,174 3,320,474 275,253 282,660 415,958 234,220 3,398,280 10,417,792 14,639,326 1,611,132 1,311,646 3,313,163 3,229,938 147,155 163,949 86,603 46,046 Total liabilities & equity Total Total equity Total Other liabilities Other liabilities Total 493,303 84,053 90,536 56,888 76,278 57,515 21,851 2,102,773 Debt issued & other borrowed funds Debt issued & other borrowed 10,925,421 8,612,843 1,064 - 71,210 42,433 271,840 166,323 Other assets Other assets Total 819,465 643,949 456,076 358,049 263,222 275,278 100,516 45,919 PPE & intangible assets 139,586 114,813 2,942,204 2,962,425 12,031 7,382 315,442 188,301 Loans to & receivables from other customers from Loans to & receivables 13,680,275 9,659,030 ------Net other comprehensive income (1,980) (909) 834 (723) comprehensive 609 (412) 248 (391) other Net As at 31st December Total comprehensive income comprehensive Total 7YVÄ[HM[LY[H_            Less: Taxes Taxes Less: 206,914 11,249 9,170 267,934 171 61 8,473 12,031 Less : Operating expenses income Operating operating : 679,804 547,930 100,442 114,256 52,792 Net 47,610 123,666 70,226 Less 1,015,022 281,244 274,646 35,559 1,332,263 37,749 155,214 7YVÄ[ILMVYL[H_LZ 90,073             31. INVESTMENT IN SUBSIDIARIES CONTD. 31.1 Summarised Financial Information of Subsidiaries Siyapatha Finance PLC Ltd Centre Sampath S C Securities (Pvt) Ltd Information Technology Sampath

Solutions Ltd Solutions For the year ended 31st December

372 SAMPATH BANK PLC Annual Report 2015 32. PROPERTY, PLANT AND EQUIPMENT

Accounting Policy Recognition Property, plant and equipment are tangible items that are held for use in the production or supply of services, for rental to others or for administrative purposes and are expected to be used during more than one period. The Group applies the requirements of the Sri Lanka Accounting Standard - LKAS 16 (Property, Plant and Equipment) in accounting for these assets. Property, plant and equipment are YLJVNUPZLKPMP[PZWYVIHISL[OH[M\[\YLLJVUVTPJILULÄ[ZHZZVJPH[LK^P[O[OLHZZL[^PSSÅV^[V[OL.YV\WHUK[OLJVZ[VM[OLHZZL[JHUIL reliably measured.

Measurement (UP[LTVMWYVWLY[`WSHU[HUKLX\PWTLU[[OH[X\HSPÄLZMVYYLJVNUP[PVUHZHUHZZL[PZPUP[PHSS`TLHZ\YLKH[P[ZJVZ[*VZ[PUJS\KLZL_WLUKP[\YL that is directly attributable to the acquisition of the asset and cost incurred subsequently to add to, replace part of an item of property, plant & equipment. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of computer equipment. When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Cost Model The Group applies cost model to property, plant and equipment except for freehold land and buildings and records at cost of purchase or construction together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment losses.

Revaluation Model The Group applies the revaluation model to the entire class of freehold land and buildings. Such properties are carried at a revalued amount, being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Freehold land and buildings of the Group are revalued every three years to ensure that the carrying amounts do not differ materially from the fair values at the reporting date. The Group last revalued its freehold lands & buildings as at 31st December 2013.

On revaluation of an asset, any increase in the carrying amount is recognised in ‘Other comprehensive income’ and accumulated in equity, under capital reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the Statement VM7YVÄ[VY3VZZ0U[OPZJPYJ\TZ[HUJL[OLPUJYLHZLPZYLJVNUPZLKHZPUJVTL[V[OLL_[LU[VM[OLWYL]PV\Z^YP[LKV^U(U`KLJYLHZLPU[OL JHYY`PUNHTV\U[PZYLJVNUPZLKHZHUL_WLUZLPU[OL:[H[LTLU[VM7YVÄ[VY3VZZVYKLIP[LK[V[OLV[OLYJVTWYLOLUZP]LPUJVTL[V[OLL_[LU[ of any credit balance existing in the capital reserve in respect of that asset.

The decrease recognised in other comprehensive income reduces the amount accumulated in equity under capital reserves. Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset.

Subsequent Cost The subsequent cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item PMP[PZWYVIHISL[OH[[OLM\[\YLLJVUVTPJILULÄ[ZLTIVKPLK^P[OPU[OH[WHY[^PSSÅV^[V[OL.YV\WHUKP[ZJVZ[JHUILYLSPHIS`TLHZ\YLK;OL JVZ[ZVMKH`[VKH`ZLY]PJPUNVMWYVWLY[`WSHU[HUKLX\PWTLU[HYLJOHYNLK[V[OL:[H[LTLU[VM7YVÄ[VY3VZZHZPUJ\YYLK

Derecognition ;OLJHYY`PUNHTV\U[VMHUP[LTVMWYVWLY[`WSHU[HUKLX\PWTLU[PZKLYLJVNUPZLKVUKPZWVZHSVY^OLUUVM\[\YLLJVUVTPJILULÄ[ZHYL expected from its use. The gain or loss arising from de-recognition of an item of property, plant and equipment is included in the Statement VM7YVÄ[VY3VZZ^OLU[OLP[LTPZKLYLJVNUPZLK>OLUYLWSHJLTLU[JVZ[ZHYLYLJVNUPZLKPU[OLJHYY`PUNHTV\U[VMHUP[LTVMWYVWLY[` plant and equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.

Annual Report 2015 SAMPATH BANK PLC 373 Notes to the Financial Statements

32. PROPERTY, PLANT AND EQUIPMENT CONTD. Depreciation The Group provides depreciation from the date the assets are available for use up to the date of disposal, at the following rates on a straight SPULIHZPZV]LY[OLWLYPVKZHWWYVWYPH[L[V[OLLZ[PTH[LK\ZLM\SSP]LZIHZLKVU[OLWH[[LYUPU^OPJO[OLHZZL[»ZM\[\YLLJVUVTPJILULÄ[ZHYL expected to be consumed by the Group.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.

Freehold lands are not depreciated. +LWYLJPH[PVUVMHUHZZL[JLHZLZH[[OLLHYSPLYVM[OLKH[L[OH[[OLHZZL[PZJSHZZPÄLKHZOLSKMVYZHSLVY[OLKH[L[OH[[OLHZZL[PZ derecognised. Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated.

Depreciation Rate per Annum (%) Asset Category 2015 2014

Freehold buildings 2.00 - 2.50 2.00 - 2.50 Leasehold properties and improvements 20.00 - 25.00 20.00 - 25.00 Computer equipment 15.00 - 25.00 15.00 - 25.00 Motor vehicles 12.50 12.50 6MÄJLLX\PWTLU[     -P_[\YLZ Ä[[PUNZ      

Changes in Estimates Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. +\YPUN[OL`LHYLUKLKZ[+LJLTILY[OL.YV\WJVUK\J[LKHUVWLYH[PVUHSLMÄJPLUJ`YL]PL^HUKJVUJS\KLK[OH[[OLYLPZUV requirement to change the previous estimates.

Capital Work in Progress These are expenses of capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation. Capital work-in-progress would be transferred to the relevant asset when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Capital work-in-progress is stated at cost less any accumulated impairment losses.

Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset have been capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard - LKAS 23 (Borrowing Costs). A qualifying asset is an asset which takes substantial period of time to get ready for its intended use or sale. Capitalisation of borrowing costs ceases when substantially HSS[OLHJ[P]P[PLZULJLZZHY`[VWYLWHYL[OLX\HSPM`PUNHZZL[MVYP[ZPU[LUKLK\ZLHYLJVTWSL[LK6[OLYIVYYV^PUNJVZ[ZHYLYLJVNUPZLKPUWYVÄ[ or loss in the period in which they are incurred.

374 SAMPATH BANK PLC Annual Report 2015 Rs 000 Rs Total Total 2014 2015 Rs 000 Total  would be as follows: Depreciation Value Value Depreciation Rs 000 Rs 000 Rs 000 000 Rs 000 Rs Rs Cost Accumulated Carrying Accumulated Cost buildings based on the above revaluation was charged buildings based on the above revaluation YKPUNS`HYL]HS\H[PVUZ\YWS\ZHTV\U[PUN[V9Z4U 2014 2015 Depreciation Value Depreciation

Cost Accumulated Carrying Rs 000 Rs 000 Rs 000 1,628,178 147,879 1,480,299 1,590,044 125,715 1,464,329 ZPVUHSS`X\HSPÄLKPUKLWLUKLU[]HS\LYZPU5V[L(JJV 49,923 816,430 1,573,626 1,132,902 121,568 111,582 - 3,806,031 3,350,248 3,286,161 261,527 672,482 733,976 58,549 112,220 16,933 5,141,848 3,480,030 697,223 56,825 98,124 746,932 234,357 5,313,491 - 3,529,953 1,050,787 2,320,558 1,830,125 178,393 209,706 - 9,119,522 8,492,096 The carrying amount of Bank’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation, land and buildings, if they were freehold revalued The carrying amount of Bank’s

Freehold lands buildings Freehold Freehold Total 909,869 147,879 761,990 871,735 125,715 746,020 718,309 - 718,309 - 718,309

There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year. to the acquisition of property, costs related no capitalised borrowing were There ;OL)HUROHKYL]HS\LKP[ZMYLLOVSKSHUKHUKI\PSKPUNZI`WYVMLZ land and of freehold account in 2013. Net impairment loss of Rs 8.7 Mn respect reserve to the revaluation had been credited [VWYVÄ[VYSVZZPU As at 31st December 32.1 (a)

Net book value as at 31st December 2014 Net book value as at 31st December 2015 Accumulated depreciation as at 31st December Accumulated depreciation Transfers / adjustments / Transfers - (8) - - Sub category transfers during the year - - - 4 (4) - - - - Written off during the year off Written - (11,941) (59,926) (17,515) (4,895) (7) - (94,284) (361,613) Disposals during the year the during Disposals - (3,302) (10,321) (18,627) (371) (22,257) - (54,878) (82,233) Charge for the year 25,103 120,533 212,571 198,268 22,848 25,622 - 604,945 615,881 Accumulated Depreciation Balance as at 1st January 24,820 711,140 1,431,302 970,772 103,990 108,224 - 3,350,248 3,178,221 Cost / valuation as at 31st December Transfers / adjustments / (41,289) Transfers (252) (252) - - Transferred from capital work-in- progress progress (43,213) - 43,213 - - work-in- capital from Transferred Sub category transfers during the year - - - 23 (23) - - - - Written off during the year off Written - (14,472) (65,059) (32,942) (6,167) (11) - (118,651) (362,367) Disposals during the year the during Disposals - (3,370) (10,571) (20,513) (455) (33,889) - (68,798) (87,832) Additions & improvements improvements & Additions 670,632 175,759 815,127 178,809 22,499 23,162 26,280 292,404 96,214 Cost / Valuation Balance as at 1st January 3,310,981 972,667 2,103,784 1,704,748 162,539 220,444 16,933 8,492,096 8,312,952 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Progress Improvements & Buildings & Properties Equipment Equipment Fittings Vehicles Work-in 32.1 Bank  -YLLOVSK3HUK 3LHZLOVSK *VTW\[LY 6ɉJL -P_[\YLZ  4V[VY *HWP[HS

Annual Report 2015 SAMPATH BANK PLC 375 Notes to the Financial Statements Rs 000 Rs Total Total 2014 2015 Rs 000 Total  , would be as follows: Depreciation Value Value Depreciation Rs 000 Rs 000 Rs 000 000 Rs 000 Rs Rs Cost Accumulated Carrying Accumulated Cost dings based on the above revaluation was charged to dings based on the above revaluation HYL]HS\H[PVUZ\YWS\ZHTV\U[PUN[V9Z 4UOHK HYL]HS\H[PVUZ\YWS\ZHTV\U[PUN[V9Z 2014 2015 Depreciation Value Depreciation

Cost Accumulated Carrying Rs 000 Rs 000 Rs 000 2,493,561 306,186 2,187,375 2,433,995 269,389 2,164,606 MLZZPVUHSS`X\HSPÄLKPUKLWLUKLU[]HS\LYZPU(JJVYKPUNS` 148,304 816,430 1,771,209 1,173,620 143,324 127,892 - 4,180,779 3,570,441 6,196,504 261,527 868,045 819,608 92,905 133,076 16,933 8,388,598 6,370,147 1,069,286 799,434 106,651 116,702 234,357 8,696,577 - 1,973,054 249,975 244,594 6,518,451 11,959,039 2,840,495 1,050,787 12,877,356 - The carrying amount of Group’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation land and buildings, if they were freehold revalued The carrying amount of Group’s Freehold land buildings Freehold Freehold Total 853,309 1,640,252 306,186 1,334,066 1,580,686 269,389 1,311,297 - 853,309 - 853,309

There were no capitalised borrowing costs related to the acquisition of property, plant & equipment during the year. to the acquisition of property, costs related no capitalised borrowing were There ;OL.YV\WOHKYL]HS\LK[OLPYMYLLOVSKSHUKHUKI\PSKPUNZI`WYV land and buil of freehold account in 2013. Net impairment loss of Rs 8.7 Mn respect reserve to the revaluation been credited WYVÄ[VYSVZZPU 32.2 (a) As at 31st December

Net book value as at 31st December 2014 Net book value as at 31st December 2015 Accumulated depreciation as at 31st December Accumulated depreciation Transfers / adjustments / Transfers - (8) - - Sub category transfers during the year - - - 4 (4) - - - - Written off during the year off Written - (11,941) (59,926) (22,146) (5,983) (7) - (100,003) (366,597) Disposals during the year the during Disposals - (3,302) (10,321) (18,673) (1,633) (22,257) - (56,186) (86,071) Charge for the year 68,293 120,533 305,684 208,837 33,954 29,226 - 766,527 740,562 Accumulated Depreciation Balance as at 1st January 80,011 711,140 1,535,772 1,005,598 116,990 120,930 - 3,570,441 3,282,555 Cost / valuation as at 31st December Transfers / adjustments / (41,289) Transfers (252) (252) - - Transferred from capital work-in- progress progress (43,213) - 43,213 - - work-in- capital from Transferred Sub category transfers during the year - - - 23 (23) - - - - Written off during the year off Written - (14,472) (65,059) (37,573) (7,255) (11) - (124,370) (367,352) Disposals during the year the during Disposals - (3,370) (10,571) (20,629) (1,815) (33,889) - (70,274) (97,220) Additions & improvements improvements & Additions 855,326 1,113,213 198,723 206,027 49,173 24,488 26,280 512,308 96,214 Cost / Valuation Balance as at 1st January 6,276,515 972,667 2,403,817 1,825,206 209,895 254,006 16,933 11,959,039 11,609,574 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Progress Improvements & Buildings & Properties Equipment Equipment Fittings Vehicles Work-in 32. PLANT AND EQUIPMENT CONTD. PROPERTY, 32.2 Group  -YLLOVSK3HUK 3LHZLOVSK *VTW\[LY 6ɉJL -P_[\YLZ  4V[VY *HWP[HS

376 SAMPATH BANK PLC Annual Report 2015 OCI 12.4 1.8 12.8 25.0 7.3 19.5 18.1 26.8 7.5 14.4 10.3 19.9 31.1 1.4 5.1 2.7 43.3 24.1 13.4 29.8 50.4 0.6 963.7 Recognised in Revaluation Gain / (Loss) 7YVÄ[VY3VZZ Revaluation Gain / (Loss) Amount Revaluation Land Building Land Building Land Building Total Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn 1,998.0 724.4 2,322.4 806.8 324.4 82.4 406.8 (8.7) 415.4 2,787.0 1,867.8 3,587.4 2,437.8 800.4 570.1 1,370.4 (8.7) 1,379.1 Before RevaluationBefore Method of Valuation Net Book Value 08.11.2013 Income basis08.11.2013 Market comparable method08.11.2013 Market comparable method08.11.2013 Market comparable method08.11.2013 Market comparable method 19.1 46.9 122.0 22.707.11.2013 Market comparable method 27.808.11.2013 77.7 Market comparable method 22.0 5.009.11.2013 - Market comparable method 56.0 09.11.2013 127.5 126.0 Market comparable method 21.5 08.11.2013 - Market comparable method 50.0 29.7 31.5 09.11.2013 64.0 26.0 Market comparable method 52.4 08.11.2013 2.9 85.0 Market comparable method 25.1 60.0 140.3 9.1 20.0 - 4.0 8.3 (1.2) 46.4 19.10.2013 20.8 70.8 - Market comparable method 3.7 78.7 29.9 21.0 - 62.4 15.3 26.7 12.8 1.8 12.8 20.6 25.0 - 7.3 67.5 16.5 92.8 16.6 02.11.2013 - - 6.7 Market comparable method 26.2 02.11.2013 31.0 21.5 Market comparable method02.11.2013 - 1.5 49.8 - 12.4 19.5 - Market comparable method -19.10.2013 0.6 - 131.2 - 8.3 Market comparable method 18.1 - 12.4 123.9 7.3 15.1 7.5 26.8 - 29.2 26.11.2013 6.2 0.9 Income basis 10.3 23.8 10.0 - 131.1 19.9 - - 14.4 -24.10.2013 16.6 30.4 - 30.6 - - Market comparable method - -21.11.2013 31.1 Market comparable method 7.5 -28.10.2013 20.4 14.4 Market comparable method22.11.2013 10.3 6.0 - Market comparable method 86.8 - 24.10.2013 19.9 28.6 - 1.6 Market comparable method 43.8 21.11.2013 53.9 Market comparable method 65.9 43.4 24.10.2013 1.4 - - 31.1 107.5 4.4 (3.4) Market comparable method 47.4 43.9 121.0 216.2 - 62.5 52.1 597.0 1.4 (1.8) - (1.8) 54.0 5.1 80.0 75.0 77.0 63.8 113.0 5.3 52.6 46.0 31.12.2013 - 228.5 2.7 40.0 34.2 Income basis 66.2 - 60.0 645.4 (3.4) 9.7 10.2 94.5 - 26.1 9.1 20.4 54.6 5.5 5.1 (1.4) 12.3 5.5 (3.9) - 43.3 48.4 3.7 1.6 7.9 17.5 10.1 8.8 22.2 24.1 2.0 789.0 13.4 29.8 - 0.2 1,143.3 - 50.4 1,265.0 (1.4) (3.9) 1,631.0 0.4 - - 476.0 - 0.6 10.2 26.1 487.7 - 963.7 - - Valuation LocationBank - P B Kalugalagedara Valuer No 180 (part), Bodiraja Mawatha, Pettah No 261, Galle Road, Ratmalana No 61A, Moratuwa Road, Piliyandala No 371, Old Moor St, Masangasweediya, Colombo 12 No 475, Elvitigala Mawatha, Narahenpita - C Wellappili Valuer No 1022, Maradana Road, Borella 5V   (/PNO3L]LS9VHK4HOHYHNHTH Date of Road, Galle No 05, Wakwella No 312/A, Galle Road, Kalutara No 7/5, Giriulla Road, Alawwa 5V(UN\Y\^H[V[H9VHK/VYHUH No 150, Colombo Road, Gampaha (land only) - E M Wimalasena Valuer Senanayake Mw, "Nuwarawewakele", Maithreepala Anuradhapura - G M Gamage Valuer 5V/HRTHUH9VHK4H[HYH DeniyayaNo 69, Main Street, 5V/HW\NHOH^HSH^H[[H0OHSHNHTH9VHK+LUP`H`H TissamaharamaNo 25-27, Main Street, - K T D Tissera Valuer No 280 & 280/1, Negombo Road, Wattala - Sarath Fernando Valuer No 31 & 33, Negombo Road, Kurunegala No 373A, Galle Road, Panadura No 187, Madawala Road, Katugastota No 591, Galle Road, Wellawatta Kandy Street, No 29, Cross 5V+OHYTHWHSH4H^H[OH/\U\WP[P`H*VSVTIV No 1/87, Victoria Range, Digana, Kandy - Bank Total Subsidiaries - P B Kalugalagedara Valuer - No 110, Sir James Peiris Mawatha,Sampath Centre Colombo 2 - Group Total 32.3 Land & Buildings Stated at Valuation / Group’s Details of Bank’s

Annual Report 2015 SAMPATH BANK PLC 377 Notes to the Financial Statements Rs 000 Rs of Total Value Net Book NBV As a % 2014 2015 Value Rs 000 Net Book 24.0 10,280 126,000 26,000 152,000 1,353 150,647 2.4% 151,297 2.4% 150,647 1,353 152,000 26,000 126,000 10,280 24.0 22.2 10,815 14,430 29,104 43,534 1,507 42,027 0.7% 42,754 0.7% 42,027 1,507 43,534 29,104 14,430 10,815 22.2 41.3 8,974 123,850 73,604 197,454 2,706 194,748 3.1% 185,996 3.1% 194,748 2,706 197,454 73,604 123,850 8,974 41.3 15.5 6,310 46,350 26,650 73,000 1,387 71,613 1.1% 72,279 1.1% 71,613 1,387 73,000 26,650 46,350 6,310 15.5 24.1 7,811 63,800 66,200 130,000 3,446 126,554 2.0% 128,209 2.0% 126,554 3,446 130,000 66,200 63,800 7,811 24.1 45.9 11,206 121,795 80,348 202,143 4,036 198,107 3.1% 198,461 3.1% 198,107 4,036 202,143 80,348 121,795 11,206 45.9 37.5 8,037 56,000 32,920 88,920 1,682 87,238 1.4% 88,061 1.4% 87,238 1,682 88,920 32,920 56,000 8,037 37.5 10.9 5,520 22,000 21,500 43,500 1,119 42,381 0.7% 42,918 0.7% 42,381 1,119 43,500 21,500 22,000 5,520 10.9 27.3 6,020 54,000 50,643 104,643 2,562 102,081 1.6% 102,598 1.6% 102,081 2,562 104,643 50,643 54,000 6,020 27.3 40.0 Bare Land 6,000 - 6,000 - 6,000 0.1% 6,000 44,772 0.1% 0.7% 6,000 44,051 - 1,450 6,000 45,501 - 6,000 28,857 Land 16,644 5,325 Bare 17.5 40.0 42.5 5,314 80,000 41,962 121,962 2,124 119,838 1.9% 118,967 1.9% 119,838 2,124 121,962 41,962 80,000 5,314 42.5 47.7 11,141 131,148 30,598 161,746 1,593 160,153 2.5% 160,918 2.5% 160,153 1,593 161,746 30,598 131,148 11,141 47.7 25.5 16,345 140,250 70,750 211,000 3,683 207,317 3.3% 209,086 3.3% 207,317 3,683 211,000 70,750 140,250 16,345 25.5 - 5,124 - 62,400 62,400 3,248 59,152 0.9% 60,712 0.9% 59,152 3,248 62,400 62,400 - 5,124 - 17.5 5,400 78,660 21,085 99,745 1,082 98,663 1.5% 98,742 1.5% 98,663 1,082 99,745 21,085 78,660 5,400 17.5 Bank 1 Pettah 2 Borella No 180, Bodiraja Mawatha, Pettah 3 Kurunegala No 1022, Maradana Road, Borella 7 Deniyaya 5V   (/PNO3L]LS9VHK4HOHYHNHTH 8 Deniyaya Deniyaya No 69, Main Street,  Perches 9 Ratmalana 5V/HW\NHOH^HSH^H[[H0OHSHNHTH9VHK+LUP`H`H 10 Piliyandala No 261, Galle Road, Ratmalana Sq.ft 11 Anuradhapura No 61A, Moratuwa Road, Piliyandala Rs 000 12 Panadura Anuradhapura Senanayake Mw, “Nuwara wewakele”, Maithreepala 13 of Land No 373A, Galle Road, Panadura Rs 000 Old Moor Street of Buildings Rs 000 14 Tissamaharama No 371, Old Moor St, Masangasweediya, Colombo 12 15 Katugastota Tissamaharama No 25-27, Main Street, Rs 000 16 Galle No 187, Madawala Road, Katugastota Road, Galle No 05, Wakwella 4 Wattala No 31 & 33, Negombo Road, Kurunegala 5 Matara No 256/1, Negombo Road, Wattala 6 Maharagama 5V/HRTHUH9VHK4H[HYH 32. PLANT AND EQUIPMENT CONTD. PROPERTY, 32.4 Land and Buildings Freehold Location Land Buildings Cost / Cost / Total Accumulated Extent Depreciation Revaluation Value

378 SAMPATH BANK PLC Annual Report 2015 Rs 000 Rs of Total Value Net Book NBV As a % 2014 2015 Value Rs 000 Net Book 119.4 6,350 645,400 72,268 717,668 3,242 714,426 11.2% 707,612 11.2% 714,426 717,668 3,242 645,400 72,268 119.4 6,350 25.4 15,026 228,500 94,500 323,000 4,919 318,081 5.0% 320,443 5.0% 318,081 4,919 323,000 94,500 228,500 15,026 25.4 10.1 Land only 65,000 - 65,000 - 65,000 1.0% - 1.0% 65,000 - 65,000 - 65,000 only Land 10.1 20.1 2,320 5,501 10,422 15,923 532 15,391 0.2% 15,326 0.2% 15,391 532 15,923 10,422 5,501 2,320 20.1 18.5 8,731 85,000 59,042 144,042 1,683 142,359 2.2% 129,670 2.2% 142,359 1,683 144,042 59,042 85,000 8,731 18.5 21.5 7,776 113,000 62,079 175,079 3,226 171,853 2.7% 173,405 2.7% 171,853 3,226 175,079 62,079 113,000 7,776 21.5 41.5 Bare Land 72,625 - 72,625 - 72,625 1.1% - 1.1% 72,625 - 72,625 - 72,625 Land Bare 41.5 25.0 4,485 49,800 43,356 93,156 2,224 90,932 1.4% 92,016 1.4% 90,932 2,224 93,156 43,356 49,800 4,485 25.0 30.0 9,400 67,500 43,213 110,713 - 110,713 1.7% 67,500 1.7% 110,713 - 110,713 43,213 67,500 9,400 30.0 950.2 406,256 3,725,773 2,792,678 6,518,451 148,304 6,370,147 100.0% 6,196,504 100.0% 6,370,147 148,304 6,518,451 2,792,678 3,725,773 406,256 950.2 20.7 8,245 16,520 21,679 38,199 1,119 37,080 0.6% 37,419 0.6% 37,080 1,119 38,199 21,679 16,520 8,245 20.7 20.8 Bare Land 31,000 - 31,000 - 31,000 0.5% 31,000 0.5% 31,000 - 31,000 - 31,000 Land Bare 20.8 792.4 185,955 2,460,773 1,069,180 3,529,953 49,923 3,480,030 54.6% 3,286,161 54.6% 3,480,030 49,923 3,529,953 1,069,180 2,460,773 185,955 792.4 24 Gampaha 5V+OHYTHWHSH4H^H[OH/\U\WP[P`H*VSVTIV Range 25 Victoria No 150, Colombo Road, Gampaha Corporate 22 Kandy 5V(UN\Y\^H[V[H9VHK/VYHUH Mawatha 23 Dharmapala Kandy Street, No 29, Cross 26 Panchikawatta No 1/87, Victoria Range, Digana, Kandy 27 Negombo No 85/87, Panchikawatta Road, Colombo 10 - Bank Total Negombo No 408, Main Street, 18 Narahenpita No 591, Galle Road, Wellawatta 21 Horana No 7/5, Giriulla Road, Alawwa Subsidiaries Centre 28 Sampath - Group Total No 110, Sir James Peiris Mawatha, Colombo 2 157.8 220,301 1,265,000 1,723,498 2,988,498 98,381 2,890,117 45.4% 2,910,343 17 Wellawatte 19 Kalutara No 475, Elvitigala Mawatha, Narahenpita 20 Alawwa No 312/A, Galle Road, Kalutara Perches Sq.ft Rs 000 of Land Rs 000 of Buildings Rs 000 Rs 000 Location Land Buildings Cost / Cost / Total Accumulated Extent Depreciation Revaluation Value

Annual Report 2015 SAMPATH BANK PLC 379 Notes to the Financial Statements

32. PROPERTY, PLANT AND EQUIPMENT CONTD. 32.5 (a) Leasehold Buildings

Bank & Group As at 31st December 2015 2014 Cost of Accumulated Net Book Net Book Buildings Depreciation Value Value Rs 000 Rs 000 Rs 000 Rs 000

01 - 05 years 200,432 158,137 42,295 111,343 06 - 10 years 823,164 650,700 172,464 138,920 Above 10 years 27,191 7,593 19,598 11,264 Total 1,050,787 816,430 234,357 261,527

32.5 (b) Fully Depreciated Property, Plant and Equipment A class-wise analysis of the initial cost of fully depreciated property, plant and equipment of the Bank which are still in use as at reporting date is as follows.

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Asset class Leasehold properties & improvements 514,857 359,850 514,857 359,850 Computer equipment & software 1,611,528 1,458,699 1,650,977 1,499,021 6MÄJLLX\PWTLU[       -P_[\YLZ Ä[[PUNZ       Motor vehicles 11,307 12,186 13,383 14,016 Total 2,619,826 2,210,415 2,672,602 2,267,957

32.5 (c) Temporarily Idle Property, Plant and Equipment - Bank / Group -V\YSHUKZ+LUP`H`H/VYHUH5LNVTIVHUK7HUJOPRH^H[[H^VY[OVM9Z4U^LYLPKSLHZH[Z[+LJLTILY!9Z Mn). The Bank holds these lands with the intention of constructing buildings in the near future.

32.5 (d) Property, Plant and Equipment Retired from Active Use - Bank / Group There were no property, plant and equipment retired from active use as at the reporting date (2014: Nil)

32.5 (e) Title Restriction on Property, Plant and Equipment - Bank / Group There were no restriction on the title of property, plant and equipment as at 31st December 2015.

32.5 (f) Property, Plant and Equipment Pledged as Security for Liabilities - Bank / Group There were no items of property, plant and equipment pledged as securities for liabilities.

32.5 (g) Compensation from Third Parties for Items of Property, Plant and Equipment - Bank / Group There were no compensation received during the year from third parties for items of property, plant and equipment that were impaired, lost or given up (2014: Nil).

380 SAMPATH BANK PLC Annual Report 2015 33. INTANGIBLE ASSETS

Accounting Policy Recognition (UPU[HUNPISLHZZL[PZHUPKLU[PÄHISLUVUTVUL[HY`HZZL[^P[OV\[WO`ZPJHSZ\IZ[HUJLOLSKMVY\ZLPU[OLWYVK\J[PVUVYZ\WWS`VMNVVKZ or services, for rental to others or for administrative purposes. An intangible asset is recognised if it is probable that the future economic ILULÄ[Z[OH[HYLH[[YPI\[HISL[V[OLHZZL[^PSSÅV^[V[OLLU[P[`HUK[OLJVZ[VM[OLHZZL[JHUILTLHZ\YLKYLSPHIS`(UPU[HUNPISLHZZL[PZ initially measured at cost. Expenditure incurred on an intangible item that was initially recognised as an expense by the Group in previous annual Financial Statements or interim Financial Statements are not recognised as part of the cost of an intangible asset at a later date.

Computer Software Cost of purchased licenses and all computer software costs incurred, licensed for use by the Group, which are not integrally related to HZZVJPH[LKOHYK^HYL^OPJOJHUILJSLHYS`PKLU[PÄLKYLSPHIS`TLHZ\YLKHUKP[»ZWYVIHISL[OH[[OL`^PSSSLHK[VM\[\YLLJVUVTPJILULÄ[ZHYL included in the Statement of Financial Position under the category ‘Intangible assets’ and carried at cost less accumulated amortisation and any accumulated impairment losses.

Goodwill Goodwill, if any that arises upon the acquisition of Subsidiaries is included in intangible assets. Goodwill is measured at initial recognition in accordance with Note 3.1.1.

Subsequent Expenditure Expenditure incurred on software is capitalised only when it is probable that this expenditure will enable the asset to generate future LJVUVTPJILULÄ[ZPUL_JLZZVMP[ZVYPNPUHSS`HZZLZZLKZ[HUKHYKVMWLYMVYTHUJLHUK[OPZL_WLUKP[\YLJHUILTLHZ\YLKHUKH[[YPI\[LK[V[OL asset reliably. All other expenditure is expensed as incurred.

Goodwill is measured at cost less accumulated impairment losses.

Amortisation of Intangible Assets 0U[HUNPISLHZZL[ZL_JLW[MVYNVVK^PSSHYLHTVY[PZLKVUHZ[YHPNO[SPULIHZPZPU[OL:[H[LTLU[VM7YVÄ[VY3VZZMYVT[OLKH[L^OLU[OL HZZL[PZH]HPSHISLMVY\ZLV]LY[OLILZ[LZ[PTH[LVMP[Z\ZLM\SLJVUVTPJSPMLIHZLKVUHWH[[LYUPU^OPJO[OLHZZL[»ZLJVUVTPJILULÄ[ZHYL JVUZ\TLKI`[OL.YV\W(TVY[PZH[PVUTL[OVKZ\ZLM\SSP]LZHUKYLZPK\HS]HS\LZHYLYL]PL^LKH[LHJOÄUHUJPHS`LHYLUKHUKHKQ\Z[LKPM appropriate. The Group assumes that there is no residual value for its intangible assets.

Asset Category Useful Life (Years) 2015 2014

Computer software 4 - 10 4 - 10 Licenses 5 - 20 5 - 20

Annual Report 2015 SAMPATH BANK PLC 381 Notes to the Financial Statements

33. INTANGIBLE ASSETS CONTD. Derecognition of Intangible Assets ;OLJHYY`PUNHTV\U[VMHUP[LTVMPU[HUNPISLHZZL[PZKLYLJVNUPZLKVUKPZWVZHSVY^OLUUVM\[\YLLJVUVTPJILULÄ[ZHYLL_WLJ[LKMYVTP[Z \ZL;OLNHPUVYSVZZHYPZPUNMYVTKLYLJVNUP[PVUVMHUP[LTVMPU[HUNPISLHZZL[PZPUJS\KLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ^OLU[OLP[LTPZ derecognised.

There were no restrictions on the title of the intangible assets as at the reporting date. Further, there were no items pledged as securities for liabilities.

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Cost Balance as at 1st January 1,120,548 1,019,448 1,173,913 1,056,649 Additions & improvements 69,247 150,817 77,376 166,981 Written off during the year - (49,717) - (49,717) Cost as at 31st December 1,189,795 1,120,548 1,251,289 1,173,913

Accumulated Amortisation Balance as at 1st January 752,386 722,089 779,581 743,344 Charge for the year 95,216 80,014 103,339 85,954 Written off during the year - (49,717) - (49,717) Accumulated amortisation as at 31st December 847,602 752,386 882,920 779,581 Net book value as at 31st December 342,193 368,162 368,369 394,332

34. DEFERRED TAX LIABILITIES / (ASSETS)

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Recognised under assets - - (23,368) (23,473) Recognised under liabilities 313,181 143,577 433,175 223,750 313,181 143,577 409,807 200,277

Net deferred tax assets / liabilities of one entity cannot be set-off against another entity’s assets / liabilities since there is no legally enforceable right to set-off. Therefore net deferred tax assets and liabilities of different entities are separately recognised in the Statement of Financial Position.

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Deferred tax liabilities (Note 34.1) 1,192,424 847,003 1,594,429 1,023,251 Deferred tax assets (Note 34.2) (879,243) (703,426) (1,184,622) (822,974) 313,181 143,577 409,807 200,277

382 SAMPATH BANK PLC Annual Report 2015 2014 Rs 000 Rs 2014 Rs 000 Rs Rs 000 Rs 000 2015 2015 2014 Rs 000 Rs 2014 Rs 000 Rs Rs 000 Rs 000 2015 2015           2014 Rs 000 Rs 2014 Rs 000 Rs             2015 2015 Rs 000 Rs 000 Bank Group Bank Group 2014 Rs 000 Rs 2014 Rs 000 Rs 2015 2015 Rs 000 Rs 000 Property, plant & equipment & 1,163,885 300,077 325,887 1,071,705 plant 1,163,885 300,077 325,887 1,071,705 assets Property, Leased 2,921,203 1,595,380 817,937 446,706 4,356,934 2,224,832 1,219,942 622,954 34.2 Assets Tax Deferred As at 31st December ;LTWVYHY`+PɈLYLUJL ;H_,ɈLJ[ ;LTWVYHY`+PɈLYLUJL ;H_,ɈLJ[

34.1 Liabilities Tax Deferred As at 31st December ;LTWVYHY`+PɈLYLUJL ;H_,ɈLJ[ ;LTWVYHY`+PɈLYLUJL ;H_,ɈLJ[

Tax losses Tax +LÄULKILULÄ[VISPNH[PVU7YVÄ[VYSVZZ 2,306,982 610,978 645,956 171,074  1,418,515 407,265 397,184 114,034  loans & receivables receivables & loans - Unclaimed impairment provision 27,062 366,811 7,577 102,707 27,062 366,811 7,577 102,707 Accelerated depreciation for tax purposes Accelerated depreciation Revaluation surplus on buildings - OCI 265,749 265,749 74,410 74,410 265,749 265,749 74,410 74,410 +LÄULKILULÄ[VISPNH[PVU6*0        4,258,657 3,025,014 1,192,424 847,003 5,694,388 3,654,466 1,594,429 1,023,251 Others 166,089 62,956 46,505 224,843 52,606 37,680 14,730 10,550 3,140,151 2,512,234 879,243 703,426 4,230,793 2,939,192 1,184,622 822,974

Annual Report 2015 SAMPATH BANK PLC 383 Notes to the Financial Statements

34. DEFERRED TAX LIABILITIES / (ASSETS) CONTD. 34.3 Recognition of Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following;

34.3.1 Bank

 ;H_,ɈLJ[ 7 3 6*0 2015 2014 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Deferred tax liabilities Accelerated depreciation for tax purposes Property, plant & equipment 300,077 325,887 (25,810) 35,255 - - Leased assets 817,937 446,706 371,231 136,888 - - Revaluation surplus on buildings - OCI 74,410 74,410 - - - - 1,192,424 847,003 345,421 172,143 - -

Deferred tax assets Unclaimed impairment provision - loans & receivables 7,577 102,707 (95,130) (618,340) - - Tax losses 397,184 114,034 283,150 101,405 - - +LÄULKILULÄ[VISPNH[PVUWYVÄ[VYSVZZ         +LÄULKILULÄ[VISPNH[PVU6*0          Others 14,730 10,550 4,180 3,829 - - 879,243 703,426 208,280 (496,640) (32,463) 216,390 313,181 143,577 137,141 668,783 32,463 (216,390)

34.3.2 Group

 ;H_,ɈLJ[ 7 3 6*0 2015 2014 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Deferred tax liabilities Accelerated depreciation for tax purposes Property, plant & equipment 300,077 325,887 (25,810) 35,309 - - Leased assets 1,219,942 622,954 596,988 209,255 - - Revaluation surplus on buildings - OCI 74,410 74,410 - - - - 1,594,429 1,023,251 571,178 244,564 - -

Deferred tax assets Unclaimed impairment provision - loans & receivables 7,577 102,707 (95,130) (627,575) - - Tax losses 645,956 171,074 474,882 102,877 - - +LÄULKILULÄ[VISPNH[PVUWYVÄ[VYSVZZ         +LÄULKILULÄ[VISPNH[PVU6*0          Others 62,956 46,505 16,451 39,784 - - 1,184,622 822,974 393,675 (446,670) (32,027) 217,042 409,807 200,277 177,503 691,234 32,027 (217,042)

384 SAMPATH BANK PLC Annual Report 2015 35. OTHER ASSETS

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Pre-paid expenses 246,869 274,087 274,441 302,909 Other debtors 1,968,597 1,321,387 2,243,696 1,654,840 Pre-paid staff cost (Note 35.1) 1,911,559 2,043,632 1,911,559 2,043,632 Refundable deposit at fair value 75,884 76,982 18,762 14,227 Pre-paid cost on refundable deposit 2,915 3,520 2,915 3,520 *VTTPZZPVUYLJLP]HISLVUÄUHUJPHSN\HYHU[LLZ5V[L        4,329,933 3,851,087 4,575,482 4,150,607

35.1 The Movement in the Pre-Paid Staff Cost Bank & Group

2015 2014 Rs 000 Rs 000

Balance as at 1st January 2,043,632 1,708,351 Adjustment for new grants net of settlements 115,709 569,516 Charge to personnel expenses (247,782) (234,235) Balance as at 31st December 1,911,559 2,043,632

35.2 Commission Receivable on Financial Guarantees Bank & Group

2015 2014 Rs 000 Rs 000

Balance as at 1st January 131,479 137,589 Interest income 10,852 11,412 Commission received (18,222) (17,522) Balance as at 31st December 124,109 131,479

36. DUE TO BANKS

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Call & time deposits 3,087,892 1,976,389 3,087,892 1,976,389 Unfavourable balances with local & foreign banks 330,607 510,358 330,607 532,480 3,418,499 2,486,747 3,418,499 2,508,869

Annual Report 2015 SAMPATH BANK PLC 385 Notes to the Financial Statements

37. DUE TO OTHER CUSTOMERS Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Local Currency Deposits Demand 29,511,406 23,781,400 29,409,394 23,781,003 Savings 146,551,907 120,910,287 146,539,292 120,844,465 Call deposits 674,388 2,031,762 674,388 2,031,762 Fixed deposits 178,534,080 149,153,301 179,490,003 148,929,499 *LY[PÄJH[LZVMKLWVZP[Z       Margin deposits 1,382,811 982,780 1,382,811 982,780 Total local currency deposits 369,680,037 308,747,635 370,521,333 308,457,614

Foreign Currency Deposits Demand 3,289,832 1,707,131 3,289,832 1,707,131 Savings 14,139,760 10,587,769 14,139,110 10,587,371 Call deposits 60,565 158,024 60,565 158,024 Fixed deposits 19,076,628 18,736,117 19,076,628 18,736,117 Margin deposits 76,197 32,465 76,197 32,465 Total foreign currency deposits 36,642,982 31,221,506 36,642,332 31,221,108 Total deposits 406,323,019 339,969,141 407,163,665 339,678,722

37.1 Current Accounts and Savings Accounts (CASA) Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

CASA Local currency deposits 176,063,313 144,691,687 175,948,686 144,625,468 Foreign currency deposits 17,429,592 12,294,900 17,428,942 12,294,502 193,492,905 156,986,587 193,377,628 156,919,970

Total Deposits Due to other customers 406,323,019 339,969,141 407,163,665 339,678,722 Due to bank - Call & time deposits (Note 36) 3,087,892 1,976,389 3,087,892 1,976,389 409,410,911 341,945,530 410,251,557 341,655,111

CASA as a percentage (%) of total deposits 47.3 45.9 47.1 45.9

38. DEBT ISSUED & OTHER BORROWED FUNDS Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Commercial papers - - 206 648,322 Redeemable debentures (Note 38.1) 20,581,099 13,500,000 21,601,700 14,767,330 Long term bond (Note 38.2) 1,780,008 1,630,747 1,780,008 1,630,747 Call borrowings 3,200,561 1,200,204 3,200,561 1,200,204 Term borrowings 3,081,384 - 10,215,270 5,359,565 Foreign currency borrowings 24,179,687 15,630,453 24,179,687 15,630,453 9LÄUHUJLIVYYV^PUNZ         57,016,284 36,335,599 65,170,977 43,610,816 The Bank has not had any default of principal, interest or other breaches with regard to any liability during 2015 and 2014.

