WHO Stake Holder Analysis

1
TRANSFORMATIONAL CHANGE
At Sampath Bank we believe progress is impossible without change. As a bank that has
seen numerous ups and downs in the course of our colourful 30-year history, we know
that courage and resolution in times of adversity can keep us on the path of long-term
success. But it is our willingness to change and evolve that truly sets us apart.
As we celebrate our thirtieth anniversary of business operations, we know we are a

vibrant and dynamic bank and one that has achieved a great deal in a comparatively
short time; establishing ourselves as a Sri Lankan bank that provides a global
experience with innovative financial solutions. And we did this by always staying several
steps ahead of our fast changing industry’s fast changing needs.
People often resist change because they focus on what they have to give up. We
focus on what we have to gain. This report describes how we have chosen to disrupt
our business paradigms, to boldly go forward with new strategies and a business
process restructuring that will deliver increased value at many levels. Our vision for
your Bank’s future has always been an aggressive one and this year sees us launching
a transformational change in the fundamentals of our business process; one that will
see your Bank evolve to a new level of quality, opening up new avenues of value creation
that we will explore with our usual ingenuity, determination and flair.
2 SAMPATH BANK PLC ANNUAL REPORT 2017
CONTENTS
Report Profile .................................................... 3 BUSINESS REPORTS FINANCIAL INFORMATION

Green Recognition ........................................... 5 The Paradigm Shift .......................................92 Financial Calendar ..................................... 178
Financial highlights ......................................... 6 Consumer Banking ........................................93 Annual Report of the Board of
Non-Financial highlights ............................... 8 Corporate Banking.........................................96 Directors on the Affairs of
Global Banking ............................................. 100 the Company............................................ 179
INTRODUCTORY INFORMATION Nostro Accounts, Correspondent Banks Directors’ Interest in Contracts
Our Vision and Values ...................................12 and Exchange Companies ................... 102 with the Bank ........................................... 188
About the Bank ...............................................13 Treasury ......................................................... 103 Directors’ Statement on Internal
Product Portfolio............................................14 Operational Support................................... 104 Control Over Financial Reporting ....... 189
Board of Directors .........................................16 Performance of Subsidiaries................... 105 Independent Assurance Report to
Corporate Management ...............................22 Investor Information .................................. 106 the Board of Directors of
Chief Managers...............................................24 Sampath Bank PLC ................................ 191
Senior Managers ............................................26 RISK & GOVERNANCE Managing Director’s and Group
Risk Management Report ......................... 118 Chief Financial Officer’s
MANAGING OUR BUSINESS Compliance ................................................... 126 Responsibility Statement .................... 192
Chairman’s Message ....................................32 Corporate Governance............................... 127 Statement of Directors’
Managing Director’s Review .......................36 Board Audit Committee Report .............. 167 Responsibility for Financial
Strategic Sustainability Framework .........41 Board Human Resources and Reporting .................................................. 193
Stakeholder Engagement............................43 Remuneration Committee Report ..... 170 Independent Auditor’s Report to the
Material Topics................................................47 Board Nomination Committee Report .. 172 Shareholders of Sampath Bank PLC 195
Our Value Creating Business Model..........50 Board Integrated Risk Management Statement of Profit or Loss ..................... 196
Committee Report ................................. 173 Statement of Comprehensive Income . 197
MANAGEMENT DISCUSSION & ANALYSIS Statement of Financial Position............. 198
Board Related Party Transactions
Operating Environment ................................54 Statement of Cash Flows ......................... 200
Review Committee Report .................. 175
Statement of Changes in Equity ............ 202
CAPITAL MANAGEMENT REPORTS
Notes to the Financial Statements ....... 204
Financial Capital.............................................60
Manufactured Capital ...................................64 SUPPLEMENTARY INFORMATION
Intellectual Capital .......................................68 Statement of Profit or Loss in US$ ....... 336
Human Capital ...............................................70 Statement of Comprehensive
Social and Relationship Capital Income in US$ ......................................... 337
Customer .....................................................78 Statement of Financial
Community ..................................................80 Position in US$ ........................................ 338
Natural Capital ................................................86 Economic Value Addition .......................... 339
Trade-off between Capitals ........................90 Ten Years at a Glance................................. 340
Quarterly Statistics .................................... 341
Capital Adequacy ........................................ 343
BASEL III Disclosure Requirements ....... 344
GRI Content Index ....................................... 353
Independent Assurance Report
to the Shareholders of
Sampath Bank PLC ................................ 359
Glossary of Financial and
Banking Terms......................................... 360
Abbreviations ............................................... 366
Notice of Annual General Meeting ......... 368
Notes .............................................................. 369
Stakeholder Feedback Form ................... 371
Corporate Information ...............................IBC
Read this Report Online
www.sampath.lk
3
REPORT PROFILE
This report is the 4th chapter in Sampath Further, the report also includes a special sustainability indicators contained in this
Bank PLC’s integrated reporting journey, section on page 105 of this Annual report as well as certain information on
which began in 2014. As in the past, the Report summarizing the performance of sustainability hosted on the corporate
2017 integrated report has been prepared subsidiaries. website. (Please use the QR code in
for the benefit of our providers of financial page 2.)
capital as well as all other stakeholders FORWARD-LOOKING STATEMENTS
who share a common interest in our Certain statements in this document BANK’S RESPONSIBILITY
performance. As such, the report aims to may constitute forward-looking The Bank acknowledges its responsibility
provide our stakeholders with an insight on statements. Such statements involve for ensuring the integrity of this integrated
how we create value through our strategy, known and unknown risks, uncertainties report and confirms that the contents of
governance and performance, along and other important factors that could the report have been collectively reviewed
with an overview of our prospects, going cause the actual results, performance in conjunction with the assurance reports
forward. or achievements of the Bank to be obtained from our various internal and
materially different from the future external assurance providers, including
SCOPE AND BOUNDARY GRI 102-50, 52 results, performance or achievements assessments on risk and internal controls.
The report covers the period 01st January expressed or implied by such forward-
2017 to 31st December 2017 and provides looking statements. The Bank undertakes FEEDBACK GRI 102-53
a comprehensive view of all business no obligation to update publicly or Any feedback or comments regarding
activities of Sampath Bank PLC for this release any revisions to these forward- this report can be directed through the
period. Accordingly, the report includes looking statements to reflect events Stakeholder Feedback Form on page 371
among other matters: an analysis of or circumstances after the date of this of the Annual Report.
the operational results, a review of the document, or to reflect the occurrence of
financial performance and an overview anticipated events.
of the Bank’s corporate governance, risk
management and compliance frameworks. ASSURANCE GRI 102-56
The report has been prepared on the basis Internally, the Bank has adopted a
of materiality, where material matters combined assurance approach, where
are defined as the factors which will management assurance and compliance
substantially affect the Bank’s ability to to ensure the accuracy of the report.
create value for its stakeholders over time.
Hence, we have focused on aspects that Messrs Ernst & Young are the Bank’s
are deemed material to our core business external auditors, who provide an opinion
of Banking and their identified economic, on our consolidated financial statements.
environmental and social impact to our They have also provided an independent
stakeholders. Page 47 of this Annual assurance report (refer page 359 of the
Report outlines the processes used to Annual Report) covering key non-financial
determine what is material for the Bank.
REPORTING FRAMEWORKS GRI 102-12, 54
Integrated Reporting International Integrated Reporting Council’s (IIRC) Integrated Reporting <IR> Framework, to show how
stakeholder value is created through the “Six Capitals”
Financial Reporting Sri Lanka Accounting Standards
Companies Act No. 07 of 2007
Corporate Governance Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri
Lanka and the Securities and Exchange Commission of Sri Lanka
Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka,
issued by the Central Bank of Sri Lanka
Listing rules of the Colombo Stock Exchange
Sustainability GRI Standards – “Comprehensive”
Reporting UN Sustainability Development Goals (SDGs)
Report Profile
OUR PROGRESS IN SUSTAINABILITY REPORTING GRI 102-51

Year Report Profile GRI Application Level External Assurance
Provided
2011 Stand-alone Report GRI 3.1 Level B Yes
2012 Incorporated in Annual Report GRI 3.1 Level B Yes
2013 Stand-alone Report GRI G4 Comprehensive Yes
2014 Integrated Report GRI G4 Comprehensive Yes
2017 Integrated Report GRI Comprehensive Yes
MEMBERSHIPS OF ASSOCIATIONS GRI 102-13

Sampath Bank PLC is a member of several national and international associations.
Name of the Association Membership Status
American Chamber of Commerce in Sri Lanka Member
Association of Compliance Officers of Banks, Sri Lanka Member
Association of Primary Dealers (APD) Member
Clearing Association of Bankers Member
CSR Lanka (Guarantee) Ltd Member
International Chamber of Commerce – ICC Sri Lanka Member
Italian Business Council Member
Lanka Clear (Pvt) Ltd Member
Lanka Financial Services Bureau (LFSB) Member
Lanka SWIFT User Group (LSUG) Member & Treasurer
Leasing Councils of Bankers in Sri Lanka Member
Payment Card Association of Sri Lanka Member
Society for Worldwide Interbank Financial Telecommunication (SWIFT) Member
Sri Lanka Association of Software & Service Companies (SLASSCOM) Member
Sri Lanka Bank's Association (Guarantee) Ltd Member
Sri Lanka Business & Bio Diversity Platform of Ceylon Chamber of Commerce Patron Member
Sri Lanka Forex Association (SLFA) Member
The Association of Banking Sector Risk Professionals - Sri Lanka Member
The Ceylon Chamber of Commerce Patron Member
The European Chamber of Commerce of Sri Lanka Member
The Financial Ombudsman Sri Lanka (Guarantee) Ltd Member
The National Chamber of Commerce of Sri Lanka Member
GREEN
RECOGNITION
SAMPATH BANK PLC

ANNUAL REPORT 2017:
A CARBON NEUTRAL
PRODUCT
As part of the ongoing commitment to achieving a Net Zero Carbon Footprint,

the Sampath Bank Annual Report 2017 was declared a Carbon Neutral Product,
following an independent assessment by the Climate Smart Initiatives (Pvt) Limited.
This is the third consecutive year in which the Annual Report has been
declared as a Carbon Neutral Product.
FINANCIAL HIGHLIGHTS
GRI 102-7
Bank Group
2017 2016 Change % 2017 2016 Change %
Profitability (Rs Mn)

Gross income 92,590 67,585 37.0 97,440 70,445 38.3
Total operating income 39,979 32,344 23.6 42,473 33,957 25.1
Operating expenses, impairment losses and
VAT & NBT on financial services 23,373 19,744 18.4 24,963 20,743 20.3
Profit before income tax 16,606 12,600 31.8 17,510 13,214 32.5
Income tax expense 4,502 3,475 29.5 4,828 3,712 30.0
Profit for the year 12,104 9,125 32.7 12,683 9,501 33.4
Assets & Liabilities (Rs Mn)

Due to banks & other customers (Deposits only) 630,442 516,273 22.1 639,269 519,140 23.1
Loans to & receivables from banks & other
customers after impairment provisions 562,883 458,831 22.7 588,455 475,397 23.8
Total equity 63,650 44,489 43.1 68,908 49,742 38.5
Total liabilities 731,452 614,023 19.1 757,808 630,357 20.2
Total assets 795,102 658,512 20.7 826,717 680,099 21.6
Investor Information
Net asset value per share (Rs) 293.02 238.94 22.6 317.23 267.16 18.7
Market value per share at the year end (Rs) 315.70 260.40 21.2
Earnings per share - Basic / Diluted (Rs) 61.95 47.35 30.8 64.91 49.28 31.7
Dividend per share (Rs) 17.20 18.75 (8.3)
Dividend cover (Times) 2.63 2.71 (3.0)
Gross dividend (Rs Mn) 4,598 3,362 36.8
Market capitalisation (Rs Mn) 68,577 46,086 48.8
Other Ratios
Dividend yield (%) 5.45 7.20 (24.3)
Price earning ratio (Times) 5.10 5.50 (7.3)
Total impairment as a % of loans to & receivables
from other customers 1.52 1.67 (8.9) 1.56 1.70 (8.2)
Non-performing loan (NPL) (%) 1.64 1.61 2.0
Liquid assets ratio (%) 22.38 21.84 2.5
Fitch rating A+ (lka) A+ (lka)

(Negative) (Negative)
Moody's rating B1 B1
(Negative) (Negative)
FINANCIAL GOALS AND ACHIEVEMENTS - BANK

Goal 2017 2016 2015 2014 2013
Financial Indicators
Return on average assets (after tax) (%) Over 1.00 1.67 1.55 1.28 1.23 0.98
Return on average equity (after tax) (%) Over 16.00 23.35 23.47 18.42 16.35 12.88
Growth in profit (%) Over 15.00 32.65 48.76 24.83 43.27 (34.43)
Growth in total assets (%) Over 15.00 20.74 25.36 21.58 13.08 23.47
Cost to income ratio (excluding VAT & NBT) (%) Below 50.00 42.32 47.83 52.75 54.82 51.20
Capital adequacy ratios BASEL III BASEL II
Common equity Tier I (%) Over 8.50 10.26 N/A N/A N/A N/A
Total Tier I (%) Over 10.00 10.26 8.31 7.90 8.83 10.08
Total capital (Tier I + Tier II) (%) Over 14.00 14.41 12.87 12.26 13.62 14.22
Comparative information for the year 2016 has been restated & reclassified wherever necessary to conform to the current year’s
presentation.
7
Profit Before Tax &

Profit After Tax
(Rs Bn)
Total Assets &
Gross Income
(Rs Bn) (Rs Bn)
Rs 16.6 Bn
20 1,000 100
Profit
92.6
Before Tax
15 750 75
47.0
67.6
+32% 2016 : Rs 12.6 Bn
10 500 44.6 50
5 250 25
12.6
16.6
12.1
432
525
659
795
6.7
9.1
4.9
6.1
9.1
0 0 0
Rs 573.9 Bn
2017
2017
2014
2015
2016
2014
2015
Profit Before Tax Total Assets 2016

Profit After Tax Gross Income (RHS) Gross
Advances
Total Advances & Total Operating +23% 2016 : Rs 468.5 Bn
Total Deposits Income
(Rs Bn) (%) (Rs Bn)
1,000 100 50
750
91.1
94.3
90.7 91.0
90
40
30
Rs 630.4 Bn
500 80
20 Total
250 70
10 Deposits
21.4
32.3
25.3
40.0
311
386
469
574
342
409
516
630
0 60 0 +22% 2016 : Rs 516.3 Bn