386 SAMPATH BANK PLC Annual Report 2015 38.1 Redeemable Debentures

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 13,500,000 6,500,000 14,767,330 6,852,830 Debentures issued 7,000,000 7,000,000 7,000,000 8,000,000 Debentures redeemed - - (267,330) (85,500) 20,500,000 13,500,000 21,500,000 14,767,330 Interest payable 1,546,818 922,983 1,668,838 974,612 Interest paid (1,465,719) (922,983) (1,567,138) (974,612) Balance as at 31st December 20,581,099 13,500,000 21,601,700 14,767,330

Details of Debentures Issued Amortised Cost Note No of Debentures Face Value 2015 2014 Rs 000 Rs 000 Rs 000

Debentures issued by the Bank Debentures issued in 2012 38.1.1 15,000,000 1,500,000 1,500,000 1,500,000 Debentures issued in 2013 38.1.2 50,000,000 5,000,000 5,000,000 5,000,000 Debentures issued in 2014 38.1.3 70,000,000 7,000,000 7,000,000 7,000,000 Debentures issued in 2015 38.1.4 70,000,000 7,000,000 7,081,099 - 20,500,000 20,581,099 13,500,000

Debentures issued by Subsidiary, Siyapatha Finance PLC Debentures issued in 2011 / 2012 38.1.5 114,000 114,000 - 114,000 Debentures issued in 2012 38.1.6 1,450,000 145,000 - 153,330 Debentures issued in 2014 38.1.7 10,000,000 1,000,000 1,020,601 1,000,000 1,259,000 1,020,601 1,267,330

Total debentures issued by the Group 21,759,000 21,601,700 14,767,330

Debentures Issued by the Bank :

38.1.1 Debentures Issued in 2012 Rated unsecured subordinated redeemable 5-year debentures of Rs 100/- each issued in 2012. The debentures are quoted on the Colombo Stock Exchange.

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

10,776,800 1,077,680 1,077,680 1,077,680 12-Oct-12 11-Oct-17 Fixed - 16.5 % per annum payable annually 2,477,900 247,790 247,790 247,790 12-Oct-12 11-Oct-17 Fixed - 15.0 % per annum payable monthly 1,745,300 174,530 174,530 174,530 12-Oct-12 11-Oct-17 Floating rate is equivalent to the six months treasury bill rate (gross) plus 2.0 % per annum payable semi-annually 15,000,000 1,500,000 1,500,000 1,500,000

Annual Report 2015 SAMPATH BANK PLC 387 Notes to the Financial Statements

38. DEBT ISSUED & OTHER BORROWED FUNDS CONTD. 38.1.2 Debentures Issued in 2013 Rated unsecured subordinated redeemable 5-year debentures of Rs 100/- each issued in 2013. The debentures are quoted on the Colombo Stock Exchange.

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

15,541,900 1,554,190 1,554,190 1,554,190 04-Dec-13 04-Dec-18 Fixed - 13.00 % per annum payable semi-annually 34,458,100 3,445,810 3,445,810 3,445,810 04-Dec-13 04-Dec-18 Fixed - 13.40 % per annum payable annually 50,000,000 5,000,000 5,000,000 5,000,000

38.1.3 Debentures Issued in 2014 Rated unsecured subordinated redeemable 5-year debentures of Rs 100/- each issued in 2014. The debentures are quoted on the Colombo Stock Exchange.

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

31,765,500 3,176,550 3,176,550 3,176,550 15-Dec-14 14-Dec-19 Fixed - 8.25% per annum payable annually 38,234,500 3,823,450 3,823,450 3,823,450 15-Dec-14 14-Dec-19 Fixed - 8.10% per annum payable semi annually 70,000,000 7,000,000 7,000,000 7,000,000

38.1.4 Debentures Issued in 2015 Rated unsecured subordinated redeemable 5-year debentures of Rs 100/- each issued in 2015. The debentures are quoted on the Colombo Stock Exchange.

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

67,412,700 6,741,270 6,819,894 - 18-Nov-15 17-Nov-20 Fixed - 9.90% per annum payable semi annually 2,587,300 258,730 261,205 - 18-Nov-15 17-Nov-20 Floating rate is equivalent to the six months treasury bill rate (net) plus 1.25 % per annum payable semi-annually 70,000,000 7,000,000 7,081,099 -

388 SAMPATH BANK PLC Annual Report 2015 Debentures Issued by the Subsidiary, Siyapatha Finance PLC:

38.1.5 Debentures Issued in 2011 / 2012 Guaranteed redeemable debentures of Rs 1,000/- each issued in 2011/2012

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

60,000 60,000 - 60,000 11-Jan-12 31-Dec-15 Fixed - 12.25% per annum payable quarterly 14,000 14,000 - 14,000 04-Jan-12 31-Dec-15 Fixed - 12.25% per annum payable quarterly 40,000 40,000 - 40,000 30-Dec-11 31-Dec-15 Fixed - 12.80% per annum payable quarterly 114,000 114,000 - 114,000

38.1.6 Debentures Issued in 2012 Rated unsecured redeemable debentures of Rs 100/- each issued in 2012

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

950,000 95,000 - 100,458 27-Jul-12 31-Jul-15 Fixed - 16.65% per annum payable semi annually 500,000 50,000 - 52,872 17-Dec-12 17-Dec-15 Fixed - 17.50% per annum payable semi annually 1,450,000 145,000 - 153,330

38.1.7 Debentures Issued in 2014 Rated unsecured subordinated redeemable 5-year debentures of Rs 100/- each issued in 2014. The debentures are quoted on the Colombo Stock Exchange.

Amortised Cost No of Debentures Face 2015 2014 Allotment Maturity Rate of Interest Value Date Date Rs 000 Rs 000 Rs 000

10,000,000 1,000,000 1,020,601 1,000,000 24-Dec-14 24-Dec-19 Fixed - 8.90% per annum payable annually 10,000,000 1,000,000 1,020,601 1,000,000

Annual Report 2015 SAMPATH BANK PLC 389 Notes to the Financial Statements

38. DEBT ISSUED & OTHER BORROWED FUNDS CONTD. 38.2 Long Term Bond The Bank has issued a redeemable zero coupon bond in 2003 with a redemption value of Rs 3,458 Mn which will be matured on 1st August 2023.

Bank & Group 2015 2014 Rs 000 Rs 000

Balance as at 1st January 1,630,747 1,494,001 Interest accrued 149,261 136,746 Balance as at 31st December 1,780,008 1,630,747

39. CURRENT TAX LIABILITIES / (RECEIVABLES)

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Current tax liabilities 4,939,539 2,319,645 5,021,362 2,436,034 Current tax receivables - - (2,249) - 4,939,539 2,319,645 5,019,113 2,436,034

39.1 Current Tax Liabilities/Receivables

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 2,319,645 2,691,865 2,436,034 2,753,338 (K]HUJLWH`TLU[[YHUZMLYYLK[VZL[VMMHNHPUZ[ÄUHUJL=(;     Current year provision 2,829,791 1,508,934 2,980,191 1,653,125 (Over) / under provision in respect of previous years - (365,000) 3,759 (365,000) Payment of tax (459,897) (1,516,154) (650,871) (1,605,429) Balance as at 31st December 4,939,539 2,319,645 5,019,113 2,436,034

39.2 Super Gain Tax (ZWLY[OLWYV]PZPVUZVM7HY[000VM[OL-PUHUJL(J[5VVM^OPJO^HZJLY[PÄLKVU[O6J[VILY[OL)HURHUK[OL.YV\WHYL liable for super gain tax of Rs 676.8 Mn and Rs 783.3 Mn respectively. According to the Act, the super gain tax shall be deemed to be an expenditure in the Financial Statements relating to the year of assessment which commenced on 1st April 2013. The Act supersedes the requirements of the Sri Lanka Accounting Standards, hence the expense of super gain tax is accounted in accordance with the requirements of the said Act as recommended by the Statement of Alternative Treatment (SoAT) on Accounting for super gain tax issued by the Institute of Chartered Accountants of Sri Lanka, dated 24th November 2015.

390 SAMPATH BANK PLC Annual Report 2015 40. OTHER LIABILITIES

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Deposit insurance premium 115,822 77,645 115,973 77,645 Deferred guarantee income 51,206 57,953 51,206 57,953 Other payable 7,049,615 5,553,943 7,765,813 5,899,070 7,216,643 5,689,541 7,932,992 6,034,668

41. OTHER PROVISIONS

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Provision for gratuity (Note 41.1) 414,373 322,384 446,214 346,893 Leave accrual plan (Note 41.2) 140,186 126,239 140,186 126,239 EPF Interest guarantee plan (Note 41.3) 78,992 65,103 78,992 65,103 Liability for pension fund (41.4) 427,234 523,372 427,234 523,372 1,060,785 1,037,098 1,092,626 1,061,607

41.1 Provision for Gratuity Net Liability Recognised in the Statement of Financial Position

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 322,384 255,548 346,893 271,439 Provision made during the year (Note 41.1.1) 132,502 81,892 140,539 90,992 454,886 337,440 487,432 362,431 )LULÄ[ZWHPKI`[OLWSHU       Balance as at 31st December (Note 41.1.2) 414,373 322,384 446,214 346,893

41.1.1 Provision Made During the Year (TV\U[Z9LJVNUPZLKPU7YVÄ[VY3VZZ Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Current service cost 41,742 36,690 46,692 40,822 5L[PU[LYLZ[VU[OLUL[KLÄULKILULÄ[SPHIPSP[`         ;V[HSHTV\U[YLJVNUPZLKPUWYVÄ[VYSVZZ        

Annual Report 2015 SAMPATH BANK PLC 391 Notes to the Financial Statements

41. OTHER PROVISIONS CONTD. Amounts Recognised in OCI

Bank Group For the year ended 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

(Gain) / loss due to changes in assumptions* (109) 217 (3,786) 3,486 Experience loss / (gain) arising during the year 61,049 16,712 65,451 16,531 Total actuarial loss / (gain) recognised in OCI 60,940 16,929 61,665 20,017

Provision made during the year 132,502 81,892 140,539 90,992

:PNUPÄJHU[HZZ\TW[PVUZ\ZLKMVY[OLHJ[\HYPHS]HS\H[PVUHYLNP]LUPU5V[L

+LÄULK)LULÄ[6ISPNH[PVU9LJVUJPSPH[PVU

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 322,384 255,548 346,893 271,439 Current service cost 41,742 36,690 46,692 40,822 Interest cost 29,820 28,273 32,182 30,153 )LULÄ[ZWHPKMYVTWSHU       (Gain) / loss due to changes in assumptions (109) 217 (3,786) 3,486 Experience loss / (gain) 61,049 16,712 65,451 16,531 Balance as at 31st December 414,373 322,384 446,214 346,893

An actuarial valuation of the gratuity fund of the Bank was carried out as at 31st December 2015 by Messrs Piyal S Goonetilleke & (ZZVJPH[LZHÄYTVMWYVMLZZPVUHSHJ[\HYPLZ;OL]HS\H[PVUTL[OVK\ZLKI`[OLHJ[\HY`[V]HS\L[OL-\UKPZ[OL¸7YVQLJ[LK

(SS:\IZPKPHYPLZVM[OL.YV\W[VVJHYY`V\[HJ[\HYPHS]HS\H[PVUZ[VHZJLY[HPU[OLPYYLZWLJ[P]LNYH[\P[`SPHIPSP[PLZ/V^L]LYHZZ\TW[PVUZHUK the sensitivity of the assumptions have been given only for the gratuity fund of the Bank since Subsidiary gratuity liabilities do not have a material impact on the Group Financial Statements.

41.1.3 Actuarial Assumptions - Bank

2015 2014

Discount rate as at 31st December 9.80% 9.25% Future salary increment rate 8.80% 8.25% Mortality GA 1983 Mortality Table GA 1983 Mortality Table Retirement age 55 years 55 years

Expected average future working life of the active participants is 11 years.

392 SAMPATH BANK PLC Annual Report 2015 41.1.4 Sensitivity of Assumptions Employed in Gratuity Valuation - Bank 9LHZVUHIS`WVZZPISLJOHUNLZH[[OLYLWVY[PUNKH[L[VVULVM[OLZPNUPÄJHU[HJ[\HYPHSHZZ\TW[PVUZOVSKPUNV[OLYHZZ\TW[PVUZJVUZ[HU[ would have affected the gratuity liability / Statement of Comprehensive Income by the amounts shown below.

Increase / Increase / 2015 2014 (Decrease) in (Decrease) in :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[ Discount rate Salary Increment on Comprehensive on Gratuity Liability on Comprehensive on Gratuity Liability Rate Income Statement Increase/ (Decrease) Income Statement Increase/ (Decrease) Increase/ (Decrease) in Liability Increase/ (Decrease) in Liability in Comprehensive in Comprehensive Income for the Year Income for the Year (Rs Mn) (Rs Mn) (Rs Mn) (Rs Mn) 1% - 39.6 (39.6) 31.6 (31.6) (1%) - (47.7) 47.7 (38.1) 38.1 - 1% (47.0) 47.0 (37.6) 37.6 - (1%) 39.8 (39.8) 31.7 (31.7)

41.2 Leave Accrual Plan 41.2.1 Net Liability Recognised in the Statement of Financial Position Bank & Group

2015 2014 Rs 000 Rs 000

Balance as at 1st January 126,239 127,682 Provision made during the year 13,947 (1,443) Balance as at 31st December 140,186 126,239

41.3 EPF Interest Guarantee Plan Employees’ Provident Fund (EPF) is an approved private provident fund which has been set up to meet the provident fund liabilities of the Bank to which the Bank and employees contribute 12% and 8% respectively on the salary of each employee. Employees who are members VM[OLM\UKHYLLU[P[SLK[VYLJLP]LPU[LYLZ[H[HN\HYHU[LLKYH[LVM5H[PVUHS:H]PUNZ)HUR»ZVUL`LHYÄ_LKKLWVZP[YH[LUL[VM>/;VU[OLPY IHSHUJLL]LUPM[OLM\UKLHYUZHSV^LYYL[\YUMYVTP[ZPU]LZ[TLU[PUHNP]LUÄUHUJPHS`LHY(ZWLY:LJ[PVU VM[OL,7-*VUZ[P[\[PVU[OL)HUR shall contribute any shortfall in the revenue account of the fund, after payment of interest at the said rate and other cost of administering the fund. Thus the Bank’s obligation to EPF is not limited to only 12% contribution referred to above and accordingly the fund was treated HZHKLÄULKILULÄ[SPHIPSP[`HZWLY:YP3HURH(JJV\U[PUN:[HUKHYK32(: ,TWSV`LL)LULÄ[Z(UHJ[\HYPHS]HS\H[PVU^HZJHYYPLKV\[I` 4LZZYZ7P`HS:.VVUL[PSSLRL (ZZVJPH[LZHÄYTVMWYVMLZZPVUHSHJ[\HYPLZ[V]HS\L[OL)HUR»ZHKKP[PVUHSVISPNH[PVUHYPZPUNMYVT:LJ[PVU VM the EPF constitution as at 31st December 2015.

Annual Report 2015 SAMPATH BANK PLC 393 Notes to the Financial Statements

41. OTHER PROVISIONS CONTD. 41.3.1 Net Liability Recognised in the Statement of Financial Position Bank & Group

As at 31st December 2015 2014 Rs 000 Rs 000

Fair value of plan assets as at 31st December (8,064,408) (7,047,409) Fund obligation as at 31st December 8,143,400 7,112,512 Net liability recognised in the Statement of Financial Position 78,992 65,103

 (TV\U[Z9LJVNUPZLKPU7YVÄ[VY3VZZ Bank & Group

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Current service cost 5,185 4,143 0U[LYLZ[L_WLUZLVUKLÄULKILULÄ[SPHIPSP[`     ;V[HSHTV\U[YLJVNUPZLKPUWYVÄ[VYSVZZ    

41.3.3 Amounts Recognised in OCI Bank & Group

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Actuarial loss / (gain) due to changes in assumptions* 5,544 (3,967) Actuarial (gain) / loss due to experience adjustments (2,862) 570 Total amount recognised in OCI 2,682 (3,397)

:PNUPÄJHU[HZZ\TW[PVUZ\ZLKMVY[OLHJ[\HYPHS]HS\H[PVUHYLNP]LUPU5V[L

41.3.4 Movement of the Net Liability Recognised in the Statement of Financial Position Bank & Group

2015 2014 Rs 000 Rs 000

Balance as at 1st January 65,103 57,979 Current service cost and interest cost 11,207 10,521 Actuarial loss / (gain) 2,682 (3,397) Balance as at 31st December 78,992 65,103

41.3.5 Actuarial Assumptions - Bank

2015 2014

Discount rate 9.80% 9.25% Future salary increment rate 8.80% 8.25% Return from EPF investments 8.21% 5.75% Long term guaranteed EPF interest rate (net of tax) 8.46% 6.00%

Expected average future working life of the active participants is 11 years.

394 SAMPATH BANK PLC Annual Report 2015 41.3.6 Sensitivity of Assumptions Employed in EPF Interest Guarantee Plan Valuation 9LHZVUHIS`WVZZPISLJOHUNLZH[[OLYLWVY[PUNKH[L[VVULVM[OLZPNUPÄJHU[HJ[\HYPHSHZZ\TW[PVUZOVSKPUNV[OLYHZZ\TW[PVUZJVUZ[HU[ would have affected the EPF interest guarantee liability / Statement of Comprehensive Income by the amounts shown below.

Increase / Increase / 2015 2014 (Decrease) in (Decrease) in :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[VU :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[VU Discount Rate Salary Increment on Comprehensive ,TWSV`TLU[)LULÄ[ on Comprehensive ,TWSV`TLU[)LULÄ[ Rate Income Statement Obligation Income Statement Obligation Increase / Increase / Increase / Increase / (Decrease) in (Decrease) (Decrease) in (Decrease) Comprehensive in Liability Comprehensive in Liability Income for the Year (Rs Mn) Income for the Year (Rs Mn) (Rs Mn) (Rs Mn) 1% - 8.1 (8.1) 6.6 (6.6) (1%) - (9.4) 9.4 (7.7) 7.7 - 1% (1.4) 1.4 (1.2) 1.2 - (1%) 1.3 (1.3) 1.1 (1.1)

41.4 Pension Fund 41.4.1 Net Liability Recognised in the Statement of Financial Position Bank & Group

As at 31st December 2015 2014 Rs 000 Rs 000

Fair value of plan assets as at 31st December (Note 41.4.4) (5,169,780) (4,661,449) Present value of funded obligations as at 31st December (Note 41.4.5) 5,597,014 5,184,821 Funded status 427,234 523,372 7YLZLU[]HS\LVM\UM\UKLKILULÄ[VISPNH[PVU     Net liability recognised in the Statement of Financial Position 427,234 523,372

(TV\U[Z9LJVNUPZLKPU7YVÄ[VY3VZZ Bank & Group

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Current service cost 225,925 185,680 5L[PU[LYLZ[L_WLUZLPUJVTLVU[OLUL[KLÄULK  ILULÄ[SPHIPSP[`HZZL[       ;V[HSHTV\U[YLJVNUPZLKPUWYVÄ[VYSVZZ       

41.4.3 Amounts Recognised in OCI Bank & Group

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Actuarial (gain) / loss due to changes in assumptions* (213,954) 554,485 Actuarial loss / (gain) due to experience adjustments 16,802 108,833 Actuarial loss / (gain) from plan assets 17,590 95,971 Total amount recognised in OCI (179,562) 759,289

:PNUPÄJHU[HZZ\TW[PVUZ\ZLKMVY[OLHJ[\HYPHS]HS\H[PVUHYLNP]LUPU5V[L

Annual Report 2015 SAMPATH BANK PLC 395 Notes to the Financial Statements

41. OTHER PROVISIONS CONTD. 41.4.4 Fair Value of Plan Assets Reconciliation Bank & Group 2015 2014 Rs 000 Rs 000

Fair value of plan assets as at 1st January 4,661,449 4,371,027 Interest income on plan assets 422,097 475,503 Actual employer contributions 200,000 - (J[\HSILULÄ[ZWHPKMYVTWSHU       Actuarial (loss) / gain from plan assets (17,590) (95,971) Fair value of plan assets as at 31st December 5,169,780 4,661,449

+LÄULK)LULÄ[6ISPNH[PVU9LJVUJPSPH[PVU Bank & Group 2015 2014 Rs 000 Rs 000

+LÄULKILULÄ[VISPNH[PVUHZH[Z[1HU\HY`        Current service cost 225,925 185,680 Interest cost 479,596 438,507 (J[\HSILULÄ[ZWHPKMYVTWSHU       Actuarial (gain) / loss due to changes in assumptions (213,954) 554,485 Actuarial loss / (gain) due to experience adjustments 16,802 108,833 +LÄULKILULÄ[VISPNH[PVUHZH[Z[+LJLTILY       

(UHJ[\HYPHS]HS\H[PVUVM[OL7LUZPVU-\UK^HZJHYYPLKV\[HZH[Z[+LJLTILYI`4LZZYZ7P`HS:.VVUL[PSSLRL (ZZVJPH[LZHÄYT of professional actuaries. The valuation method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended I`:YP3HURH(JJV\U[PUN:[HUKHYK32(: ,TWSV`LL)LULÄ[Z

41.4.6 Actuarial Assumptions

2015 2014

Discount rate as at 31st December 9.80% 9.25% Future salary increment rate 8.80% 8.25% Expected return on assets 9.80% 9.25% Mortality GA 1983 Mortality Table GA 1983 Mortality Table Retirement age Normal retirement age or Normal retirement age or age on valuation date, age on valuation date, if greater if greater

The plan assets consist of term deposits, repurchase agreements , debenture investments in listed companies and listed equity shares. Expected average future working life of the active participants is 9.4 years.

396 SAMPATH BANK PLC Annual Report 2015 41.4.7 Sensitivity of Assumptions Employed in Pension Fund Valuation 9LHZVUHIS`WVZZPISLJOHUNLZH[[OLYLWVY[PUNKH[L[VVULVM[OLZPNUPÄJHU[HJ[\HYPHSHZZ\TW[PVUZOVSKPUNV[OLYHZZ\TW[PVUZJVUZ[HU[ would have affected the net pension liability / Statement of Comprehensive Income by the amounts shown below.

Increase / Increase / 2015 2014 (Decrease) in (Decrease) in :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[VU :LUZP[P]P[`,ɈLJ[ :LUZP[P]P[`,ɈLJ[VU Discount Rate Salary Increment on Statement of ,TWSV`TLU[)LULÄ[ on Comprehensive ,TWSV`TLU[)LULÄ[ Rate Comprehensive Obligation Income Statement Obligation Income Increase / Increase / Increase / Increase / (Decrease) in Net (Decrease) in (Decrease) in Net (Decrease) in Pension Liability Comprehensive Pension Liability Comprehensive (Rs Mn) Income for the Year (Rs Mn) Income for the Year (Rs Mn) (Rs Mn) 1% - 663.7 (663.7) 634.3 (634.3) (1%) - (804.5) 804.5 (774.8) 774.8 - 1% (372.1) 372.1 (357.2) 357.2 - (1%) 339.0 (339.0) 323.6 (323.6)

42. STATED CAPITAL 42.1 Stated Capital Bank & Group 2015 2014 Rs 000 Rs 000

Ordinary shares as at 1st January 4,470,151 4,460,339 Issue of shares under ESOP - 9,812 Scrip dividend 911,254 - Ordinary Shares as at 31st December 5,381,405 4,470,151

Rights, preferences and restrictions of classes of capital The holders of ordinary shares have the right to receive dividend as declared from time to time and are entitled to one vote per share at the Annual General Meeting of the Bank.

42.2 Reconciliation of Number of Shares

2015 2014

Ordinary shares as at 1st January 167,910,253 167,787,605 5\TILYVMZOHYLZPZZ\LKK\L[VÄUHSZJYPWKP]PKLUK   Number of shares issued under ESOP - 122,648 Ordinary shares as at 31st December 172,312,655 167,910,253

Annual Report 2015 SAMPATH BANK PLC 397 Notes to the Financial Statements

42. STATED CAPITAL CONTD. 42.3 Share Based Payment Transaction: Employee Share Option Plan (ESOP) - 2010 The shareholders approved an Employee Share Option Plan (ESOP 2010) at the Extra Ordinary General Meeting held on 21st August 2010. ESOP 2010 was introduced in the year 2011 having achieved targets set for 2010. The option exercisable period was 3 years, from the entitlement date of 30th June 2011.

Accordingly, the option scheme was closed on 30th June 2014. The stated capital of the Bank increased by Rs 238.6 Mn as a result of the consideration paid by the staff under the ESOP from 30th June 2011 to 30th June 2014.

Sri Lanka Accounting Standards - SLFRS 2 (Share - based Payment) did not apply on this transaction due to the transitional arrangement in the Standard.

ESOP Position As at 31st December 2015 2014 Number of Number of shares shares

Number of options granted - 3,056,159 Number of options exercised - (2,982,941) Number of options expired - (73,218) Number of options remaining - -

Option price (Rs) - 80 Weighted average market price (Rs) - 206.99

5VÄUHUJPHSHZZPZ[HUJL^HZWYV]PKLKI`[OL)HUR[V[OLZ[HMM[VW\YJOHZL[OLZOHYLVW[PVUZ

43. STATUTORY RESERVES

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Statutory reserve fund (Note 43.1) 1,790,000 1,480,000 1,860,058 1,530,831 Investment fund account (Note 43.2) - - - - 1,790,000 1,480,000 1,860,058 1,530,831

43.1 Statutory Reserve Fund

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 01st January 1,480,000 1,234,149 1,530,831 1,271,913 Transfer during the year 310,000 245,851 329,227 258,918 Balance as at 31st December 1,790,000 1,480,000 1,860,058 1,530,831

The statutory reserve fund is maintained as required by Section 20 (1) of the Banking Act No 30 of 1988. Accordingly, a sum equivalent to UV[SLZZ[OHU VM[OLWYVÄ[HM[LY[H_ILMVYLHU`KP]PKLUKPZKLJSHYLKVYHU`WYVÄ[ZHYL[YHUZMLYYLK[VLSZL^OLYLZOV\SKIL[YHUZMLYYLK[V HIV]LYLZLY]L\U[PS[OLYLZLY]LPZLX\HS[V VM[OL)HUR»ZZ[H[LKJHWP[HS;OLYLHM[LYHM\Y[OLYZ\TLX\P]HSLU[[V VMZ\JOWYVÄ[ZZOV\SK be transferred to the statutory reserve until the amount of the said reserve fund is equal to the stated capital of the Bank.

398 SAMPATH BANK PLC Annual Report 2015 43.2 Investment Fund Account

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 01st January - 2,439,494 - 2,497,983 Transferred to retained earnings - (2,439,494) - (2,497,983) Balance as at 31st December - - - -

The operation of the investment fund account was ceased with effect from 1st October 2014. Accordingly the Bank / Group transferred the balance remaining in the investment fund account as at 30th September 2014 to retained earnings.

44. OTHER RESERVES

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Revaluation reserve (Note 44.1) 1,846,649 1,846,649 4,202,261 4,202,261 Available for sale reserve (Note 44.2) 875,723 1,267,433 875,723 1,267,433 /LKNLYLZLY]L5V[L     General reserve (Note 44.4) 22,165,000 18,665,000 22,165,001 18,665,001 24,887,372 21,779,082 27,242,985 24,134,695

44.1 Revaluation Reserve

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 01st January 1,846,649 1,846,649 4,202,261 4,202,261 Revaluation surplus - - - - Balance as at 31st December 1,846,649 1,846,649 4,202,261 4,202,261

Revaluation reserve represents the fair value changes of free hold land & buildings as at the date of revaluation.

44.2 Available for Sale Reserve Bank & Group 2015 2014 Rs 000 Rs 000

Balance as at 01st January 1,267,433 1,966,240 (Loss) / gain arising on re-measuring available for  ZHSLÄUHUJPHSHZZL[Z       Exchange difference in translation 32,061 993 Balance as at 31st December 875,723 1,267,433

;OLH]HPSHISLMVYZHSLYLZLY]LJVTWYPZLZ[OLJ\T\SH[P]LUL[JOHUNLPUMHPY]HS\LVMH]HPSHISLMVYZHSLÄUHUJPHSHZZL[Z\U[PS[OL`HYL derecognised or impaired.

Annual Report 2015 SAMPATH BANK PLC 399 Notes to the Financial Statements

44. OTHER RESERVES CONTD. 44.3 Hedge Reserve Bank & Group

2015 2014 Rs 000 Rs 000

Balance as at 01st January - (168,014) .HPUSVZZHYPZPUNMYVTJHZOÅV^OLKNL      Balance as at 31st December - -

;OLLMMLJ[P]LWVY[PVUVMJOHUNLZPUMHPY]HS\LVMKLYP]H[P]LZ[OH[HYLKLZPNUH[LKHUKX\HSPÄLKHZJHZOÅV^OLKNLZPZYLJVNUPZLKPU[OLOLKNL reserve.

44.4 General Reserve

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 01st January 18,665,000 14,138,984 18,665,001 14,138,985 Unclaimed dividend adjustment (90) (20) (90) (20) Transfer during the year 3,500,090 4,526,036 3,500,090 4,526,036 Balance as at 31st December 22,165,000 18,665,000 22,165,001 18,665,001

;OL)HUR[YHUZMLYZJLY[HPUHTV\U[VMWYVÄ[MYVTYL[HPULKLHYUPUNZ[VNLULYHSYLZLY]LHJJV\U[LHJO`LHY;OLW\YWVZLVM[OLHIV]L[YHUZMLY is to build an adequate reserve to meet potential future unknown liabilities / commitments.

45. RETAINED EARNINGS

Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 01st January 3,182,746 2,500,411 4,375,667 3,300,881 Super gain tax (Note 39.2) (676,765) - (781,760) - Balance after super gain tax 2,505,981 2,500,411 3,593,907 3,300,881

7YVÄ[MVY[OL`LHY        (J[\HYPHSNHPUSVZZVUKLÄULKILULÄ[WSHUZ         Deferred tax effect (32,463) 216,390 (32,027) 217,042 Final dividend for 2013 : Cash - (1,342,631) - (1,342,631) Final dividend for 2014 : Cash (839,551) - (839,551) - Final dividend for 2014 : Scrip (1,007,461) - (1,007,461) - Transfers to reserves during the year (3,810,090) (2,332,393) (3,829,317) (2,286,971) Balance as at 31st December 3,066,297 3,182,746 4,624,088 4,375,667

400 SAMPATH BANK PLC Annual Report 2015 46. NON CONTROLLING INTEREST Non controlling interest represents 2.86% of net assets of the Subsidiary, Sampath Centre Ltd. Group 2015 2014 Rs 000 Rs 000

Balance as at 01st January 92,285 88,985 Super gain tax (1,490) - Balance after super gain tax 90,795 88,985 7YVÄ[MVY[OL`LHY    (J[\HYPHSNHPUSVZZVUKLÄULKILULÄ[WSHUZ   Dividend paid (1,000) (1,000) Balance as at 31st December 94,663 92,285

47. COMMITMENTS AND CONTINGENCIES

Accounting Policy *VU[PUNLU[SPHIPSP[PLZHYLWVZZPISLVISPNH[PVUZ^OVZLL_PZ[LUJL^PSSILJVUÄYTLKVUS`I`\UJLY[HPUM\[\YLL]LU[ZVYWYLZLU[VISPNH[PVUZ^OLYL [OL[YHUZMLYVMLJVUVTPJILULÄ[ZPZUV[WYVIHISLVYJHUUV[ILYLSPHIS`TLHZ\YLKHZKLÄULKPU[OL:YP3HURH(JJV\U[PUN:[HUKHYK32(: 37 (Provisions, Contingent Liabilities and Contingent Assets).

;VTLL[[OLÄUHUJPHSULLKZVMJ\Z[VTLYZ[OL)HURLU[LYZPU[V]HYPV\ZPYYL]VJHISLJVTTP[TLU[ZHUKJVU[PUNLU[SPHIPSP[PLZ;OLZLJVUZPZ[ VMÄUHUJPHSN\HYHU[LLZSL[[LYZVMJYLKP[HUKV[OLY\UKYH^UJVTTP[TLU[Z[VSLUK3L[[LYZVMJYLKP[N\HYHU[LLZHUKHJJLW[HUJLZJVTTP[ [OL)HUR[VTHRLWH`TLU[ZVUILOHSMVMJ\Z[VTLYZPU[OLL]LU[VMHZWLJPÄJHJ[NLULYHSS`YLSH[LK[V[OLPTWVY[VYL_WVY[VMNVVKZ;OL` carry a similar credit risk to loans. Operating lease commitments of the Bank (as a lessor and as a lessee) and pending legal claims against the Bank too form part of commitments of the Bank. Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed unless they are remote. But these contingent liabilities do contain credit risk and are therefore form part of the overall risk of the Bank.

Financial guarantees are initially recognised in the Statement of Financial Position (within ‘other liabilities’) at fair value, being the premium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of the amount initially YLJVNUPZLKSLZZJ\T\SH[P]LHTVY[PZH[PVUYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZHUK[OLILZ[LZ[PTH[LVML_WLUKP[\YLYLX\PYLK[V ZL[[SLHU`ÄUHUJPHSVISPNH[PVUHYPZPUNHZHYLZ\S[VM[OLN\HYHU[LL

(U`PUJYLHZLPU[OLSPHIPSP[`YLSH[PUN[VÄUHUJPHSN\HYHU[LLZPZYLJVYKLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº0TWHPYTLU[JOHYNLMVYSVHUZ V[OLYSVZZLZ»;OLWYLTP\TYLJLP]LKPZYLJVNUPZLKPU[OL:[H[LTLU[VM7YVÄ[VY3VZZ\UKLYº5L[MLLZHUKJVTTPZZPVUPUJVTL»VUH straight line basis over the life of the guarantee.

47.1 Commitments and Contingencies Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Commitments Commitment for unutilised facilities - Direct credit facilities 63,409,991 49,383,326 63,625,062 49,611,384 - Indirect credit facilities 34,379,494 23,609,202 34,379,494 23,609,202 Capital commitments (Note 47.2) 177,752 338,282 184,775 351,542 97,967,237 73,330,810 98,189,331 73,572,128

Contingent Liabilities Acceptances 15,858,037 12,193,392 15,858,037 12,193,392 Documentary credit 17,049,372 16,561,496 17,049,372 16,561,496 Guarantees 39,676,660 36,935,789 39,676,660 36,935,789 Bills sent for collection 177,440 104,104 177,440 104,104 Others 17,435 13,902 17,435 13,902 72,778,944 65,808,683 72,778,944 65,808,683

Forward exchange contracts 15,857,419 11,131,338 15,857,419 11,131,338 Currency SWAPs 28,389,283 19,894,827 28,389,283 19,894,827 44,246,702 31,026,165 44,246,702 31,026,165 Total commitment & contingencies 214,992,883 170,165,658 215,214,977 170,406,976

Annual Report 2015 SAMPATH BANK PLC 401 Notes to the Financial Statements

47. COMMITMENTS AND CONTINGENCIES CONTD. 47.2 Capital Commitments Capital expenditure approved by the Board of Directors, for which provisions have not been made in the Financial Statements are detailed below.

Bank Group As at 31st December 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Approved & contracted for 69,224 159,576 76,247 159,576 Approved but not contracted for 108,528 178,706 108,528 191,966 177,752 338,282 184,775 351,542

47.3 Litigation against the Bank Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Bank THRLZHKQ\Z[TLU[Z[VHJJV\U[MVYHK]LYZLLMMLJ[Z^OPJO[OLJSHPTZTH`OH]LVUP[ZÄUHUJPHSZ[HUKPUN;OLYL^LYLUVWLUKPUNSP[PNH[PVU against the Bank as at 31st December 2015 which would have a material impact on the Financial Statements other than those disclosed below. i. Commercial High Court Case No HC (Civil) 11 / 2004 (1) The Plaintiff has instituted action against the Bank claiming a sum of Rs 273,272,295.16 on a transfer of funds done by the Bank. In addition, the Plaintiff is seeking a further sum of Rs 53,411,299.34 and a sum of Rs 4,906,796.63 per month from the date of action (i.e. 26th January 2004) until payment, as losses and damages. The Bank has denied the claim of the Plaintiff and has vigorously defended the claim. The Judgment has been delivered in favour of the Bank against which the Plaintiff has appealed in the Supreme Court under the Case No SC 06/2013 (f) and same is yet to be listed. ii. Following Cases are Filed against the Bank in Order to Recover Damages (a) Case No - DMR 5787 / 10 The Plaintiff’s action against the Bank has been dismissed by the District Court. The Plaintiff has preferred an appeal against the judgment to the Civil Apellate Courts. Appeal is pending.

(b ) Case No - DMR 1904 / 2012 The Plaintiff has allegedly instituted this action against the Bank claiming a sum of Rs 2.5 Mn as damages on the basis that the Bank has PSSLNHSS`OHUKLKV]LY[OL*LY[PÄJH[LVM9LNPZ[YH[PVUWLY[HPUPUN[V[OL]LOPJSLSLHZLK\UKLY[OL3LHZL(NYLLTLU[5V3:)32\SP[V the spouse and the consent letter given by the spouse is challenging in Courts.

(c) Case No - 7058 / DMR The Plaintiff has instituted this action against the Bank, claiming a sum of Rs 20 Mn on the basis that the Bank has increased the rate of PU[LYLZ[PUYLZWLJ[VM[OLOV\ZPUNSVHUVI[HPULKI`OPTHUKOLZ\MMLYLKKHTHNLZHZHYLZ\S[VM[OH[/V^L]LY[OL3L[[LYVM6MMLYJVUÄYTZ that the Bank has the right to increase the rate of interest.

(d) Case No - CHC 320 / 2011 7SHPU[PMMOHZPUZ[P[\[LKSLNHSHJ[PVUHNHPUZ[[OLIHURZ[+LMLUKHU[VM[OPZJHZLPUVYKLY[VVI[HPUHUVYKLYMYVT[OL*VTTLYJPHS/PNO*V\Y[ of Western Province for the cancellation of resale of the property described in the plaint.

(e) Case No - 58032 / MR ;OL7SHPU[PMMOHZÄSLK[OPZHJ[PVUHNHPUZ[[OL)HURHZ^LSSHZ[OL*90)JSHPTPUN9Z4UHZKHTHNLZVU[OLIHZPZ[OH[OPZ*VTWHU` namely Jagath Robotics (Pvt) Ltd has been reported to the CRIB, under an irrelevant reference due to negligence of the Bank. The Bank is defending the above action and chances for the Plaintiff to succeed in this case are very remote.

(f) Case No - 11938 / M - Embilipitiya Plaintiff has instituted this action against the Bank claiming damages of Rs 1.0 Mn for the payment of Rs 0.1 Mn from a Savings account, to a person who has forged the Plaintiff’s signature.

402 SAMPATH BANK PLC Annual Report 2015 (g) DC Colombo Case No 891 / 13 - Jayantha Dadigama ;OLWSHPU[PMMOHZÄSLKHJHZLHNHPUZ[[OL)HURJSHPTPUNKHTHNLZVM9Z4UVU[OLIHZPZ[OH[[OL)HUROHZ\USH^M\SS`H\J[PVULKOPZ property under the provisions of Act No 04 of 1990. The basis of the case is not favourable to the Plaintiff since the Bank has acted all the time as per the provisions of law.

(h) CHC Colombo Case No 29 / 13 / MR - R J Technology Systems ;OLHIV]LJHZL^HZÄSLKI`+3+79VZOHU1H`HZPUNOL[OLWYVWYPL[VYVM91;LJOUVSVN`:`Z[LTZHNHPUZ[[OL)HURJSHPTPUNKHTHNLZVM Rs 40 Mn on the basis that the Bank illegally suspended his credit balance of Rs 299,209.43 and as a result, two cheques issued by him got returned.

Over Rs 3 Mn is due to the Bank from the said customer on a charge back created through the payment gateway, which was utilized by the customer and the Bank is defending this action on the right of set off recognised by law relating to banking facilities.

(i) CHC Colombo Case No 299 / 13 / MR – R J Technology Systems ;OLHIV]LJHZL^HZÄSLKI`+3+79VZOHU1H`HZPUNOL[OLWYVWYPL[VYVM91;LJOUVSVN`:`Z[LTZHNHPUZ[[OL)HURJSHPTPUNKHTHNLZVM Rs 250 Mn, on the basis that the Bank has illegally suspended operation of his current account and the payment gateway facility provided to him by the Bank.

Over Rs 3 Mn is due to the Bank from the said customer on a charge back created through the payment gateway, which was utilised by the customer and the Bank is defending this action on the right of set off recognised by law relating to banking facilities.

(j) D C Polonnaruwa case No 16139 / L / 15 - P A S N R Kularathne The plaintiff has instituted above action against the Bank claiming a sum of Rs 120 Mn as damages, and also seeking an order from courts declaring that he is the owner of the land and property acquired by the Bank under Parate Execution. Further he claims that the Bank has fraudulently acted with one of the customers of the Bank who died recently and got transferred the land owned by plaintiff in the name of the deceased customer together with the rice mill and hence he has suffered a loss of Rs 120 Mn.

:PUJL[OLYLPZUVTLYP[VM[OLJHZL)HURPZJVUÄKLU[[OH[^LJHUKLMLUKHUKZHMLN\HYKV\YWVZP[PVUPUJV\Y[ iii. The Following Cases are Filed Against the Bank in Order to Prevent the Bank from Enforcing the Mortgages to Recover its Dues: (a) :L]LUHJ[PVUZOH]LILLUÄSLKPU:\WYLTL*V\Y[PU*HZL5VZ:* :*:* :* :*:* 11, 24 / 2008 SC.

(b) ;^VHJ[PVUZOH]LILLUÄSLKPU*V\Y[VM(WWLHSPU*HZL5VZ*(3(*(

(c ) ;^VHJ[PVUZOH]LILLUÄSLKPU*P]PS(WWLHSPU*HZL5VZ*(3(*(3(3(

(d) :L]LUHJ[PVUZOH]LILLUÄSLKPU*VTTLYJPHS/PNO*V\Y[PU*HZL5VZ49494949  / 2014 / MR, 153 / 11 MR, 427 / 15 / MR

(e) 5PULHJ[PVUZOH]LILLUÄSLKPU+PZ[YPJ[*V\Y[VM*VSVTIVPU*HZL5VZ 3+:7+3449  2014 DSP, 84 / 14 / DSP, 146 / 15 DSP, 721 / 15 MR, 11 / 15 DSP, One in District Court of Kurunegala in Case No 8660 / SP, Three in District Court of Marawila in Case Nos 1613 / L, 1070 / S,1747 / L, Three in District Court of Kandy in Case Nos 228 / 10 DPA, 36599 / MR, 401 / 14 DMR, One in District Court of Monaragala in Case No 1691 / SPL, One in District Court of Minuwangoda in Case No 12 / SPL, One in District Court of Chilaw in Case No 4127 / 11 / L, One in District Court of Kalutara in Case No 4369 / SPL, One in District Court of Ratnapura in Case No 30132 / M, Two in District Court of Matale in Case Nos 6257 / L, 6048 /L, One in District Court of Galle in Case No 3480/SP, One in District Court of Gampaha in Case No 1885/L, One in District Court of Batticaloa in Case No 5487 / L / 11, One in District Court of Bandarawela in Case No 302 / SPL, Two in District Court of Kegalle in Case Nos 8031 / SPL, 8067 / SPL, One in District Court of Nikaweratiya in Case No 37 / SPL, One in the District Court of Ruwanwella in Case No 168 / P, One in the District court of Wariyapola in Case No 16 / L, One in the District court of Nawalapitiya in Case No 62 / 14 / P, 6ULPU[OL+PZ[YPJ[JV\Y[VM/VTHNHTHPU*HZL5V  76ULPU[OL+PZ[YPJ[JV\Y[VM7VSVUUHY\^HPU*HZL5V 36ULPU [OL+PZ[YPJ[*V\Y[VM([[HUHNHSSHPU*HZL5V 36ULPU[OL+PZ[YPJ[*V\Y[VM/VYHUHPU*HZL5V  7

Litigation against the Group 6[OLY[OHU[OVZLKPZJSVZLKHIV]L[OLYLPZUVJHZLÄSLKHNHPUZ[[OL.YV\W^OPJO^V\SKOH]LTH[LYPHSPTWHJ[VU[OLÄUHUJPHSWVZP[PVUVM[OL Group.

Annual Report 2015 SAMPATH BANK PLC 403 Notes to the Financial Statements

48. COMPARATIVE INFORMATION ;OLJVTWHYH[P]LPUMVYTH[PVUPZYLJSHZZPÄLK^OLYL]LYULJLZZHY`[VJVUMVYT[V[OLJ\YYLU[`LHY»ZWYLZLU[H[PVUHUKKL[HPSZHYLNP]LUILSV^

 6WDWHPHQWRI3URðWRU/RVV

Bank Group  5V[L 9LJSHZZPÄLK (Z (KQ\Z[TLU[ 9LJSHZZPÄLK (Z (KQ\Z[TLU[ disclosed disclosed in 2014 in 2014 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Fee & commission income 48.1.1 5,055,618 3,357,982 1,697,636 5,132,720 3,435,084 1,697,636 Fee & commission expense 48.1.2 868,212 271,058 597,154 873,362 276,208 597,154 Other operating income 48.1.1,48.1.3 48.1.4 & 48.1.5 1,069,469 3,639,080 (2,569,611) 1,152,792 3,790,375 (2,637,583) Other operating expenses 48.1.2,48.1.3 & 48.1.5 6,668,211 7,273,770 (605,559) 6,839,150 7,512,681 (673,531) Net impairment charge / 48.1.4 1,401,399 2,264,969 (863,570) 1,580,792 2,444,362 (863,570) (reversal) for loans & other losses

48.1.1 -LLZYLJV]LYLK9Z 4U^OPJO^HZWYL]PV\ZS`YLWVY[LK\UKLYV[OLYVWLYH[PUNPUJVTLOHZILLUYLJSHZZPÄLK\UKLYMLL  commission income.

48.1.2 *HYKYLSH[LKMLLL_WLUZLZ9Z 4U^OPJO^HZWYL]PV\ZS`YLWVY[LK\UKLYV[OLYVWLYH[PUNL_WLUZLZOHZILLUYLJSHZZPÄLK\UKLY fee & commission expenses.

48.1.3 Postage recovered (Rs 8.4 Mn) which was previously reported under other operating income has been netted with the postage L_WLUZLZHUKYLJSHZZPÄLK\UKLYV[OLYVWLYH[PUNL_WLUZLZ

48.1.4 9L]LYZHSVMPTWHPYTLU[WYV]PZPVUZ9Z 4U^OPJO^HZWYL]PV\ZS`YLWVY[LK\UKLYV[OLYVWLYH[PUNPUJVTLOHZILLUYLJSHZZPÄLK under net impairment charge / (reversal) for loans & other losses.

48.1.5 Removal of Rs 68 Mn from both other operating income and other operating expenses of the Group.

48.2 Statement of Financial Position ;OLYL^LYLUVYLJSHZZPÄJH[PVUZK\YPUN[OL`LHY

404 SAMPATH BANK PLC Annual Report 2015 49. RELATED PARTY DISCLOSURES ;OL)HURHUK[OL.YV\WJHYYPLZV\[[YHUZHJ[PVUZPU[OLVYKPUHY`JV\YZLVMI\ZPULZZ^P[O[OLWHY[PLZ^OVHYLKLÄULKHZYLSH[LKWHY[PLZPU:YP Lanka Accounting Standards - LKAS 24 (Related Party Disclosures), the details of which are reported below.

49.1 Terms and Conditions The pricing applicable to such transactions is based on the assessment of risk and pricing model of the Bank and is comparable with what is applied to transactions between the Bank & the Group and its unrelated customers with similar credit standing.

The subsidiary companies are carried out transactions in the ordinary course of business on an arm’s length basis at commercial rates.

49.2 Parent and Ultimate Controlling Party ;OL)HURKVLZUV[OH]LHUPKLU[PÄHISLWHYLU[VMP[ZV^U

49.3 Transactions with Key Management Personnel (KMP) As per Sri Lanka Accounting Standard - LKAS 24 (Related Party Disclosures), key management personnel (KMP) are those having authority HUKYLZWVUZPIPSP[`MVYWSHUUPUNKPYLJ[PUNHUKJVU[YVSSPUN[OLHJ[P]P[PLZVM[OLLU[P[`(JJVYKPUN[V[OLHIV]LKLÄUP[PVUHWLYZVUJHUUV[IL considered as a KMP unless such person have both the authority and responsibility to carry out all the three activities mentioned in the HIV]LKLÄUP[PVUPLWSHUUPUNKPYLJ[PUNHUKJVU[YVSSPUN[OLHJ[P]P[PLZVM[OLLU[P[`

Accordingly the Board of Directors of the Bank are considered as KMP of the Bank and the Group.

49.3.1 Compensations of KMP

For the year ended 31st December Bank Group 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

:OVY[[LYTLTWSV`LLILULÄ[Z     ;LYTPUHSILULÄ[Z     7VZ[LTWSV`TLU[ILULÄ[Z     Directors’ fees & expenses 53,935 47,877 55,095 48,937 Total 97,972 85,515 99,132 86,575

0UHKKP[PVU[V[OLHIV]L[OL)HUROHZHSZVWHPKUVUJHZOILULÄ[ZZ\JOHZM\LSTLKPJHSILULÄ[Z[V247^OVHYLLTWSV`LLZVM[OL)HURPU SPUL^P[O[OLHWWYV]LKILULÄ[WSHUZVM[OL)HUR

Annual Report 2015 SAMPATH BANK PLC 405 Notes to the Financial Statements

49. RELATED PARTY DISCLOSURES CONTD. 49.4 Transactions, Arrangements and Agreements involving KMP and their Close Family Members (CFMs) *-4ZVM[OL247HYL[OVZLMHTPS`TLTILYZ^OVTH`ILL_WLJ[LK[VPUÅ\LUJLVYILPUÅ\LUJLKI`[OH[247PU[OLPYKLHSPUNZ^P[O[OL entity. They may include KMP’s domestic partner, children of the KMP’s domestic partner and dependants of the KMP.

49.4.1 Loans and Advances to KMP and their CFMs are detailed below:

2015 2014 Limit Closing Average Limit Closing Average Balance Balance Balance Balance Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Loans & receivables 4,000 - - 4,000 - - Credit cards 7,740 1,039 1,267 8,740 743 1,163

49.4.2 Deposits and Investments from KMP and their CFMs are detailed below:

2015 2014 Closing Average Closing Average Balance Balance Balance Balance Rs 000 Rs 000 Rs 000 Rs 000

Deposits and investments 269,158 254,253 226,636 216,775

49.4.3 Share Based Payments to KMP

For the year ended 31st December 2015 2014

Cash dividend (Rs 000) 631 985 Scrip dividend - number of shares 3,303 -

49.5 Transactions, Arrangements and Agreements involving Entities which are Controlled and / or Jointly Controlled by the KMP or their CFMs (excluding transactions with Bank’s Subsidiaries)

Closing Balance Average Balance 2015 2014 2015 2014 Rs 000 Rs 000 Rs 000 Rs 000

Loans & receivables 2,633,870 3,888,017 3,176,441 3,217,568 Documentary credits 396,270 509,942 458,410 434,268 Acceptance 634,144 408,071 401,958 530,081 Guarantees 682,452 549,955 491,080 535,694 Deposits 204,843 163,295 188,966 143,932 Total 4,551,580 5,519,280 4,716,854 4,861,543

Siyapatha Finance PLC has granted a lease facility amounting to Rs 0.9 Mn (Rs 1.8 Mn - 2014) to an entity which is controlled by a KMP.

406 SAMPATH BANK PLC Annual Report 2015 49.6 Credit Card Facilities to entities which are controlled and / or jointly controlled by the KMP or their CFMs are detailed below:

2015 2014 Limit Closing Average Limit Closing Average Balance Balance Balance Balance Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Credit Card Facilities 4,050 428 615 1,650 467 495

49.7 Share Based Payments to entities which are controlled and / or jointly controlled by the KMP or their CFMs are detailed below:

For the year ended 31st December 2015 2014

Cash dividend (Rs 000) 125,537 200,860 Scrip dividend - number of shares 658,286 -

49.8 Interest Income & Expense to KMP and their CFMs and Entities which are controlled and / or jointly controlled by the KMP or their CFMs are detailed below:

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Interest income 197,747 257,823 Interest expense 17,900 22,179

49.9 Payment for Promotional Activities During the year, the Bank had paid following amounts for the credit card promotional activities carried out with the entities where KMPs have either control and / or joint control.

For the Year ended 31st December 2015 2014 Rs 000 Rs 000

Payment for credit card promotional activities 33,157 11,489

49.10 Goods and Services Purchased & Sold During the year, goods and services purchased and sold from / to the entities where KMPs have either control and / or joint control in the normal course of the business, are detailed below.

The Bank has made the following payments during the year.

For the year ended 31st December 2015 2014 Rs 000 Rs 000

Expenses on goods & services purchased 37,596 35,890 Income from goods & services sold - -

Siyapatha Finance PLC and Sampath Centre Limited have paid Rs 22 Mn (Rs 21 Mn - 2014) for the entities which are controlled by KMP.

Annual Report 2015 SAMPATH BANK PLC 407 Notes to the Financial Statements

49. RELATED PARTY DISCLOSURES CONTD. 49.11 Transactions with Subsidiaries ;OL)HUROHK[OLMVSSV^PUNÄUHUJPHSKLHSPUNZK\YPUN[OL`LHY^P[OP[Z:\IZPKPHY`JVTWHUPLZ

2015 2014 Subsidiary Company Nature of Facility/ 31st Average 31st Average Transaction December Balance December Balance Rs 000 Rs 000 Rs 000 Rs 000

Sampath Centre Ltd As at Deposits 341,256 384,385 290,005 201,050 Loans and receivables - 5,093 - 1,140 Other assets 63,172 62,754 62,754 62,754 Other liabilities 39,961 48,282 40,001 66,696 For the year ended Income and fees received (Net) 34,000 30,600 Expenses and fees paid 373,067 270,575

S C Securities (Pvt) Ltd As at Loans and receivables 61,007 58,358 42,433 58,191 Guarantees 1,750 1,750 1,750 1,750 Deposits 7 - 15 - Investments - treasury bills 11,912 11,619 11,359 10,992 For the year ended Income and fees received 7,564 10,011 Expenses and fees paid 2,990 1,952

Siyapatha Finance PLC As at Loans and receivables 2,770,729 2,170,254 1,315,504 1,674,560 Other liabilities 703,677 631,308 489,685 594,842 For the year ended Expenses and fees paid 39,335 35,044 Income and fees received 192,289 182,936

Sampath Information Technology Solutions Ltd As at Loans and receivables 266,372 185,765 160,620 201,555 Other liabilities 28,590 43,120 10,594 - Deposits 650 426 398 365 For the year ended Income and fees received 19,851 11,345 Expenses and fees paid 114,973 97,709 Purchase of computer 20,252 10,241 hardware & software

408 SAMPATH BANK PLC Annual Report 2015 7UDQVDFWLRQVZLWK3RVW(PSOR\PHQW%HQHðW3ODQVRIWKH%DQN

As at 31st December 2015 2014 Nature of Transaction Rs 000 Rs 000

Sampath Bank Employees’ Provident Fund Deposits 3,226,994 531,500 Investment in repo 1,431,300 - Debentures 749,077 497,750

Sampath Bank Employees’ Pension Fund Deposits 1,309,237 1,590,881 Treasury bills - 557,000 Debentures 530,682 795,182 Investment in Sampath Bank shares - market value 696,101 623,924 Investment in Repo 2,337,639 922,177

50. SEGMENT INFORMATION

Accounting Policy An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed regularly by the chief operating decision maker to make decisions about resources allocated to each segment and assess its performance, HUKMVY^OPJOKPZJYL[LÄUHUJPHSPUMVYTH[PVUPZH]HPSHISL

-VYTHUHNLTLU[W\YWVZLZ[OL.YV\WOHZPKLU[PÄLKMV\YVWLYH[PUNZLNTLU[ZIHZLKVUWYVK\J[ZHUKZLY]PJLZHZMVSSV^Z! Banking Leasing, hirepurchase & factoring Dealing / Investment Others

3LHZPUNOPYLW\YJOHZL MHJ[VYPUNYLWYLZLU[Z[OLÄUHUJLSLHZPUNOPYLW\YJOHZL MHJ[VYPUNI\ZPULZZLZVM[OL)HURHZ^LSSHZ[OLHIV]L activities of its Subsidiary, Siyapatha Finance PLC. Dealing / Investment involves activities such as stock broking, securities dealing, investment banking, venture capital businesses and foreign currency related services.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation HUKWLYMVYTHUJLHZZLZZTLU[:LNTLU[WLYMVYTHUJLPZL]HS\H[LKIHZLKVUVWLYH[PUNWYVÄ[ZVYSVZZLZ^OPJOPUJLY[HPUYLZWLJ[ZHYL TLHZ\YLKKPMMLYLU[S`MYVTVWLYH[PUNWYVÄ[ZVYSVZZLZPU[OL*VUZVSPKH[LK-PUHUJPHS:[H[LTLU[Z0UJVTL[H_LZHYLTHUHNLKVUHNYV\WIHZPZ and are not allocated to operating segments.

Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the gross income and expense. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

Revenue from transactions with a single external customer or counterparty did not exceed 10% or more of the Bank’s total revenue in 2015 or 2014.

Annual Report 2015 SAMPATH BANK PLC 409 Notes to the Financial Statements

93 327 2014 Rs 000 845,309 - - 2015 Rs 000 742,254 22,606,327 5,749,410 21,025,535 5,749,410 18,550,386 16,780,790 1,190,589 1,022,307 5,417,211 4,259,358 2,465,911 1,282,521 - 992,844 1,580,792 - ,208 538,647,452 442,789,972 2014 Rs 000 28,928) 13,962,038 12,180,226 91,422) 518,323,773 425,723,342 431,501) 499,444,253 408,186,343 2,431,501) 499,444,253 408,186,343 ------2015 Rs 000 (58,950) (49,972) 96,614 87,430 - - 20,323,679 17,066,630 20,323,679 17,066,630 - 2014 Rs 000 - (79) - - - - - 2015 Rs 000 2,754 61,370 (2,691,264) 307,162 20,216,418 (2,599,375) - - - 2014 Rs 000 - - - - 2015 Rs 000 Dealing / Investment Other Eliminations/Unallocated Total 155,564 137,402 - 1,427,738 784,744 - - - - 2014 Rs 000 (46,557) (12,019,811) 6,233,677 (242,228) (150,887) (249,524) (221,492) (13,458,903) 5,008,000 - - - - - Factoring 2015 Rs 000 Leasing, Hire purchase & purchase Leasing, Hire - - - 2014 Rs 000 - - - 6,628,190 5,267,555 6,628,190 Banking 2015 Rs 000 1,038,173 497,856 -

(reversal) for loans & other (reversal) losses 916,848 1,346,748 73,607 208,764 2,389 25,280 - 50. CONTD. SEGMENT INFORMATION *HZOÅV^ZMYVTÄUHUJPUN activities 19,358,544 (3,987,392) 3,546,384 1,019,485 - Net interest incomeNet interest 14,169,375 12,693,391 1,894,203 1,439,383 2,485,890 2,647,142 918 874 - Capital expenditure 884,374 821,449 57,213 49,350 6,772 621 242,230 150,887 - Dividend Income - Net fee & commission income 5,211,283 4,159,869 173,978 61,800 36,004 37,881 (673) (192) (3,381) - -VYLPNUL_JOHUNLWYVÄ[ Other income 55,297 42,090 133,547 105,091 (75,654) 19,411 436,213 364,116 (337,271) (334,480) 212,132 196,228 Total revenue from external from revenue Total customers 20,474,128 17,393,206 2,201,728 1,606,274 4,029,542 3,626,580 436,458 364,719 (399,602) (384,452) 26,742,254 22,606, Inter segment revenue - Total operating incomeTotal 20,474,128 17,393,206 2,201,728 1,606,274 4,029,542 3,626,580 436,458 364,719 (399,602) (384,452) 26, Less: Impairment charge / Net operating income 19,557,280 16,046,458 2,128,121 1,397,510 4,027,153 3,601,300 436,458 364,719 (399,602) (384,452) 2 Less : Total operating expensesLess : Total 10,722,172 9,324,448 1,313,892 846,962 2,035,967 2,153,262 224,109 184,482 (334,102) (3 Segment result 8,835,108 6,722,010 814,229 550,548 1,991,186 1,448,038 212,349 180,237 (65,500) (55,524) 11,787,372 8, services 1,997,729 1,598,395 services 1,997,729 3LZZ!=(; 5);VUÄUHUJPHS Less: Income tax expenses 3,161,453 1,979,359 3,161,453 expenses tax Income Less: 7YVÄ[MVY[OL`LHY Non controlling interest (4,844) (4,320) interest(4,844) controlling Non 7YVÄ[H[[YPI\[HISL[VLX\P[` holders of the Bank 6,623,346 5,263,235 Bank6,623,346 the of holders

Segment assets 389,623,046 318,107,110 33,229,202 18,990,214 97,015,827 88,562,747 3,814,238 3,554,693 (5,358,540) (3,4 Unallocated assets - - - Total assetsTotal 389,623,046 318,107,110 33,229,202 18,990,214 97,015,827 88,562,747 3,814,238 3,554,693 14,965,139 13,575

Segment liabilities 333,980,396 269,757,100 38,469,399 20,926,417 130,858,604 119,655,618 414,473 278,709 (4,278,619) ( Unallocated liabilities - Total liabilitiesTotal 333,980,396 269,757,100 38,469,399 20,926,417 130,858,604 119,655,618 414,473 278,709 (4,278,619) (2,

activities (842,578) 1,635,641 (3,415,347) (803,696) (19,632) 4,644 244,328 246,912 2,947,388 (348,908) (1,085,841) 734,5 *HZOÅV^ZMYVTVWLYH[PUN *HZOÅV^ZMYVTPU]LZ[PUN activities (890,051) (806,741) (57,289)

410 SAMPATH BANK PLC Annual Report 2015 51. EVENTS AFTER THE REPORTING PERIOD

Accounting Policy Events after the reporting period are those events, favourable and unfavourable, that occur between the reporting date and the date when the Financial Statements are authorised for issue.

5VJPYJ\TZ[HUJLZOH]LHYPZLUZPUJL[OLYLWVY[PUNKH[L^OPJO^V\SKYLX\PYLHKQ\Z[TLU[Z[VVYKPZJSVZ\YLPU[OLÄUHUJPHSZ[H[LTLU[ZV[OLY than those disclosed below.

51.1 Bank 51.1.1 Proposed Dividends +PYLJ[VYZOH]LYLJVTTLUKLKHÄUHSKP]PKLUKVM9ZWLYZOHYL[VILWHPKMVY[OLÄUHUJPHS`LHYLUKLKZ[+LJLTILY;OPZ will be paid by Rs 6.00 in the form of cash dividend and the balance Rs 7.00 in the form of scrip dividend. Further this dividend is to be approved by the shareholders at the Annual General Meeting to be held on 31st March 2016.

0UHJJVYKHUJL^P[O:YP3HURH(JJV\U[PUN:[HUKHYK32(:,]LU[Z(M[LY[OL9LWVY[PUN7LYPVK[OPZWYVWVZLKÄUHSKP]PKLUKOHZ not been recognised as a liability as at 31st December 2015. As required by section 56 (2) of the Companies Act No 7 of 2007, the )VHYKVM+PYLJ[VYZOHZJVUÄYTLK[OH[[OL)HUROHZZH[PZÄLK[OLºZVS]LUJ`[LZ[»OH]PUNVI[HPULKHJLY[PÄJH[LMYVT[OLH\KP[VYZWYPVY[V YLJVTTLUKPUN[OLÄUHSKP]PKLUKMVY[OL`LHY

Under the Inland Revenue Act No 10 of 2006, a Withholding Tax of 10% has been imposed on dividend declared.

52. FAIR VALUE OF ASSETS & LIABILITIES 52.1 Assets & Liabilities Recorded at Fair Value The following is a description of how fair values are determined for assets and liabilities that are recorded at fair value. These incorporate the Bank’s estimate of assumptions that a market participant would make when valuing assets and liabilities.

Derivatives - Assets & Liabilities Derivative products which consist of SWAPs, forward foreign exchange contracts and hedges are valued using a valuation technique with market-observable inputs. The most frequently applied valuation techniques include forward foreign exchange spot and forward premiums.

Financial Assets - Available for Sale (]HPSHISLMVYZHSLÄUHUJPHSHZZL[ZWYPTHYPS`JVUZPZ[VMX\V[LK\UX\V[LKLX\P[`ZLJ\YP[PLZHUKNV]LYUTLU[ZLJ\YP[PLZ.V]LYUTLU[ZLJ\YP[PLZ are valued using the yield curve published by the Central Bank of Sri Lanka. Quoted equity securities are valued using quoted market prices in the active markets as at the reporting date.

Unquoted equity securities (except LankaBangla Securities Ltd) are carried at cost since it is the most reasonable value avalable to represent the price of such securities. Fair value of LankaBangla Securities Ltd is derived using a valuation model, the details of which are given in Note 52.5.2.

Trading Assets & Other Assets Measured at Fair Value Trading assets and other assets measured at fair value are the government securities and quoted equity securities. Government securities are valued using yield curve published by the Central Bank of Sri Lanka. For quoted equity securities, the Bank uses quoted market prices in the active market as at the reporting date.

Property, Plant & Equipment Freehold land and buildings are carried at revalued amount, being their fair value at the revaluation date less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Annual Report 2015 SAMPATH BANK PLC 411 Notes to the Financial Statements

52. FAIR VALUE OF ASSETS & LIABILITIES CONTD. 52.2 Valuation Model -VYHSSÄUHUJPHSPUZ[Y\TLU[Z^OLYLMHPY]HS\LZHYLKL[LYTPULKI`YLMLYYPUN[VL_[LYUHSS`X\V[LKWYPJLZVYVIZLY]HISLWYPJPUNPUW\[Z[VTVKLSZ independent price determination or validation is obtained. In an inactive market, direct observation of a traded price may not be possible. In [OLZLJPYJ\TZ[HUJLZ[OL)HUR\ZLZHS[LYUH[P]LTHYRL[PUMVYTH[PVU[V]HSPKH[L[OLÄUHUJPHSPUZ[Y\TLU[»ZMHPY]HS\L^P[ONYLH[LY^LPNO[NP]LU to information that is considered to be more relevant and reliable.

Fair value of freehold land and buildings was determined by using Market Comparable Method or Income Basis. These valuations WLYMVYTLKI`[OL]HS\LYZHYLIHZLKVUHJ[P]LTHYRL[WYPJLZZPNUPÄJHU[S`HKQ\Z[LKMVYKPMMLYLUJLPU[OLUH[\YLSVJH[PVUVYJVUKP[PVUVM[OL ZWLJPÄJWYVWLY[`4HUHNLTLU[KL[LYTPULK[OH[MYLLOVSKSHUKHUKI\PSKPUNZJVUZ[P[\[LVULJSHZZVMHZZL[\UKLY:YP3HURH(JJV\U[PUN Standard - SLFRS 13 (Fair Value Measurement), based on the nature, characteristics and risks of the property.

Fair values are determined according to the following hierarchy:

Level 1 – Quoted market price (unadjusted): quoted prices for identical assets and liabilities in active markets. Level 2 – Valuation technique using observable inputs: quoted prices for similar assets and liabilities in active markets or quoted prices for  PKLU[PJHSVYZPTPSHYHZZL[ZHUKSPHIPSP[PLZPUPUHJ[P]LTHYRL[ZHUKHYL]HS\LK\ZPUNTVKLSZ^OLYLHSSZPNUPÄJHU[PUW\[ZHYLVIZLY]HISL Level 3 –=HS\H[PVU[LJOUPX\L^P[OZPNUPÄJHU[\UVIZLY]HISLPUW\[Z!HZZL[ZHUKSPHIPSP[PLZ]HS\LK\ZPUN]HS\H[PVU[LJOUPX\LZ^OLYLVULVY   TVYLZPNUPÄJHU[PUW\[ZHYL\UVIZLY]HISL

52.3 Valuation Framework The Bank has an established control framework with respect to the measurement of fair values of trading and investment operations and all V[OLYZPNUPÄJHU[HZZL[ZHUKSPHIPSP[PLZ:WLJPÄJJVU[YVSZPUJS\KL!  (YL]PL^HUKHWWYV]HSWYVJLZZMVYZPNUPÄJHU[Q\KNTLU[ZHUKHZZ\TW[PVUZUL^TVKLSZJOHUNLZ[VL_PZ[PUNQ\KNTLU[Z assumptions and models involving Board Audit Committee. Periodic (at least quarterly) reviewing of fair value measurements against observable market data.  7LYPVKPJH[SLHZ[HUU\HSS`YL]PL^PUNVMMHPY]HS\LTLHZ\YLTLU[TVKLSZHNHPUZ[JOHUNLZPUTHYRL[JVUKP[PVUZZPNUPÄJHU[Q\KNTLU[Z and assumptions. Use of sophisticated software for fair value measurements of trading and investment securities and derivatives.  0UKLWLUKLU[HUHS`ZPZHUKPU]LZ[PNH[PVUVMZPNUPÄJHU[KHPS`]HS\H[PVUTV]LTLU[ZPU[YHKPUNHUKPU]LZ[TLU[ZLJ\YP[PLZHUKKLYP]H[P]LZ  (K\HS]LYPÄJH[PVUWYVJLZZMVYTHYRL[KH[HPUW\[Z[V[OLMHPY]HS\LTLHZ\YLTLU[ZVM[^HYL

52.4 Assets & Liabilities Measured at Fair Value - Fair Value Hierarchy The following table shows an analysis of assets and liabilities recorded at fair value by level of the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the value recognised in the Statement of Financial Position.

412 SAMPATH BANK PLC Annual Report 2015

 8\V[LK7YPJLZ :PNUPÄJHU[ :PNUPÄJHU[ ;V[HS Rs 000 Rs 000 Rs 000 Rs 000 -HPY=HS\L4LHZ\YLTLU[SLZZZ\IZLX\LU[HJJ\T\SH[LK efore the fair value exist in the recent valuation (31st December 2013) the fair value exist in recent efore Using Measurement Fair Value (Level 1) (Level 2) (Level 3) 2) (Level 1) (Level (Level in Active Observable Unobservable Markets Inputs 2014 2015 Fair Value Measurement Using Measurement Fair Value Rs 000 Rs 000 Rs 000 Rs 000 Markets Inputs in Active Observable Unobservable 8\V[LK7YPJLZ :PNUPÄJHU[ :PNUPÄJHU[ ;V[HS S\LYZPUJVTWSPHUJL^P[O:YP3HURH(JJV\U[PUN:[HUKHYK:3-9: (Level 1) (Level 2) (Level 3) 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015

depreciation and impairment losses is considered as the fair value exist as at the reporting date (31st December 2015). as the fair value exist at reporting and impairment losses is considered depreciation 52.4.1 Bank As at 31st December during 2015 and 2014. no material transfers between levels of fair value hierarchy were There Ther policy. to the Bank’s years according the fair value of land and buildings once in three * The independent valuers provide ^OPJO^HZJHYYPLKV\[I`WYVMLZZPVUHSS`X\HSPÄLKPUKLWLUKLU[]H

Date of Date Valuation Valuation Quoted equity securities SWAPs at fair value Financial assets measured 692,333 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z 16,331,920 securities Currency 692,333 - equity exchange contracts foreign Forward 121,741 16,331,920 - Financial assets - held for trading Government 121,741 - Quoted 1,767,317 1,767,317 - - 198,448 - 198,448 - - 101,028 121,013 - 101,028 - 319,461 - - 319,461 121,013 - 177,224 - 177,224 - 76,196 - 76,196 Financial assets - held for trading pledged as collaterals 17,024,253 17,024,253 - 1,889,058 1,889,058 - Government securities 2,702,785 - - 2,702,785 13,205,359 - - 13,205,359 securities 13,205,359 - Government 2,702,785 Financial assets - available for sale 2,702,785 - Quoted equity securities 1,533,863 1,533,863 - securities equity 1,217,611 1,217,611 - Government 49,976,743 - Quoted 49,976,743 - Government securities Government 7,210,585 - 1RQðQDQFLDODVVHWVPHDVXUHGDWIDLUYDOXH land & buildings (under Freehold 7,210,585 - SWAPs plant & equipment) * property, at fair value Financial liabilities measured +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z Currency 11,094 exchange contracts foreign Forward 11,094 - 239,569 - 239,569 - - 52,179 62,996,782 52,179 - 319,461 - 56,057 63,372,300 31,763,475 457,058 - 177,224 47,759 31,988,458 457,058 - - - - - 217,489 3,480,030 - 3,480,030 3,480,030 - - - 217,489 - 3,286,161 - - 3,286,161 41,085 3,286,161 - 41,085 Unquoted equity securities equity Unquoted Financial assets - available for sale 1,581,622 pledged as collaterals 47,759 - 1,533,863 - - 56,057 51,250,411 - - 47,759 56,057 51,194,354 -

Annual Report 2015 SAMPATH BANK PLC 413 Notes to the Financial Statements

 8\V[LK7YPJLZ :PNUPÄJHU[ :PNUPÄJHU[ ;V[HS Rs 000 Rs 000 Rs 000 Rs 000 -HPY=HS\L4LHZ\YLTLU[SLZZZ\IZLX\LU[HJJ\T\SH[LK refore the fair value exist in the recent valuation (31st December 2013) the fair value exist in recent refore Using Measurement Fair Value (Level 1) (Level 2) (Level 3) 2) (Level 1) (Level (Level in Active Observable Unobservable Markets Inputs 2014 2015 Fair Value Measurement Using Measurement Fair Value Rs 000 Rs 000 Rs 000 Rs 000 Markets Inputs in Active Observable Unobservable 8\V[LK7YPJLZ :PNUPÄJHU[ :PNUPÄJHU[ ;V[HS S\LYZPUJVTWSPHUJL^P[O:YP3HURH(JJV\U[PUN:[HUKHYK:3-9: (Level 1) (Level 2) (Level 3) 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015 31st December 2015 - December 31st property, plant & equipment) * property, - - 6,370,147 6,370,147 - - 6,196,504 6,196,504

depreciation and impairment losses is considered as the fair value exist as at the reporting date (31st December 2015). as the fair value exist at reporting and impairment losses is considered depreciation 52. 52.4.2 Group OF ASSETS & LIABILITIES CONTD. VALUE FAIR As at 31st December during 2015 and 2014. no material transfers between levels of fair value hierarchy were There The policy. to the Group’s years according the fair value of land and buildings once in three * The independent valuers provide ^OPJO^HZJHYYPLKV\[I`WYVMLZZPVUHSS`X\HSPÄLKPUKLWLUKLU[]H

Currency SWAPs SWAPs +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z Currency 11,094 exchange contracts foreign Forward 11,094 - 239,569 - 239,569 - - 52,179 52,179 - 457,058 - 457,058 - - - 217,489 - 217,489 - 41,085 - 41,085 Financial liabilities measured at fair value Financial liabilities measured Date of Date Valuation Valuation Quoted equity securities SWAPs 692,333 at fair value Financial assets measured +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z 16,331,920 securities Currency 692,333 - equity exchange contracts foreign Forward 121,741 16,331,920 - Financial assets - held for trading Government 121,741 - Quoted 1,776,333 1,776,333 - - 198,448 - 198,448 - - 101,028 121,013 - 101,028 land & buildings (under Freehold - 319,461 - - 319,461 121,013 - 177,224 - 177,224 - 76,196 - 76,196 - - 6,370,147 - - 6,196,504 Government securities Government 6,519,573 - 1RQðQDQFLDODVVHWVPHDVXUHGDWIDLUYDOXH 6,519,573 - 62,996,782 319,461 56,113 63,372,356 31,763,475 177,224 47,815 31,988,514 Financial assets - held for trading pledged as collaterals 17,024,253 17,024,253 - 1,898,074 1,898,074 - Government securities 2,693,769 - - 2,693,769 13,205,359 - - 13,205,359 securities 13,205,359 - Government 2,693,769 Financial assets - available for sale 2,693,769 - Quoted equity securities 1,533,863 1,533,863 - securities equity 1,217,611 1,217,611 - Government 50,667,755 - Quoted 50,667,755 - Financial assets - available for sale 1,581,678 pledged as collaterals 47,815 1,533,863 - 51,941,479 56,113 51,885,366 - Unquoted equity securities equity Unquoted - - 56,113 - - 47,815

414 SAMPATH BANK PLC Annual Report 2015 52.5 Level 3 Fair Value Measurement 52.5.1 Reconciliation The following table shows a reconciliation from the beginning balances to the ending balances of fair value measurements in Level 3 of the fair value hierarchy.

Bank Group Assets Measured at Level 3 Assets Measured at Level 3 Unquoted Freehold Unquoted Freehold Equity Land and Equity Land and Securities Buildings Securities Buildings Rs 000 Rs 000 Rs 000 Rs 000

Balance as at 1st January 2014 76,556 3,175,522 76,612 6,123,391 Additions 308 134,858 308 148,318 Disposals / deductions - (1,136) - (1,136) ;V[HSNHPUZSVZZLZYLJVNUPZLKPUWYVÄ[VYSVZZ! Impairment charge for the year (Note 11) (29,105) - (29,105) - Depreciation of buildings - (23,083) - (74,069) Balance as at 31st December 2014 47,759 3,286,161 47,815 6,196,504 Additions 10,687 218,972 10,687 241,936 Disposals / deductions - - - - ;V[HSNHPUZSVZZLZYLJVNUPZLKPUWYVÄ[VYSVZZ! Impairment charge for the year (Note 11) (2,389) - (2,389) - Depreciation of buildings - (25,103) - (68,293) Balance as at 31st December 2015 56,057 3,480,030 56,113 6,370,147

Annual Report 2015 SAMPATH BANK PLC 415 Notes to the Financial Statements

LK\UKLY3L]LSVM[OLMHPY]HS\LOPLYHYJO` ]HS\L ISLPUW\[Z\ZLKPUTLHZ\YPUNMHPY]HS\LVM[OLHZZL[ZJH[LNVYPZ Inputs for Unobservable Inputs Sensitivity to Unobservable Inputs Technique Unobservable Range of Estimates Measurement  =HS\H[PVU :PNUPÄJHU[ >LPNO[LK(]LYHNL -HPY=HS\L PZVSH[PVU^V\SKYLZ\S[PUHZPNUPÄJHU[S`OPNOLYSV^LYMHPY U^V\SKYLZ\S[PUHZPNUPÄJHU[S`SV^LYOPNOLYMHPY]HS\L 2015 2015 Bank Group Value Value Fair Value

Rs 000 Rs 000 as at 31st as at 31st Fair December 52. Unobservable Inputs Used In Measuring Fair Value 52.5.2 OF ASSETS & LIABILITIES CONTD. VALUE FAIR ;OL[HISLILSV^ZL[ZV\[PUMVYTH[PVUHIV\[ZPNUPÄJHU[\UVIZLY]H :PNUPÄJHU[PUJYLHZLZKLJYLHZLZPUHU`VM[OLZLPUW\[ZPU :PNUPÄJHU[PUJYLHZLZKLJYLHZLZPU[OPZPUW\[PUPZVSH[PV Discount rate 10.92% ** 10.92% rate Discount * 0% Bank Unquoted equity investment in LankaBangla Securities Ltd 10,940 plant & equipment Property, 10,940 land - Freehold model Dividend growth dividend Estimated future buildings - Freehold 2,460,773 BDT 1.59 - 1.75 3,725,773 1,019,257 Market comparable method 2,644,374 Estimated price per perch Market comparable method Estimated price per sq.ft per share Income basis rate Expected dividend growth 4.41% - 4.64% value per sq.ft Estimated rental Bank / Group * (BDT = Bangladesh Taka) Bank / Group * Bank Group Rs 150,000 - 8,985,450 growth Expected market rental * Group Rs 2,529 - 8,475 Discount rate Bank / Group * Rs 48 - 97 Rs 48 - 113 0% - 5% 5% - 6.2% * * * **

Type of Asset Type

416 SAMPATH BANK PLC Annual Report 2015 52.6 Fair Value of Financial Assets and Liabilities Carried at Amortised Cost ;OLMVSSV^PUNKLZJYPILZ[OLTL[OVKVSVNPLZHUKHZZ\TW[PVUZ\ZLK[VKL[LYTPULMHPY]HS\LZVM[OVZLÄUHUJPHSPUZ[Y\TLU[Z^OPJOHYLUV[ already recorded at fair value in the Financial Statements.