2017
2017
2014
2015
2016
2014
2015
2016
Total Advances - Gross

Total Deposits
Loan to Deposit Ratio (RHS)
Rs 9.4 Bn
Composition of Composition of Total Taxes Paid to
Total Operating Income 2017 Total Expenses 2017
the Government
(%) (%)
8.7 8.5 60.7 +22% 2016 : Rs 7.7 Bn
14.6
20.4
16.2
70.9
Rs 315.70
Net Interest Income Operating Expenses Market Price
Net Fee & Commission Income Income Tax Expense
Trading, Investment & Other VAT & NBT on Financial Services Per Share
Operating Income Net Impairment Charge
+21% 2016 : Rs 260.40
NON-FINANCIAL HIGHLIGHTS
GRI 102-7
2017 2016
Human Capital
Total workforce 4,011 3,960
Male 2,611 2,586
Female 1,400 1,374
Intake - undergraduate development programme (Industrial placements) 251 173
Intake - school leavers’ development programme (Internships) 553 304
Local hiring 232 185
Employee retention (%) 97.7 96.5
Total training hours 154,579 136,271
Average training hours per employee 39 34
Training programmes 419 487
Skills development programmes 235 251
Transition assistance programmes 184 236
Investment in training & development (Rs Mn) 70.2 69.1
No. of industrial disputes Nil Nil
No. of incidents of child labour (below 18yrs) & forced labour Nil Nil
Employees who receive regular performance & career development review 100 100
(as a % of total employees)
Profit per employee (Rs Mn) 3.0 2.3
Intellectual Capital
Investment in IT development (Rs Mn) 783 105
Manufactured Capital
No. of ATMs 391 381
No. of Deposit kiosks 183 108
Social & Relationship Capital

No. of MyBank agents 392 131
Value distributed among investors (Rs Mn) 7,504 5,955
Value distributed from Corporate Social Responsibility Fund (Rs Mn) 40.2 20.3
No. of Entrepreneurs developed 459 293
Employee volunteerism for CSR (Man Hrs) 25,555 24,431
Natural Capital
Papers recycled (Kg) 42,492 44,863
Savings from paper recycling
No. of fully grown trees 722 763
Electricity (kWh) 169,968 179,452
Landfill (m3) 127 135
Oil (Litres) 74,573 78,735
Water (Litres) 1,350,396 1,425,746
Carbon footprint of the Bank (tCO2e) 12,398.7 11,613.5
9
HUMAN CAPITAL
Profit After Tax &

Staff Strength
(Rs Bn)
Staff Strength -
Gender-wise Rs 3.0 Mn
6,000 16 3,000
Profit per
12.1 2,500 Employee
5,000 12
9.1
2,000 +30% 2016 : Rs 2.3 Mn
4,000 8 1,500
6.1 1,000
3,000 4.9 4
500
4,000
3,993
3,960
4,011
2,631
2,595
2,586
2,611
1,369
1,398
1,374
1,400
2,000 0 0
2017
2017
2014
2015
2016
2014
2015
2016
No. of Staff Members Male

Profit After Tax (RHS) Female
SOCIAL AND RELATIONSHIP CAPITAL

CSR INITIATIVES
EDUCATION FOR ALL ENTREPRENEURSHIP COMMUNITY CAPACITY EMERGENCY RESPONSE

DEVELOPMENT BUILDING
Investment Investment Investment Investment

Rs Mn Rs Mn Rs Mn Rs Mn
15.0 8.8 6.4 1.0
NATURAL CAPITAL
Environmental Investment Employee Engagement Number of

Carbon Footprint of the Bank
Initiatives Volunteered Volunteer Beneficiaries
Employees Hours
10 Rs 6.0 Mn 170 9,606 > 400,000 12,398.66 tCO2e

RELEASING OUR POTENTIAL TO TRANSFORM OUR WORLD

11
INTRODUCTORY INFORMATION
Our Vision and Values .......................................... 12
About the Bank ...................................................... 13
Product Portfolio................................................... 14
Board of Directors ................................................ 16
Corporate Management ...................................... 22
Chief Managers ..................................................... 24
Senior Managers ................................................... 26
OUR VISION AND VALUES GRI 102-16
OUR VISION
“The Growing Force
in Sri Lankan
Financial Services”
OUR VALUES
y Create a learning culture that promotes individual
and organisational development as well as
promoting innovation and value for customers.
y Treat all internal and external customers the way
we would like to be treated.
y Encourage and promote teamwork in all aspects
of behaviour.
y Open to feedback and demonstrate an eagerness
for personal development.
y Monitor and demonstrate an impressive
commitment to results.
y Uncompromising ethical and professional
standards of behaviour.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 13
ABOUT THE BANK GRI 102-2
OVER THE YEARS SAMPATH BANK HAS CONTINUED

TO BREAK NEW GROUND THROUGH ITS RANGE OF
PRODUCTS AND SERVICES AND MULTI-CHANNEL
BUSINESS MODEL TO BRING PROSPERITY TO
GENERATIONS OF SRI LANKANS.
Sampath Bank PLC was incorporated in customers at each stage of their life.
229 1986 and listed on the main board of the
Colombo Stock Exchange in 1987. Since
Sampath Bank’s consumer banking
customer base has been growing steadily
Branches its inception Sampath Bank has continued year-on-year.
to grow, playing an increasingly important
role in the economic development of The corporate banking arm strives to build
Sri Lanka and its people. long-term partnerships with corporate
clients by facilitating their specific needs
The Bank has been responsible for many through the provision of customized
391 firsts – first to announce daily banking
hours until 3.00 pm, when competitors
solutions and expert advisory services.
Further, as a staunch supporter of the
ATMs were closing their doors by 1.30 pm each country’s SME sector, Sampath Bank offers
day; first to introduce the uni-banking purpose-built solutions geared to assist
concept, to facilitate seamless connectivity SMEs to accelerate their growth journey.
between branches, allowing the customers
to bank at any branch across the country Today, with countless banking
and first to launch an around-the-clock solutions, 229 branches, 391 ATMs, an
4,011 ATM network, all within the first two years
of operation.
unprecedented number of digital channels,
4,011 employees, a customer base in
Employees excess of 2.6 Mn and market capitalisation
To continue at the forefront of the industry, of Rs 68.6 Bn, Sampath Bank is ranked
the Bank leverages on the use of digital among the top three private banks in Sri
technology and innovation to reach a wider Lanka.
banking audience and create solutions
for a better tomorrow. Over the years, In testimony of its industry-leading
Rs 68.6 Bn Sampath Bank has continued to break

new ground through its range of products
position, Sampath Bank was awarded the
titles of ‘Best Commercial Bank 2017’ and
Bank’s Market and services and multi-channel business
model to bring prosperity to generations of
‘Best Retail Bank 2017’ in Sri Lanka by
the UK-based World Finance Magazine,
Capitalisation Sri Lankans. for the fourth consecutive year. Moreover,
for the 4th time in 5 years, Sampath Bank
The Bank’s consumer banking proposition was recognised as “Sri Lanka’s Best Bank”
is a compelling one that offers the gamut at the prestigious Euromoney Awards for
of consumer banking solutions to meet Excellence 2017.
the personal and lifestyle needs of retail
PRODUCT PORTFOLIO GRI 102-2
CONSUMER BANKING
Current Accounts y Sampath General Current Account

y Sampath Supreme Current Account y Sampath Double S
y Sampath Payment Guaranteed y Sampath Hit Saver
Cheques
y Sampath Pubudu & Sapiri
Savings y Regular Savings y X-SET

y Children's Savings
y Teenage Savings y Ladies 1st
y Ladies Savings
y Senior Citizen’s Savings y Sampath Sanhinda Saver
y Regular Deposits y Fixed Deposits