Assets of which Fair Value Approximates Carrying Value -VYÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZ[OH[OH]LHZOVY[[LYTTH[\YP[`P[PZHZZ\TLK[OH[[OLJHYY`PUNHTV\U[ZHWWYV_PTH[L[OLPYMHPY]HS\LZ;OPZ HZZ\TW[PVUPZHSZVHWWSPLK[VKLTHUKKLWVZP[ZHUKZH]PUNZKLWVZP[Z^OPJOKVUV[OH]LHZWLJPÄJTH[\YP[`

Fixed Rate Financial Instruments ;OLMHPY]HS\LVMÄ_LKYH[LÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZJHYYPLKH[HTVY[PZLKJVZ[HYLLZ[PTH[LKI`JVTWHYPUNTHYRL[PU[LYLZ[YH[LZ^OLU [OL`^LYLÄYZ[YLJVNUPZLK^P[OJ\YYLU[THYRL[YH[LZMVYZPTPSHYÄUHUJPHSPUZ[Y\TLU[Z;OLLZ[PTH[LKMHPY]HS\LVMÄ_LKPU[LYLZ[ILHYPUN KLWVZP[ZPZIHZLKVUKPZJV\U[LKJHZOÅV^Z\ZPUNWYL]HPSPUNTHYRL[PU[LYLZ[YH[LZMVYKLI[Z^P[OZPTPSHYJYLKP[YPZRHUKTH[\YP[`-VYX\V[LK KLI[PZZ\LK[OLMHPY]HS\LZHYLKL[LYTPULKIHZLKVUX\V[LKTHYRL[WYPJLZ-VY]HYPHISLYH[LPUZ[Y\TLU[Z^P[OHÄ_LKJYLKP[ZWYLHKHU HKQ\Z[TLU[PZTHKL[VYLÅLJ[[OLJOHUNLPUJYLKP[ZWYLHKZPUJL[OLPUZ[Y\TLU[^HZÄYZ[YLJVNUPZLK

Variable Rate Financial Instruments =HYPHISLYH[LPZHMHPYTLHZ\YL^OPJOYLÅLJ[ZTHYRL[TV]LTLU[Z/LUJL[OLJHYY`PUN]HS\LYLWYLZLU[Z[OLMHPY]HS\LVM[OL]HYPHISLYH[L instruments.

Annual Report 2015 SAMPATH BANK PLC 417 Notes to the Financial Statements V[JHYYPLKH[MHPY]HS\LPU[OL-PUHUJPHS:[H[LTLU[Z;OPZ HS\LZILJH\ZLMVYL_HTWSL[OL`HYLZOVY[[LYTPUUH[\YLVY       ]HS\LZVM[OL)HUR»ZÄUHUJPHSPUZ[Y\TLU[ZI`JSHZZLZ[OH[HYLU UKUVUÄUHUJPHSSPHIPSP[PLZ [OLPYJHYY`PUNHTV\U[ZHYLHYLHZVUHISLHWWYV_PTH[PVUVMMHPY] Bank Group ;OLMVSSV^PUN[HISLSPZ[Z[OVZLÄUHUJPHSPUZ[Y\TLU[ZMVY^OPJO market rates frequently. to current re-priced Assets Liabilities Cash & cash equivalents Balances with Central Bank of Sri Lanka Placements with banks agreements Reverse repurchase 6[OLYÄUHUJPHSHZZL[Z agreements Securities sold under repurchase Due to banks Dividend payable Savings, demand & margin deposits in “Due to other customers” 6[OLYÄUHUJPHSSPHIPSP[PLZ - 268,685,795 - 268,685,795 268,387,390 - 277,814,111 - 277,814,111 277,498,006 Debt issued & other borrowed funds borrowed other & issued - 57,243,238 Debt - 57,243,238 57,016,284 - 65,412,377 - 65,412,377 65,170,977 Financial liabilities Due to other customers - Call,  Ä_LK JLY[PÄJH[LVMKLWVZP[Z      Financial assets held to maturity - - - - - 63,658 - - 63,658 63,121 63,658 63,658 - maturity - to held assets Financial - 410,899,773 - 410,899,773 410,716,009 63,658 421,601,617 - 421,665,275 421,360,344 Other loans & receivables receivables & loans Other - 33,426,857 - 33,426,857 33,368,274 - 33,426,857 - 33,426,857 33,368,274 Loans to & receivables from from Loans to & receivables customers other - 375,822,035 - 375,822,035 375,696,530 - 386,523,879 - 386,523,879 386,277,744 Loans to & receivables from banks from receivables & - 1,650,881 to Financial assets Loans - 1,650,881 1,651,205 - 1,650,881 - 1,650,881 1,651,205 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 52. :L[V\[ILSV^PZHJVTWHYPZVUVM[OLJHYY`PUNHTV\U[ZHUKMHPY OF ASSETS & LIABILITIES CONTD. VALUE FAIR [HISLKVLZUV[PUJS\KL[OLMHPY]HS\LZVMUVUÄUHUJPHSHZZL[ZH As at 31st December 2015 Level 1 Level 2 Level 3 Fair Value Total Value Level 1 Level 2 Carrying Level 3 Total Value Fair Value Carrying

418 SAMPATH BANK PLC Annual Report 2015 HS\LZILJH\ZLMVYL_HTWSL[OL`HYLZOVY[[LYTPUUH[\YLVY             [OLPYJHYY`PUNHTV\U[ZHYLHYLHZVUHISLHWWYV_PTH[PVUVMMHPY] Bank Group ;OLMVSSV^PUN[HISLSPZ[Z[OVZLÄUHUJPHSPUZ[Y\TLU[ZMVY^OPJO market rates frequently. to current re-priced Assets Liabilities Cash & cash equivalents Balances with Central Bank of Sri Lanka Placements with banks agreements Reverse repurchase 6[OLYÄUHUJPHSHZZL[Z agreements Securities sold under repurchase Due to banks Dividend payable Savings, demand & margin deposits in “Due to other customers” 6[OLYÄUHUJPHSSPHIPSP[PLZ - 217,179,345 - 217,179,345 218,302,908 - 224,234,926 - 224,234,926 225,354,323 Debt issued & other borrowed funds borrowed other & issued - 37,145,149 Debt - 37,145,149 36,335,599 - 44,420,365 - 44,420,365 43,610,816 Financial liabilities Due to other customers - Call,  Ä_LK JLY[PÄJH[LVMKLWVZP[Z           980,148 328,554,305 - 329,534,453 327,375,859 984,818 337,791,121 - 338,775,939 335,514,825 Financial assets held to maturity 980,148 to held - assets - 980,148 980,165 984,818 Financial - - 984,818 984,363 Other loans & receivables receivables & loans Other - 24,154,084 - 24,154,084 24,026,116 - 24,154,084 - 24,154,084 24,026,116 Loans to & receivables from from Loans to & receivables customers other - 303,464,668 - 303,464,668 301,434,602 - 312,701,484 - 312,701,484 309,569,370 Loans to & receivables from banks from - 935,553 receivables & - 935,553 934,976 to Financial assets - 935,553 Loans - 935,553 934,976 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 As at 31st December 2014  5HFODVVLðFDWLRQRI)LQDQFLDO$VVHWV /LDELOLWLHV ;OLYL^LYLUVYLJSHZZPÄJH[PVUZK\YPUNHUK Level 1 Level 2 Level 3 Fair Value Total Value Level 1 Level 2 Carrying Level 3 Total Value Fair Value Carrying

Annual Report 2015 SAMPATH BANK PLC 419 Notes to the Financial Statements

53. RISK MANAGEMENT 53.1 Introduction 9PZRPZPUOLYLU[PU[OL)HUR»ZHJ[P]P[PLZI\[PZTHUHNLK[OYV\NOHWYVJLZZVMVUNVPUNPKLU[PÄJH[PVUTLHZ\YLTLU[HUKTVUP[VYPUNZ\IQLJ[[V YPZRSPTP[ZHUKV[OLYJVU[YVSZ;OPZWYVJLZZVMYPZRTHUHNLTLU[PZJYP[PJHS[V[OL)HUR»ZJVU[PU\V\ZWYVÄ[HIPSP[`HUKLHJOPUKP]PK\HS^P[OPU[OL Bank is accountable for the risk exposures relating to his or her responsibilities. The Bank is mainly exposed to;

Credit risk Liquidity risk Market risk Operational risk

The Bank’s exposure to each of the above risks, its risk management objectives, policies and processes associated with measuring and managing such risks with its strategy on capital management is detailed below.

Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has delegated its authority to Board Integrated Risk Management Committee (BIRMC) which is responsible for developing and monitoring Bank’s risk management policies. The Committee comprises of Executive and Non Executive Directors. Meetings of BIRMC are held regularly and the Board of Directors are duly updated of its activities.

The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank to set appropriate risk limits and JVU[YVSZHUK[VTVUP[VYHKOLYLUJL[VLZ[HISPZOLKSPTP[Z9PZRTHUHNLTLU[WVSPJPLZHUKZ`Z[LTZHYLYL]PL^LKYLN\SHYS`[VYLÅLJ[JOHUNLZPU market conditions, products and services offered. The Bank, through its training and management standards and procedures continuously updates and maintains a disciplined and constructive control environment, in which all employees are assigned and made to understand their respective roles and responsibilities.

Integrated Risk Management Unit ;OL)\ZPULZZ\UP[ZPL*YLKP[+LWHY[TLU[Z)YHUJOLZ9LNPVUHS6MÄJLZ;YLHZ\Y`L[JOH]LWYPTHY`YLZWVUZPIPSP[`MVY9PZR4HUHNLTLU[ ;OL0U[LNYH[LK9PZR4HUHNLTLU[

Asset / Liability Management Committee (ALCO) ALCO is chaired by the Managing Director and has representatives from Treasury Department, Credit Departments, Marketing Department, -PUHUJL+LWHY[TLU[[OL.YV\W*OPLM-PUHUJPHS6MÄJLY*OPLM6WLYH[PUN6MÄJLYHUK[OL.YV\W9PZR6MÄJLY;OL*VTTP[[LLTLL[ZYLN\SHYS` to monitor and manage the assets & liabilities of the Bank and also overall liquidity position to keep the Bank’s liquidity at healthy levels, whilst satisfying regulatory requirements.

Risk Measurement and Reporting The Bank’s risks are measured using appropriate techniques based on the type of risk and industry best practices. The Bank also carries out Stress Testing to identify the effect of extreme events/worst case scenarios in most of the major types of risks and the results are reported to Board Integrated Risk Management Committee on a periodic basis.

Monitoring and controlling of different types of risks is primarily performed based on policies, limits and thresholds established by the Bank. ;OLZLSPTP[ZYLÅLJ[[OLI\ZPULZZZ[YH[LN`HUKTHYRL[LU]PYVUTLU[VM[OL)HURHZ^LSSHZ[OLSL]LSVMYPZR[OH[[OL)HURPZ^PSSPUN[VHJJLW[ (Risk Appetite).

Risk Mitigation As part of its overall risk management, the Bank obtains various types of collaterals to mitigate the risk. Details such as nature of the JVSSH[LYHS[OH[JV\SKILHJJLW[LKYLX\PYLKZLJ\YP[`THYNPUL[JHYLJSLHYS`KLÄULKPU[OL*YLKP[7VSPJ`VM[OL)HURHUKHU`KL]PH[PVUZ[OH[ YLX\PYLZWLJPÄJHWWYV]HS/V^L]LYYLZWLJ[P]LHWWYV]PUNH\[OVYP[PLZ^V\SK[HRLPU[VHJJV\U[[OLH]HPSHIPSP[`VMZLJ\YP[`VUS`HZ[OLZLJVUKHY` source of repayment.

420 SAMPATH BANK PLC Annual Report 2015 53.2 Credit Risk *YLKP[YPZRPZ[OLYPZRVMÄUHUJPHSSVZZ[V[OL)HURPMHIVYYV^LYVYJV\U[LYWHY[`[VHÄUHUJPHSPUZ[Y\TLU[MHPSZ[VTLL[P[ZJVU[YHJ[\HS obligations, and arises principally from the Bank’s loans and advances to customers/other banks and investments in debt securities. In addition to the credit risk from direct funding exposures, the Bank would also be exposed to indirect liabilities such as Letters of Credit, guarantees etc, which would carry credit risk.

The Bank considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector concentration risks) to ensure stringent Credit Risk Management.

53.2.1 Impairment Assessment The methodology of the impairment assessment has explained in the Note No 3.3.8 under Accounting Policies.

+LYP]H[P]L-PUHUJPHS0UZ[Y\TLU[Z *YLKP[YPZRHYPZPUNMYVTKLYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZPZH[HU`[PTLSPTP[LK[V[OVZL^P[OWVZP[P]LMHPY]HS\LZHZYLJVYKLKPU[OL:[H[LTLU[ of Financial Position. With gross–settled derivatives, the Bank is also exposed to a settlement risk, being the risk that the Bank honours its obligation, but the counterparty fails to deliver the counter value.

53.2.2 Credit–related Commitments Risks The Bank makes available to its customers guarantees that may require that the Bank makes payments on their behalf and enters into commitments to extend credit lines to secure their liquidity needs. Letters of Credit and guarantees (including standby Letters of Credit) JVTTP[[OL)HUR[VTHRLWH`TLU[ZVUILOHSMVMJ\Z[VTLYZPU[OLL]LU[VMHZWLJPÄJHJ[NLULYHSS`YLSH[LK[V[OLPTWVY[VYL_WVY[VMNVVKZ Such commitments expose the Bank to risks similar to loans and are mitigated by the same control processes and policies.

53.2.3 Collateral and Other Credit Enhancements H5L[L_WVZ\YL[VJYLKP[YPZR The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral. The main types of collateral obtained are as follows:

For commercial lending : charges over real estate properties, inventory and trade receivables For retail lending : mortgages over residential properties

The Bank also obtains guarantees from parent companies for loans to their subsidiaries.

Management monitors the market value of collateral and will request additional collateral in accordance with the underlying agreement. It is the Bank’s policy to dispose repossessed properties in an orderly manner. The proceeds are used to recover the outstanding claim. In general, the Bank does not occupy repossessed properties for business use.

Annual Report 2015 SAMPATH BANK PLC 421 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.2.3 Collateral and Other Credit Enhancements Contd.

The following tables show the maximum exposure and net exposure (Net of fair value of any collaterals held) to credit risk by class of ÄUHUJPHSHZZL[

As at 31st December 2015 2014 Bank Note Maximum Net Maximum Net Exposure to Exposure Exposure to Exposure Credit Risk Credit Risk Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 13,588,075 4,633,922 11,556,620 3,383,870 Placements with banks 21 5,193,369 5,193,369 1,791,698 1,791,698 Reverse repurchase agreements - - 31,285,348 - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Financial assets - held for trading 23 1,889,058 1,889,058 17,024,253 17,024,253 Financial assets - held for trading pledged as collaterals 24 2,702,785 2,702,785 13,205,359 13,205,359 Loans to & receivables from banks 25 1,651,205 1,345,728 934,976 500,645 Loans to & receivables from other customers 26 375,696,530 182,191,627 301,434,602 147,874,168 Other loans & receivables 27 33,368,274 28,272,762 24,026,116 20,079,026 Financial assets - available for sale 28 51,250,411 51,250,411 1,581,622 1,581,622 Financial assets - available for sale pledged as collaterals 29 7,210,585 7,210,585 - - Financial assets - held to maturity 30 - - 980,165 980,165 Other assets 1,964,787 1,964,787 1,157,226 1,157,226 Total 494,834,540 286,974,495 405,155,209 207,755,256

As at 31st December 2015 2014 Group Note Maximum Net Maximum Net Exposure to Exposure Exposure to Exposure Credit Risk Credit Risk Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Cash & cash equivalents 19 13,713,456 4,676,417 11,645,326 3,460,041 Placements with banks 21 5,193,369 5,193,369 1,791,698 1,791,698 Reverse repurchase agreements - - 31,285,348 - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Financial assets - held for trading 23 1,898,074 1,898,074 17,024,253 17,024,253 Financial assets - held for trading pledged as collaterals 24 2,693,769 2,693,769 13,205,359 13,205,359 Loans to & receivables from banks 25 1,651,205 1,345,728 934,976 500,645 Loans to & receivables from other customers 26 386,277,744 183,395,985 309,569,370 148,172,996 Other loans & receivables 27 33,368,274 28,272,762 24,026,116 20,079,026 Financial assets - available for sale 28 51,941,479 51,941,479 1,581,678 1,581,678 Financial assets - available for sale pledged as collaterals 29 6,519,573 6,519,573 - - Financial assets - held to maturity 30 63,121 63,121 984,363 984,363 Other assets 2,099,327 2,099,327 1,372,780 1,372,780 Total 505,738,852 288,419,065 413,598,491 208,350,063

I6MMZL[[PUNÄUHUJPHSHZZL[Z SPHIPSP[PLZ -PUHUJPHSHZZL[ZHUKÄUHUJPHSSPHIPSP[PLZHYLVMMZL[HUK[OLUL[HTV\U[PZWYLZLU[LKPU[OLZ[H[LTLU[VM-PUHUJPHS7VZP[PVU^OLU[OL.YV\W has a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

422 SAMPATH BANK PLC Annual Report 2015 J-PUHUJPHSHZZL[Z SPHIPSP[PLZUV[Z\IQLJ[[VVMMZL[[PUN Amounts that do not qualify for offsetting include netting arrangements that only permit outstanding transactions with the same counterparty to be offset in an event of default or occurrence of other predetermined events. Such netting arrangements include repurchase arrangements and other similar secured lending and borrowing arrangements.

;OLHTV\U[VM[OLÄUHUJPHSJVSSH[LYHSYLJLP]LKVYWSLKNLKZ\IQLJ[[VUL[[PUNHYYHUNLTLU[ZI\[UV[X\HSPÄLKMVYVMMZL[[PUNHYLKPZJSVZLK below.

Bank

As at 31st December 2015 2014 Gross Amount Net Gross Amount Gross Amount Subject to Amount Amount Subject to Amount Netting but Netting but do Not do Not Qualify for Qualify for  6ɈZL[[PUN   6ɈZL[[PUN Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Loans to & receivables from other customers 36,503,175 24,780,279 11,722,896 28,653,915 22,071,315 6,582,600

Financial Liabilities Securities sold under repurchase agreements 9,316,122 9,316,122 - 13,001,462 13,001,462 -

Group

As at 31st December 2015 2014 Gross Amount Net Gross Amount Gross Amount Subject to Amount Amount Subject to Amount Netting but Netting but do Not do Not Qualify for Qualify for  6ɈZL[[PUN   6ɈZL[[PUN Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Financial Assets Loans to & receivables from other customers 36,503,175 24,780,279 11,722,896 28,653,915 22,071,315 6,582,600

Financial Liabilities Securities sold under repurchase agreements 8,662,930 8,662,930 - 12,500,414 12,500,414 -

53.2.4 Credit Quality by Class of Financial Assets ;OL)HURTHUHNLZ[OLJYLKP[X\HSP[`VMÄUHUJPHSHZZL[Z\ZPUNPU[LYUHSJYLKP[YH[PUNZ;OL[HISLZILSV^ZOV^[OLJYLKP[X\HSP[`I`[OLJSHZZVM HZZL[MVYHSSÄUHUJPHSHZZL[ZL_WVZLK[VJYLKP[YPZR;OLHTV\U[ZWYLZLU[LKHYLNYVZZVMPTWHPYTLU[HSSV^HUJLZ

Annual Report 2015 SAMPATH BANK PLC 423 Notes to the Financial Statements  3,820 1 14 - - 15 14 - 1 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 30 Days Days Days 90 Days Less than 31 to 60 61 to 90 than More Total Past Due but Not Impaired UKHIV]LI\[UV[PTWHPYLKSVHUZI`JSHZZVMÄUHUJPHSHZZL[Z 275,701,544 92,575,464 100,354,461 523,205,956 3,224,972 21,236,495 25,150,739 4,962,281 53. RISK MANAGEMENT CONTD. +LÄUP[PVUVM7HZ[+\L beyond their contractual due date as ‘past due’. The Bank considers that any amount uncollected one day or more (a) Bank - as at 31st December 2015 High Neither Past Due nor Impaired Standard Sub Unrated Exposures but Not Past Due Impaired Individually Total Grade Grade Standard Not Subject Impaired Grade to Ratings to Grade Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Cash & cash equivalents 13,547,331 40,744 - - - - - 13,588,075 equivalents 40,744 - 13,547,331 cash & Financial Assets Cash Balances with Central Bank of Sri Lanka 21,341,882 ------21,341,882 Placements with banks 3,974,515 1,218,854 - - - - - 5,193,369 banks agreements 1,218,854 - with 3,974,515 repurchase - Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 1,883,778 - - 5,280 - - - 1,889,058 pledged as collaterals 2,702,785 as 2,702,785 - pledged Financial assets - held for trading banks from Loans to & receivables - 1,651,190 - - - 15 - 1,651,205 Loans to & receivables from other customers from Loans to & receivables 141,467,937 87,961,960 3,224,972 20,677,257 24,088,151 100,354,446 4,919,097 382,69 Other loans & receivables Other loans & receivables 31,267,917 1,597,865 - 502,492 - - 750 33,369,024

Quoted equity securities securities 1,217,611 87,551 42,434 collaterals securities 1,217,611 - equity 49,976,743 45,117 - equity 7,210,585 - as 49,976,743 - Government 7,210,585 - Quoted securities Unquoted Financial assets - available for sale pledged 1,964,787 Government assets Financial assets - available for sale 1,017,471 - - Financial assets - held to maturity Other 27,255 Total 96,256 - (NLHUHS`ZPZVMWHZ[K\LPLMHJPSP[PLZPUHYYLHYZVMKH`H 823,805

Loans to & receivables from banks from Loans to & receivables Loans to & receivables from other customers from Loans to & receivables 76,160,901 15,365,168 4,537,691 4,290,686 100,354,446

424 SAMPATH BANK PLC Annual Report 2015  ,181 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 30 Days Days Days 90 Days Less than 31 to 60 61 to 90 than More Total Past Due but Not Impaired UKHIV]LI\[UV[PTWHPYLKSVHUZI`JSHZZVMÄUHUJPHSHZZL[Z 234,965,885 60,704,481 1,717,964 18,033,425 32,373,747 77,149,240 429,799,894 4,855,152 (b) Bank - as at 31st December 2014 High Neither Past Due nor Impaired Standard Sub Unrated Exposures but Not Past Due Impaired Individually Total Grade Grade Standard Not Subject Impaired Grade to Ratings to Grade Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Cash & cash equivalents 11,546,401 10,219 - - - - - 11,556,620 equivalents 10,219 - 11,546,401 cash & Financial Assets Cash Balances with Central Bank of Sri Lanka 17,607,251 ------17,607,251 Reverse repurchase agreements 31,240,340 - - 45,008 - - - 31,285,348 banks 1,791,698 agreements 45,008 - 1,080,607 - 31,240,340 - with repurchase 711,091 Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z            Financial assets - held for trading 16,926,141 41,626 - 56,486 - - - 17,024,253 Loans to & receivables from banks 934,976 934,976 - from collaterals receivables 13,205,359 as 13,205,359 - & pledged to Financial assets - held for trading Loans other customers from Loans to & receivables 117,178,118 58,323,436 1,717,964 17,842,006 31,415,253 77,149,240 4,816,164 308,442 Other loans & receivables 22,816,014 1,210,102 - - - - 750 24,026,866 receivables 750 1,210,102 - 22,816,014 securities & securities 1,533,863 76,864 38,238 securities collaterals 1,533,863 - equity loans 38,626 - equity - Government as Quoted Other Unquoted securities Financial assets - available for sale - - pledged 980,165 Government assets 1,157,226 980,165 - Financial assets - available for sale Financial assets - held to maturity 919,868 - Other 44,539 Total 37,552 - (NLHUHS`ZPZVMWHZ[K\LPLMHJPSP[PLZPUHYYLHYZVMKH`H 155,267

Loans to & receivables from other customers from Loans to & receivables 51,847,129 15,510,887 4,866,341 4,924,883 77,149,240

Annual Report 2015 SAMPATH BANK PLC 425 Notes to the Financial Statements  4,221 1 14 - - 15 14 - 1 10,706 65,213 50,280 15,213 141,412 10,706 65,213 50,280 15,213 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 30 Days Days Days 90 Days Less than 31 to 60 61 to 90 than More Total Past Due but Not Impaired UKHIV]LI\[UV[PTWHPYLKSVHUZI`JSHZZVMÄUHUJPHSHZZL[Z 272,914,725 92,575,464 105,255,487 534,542,753 3,224,972 29,795,810 25,116,800 5,659,495 53. RISK MANAGEMENT CONTD. (c) - as at 31st December 2015 Group High Neither Past Due nor Impaired Standard Sub Unrated Exposures but Not Past Due Impaired Individually Total Grade Grade Standard Not Subject Impaired Grade to Ratings to Grade Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Cash & cash equivalents 13,672,702 40,744 - 10 - - - 13,713,456 equivalents 10 - 40,744 - 13,672,702 cash & Financial Assets Cash Balances with Central Bank of Sri Lanka 21,341,882 ------21,341,882 Placements with banks 3,974,515 1,218,854 - - - - - 5,193,369 banks agreements 1,218,854 - with 3,974,515 repurchase - Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 1,892,794 - - 5,280 - - - 1,898,074 pledged as collaterals 2,693,769 as 2,693,769 - pledged Financial assets - held for trading banks from Loans to & receivables - 1,651,190 - - - 15 - 1,651,205 Loans to & receivables from other customers from Loans to & receivables 138,492,626 87,961,960 3,224,972 29,193,766 24,160,018 105,114,060 5,506,819 393,65 Other loans & receivables Other loans & receivables 31,267,917 1,597,865 - 502,492 - - 750 33,369,024 Quoted equity securities securities 1,217,611 87,607 42,434 collaterals securities 1,217,611 - equity 50,667,755 45,173 - equity 6,519,573 - as 50,667,755 - Government 6,519,573 - Quoted securities Unquoted Financial assets - available for sale pledged 63,121 Government 63,121 - Financial assets - available for sale assets Financial assets - held to maturity Other 823,805 96,256 2,152,625 - 70,051 911,609 141,412 109,492

Total (NLHUHS`ZPZVMWHZ[K\LPLMHJPSP[PLZPUHYYLHYZVMKH`H

Loans to & receivables from banks from Loans to & receivables Loans to & receivables from other customers from Loans to & receivables 78,717,526 16,619,800 5,116,331 4,660,403 105,114,060 Other assets

426 SAMPATH BANK PLC Annual Report 2015  ,767 13,810 76,490 50,125 31,074 171,499 13,810 76,490 50,125 31,074 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 30 Days Days Days 90 Days Less than 31 to 60 61 to 90 than More Total Past Due but Not Impaired UKHIV]LI\[UV[PTWHPYLKSVHUZI`JSHZZVMÄUHUJPHSHZZL[Z 233,540,222 60,704,481 1,717,964 23,858,090 32,373,803 81,304,130 438,622,967 5,124,277 (d) - as at 31st December 2014 Group High Neither Past Due nor Impaired Standard Sub Unrated Exposures but Not Past Due Impaired Individually Total Grade Grade Standard Not Subject Impaired Grade to Ratings to Grade Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Cash & cash equivalents 11,635,097 10,219 - 10 - - - 11,645,326 equivalents 10 - 10,219 - 11,635,097 cash & Financial Assets Cash Balances with Central Bank of Sri Lanka 17,607,251 ------17,607,251 Reverse repurchase agreements 31,240,340 - - 45,008 - - - 31,285,348 banks 1,791,698 agreements 45,008 - 1,080,607 - 31,240,340 - with repurchase 711,091 Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z            Financial assets - held for trading 16,926,141 41,626 - 56,486 - - - 17,024,253 Loans to & receivables from banks 934,976 934,976 - from collaterals receivables 13,205,359 as 13,205,359 - & pledged to Financial assets - held for trading Loans other customers from Loans to & receivables 115,659,561 58,323,436 1,717,964 23,666,028 31,415,253 81,132,631 4,987,894 316,902 Total (NLHUHS`ZPZVMWHZ[K\LPLMHJPSP[PLZPUHYYLHYZVMKH`H

Other loans & receivables 22,816,014 1,210,102 - - - - 750 24,026,866 receivables 750 1,210,102 - 22,816,014 securities & securities 1,533,863 76,920 38,238 securities collaterals 1,533,863 - equity loans 38,682 - equity - Government as Quoted Other Unquoted securities - Financial assets - available for sale - pledged 984,363 Government 984,363 - Financial assets - available for sale assets Financial assets - held to maturity Other 155,267 37,552 1,426,753 171,499 97,395 919,868 - 45,172

Loans to & receivables from other customers from Loans to & receivables 53,750,445 16,420,601 5,428,159 5,533,426 81,132,631 Other assets

Annual Report 2015 SAMPATH BANK PLC 427 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.2.5 Credit Risk Exposure for Each Internal Credit Risk Rating It is the Bank’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of qualitative as well as quantitative variables for the measurement of counterparty risk. All internal risk ratings are tailored to various categories and are derived in accordance with the Bank’s Rating Policy. The risk ratings of the business borrowers are updated at least annually or earlier if required. The table below shows the Bank’s internal credit rating of the loans to & receivables from banks and loans to & receivables from other customers.

Bank’s Internal Credit Rating Bank Fitch Historical Total Historical Total Rating Rating Default Default Rate Rate As at 31st December 2015 2015 2014 2014 % Rs 000 % Rs 000

High Grade Risk Rating Class 1 A+ AAA to AA+ 0.27 13,995,620 0.35 16,695,671 Risk Rating Class 2 A AA to AA- 0.37 45,917,402 0.40 30,099,352 Risk Rating Class 3 A- A+ to A 0.46 59,070,618 0.40 47,112,538 Risk Rating Class 4 B+ A- to BBB+ 0.63 60,344,556 1.74 49,365,928

Standard Grade Risk Rating Class 5 B BBB to BBB- 0.72 72,681,236 1.09 49,599,355 Risk Rating Class 6 B- BB+ to BB 0.99 39,916,564 1.78 25,996,086 Risk Rating Class 7 C+ BB- to B+ 1.13 24,741,902 2.57 20,290,568

Sub Standard Grade Risk Rating Class 8 C B to B- 1.90 4,054,666 1.49 3,512,971 Risk Rating Class 9 C- CCC to CC 0.90 1,606,637 2.17 2,324,494

Unrated 0.71 31,261,353 1.41 25,279,238

Impaired Risk Rating Class 10 D C to D 3.45 3,883,160 2.31 3,457,368

Exposures Not Subject to Ratings Pawning 13,471,959 24,588,444 Others 13,399,352 11,055,144 Total 384,345,025 309,377,157

53.2.6 Analysis of Risk Concentration Risk concentrations: maximum exposure to credit risk without taking account of any collateral and other credit enhancements .

The Concentration risk is monitored/managed through borrower/group, sector, product etc. Maximum exposure of both funded and non funded facilities to a company and a group as at the reporting date was Rs 6,217 Mn and Rs 10,974 Mn respectively. The following tables show the maximum exposure to credit risk for the components of the Statement of Financial Position, including geography of counterparty and sector.

428 SAMPATH BANK PLC Annual Report 2015

   7HJPÄJ  (MYPJH  Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 \Z[VTLYZ^P[OPU:YP3HURH 516,176,422 504,759,562 3,401,316 2,228,305 3,872,268 1,642,318 272,653 372,538,253 *V\U[Y`9PZR.LVNYHWOPJHS(UHS`ZPZ (a) Bank - as at 31st December 2015 7YV]PUJPHSIYLHRKV^UMVYSVHUZ[V YLJLP]HISLZMYVTV[OLYJ Sri Lanka Europe America South Asia Asia Middle East Total 

Reverse repurchase agreements agreements repurchase Balances with Central Bank of Sri Lanka Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z - 21,341,882 -    -   -   -   - 21,341,882  Cash & cash equivalents cash & banks Financial Assets Cash with Placements 13,588,075 11,945,903 229,852 943,234 148,283 304,499 Financial assets - held for trading 16,304 - 3,110,333 747,297 1,889,058 - 1,335,739 - 5,193,369 - - - - - 1,889,058 Financial assets - held for trading pledged as collaterals 2,702,785 - - - - - 2,702,785 Loans to & receivables from banks from Loans to & receivables 1,651,205 - - - - - 1,651,205 Loans to & receivables from other customers ** from Loans to & receivables Financial assets - available for sale 372,538,253 - 50,021,859 441,518 2,460,432 - - 256,327 - 375,696,530 1,228,552 - - 51,250,411 Other loans & receivables receivables & 33,368,274 loans 33,368,274 - Other Financial assets - available for sale pledged as collaterals 7,210,585 - - - - - 7,210,585 Financial assets - held to maturity to held - - assets assets Financial Other Total 1,806,760 27,255 96,256 33,600 912 1,964,787 4 Province Rs 000 Rs Province Central 19,987,109 Eastern 6,249,030 North Central North Western Northern 5,566,651 Sabaragamuwa 7,492,794 Southern 17,630,812 Uva 6,608,062 Western 284,394,221 Total 9,693,926 14,915,648

Annual Report 2015 SAMPATH BANK PLC 429 Notes to the Financial Statements

 7HJPÄJ  (MYPJH  Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 \Z[VTLYZ^P[OPU:YP3HURH 298,356,229 422,762,460 414,789,826 1,036,098 1,138,559 3,926,356 1,534,885 336,736 53. RISK MANAGEMENT CONTD. (b) Bank - as at 31st December 2014 000 7YV]PUJPHSIYLHRKV^UMVYSVHUZ[V YLJLP]HISLZMYVTV[OLYJ Sri Lanka Rs Province Europe Central 13,410,832 Eastern 4,775,115 America North Central South Asia North Western Northern 4,429,587 Sabaragamuwa 6,262,100 Southern 14,015,577 Asia Middle East Uva 5,029,285 Western 230,639,267 Total Total 7,596,532 12,197,934 

+LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 17,024,253 - - - - - 17,024,253 Reverse repurchase agreements agreements 31,285,348 repurchase 31,285,348 - Reverse Financial Assets Cash & cash equivalents 10,244,172 899,166 39,303 40,076 326,222 7,681 11,556,620 Financial assets - held for trading pledged as collaterals 13,205,359 - - - - - 13,205,359 Balances with Central Bank of Sri Lanka 17,607,251 - - - - - 17,607,251 Loans to & receivables from banks from Loans to & receivables 934,976 - - - - - 934,976 Placements with banks with 1,791,698 1,193,851 - Placements 597,847 - - Loans to & receivables from other customers ** from Loans to & receivables Financial assets - available for sale 298,356,229 94,915 462,022 2,188,601 38,626 12,967 319,868 - 301,434,602 - 1,542,996 - - 1,581,622 Other loans & receivables receivables & 24,026,116 loans 24,026,116 - Other Financial assets - available for sale pledged as collaterals ------Financial assets - held to maturity 980,165 - - - - - 980,165 Other assets Other Total 154,683 920,301 35,369 37,550 1,157,226 136 9,187

430 SAMPATH BANK PLC Annual Report 2015

   7HJPÄJ  (MYPJH  Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 \Z[VTLYZ^P[OPU:YP3HURH (c) - as at 31st December 2015 Group 000 7YV]PUJPHSIYLHRKV^UMVYSVHUZ[V YLJLP]HISLZMYVTV[OLYJ Sri Lanka Rs Province Europe Central 21,662,872 America Eastern 7,228,440 North Central South Asia North Western Northern 5,617,883 Sabaragamuwa 8,179,753 Asia Southern 18,474,948 Middle East Uva 7,015,061 Western 288,293,638 383,119,467 Total Total 10,165,610 16,481,262 

Reverse repurchase agreements agreements repurchase Balances with Central Bank of Sri Lanka Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z - 21,341,882 -    -   -   -   - 21,341,882  Cash & cash equivalents cash & banks Financial Assets Cash with Placements 13,713,456 12,071,284 229,852 943,234 148,283 304,499 Financial assets - held for trading 16,304 - 3,110,333 747,297 1,898,074 - 1,335,739 - 5,193,369 - - - - - 1,898,074 Financial assets - held for trading pledged as collaterals 2,693,769 - - - - - 2,693,769 Loans to & receivables from banks from Loans to & receivables 1,651,205 - - - - - 1,651,205 Loans to & receivables from other customers ** from Loans to & receivables Financial assets - available for sale 383,119,467 - 50,712,927 441,518 2,460,432 - - 256,327 - 386,277,744 1,228,552 - - 51,941,479 Other loans & receivables receivables & 33,368,274 loans 33,368,274 - Other Financial assets - available for sale pledged as collaterals 6,519,573 - - - - - 6,519,573 Financial assets - held to maturity 63,121 - - - - - 63,121 Other assets Other Total 1,941,300 27,255 96,256 33,600 912 2,099,327 4 527,080,734 515,663,874 3,401,316 2,228,305 3,872,268 1,642,318 272,653

Annual Report 2015 SAMPATH BANK PLC 431 Notes to the Financial Statements

 7HJPÄJ  (MYPJH  Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 \Z[VTLYZ^P[OPU:YP3HURH 431,205,742 423,233,108 1,036,098 1,138,559 3,926,356 1,534,885 336,736 306,490,997 53. RISK MANAGEMENT CONTD. (d) - as at 31st December 2014 Group 7YV]PUJPHSIYLHRKV^UMVYSVHUZ[V YLJLP]HISLZMYVTV[OLYJ Sri Lanka Europe America South Asia Asia Middle East Total 

+LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 17,024,253 - - - - - 17,024,253 Reverse repurchase agreements agreements 31,285,348 repurchase 31,285,348 - Reverse Financial Assets Cash & cash equivalents 10,332,878 899,166 39,303 40,076 326,222 7,681 11,645,326 Financial assets - held for trading pledged as collaterals 13,205,359 - - - - - 13,205,359 Balances with Central Bank of Sri Lanka 17,607,251 - - - - - 17,607,251 Loans to & receivables from banks from Loans to & receivables 934,976 - - - - - 934,976 Placements with banks with 1,791,698 1,193,851 - Placements 597,847 - - Loans to & receivables from other customers ** from Loans to & receivables Financial assets - available for sale 306,490,997 94,915 462,022 2,188,601 38,682 12,967 319,868 - 309,569,370 - 1,542,996 - - 1,581,678 Other loans & receivables receivables & 24,026,116 loans 24,026,116 - Other Financial assets - available for sale pledged as collaterals ------Financial assets - held to maturity 984,363 - - - - - 984,363 Other assets Other Total 154,683 1,135,855 35,369 37,550 1,372,780 136 9,187 Province Rs 000 Rs Province Central 14,661,573 Eastern 5,437,742 North Central North Western Northern 4,435,785 Sabaragamuwa 6,592,222 Southern 14,476,620 Uva 5,124,525 Western 234,651,319 Total 7,910,020 13,201,191