Term Deposit Accounts
y Flexible Deposits y Certificate of Deposits
y Senior Citizens Deposits
y Sampath Kalin Cash
y Easy FD
y Sampath Sanhinda FD
y Personal Foreign Currency Accounts
Foreign Currency Accounts (PFCA)
y Business Foreign Currency Accounts
(BFCA)
y Capital Transactions Rupee Accounts
(CTRA)
y Inward Investment Accounts (IIA)
y Outward Investment Accounts (OIA)
y Diplomatic Foreign Currency Accounts
(DFA) and Diplomatic Rupee Accounts
(DRA)
y Resident Guest Scheme – Special
Accounts
y Senior Foreign Nationals’ – Special
Accounts
y Sevana Housing Loan

y Sevana Dayada Housing Loan
y Foreign Currency Housing Loan
y Housing Loans
Loans
y Business Loans y Factoring Facility
y Personal Loans y Sampath BIZCASH
y Sampath Samachara Loan

y Special loans for Government
Leasing y Sampath Leasing medical officers
Accounts for Professionals y Sampath Professional Account
Pawning y Sampath Randiriya
Branchless Banking y My Bank
Gift Vouchers y Sampath Thilina

y Sampath Visa Credit Cards
y Sampath Credit Cards
SampathCards y Sampath Mastercard Credit Cards
y Sampath Debit Cards
y Sampath Bank American Express®
y Sampath Web Card Credit Cards
Foreign Remittances y e-Remittance y Sampath Instant Loan

y Sampath Vishwa
y Pay Easy
Relationship Banking y Platinum Plus
y Sampath Missed Call Banking
y Sampath Z-Reload
y Sampath M-POS
Electronic Banking y Internet Banking
y Mobile Cash
y Mobile Banking
y SMS Banking
y ATM Banking
y SMS Alertz
y Sampath Bank App
y Sampath PayApp
Safety Lockers y Sampath Safe Deposit Lockers y Telebanking
y Banking Robot
Clubs & Societies Account y Sampath Samaja y Sampath Cardless Cash
y Off-site ATMs
y Interbank ATM Network
Entrepreneur Development y Sampath Saviya y Cash Deposit ATMs
y Cheque Deposit ATMs
y Foreign Currency Exchange ATMs
y Cash Deposit Kiosk
CORPORATE BANKING TREASURY
Financing y Corporate Credit Spot Contract

y Commercial Credit
y Corporate Finance
y Development Banking
y Foreign Currency Banking Unit (FCBU) Forward Exchange Contract
International Trade y Trade Services Repo & Reverse Repo

y Export House
y Correspondent Banks
Treasury Bills
y Sampath Vishwa Corporate
Electronic Banking
y Sampath Payment Gateway
y Sampath Corporate Payment
System Treasury Bonds
NEW OFFERINGS
Sampath PAYAPP Banking Robot
Sampath PAYAPP is a revolutionary mobile app The first ever Banking Robot in Sri Lanka was introduced by
introduced by Sampath Bank PLC for Sri Lankan Citizens. Sampath Bank. The Banking Robot is an automated teller
Sampath PayApp enables you to pay for anything at a which uses artificial intelligence to understand vocal requests
shop or on a website conveniently. It also enables you to and perform the relevant transactions in the form of a
send money to anyone who’s already a PayApp customer. humanoid robot. The Robot detects the presence of customers
With Sampath PayAPP, your phone becomes your wallet. and simply starts a conversation.
BOARD OF DIRECTORS
MR CHANNA PALANSURIYA MR NANDA FERNANDO

Chairman Managing Director
PROF MALIK RANASINGHE MR SANJIVA SENANAYAKE

Deputy Chairman Senior Director
MR DEEPAL SOORIYAARACHCHI MRS DHARA WIJAYATILAKE

Director Director
MISS ANNIKA SENANAYAKE MR RANIL PATHIRANA

Director Director
MRS SAUMYA AMARASEKERA MR RUSHANKA SILVA

Director Director
MRS ANUJA GOONETILLEKE

Company Secretary
Board of Directors GRI 102-22, 23
MR CHANNA PALANSURIYA MR NANDA FERNANDO

Non-Independent, Non-Executive Director Executive Director
QUALIFICATIONS, SKILLS & EXPERIENCE: FORMER APPOINTMENTS: QUALIFICATIONS, SKILLS & EXPERIENCE:
Earned Masters of Business Administration Chairman of Style Kraft Sportsware (Pvt) Over 35 years of experience in banking
from The Open University of Malaysia Ltd, Deputy Chairman of National Livestock and finance, driving multiple aspects of
and counts over thirty years of extensive Development Board, Chairman of Orit banking business, Transactional Banking
experience in the apparel sector by Apparels Lanka (Pvt) Ltd, Chairman of in Retail and Corporate Banking, amongst
heading the Orit Group of companies and Orit Trading (Pvt) Ltd, Deputy Chairman of many other key growth areas. Is an
through continuous leadership given to Sampath Bank PLC, Director of Siyapatha Associate member and a Senior Fellow
other companies in the apparel industry. Finance PLC, Board Member of Sri Lanka member of The Institute of Bankers of Sri
Further, being a Board member of the Institute of Textile and Apparel, Chairman Lanka and holds a Masters of Business
Board of Investment of Sri Lanka for ten of Apparel Exporters’ Association 200gfp Administration degree specializing in
years, gained wide experience in public during 2006-2008, Chairman of CG Lanka Marketing from Sikkim Manipal University,
administration. He won the Asia Pacific Clothing (Pvt) Ltd till 2013 and Board India. He is also a qualified Four Bead
Outstanding Entrepreneurship Award in Member of Board of Investment of Sri Leader Trainer and functions as the Group
2013, the Silver Award of the National Lanka. Advisor to the Scouts Group Committee of
Chamber of Exporters of Sri Lanka for the S. Thomas’ College, Mount Lavinia.
Garment Extra Large category in 2004
and Sri Lankan Entrepreneur of the Year APPOINTED TO THE BOARD:
in 2002. 13th September 2016 as an Executive
Director.
APPOINTED TO THE BOARD:
1st January 2012 as a Non Independent MEMBERSHIP IN BOARD SUB COMMITTEES:
Non Executive Director. Appointed as Member of Board Integrated Risk
Deputy Chairman on 26th January 2012, Management Committee, Board Related
and held office as a Board member until Party Transactions Committee, Board
12th November 2015. Re appointed to the Credit Committee, Board Shareholder
Board on 28th April 2016 and appointed as Relations Committee, Board Strategic
Chairman on 1st August 2016. Planning Committee, Board Treasury
Committee, Board Capital Planning
MEMBERSHIP IN BOARD SUB COMMITTEES: Committee, Board IT Committee and Board
Chairman of Board Strategic Planning Marketing Committee.
Committee, Member of Board Human
Resources and Remuneration Committee, CURRENT APPOINTMENTS:
Board Nomination Committee, Board Managing Director of Sampath Bank
Credit Committee and Board Marketing PLC, Director of Lanka Financial Services
Committee. Bureau Ltd, a Governing Board Director of
the Institute of Bankers of Sri Lanka and a
CURRENT APPOINTMENTS: Director of Lanka Clear (Pvt) Ltd.
Chairman of Sampath Bank PLC, Director
of National Livestock Development FORMER APPOINTMENTS:
Board, Chairman of Siyapatha Finance Chairman of Bankers’ Technical Advisory
PLC, Director of Braybrooke Residential Committee which functions under the
Properties (Pvt) Ltd, Executive Committee purview of Sri Lanka Bankers’ Association,
Member of Joint Apparel Association Forum a past District Commissioner of the Sri
(JAAF), Executive Committee Member of Sri Lanka Scout Association and Director of
Lanka Apparel Exporters’ Association and SC Securities (Pvt) Ltd.
Executive Committee Member of Sri Lanka
Apparel Sourcing Association (SLASA).
PROF MALIK RANASINGHE MR SANJIVA SENANAYAKE

Deputy Chairman Senior Director
Independent, Non-Executive Director Independent, Non-Executive Director
QUALIFICATIONS, SKILLS & EXPERIENCE: CURRENT APPOINTMENTS: QUALIFICATIONS, SKILLS & EXPERIENCE:
Extensive governance experience as Deputy Chairman of Sampath Bank PLC, Extensive experience in the financial
a former Vice-Chancellor and a Non Senior Professor in Civil Engineering services sector locally and overseas and
Executive Director on Corporate Boards. at University of Moratuwa, Member having served in the senior management
A Fellow Member, Chartered Engineer of University Grants Commission, positions at premier financial institutions
and International Professional Engineer Independent Non Executive Director and as an independent consultant. Holds
of the Institution of Engineers, Sri Lanka, of Textured Jersey Lanka PLC, Access Master of Science and Bachelor of Science
Fellow of the National Academy of Engineering PLC, United Motors Lanka PLC Degrees in Engineering from University of
Sciences, Sri Lanka and the Institute of and Resus Energy PLC. London.
Project Managers of Sri Lanka, Graduate
Member, Sri Lanka Institute of Directors, FORMER APPOINTMENTS: APPOINTED TO THE BOARD:
PhD from The University of British Vice Chancellor of the University of 1st January 2012 as an Independent Non
Columbia, Vancouver, Canada in Civil Moratuwa, Chairman of the Committee Executive Director and appointed as Senior
Engineering Economics as a Canadian of Vice Chancellors and Directors of Sri Director on 26th January 2012.
Commonwealth Scholar; recipient of Lanka, Council Member of the Association
accolades and awards including the 1999 of Commonwealth Universities, Fellow MEMBERSHIP IN BOARD SUB COMMITTEES:
General Research Committee Award for of the National University of Singapore, Chairman of Board Integrated Risk
Outstanding Contribution to Sri Lankan Independent Non Executive Director of the Management Committee and Board
Science from the Sri Lanka Association for Colombo Stock Exchange, Lanka IOC PLC Treasury Committee. Member of Board
Advancement of Science, the Committee and Hemas Power PLC. Nomination Committee, Board Related
of Vice Chancellors and Directors (CVCD) Party Transactions Review Committee,
Excellence Award for 2012 for the Most Board Capital Planning Committee and
Outstanding Senior Researcher in Board IT Committee.
Technology and related Sciences, the
Award for Outstanding Contribution to CURRENT APPOINTMENTS:
Education 2012 at World Education
Senior Director of Sampath Bank
Congress and the Education Leadership
PLC, Non Executive Director of Asian
Award 2013 in Singapore.
Hotels and Properties PLC and Hemas
Pharmaceuticals (Pvt) Ltd.
APPOINTED TO THE BOARD:
30th August 2011 as an Independent Non FORMER APPOINTMENTS:
Executive Director. Appointed as Deputy
Group Resident Representative for Sri
Chairman on 1st August 2016.
Lanka and the Maldives in International
Finance Corporation (IFC) (The private
MEMBERSHIP IN BOARD SUB COMMITTEES:
sector investment arm of World Bank)
Chairman of Board Credit Committee, Senior Investment Officer - Global
Board Capital Planning Committee, Board Financial Markets (West Africa), Assistant
IT Committee and Board Shareholder General Manager (Treasury and Investment
Relations Committee. Member of Board Banking) of National Development Bank
Audit Committee, Board Related Party PLC, Consultant (Treasury and Business
Transactions Review Committee, Board Development) of Commercial Bank of
Strategic Planning Committee and Board Ceylon PLC: Senior Risk Manager - Citibank
Treasury Committee. Sydney, Australia, Head of Treasury and
Investment Banking Citibank Brunei,
various positions including Treasurer and
Head of Public Sector Business Citibank
Colombo.
Board of Directors
MR DEEPAL SOORIYAARACHCHI MRS DHARA WIJAYATILAKE MISS ANNIKA SENANAYAKE

Independent, Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director
QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE:
Counts over 30 years’ experience in Sales, Attorney-at-Law, LLB (Cey), Retired from Bachelor of Arts in Management Studies
Advertising, Marketing, Human Resources the Public Service of Sri Lanka in August from the University of Nottingham. Heads
Development and Strategy with extensive 2015, after 41 years of service. The first Corporate Planning for the IWS Holdings
experience in the field of Insurance. Fellow lady in Sri Lanka to hold the post of the Group which is engaged in diversified
member of the Chartered Institute of Secretary to a Cabinet Ministry. business interests in telecommunication,
Marketing UK and a Chartered Marketer, shipping, media and broadcast,
Fellow Member of the Sri Lanka Institute APPOINTED TO THE BOARD: automobiles, aviation, warehousing, food
of Marketing. Holds a Masters of Business 30th August 2011 as an Independent Non and beverage processing and packaging.
Administration from the University of Sri Executive Director. Miss Senanayake is CNN’s official business
Jayawardanapura. Pioneer in disseminating representative for Sri Lanka.
Management knowledge in Sinhala. MEMBERSHIP IN BOARD SUB COMMITTEES:
A leading management development APPOINTED TO THE BOARD:
Chairperson of Board Related Party
consultant and author. Accredited Master Transactions Review Committee. Member 1st January 2012 as an Independent Non
Coach and Master Mentor. of Board Audit Committee, Board Executive Director.
Nomination Committee, Board Human
APPOINTED TO THE BOARD: MEMBERSHIP IN BOARD SUB COMMITTEES:
Resources and Remuneration Committee,
5th August 2010 as an Independent Non Board Strategic Planning Committee and Chairperson of the Board Nomination
Executive Director. Board Credit Committee. Committee, Member of Board Human
Resources & Remuneration Committee,
MEMBERSHIP IN BOARD SUB COMMITTEES: CURRENT APPOINTMENTS: Board Integrated Risk Management
Chairman of Board Human Resources Independent Non Executive Director of Committee, Board Strategic Planning
and Remuneration Committee and Board Sampath Bank PLC, Member of the Public Committee, Board Marketing Committee,
Marketing Committee. Member of Board Service Commission, Secretary General and Board Treasury Committee and Board IT
Audit Committee, Board Integrated Risk CEO of The Ceylon Chamber of Commerce, Committee.
Management Committee, Board Related Director of SLINTEC Academy and Member
Party Transactions Review Committee, of the Sri Lanka Law Commission. CURRENT APPOINTMENTS:
Board Shareholder Relations Committee Independent Non Executive Director
and Board IT Committee. FORMER APPOINTMENTS: of Sampath Bank PLC, Director of IWS
Secretary to the Ministry of Justice, Holdings (Pvt) Ltd, Director of APL Lanka
CURRENT APPOINTMENTS: (Pvt) Ltd, RAD Productions (Pvt) Ltd.
Secretary to the Ministry of Plan
Independent Non Executive Director of Implementation, Secretary to the Ministry Trustee - Youth Business Sri Lanka, Ceylon
Sampath Bank PLC, Independent Non of Technology and Research, Advisor to Chamber of Commerce, Trustee of the Ray
Executive Director of AIA Insurance Lanka Minister of Higher Education and Research. Wijewardene Charitable Trust in Sri Lanka.
PLC, Panasian Power PLC, Singer Sri Lanka
PLC and Hemas Manufacturing (Pvt) Ltd.
FORMER APPOINTMENTS:
Past President of Sri Lanka Institute of
Marketing, Managing Director Aviva NDB
Insurance PLC, Commissioner - Sri Lanka
Inventors’ Commission, Consulting Partner
- RBL Group USA.
MR RANIL PATHIRANA MRS SAUMYA AMARASEKERA MR RUSHANKA SILVA