432 SAMPATH BANK PLC Annual Report 2015 76,422    13,235,134 15,270,515 49,804,457 375,696,530 13,235,134 15,270,515 49,804,457 516,1 109,063,701 13,235,134 17,291,996 49,804,457 38,042,572 23,615,591 55,618,953 9,227,359 52,080,200 94,526,599 53,669,860 Other assets 1,964,787 Other 1,963,703 - Total 1,084 - - - Financial assets - held to maturity - - - to 1,273,668 securities 45,116 - collaterals 7,210,585 held 1,228,552 - 49,976,743 securities equity 7,210,585 - - - 49,976,743 - as - - - Government - Other - pledged Financial assets - available for sale assets Financial assets - available for sale Financial Other loans & receivables Other loans & receivables 78,146 509,893 - - 816,128 1,694,617 7,613,845 22,642,983 - 12,662 - 33,368,274 Loans to & receivables from banks ------1,651,205 - - - - 1,651,205 1,651,205 - banks - - from collaterals 2,702,785 receivables 2,702,785 - as & - - pledged to Financial assets - held for trading Loans other customers from Loans to & receivables 37,964,426 55,109,060 23,615,591 9,227,359 51,264,072 92,803,866 26,911,127 490,923 Government securities ------1,767,317 - - - 1,767,317 securities equities 121,741 1,767,317 - Government116,461 - - Quoted - 5,280 Financial assets - held for trading - - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z             Balances with Central Bank of Sri Lanka ------21,341,882 - - - 21,341,882 21,341,882 - Lanka - - Sri of 13,588,075 2,930,483 - equivalents Bank 10,657,592 cash - Central - banks 5,193,369 agreements & 5,193,369 - with - - - with repurchase - - Financial Assets Cash Balances Placements Reverse and Services Business and Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 and Related Financial Services Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Total Consumers Other Infrastructure Government Banks, Traders Construction Transport Tourism Manufacturing 0UK\Z[Y`(UHS`ZPZ The following tables show the risk concentration by industry for components of Statement Financial Position (a) Bank - as at 31st December 2015 Agriculture

Annual Report 2015 SAMPATH BANK PLC 433 Notes to the Financial Statements 2,460   13,702,188 9,738,393 48,453,831 301,434,602 13,702,188 9,738,393 48,453,831 422,76 35,569,386 44,374,463 18,336,405 5,456,299 33,056,175 74,520,613 41,211,412 97,276,351 13,702,188 10,805,337 48,453,831 Government securities ------16,331,920 - - - 16,331,920 securities 16,331,920 - Government - Financial assets - held for trading pledged as collaterals ------13,205,359 - - - 13,205,359 collaterals 692,333 13,205,359 - equities 369,075 - as - 266,772 Quoted 56,486 - pledged - Financial assets - held for trading Loans to & receivables from banks ------934,976 - - - - 934,976 banks 934,976 - - from receivables & to Loans other customers from Loans to & receivables 35,491,240 43,815,396 18,336,405 5,456,299 33,056,175 73,205,957 19,912,352 266,366 Balances with Central Bank of Sri Lanka ------17,607,251 - - - 17,607,251 17,607,251 - Lanka - Sri of 11,556,620 equivalents Bank 11,556,620 - cash - Central & with Financial Assets Cash Balances Other loans & receivables 78,146 502,581 - - - 1,020,039 4,767,738 17,644,950 - 12,662 - 24,026,116 12,662 - 17,644,950 - 980,165 4,767,738 maturity 980,165 - 1,020,039 - receivables to 502,581 - 1,581,622 securities 78,146 38,626 - & collaterals held 1,542,996 - securities equity - loans as - - - Government - - Other Other pledged Financial assets - available for sale assets Financial assets - available for sale Financial Reverse repurchase agreements ------45,008 31,240,340 - - - 31,285,348 31,240,340 - banks 1,791,698 agreements 45,008 1,791,698 - - with repurchase - Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z              Other assets 1,157,226 1,015,656 - Other Total 141,570 - - and Related Financial Services Financial Related and and Services Business and Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Total Consumers Other Infrastructure Government Banks, Traders Construction Transport Tourism Manufacturing 53. RISK MANAGEMENT CONTD. (b) Bank - as at 31st December 2014 Agriculture

434 SAMPATH BANK PLC Annual Report 2015 80,734    13,235,134 24,795,665 49,804,457 386,277,744 13,235,134 24,795,665 49,804,457 527,0 109,126,878 13,235,134 26,656,817 50,030,984 38,732,243 56,178,259 23,734,749 9,463,003 52,411,980 96,479,793 51,030,894 Government securities ------1,776,333 - - - 1,776,333 securities 1,776,333 - Government - Financial assets - held for trading pledged as collaterals 2,693,769 equities 2,693,769 - 121,741 as - 116,461 - Quoted 5,280 pledged - Financial assets - held for trading Loans to & receivables from banks ------1,651,205 - - - - 1,651,205 1,651,205 - banks - from receivables & to Loans other customers from Loans to & receivables 38,654,097 55,668,366 23,734,749 9,463,003 51,595,852 94,757,060 24,078,438 490,923 Government securities ------50,667,811 - - - 50,667,811 securities 50,667,811 - Government - Financial assets - available for sale Balances with Central Bank of Sri Lanka ------21,341,882 - - - 21,341,882 21,341,882 - Lanka - Sri of 13,713,456 2,930,483 - equivalents Bank 10,782,973 cash - Central & with Financial Assets Cash Balances Other loans & receivables 78,146 509,893 - - 816,128 1,694,617 7,613,845 22,642,983 - 12,662 - 33,368,274 12,662 - 22,642,983 - 7,613,845 1,694,617 816,128 receivables 509,893 - 1,273,668 securities 78,146 45,116 - & collaterals 6,519,573 1,228,552 - equity 6,519,573 - - loans as - Other Other pledged Financial assets - available for sale Placements with banks 5,193,369 agreements 5,193,369 - - - with repurchase - Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z             Financial assets - held to maturity ------63,121 - - - 63,121 maturity 63,121 - - to held - assets Financial Total Other assets ------69,426 - - 1,803,374 226,527 2,099,327 assets 226,527 1,803,374 Other 69,426 - - and Related Financial Services Financial Related and and Services Business and Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Total Consumers Other Infrastructure Government Banks, Traders Construction Transport Tourism Manufacturing (c) - as at 31st December 2015 Group Agriculture

Annual Report 2015 SAMPATH BANK PLC 435 Notes to the Financial Statements 5,742   13,702,186 15,572,137 48,453,831 309,569,370 13,702,186 15,572,137 48,453,831 431,20 36,192,420 45,012,269 18,336,405 5,673,305 33,370,285 76,387,619 40,004,018 97,280,549 13,702,186 16,556,137 48,690,549 Government securities ------16,331,920 - - - 16,331,920 securities 16,331,920 - Financial assets - held for trading Government - pledged as collaterals ------13,205,359 - - - 13,205,359 collaterals 13,205,359 - as - 692,333 equities 369,075 - pledged 266,772 Quoted Financial assets - held for trading 56,486 - - Loans to & receivables from banks ------934,976 - - - - 934,976 banks 934,976 - - from receivables & to Loans other customers from Loans to & receivables 36,114,274 44,453,202 18,336,405 5,673,305 33,370,285 75,072,963 18,554,416 266,366 Balances with Central Bank of Sri Lanka ------17,607,251 - - - 17,607,251 17,607,251 - Lanka - Sri of 11,645,326 equivalents Bank 11,645,326 - cash - Central & with Financial Assets Cash Balances Other loans & receivables 78,146 502,581 - - - 1,020,039 4,767,738 17,644,950 - 12,662 - 24,026,116 12,662 - 17,644,950 - 984,363 4,767,738 maturity 984,363 - 1,020,039 - receivables to 502,581 - 78,146 & collaterals held 1,581,678 securities 38,625 - loans as - - 1,543,053 - - securities equity - Other pledged Financial assets - available for sale assets Government Other - - Financial assets - available for sale Financial Total Reverse repurchase agreements ------45,008 31,240,340 - - - 31,285,348 31,240,340 - banks 1,791,698 agreements 45,008 1,791,698 - - with repurchase - Placements Reverse +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z              Other assets ------203,349 - - 932,713 236,718 1,372,780 assets 236,718 932,713 Other 203,349 - - and Related Financial Services Financial Related and and Services Business and Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Total Consumers Other Infrastructure Government Banks, Traders Construction Transport Tourism Manufacturing 53. RISK MANAGEMENT CONTD. (d) - as at 31st December 2014 Group Agriculture

436 SAMPATH BANK PLC Annual Report 2015 53.2.7 Commitments and Contingencies ;VTLL[[OLÄUHUJPHSULLKZVMJ\Z[VTLYZ[OL)HURLU[LYZPU[V]HYPV\ZJVTTP[TLU[ZHUKJVU[PUNLU[SPHIPSP[PLZ,]LU[OV\NO[OLZL obligations may not be recognised in the Statement of Financial Position, they do contain credit risk and are, therefore, part of the overall risk of the Bank.

;OLTH_PT\TL_WVZ\YL[VJYLKP[YPZRYLSH[PUN[VHÄUHUJPHSN\HYHU[LLPZ[OLTH_PT\THTV\U[[OL)HURZOV\SKOH]L[VWH`PM[OLN\HYHU[LL is called upon. The maximum exposure to credit risk relating to a loan commitment is the full amount of the commitment. In both cases, the TH_PT\TYPZRL_WVZ\YLPZZPNUPÄJHU[S`NYLH[LY[OHU[OLHTV\U[YLJVNUPZLKHZHSPHIPSP[`PU[OL:[H[LTLU[VM-PUHUJPHS7VZP[PVU;OL)HUR»Z maximum credit risk exposure for commitments and contingencies are disclosed in the Note no 47.1.

53.3 Liquidity Risk and Funding Management 3PX\PKP[`YPZRPZ[OLYPZR[OH[[OL)HUR^PSSLUJV\U[LYKPMÄJ\S[PLZPUTLL[PUNP[ZÄUHUJPHSJVTTP[TLU[Z[OH[HYLZL[[SLKI`KLSP]LYPUNJHZOVY HUV[OLYÄUHUJPHSHZZL[/LUJL[OL)HURTH`IL\UHISL[VTLL[P[ZWH`TLU[VISPNH[PVUZ^OLU[OL`MHSSK\L\UKLYIV[OUVYTHSHUKZ[YLZZ JPYJ\TZ[HUJLZ;VSPTP[[OPZYPZRTHUHNLTLU[OHZHYYHUNLKKP]LYZPÄLKM\UKPUNZV\YJLZPUHKKP[PVU[VP[ZJVYLKLWVZP[IHZLHUKHKVW[LKH WVSPJ`VMJVU[PU\V\ZS`THUHNPUNHZZL[Z^P[OSPX\PKP[`PUTPUKHUKVMTVUP[VYPUNM\[\YLJHZOÅV^ZHUKSPX\PKP[`VUHKHPS`IHZPZ;OL)HUROHZ developed internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cash ÅV^ZHUK[OLH]HPSHIPSP[`VMOPNONYHKLJVSSH[LYHS^OPJOJV\SKIL\ZLK[VZLJ\YLHKKP[PVUHSM\UKPUNPMYLX\PYLK

The Bank maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseen PU[LYY\W[PVUVML_WLJ[LKJHZOÅV^;OL)HURHSZVOHZJVTTP[[LKSPULZVMJYLKP[[OH[JV\SKIL\[PSPaLK[VTLL[SPX\PKP[`ULLKZ-\Y[OLY[OL Bank maintained a statutory deposit with the Central Bank of Sri Lanka equal to 6% of customer deposits. In accordance with the Bank’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to IV[O[OLTHYRL[PUNLULYHSHUKZWLJPÄJ[V[OL)HUR;OLTVZ[PTWVY[HU[VM[OPZPZ[VTHPU[HPU[OLYLX\PYLKYH[PVVMSPX\PKHZZL[Z[VSPHIPSP[PLZ to meet the regulatory requirement (20%). Liquid assets consist of cash, short–term bank deposits and liquid debt securities available for immediate sale. Further the Statutory Liquid Assets Ratio of the Bank for the month of December 2015 is as follows.

53.3.1 Statutory Liquid Assets Ratio (SLAR) For the month of December 2015 : 22.05% ( 2014 : 24.54% )

53.3.2 Loans to & receivables from banks and other customers (Advances) to Due to banks and other customers (Deposits) Ratio The Bank is aware of the importance of due to banks & other customers as a source of funds for its lending operations. This is monitored using the following ratio, which compares loans to & receivables from banks and other customers (Advances) as a percentage of due to banks & due to other customers (Deposits).

Loans to & receivables from banks and other customers (Advances) to Due to banks and other customers (Deposits) Ratio As at 31st December 2015 : 93.89% ( 2014 : 90.48% )

Annual Report 2015 SAMPATH BANK PLC 437 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities ;OL[HISLZILSV^Z\TTHYPZL[OLTH[\YP[`WYVÄSLVM[OL\UKPZJV\U[LKJHZOÅV^ZVM[OL)HUR»ZÄUHUJPHSHZZL[ZHUKÄUHUJPHSSPHIPSP[PLZHZH[ Z[+LJLTILY9LWH`TLU[Z^OPJOHYLZ\IQLJ[[VUV[PJLHYL[YLH[LKHZPMUV[PJL^LYL[VILNP]LUPTTLKPH[LS`/V^L]LY[OL)HUR L_WLJ[Z[OH[THU`J\Z[VTLYZ^PSSUV[YLX\LZ[YLWH`TLU[VU[OLLHYSPLZ[KH[LP[JV\SKILYLX\PYLK[VWH`HUK[OL[HISLZKVUV[YLÅLJ[[OL L_WLJ[LKJHZOÅV^ZPUKPJH[LKI`P[ZKLWVZP[YL[LU[PVUOPZ[VY`

Contractual Maturities of Undiscounted Cash Flows of Financial Assets and Financial Liabilities

(a) Bank - as at 31st December 2015

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

Financial Assets Cash & cash equivalents 13,588,075 - - - - 13,588,075 Balances with Central Bank of Sri Lanka 14,885,289 5,127,411 556,303 445,854 327,025 21,341,882 Placements with banks 3,974,566 1,228,966 - - - 5,203,532 Reverse repurchase agreements ------+LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 1,889,058 - - - - 1,889,058 Financial assets - held for trading pledged as collaterals 2,702,785 - - - - 2,702,785 Loans to & receivables from banks 262,742 414,058 812,204 447,918 - 1,936,922 Loans to & receivables from other customers 149,519,859 72,870,391 94,557,772 48,371,124 38,088,688 403,407,834 Other loans & receivables 5,002,111 4,067,153 22,371,438 5,567,624 20,685 37,029,011 Financial assets - available for sale 51,250,411 - - - - 51,250,411 Financial assets - available for sale pledged as collaterals 7,210,585 - - - - 7,210,585 Financial assets - held to maturity ------Other assets 741,515 679,128 44,562 43,487 509,914 2,018,606 Total Financial Assets 251,204,965 84,528,599 118,342,279 54,876,007 38,946,312 547,898,162

Financial Liabilities Due to banks 2,918,371 520,942 - - - 3,439,313 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z         Securities sold under repurchase agreements 8,834,839 531,967 - - - 9,366,806 Due to other customers 283,689,067 100,047,099 11,149,194 8,437,783 5,683,617 409,006,760 Debt issued & other borrowed funds 19,047,924 7,707,129 19,170,343 17,951,498 4,702,562 68,579,456 Dividend payable 90,969 - - - - 90,969 Other liabilities 2,331,761 2,051,568 211,095 - 199,786 4,794,210 Total Financial Liabilities 317,092,913 111,135,781 30,530,632 26,389,281 10,585,965 495,734,572

Total Net Financial Assets / (Liabilities) (65,887,948) (26,607,182) 87,811,647 28,486,726 28,360,347 52,163,590

438 SAMPATH BANK PLC Annual Report 2015 (b) Bank - as at 31st December 2014

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

Financial Assets Cash & cash equivalents 11,561,165 - - - - 11,561,165 Balances with Central Bank of Sri Lanka 13,082,910 4,190,992 195,905 136,280 1,164 17,607,251 Placements with banks 711,124 1,091,211 - - - 1,802,335 Reverse repurchase agreements 31,439,466 - - - - 31,439,466 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Financial assets - held for trading 17,024,253 - - - - 17,024,253 Financial assets - held for trading pledged as collaterals 13,205,359 - - - - 13,205,359 Loans to & receivables from banks 64,785 311,400 498,050 216,426 - 1,090,661 Loans to & receivables from other customers 156,545,212 67,768,758 62,512,861 33,030,996 24,318,048 344,175,875 Other loans & receivables 2,257,947 4,912,877 15,992,750 3,950,133 51,239 27,164,946 Financial assets - available for sale 1,581,622 - - - - 1,581,622 Financial assets - available for sale pledged as collaterals ------Financial assets - held to maturity - 1,000,000 - - - 1,000,000 Other assets 611,158 328,801 38,660 41,815 198,154 1,218,588 Total Financial Assets 248,166,609 79,699,655 79,238,226 37,375,650 24,568,605 469,048,745

Financial Liabilities Due to banks 2,486,747 - - - - 2,486,747 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z          Securities sold under repurchase agreements 11,874,374 1,178,269 - - - 13,052,643 Due to other customers 252,459,316 85,048,491 4,082,469 3,413,749 36,786 345,040,811 Debt issued & other borrowed funds 7,395,879 4,010,045 13,641,124 15,800,890 5,559,765 46,407,703 Dividend payable 79,284 - - - - 79,284 Other liabilities 1,402,391 2,203,932 26,757 - 163,569 3,796,649 Total Financial Liabilities 275,730,671 92,460,236 17,750,350 19,214,639 5,760,120 410,916,016

Total Net Financial Assets / (Liabilities) (27,564,062) (12,760,581) 61,487,876 18,161,011 18,808,485 58,132,729

Annual Report 2015 SAMPATH BANK PLC 439 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. (c) Group - as at 31st December 2015

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

Financial Assets Cash & cash equivalents 13,713,456 - - - - 13,713,456 Balances with Central Bank of Sri Lanka 14,885,289 5,127,411 556,303 445,854 327,025 21,341,882 Placements with banks 3,974,566 1,228,966 - - - 5,203,532 Reverse repurchase agreements ------+LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 1,898,074 - - - - 1,898,074 Financial assets - held for trading pledged as collaterals 2,693,769 - - - - 2,693,769 Loans to & receivables from banks 262,742 414,058 812,204 447,918 - 1,936,922 Loans to & receivables from other customers 152,703,049 75,791,847 99,817,251 50,310,584 38,183,627 416,806,358 Other loans & receivables 5,002,111 4,067,153 22,371,438 5,567,624 20,685 37,029,011 Financial assets - available for sale 51,941,479 - - - - 51,941,479 Financial assets - available for sale pledged as collaterals 6,519,573 - - - - 6,519,573 Financial assets - held to maturity 2,400 56,447 - - 4,274 63,121 Other assets 835,770 627,522 67,274 73,739 699,475 2,303,780 Total Financial Assets 254,610,247 87,454,896 123,624,470 56,845,719 39,235,086 561,770,418

Financial Liabilities Due to banks 2,918,371 520,942 - - - 3,439,313 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z         Securities sold under repurchase agreements 8,226,745 478,897 - - - 8,705,642 Due to other customers 283,474,695 101,095,042 11,219,297 8,442,873 5,683,617 409,915,524 Debt issued & other borrowed funds 20,991,599 9,495,273 22,653,909 20,119,532 4,702,562 77,962,875 Dividend payable 90,969 - - - - 90,969 Other liabilities 2,898,177 2,051,568 211,097 - 247,436 5,408,278 Total Financial Liabilities 318,780,538 113,918,798 34,084,303 28,562,405 10,633,615 505,979,659

Total Net Financial Assets / (Liabilities) (64,170,291) (26,463,902) 89,540,167 28,283,314 28,601,471 55,790,759

440 SAMPATH BANK PLC Annual Report 2015 (d) Group - as at 31st December 2014

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

Financial Assets Cash & cash equivalents 11,649,873 - - - - 11,649,873 Balances with Central Bank of Sri Lanka 13,082,910 4,190,992 195,905 136,280 1,164 17,607,251 Placements with banks 711,124 1,091,211 - - - 1,802,335 Reverse repurchase agreements 31,439,466 - - - - 31,439,466 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Financial assets - held for trading 17,024,253 - - - - 17,024,253 Financial assets - held for trading pledged as collaterals 13,205,359 - - - - 13,205,359 Loans to & receivables from banks 64,785 311,400 498,050 216,426 - 1,090,661 Loans to & receivables from other customers 157,996,520 69,712,100 66,006,397 34,248,090 24,347,538 352,310,645 Other loans & receivables 2,257,947 4,912,877 15,992,750 3,950,133 51,239 27,164,946 Financial assets - available for sale 1,581,678 - - - - 1,581,678 Financial assets - available for sale pledged as collaterals ------Financial assets - held to maturity - 1,000,000 - - 4,198 1,004,198 Other assets 586,529 593,931 70,524 47,697 135,462 1,434,143 Total Financial Assets 249,682,052 81,908,127 82,763,626 38,598,626 24,539,601 477,492,032

Financial Liabilities Due to banks 2,508,869 - - - - 2,508,869 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z          Securities sold under repurchase agreements 11,382,289 1,169,310 - - - 12,551,599 Due to other customers 252,168,898 85,048,491 4,082,469 3,413,749 36,786 344,750,393 Debt issued & other borrowed funds 8,823,228 5,537,577 16,114,197 17,648,153 5,559,765 53,682,920 Dividend payable 79,284 - - - - 79,284 Other liabilities 1,418,064 2,203,932 26,757 - 171,872 3,820,625 Total Financial Liabilities 276,413,312 93,978,809 20,223,423 21,061,902 5,768,423 417,445,869

Total Net Financial Assets / (Liabilities) (26,731,260) (12,070,682) 62,540,203 17,536,724 18,771,178 60,046,163

Annual Report 2015 SAMPATH BANK PLC 441 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.3.4 Remaining Contractual Maturities of Commitments and Contingencies The tables below show the contractual expiry by remaining maturity of the Bank’s contingent liabilities and commitments. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down. For issued guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

(a) Bank - as at 31st December 2015

On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Contingent Liabilities Guarantees 3,806,464 12,568,497 12,529,043 4,941,850 5,830,806 39,676,660 Acceptance 25,608 11,249,117 4,566,008 17,304 - 15,858,037 Bills sent for collection 151,301 26,139 - - - 177,440 Forward contracts 365,467 16,397,635 27,483,600 - - 44,246,702 Documentary credit 1,129,271 13,410,939 1,875,857 633,305 - 17,049,372 Others 17,435 - - - - 17,435 Total Contingencies 5,495,546 53,652,327 46,454,508 5,592,459 5,830,806 117,025,646

Commitments Undrawn overdrafts 34,782,721 - - - - 34,782,721 Undrawn loans 13,865,183 - - - - 13,865,183 Undisbursed cash loans ------Undrawn credit card limits 14,762,087 - - - - 14,762,087 Undrawn indirect credit facilities 34,379,494 - - - - 34,379,494 Capital commitments 177,752 - - - - 177,752 Total Commitments 97,967,237 - - - - 97,967,237 Total Commitments & Contingencies 103,462,783 53,652,327 46,454,508 5,592,459 5,830,806 214,992,883

(b) Bank - as at 31st December 2014

On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Contingent Liabilities Guarantees 2,402,223 13,681,503 13,671,534 4,740,183 2,440,346 36,935,789 Acceptance 29,011 7,665,776 4,482,861 15,744 - 12,193,392 Bills sent for collection 104,104 - - - - 104,104 Forward contracts 7,457 13,394,053 17,624,655 - - 31,026,165 Documentary credit 652,869 13,045,129 2,863,498 - - 16,561,496 Others 13,902 - - - - 13,902 Total Contingencies 3,209,566 47,786,461 38,642,548 4,755,927 2,440,346 96,834,848

Commitments Undrawn overdrafts 30,328,520 - - - - 30,328,520 Undrawn loans 7,482,801 - - - - 7,482,801 Undisbursed cash loans 750 - - - - 750 Undrawn credit card limits 11,571,255 - - - - 11,571,255 Undrawn indirect credit facilities 23,609,202 - - - - 23,609,202 Capital commitments 338,282 - - - - 338,282 Total Commitments 73,330,810 - - - - 73,330,810 Total Commitments & Contingencies 76,540,376 47,786,461 38,642,548 4,755,927 2,440,346 170,165,658

442 SAMPATH BANK PLC Annual Report 2015 (c) Group - as at 31st December 2015

On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Contingent Liabilities Guarantees 3,806,464 12,568,497 12,529,043 4,941,850 5,830,806 39,676,660 Acceptance 25,608 11,249,117 4,566,008 17,304 - 15,858,037 Bills sent for collection 151,301 26,139 - - - 177,440 Forward contracts 365,467 16,397,635 27,483,600 - - 44,246,702 Documentary credit 1,129,271 13,410,939 1,875,857 633,305 - 17,049,372 Others 17,435 - - - - 17,435 Total Contingencies 5,495,546 53,652,327 46,454,508 5,592,459 5,830,806 117,025,646

Commitments Undrawn overdrafts 34,682,721 - - - - 34,682,721 Undrawn loans 13,865,183 - - - - 13,865,183 Undisbursed cash loans ------Undrawn credit card limits 14,762,087 - - - - 14,762,087 Undrawn commitments factoring 315,071 - - - - 315,071 Undrawn indirect credit facilities 34,379,494 - - - - 34,379,494 Capital commitments 184,775 - - - - 184,775 Total Commitments 98,189,331 - - - - 98,189,331 Total Commitments & Contingencies 103,684,877 53,652,327 46,454,508 5,592,459 5,830,806 215,214,977

(d) Group - as at 31st December 2014

On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Contingent Liabilities Guarantees 2,402,223 13,681,503 13,671,534 4,740,183 2,440,346 36,935,789 Acceptance 29,011 7,665,776 4,482,861 15,744 - 12,193,392 Bills sent for collection 104,104 - - - - 104,104 Forward contracts 7,457 13,394,053 17,624,655 - - 31,026,165 Documentary credit 652,869 13,045,129 2,863,498 - - 16,561,496 Others 13,902 - - - - 13,902 Total Contingencies 3,209,566 47,786,461 38,642,548 4,755,927 2,440,346 96,834,848

Commitments Undrawn overdrafts 30,328,520 - - - - 30,328,520 Undrawn loans 7,482,801 - - - - 7,482,801 Undisbursed cash loans 750 - - - - 750 Undrawn credit card limits 11,571,255 - - - - 11,571,255 Undrawn commitments factoring 228,058 - - - - 228,058 Undrawn indirect credit facilities 23,609,202 - - - - 23,609,202 Capital commitments 351,542 - - - - 351,542 Total Commitments 73,572,128 - - - - 73,572,128 Total Commitments & Contingencies 76,781,694 47,786,461 38,642,548 4,755,927 2,440,346 170,406,976

Annual Report 2015 SAMPATH BANK PLC 443 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.4 Market Risk 4HYRL[YPZRPZ[OLYPZR[OH[[OLMHPY]HS\LVYM\[\YLJHZOÅV^ZVMÄUHUJPHSPUZ[Y\TLU[Z^PSSÅ\J[\H[LK\L[VJOHUNLZPUTHYRL[]HYPHISLZZ\JOHZ PU[LYLZ[YH[LZMVYLPNUL_JOHUNLYH[LZJVTTVKP[`WYPJLZHUKLX\P[`WYPJLZ;OL)HURJSHZZPÄLZL_WVZ\YLZ[VTHYRL[YPZRPU[VLP[OLY[YHKPUN or non–trading portfolios and manages each of those portfolios separately.

53.4.1 Interest Rate Risk 0U[LYLZ[YH[LYPZRHYPZLZMYVT[OLWVZZPIPSP[`[OH[JOHUNLZPUPU[LYLZ[YH[LZ^PSSHMMLJ[M\[\YLJHZOÅV^ZVY[OLMHPY]HS\LZVMÄUHUJPHSPUZ[Y\TLU[Z The Bank’s policy is to continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintained within prudential levels.

;OLMVSSV^PUN[HISLKLTVUZ[YH[LZ[OLZLUZP[P]P[`VM[OL)HUR»Z:[H[LTLU[VM7YVÄ[VY3VZZMVY[OL`LHYLUKLKZ[+LJLTILYHUKZ[ December 2014 to a reasonable possible change in interest rates, with all other variables held constant.

Rate Sensitive Assets (RSA) & Rate Sensitive Liabilities (RSL) as at 31st December 2015 2014 Rs 000 Rs 000

Rate Sensitive Assets (RSA)* 388,781,320 293,284,711 Rate Sensitive Liabilities (RSL)* 408,244,998 330,828,558 GAP (RSA - RSL) (19,463,678) (37,543,847)

0TWHJ[VU:[H[LTLU[VM7YVÄ[VY3VZZK\L[V0U[LYLZ[9H[L:OVJRZHZH[Z[+LJLTILY 2015 2014 Rs 000 Rs 000

Interest Rate Shock 0.50% 46,103 (90,704) 1.00% 92,206 (181,408) (0.50%) (46,103) 90,704 (1.00%) (92,206) 181,408

*The above computation is based on the rate sensitive assets and liabilities which are matured or repriced within one year.

Interest Rate Sensitivity Analysis ;OL[HISLZILSV^HUHS`ZL[OL)HUR»ZPU[LYLZ[YH[LYPZRL_WVZ\YLVUÄUHUJPHSHZZL[ZHUKSPHIPSP[PLZ;OL)HUR»ZHZZL[ZHUKSPHIPSP[PLZHYL included at carrying amount and categorised by the earlier of contractual re–pricing or maturity dates.

444 SAMPATH BANK PLC Annual Report 2015 32,265,517 (51,729,195) 32,858,296 7,345,336 19,585,088 (5,854,468) 34,470,574 114,394,925 13,116,642 16,184,719 481,705,848 293,850,073 2,377,996 41,781,493 516,176,422 326,115,590 62,665,730 45,974,938 23,530,055 21,963,084 35,927,025 Total Financial Liabilities Total Interest Rate Sensitivity Gap Interest Other liabilities Other 5,083,897 5,083,897 - Due to banks 3,418,499 to 1,889,323 Financial Liabilities Due payable 506,559 - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z agreements Securities sold under repurchase Due to other customers 1,022,617 funds Debt issued & other borrowed Dividend 8,799,570 90,969 516,552 90,969 20,553,003 - 10,862,885  263,474,883 - 8,321,786 102,508,929 14,921,128 4,794,856 2,357,482  1,263,591 - 20,514 - 34,260,246  - 406,323,019 57,016,284  - 9,316,122     Total Financial Assets Total Financial assets - held to maturity to agreements - held repurchase - Reverse - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZFinancial assets - held for trading Financial assets - held for trading pledged as collaterals banks from Loans to & receivables assets other customers from Loans to & receivables assets Other loans & receivables Financial assets - available for sale 2,702,785 Financial assets - available for sale pledged as collaterals Financial Other 250,229,790 7,210,585 - 1,767,317 42,078,447 41,358,223 1,643,868 1,964,787  19,837,287 - - 49,976,743 21,944,889 - 1,321 1,964,787 5,679,504 247,894  - 19,367,108 375,696,530 2,925 - - - - 4,613,790 3,091 3,689,677  - - - - 18,195 -  - - - - - 2,702,785 33,368,274 - 121,741  - 1,651,205 - 1,889,058   7,210,585 1,273,668   51,250,411 Placements with banks 5,193,369 with 1,218,854 - Balances with Central Bank of Sri Lanka Placements 3,974,515 - - - - - 21,341,882 21,341,882 Cash & cash equivalents 13,588,075 cash 10,657,592 (a) Bank - as at 31st December 2015 2,930,483 - & Financial Assets Cash Up to 3 Months Rs 000 3 - 12 Months Rs 000 Years 1 - 3 Rs 000 Years 3 - 5 Rs 000 Years Over 5 Rs 000 Non Interest Bearing Rs 000 Total Rs 000

Annual Report 2015 SAMPATH BANK PLC 445 Notes to the Financial Statements 36,504,292 14,116,378 15,978,621 26,983,445 (16,714,319) (2,071,999) (20,829,528) 245,732,705 85,095,853 13,660,537 15,626,173 395,779,015 2,687,637 32,976,110 422,762,460 224,903,177 68,381,534 50,164,829 29,742,551 18,666,258 30,904,111 Total Financial Liabilities Total Rate Sensitivity Gap Interest Other liabilities Other 3,854,603 3,854,603 - Dividend payable +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z agreements Securities sold under repurchase Due to other customers funds Debt issued & other borrowed Dividend 11,854,431 79,284 1,147,031 79,284 8,492,214 - -  2,598,341 225,385,581 81,350,481 9,347,438 13,231,016 4,313,099 -  2,666,590 2,395,157 21,047 -  26,503,776 - 339,969,141 36,335,599 -  13,001,462     Due to banks to Financial Liabilities 2,486,747 Due 2,486,268 479 - Total Financial Assets Total +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZFinancial assets - held for trading Financial assets - held for trading pledged as collaterals banks from Loans to & receivables other customers from Loans to & receivables assets Other loans & receivables Financial assets - available for sale 13,205,359 Financial assets - available for sale pledged as collaterals Financial assets - held to maturity Other - 148,924,630 16,331,920 58,318,972 48,586,868 - 1,157,226 52,314  26,834,216 - 18,629,868 - 1,157,226 253,439 12,384,302 - 140,048  429,094 - - 7,748,351 301,434,602 - - 1,148,867 200,129 - - 2,708,206  980,165 - - - 36,390 - -  - - - - 13,205,359 - - 24,026,116 - 692,333  934,976 - - 17,024,253  -  - - 1,581,622 - 1,581,622 - 980,165 Reverse repurchase agreements agreements 31,285,348 repurchase 31,285,348 - Reverse Placements with banks 1,791,698 with 1,080,607 - Balances with Central Bank of Sri Lanka Placements 711,091 - - - - - 17,607,251 17,607,251 Cash & cash equivalents 11,556,620 cash 53. 9,548,407 RISK MANAGEMENT CONTD. (b) Bank - as at 31st December 2014 2,008,213 - & Financial Assets Cash Up to 3 Months Rs 000 3 - 12 Months Rs 000 Years 1 - 3 Rs 000 Years 3 - 5 Rs 000 Years Over 5 Rs 000 Non Interest Bearing Rs 000 Total Rs 000

446 SAMPATH BANK PLC Annual Report 2015 28,040,815 (50,446,436) 37,154,165 9,068,816 18,809,926 (5,901,893) 36,725,393 300,025,365 115,376,807 13,268,220 16,197,513 3,398,597 42,088,839 490,355,341 527,080,734 328,066,180 64,930,371 50,422,385 25,266,329 22,208,523 36,186,946 Total Financial Liabilities Total Interest Rate Sensitivity Gap Interest Other liabilities 5,391,243 Other 5,391,243 - Due to banks 3,418,499 to 1,889,323 Financial Liabilities Due payable 506,559 - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z agreements Securities sold under repurchase Due to other customers 1,022,617 funds Debt issued & other borrowed Dividend 8,197,892 90,969 465,038 90,969 27,548,849 - 10,899,722  263,256,007 - 8,413,813 103,505,488 14,930,510 4,854,407 3,378,083  1,267,003 - 20,514 - 34,260,246  - 407,163,665 65,170,977  - 8,662,930     Total Financial Assets Total Reverse repurchase agreements agreements repurchase Reverse - +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZFinancial assets - held for trading Financial assets - held for trading pledged as collaterals banks from Loans to & receivables other customers from Loans to & receivables assets Other loans & receivables Financial assets - available for sale 2,693,769 Financial assets - available for sale pledged as collaterals Financial assets - held to maturity Other 252,177,924 6,519,573 - 1,776,333 44,286,641 45,805,670 1,643,868 2,099,327  21,573,561 - - 50,667,811 22,186,054 - 1,321 2,099,327 5,679,504 247,894  - 19,367,108 386,277,744 2,925 - 2,400 - - - 4,613,790 56,447 3,091 3,689,677  - - - - 18,195 - -  - - - - - 2,693,769 33,368,274 - - 121,741  - 1,651,205 - 1,898,074 4,274   6,519,573 1,273,668   51,941,479 - 63,121 Placements with banks 5,193,369 with 1,218,854 - Balances with Central Bank of Sri Lanka Placements 3,974,515 - - - - - 21,341,882 21,341,882 Cash & cash equivalents 13,713,456 cash 10,782,973 (c) - as at 31st December 2015 Group 2,930,483 - & Financial Assets Cash Up to 3 Months Rs 000 3 - 12 Months Rs 000 Years 1 - 3 Rs 000 Years 3 - 5 Rs 000 Years Over 5 Rs 000 Non Interest Bearing Rs 000 Total Rs 000

Annual Report 2015 SAMPATH BANK PLC 447 Notes to the Financial Statements 37,524,754 13,486,210 16,012,310 28,896,880 (16,289,551) (1,791,305) (20,045,538) 246,400,462 86,614,427 16,133,611 17,473,436 402,308,862 2,687,637 32,999,289 431,205,742 226,354,924 70,324,876 53,658,365 30,959,646 18,699,947 31,207,984 Total Financial Liabilities Total Rate Sensitivity Gap Interest Other liabilities Other 3,878,578 3,878,578 - Dividend payable +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z agreements Securities sold under repurchase Due to other customers funds Debt issued & other borrowed Dividend 11,362,341 79,284 1,138,073 79,284 9,919,562 - -  4,125,873 225,095,958 11,820,512 81,350,481 15,078,279 4,313,099 -  2,666,590 2,395,157 21,047 -  - 26,502,980 339,678,722 43,610,816 -  12,500,414     Due to banks to 2,508,869 Financial Liabilities Due 2,486,268 22,601 - Total Financial Assets Total +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[ZFinancial assets - held for trading Financial assets - held for trading pledged as collaterals banks from Loans to & receivables other customers from Loans to & receivables assets Other loans & receivables Financial assets - available for sale 13,205,359 Financial assets - available for sale pledged as collaterals Financial assets - held to maturity Other - 150,375,934 16,331,920 60,262,314 52,080,404 - 1,372,780 52,314  28,051,311 - 18,659,359 - 1,372,780 253,439 12,384,302 - 140,048  429,094 - - 7,748,351 309,569,370 - - 1,148,867 200,129 - - 2,708,206  980,165 - - - 36,390 - -  - - - - 13,205,359 - - 24,026,116 - 692,333  934,976 - - 17,024,253  4,198 -  - 1,581,678 - - 1,581,678 984,363 Reverse repurchase agreements agreements 31,285,348 repurchase 31,285,348 - Reverse Placements with banks 1,791,698 with 1,080,607 - Balances with Central Bank of Sri Lanka Placements 711,091 - - - - - 17,607,251 17,607,251 Cash & cash equivalents 11,645,326 cash 53. 9,636,670 RISK MANAGEMENT CONTD. (d) - as at 31st December 2014 Group 2,008,656 - & Financial Assets Cash Up to 3 Months Rs 000 3 - 12 Months Rs 000 Years 1 - 3 Rs 000 Years 3 - 5 Rs 000 Years Over 5 Rs 000 Non Interest Bearing Rs 000 Total Rs 000

448 SAMPATH BANK PLC Annual Report 2015 53.4.2 Currency Risk *\YYLUJ`YPZRHYPZLZHZHYLZ\S[VMÅ\J[\H[PVUZPU[OL]HS\LVMHÄUHUJPHSPUZ[Y\TLU[K\L[VJOHUNLZPUMVYLPNUL_JOHUNLYH[LZ;OL)HUR»Z Board has set limits on positions by currency. In accordance with the Bank’s policy, positions are monitored on a daily basis and hedging strategies are used to ensure positions are maintained within established limits.

;OL[HISLZILSV^PUKPJH[L[OLJ\YYLUJPLZ[V^OPJO[OL)HUROHKZPNUPÄJHU[L_WVZ\YLZHZH[Z[+LJLTILYHUKZ[+LJLTILY and the effect to the gains/losses in case of a market exchange rates increase/decrease by 5 % and 10%. The analysis calculates the effect of a reasonably possible movement of the currency rate against the LKR, with all other variables held constant, on the Statement of 7YVÄ[VY3VZZK\L[V[OLMHPY]HS\LVMJ\YYLUJ`ZLUZP[P]LUVU[YHKPUNTVUL[HY`HZZL[ZHUKSPHIPSP[PLZHUKLX\P[`K\L[VJOHUNLPUMHPY]HS\L VMJ\YYLUJ`Z^HWZHUKMVY^HYKL_JOHUNLJVU[YHJ[Z\ZLKHZJHZOÅV^OLKNLZ(ULNH[P]LHTV\U[PU[OL¸0TWHJ[VU:[H[LTLU[VM7YVÄ[ VY3VZZ¹JVS\TUVM[OL[HISLYLÅLJ[ZHWV[LU[PHSUL[YLK\J[PVUPU:[H[LTLU[VM7YVÄ[VY3VZZVYLX\P[`^OPSLHWVZP[P]LHTV\U[YLÅLJ[ZHUL[ potential increase.

Foreign Exchange Position as at 31st December 2015 2014 Net Overall Net Overall Net Overall Net Overall Long Short Long Short Currency Rs 000 Rs 000 Rs 000 Rs 000

USD 536,238 - - 248,002 GBP 24,897 - 4,128 - EUR 82,446 - 31,298 - JPY 7,764 - 1,217 - AUD 21,051 - 4,212 - CAD 29,355 - 26,682 - */-     SGD 17,188 - 14,119 - /2+      Sub Total 763,245 - 130,605 248,002 Other Currencies 112,621 - 165,126 9,523 Grand Total 875,866 - 295,731 257,525 /PNOLYVM3VUNVY:OVY[      

0TWHJ[VU:[H[LTLU[VM7YVÄ[VY3VZZK\L[V Exchange Rate Shocks 2015 2014 Net Open Impact on Net Open Impact on Position Statement of Position Statement of  (M[LY9H[L 7YVÄ[VY3VZZ (M[LY9H[L 7YVÄ[VY3VZZ Shocks) for the year Shocks) for the year ended 31st ended 31st December December Exchange Rate Shocks Rs 000 Rs 000 Rs 000 Rs 000

5% 919,659 43,793 310,518 14,787 10% 963,452 87,587 325,305 29,573 -5% 832,072 (43,793) 280,945 (14,787) -10% 788,279 (87,587) 266,159 (29,573)

53.4.3 Equity Price Risk Equity price risk is the risk that the fair value of equities decreases as a result of changes in the level of equity indices and individual stocks. Investment Committee reviews and approves all equity investment decisions. Further the market value of the Bank’s equity portfolio as of 31st December 2015 is Rs. 121,740,400/-. (2014: Rs 692,332,623/-).

Annual Report 2015 SAMPATH BANK PLC 449 Notes to the Financial Statements

53. RISK MANAGEMENT CONTD. 53.5 Operational Risk Operational risk is the risk of losses arising from failed internal processes, systems failure, human error, fraud or external events. When JVU[YVSZMHPS[VWLYMVYTVWLYH[PVUHSYPZRZJHUJH\ZLKHTHNL[VYLW\[H[PVUOH]LSLNHSVYYLN\SH[VY`PTWSPJH[PVUZVYSLHK[VÄUHUJPHSSVZZ Strategic and Reputational Risks are not covered in Operational Risk.

Operational Risks of the Bank are mitigated and managed through a Board approved Operational Risk Management Policy control framework which consists of monitoring and responding to potential risks such as segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, Business Continuity Planning etc. Operational Risk Management Unit YLWVY[Z[V.YV\W9PZR6MÄJLYHUK[OL)VHYK0U[LNYH[LK9PZR4HUHNLTLU[*VTTP[[LL^OPJOTHPU[HPUZHOPNOSL]LSV]LYHSSZ\WLY]PZPVUVM managing Operational Risks of the Bank.

53.6 Capital Management The Bank’s capital management objectives can be summarised as follows: 4HPU[HPUZ\MÄJPLU[JHWP[HS[VTLL[TPUPT\TYLN\SH[VY`JHWP[HSYLX\PYLTLU[Z /VSKZ\MÄJPLU[JHWP[HS[VZ\WWVY[[OL)HUR»ZYPZRHWWL[P[L Provide additional capital to business segments of the Bank to achieve the overall strategic objectives Provide a “cushion” or “buffer” in absorbing potential losses arising from various risks and safeguarding the depositors’ funds

Regulatory Capital The Bank manages its capital considering the regulatory capital requirements. The Central Bank of Sri Lanka (CBSL) sets and monitors capital requirements for licensed commercial banks in Sri Lanka based on the Basel framework. Accordingly commercial banks in Sri Lanka need to maintain a total capital adequacy ratio of 10% and a core capital adequacy ratio (Tier I) of at least 5%. The Bank has always maintained the Capital Adequacy Ratios above the minimum regulatory requirements .

450 SAMPATH BANK PLC Annual Report 2015 54. MATURITY ANALYSIS (a) Maturity Gap Analysis as at 31st December 2015

Bank Group Within 12 After 12 Total Within 12 After 12 Total Months Months Months Months Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Assets Cash & cash equivalents 13,588,075 - 13,588,075 13,713,456 - 13,713,456 Balances with Central Bank of Sri Lanka 20,012,700 1,329,182 21,341,882 20,012,700 1,329,182 21,341,882 Placements with banks 5,193,369 - 5,193,369 5,193,369 - 5,193,369 Reverse repurchase agreements ------+LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z           Financial assets - held for trading 1,889,058 - 1,889,058 1,898,074 - 1,898,074 Financial assets - held for trading pledged as collaterals 2,702,785 - 2,702,785 2,693,769 - 2,693,769 Loans to & receivables from banks 554,045 1,097,160 1,651,205 554,045 1,097,160 1,651,205 Loans to & receivables from other customers 224,927,132 150,769,398 375,696,530 229,458,847 156,818,897 386,277,744 Other loans & receivables 8,699,601 24,668,673 33,368,274 8,699,601 24,668,673 33,368,274 Financial assets - available for sale 51,250,411 - 51,250,411 51,941,479 - 51,941,479 Financial assets - available for sale pledged as collaterals 7,210,585 - 7,210,585 6,519,573 - 6,519,573 Financial assets - held to maturity - - - 58,847 4,274 63,121 Investment in subsidiaries - 1,079,921 1,079,921 - - - Property, plant & equipment - 5,313,491 5,313,491 - 8,696,577 8,696,577 Intangible assets - 342,193 342,193 - 368,369 368,369 Current tax receivables - - - 2,249 - 2,249 Deferred tax assets - - - - 23,368 23,368 Other assets 1,782,343 2,547,590 4,329,933 1,933,215 2,642,267 4,575,482 Total Assets 338,129,565 187,147,608 525,277,173 342,998,685 195,648,767 538,647,452

Liabilities Due to banks 3,418,499 - 3,418,499 3,418,499 - 3,418,499 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z          Securities sold under repurchase agreements 9,316,122 - 9,316,122 8,662,930 - 8,662,930 Due to other customers 382,311,407 24,011,612 406,323,019 383,089,090 24,074,575 407,163,665 Debt issued & other borrowed funds 24,217,241 32,799,043 57,016,284 30,912,047 34,258,930 65,170,977 Dividend payable 90,969 - 90,969 90,969 - 90,969 Current tax liabilities 3,691,556 1,247,983 4,939,539 3,773,379 1,247,983 5,021,362 Deferred tax liabilities - 313,181 313,181 - 433,175 433,175 Other liabilities 6,445,350 771,293 7,216,643 7,141,806 791,186 7,932,992 Other provisions - 1,060,785 1,060,785 - 1,092,626 1,092,626 Total Liabilities 429,948,202 60,203,897 490,152,099 437,545,778 61,898,475 499,444,253

Maturity Gap (91,818,637) 126,943,711 35,125,074 (94,547,093) 133,750,292 39,203,199

Cumulative Gap (91,818,637) 35,125,074 - (94,547,093) 39,203,199 -

Annual Report 2015 SAMPATH BANK PLC 451 Notes to the Financial Statements

54. MATURITY ANALYSIS CONTD. (b) Maturity Gap Analysis as at 31st December 2014

Bank Group Within 12 After 12 Total Within 12 After 12 Total Months Months Months Months Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000

Assets Cash & cash equivalents 11,556,620 - 11,556,620 11,645,326 - 11,645,326 Balances with Central Bank of Sri Lanka 17,273,902 333,349 17,607,251 17,273,902 333,349 17,607,251 Placements with banks 1,791,698 - 1,791,698 1,791,698 - 1,791,698 Reverse repurchase agreements 31,285,348 - 31,285,348 31,285,348 - 31,285,348 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z       Financial assets - held for trading 17,024,253 - 17,024,253 17,024,253 - 17,024,253 Financial assets - held for trading pledged as collaterals 13,205,359 - 13,205,359 13,205,359 - 13,205,359 Loans to & receivables from banks 305,753 629,223 934,976 305,753 629,223 934,976 Loans to & receivables from other customers 207,383,649 94,050,953 301,434,602 210,772,594 98,796,776 309,569,370 Other loans & receivables 6,326,903 17,699,213 24,026,116 6,326,903 17,699,213 24,026,116 Financial assets - available for sale 1,581,622 - 1,581,622 1,581,678 - 1,581,678 Financial assets - available for sale pledged as collaterals ------Financial assets - held to maturity 980,165 - 980,165 980,165 4,198 984,363 Investment in subsidiaries - 1,059,921 1,059,921 - - - Property, plant & equipment - 5,141,848 5,141,848 - 8,388,598 8,388,598 Intangible assets - 368,162 368,162 - 394,332 394,332 Current tax receivables ------Deferred tax assets - - - - 23,473 23,473 Other assets 1,461,090 2,389,997 3,851,087 1,505,192 2,645,415 4,150,607 Total Assets 310,353,586 121,672,666 432,026,252 313,875,395 128,914,577 442,789,972

Liabilities Due to banks 2,486,747 - 2,486,747 2,508,869 - 2,508,869 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z          Securities sold under repurchase agreements 13,001,462 - 13,001,462 12,500,414 - 12,500,414 Due to other customers 334,114,721 5,854,420 339,969,141 333,824,302 5,854,420 339,678,722 Debt issued & other borrowed funds 9,697,744 26,637,855 36,335,599 12,652,625 30,958,191 43,610,816 Dividend payable 79,284 - 79,284 79,284 - 79,284 Current tax liabilities 2,319,645 - 2,319,645 2,435,816 218 2,436,034 Deferred tax liabilities - 143,577 143,577 - 223,750 223,750 Other liabilities 5,279,837 409,704 5,689,541 5,538,607 496,061 6,034,668 Other provisions - 1,037,098 1,037,098 - 1,061,607 1,061,607 Total Liabilities 367,031,619 34,082,654 401,114,273 369,592,096 38,594,247 408,186,343

Maturity Gap (56,678,033) 87,590,012 30,911,979 (55,716,701) 90,320,330 34,603,629

Cumulative Gap (56,678,033) 30,911,979 - (55,716,701) 34,603,629 -

452 SAMPATH BANK PLC Annual Report 2015 Looking towards even greater success in the years that lie ahead

Supplementary Information

:[H[LTLU[VM7YVÄ[VY3VZZPU<:  :[H[LTLU[VM*VTWYLOLUZP]L0UJVTLPU<:  :[H[LTLU[VM-PUHUJPHS7VZP[PVUPU<:  =HS\L(KKP[PVU ;LU@LHYZH[H.SHUJL 8\HY[LYS`:[H[PZ[PJZ *HWP[HS(KLX\HJ`  .90.*VU[LU[0UKL_ .90-PUHUJPHS:LY]PJLZ:LJ[VY+PZJSVZ\YLZ :\WWSLTLU[HY`:\Z[HPUHIPSP[`0UKPJLZ 0UKLWLUKLU[(ZZ\YHUJL9LWVY[ .SVZZHY`VM-PUHUJPHSHUK)HURPUN;LYTZ (IIYL]PH[PVUZ :HTWH[O:VUN 5V[PJLVM(UU\HS.LULYHS4LL[PUN -VYTVM7YV_` :[HRLOVSKLY-LLKIHJR-VYT

Annual Report 2015 SAMPATH BANK PLC 453 :[H[LTLU[VM7YVÄ[VY3VZZPU<:

Bank Group For the year ended 31st December 2015 2014 2015 2014 <:  <:  <:  <: 

Gross income 326,154 339,917 340,513 353,616

Interest income 263,132 290,081 275,356 302,557 Less: Interest expense 142,454 170,236 146,712 174,655 Net interest income 120,678 119,845 128,643 127,902

Fee & commission income 44,992 38,534 45,915 39,121 Less: Fee & commission expense 8,331 6,618 8,348 6,656 Net fee & commission income 36,661 31,916 37,567 32,465

Net trading income (2,367) 3,151 (2,367) 3,151 Other operating income 20,397 8,151 21,609 8,787 Total operating income 175,370 163,063 185,453 172,304

Less: Net impairment charge / (reversal) for loans & other losses 6,544 10,681 6,886 12,048 Net operating income 168,826 152,382 178,567 160,256

Less: Operating expenses Personnel expenses 42,588 38,574 45,246 40,709 Other operating expenses 49,918 50,825 51,578 52,128 Total operating expenses 92,506 89,399 96,824 92,837

2SHUDWLQJSURðWEHIRUHYDOXHDGGHGWD[ 9$7 DQG  QDWLRQEXLOGLQJWD[ 1%7 RQðQDQFLDOVHUYLFHV 76,320 62,983 81,743 67,419

3LZZ!=(; 5);VUÄUHUJPHSZLY]PJLZ        3URðWEHIRUHLQFRPHWD[ 63,113 51,269 67,889 55,236

Less: Income tax expense 20,575 13,816 21,924 15,087 3URðWIRUWKH\HDU 42,538 37,453 45,965 40,149

Attributable to: Equity holders of the Bank 42,538 37,453 45,932 40,116 Non controlling interest - - 33 33 42,538 37,453 45,965 40,149

Earnings per share (US$) Earnings per share: Basic (US$) 0.27 Earnings per share: Diluted (US$) 0.27

Dividend per share (US$) Dividend per share: Gross (US$) 0.09* 0.08 Dividend per share: Net (US$) 0.08* 0.08

Exchange rate of US$ was Rs 144.20 as at 31st December 2015 (Rs 131.20 as at 31st December 2014)

* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.

454 SAMPATH BANK PLC Annual Report 2015 :[H[LTLU[VM*VTWYLOLUZP]L0UJVTLPU<:

Bank Group For the year ended 31st December 2015 2014 2015 2014 <:  <:  <:  <: 

3URðWIRUWKH\HDU 42,538 37,453 45,965 40,149

Other comprehensive income 6[OLYJVTWYLOLUZP]LPUJVTL[VILYLJSHZZPÄLK[VWYVÄ[VYSVZZ!

(Loss) / Gain arising on re-measuring available for  ZHSLÄUHUJPHSHZZL[Z         Exchange difference in translation 223 8 223 8 (2,716) (5,326) (2,716) (5,326)

.HPU3VZZHYPZPUNMYVTJHZOÅV^OLKNL       1HWRWKHUFRPSUHKHQVLYHLQFRPHWREHUHFODVVLðHGWRSURðWRUORVV (2,716) (4,046) (2,716) (4,046)

6[OLYJVTWYLOLUZP]LPUJVTLUV[[VILYLJSHZZPÄLK[VWYVÄ[VYSVZZ!

(J[\HYPHSNHPUSVZZVUKLÄULKILULÄ[WSHUZ         Deferred tax effect on above (225) 1,649 (222) 1,654 579 (4,241) 577 (4,260) 1HWRWKHUFRPSUHKHQVLYHLQFRPHQRWWREHUHFODVVLðHG  WRSURðWRUORVV 579 (4,241) 577 (4,260)

Other comprehensive income net of tax (2,137) (8,287) (2,139) (8,306) Total comprehensive income for the year net of tax 40,401 29,166 43,826 31,843

Attributable to: Equity holders of the Bank 40,401 29,166 43,792 31,811 Non controlling interest - - 34 33 40,401 29,166 43,826 31,844

Exchange rate of US$ was Rs 144.20 as at 31st December 2015 (Rs 131.20 as at 31st December 2014)

Annual Report 2015 SAMPATH BANK PLC 455 :[H[LTLU[VM-PUHUJPHS7VZP[PVUPU<:

Bank Group As at 31st December 2015 2014 2015 2014 <:  <:  <:  <: 

ASSETS Cash & cash equivalents 94,231 88,084 95,100 88,760 Balances with Central Bank of Sri Lanka 148,002 134,202 148,002 134,202 Placements with banks 36,015 13,656 36,015 13,656 Reverse repurchase agreements - 238,455 - 238,455 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z      Financial assets - held for trading 13,100 129,758 13,163 129,758 Financial assets - held for trading pledged as collaterals 18,743 100,651 18,681 100,651 Loans to & receivables from banks 11,451 7,126 11,451 7,126 Loans to & receivables from other customers 2,605,385 2,297,520 2,678,764 2,359,523 Other loans & receivables 231,403 183,126 231,403 183,126 Financial assets - available for sale 355,412 12,055 360,204 12,055 Financial assets - available for sale pledged as collaterals 50,004 - 45,212 - Financial assets - held to maturity - 7,471 438 7,503 Investment in subsidiaries 7,489 8,079 - - Property, plant & equipment 36,848 39,191 60,309 63,937 Intangible assets 2,373 2,806 2,555 3,006 Current tax receivables - - 16 - Deferred tax assets - - 162 179 Other assets 30,028 29,352 31,729 31,636 Total Assets 3,642,699 3,292,883 3,735,419 3,374,924

LIABILITIES Due to banks 23,707 18,954 23,707 19,122 +LYP]H[P]LÄUHUJPHSPUZ[Y\TLU[Z        Securities sold under repurchase agreements 64,606 99,097 60,076 95,278 Due to other customers 2,817,774 2,591,228 2,823,604 2,589,015 Debt issued & other borrowed funds 395,397 276,948 451,949 332,400 Dividend payable 631 604 631 604 Current tax liabilities 34,255 17,680 34,822 18,567 Deferred tax liabilities 2,172 1,094 3,004 1,705 Other liabilities 50,045 43,365 55,012 45,995 Other provisions 7,356 7,905 7,577 8,092 Total Liabilities 3,399,113 3,057,273 3,463,552 3,111,176

EQUITY Stated capital 37,319 34,071 37,319 34,071 Reserves Statutory reserves 12,413 11,280 12,899 11,668 Other reserves 172,589 165,999 188,925 183,953 Retained earnings 21,265 24,260 32,067 33,352 Total equity attributable to equity holders of the Bank 243,586 235,610 271,210 263,044 Non controlling interest - - 657 704 Total Equity 243,586 235,610 271,867 263,747 Total Liabilities & Equity 3,642,699 3,292,883 3,735,419 3,374,924

Net asset value per share (US$) 1.41 1.37 1.57 1.53 Commitments & contingencies 1,490,935 1,296,994 1,492,476 1,298,834

Exchange rate of US$ was Rs 144.20 as at 31st December 2015 (Rs 131.20 as at 31st December 2014)

456 SAMPATH BANK PLC Annual Report 2015 Value Addition

G4-EC 01,02

Economic Value Addition - Bank For the year ended 31st December 2015 2014 Rs Mn Rs Mn

Average shareholders’ funds 33,019 29,665 Provision for impairment losses 6,997 7,008 40,016 36,673

7YVÄ[H[[YPI\[HISL[VZOHYLOVSKLYZ       Impairment charge / (reversal) for loans & other losses 944 1,401 Amounts written off - loans & receivables (851) (4,342) 6,227 1,973

Economic cost ( 12 months average Treasury Bill rate plus 2% risk premium) 8.6% 8.7% Economic cost 3,441 3,191 Economic value addition 2,786 (1,218)

;OLLJVUVTPJ]HS\LJYLH[LKI`[OL)HUR[VP[ZZOHYLOVSKLYZ»K\YPUN[OLWLYPVKPZYLÅLJ[LKPU[OLHIV]LHUHS`ZPZ 

Direct Economic Value Generated & Distributed - Bank Information on the creation and distribution of economic value provides a basic indication of how the bank has created wealth for stakeholders 2015 2014 Rs Mn Rs Mn

Direct Economic Value Generated Interest income 37,944 38,059 Foreign exchange income 2,466 1,283 Commission income 6,488 5,056 Investment income 249 425 Other income 55 42 47,202 44,865

Economic Value Distributed

To Depositors and Lenders Interest expenses 18,995 21,412 18,995 21,412

Operating Costs Depreciation & amortisation set aside 700 696 Fee & commission expenses 1,201 868 Other operating expenses 6,418 5,858 8,319 7,422

To Employees ,TWSV`LLZHSHYPLZ ILULÄ[Z      6,141 5,061

Payments to Government Income tax expenses 2,830 1,144 =(; 5);VUÄUHUJPHSZLY]PJLZ       Crop insurance levy 61 49 4,795 2,730

To Community Social responsibility projects 16 18 Donations 2 49 18 67

Payments to Providers of Capital Interest to debenture holders 1,547 923 Dividend to shareholders 2,240 1,847 3,787 2,770

Economic Value Distributed 42,055 39,462 Economic Value Retained (after payment of dividend to shareholders) 5,147 5,403 47,202 44,865

Annual Report 2015 SAMPATH BANK PLC 457 Ten Years at a Glance

SLAS SLFRS For the year ended 31st December 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Operating Results (Rs Mn) Gross income 12,340 17,400 22,243 25,213 24,333 27,577 38,796 47,509 44,597 47,032 Interest income 9,997 14,950 19,451 20,970 18,477 21,111 31,882 41,892 38,059 37,944 Interest expenses 5,890 9,947 12,801 13,165 9,953 12,168 20,269 26,556 22,335 20,542 Net interest income 4,107 5,003 6,650 7,805 8,525 8,943 11,613 15,336 15,724 17,402 Exchange income 646 505 647 774 498 837 2,154 520 1,283 2,466 Other income 1,697 1,944 2,144 3,469 5,357 4,792 4,105 4,901 4,387 5,421 Total operating income 6,450 7,452 9,441 12,048 14,380 14,572 17,872 20,757 21,394 25,288 Operating expenses 3,131 3,614 4,662 5,484 6,320 8,059 9,248 10,634 11,729 13,339 Impairment losses 444 1,003 1,252 1,203 1,944 618 65 4,736 1,401 944 7YVÄ[ILMVYLPUJVTL[H_                  Income tax expense 1,240 1,167 1,150 1,878 1,199 1,606 2,170 1,061 1,813 2,967 7YVÄ[HM[LY[H_               

SLAS SLFRS As at 31st December 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Assets (Rs Mn) Cash & cash equivalents including placements 8,814 9,108 6,923 5,868 6,048 16,073 19,220 10,094 13,348 18,781 Loans & advances 75,970 93,430 95,655 98,685 ------Loans to & receivables from banks - - - - - 442 816 638 935 1,651 Loans to & receivables from other customers - - - - 124,067 169,681 208,184 259,402 301,435 375,697 Investment in associates & subsidiaries 1,096 970 970 992 992 1,055 1,060 1,060 1,060 1,080 Property, plant & equipment 1,823 3,080 3,289 3,420 4,278 4,528 4,560 5,135 5,142 5,313 Other assets 21,847 26,608 31,702 47,197 55,929 55,879 75,570 105,713 110,106 122,755 Total assets 109,550 133,196 138,539 156,162 191,314 247,658 309,410 382,042 432,026 525,277

Liabilities (Rs Mn) Due to banks & other customers (Deposits Only) 81,432 99,419 107,380 126,091 153,310 195,900 243,575 302,429 341,946 409,411 9LÄUHUJLIVYYV^PUNZ              Other liabilities evidenced by paper 2,734 4,433 4,514 3,102 ------Borrowings from banks & debt issued and other borrowed funds - - - - 8,702 20,225 29,206 39,194 36,846 57,347 Other liabilities 15,984 16,618 12,276 10,304 8,311 10,189 10,985 12,000 22,322 23,394 Total liabilities 102,924 124,627 128,762 144,316 170,323 226,314 283,766 353,623 401,114 490,152

Shareholders’ Fund (Rs Mn) Stated capital 1,582 1,582 1,582 1,582 1,786 2,744 3,564 4,460 4,470 5,381 Reserves 5,044 6,987 8,195 10,265 19,204 18,600 22,080 23,958 26,442 29,744

Investor Information Dividend paid / proposed (Rs Mn) 172.2 206.7 275.6 473.6 1,235.8 1,427.0 1,954.1 1,342.6 1,847.0 2,240.0 Dividend cover (times) 6.0 5.1 5.1 4.4 2.7 2.4 2.6 2.6 2.6 2.7 Net assets per share (Rs) 96.17 124.39 141.92 77.52 131.18 129.00 152.96 169.37 179.39 203.85 4HYRL[WYPJLWLYZOHYL9Z/PNO              Market price per share (Rs) - Low 75.25 100.00 65.00 65.00 201.00 191.00 148.50 161.60 164.20 235.20 Market price as at 31st December (Rs) 109.75 120.00 68.00 204.25 271.90 195.00 200.50 171.90 236.30 248.00

Other Information Exchange rate (US $) 107.52 108.65 113.00 114.47 110.95 113.90 127.65 130.75 131.20 144.20 Number of staff as at 31st December 2,039 2,213 2,364 2,388 2,688 3,230 3,455 3,688 4,000 3,993 Number of branches as at 31st December 96 105 112 131 171 206 209 212 220 225

Ratios Growth of income (%) 41.8 41.0 27.8 13.4 (3.5) 13.3 40.7 22.5 (6.1) 5.50 *VZ[[VPUJVTLYH[PV^P[O=(;HUK5);VUÄUHUJPHSZLY]PJLZ                  *VZ[[VPUJVTLYH[PV^P[OV\[=(;HUK5);VUÄUHUJPHSZLY]PJLZ                 Growth of deposits (%) 23.5 22.4 8.1 17.5 19.4 27.8 24.3 24.2 13.1 19.7 Growth of advances (%) 26.4 23.0 2.4 3.2 30.3 37.1 22.9 24.4 16.3 24.8 Dividend per share (Rs) 2.50 3.00 4.00 6.25 8.09 9.00 12.00 8.00 11.00 13.0 Return on average assets (after tax) (%) 1.06 0.87 1.04 1.42 1.94 1.55 1.88 0.98 1.23 1.28 Return on average equity (after tax) (%) 16.78 13.84 15.41 19.41 24.59 16.17 22.26 12.88 16.35 18.42 Property plant and equipment to shareholders’ fund (%) 27.5 35.9 33.6 28.9 20.4 21.2 17.8 18.1 16.6 15.1 Total assets to shareholders’ fund (Times) 16.5 15.5 14.2 13.2 9.1 11.6 12.1 13.4 14.0 15.0

Liquid assets ratio (%) 31.3 29.0 29.5 30.5 26.3 25.0 22.4 27.6 24.5 22.1 $VVSHFLðHGLQ%DQNLQJ$FW1RRI

Capital adequacy ratios (%) - TIER I 8.38 7.58 8.10 10.40 10.71 10.24 11.80 10.08 8.83 7.90 - TIER I+II 10.82 11.58 11.95 13.45 12.91 11.45 13.61 14.22 13.62 12.26

*VTWHYH[P]LPUMVYTH[PVUMVY[OL`LHYOHZILLUYLJSHZZPÄLK^OLYL]LYULJLZZHY`[VJVUMVYT[V[OLJ\YYLU[`LHY»ZWYLZLU[HPVU

458 SAMPATH BANK PLC Annual Report 2015 Quarterly Statistics     December September December June March 31st 30th 31st Rs Mn Rs Mn Rs Mn Rs Mn Mn Rs Mn Rs Mn Rs Rs 31st 30th 31st September December June March Rs Mn Rs Mn Rs Mn Rs Mn Mn Rs Mn Rs Mn Rs Rs       U 2014 2014 2014 2014 2015 2015 31st 30th 31st 31st 30th 31st Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn December September June March December September June March ^OLYL]LYULJLZZHY`[VJVUMVYT[V[OLJ\YYLU[`LHY»ZWYLZLU[H[PV

for loans & other losses 178 400 337 29 201 468 306 425

*VTWHYH[P]LPUMVYTH[PVUMVY[OL`LHYOHZILLUYLJSHZZPÄLK As at Statement of Financial Position Total assets Total 525,277 489,344 461,004 438,703 432,026 396,192 385,349 378,084 Loans to & receivables from banks from Loans to & receivables 1,651 1,682 1,292 868 935 485 532 595 Loans to & receivables from other customers from Loans to & receivables 375,697 343,660 329,512 308,704 301,435 267,568 253,278 249,801 Due to other customers 406,323 381,986 362,391 348,511 339,969 327,209 319,761 311,998 Total equity Total 35,125 34,500 32,513 31,070 30,912 30,526 29,172 29,600

For the three months ended For the three

6WDWHPHQWRI3URðWRU/RVV income Net interest 4,416 4,506 4,433 4,047 4,037 3,936 3,783 3,968 Net fee & commission income 1,453 1,395 1,220 1,219 1,186 1,087 973 941 Net trading income 40 (246) 115 (250) (36) 73 16 360 Other operating income 633 1,093 560 655 458 413 391 (193) Total operating income Total 6,542 6,748 6,328 5,671 5,645 5,509 5,163 5,076 Less: Impairment charge / (reversal) Less: Impairment charge / (reversal) Net operating income 6,364 6,348 5,990 5,642 5,444 5,041 4,857 4,651 Less: Total operating expenses Less: Total 3,895 3,202 3,222 3,021 3,307 3,076 2,719 2,626 =(; 5);VUÄUHUJPHSZLY]PJLZ      Income tax expense 713 844 698 712 573 541 231 468 7YVÄ[MVY[OLWLYPVK        Other comprehensive income for the period Other comprehensive (85) 235 (120) (338) (814) 320 (571) (22) Total comprehensive income for the period comprehensive Total 1,302 1,987 1,444 1,093 386 1,354 909 1,178

Annual Report 2015 SAMPATH BANK PLC 459 Quarterly Statistics     December September December June March 31st 30th 31st December September December June March 31st 30th 31st 2014 2014 2014 2014 2015 2015  31st 30th 31st 31st 30th 31st December September June March December September June March

For the three months ended For the three ( Rs ) Market price per share /PNOLZ[           Lowest 246.00 248.10 240.00 235.20 225.60 199.00 173.00 164.20 Closing 248.00 258.20 259.30 252.10 236.30 241.80 200.20 182.10

As at 3URðWDELOLW\ Interest Margin ( % ) Interest 3.64 3.75 3.80 3.77 3.95 4.04 2.77 2.98 Return on assets (before tax) ( % ) Return on assets (before 1.90 2.02 1.97 2.00 1.69 1.71 1.78 1.78 Return on equity (after tax) ( % ) 18.42 19.41 19.00 18.73 16.35 16.68 18.77 16.78 Capital Adequacy Ratio Adequacy Capital Tier I ( % ) 7.90 7.95 8.47 8.27 8.83 9.43 9.85 9.89 Tier I + II ( % ) 12.26 12.12 12.87 12.78 13.62 12.74 13.25 13.85 Assets Quality Quality Assets ratio ( % ) NPA Gross 1.64 1.70 1.71 1.84 1.93 2.39 2.60 2.38 Net NPA ratio ( % ) Net NPA 0.46 0.50 0.47 0.55 0.53 0.73 0.84 0.93 Regulatory Liquidity Regulatory Bank ( % ) 22.05 21.39 21.06 22.83 24.54 26.45 27.93 29.11 Domestic banking unit ( % ) 21.84 21.14 20.89 22.72 24.38 26.12 27.52 28.60 Off-Shore banking unit ( % ) Off-Shore 27.24 25.98 26.37 26.68 23.75 31.46 30.56 32.64

460 SAMPATH BANK PLC Annual Report 2015 Capital Adequacy

Capital Adequacy is one of the key Risk-weighted Assets (RWA) were introduced in June 2006. This is the ÄUHUJPHSPUKPJH[VYZ^OPJOPSS\Z[YH[LZ[OL Risk-weighted Assets are a measure basis currently used by Sri Lankan banks soundness and the stability of a bank by of the amount of the bank’s assets and for the computation of Capital Adequacy measuring the adequacy of its capital off-balance sheet exposures, weighted Ratio effective from 1st January 2008. to meet unexpected losses arising from according to their risks. Different classes various risks, associated with business of assets have different risk weights Basel II comprises three mutually of banking, such as credit risk, market associated with them. reinforcing pillars, risk, operational risk etc. The capital of Pillar 1 - Minimum Capital a bank acts as a “cushion” or “buffer” At present, Capital Adequacy Requirement in absorbing potential losses arising computation is prepared as per the Pillar 2 - Supervisory Review from these risks and safeguarding the “BASEL Accord” which is an universally process depositors’ funds. accepted framework put forward by the Pillar 3 - Market Discipline “Basel Committee on Bank Supervision Capital Adequacy Ratio (CAR) is a (BCBS)” of the Bank for International Pillar 1 – Minimum Capital measure of the amount of a bank’s Settlements (BIS). Requirement Capital expressed as a percentage of its Pillar-1 deals with maintenance of Risk-weighted Assets. Basel I regulatory capital calculated for three In 1988, the BCBS published the 1988 major components of risks that a bank *(9PZKLÄULKHZ! Basel Accord for minimum capital faces: credit risk, operational risk, requirement. This was enforced by law and market risk. Other risks are not Tier I Capital + Tier II Capital in the Group of Ten (G-10) countries in considered fully at this stage. CAR = Risk-weighted Assets 1992. The Basel Accord also known as “Basel I” was adopted by Sri Lankan The credit risk component can be banks to compute the Capital Adequacy calculated in three different ways of Tier I Capital Ratios up to 31st December 2007. varying degrees of sophistication, namely The Tier I Capital mainly consists of Standardised Approach, Foundation IRB stated capital, non-redeemable and Basel I accord was criticized mainly for (Internal Rating-Based) Approach and non-cumulative preference shares, taking a too simplistic approach to setting Advanced IRB (Internal Rating-Based) other capital and revenue reserves after credit risk weights and for ignoring other Approach. In accordance with the current deducting the total value of intangible types of risks. regulatory framework in the country the assets, 50% of the investments made Bank has adopted the Standardised in shares and debentures of other These criticisms have led to the creation Approach for calculating credit and IHURZHUKÄUHUJPHSJVTWHUPLZHUK of a new Basel Capital Accord, known as market risk while the Basic Indicator \UJVUZVSPKH[LKIHURPUNHUKÄUHUJPHS Basel II, which added operational risk and Approach has been used in calculating subsidiary companies. HSZVKLÄULKUL^JHSJ\SH[PVUZMVYJYLKP[ operational risk. risk. Tier II Capital Pillar 2 – Supervisory Review Tier II Capital includes revaluation These new set of rules known as Basel II Process reserves approved by CBSL, general loan was later developed to replace the Basel I Pillar - 2 sets forth the framework for loss provisions, and subordinated term accord by the Basel Committee. the Supervisory Review Process (SRP) debts approved by CBSL, after deducting and the framework for Internal Capital 50% of the investments made in shares Basel II Adequacy Assessment Process (ICAAP) and debentures of other banks and The Basel Committee on Bank of banks. Pillar - 2 recognises risks in a ÄUHUJPHSJVTWHUPLZHUK\UJVUZVSPKH[LK Supervision (BCBS) published the wider sense including risks not captured IHURPUNHUKÄUHUJPHSZ\IZPKPHY` International Convergence of Capital and accounted by Pillar - 1. (e.g. credit companies. Measurement and Capital Standards, concentration risk, liquidity risk, business a revised framework (Basel II), in June and strategic risk etc.). It also covers 2004. Certain amendments to the above the Stress Tests which are used to measure the impact on possible adverse movements in different market scenarios.

Annual Report 2015 SAMPATH BANK PLC 461 Capital Adequacy

Pillar 3 – Market Discipline Basel III Main Areas of Reform in Pillar - 3 presents a number of disclosure 0U[OLHM[LYTH[OVM  ÄUHUJPHS Basel III requirements. The objective is to crisis, the BCBS agreed on reforms to Capital requirement raise the level of market discipline by “strengthen global capital and liquidity Revised minimum equity and Tier I Capital giving external stakeholders a better rules with the goal of promoting a more Requirement understanding of capital adequacy resilient banking sector”, which is being Banks need to maintain a minimum calculations and the procedures involved YLMLYYLK[VHZ)HZLS000/LUJL[OLTHPU Common Equity Tier I (CET I) ratio in a bank. This Pillar is seen as particularly objective of Basel III is to minimize the of 4.5% at all times. important because under the advanced WVZZPIPSP[`VMVJJ\YYLUJLVMHÄUHUJPHS Additional Tier I (AT I) capital of approaches of Basel II, banks are allowed crisis. 1.5% will be enforced in sagged to rely more heavily on internal methods basis. for determining risk, giving them greater Tier II capital will be at 4%. discretion in determining their capital needs.

Basel III: Capital and Leverage Standards  4VYLYLZ[YPJ[P]LKLÄUP[PVUVMJHWP[HS More demanding capital ratios, bigger capital buffers  /PNOLYJHWP[HSJOHYNLZMVYJV\U[LYWHY[`YPZR Formal leverage ratio Micro prudential

Basel III: Quantitative Liquidity Standards Liquidity Coverage Ratio to survive 1 - month stress period Net Stable Funding Ratio to require longer term funding sources Reform Agenda of Basel III

Systemic Risk SIFIs (Systemically Important Financial Institutions). Too big too fail Surcharges in Capital Macro prudential OTC (Over-the-Counter) derivatives in central clearing institutions

New cross Border Resolution Countercyclical Provisioning

462 SAMPATH BANK PLC Annual Report 2015 Additional three buffers, Securities Financing Transaction Capital Conservation Buffer (CCB) (SFT) exposures – 2.5% Domestic – Systemically Important Liquidity requirement Banks (D-SIBs) – 1.5% Liquidity Coverage Ratio (LCR) Countercyclical Buffer – as and The objective of this ratio is maintenance when necessary of high quality liquid assets that can be converted into cash, to meet funding will be introduced to straighten the capital needs of bank over the next 30 days, requirement. under a highly stressed scenario.

Leverage ratio Net Stable Funding Ratio (NSFR) Basel III has introduced a NSFR measures the long term capability framework with a simple, of bank. It ensures that banks hold a transparent, non-risk based minimum amount of stable funding leverage ratio to act as a credible based on the liquidity characteristics supplementary measure to the risk of their assets and activities over a one based capital requirement. year horizon. The objective is to reduce maturity mismatches between the asset  ;OLSL]LYHNLYH[PVPZKLÄULKHZ[OL and liability items on the balance sheet, capital measure (the numerator) funding and rollover risk. divided by the exposure measure (the denominator) and the ratio is Implementation of Basel III in Sri Lanka expressed as a percentage. Basel III is very likely to be implemented in Sri Lanka in 2016 once the Central Bank Leverage Capital Measure decides on the effective date. Sampath = Ĩ Ratio Exposure Measure )HURPZJVUÄKLU[[OH[P[^PSSJVTWS`^P[O HSS[OLYLX\PYLTLU[ZVM)HZLS000/V^L]LY Capital Measure: The capital measure it is equally important for the Sri Lankan MVY[OLSL]LYHNLYH[PVPZKLÄULKHZ;PLY banks to migrate into the advanced Capital. approaches of Basel III as quickly as possible, in order to reap the full capital Exposure Measure: The total exposure ZH]PUNZILULÄ[ZVM)HZLSSS0U[OPZ measure is the sum of the followings: connection, Sampath Bank is ready with All on - balance sheet and off- its internal rating system for measuring balance sheet (OBS) exposures the credit risk and could implement same Derivative exposures once the regulatory validation is obtained.