Independent, Non-Executive Director Non-Independent, Non-Executive Director Non-Independent, Non-Executive Director
QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE: QUALIFICATIONS, SKILLS & EXPERIENCE:
Extensive experience in finance and Counts over 30 years in active legal Dedicated professional with a solid
management in financial, apparel and practice in Civil Law, practicing in the background in Management Accounting,
energy sectors. Fellow member of the Original, Appellate & Supreme Courts as an Marketing and Sales. An Associate Member
Chartered Institute of Management Attorney-at-Law. Holds a Masters degree of the Chartered Institute of Management
Accountants, UK (FCMA) and holds a in Law from the University of Pennsylvania Accountants UK (ACMA). Strategic and
Bachelor of Commerce degree from the with particular emphasis on Insurance, creative thinker who has proven his ability
University of Sri Jayawardanapura. Privacy and Defamation Laws. Has to develop strong client relationships
experience in areas relating to Property, quickly and promote teamwork efficiently
APPOINTED TO THE BOARD: Testamentary, Condominium Disputes, and a leader with a rich mixture of
1st January 2012 as a Non Executive Trusts, Family Law, and Money Recovery. experience and successes in the business
Director. Became an Independent Non Also litigates on behalf of financial services world, having completed his secondary
Executive Director on 31st January 2015. sector clients and has specialised in local education at Trinity College, Kandy. Holds a
and international arbitrations. Masters of Business Administration from
MEMBERSHIP IN BOARD SUB COMMITTEES: University of Western Sydney, Australia.
Chairman of Board Audit Committee, APPOINTED TO THE BOARD:
Member of Board Strategic Planning 1st June 2012 as a Non Independent Non APPOINTED TO THE BOARD:
Committee and Board Capital Planning Executive Director. 1st September 2017 as a Non Independent
Committee. Non Executive Director.
MEMBERSHIP IN BOARD SUB COMMITTEES:
CURRENT APPOINTMENTS: Member of Board Nomination MEMBERSHIP IN BOARD SUB COMMITTEES:
Independent Non Executive Director Committee, Board Human Resources Member of Board Credit Committee, Board
of Sampath Bank PLC, Chairman of and Remuneration Committee, Board Strategic Planning Committee, Board
Renewgen (Pvt) Ltd, Managing Director of Integrated Risk Management Committee Marketing Committee, Board Shareholder
Hirdaramani International Exports (Pvt) and Board Marketing Committee. Relations Committee and Board IT
Ltd. Group Finance Director - Hirdaramani Committee.
Group of Companies, Non Executive CURRENT APPOINTMENTS:
Director of Windforce (Pvt) Ltd, Star Non-Independent Non Executive Director CURRENT APPOINTMENTS:
Packaging (Pvt) Ltd, Alumex PLC, Odel PLC, of Sampath Bank PLC, Legal practitioner, Non Independent Non Executive Director
Taprobane Holdings PLC and Ceylon Hotels Member of the Bar Association of Sri Lanka. of Sampath Bank PLC, Managing Director
Corporation Ltd. Director of Manson Investments (Pvt) of Indra Traders (Pvt) Ltd, Non Executive
Ltd, Ceylon Leisure Holdings (Pvt) Ltd and Director of Sampath Centre Limited, Non
FORMER APPOINTMENTS: Leisure Lines Lanka (Pvt) Ltd. Executive Director of Serendib Finance
Chief Executive Officer of Vanik Bangladesh Limited, Indra Motor Spares (Pvt) Ltd,
Securities; Assistant Vice President Indra Property Development (Pvt) Ltd,
of Vanik Incorporation, Director of Indra Holding (Pvt) Ltd and Braybrooke
Hayleys MGT Knitting PLC, Hayleys PLC, Residential Properties (Pvt) Ltd.
Nirmalapura Windpower (Pvt) Ltd and Esna
Power (Pvt) Ltd.
CORPORATE MANAGEMENT
MR NANDA FERNANDO MR THARAKA RANWALA MRS SHASHI KANDAMBI JASSIM MR AJANTHA DE VAS GUNASEKARA
Managing Director Senior Deputy General Manager - Senior Deputy General Manager - Group Chief Financial Officer
Consumer Banking Corporate Banking
MR AJITH SALGADO MR ARUNA JAYASEKERA MR DINUSHA IHALALANDA MR PRADEEP PERERA

Group Chief Information Officer Group Chief Human Resource Deputy General Manager - Chief Internal Auditor
Officer Operations
MR MANOJ AKMEEMANA MRS AYODHYA IDDAWELA PERERA MR THUSITHA NAKANDALA

Chief Strategy Officer Deputy General Manager – Deputy General Manager –
Corporate Banking Branch Banking
MRS ANUJA GOONETILLEKE MR RAJENDRA RANASINGHE MR PUNUNUWAN WICKREMASEKERA MR SANATH ABHAYARATNE

Company Secretary Assistant General Manager – Chief Legal Officer Assistant General Manager -
IT Business Development Deposit Mobilization
MR SANJAYA GUNAWARDENA MR MAHEEL KURAGAMA MR AMAL KIRIHENE MR PRASANTHA DE SILVA

Assistant General Manager – Assistant General Manager – Assistant General Manager – Assistant General Manager –
Strategic Planning & Research Operations Corporate Credit Treasury
MS NADI B DHARMASIRI MR SISIRA DABARE MRS ACHALA WICKREMARATNE MR LALITH WERAGODA

Head of Marketing Assistant General Manager - Group Chief Risk Officer Assistant General Manager –
Recoveries Human Resources
MR DEEPAL DE SILVA
Assistant General Manager –
Branch Banking
CHIEF MANAGERS
MR DUSHYANTHA DASSANAYAKA MR ASOKA MANIKGODA MR ANANDA WIJITHA MR HEMANTHA MARASINGHE

Chief Manager – Electronic Head of Recoveries Head of Information Technology - Chief Manager – Administration
Delivery Channels Electronic Data Processing
MR PRIAM KASTURIRATNA MR CHATURA RUDESH MR NALAKA GUNAWARDENA MR PRASANNA MULLEGAMA

Chief Manager – Strategic Planning Head of Trade Services & Chief Manager – System Audit Chief Manager – Branch Banking
International Operations
MR JANAKA JAYASURIYA MRS KUMARI JAYASURIYA MR PASAN MANUKITH MR HALIN HETTIGODA

Chief Manager – Corporate Credit Chief Manager – Branch Banking Head of Information Technology - Head of Deposit Mobilization
System Development
MR LASANTHA SENARATNE MS DULSIRI JAYASINGHE MRS ALOKA EKANAYAKE MR SUMIE MITHRAPALA

Group Compliance Officer Head of Corporate Finance Head of FCBU Chief Manager – Branch Banking
MR SENAKA HEWAVITHARANA MRS CHAMPIKA NANAYAKKARA MR SHIRAN KOSSINNA MR KASUN FERNANDO

Head of Legal Chief Manager – Corporate Credit Chief Manager - Consumer Chief Manager – Branch Banking
Banking
MR UDARA SURAWEERA MR KUSAL DE SILVA MR LAKMAL MUNASINGHE MR KASUN RATNAYAKE