Annual Report 2015 SAMPATH BANK PLC 463 Capital Adequacy Weighted Weighted Assets Risk

Assets Rs Mn Rs Mn Mn Rs Rs Risk Rs Mn Assets 2014 Weighted 2015

Rs Mn Assets          Bank Group Assets Risk Weighted Assets Rs Mn Rs Mn Mn Rs Rs Risk Rs Mn Assets 2014 Weighted 2015

Rs Mn Assets 506,157 356,988 434,175 269,227 519,625 371,864 445,600 280,674 Risk-weighted Assets for Credit Risk Risk-weighted Assets for Credit

Computation of Capital Adequacy Ratios - Basel II

Claims on central government & Central Bank of Sri Lanka 47,189 - 67,290 - 47,252 - 67,294 - Claims on public sector entities 336 336 805 370 336 336 805 370 Claims on banks exposures Claims on banks exposures 8,189 2,679 6,331 2,204 8,232 2,692 6,407 2,280 *SHPTZVUÄUHUJPHSPUZ[P[\[PVUZ         Claims on corporates 239,521 227,337 187,764 178,063 250,929 238,745 194,686 184,985 Retail claims 94,857 80,666 69,466 58,119 94,857 80,666 69,466 58,119 Claims secured by residential property property by residential Claims secured 23,721 18,272 15,354 9,745 23,721 18,272 15,354 9,745 Non performing assets 3,281 4,654 2,889 3,761 3,275 4,648 3,002 3,874 Non performing assets secured by Non performing assets secured property residential 250 240 316 304 250 240 316 304 Cash / gold against loans 55,119 40 57,160 29 55,202 40 57,173 29 Other assets 8,225 8,225 7,599 7,599 13,269 13,269 11,972 11,972 Total

464 SAMPATH BANK PLC Annual Report 2015

Rs Mn Rs Mn Mn Rs Rs Items Sheet Balance  VM6Ɉ VM6Ɉ Amount Equivalent Amount Principal Credit 2014 2015 Sheet Rs Mn Rs Mn Amount Equivalent Balance Principal Credit

Items

 VM6Ɉ VM6Ɉ

Rs Mn Rs Mn Mn Rs Rs Items Sheet Sheet Sheet Balance  6Ɉ VM6Ɉ Amount of Equivalent of Amount Principal Credit Bank Group 2014 2015 Principal Credit Amount Equivalent Amount

Rs Mn Rs Mn Mn Rs Rs Items Sheet Sheet Sheet Balance  VM6Ɉ VM6Ɉ 84,958 - 45,239 - 84,958 - 45,239 - 10,417 5,967 8,504 4,920 10,417 5,967 8,504 4,920 45,016 900 35,528 711 45,016 900 35,528 711 13,306 6,653 4,619 2,309 13,306 6,653 4,619 2,309 23,023 23,023 20,418 20,418 22,624 22,624 20,418 20,418 34,988 6,998 31,475 6,295 34,988 6,998 31,475 6,295 211,708 43,541 145,783 34,653 211,309 43,142 145,783 34,653 contingencies Total Original maturity-less than one year 2.0 45,016 900 35,528 711 45,016 900 35,528 711 Foreign exchange contracts Foreign Undrawn term loans 50.0 13,306 6,653 4,619 2,309 13,306 6,653 4,619 2,309 Other commitments with an original maturity of over one year facilities/unused Undrawn overdraft lines card credit 0.0 84,958 - 45,239 - 84,958 - 45,239 - Other commitments with an original maturity of up to one year or which can be unconditionally cancelled at any time acceptances related Trade 20.0 15,858 3,172 12,193 2,439 15,858 3,172 12,193 2,439 Documentary letters of credit 20.0 17,050 3,410 16,610 3,322 17,050 3,410 16,610 3,322 Shipping guarantees 20.0 2,080 416 2,672 534 2,080 416 2,672 534 Short-term self-liquidating trade-related Short-term self-liquidating trade-related Others 80/77.5 2,526 2,022 2,430 1,883 2,526 2,022 2,430 1,883 Performance bonds, bid bonds & warranties 50.0 7,891 3,945 6,074 3,037 7,891 3,945 6,074 3,037 Transaction-related contingencies Transaction-related General guarantees of indebtedness 100.0 23,023 23,023 20,418 20,418 22,624 22,624 20,418 20,418 Direct credit substitutes credit Direct

Factor (%) Factor

Conversion 6Ɉ)HSHUJL:OLL[0[LTZ *YLKP[

Annual Report 2015 SAMPATH BANK PLC 465 Capital Adequacy

Bank Group 2015 2014 2015 2014 Risk-weighted Amount for Market Risk Rs Mn Rs Mn Rs Mn Rs Mn

Interest rate risk 396 296 396 296 General risk 396 296 396 296  :WLJPÄJYPZR     Equity risk 2 55 2 55 General risk 1 33 1 33  :WLJPÄJYPZR     Foreign exchange & gold risk 120 47 120 47 Total capital charge for market risk 518 398 518 398 Total Risk-weighted amount for market risk (total capital charge x 10) 5,178 3,983 5,178 3,983

Bank Group 2015 2014 2015 2014 Risk-weighted Amount for Operational Risk Rs Mn Rs Mn RRs Mn Rs Mn

(]LYHNLUL[PUJVTLMVYSHZ[[OYLLÄUHUJPHS`LHYZ       Deductions: - - - - 9LHSPZLKWYVÄ[ZMYVT[OLZHSLVMZLJ\YP[PLZ  H]LYHNLVMSHZ[[OYLLÄUHUJPHS`LHYZ         Extraordinary / irregular item of income  H]LYHNLVMSHZ[[OYLLÄUHUJPHS`LHYZ       Gross income 22,336 18,044 23,508 18,947 Total capital charge for operational risk (Gross income x 15%) 3,350 2,707 3,526 2,842

Total Risk-weighted amount for operational risk (Total capital charge for operational risk x 10) 33,504 27,066 35,262 28,421

Computation of total Risk-weighted amount Risk-weighted amount for credit risk 356,988 269,227 371,864 280,674 Risk-weighted amount for market risk 5,178 3,983 5,178 3,983 Risk-weighted amount for operational risk 33,504 27,066 35,262 28,421 Total Risk-weighted amount 395,670 300,276 412,304 313,078

466 SAMPATH BANK PLC Annual Report 2015 Bank Group 2015 2014 2015 2014 Computation of Capital Base Rs Mn Rs Mn Rs Mn Rs Mn

Core Capital (Tier I) Stated capital 5,381 4,470 5,381 4,470 Statutory reserve fund 1,790 1,480 1,860 1,531 7\ISPZOLKYL[HPULKWYVÄ[Z      General and other reserves 22,165 18,665 22,165 18,665 Minority interests (consistent with the above capital constituents) - - 95 92 Deductions/Adjustments-Tier I Goodwill - - - - Net deferred tax assets - - - - Other intangible assets 342 368 368 394 50% of investments in unconsolidated banking  HUKÄUHUJPHSZ\IZPKPHY`JVTWHUPLZ     50% investments in the capital of other banks and  ÄUHUJPHSPUZ[P[\[PVUZ       Total Core Capital 31,246 26,522 33,158 28,047

Supplementary Capital (Tier II) Revaluation reserves (as approved by CBSL) 427 427 427 427 General provisions 1,693 1,279 1,693 1,279 Approved subordinated term debt 15,623 13,261 16,579 13,530 Deductions-Tier II 50% of investments in unconsolidated banking and  ÄUHUJPHSZ\IZPKPHY`JVTWHUPLZ     50% investments in the capital of other banks and  ÄUHUJPHSPUZ[P[\[PVUZ       Eligible Tier II Capital 17,244 14,375 18,463 14,907 Base Capital (Tier I + Tier II) 48,490 40,897 51,621 42,954

Limits: (i) Approved subordinated term debt is limited to 50% of total Tier I capital. (ii) The total of Tier II supplementary elements should not exceed a maximum of 100% of Tier I elements. (iii) General provision should not exceed 1.25% of Risk-weighted assets.

Bank Group 2015 2014 2015 2014

Core Capital Ratio (minimum ratio - 5%) Core Capital (Tier 1) x 100 31,246 x 100 26,522 x 100 33,157 x 100 28,047 x 100 Total Risk-weighted Assets 395,670 300,276 412,304 313,078

Total Capital Ratio (minimum ratio - 10%) Capital Base x 100 48,490 x 100 40,897 x 100 51,619 x 100 42,954 x 100 Total Risk-weighted Assets 395,670 300,276 412,304 313,078

Core Capital (Tier I) Ratio (%) 7.90 8.83 8.04 8.96 Total Capital Ratio (%) 12.26 13.62 12.52 13.72

Annual Report 2015 SAMPATH BANK PLC 467 GRI G4 Content Index

GRI G4 : ‘IN ACCORDANCE – COMPREHENSIVE’

External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles G4 GENERAL STANDARD DISCLOSURES STRATEGY AND ANALYSIS G4-1 Statement from the highest governance body Yes 46-51 G4-2 A description of key impacts, risks, and opportunities Yes 55-56 ORGANIZATIONAL PROFILE G4-3 Name of the organization Yes Inner Back Cover G4-4 Primary brands, products and services Yes 30-31 G4-5 Location of the organization’s headquarters Yes Inner Back Cover G4-6 Number of countries where the organization operates Yes 125-132 G4-7 Nature of ownership and legal form Yes 3, Inner Back Cover G4-8 Markets served Yes 117-124 G4-9 Scale of the organization Yes 133,159 G4-10 Workforce Yes 159 *UNGC Principle 06 – The elimination of discrimination in 152-153 respect of employment and occupation G4-11 Total employees covered by collective bargaining agreements Yes 149 *OECD – Employment and industrial relations 149-155 *UNGC Principle 03 – Businesses should uphold the 149 freedom of association and the effective recognition of the right to collective bargaining G4-12 Organization’s supply management procedures Yes 176-177 G4-13 :PNUPÄJHU[JOHUNLZK\YPUN[OLYLWVY[PUNWLYPVK Yes 49-51 G4-14 Application of the precautionary principle Yes 173 G4-15 Details of externally developed economic, environmental and Yes 41 social charters, principles, or other initiatives G4-16 Memberships of associations Yes 5 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES G4-17 Entities representing the consolidated performance of Sampath Yes 327 Bank PLC G4-18 7YVJLZZMVYKLÄUPUNYLWVY[JVU[LU[HUKHZWLJ[IV\UKHYPLZ Yes 59-61 G4-19 Material aspects Yes 60-61 G4-20 Aspect boundaries within the Bank Yes 60-61 G4-21 Aspect boundaries outside the Bank Yes 60-61 G4-22 Effects of any restatements Yes 404 G4-23 :PNUPÄJHU[JOHUNLZMYVTWYL]PV\ZYLWVY[PUNWLYPVK Yes 61 :;(2,/63+,9,5.(.,4,5; G4-24 Stakeholder groups who engage by the organization Yes 58,145,146, 161,174,175, 178 G4-25 )HZPZMVYPKLU[PÄJH[PVUHUKZLSLJ[PVUVMZ[HRLOVSKLYZ Yes 58 G4-26 Organization’s approach to stakeholder engagement Yes 145,146,161, 174,175,178

468 SAMPATH BANK PLC Annual Report 2015 External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles G4-27 Key topics and concerns raised by stakeholders and the Bank's Yes 145,146,161, response to these key topics and concerns 174,175,178 REPORT PROFILE G4-28 Reporting period Yes 41 G4-29 Date of most recent previous report Yes 41 G4-30 Reporting cycle Yes 41 G4-31 Contact point for questions regarding the report or its content Yes Inner Back Cover G4-32 “In Accordance” option selected Yes 41 G4-33 Assurance Yes 41,478 GOVERNANCE G4-34 Governance structure including committees responsible for Yes 230,232,233, decision making on economic, environmental and social impacts 235 G4-35 Process for delegating authority for economic, environmental and Yes 179 social topics G4-36 Executive-level positions responsible for economic, environmental Yes 179,230 and social topics G4-37 Processes for consultation between stakeholders and the highest Yes 57,180 governance body G4-38 Composition of the highest governance body and its committees Yes 233-235 G4-39 *OHPYHUKL_LJ\[P]LVMÄJLYWVZP[PVUZ Yes 234 G4-40 Nomination and selection processes for Sampath Bank PLC’s Yes 262,267,275 Board and its committees G4-41 7YVJLZZ[VLUZ\YLJVUÅPJ[ZVMPU[LYLZ[HYLH]VPKLKH[)VHYKSL]LS Yes 265,277,278, 292 G4-42 Development, approval and updating of matters related to Yes 54-55, economic, environmental and social impacts 228,296 G4-43 Measures taken to develop and enhance the collective Yes 240,243,248 knowledge of the board on economic, environmental and social topics G4-44 Processes for evaluation of the performance of the Board with Yes 240,243,248 regard to economic, environmental and social topics and the actions taken in response to the evaluation G4-45 /PNOLZ[NV]LYUHUJLIVK`»ZYVSLPU[OLPKLU[PÄJH[PVUHUK Yes 56 management of economic, environmental and social impacts, risks, and opportunities G4-46 /PNOLZ[NV]LYUHUJLIVK`»ZYVSLPUYL]PL^PUN[OLLMMLJ[P]LULZZVM Yes 56 the organization’s risk management processes G4-47 Frequency of the highest governance body’s review of economic, Yes 237-239 environmental and social impacts, risks, and opportunities G4-48 The committee that formally reviews and approves the Yes 56,59 sustainability report to ensure that all material aspects are covered G4-49 Process for communicating critical concerns to the Board Yes 254,261 G4-50 Scope and total number of critical concerns that were Yes 172 communicated to the Board

Annual Report 2015 SAMPATH BANK PLC 469 GRI G4 Content Index

External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles G4-51 Remuneration policies applicable for the board of directors and Yes 251,285,286 senior management G4-52 Process for determining remuneration Yes 251,285 G4-53 Process of obtaining stakeholders’ views regarding remuneration Yes Not Applicable G4-54 Ratio of the annual total compensation for the highest- No ** paid individual as a percentage of the median annual total compensation for all employees (excluding the highest-paid individual) G4-55 Ratio of the increase in annual total compensation for the highest- No ** paid individual as a percentage of the median increase in annual total compensation for all employees (excluding the highest-paid individual) ,;/0*:(5+05;,.90;@ G4-56 Values, principles, standards and norms of behaviour such as Yes 52-53,236 codes of conduct G4-57 Internal and external mechanisms for seeking advice on ethical Yes 257,284 and lawful behaviour, and matters related to the Bank's integrity G4-58 Internal and external mechanisms for reporting concerns Yes 204,270,284 regarding unethical or unlawful behaviour, and matters related to the Bank's integrity G4 SPECIFIC STANDARD DISCLOSURES CATEGORY: ECONOMIC *OECD – Taxation 346-348 DMA Disclosures on management approach 44-51 ASPECT: ECONOMIC PERFORMANCE G4-EC1 Direct economic value generated and distributed Yes 457 G4-EC2 Risks and opportunities posed by climate change Yes 197 G4-EC3 *V]LYHNLVM[OL)HURZKLÄULKILULÄ[WSHUVISPNH[PVUZ Yes 329,344,392 G4-EC4 Financial assistance received from Government Yes 348 ASPECT: MARKET PRESENCE G4-EC5 Standard entry level wage by gender Yes 146 G4-EC6 Senior management who hired from local community Yes 159 ASPECT: INDIRECT ECONOMIC IMPACTS G4-EC7 Development and impact of infrastructure investments and Yes 181-182 services supported G4-EC8 0KLU[PÄLKPUKPYLJ[LJVUVTPJPTWHJ[Z Yes 183 ASPECT: PROCUREMENT PRACTICES G4-EC9 Spending on local suppliers Yes 177 CATEGORY: ENVIRONMENTAL *OECD VI – Environment 191-200 *UNGC Principle 07 – Precautionary approach to environmental 192 challenges *UNGC Principle 08 – Initiatives to promote greater environmental 192-195,198- responsibility 200 *UNGC Principle 09 – Developments and diffusion of environmentally 78-80 friendly technologies

470 SAMPATH BANK PLC Annual Report 2015 External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles DMA Disclosures on management approach 191 ASPECT: MATERIALS G4-EN1 Materials use to produce primary products Yes 191,195,200 G4-EN2 Recycling mechanisms Yes 194,200 ASPECT: ENERGY G4-EN3 Direct energy consumption Yes (Partial) 192 G4-EN4 Indirect energy consumption Yes 194 G4-EN5 Energy Intensity Yes 192 G4-EN6 Energy consumption statistics Yes 192 G4-EN7 Product related energy consumption Yes 192 ASPECT: WATER G4-EN8 Total water withdrawal by source Yes (Partial) 194 G4-EN9 >H[LYZV\YJLZHYLZPNUPÄJHU[S`HMMLJ[LKMYVT^P[OKYH^HSVM^H[LY Yes 194 G4-EN10 Percentage and total volume of water recycled and reused Yes 194 ASPECT: BIODIVERSITY G4-EN11 Owned operational sites owned, leased, managed in, or adjacent Yes 197 to protected areas and areas of high Biodiversity value outside protected areas G4-EN12 :PNUPÄJHU[PTWHJ[ZVMHJ[P]P[PLZWYVK\J[ZHUKZLY]PJLZVU Yes 199 biodiversity in protected areas and areas of high biodiversity value outside protected areas G4-EN13 /HIP[H[ZWYV[LJ[LKVYYLZ[VYLK Yes 199 G4-EN14 IUCN red list species and national conservation list species with Yes 199 habitats in areas affected by operations ASPECT: EMISSIONS G4-EN15 +PYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZ:JVWL Yes 195-197 G4-EN16 ,ULYN`PUKPYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZ:JVWL Yes 195-197 G4-EN17 6[OLYPUKPYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZ:JVWL Yes 195-197 G4-EN18 .YLLUOV\ZLNHZ./.LTPZZPVUZPU[LUZP[` Yes 195-197 G4-EN19 9LK\J[PVUVMNYLLUOV\ZLNHZ./.LTPZZPVUZ Yes 191,195-197 G4-EN20 Emissions of ozone-depleting substances (ODS) Yes 197

G4-EN21 NOX, SOXHUKV[OLYZPNUPÄJHU[HPYLTPZZPVUZ Yes 197-199 ASPECT: EFFLUENTS AND WASTE G4-EN22 Total water discharge by quality and destination Yes 194 G4-EN23 Total weight of waste by type and disposal method Yes 194 G4-EN24 ;V[HSU\TILYHUK]VS\TLVMZPNUPÄJHU[ZWPSSZ Yes 194 G4-EN25 Weight of transported, imported, exported, or treated waste Yes 194 deemed hazardous under the terms of the Basel convention 2 G4-EN26 Identity, size, protected status, and biodiversity value of Yes 194 ^H[LYIVKPLZHUKYLSH[LKOHIP[H[ZZPNUPÄJHU[S`HMMLJ[LKI`[OL organization’s discharges of water and runoff ASPECT: PRODUCTS AND SERVICES G4-EN27 Mitigation of environmental impacts of products and services Yes 195 G4-EN28 Product packaging Yes 194,200

Annual Report 2015 SAMPATH BANK PLC 471 GRI G4 Content Index

External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles ASPECT: COMPLIANCE G4-EN29 Compliance Yes 197 ASPECT: TRANSPORT G4-EN30 Environmental impact of transport Yes 197 ASPECT: OVERALL G4-EN31 Expenditure incurred on environmental protection Yes 191 ASPECT: SUPPLIER ENVIRONMENTAL ASSESSMENT G4-EN32 Environment screening of suppliers Yes 177 G4-EN33 (ZZLZZTLU[VMZPNUPÄJHU[HJ[\HSHUKWV[LU[PHSULNH[P]L Yes 177 environmental impacts in the supply chain and actions taken (:7,*;!,5=09654,5;(3.90,=(5*,4,*/(50:4: G4-EN34 Environmental grievances Yes 178 CATEGORY: SOCIAL SUB CATEGORY : LABOUR PRACTICES AND DECENT WORK *OECD – Employment and industrial relations 149-155 *UNGC Principle 06 - The elimination of discrimination in respect of 152-153 employment and occupation DMA Disclosures on management approach 146 ASPECT: EMPLOYMENT G4-LA 1 New employee hires and employee turnover Yes 156 G4-LA 2 )LULÄ[ZWYV]PKLK[VM\SS[PTLLTWSV`LLZ Yes 148 G4-LA 3 Parental leave Yes 157 ASPECT: LABOUR/MANAGEMENT RELATIONS *UNGC Principle 03 – Businesses should uphold the freedom of 149 association and the effective recognition of the right to collective bargaining G4-LA 4 5V[PJLWLYPVKZVUVWLYH[PVUHSJOHUNLZZWLJPÄLKPUJVSSLJ[P]L Yes 149 agreements (:7,*;!6**<7(;065(3/,(3;/(5+:(-,;@ *OECD – Environment 153 G4-LA 5 /LHS[OHUKZHML[`JVTTP[[LLZ Yes 153 G4-LA 6 Occupational diseases, lost days and absenteeism Yes 153,157 G4-LA 7 Workers with high incidence or high risk of diseases related to Yes 153 their occupation G4-LA 8 /LHS[OHUKZHML[`[VWPJZJV]LYLKPUMVYTHSHNYLLTLU[Z^P[O[YHKL Yes 149,153 unions ASPECT: TRAINING AND EDUCATION 151-152,157- *OECD – Environment 158 G4-LA 9 -11 Training and education for employees Yes 157-158 ASPECT: DIVERSITY AND EQUAL OPPORTUNITY *UNGC – Women empowerment principles 153 G4-LA 12 Diversity and equality of committees Yes 159 ASPECT: EQUAL REMUNERATION FOR WOMEN AND MEN G4-LA 13 Remuneration for men and women Yes 160

472 SAMPATH BANK PLC Annual Report 2015 External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles ASPECT: SUPPLIER ASSESSMENT FOR LABOUR PRACTICES G4-LA 14 Labour screening practices for suppliers Yes 177 G4-LA 15 Assessment of potential negative impacts for labour practices in Yes 177 the supply chain and actions taken (:7,*;!3()6<979(*;0*,:.90,=(5*,4,*/(50:4: G4-LA 16 5\TILYVMNYPL]HUJLZHIV\[SHIV\YWYHJ[PJLZÄSLKHKKYLZZLK Yes 160 and resolved through formal grievance mechanisms *OECD – Bribe solicitation and extortion -

:<)*(;,.69@!/<4(590./;: 6,*+¶/\THUYPNO[Z 152 *UNGC Principle 01 – Business support and respect towards the 152,157 protection of proclaimed human rights *UNGC Principle 02 – Ensure the non-complicit in human right abuses 160 ASPECT: INVESTMENT ./9 :PNUPÄJHU[PU]LZ[TLU[HNYLLTLU[Z Yes 184 ./9 Training on human rights Yes 183 ASPECT: NON-DISCRIMINATION *OECD – Employment and industrial relations 149-155 *UNGC Principle 06 - The elimination of discrimination in respect of 152-153 employment and occupation ./9 Incidents of discrimination Yes 152 ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING *OECD – Employment and industrial relations 149 *UNGC Principle 03 – Businesses should uphold the freedom of 149 association and the effective recognition of the right to collective bargaining ./9 6WLYH[PVUZHUKZ\WWSPLYZPKLU[PÄLKPU^OPJO[OLYPNO[[VL_LYJPZL Yes 149,177 freedom of association (:7,*;!*/03+3()6<9 *OECD – Employment and industrial relations 152,177 *UNGC Principle 05 – Effective abolition of child labour 152,177 ./9 Measures taken to the effective abolition of child labour in Yes 152,177 operations and suppliers ASPECT: FORCED OR COMPULSORY LABOUR *OECD – Employment and industrial relations 152,177 *UNGC Principle 04 – Elimination of all forms of forced and compulsory 152,177 labour ./9 Measures taken to the elimination of all forms of forced or Yes 152,177 compulsory labour ASPECT: SECURITY PRACTICES ./9 Training of security personnel in relation to human rights policies Yes 153 or procedures that are relevant to operations (:7,*;!05+0.,56<:90./;: ./9  Total number of incidents of violations involving rights of Yes 152 indigenous people and actions taken

Annual Report 2015 SAMPATH BANK PLC 473 GRI G4 Content Index

External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles ASPECT: ASSESSMENT *UNGC principles and principles for responsible investment 330,367 ./9  Total number and percentage of operations that have been Yes 152 subject to human rights reviews or impact assessments (:7,*;!:<7730,9/<4(590./;:(::,::4,5; *UNGC principles and principles for responsible investment 330,367 ./9 Supplier screening Yes 177 ./9 Negative human rights impacts in the supply chain Yes 177 (:7,*;!/<4(590./;:.90,=(5*,4,*/(50:4: ./9 /\THUYPNO[ZNYPL]HUJLZ Yes 160 SUB CATEGORY: SOCIETY DMA Disclosures on management approach 178 ASPECT: LOCAL COMMUNITIES *UNGC Principle 01 - Business support and respect towards the 152,157 protection of proclaimed human rights G4-SO1 Local community engagement, impact assessments and Yes 178,180,182 development programs

G4-SO2 6WLYH[PVUZ^P[OZPNUPÄJHU[HJ[\HSHUKWV[LU[PHSULNH[P]LPTWHJ[Z Yes 181 on local communities ASPECT: ANTI-CORRUPTION *OECD – Bribe solicitation and extortion - *UNGC Principle 10 – Business works against all forms of corruption, 176,183,236 including extortion and bribery G4-SO3 Operations assessed for risks related to corruption and the Yes 183 ZPNUPÄJHU[YPZRZPKLU[PÄLK G4-SO4 Communication and training on anti-corruption policies and Yes 183 procedures G4-SO5 *VUÄYTLKPUJPKLU[ZVMJVYY\W[PVUHUKHJ[PVUZ[HRLU Yes 183 ASPECT: PUBLIC POLICY *OECD – Bribe solicitation and extortion - *UNGC Principle 10 – Business works against all forms of corruption 176,183,236 including extortion and bribery G4-SO6 7VSP[PJHSJVU[YPI\[PVUZI`JV\U[Y`HUKYLJPWPLU[ILULÄJPHY` Yes 181 (:7,*;!(5;0*647,;0;0=,),/(=06<9 *OECD – Competition 183 G4-SO7 Legal actions for anti-competitive behaviour, anti-trust and Yes 183 monopoly practices and their outcomes ASPECT: COMPLIANCE *OECD – Competition 183 G4-SO8 4VUL[HY`]HS\LVMZPNUPÄJHU[ÄULZHUK[V[HSU\TILYVMUVU Yes 183 monetary sanctions for non-compliance with laws and regulations

474 SAMPATH BANK PLC Annual Report 2015 External Page Reference GRI GRI Disclosure Description Assurance OECD/UNGC Indicator GRI Provided* Principles ASPECT: SUPPLIER ASSESSMENT FOR IMPACTS ON SOCIETY 6,*+/\THUYPNO[Z 175-177 *OECD - Environment 175-177 *OECD - Bribe solicitation and extortion - *OECD - Competition 175-177 G4-SO9 Suppliers screened using criteria for impacts on society Yes 177 G4-SO10 (ZZLZZTLU[VMZPNUPÄJHU[HJ[\HSHUKWV[LU[PHSULNH[P]LPTWHJ[Z Yes 177 on society in the supply chain and actions taken (:7,*;!.90,=(5*,4,*/(50:4:-69047(*;:65:6*0,;@ 6,*+/\THUYPNO[Z 180-185 *OECD - Environment 180-185 *OECD - Bribe solicitation and extortion - *OECD - Competition 180-185 G4-SO11 .YPL]HUJLZHIV\[PTWHJ[ZVUZVJPL[`ÄSLKHKKYLZZLKHUK Yes 178 resolved through formal grievance mechanisms SUB CATEGORY: PRODUCT RESPONSIBILITY *OECD - Consumer interests 161-173 DMA Disclosures on management approach 161 (:7,*;!*<:;64,9/,(3;/(5+:(-,;@ *OECD - Environment 161-173 G4-PR1 Safety of products and services Yes 171 G4-PR2 /LHS[OHUKZHML[`JVTWSPHUJL Yes 171 ASPECT: PRODUCT AND SERVICE LABELLING G4-PR3 Product information and labelling Yes 170 G4-PR4 Compliance Yes 170 G4-PR5 Results of surveys measuring customer satisfaction Yes 169 ASPECT: MARKETING COMMUNICATIONS G4-PR6 Banned or disputed products Yes 163 G4-PR7 Compliance Yes 163 ASPECT: CUSTOMER PRIVACY G4-PR8 Customer complaints on customer privacy Yes 171 ASPECT: COMPLIANCE G4-PR9 Overall compliance of all aspects pertaining to product Yes 172 responsibility

 (SS[OLZ[HUKHYKKPZJSVZ\YLHUKZWLJPÄJZ[HUKHYKKPZJSVZ\YLP[LTZPUHJJVYKHUJL[V.90.OH]LILLUHZZ\YLKI`L_[LYUHSH\KP[VYZ,YUZ[HUK@V\UN7SLHZL refer the page number 478 for the External Assurance Statement on sustainability in this regard. ** Information cannot be disclosed.

Annual Report 2015 SAMPATH BANK PLC 475 GRI Financial Services Sector Disclosures

SPECIFIC STANDARD DISCLOSURES FOR THE SECTOR

Indicator :LJ[VY:WLJPÄJ+PZJSVZ\YLZ Page Reference

CATEGORY: ECONOMIC DMA Economic performance 179,182 G4-EC1 Direct economic value generated and distributed 181-190,457 CATEGORY: ENVIRONMENTAL G4-EN15 +PYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZ¶ZJVWL 196,197 G4-EN16 ,ULYN`PUKPYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZZJVWL 196,197 G4-EN17 6[OLYPUKPYLJ[NYLLUOV\ZLNHZ./.LTPZZPVUZZJVWL 196,197 G4-EN23 ,MÅ\LU[ZHUK^HZ[L 194 CATEGORY: SOCIAL SUB CATEGORY: Labour Practices and Decent Work DMA Occupational health and safety 151-152,173 :<)*(;,.69@!/\THU9PNO[Z ./9 Investment No SUB CATEGORY: Society DMA Local Communities FS13 Access points in low-populated or economically disadvantaged areas by type 166 FS14 0UP[PH[P]LZ[VPTWYV]LHJJLZZ[VÄUHUJPHSZLY]PJLZMVYKPZHK]HU[HNLKWLVWSL 166-168 SUB CATEGORY: Product Responsibility DMA Product and Service Labelling FS15 7VSPJPLZMVY[OLMHPYKLZPNUHUKZHSLVMÄUHUJPHSWYVK\J[ZHUKZLY]PJLZ 163 FS16 0UP[PH[P]LZ[VLUOHUJLÄUHUJPHSSP[LYHJ`I`[`WLVMILULÄJPHY` 93-94,183-185 DMA Product Portfolio FS1 7VSPJPLZ^P[OZWLJPÄJLU]PYVUTLU[HSHUKZVJPHSJVTWVULU[ZHWWSPLK[VI\ZPULZZSPULZ 179-180,198-200 FS2 Procedures for assessing and screening environmental and social risks in business lines 202-225 FS3 Processes for monitoring clients’ implementation of and compliance with environmental and social requirements No included in agreements or transactions FS4 Process(es) for improving staff competency to implement the environmental and social policies and procedures as No applied to business lines FS5 Interactions with clients/investees/business partners regarding environmental and social risks and opportunities No FS6 7LYJLU[HNLVM[OLWVY[MVSPVMVYI\ZPULZZSPULZI`ZWLJPÄJYLNPVUZPaLLN4PJYV:4,3HYNLHUKI`ZLJ[VY No FS7 4VUL[HY`]HS\LVMWYVK\J[ZHUKZLY]PJLZKLZPNULK[VKLSP]LYHZWLJPÄJZVJPHSILULÄ[MVYLHJOI\ZPULZZSPULIYVRLU No down by purpose FS8 4VUL[HY`]HS\LVMWYVK\J[ZHUKZLY]PJLZKLZPNULK[VKLSP]LYHZWLJPÄJLU]PYVUTLU[HSILULÄ[MVYLHJOI\ZPULZZ No line broken down by purpose DMA Audit FS9 Coverage and frequency of audits to assess implementation of environmental and social policies and risk No assessment procedures DMA Active Ownership FS12 Voting policy(ies) applied to environmental or social issues for shares over which the reporting organization holds No the right to vote shares or advises on voting FS10 Percentage and number of companies held in the institution’s portfolio with which the reporting organization has No interacted on environmental or social issues FS11 Percentage of assets subject to positive and negative environmental or social screening No

476 SAMPATH BANK PLC Annual Report 2015 Supplementary Sustainability Indices

IFC Sustainability Framework Index

No Performance Standard Disclosure Page Reference 1 Assessment and management of environmental and social risks and impacts 180,182,202-225 2 Labour and working conditions 146-160 3 9LZV\YJLLMÄJPLUJ`HUKWVSS\[PVUWYL]LU[PVU 192-195 4 Community health, safety and security 171,173,182 5 Land acquisition and involuntary resettlement No 6 Biodiversity conservation and sustainable management of living natural resources 199-200 7 Indigenous people 152 8 Cultural heritage No

International Integrated Reporting Framework: Six Capital Index (Note: Please refer page 52-53 for Value Creation Business Model)

Capitals Description Page Reference

Financial capital Funds available to an organization for use in the production of goods or the 320-324 provision of services.

6I[HPULK[OYV\NOÄUHUJPUNZ\JOHZKLI[LX\P[`VYNYHU[ZVYNLULYH[LK[OYV\NO 322-326 operations or investments. Manufactured Manufactured physical objects (as distinct from natural physical objects) that are 78-80,110,117,163- capital available to an organization for use in the production of goods or the provision of 168, services. Intellectual capital Intellectual property 30-31

“Organizational capital” such as tacit knowledge, systems, procedures and 109-111,195 protocols. /\THUJHWP[HS Alignment with and support for an organization’s governance framework, risk 203,228-230 management approach, and ethical values.

Ability to understand, develop and implement an organization’s strategy. 144-145

Loyalties and motivations for improving processes, goods and services, including 54-56 their ability to lead, manage and collaborate. Social and Shared norms and common values and behaviours 52-53 Relationship Capital Key stakeholder relationships, and the trust and willingness to engage that 57-58,145-200 an organization has developed and strives to build and protect with external stakeholders. Natural capital All renewable and nonrenewable environmental resources and processes that 92,195,200 provide goods or services that support the past, current or future prosperity of an organization.

Annual Report 2015 SAMPATH BANK PLC 477 Independent Assurance Report

Independent Assurance Report enable to obtain assurance that we would  Checking the calculations performed to Sampath Bank PLC on the ILJVTLH^HYLVMHSSZPNUPÄJHU[TH[[LYZ[OH[ by the bank on a sample basis through Sustainability Reporting Criteria TPNO[ILPKLU[PÄLKPUHYLHZVUHISLHZZ\YHUJL recalculation. Presented Under the Integrated engagement. Accordingly, we do not express  Reconciling and agreeing the data Annual Report- 2015 an opinion providing reasonable assurance. VUÄUHUJPHSWLYMVYTHUJLHYLWYVWLYS` Introduction and scope of the KLYP]LKMYVT[OLIHUR»ZH\KP[LKÄUHUJPHS engagement Management of the Bank’s responsibility statements for the year ended 31 The management of Sampath Bank PLC for the Report December 2015. (“the Bank”) engaged us to provide an The management of the bank is responsible  Comparison of the content of the independent assurance on the following for the preparation of the self-declaration, the Report against the criteria for a Global elements of the sustainability reporting information and statements contained within Reporting Initiative G4 ‘In accordance’ - criteria presented under the annual report- the Report, and for maintaining adequate Comprehensive guidelines. 2015 (“the Report”). records and internal controls that are  Reasonable assurance on the information designed to support the sustaining reporting Our procedures did not include testing VUÄUHUJPHSWLYMVYTHUJLHZZWLJPÄLKVU process in line with the GRI Sustainability electronic systems used to collect and page 457 of the Report. Reporting Guidelines. aggregate the information.  Limited assurance on other information presented in the Report, prepared in Ernst & Young’s responsibility Limitations and considerations accordance with the requirements of Our responsibility is to express a conclusion Environmental and social performance data the Global Reporting Initiative G4 ‘In as to whether we have become aware of are subject to inherent limitations given accordance’ - Comprehensive guidelines. any matter that causes us to believe that the their nature and the methods used for Report is not prepared in accordance with determining, calculating and estimating such Basis of our work and level of assurance the requirements of the Global Reporting data. We performed our procedures to provide Initiative G4 ‘In accordance’ - Comprehensive limited assurance in accordance with Sri guidelines. This report is made solely to the Conclusion Lanka Standard on Assurance Engagements Bank in accordance with our engagement Based on the procedures performed, as (SLSAE 3000): ‘Assurance Engagements letter dated 09 December 2015. We disclaim described above, we conclude that; 6[OLY[OHU(\KP[ZVY9L]PL^ZVM/PZ[VYPJHS any assumption of responsibility for any  ;OLPUMVYTH[PVUVUÄUHUJPHSWLYMVYTHUJL Financial Information’, issued by the Institute reliance on this report to any person other HZZWLJPÄLKVUWHNLVM[OL9LWVY[ of Chartered Accountants of Sri Lanka than the bank or for any purpose other than are properly derived from the audited (“CASL”). that for which it was prepared. In conducting ÄUHUJPHSZ[H[LTLU[ZVM[OL)HURMVY[OL our engagement, we have complied with the year ended 31 December 2015. The evaluation criteria used for this limited independence requirements of the Code for  Nothing has come to our attention assurance engagement are based on the Ethics for Professional Accountants issued that causes us to believe that other Sustainability Reporting Guidelines (“GRI by the CASL. information presented in the Report Guidelines”) and related information in are not fairly presented, in all material particular, the requirements to achieve Key assurance procedures respects, in accordance with the Bank’s GRI G4 ‘In accordance’ - Comprehensive We planned and performed our procedures sustainability practices and policies guideline publication, publicly available to obtain the information and explanations some of which are derived from GRI- at GRI’s global website at “www. JVUZPKLYLKULJLZZHY`[VWYV]PKLZ\MÄJPLU[ G4-‘In accordance’ Comprehensive globalreporting.org”. evidence to support our limited assurance Sustainability Reporting Guidelines. conclusions. Key assurance procedures Our engagement provides limited assurance included: as well as reasonable assurance. A limited  Interviewing relevant bank’s personnel assurance engagement is substantially to understand the process for collection, Ernst & Young less in scope than a reasonable assurance analysis, aggregation and presentation of Chartered Accountants engagement conducted in accordance with data. SLSAE-3000 and consequently does not  Reviewing and validation of the 16 February 2016 information contained in the Report. Colombo

478 SAMPATH BANK PLC Annual Report 2015 Glossary of Financial and Banking Terms

A ZPNUPÄJHU[PUÅ\LUJLHUK[OH[PZULP[OLY International Settlement (BIS) and as Acceptances a subsidiary nor an interest in a joint TVKPÄLK[VZ\P[SVJHSYLX\PYLTLU[ZI`[OL Promise to pay created when the drawee venture. Central Bank of Sri Lanka. of a time draft stamps or writes the word Available For Sale (AFS) Financial Cash Equivalents "accepted" above his signature and a Assets Cash equivalents are short-term, highly designated payment date. 5VUKLYP]H[P]LÄUHUJPHSHZZL[Z[OH[HYL liquid investments that are readily Accounting Policies designated as available for sale or are not convertible to known amounts of cash ;OLZWLJPÄJWYPUJPWSLZIHZLZ JSHZZPÄLKHZHSVHUZHUKYLJLP]HISLZ HUK^OPJOHYLZ\IQLJ[[VHUPUZPNUPÄJHU[ conventions, rules and practices adopted (b) held-to-maturity investments or (c) risk of changes in value. by an entity in preparing and presenting ÄUHUJPHSHZZL[ZH[MHPY]HS\L[OYV\NOWYVÄ[ Cash Flows Financial Statements. or loss. *HZOÅV^ZHYLPUÅV^ZHUKV\[ÅV^ZVM Accrual Basis Average Weighted Deposit Rate cash and cash equivalents. Recognition of the effects of transactions (AWDR) Collectively Assessed Loan and other events when they occur AWDR is calculated by the Central Impairment Provisions without waiting for receipt or payment of Bank monthly based on the weighted Also known as portfolio impairment cash or its equivalents. average of all outstanding interest bearing deposits of commercial banks and the provisions. Impairment assessment on Amortisation corresponding interest rates. a collective basis for homogeneous The systematic allocation of the groups of loans that are not considered depreciable amount of an intangible asset Average Weighted Prime Lending Rate PUKP]PK\HSS`ZPNUPÄJHU[HUK[VJV]LYSVZZLZ over its useful life. (AWPLR) that has been incurred but has not yet AWPLR is calculated by the Central Bank ILLUPKLU[PÄLKH[[OLYLWVY[PUNKH[L Amortised Cost weekly based on commercial bank's Typically assets within the consumer ;OLHTVY[PZLKJVZ[VMHÄUHUJPHSHZZL[ lending rates offered to their prime banking business (housing, personal, VYÄUHUJPHSSPHIPSP[`PZ[OLHTV\U[H[ customers during the week. vehicle loans, credit cards etc) are ^OPJO[OLÄUHUJPHSHZZL[VYÄUHUJPHS assessed on a portfolio basis. liability is measured at initial recognition B Commercial Paper (CP) minus principal repayments, plus or Basel II An unsecured, short-term debt minus the cumulative amortisation using The capital adequacy framework issued instrument issued by a corporation, the effective interest method of any by the Basel Committee on Banking [`WPJHSS`MVY[OLÄUHUJPUNVMHJJV\U[Z difference between that initial amount Supervision (BCBS) in the form of the receivable, inventories and meeting short- and the maturity amount, and minus any ‘International Convergence of Capital term liabilities. The debt is usually issued reduction (directly or through the use of Measurement and Capital Standards’. an allowance account) for impairment or H[HKPZJV\U[YLÅLJ[PUNWYL]HPSPUNTHYRL[ uncollectability. Basel III interest rates. The BCBS issued the Basel III rules Asset and Liability Committee (ALCO) Commitments text, which presents the details of A risk-management committee in a bank Credit facilities approved but not yet strengthened global regulatory standards that generally comprises the senior- utilized by the clients as at the reporting on bank capital adequacy and liquidity. management levels of the institution. date. The ALCO’s primary goal is to evaluate, Bills sent for Collection Consolidated Financial Statements monitor and approve practices relating A bill of exchange drawn by an exporter *VUZVSPKH[LKÄUHUJPHSZ[H[LTLU[ZHYL[OL to risk due to imbalances in the capital usually at a term, on an importer overseas ÄUHUJPHSZ[H[LTLU[ZVMHNYV\WPU^OPJO structure. Among the factors considered and brought by the exporter to his bank the assets, liabilities, equity, income, are liquidity risk, interest rate risk, with a request to collect the proceeds. L_WLUZLZHUKJHZOÅV^ZVM[OLWHYLU[ operational risk and external events and its subsidiaries are presented as that may affect the bank’s forecast and C those of a single economic entity. strategic balance-sheet allocations. Capital Adequacy Ratio The percentage of risk-adjusted assets Contingencies Associate Company A condition or situation, the ultimate An associate is an entity, including Z\WWVY[LKI`JHWP[HSHZKLÄULK\UKLY the framework of risk-based capital outcome of which (gain or loss) will be an unincorporated entity such as a standards developed by the Bank for JVUÄYTLKVUS`VU[OLVJJ\YYLUJLVY partnership, over which the investor has