Chief Manager – Operations & Head of Card Centre, Chief Manager – Branch Banking Chief Manager – Branch Banking
Business Process Re-engineering E-remittance & Bank Notes
Operations
SENIOR MANAGERS
MR PRASADA GOONERATNE MR JANAKA KARUNARATNE MR THUSHANTHA SUMITHRAARACHCHI MR CHINTHAKE DE SILVA

Senior Manager – Database Senior Regional Manager Senior Manager – Systems & Senior Manager - Consumer
Administration Procedures Banking
MR KESHAN DABARE MR MADHUPRIYA DISSANAYAKE MR PRABODHA COORAY MRS NAYANA JAYASENA

Senior Manager – Lending Products Senior Regional Manager Senior Manager - Consumer Senior Manager – IT System
Banking Development
MR BHARANA JAYAWARDENA MRS MANOJI HETTIGODA MR SUDATH ILLEPERUMA MR AMILA THEWARAPPERUMA

Senior Regional Manager Senior Manager – Trade Services Senior Regional Manager Senior Manager – Deposit
Mobilization
MR MANJULA SENEVIRATNE MR PRIYANKA DE SILVA MRS PIYAMI COORAY MR CHAMINDA JAYASINGHE

Senior Manager – Bancassurance Senior Manager – Corporate Credit Senior Manager – Corporate Credit Senior Manager – Card Centre
Operations
MRS MUDITHA LIYANAPATHIRANA MR MANJULA ABEYSUNDARA MR ANURA JAYAKODY MR ASANTHA PUNCHIHEWA

Senior Regional Manager Senior Manager – Old Moor Street Senior Manager – Network Senior Manager – Corporate
Branch Service Centre Finance
MR ROHANA ALUTHGEDARA MR VIPULA KURUPPUARACHCHI MR KITHSIRI DODAMGODA MR JANAKA MOHOTTY

Senior Manager – Central Senior Regional Manager Senior Regional Manager Senior Regional Manager
Processing Unit
Senior Managers
MR DARSHIN PATHINAYAKE MR N JEYASEELAN MS SUBHASHINI PREMACHANDRA MR SUDARSHANA JAYASEKERA

Senior Manager – Remittances, Senior Manager - Consumer Senior Manager – Treasury Senior Manager - Compliance
Bank Notes Operations & Card Banking Investments
Centre Marketing
MR JANAKA JAYAWICKREMA MR M H U DHANANJAYA MR ARUNA JINADASA MR MAHINDA AMARASINGHE

Senior Manager – Logistics Senior Manager - Corporate Credit Senior Regional Manager Senior Manager – Kiribathgoda
Branch
MR PUJITHA RAJAPAKSA MR CRISHANTHA CHAMINDA MR NAMAL GUNAWARDENA MR THUSHARA JAYATUNGA

Senior Manager – Marketing Senior Manager - Consumer Senior Manager - FCBU Senior Manager – IT Security
Banking
MRS CHRYSHANTHI LOKUHETTY MR NALIN TILLEKERATNE MRS SAJANI ABEYSEKERA MR SALINDA JAYAWARDENA
Senior Manager – Human Senior Manager – Central Senior Manager – Corporate Senior Manager - Consumer
Resources Processing Unit Finance Banking
MR ANTON DAVID MR ASANKA LIYANAGE MRS SACHITHRI FERNANDO MRS GAYANI JINADASA
Senior Regional Manager Senior Manager – Finance Senior Manager – Planning Senior Manager - Finance
INCREASING INNOVATION TO DELIVER CONTINUOUS CHANGE

31
MANAGING OUR BUSINESS

Chairman’s Message ............................................ 32
Managing Director’s Review ............................... 36
Strategic Sustainability Framework ................ 41
Stakeholder Engagement ................................... 43
Material Topics ...................................................... 47
Our Value Creating Business Model.................. 50
CHAIRMAN’S MESSAGE
Rs 12.1 Bn
Profit
After Tax
+33% 2016 : Rs 9.1 Bn
Dear Stakeholders,
Reflecting on macroeconomic
developments in 2017, it is clear that
the global economy was on the rebound.
Ending three years of slow growth, global
GDP growth overtook mid-year projections
and edged closer to 3.0% in 2017. Both STEMMING FROM THIS, WE TOOK WHAT WE BELIEVE
advanced and emerging economies around IS A QUANTUM LEAP TO ENSURE THAT WE ARE WELL-
the world reported improved economic
performances, bolstered by a strong revival POSITIONED TO STAY ALIGNED IN A CHANGING WORLD.
in global trade and investment as well TERMED THE “PARADIGM SHIFT” PROGRAMME,
as an overall improvement in business
sentiments. THE MOVE ENTAILED A MASSIVE REVAMP OF OUR
OPERATIONAL ARCHITECTURE, IN WHAT IS PERHAPS
The Sri Lankan economy too expanded
by 3.7%, driven by services and THE SINGLE-LARGEST INTERNAL RESTRUCTURING
manufacturing, and a sustained increase EFFORT WE HAVE UNDERTAKEN TO-DATE.
in expenditure on large infrastructure
projects countrywide. However, for the third
consecutive year, growth in the agricultural Against this backdrop, we sharpened our
sector was hampered by unfavourable resolve to discover opportunities in the Gross Income
weather conditions. Inflation rose slightly face of every challenge and made steady
more than the usual mid-single digit level, progress on our strategy to deliver yet (Rs Bn)
ending the year above 7%. another stellar performance on all fronts.
100
In fact, I would say we are well on our way
GDP Growth - Sri Lanka to transforming into a world-class bank. 80
60
(%)
A FINANCIALLY STABLE BANK
A strong operating performance combined 40
6.0
with sustained cost efficiencies produced
4.9 20
4.8 record results for the year – Gross Income
67.6
44.6
47.0
92.6
4.5 4.4
reached Rs 92.6 Bn, 37.0% higher than the 0
2017
2014
2015
2016
3.7 Rs 67.6 Bn reported in 2016, while Profit

3.0
after Tax increased by 32.7% year-on-year
1.5
to Rs 12.1 Bn from Rs 9.1 Bn in 2016. Our
balance sheet remains healthy, supported The Board has proposed a scrip dividend
0.0 by a stronger capital base, liquidity levels of Rs 17.20 per share for 2017, subject to
and asset quality that is well within the approval of the shareholders at the
2017
2014
2015
2016
Sep.
regulatory requirements. upcoming AGM on 29th March 2018. The

INTRODUCTORY INFORMATION MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 33
Rs 4.6 Bn dividend payout ratio for the year was

38.0%, compared to 36.8% in 2016.
Gross The share price moved up from Rs 260.40

recorded at the end of December 2016 to
Dividend Rs 315.70 as at 31st December 2017, a
+37% 2016 : Rs 3.4 Bn clear indication of investor confidence in
the Bank.
These record results could not come at

a better time, for it proves that Sampath
Bank is well positioned to weather
economic challenges and in turn support
our customers, shareholders and all other
stakeholders.
Page 92 A BANK FOR EVERYONE