Annual Report 2015 SAMPATH BANK PLC 479 Glossary of Financial and Banking Terms

non-occurrence of one or more uncertain Credit Risk Derecognition future events. *YLKP[YPZRPZ[OLYPZRVMÄUHUJPHSSVZZ[V Derecognition is the removal of a the Bank if a customer or counter party WYL]PV\ZS`YLJVNUPZLKÄUHUJPHSHZZL[VY Control [VHÄUHUJPHSPUZ[Y\TLU[MHPSZ[VTLL[ ÄUHUJPHSSPHIPSP[`MYVTHULU[P[`»ZZ[H[LTLU[ An investor controls an investee when its contractual obligations, and arises VMÄUHUJPHSWVZP[PVU the investor is exposed, or has rights, to principally from the loans and advances variable returns from its involvement with to customers and other banks and Derivatives the investee and has the ability to affect investment debt securities. (KLYP]H[P]LPZHÄUHUJPHSPUZ[Y\TLU[ those returns through its power over the or other contract, the value of which investee. Credit Risk Mitigation changes in response to some underlying A technique to reduce the credit variable (e.g. an interest rate), that has an Corporate Governance risk associated with an exposure by initial net investment smaller than would The process by which corporate entities application of credit risk mitigants such be required for other instruments that are governed. It is concerned with the as collateral, guarantee and credit have a similar response to the variable, way in which power is exercised over protection. and that will be settled at a future date. the management and direction of entity, the supervision of executive actions and Currency Risk Discount Rate accountability to owners and others. The risk that the fair value or future A rate used to place a current value on JHZOÅV^ZVMHÄUHUJPHSPUZ[Y\TLU[^PSS M\[\YLJHZOÅV^Z0[PZULLKLK[VYLÅLJ[ Correspondent Bank Å\J[\H[LILJH\ZLVMJOHUNLZPUMVYLPNU the fact that money has a time value. A bank in a foreign country that offers exchange rates. banking facilities to the customers of a Dividend Cover bank in another country. Currency SWAPs 7YVÄ[HM[LY[H_KP]PKLKI`NYVZZKP]PKLUK The simultaneous purchase of an amount This ratio measures the number of times Cost Method of a currency for spot settlement and the dividend is covered by the current year’s A method of accounting whereby the sale of the same amount of the same KPZ[YPI\[HISLWYVÄ[Z investment is recorded at cost. The currency for forward settlement. 0UJVTL:[H[LTLU[YLÅLJ[ZPUJVTLMYVT Dividend Yield the investment only to the extent that Customer Deposits Dividend earned per share as a the investor receives distributions from Money deposited by account holders. percentage of its market value. HJJ\T\SH[LKUL[WYVÄ[ZVM[OLPU]LZ[LL Such funds are recorded as liabilities. arising subsequent to the date of Documentary Letters of Credit (LCs) acquisition. D Written undertakings by a bank on behalf of its customers, authorising a Deferred Tax &RVW3XVK,QñDWLRQ third party to draw on the Bank up to a :\TZL[HZPKLPU[OLÄUHUJPHSZ[H[LTLU[Z A continuous increase in average price Z[PW\SH[LKHTV\U[\UKLYZWLJPÄJ[LYTZ for taxation that may become payable/ levels due to an increase in production and conditions. Such undertakings are YLJLP]HISLPUHÄUHUJPHS`LHYV[OLY costs. established for the purpose of facilitating [OHU[OLJ\YYLU[ÄUHUJPHS`LHY0[HYPZLZ international trade. Cost to Income Ratio because of temporary differences between tax rules and accounting Operating expenses excluding E impairment charge for loans and other conventions. Earnings per Share (EPS) losses as a percentage of total operating Delinquency ;OLWYVÄ[H[[YPI\[HISL[VLHJOVYKPUHY` income. (KLI[VYV[OLYÄUHUJPHSVISPNH[PVUPZ ZOHYLPU[OL)HURIHZLKVU[OLWYVÄ[MVY Country Risk considered to be in a state of delinquency the period after tax and after deducting The risk that a foreign government will when payments are overdue. Loans and minority interest and preference share UV[M\SÄSSP[ZVISPNH[PVUZVYVIZ[Y\J[Z[OL advances are considered to be delinquent Dividend. remittance of funds by debtors, either for when consecutive payments are missed. Economic Value Added (EVA) ÄUHUJPHSYLHZVUZ[YHUZMLYYPZRVYMVYV[OLY Also known as ‘Arrears’. A measure of productivity which takes reasons (political risk). Depreciation into consideration cost of total invested Credit Rating The systematic allocation of the equity. An evaluation of a corporate's ability to depreciable amount of an asset over its Effective Interest Rate (EIR) repay its obligations or likelihood of not useful life. Rate that exactly discounts estimated defaulting, carried out by an independent future cash payments or receipts rating agency. [OYV\NO[OLL_WLJ[LKSPMLVM[OLÄUHUJPHS

480 SAMPATH BANK PLC Annual Report 2015 instruments or, when appropriate, a Finance Lease neither the intention nor the need to shorter period to the net carrying amount (ÄUHUJLSLHZLPZHSLHZL[OH[[YHUZMLYZ liquidate or curtail materially the scale of VM[OLÄUHUJPHSHZZL[VYÄUHUJPHSSPHIPSP[` substantially all the risks and rewards its operations. incidental to ownership of an asset. Title Effective Tax Rate (ETR) may or may not eventually be transferred. Gross Dividend Provision for taxation excluding deferred ;OLWVY[PVUVMWYVÄ[ZKPZ[YPI\[LK[V[OL [H_KP]PKLKI`[OLWYVÄ[ILMVYL[H_H[PVU Financial Guarantee Contract shareholders including the tax withheld. (ÄUHUJPHSN\HYHU[LLJVU[YHJ[PZH Equity Instrument contract that requires the issuer to make Group An equity instrument is any contract ZWLJPÄLKWH`TLU[Z[VYLPTI\YZL[OL A group is a parent and its subsidiaries. that evidences a residual interest in the holder for a loss it incurs because a assets of an entity after deducting all of Guarantees ZWLJPÄLKKLI[VYMHPSZ[VTHRLWH`TLU[ A promise made by a third party its liabilities. when due in accordance with the original (guarantor), who is not a party to a Equity Method VYTVKPÄLK[LYTZVMHKLI[PUZ[Y\TLU[ contract between two others, that the The equity method is a method of Financial Instrument guarantor will be liable if the guarantee accounting whereby the investment is Financial instrument is any contract that MHPSZ[VM\SÄSS[OLJVU[YHJ[\HSVISPNH[PVUZ initially recognised at cost and adjusted NP]LZYPZL[VHÄUHUJPHSHZZL[VMVULLU[P[` thereafter for the post-acquisition change HUKHÄUHUJPHSSPHIPSP[`VYLX\P[`PUZ[Y\TLU[ H in the investor’s share of net assets of the of another entity. Hedging PU]LZ[LL;OLWYVÄ[VYSVZZVM[OLPU]LZ[VY A strategy under which transactions PUJS\KLZ[OLPU]LZ[VY»ZZOHYLVM[OLWYVÄ[ Firm Commitment are effected with the aim of providing or loss of the investee. (ÄYTJVTTP[TLU[PZHIPUKPUN cover against the risk of unfavourable agreement for the exchange of a price movements (interest rate, foreign ESOP (Employee Share Ownership ZWLJPÄLKX\HU[P[`VMYLZV\YJLZH[H exchange rate, commodity prices, etc) Plan) ZWLJPÄLKWYPJLVUHZWLJPÄLKM\[\YLKH[L A method of giving employees shares in or dates. Held to Maturity (HTM) Financial the business for which they work. Assets Foreign Exchange Income /LSK[VTH[\YP[`PU]LZ[TLU[ZHYLUVU Events after the Reporting Period The realised gain recorded when assets KLYP]H[P]LÄUHUJPHSHZZL[Z^P[OÄ_LK Events after the reporting period or liabilities denominated in foreign VYKL[LYTPUHISLWH`TLU[ZHUKHÄ_LK are those events, favourable and currencies are translated into Sri Lankan maturity that an entity has the positive unfavourable, that occur between the end Rupees on the reporting date at prevailing intention and ability to hold to maturity. of the reporting period and the date when rates which differ from those rates in force [OLÄUHUJPHSZ[H[LTLU[ZHYLH\[OVYPZLK at inception or on the previous reporting High Quality Liquid Assets (HQLA) for issue date. Foreign exchange income also /83(HYLHZZL[Z[OH[JHUILLHZPS`HUK arises from trading in foreign currencies. immediately converted into cash at little Expected Loss (EL) or no loss of value, that can be readily A regulatory calculation of the amount Forward Exchange Contract sold or used as collateral to obtain expected to be lost on an exposure using Agreement between two parties to funds in a range of stress scenarios and a 12 month time horizon and downturn exchange one currency for another at a are unencumbered, i.e., without legal, loss estimates. EL is calculated by future date at a rate agreed upon today. regulatory or operational impediments. multiplying the Probability of Default (a percentage) by the Exposure at Default G (an amount) and Loss Given Default (a I Global Reporting Initiative (GRI) percentage). Impaired Loans GRI is a leading organization in the Impaired loans are loans where the Exposure Z\Z[HPUHIPSP[`ÄLSK.90WYVTV[LZ[OL Group does not expect to collect all A claim, contingent claim or position use of sustainability reporting as a [OLJVU[YHJ[\HSJHZOÅV^ZVYL_WLJ[Z ^OPJOJHYYPLZHYPZRVMÄUHUJPHSSVZZ way for organizations to become more to collect them later than they are sustainable and contribute to sustainable contractually due. F development. Impairment Fair Value Going Concern This occurs when recoverable amount of Fair Value is the price that would be ;OLÄUHUJPHSZ[H[LTLU[ZHYLUVYTHSS` an asset is less than its carrying amount. received to sell an asset or paid to prepared on the assumption that an transfer a liability in an orderly transaction entity is a going concern and will continue Impairment Provisions between market participants at the in operation for the foreseeable future. Impairment provisions are provisions held measurement date. /LUJLP[PZHZZ\TLK[OH[[OLLU[P[`OHZ on the Statement of Financial Position as

Annual Report 2015 SAMPATH BANK PLC 481 Glossary of Financial and Banking Terms

a result of the raising of a charge against responsibility for planning, directing and Materiality WYVÄ[MVY[OLPUJ\YYLKSVZZ controlling the activities of the entity. ;OLYLSH[P]LZPNUPÄJHUJLVMH[YHUZHJ[PVU or an event, the omission or misstatement ,QGLYLGXDOO\6LJQLðFDQW/RDQ L VM^OPJOJV\SKPUÅ\LUJL[OLKLJPZPVUZVM ,PSDLUPHQW3URYLVLRQ 6SHFLðF Liquidity Coverage Ratio (LCR) \ZLYZVMÄUHUJPHSZ[H[LTLU[Z Impairment Provision) Banks are required to maintain an Impairment is measured individually for HKLX\H[LSL]LSVM\ULUJ\TILYLK/PNO N HZZL[Z[OH[HYLPUKP]PK\HSS`ZPNUPÄJHU[[V 8\HSP[`3PX\PK(ZZL[Z/83([OH[JHUIL Net Asset Value Per Share the Group. converted into cash to meet their liquidity Shareholders’ funds divided by the Intangible Asset needs for a 30 calendar day time horizon number of ordinary shares in issue. (UPU[HUNPISLHZZL[PZHUPKLU[PÄHISL \UKLYHZPNUPÄJHU[S`ZL]LYLSPX\PKP[`Z[YLZZ Net-Interest Income (NII) non-monetary asset without physical scenario. LCR is computed by dividing The difference between what a bank substance. [OLZ[VJRVM/83(I`[OL[V[HSUL[JHZO V\[ÅV^ZV]LY[OLUL_[JHSLUKHYKH`Z earns on assets such as loans and Interest Cover securities and what it pays on liabilities A ratio showing the number of times Liquid Assets Z\JOHZKLWVZP[ZYLÄUHUJLM\UKZHUK interest charges is covered by earnings Assets that are held in cash or in a form inter-bank borrowings. before interest and tax. that can be converted to cash readily, such as deposits with other banks, bills of Nostro Account Interest Margin exchange and treasury bills and bonds. A bank account held in foreign country Net interest income expressed as a by a domestic bank, denominated in the percentage of average interest earning Liquidity Risk currency of that country. Nostro accounts assets. The risk that an entity will encounter are used to facilitate the settlement of KPMÄJ\S[`PUTLL[PUNVISPNH[PVUZHZZVJPH[LK foreign exchange trade transactions. Interest Rate Risk ^P[OÄUHUJPHSSPHIPSP[PLZ The risk that the fair value or future Non-Controlling Interest JHZOÅV^ZVMHÄUHUJPHSPUZ[Y\TLU[^PSS Loans and Receivables Non controlling interest is the equity in Å\J[\H[LILJH\ZLVMJOHUNLZPUTHYRL[ 5VUKLYP]H[P]LÄUHUJPHSHZZL[Z^P[OÄ_LK a subsidiary not attributable, directly or interest rates. or determinable payments that are not indirectly to a parent. quoted in an active market other than Interest Rate SWAP those intends to sell immediately or in the O An agreement between two parties where near term and designated as fair value Operational Risk one stream of future interest payments is [OYV\NOWYVÄ[VYSVZZVYH]HPSHISLZHSLVU Operational risk refers to the losses exchanged for another stream of future initial recognition. arising from fraud, negligence, oversight, PU[LYLZ[WH`TLU[ZIHZLKVUHZWLJPÄLK human error, process errors, system Loss Given Default (LGD) principal amount. failures, external events, etc. LGD is the percentage of an exposure Interest Spread that a lender expects to loose in the event This represents the difference between of obligor default. P the average interest rate earned and the Parent average interest rate paid on funds. M A parent is an entity that controls one or more entities. Market Capitalisation Investment Properties The value of a company obtained by Investment property is property (land Power multiplying the number of ordinary shares or a building - or part of a building – or The Power is the existing rights that give in issue by its market value as at a date. both) held (by the owner or by the lessee the current ability to direct the relevant activities. \UKLYHÄUHUJLSLHZL[VLHYUYLU[HSZVY Market Risk for capital appreciation or both, rather Market risk is the risk that changes in Price Earnings Ratio (P/E Ratio) than for use in the production or supply market prices, such as interest rates, The current market price of the share is of goods or services or for administrative equity prices, foreign exchange rates and divided by the earnings per share of the services; or sale in the ordinary course of credit spreads (not relating to changes in Bank. business. the obligor’s/issuer’s credit standing) will affect the Bank’s income or the value of Probability of Default (PD) K P[ZOVSKPUNZVMÄUHUJPHSPUZ[Y\TLU[Z The probability that an obligor will default Key Management Personnel within a one-year time horizon. Key management personnel are those persons having authority and

482 SAMPATH BANK PLC Annual Report 2015 Prudence (or credit) equivalents and then by U Inclusion of a degree of caution in the applying appropriate risk weighting Unit Trust exercise of judgment needed in making factors. An undertaking formed to invest in the estimates required under conditions securities under the terms of a trust deed. of uncertainty, such that assets or income S are not overstated and liabilities or Segmental Analysis Useful Life expenses are not understated. (UHS`ZPZVMÄUHUJPHSPUMVYTH[PVUI` Useful life is the period over which an ZLNTLU[ZVMHULU[LYWYPZLZWLJPÄJHSS` asset is expected to be available for use R the different industries and the different by an entity or the number of production Relevant Activities geographical areas in which it operates. or similar units expected to be obtained Relevant activities are activities of the from the asset by an entity. PU]LZ[LL[OH[ZPNUPÄJHU[S`HMMLJ[[OL Shareholders’ Funds investee's returns. Total of issued and fully paid share capital V and capital and revenue reserves. Value Added Repurchase Agreement Wealth created by providing banking Single Borrower Limit This is a contract to sell and subsequently and other services less the cost of 30% of Tier II Capital. repurchase government securities at a providing such services. The value added NP]LUWYPJLVUHZWLJPÄLKM\[\YLKH[L Statutory Reserve Fund is allocated among the employees, the providers of capital, to government by Return on Average Assets (ROA) A capital reserve created as per the way of taxes and retained for expansion 7YVÄ[HM[LY[H_L_WYLZZLKHZHWLYJLU[HNL provisions of the Banking Act No. 30 of and growth. of average total assets, used along with 1988. 96,HZHTLHZ\YLVMWYVÄ[HIPSP[`HUK Subsidiary Vostro Account as a basis of intra-industry performance A Subsidiary is an entity that is controlled A local currency account maintained by comparison. by another entity. a local bank for a foreign (correspondent) bank. For the foreign bank, it is a nostro Return on Average Equity (ROE) Substance over Form account. The domestic bank acts as 7YVÄ[HM[LY[H_SLZZWYLMLYYLKZOHYL The consideration that the accounting custodian or manages the account of a dividends if any, expressed as a [YLH[TLU[HUK[OLWYLZLU[H[PVUPUÄUHUJPHS foreign counterpart. percentage of average ordinary statements of transactions and events shareholders’ equity. should be governed by their substance Y Revenue Reserves HUKÄUHUJPHSYLHSP[`HUKUV[TLYLS`I` Yield to Maturity Reserves set aside for future distribution legal form. Discount rate at which the present value and investment. of future payments would equal the T security’s current price. Reverse Repurchase Agreement Tier I Capital (Core Capital) Transaction involving the purchase of Consists of the sum total of paid up government securities by a bank or ordinary shares, non cumulative & non dealer and resale back to the seller at a redeemable preference shares, share NP]LUWYPJLVUHZWLJPÄJM\[\YLKH[L premium, statutory reserve funds, W\ISPZOLKYL[HPULKWYVÄ[ZNLULYHS V[OLY Rights Issue reserves less goodwill. Issue of shares to the existing shareholders at an agreed price, generally Tier II Capital (Supplementary Capital) lower than market price. Supplementary capital includes, approved revaluation reserves, general provisions, Risk-weighted Assets hybrid (debt/equity) capital items and Used in the calculation of risk-based approved subordinated term debts. capital ratios. The face amount of lower risk assets is discounted using risk Total Capital ^LPNO[PUNMHJ[VYZPUVYKLY[VYLÅLJ[H Capital base is summation of the core comparable risk per rupee among all capital (Tier I) and the supplementary types of assets. The risk inherent in capital (Tier II). commitment & contingencies is also YLJVNUPZLKÄYZ[I`HKQ\Z[PUNUV[PVUHS values to Statement of Financial Position

Annual Report 2015 SAMPATH BANK PLC 483 Abbreviations

& And BIA Business Impact Analysis CNY Chinese Yuan Renminbi 24/7-365 At any time, all year round BIRMC Board Integrated Risk CO2e Carbon Dioxide Equivalent, AC Air Conditioner Management Committee is a standard unit for measuring carbon ACU Asian Clearing Union BIS Bank for International Settlements footprints ADB Asian Development Bank Bn Billions CRIB Credit Information Bureau AED Emirati Dirham of Sri Lanka BNO Bank Notes Operation AFS Available for Sale CRMU Credit Risk Management BOD Board of Directors AGM Assistant General Unit BRPTRC Board Related Party Manager/Annual General CRRF Credit Risk Review Transaction Review Meeting (as appropriate) Function Committee ALCO Asset & Liability CSE Colombo Stock Exchange Management Committee BSS Baseline Standard CSR Corporate Social BWC Bolgoda Wetland Complex AML Anti Money Laundering Responsibility CAD Canadian Dollar API Application Program DBU Development Banking Unit Interface CAR Capital Adequacy Ratio DGM Deputy General Manager APP A self-contained program CASA Current and Savings DKK Danish Krone or piece of software Accounts DPS Dividend per Share KLZPNULK[VM\SÄSSH CASL Chartered Accountants of particular purpose; an Sri Lanka (ICASL) DRP Disaster Recovery Plan application, especially as CBSL Central Bank of Sri Lanka D-SIB Domestic – Systemically downloaded by a user to a Important Bank mobile device. CCB Capital Conservation Buffer EAR Earnings at Risk ASA Alternative Standardised CCC Carbon Consultancy ED Executive Director Approach Company EI Executive I AT I Additional Tier I CCD Central Cash Department EII Executive II ATM CCPU Central Credit Processing Unit EIR Effective Interest Rate AUD Australian Dollar CCU Credit Control Unit EPF Employee Provident Fund AWDR Average Weighted Deposit Rate CCY Currency EPS Earnings per Share AWPLR Average Weighted Prime CDP Carbon Disclosure Project ESC Economic Service Charges Lending Rate CEA Central Environmental ESOP Employee Share Option B2B Business to Business Authority Plan B2C Business to Customer CEFE Competency-based ETF Employee Trust Fund Economies through BA Business Analytics ETR Effective Tax Rate Formation of Enterprise BAC Board Audit Committee EUR Euro CEO *OPLM,_LJ\[P]L6MÄJLY BBS Branch Bench Strength EVE Economic Value of Equity CET I Common Equity Tier I BCBS Basel Committee on Bank EWS Early Warning Signals CFMs Close Family Members Supervision FCBU Foreign Currency Banking CFO *OPLM-PUHUJPHS6MÄJLY BCP Business Continuity Plan Unit */- Swiss Franc BDT Bangladesh Taka FSVAT Financial Services Value CIT Cheque Imaging and Added Tax )/9 9* )VHYK/\THU9LZV\YJLZ Truncating and Remuneration GBP British Pound Committee CKD Chronic Kidney Disease GCC Gulf Cooperation Council CNP Card Not Presented

484 SAMPATH BANK PLC Annual Report 2015 GCFO Group Chief Financial KPI Key Performance Indicator NSC Network Service Centre 6MÄJLY KPO 2H[\UH`HRL7H`6MÄJL NSFR Net Stable Funding Ratio GCO .YV\W*VTWSPHUJL6MÄJLY KRI Key Risk Indicator NZD New Zealand Dollar GDP Gross Domestic Production kWh Kilowatt-hour OBS Off - Balance Sheet ./. .YLLU/V\ZL.HZ KYC Know Your Customer OCI Other Comprehensive GRI Global Reporting Initiative LCB Local Commercial Bank Income GRO .YV\W9PZR6MÄJLY LCR Liquidity Coverage Ratio ORMU Operational Risk Management Unit //0 /LYÄUKHOS/PYZOTHU LED Light Emitting Diode Index OTC Over-the-Counter LFSB Lanka Financial Services /2+ /VUN2VUN+VSSHY Bureau p a Per Annum /6 /LHK6MÄJL LGD Loss Given Default P/E Ratio Price Earnings Ratio /83( /PNO8\HSP[`3PX\PK(ZZL[Z LKAS Sri Lanka Accounting PAT 7YVÄ[(M[LY;H_ /9 /\THU9LZV\YJLZ Standard PBT 7YVÄ[)LMVYL;H_ /9+ /\THU9LZV\YJLZ LSUB Lanka SWIFT User Group PD Probability of Default Development LTV Ratio Loan to Value Ratio PoS Point of Sale /;4 /LSK[V4H[\YP[` M3 Cubic meter Prof Professor ICAAP Internal Capital Adequacy MBA Master of Business PUC Projected Unit Credit Assessment Process Administration Q&A Question and Answer ICASL The Institute of Chartered MD Managing Director R&D Research & Development Accountants of Sri Lanka Mn Millions (CASL) RCSA Risk and Control Self MoM Month on Month Assessments ICC International Chamber of Commerce mPOS Mobile Point of Sale RM Relationship Manager ICOFR Internal Control Over MSME Micro, Small and Medium RMU Risk Management Unit Financial Reporting Scale Entrepreneur RO Plant Reverse Osmosis Drinking IFA Investment Fund Account MW Megawatt Water Plant IIRC International Integrated NAITA National Apprenticeship ROA Return on Average Assets Reporting Council and Industrial Training ROCE Return on Capital Authority IND Independent Director Employed NBFI Non-Bank Financial IRB Internal Rating - Based ROE Return on Equity Institution IRMU Integrated Risk RPT Related Party Transaction/ NBT Nations Building Tax Management Unit (s) NCRE Non-Conventional IT Information Technology RSA Rate Sensitive Assets Renewable Energy JEI Junior Executive I RSL Rate Sensitive Liabilities NED Non Executive Director JEII Junior Executive II RWA Risk Weighted Assets NEDA National Entrepreneur SBEA Sampath Bank Employee JPY Japanese Yen Development Authority Association Kg Kilograms NID Non Independent Director SDF Standing Deposit Facility Km Kilometre NII Net Interest Income SEC Securities and Exchange Km2 Square kilometre NIM Net Interest Margin Commission of Sri Lanka KMP Key Management NOK Norwegian Krone SEI Senior Executive I Personnel NPA Non Performing Assets SEII Senior Executive II Kms Kilo Meters NPL Non Performing Loans SEK Swedish Krona

Annual Report 2015 SAMPATH BANK PLC 485 Abbreviations

SENS Sampath Employee UK United Kingdom 5V[PÄJH[PVU:`Z[LT UPS Uninterruptible Power SFT Securities Financing Supply Transaction US United States SGD Singapore Dollar USD US$ United States Dollar SID Senior Independent VAR Value at Risk Director VAT Value Added Tax SIFI Systemically Important Vis-à-vis In relation to, counterpart Financial institutions >/; Withholding Tax SITS Sampath Information Technology Solutions Ltd YoY Year on Year SLA Statutory Liquid Assets ZAR South African Rand SLAR Statutory Liquid Asset Ratio SLAS Sri Lanka Accounting Standard SLDB Sri Lanka Development Bonds SLF Standing Lending Facility SLFRS Sri Lanka Accounting Standard SLIPS Sri Lanka Interbank Payments System SME Small & Medium Enterprises SMS Short Message Service SNaPC Sampath Nature Protection Club sq ft / ft2 Square Feet SREP Supervisory Review Process STP Straight Through Process SWIFT Society for Worldwide Interbank Financial Telecommunication tCO2e Tones of Carbon Dioxide Equivalent TLE Terminal Line Encryption Tn Trillion TT Telegraphic Transfer UAE

486 SAMPATH BANK PLC Annual Report 2015 Sampath Song

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ntw;wpf; nfhbAld; ew;ngaH To be united in loving connection ngw;W Njrj;ij xd;wpizj;J> With similarity for all Kjyplkile;J rpwg;gha; With our tears and sweat we have kpspUk; cyfg;GfOld; built this rk;gj; tq;fp Citadel of wonder Sampath Bank To fly our flag of well we pride and Enlightening our land To reach the top and be there always World renown as Sampath Bank

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Sinhala Lyrics by : Ms Sunethra Kumarasinghe

Annual Report 2015 SAMPATH BANK PLC 487 Notice of Annual General Meeting

Notice is hereby given that the 30th Rs. 7.00 be distributed in the form 3. To re-elect Mr Dhammika Perera who Annual General Meeting of Sampath of scrip dividend amounting to total retires at the Annual General Meeting Bank PLC will be held at the “Balmoral” sum of Rupees One Billion and as a Director in terms of Article No. /HSS;OL2PUNZI\Y`5V 1HUHKOPWH[OP ;^V/\UKYLKHUK:P_4PSSPVU6UL 87 of the Articles of Association of the Mawatha, Colombo 01, on 31st March /\UKYLKHUK,PNO[`,PNO[;OV\ZHUK Company. 2016 at 9.30 a.m. for the following HUK-P]L/\UKYLKHUK,PNO[`-P]L purposes. (Rs. 1,206,188,585/-). Rupees One 4. To re-elect Mr Deshal De Mel who )PSSPVUHUK6UL/\UKYLK:P_[`;OYLL retires at the Annual General Meeting 1. To receive and consider the Annual 4PSSPVU5PUL/\UKYLKHUK;OPY[` as a Director in terms of Article No. Report of the Board of Directors Eight Thousand and Twelve (Rs 87 of the Articles of Association of the on the affairs of the Company and 1,163,938,012/-) of the scrip dividend Company. the Statement of Audited Accounts shall be subject to dividend tax at for the year ended 31st December the rate of 10% whilst the remainder 5. To re-elect Miss Annika Senanayake 2015 with the Report of the Auditors is exempt from dividend tax. The who retires at the Annual General thereon. shares issued in the scrip dividend Meeting as a Director in terms of shall be valued at Rs 233.44 per Article No. 87 of the Articles of 2. To declare a dividend of Rs 13.00 per share which result in one (01) share Association of the Company. ZOHYLMVY[OLÄUHUJPHS`LHYIL being issued for each existing Thirty declared payable as follows: Six point Nine One Zero Three Two 6. To re-elect Mrs Saumya Amarasekera Zero (36.910320) shares held by the who retires at the Annual General a. Cash Dividend of Rs 6.00 per shareholders at the end of trading on Meeting as a Director in terms of share; and the Colombo Stock Exchange on the Article No. 87 of the Articles of b. Scrip Dividend of Rs 7.00 per date of the Annual General Meeting. Association of the Company. share Consequently the total number of shares to be issued under the scrip 7. To approve the Donations and and therefore to consider and if dividend shall be Four Million Six Contributions made by the Directors [OV\NO[Ä[[VWHZZ[OLMVSSV^PUN during the year under review. resolution by way of an Ordinary /\UKYLKHUK:P_[`,PNO[;OV\ZHUK Resolution. -V\Y/\UKYLKHUK-V\Y[LLU (4,668,414) Ordinary Shares.” 8. To re-appoint M/s Ernst & Young, “It is hereby resolved that a dividend Chartered Accountants, as Auditors “It is further resolved that the shares VM9ZWLYZOHYLMVY[OLÄUHUJPHS of the Company for the ensuing year issued for the scrip dividend be listed year 2015 payable as follows; and to authorize the Directors to on the Colombo Stock Exchange” determine their remuneration. Rs 6.00 be distributed in the “It is further resolved that the shares form of cash amounting to a total By Order of the Board arising from the aggregation of the payment of a sum of Rupees One residual fractions consequent to the Billion and Thirty Three Million scrip dividend be disposed of in the ,PNO[/\UKYLKHUK:L]LU[`-P]L market by a trustee to be nominated ;OV\ZHUK5PUL/\UKYLKHUK;OPY[` by the Board of Directors and the Anuja Goonetilleke (Rs. 1,033,875,930/-). Rupees Nine proceeds to be distributed amongst Company Secretary /\UKYLKHUK5PUL[`:L]LU4PSSPVU:P_ those shareholders entitled to the /\UKYLKHUK:P_[`6UL;OV\ZHUK fraction of such shares.” Colombo, Sri Lanka 6UL/\UKYLKHUK-PM[`-V\Y9Z 16th February 2016 997,661,154/-) of the cash dividend shall be subject to dividend tax at the rate of 10% whilst the remainder is exempt from dividend tax; and

5V[L! A member is entitled to appoint a Proxy to attend and vote on his/her behalf and a Proxy need not be a member of the Company. A Form of Proxy PZH[[HJOLKMVY[OLW\YWVZL;OLPUZ[Y\TLU[HWWVPU[PUNH7YV_`T\Z[ILKLWVZP[LKH[[OL9LNPZ[LYLK6MÄJLVM[OL)HURH[5V:PY1HTLZ7LPYPZ 4H^H[OH*VSVTIVUV[SLZZ[OHUMVY[`LPNO[ OV\YZILMVYL[OL[PTLÄ_LKMVYOVSKPUNVM[OL4LL[PUN

@V\HYLRPUKS`YLX\LZ[LK[VIYPUN^P[O`V\`V\Y5H[PVUHS0KLU[P[`*HYKVYHU`]HSPKZV\YJLVMPKLU[PÄJH[PVULN+YP]PUNSPJLUZL7HZZWVY[

488 SAMPATH BANK PLC Annual Report 2015 Form of Proxy

Thirtieth Annual General Meeting Sampath Bank PLC 110, Sir James Peiris Mawatha, Colombo - 02.

I/We,...... of ………………………………...... ……...... ……………………………….…………………………...... …… being a member/members of Sampath Bank PLC hereby appoint Mr/Mrs/Miss/Ven/Rev……………………...... ………………………………………………..……………...... ……of ………………………………………………………………………………………………………………………...…………Failing him/her Mr. Dhammika Perera of 27th Floor, East Tower, World Trade Centre, Echelon Square, Colombo 01, failing him Mr. Sanjiva Senanayake VM5H^HSH9VHK5\NLNVKHMHPSPUNOPT4Y(YH]PUKH7LYLYHVM-3HRL9VHK(]LYPOLUH/VRHUKHYH:V\[OMHPSPUN him Mr. Ranjith Samaranayake of 51A, Weerapuranappu Mawatha, Laxapathiya, Moratuwa, failing him Mr. Deepal Sooriyaarachchi of 28/10 Birnamwood, Wijesekera Mawatha, Mirihana, Nugegoda, failing him Prof. Malik Ranasinghe of 18, Layards Road, Colombo 05, failing him Mrs. Dharani Wijayatilake of 78/1, Old Road, Nawala, failing her Mr. Deshal De Mel of 103/1, Rosemead Place, Colombo 07, failing him Mr. Ranil Pathirana of 243/5, Lake Gardens, Sri Jayawardenapura Mawatha, Rajagiriya, failing him Miss. Annika Senanayake of 18/1, Alfred Place, Colombo 03, failing her Mrs. Saumya Amarasekera of 03, Sravasti Place, Colombo 07. as my/our proxy to attend and vote for me/us on my/our behalf at the Thirtieth Annual General Meeting of the Company to be held at “Balmoral” /HSS, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, on 31st March 2016 at 9.30 a.m. and at any adjournment thereof.

FOR AGAINST

1 To receive and consider the Audited Financial Statements and the Annual Report of the Board for the year ended 31st December 2015. 2 To declare the recommended Cash Dividend of Rs 6.00 per share and the Scrip Dividend of Rs 7.00 per Share for the Financial Year 2015 along with the Ordinary Resolutions set out in the Notice convening the meeting. 3 To re-elect Mr Dhammika Perera as a Director under Article No. 87 of The Articles of Association of the Company. 4 To re-elect Mr Deshal De Mel as a Director under Article No. 87 of The Articles of Association of the Company. 5 To re-elect Miss Annika Senanayake as a Director under Article No. 87 of The Articles of Association of the Company. 6 To re-elect Mrs Saumya Amarasekera as a Director under Article No. 87 of The Articles of Association of the Company. 7 To approve donations/contributions made by the Directors during the year under review.

8 To re-appoint M/s Ernst & Young, Chartered Accountants, as Auditors of the Company for the ensuing year and authorise the Directors to determine their remuneration.

Mark your preference with “X” Signed on this ………………………Day of …………………. 2016

Signature/s ……………………………………………

Note: 1. Proxy need not be a member of the Company 2. Instructions regarding completion of Proxy are given in next page

Annual Report 2015 SAMPATH BANK PLC 489 Form of Proxy

INSTRUCTIONS AS TO COMPLETION

 2PUKS`WLYMLJ[[OLMVYTVMWYV_`HM[LYÄSSPUNPUSLNPIS``V\YM\SSUHTLHUKHKKYLZZHUKI`ZPNUPUNVU the space provided.

 ;OLJVTWSL[LKMVYTVMWYV_`ZOV\SKILKLWVZP[LKH[[OL9LNPZ[LYLK6MÄJLVM[OL*VTWHU`H[5V 110, Sir James Peiris Mawatha, Colombo 02, not less than 48 hours before, the appointed time for the holding of the meeting.

3. If you wish to appoint a person other than Chairman or a Director of the Company as your proxy, please insert the relevant details in the space provided [above names of the Board of Directors] on the Proxy Form.

4. Article No. 73 of the Articles of Association of Company provides that: “Any corporation which is a member of the Company may by resolution of its directors or other governing body, authorize such WLYZVUHZP[[OPURZÄ[[VHJ[HZP[ZYLWYLZLU[H[P]LH[HU`TLL[PUNVM[OL*VTWHU`VYVMHU`JSHZZ of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the Company”.

5. Please indicate with an ‘x’ in the space provided how your Proxy is to vote on each resolution, if UVPUKPJH[PVUPZNP]LU[OL7YV_`H[OPZKPZJYL[PVU^PSS]V[LHZOL[OPURZÄ[

6. In the case of a Company/Corporation, the Proxy must be under its Common Seal which should ILHMÄ_LKHUKH[[LZ[LKPU[OLTHUULYWYLZJYPILKI`P[Z(Y[PJSLZVM(ZZVJPH[PVU

7. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at the 9LNPZ[LYLK6MÄJLVM[OL*VTWHU`MVYYLNPZ[YH[PVU

Name of Shareholder :......

N I C No of Shareholder :......

:OHYL*LY[PÄJH[L5V4LTILYZOPW5V !

CDS A/C No [if applicable] :......

No of shares :......

Name of Proxy holder :......

N I C No of Proxy holder :......

490 SAMPATH BANK PLC Annual Report 2015 Stakeholder Feedback Form

To request information or submit a comment / query to the Bank, please complete the following and return this page to:

Company Secretary, Sampath Bank PLC, No 110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka. e-mail: [email protected] Tel: +94 11 4730418 / 420 / 548

We also appreciate your comments on this Annual Report.

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Annual Report 2015 SAMPATH BANK PLC 491 Stakeholder Feedback Form

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492 SAMPATH BANK PLC Annual Report 2015 Mr Deshal De Mel - Non Executive Director Mr Ranil Pathirana Corporate - Non Executive Director Mrs Saumya Amarasekera - Non Executive Director Mr Aravinda Perera Information - Managing Director/Executive Director Mr Ranjith Samaranayake  .YV\W*OPLM-PUHUJPHS6MÄJLY Name of Company &RPSDQ\6HFUHWDU\ Executive Director Sampath Bank PLC Mrs Anuja Goonetilleke Attorney-at-Law Subsidiary Companies Legal Form A Public Limited Liability Company 6WRFN([FKDQJH/LVWLQJV 5HTLVM[OL Holding 5H[\YLVM incorporated in Sri Lanka on 10th March 172,312,655 Ordinary Shares *VTWHU` % )\ZPULZZ 1986 under the Companies Act No 17 of 1982 and listed in the Colombo Stock 15,000,000 Listed Unsecured Sampath 97.14 Renting of Exchange. A Licensed Commercial Bank Subordinated Redeemable Debentures of Centre Ltd Commercial under the Banking Act No 30 of 1988. Rs 100/- each - 2012/2017 Property Re-registered on 28th April 2008 under SC Securities 100.00 Stock Broking the Companies Act No 7 of 2007. 50,000,000 Listed Unsecured (Pvt) Ltd Subordinated Redeemable Debentures of Company Registration Rs 100/- each - 2013/2018 Siyapatha 100.00 Leasing, Number Finance PLC factoring, PQ 144 70,000,000 Listed Unsecured pawning & Subordinated Redeemable Debentures of accepting +HDG2IðFH 5HJLVWHUHG Rs 100/- each - 2014/2019 deposits 2IðFH No.110, Sir James Peiris Mawatha, Sampath 100.00 Developing 70,000,000 Listed Unsecured Colombo 02, Sri Lanka Information Software Subordinated Redeemable Debentures of ;LJOUVSVN` Solutions & Rs 100/- each - 2015/2020 Telephone Solutions Ltd Maintenance +94 (011) 2300260, +94 (011) 2358358, of Hardware +94 (011) 4730630, +94 (011) 5331441, VAT Registration Number 134001194 – 7000 +94 (011) 5600600 For Investor Relations and Fax Credit Rating &ODULðFDWLRQVRQWKH5HSRUW +94 (011) 2303085 Fitch Rating: Fitch Rating Lanka Limited 3OHDVH&RQWDFW OHZHMÄYTLK5H[PVUHS3VUN;LYT9H[PUN Company Secretary, SWIFT Code of A+ (lka) stable to Sampath Bank. Sampath Bank PLC, BSAMLKLX No. 110, Sir James Peiris Mawatha, %RDUGRI'LUHFWRUV Colombo 02, Sri Lanka E-mail Mr Dhammika Perera - Chairman [email protected] Mr Channa Palansuriya E-mail: [email protected] [email protected] - Deputy Chairman/Non Executive ;LS!   Director (until 12th November 2015) Web Page Mr Sanjiva Senanayake - Senior Director www.sampath.lk - Non Executive Director Auditors Mr Deepal Sooriyaarachchi - Non Executive Director Messrs Ernst & Young Prof Malik Ranasinghe Chartered Accountants Designed & produced by - Non Executive Director Lawyers Mrs Dhara Wijayatilake Messrs Nithya Partners - Non Executive Director Digital Plates & Printing by Miss Annika Senanayake Aitken Spence Printing & Packaging (Pvt) Ltd Attorneys-at-Law Photography by Taprobane Street - Non Executive Director