The Paradigm Shift Although our banking franchise is stronger
A complete paradigm shift, the move signals the than ever, we are nonetheless acutely
Bank’s overreaching desire to stay a cut above
the rest. It is also seen as the obvious next step aware that sustaining our position in the
in spearheading Sampath Bank PLC’s strategic
vision to “Be the growing force in Sri Lankan
longer-term will largely depend on how
Euromoney Awards for Excellence 2017 for the
financial services”. agile and innovative we are as a bank. 4th phenomenal time
Further, given the ever-changing needs
of the customer, it is imperative that we
align strategies and develop the requisite This latest upgrade provides Sampath
Profit After Tax behavioural shifts to achieve the desired Bank with the requisite technology
customer outcomes. infrastructure to handle the surge in
(Rs Bn) volume and complexity of customer
Stemming from this, we took what we transactions, broader range of financial
15 believe is a quantum leap to ensure that products and services, as well as the
we are well-positioned to stay aligned in management and analysis of customer
12
a changing world. Termed the “Paradigm information.
9 Shift” programme, the move entailed
a massive revamp of our operational A DIGITALLY SOPHISTICATED BANK
6
architecture, in what is perhaps the We recognise that with changing customer
3 single-largest internal restructuring effort behaviours, the advent of the smart device
12.1
4.9
9.1
6.1
we have undertaken to-date. The purpose and popularity of social media usage have
0
of the exercise is threefold; firstly to fuel
2017
2014
2015
2016
forever changed conventional brick and

growth of corporate business through mortar banking. Also we operate in an
sector-specialisation; secondly to raise increasingly competitive environment,
the standards of consumer banking and made more so in recent years by the
Dividend Payout Ratio
reach out to as many individuals and SMEs advent of telecommunications companies
as possible across Sri Lanka and finally, (Tel-cos) offering financial solutions. This
(%) to position Sampath Bank as the market- has highlighted the importance of pursuing
42
leading financial technology (Fin-tech) innovation to stay ahead of the curve.
solutions provider in the country.
39 Our digital strategy focuses on digital
36.8 38.0
In parallel we also invested in upgrading innovation and competitive use of data
37.6 36.5
36 our core banking system. Another key analytics, to take the lead in reshaping the
milestone for 2017, the successful future of banking in Sri Lanka. The focus
33 migration from our legacy system to the for 2017 was to systematically expand our
more powerful Finacle 10 Core Banking digital channels and also further integrate
30 platform, is a further affirmation of our our physical and electronic distribution
2017
2014
2015
2016
commitment to continuously enhance channels to enable customers to transact

operational efficiency and service quality.
Chairman’s Message
THE YEAR 2017 PROVED

TO BE ANOTHER
REWARDING YEAR FOR
SAMPATH BANK. WE
WERE HONOURED AS
“SRI LANKA’S BEST BANK”
AT THE PRESTIGIOUS
EUROMONEY AWARDS
FOR EXCELLENCE 2017.
seamlessly across multiple touch-points.

The new self-service channels - “10 digital
products”; Sampath PAYAPP, Sampath
Payeasy etc., that we have rolled out in
2017 enable customers to bank on their Sampath Bank was recognised as the ‘Best Commercial Bank 2017’ and ‘Best
own devices and affords them greater Retail Bank 2017’ in Sri Lanka by the UK based World Finance Magazine
control and freedom to manage their
financial lives. Judging by how the market
has responded to these products, it is
At the same time, we are always looking Cascading from our capital plan, we raised
obvious that customers indeed want a
for ways to improve and strengthen our Rs 7.6 Bn by way of a rights issue after
banking service that is integrated into their
governance practices and make every a lapse of twelve years. I see this as an
everyday lives. These are groundbreaking
effort to subscribe to global best practices important step towards strengthening our
digital products that enable individuals
for Corporate Governance. Tier I capital.
to carry out cashless transactions and
as such symbolize our support for the
In 2017 two additional Board Committees Total Capital (Tier I + Tier II)
government-led effort to make Sri Lanka a
were established; the Board IT Committee
cashless society.
and the Board Capital Planning Committee.
(Rs Bn)
The Board IT Committee is tasked with
A WELL-GOVERNED BANK
to expediting the digitization agenda 100
Our commitment to strong and effective and safeguarding the Bank against cyber
governance is the fundamental part of security risk, while the Board Capital 80
the way we run our business. There exists Planning Committee was appointed to 60
a clear delineation between the Sampath oversee the Bank’s capital requirements
Bank Board and the Management. and ensure compliance with the new 40
The Board as the ultimate authority BASEL III regulations that came into effect 20
provides a strict oversight for the proper
40.9
61.3
48.5
80.9
on 01st July 2017.

management of the business. 0
2017
2014
2015
2016
A WELL-MANAGED BANK
In line with the Banking Act Direction No.
Eager to comply with the new capital
11 of 2007 issued by the Central Bank of
requirements under the new
Sri Lanka, on Corporate Governance for Adding a Rs 6.0 Bn boost to the Bank’s
BASEL III regulations, we took swift action
Licensed Commercial Banks and the Code Tier II capital, Sampath Bank became
to strengthen the Bank’s Tier I and
of Best Practice for Corporate Governance the issuer of Sri Lanka’s first ever BASEL
Tier II capital. Under the aegis of the Board
jointly issued by the SEC and the CASL, III compliant Debenture. The Bank also
Capital Planning Committee, a new capital
we have made sure that our Corporate succeeded in securing a further USD
plan was formulated with actionable
Governance Framework is both forward 100 Million senior debt from China
objectives.
looking and ethical and places a heavy Development Bank in a landmark offshore
emphasis on compliance. deal with a five year tenure.
GRI 102-10
In December 2017, the Bank announced a qualitative aspects of the business. For APPRECIATIONS
second rights issue to raise a further Rs the 4th year running, Sampath Bank was In closing, I wish to thank my colleagues
12.5 Bn Tier I capital and also announced also recognised as the ‘Best Commercial on the Board for their steadfast support,
another BASEL III compliant Debenture Bank 2017’ and ‘Best Retail Bank 2017’ in commitment and conscientious
issue, with the provision to raise up to Sri Lanka by the UK based World Finance stewardship of the Bank.
Rs 7.5 Bn during the first half of 2018. Magazine, unprecedented achievements
that reinforce our position in the industry. At this juncture, I also wish to thank
A SUSTAINABLE BANK Mr. Nanda Fernando, our energetic
Sustainability has always been at the FUTURE OUTLOOK AND PROSPECTS Managing Director for the tenacity with
core of our purpose-driven DNA. We We expect economic conditions in Sri which he has driven the Bank to a new
recognise that not all returns can be Lanka to improve steadily in 2018 and level of excellence and dynamism. My
found in financial statements and that beyond. Moving forward, we want to be appreciation also goes to Team Sampath -
our commitment to transform the lives of a big part of our country’s growth and the engine that powers our operations.
our customers, employees and the wider development. This means we would need to I thank you for the dedication and passion
community, is equally important. be positively positioned to meet any future for this business, which has become a
challenges and commitments. In short great source of competitive advantage.
We recognise that our lending practices - be responsive and keep pace with our
play an influential role in shaping the customers and their changing needs and A special word of thanks also goes to the
behaviours of our customers towards expectations. We would need to adapt our Central Bank of Sri Lanka, the Securities &
sustainable development. This has business model accordingly. Our greatest Exchange Commission, the Colombo Stock
prompted the commitment towards differentiator will be the quality of the value Exchange and the Ministry of Finance for
responsible lending. proposition we offer our customers, where their continuous support.
a combination of innovative products,
At the same time, we are working to create competitive pricing and unbeatable To our loyal customers, the Bank is
a highly motivated and engaged workforce, customer experience will set us apart from infinitely grateful for the trust and
for we believe Team Sampath to be the our competitors. confidence you have placed in the
true source of the Bank’s long-term Sampath brand for the past three decades.
sustainability. Hence, our vision in the next phase of You remain the reason we are driven to
growth is to act like a start-up, and be able innovate, succeed and grow.
Investing in the community, we focus to respond and innovate quickly to deliver
on addressing systematic issues, simple, fast and contextual banking in the Many thanks also to our suppliers and
which are national priorities, such as digital age. service providers for understanding our
education, health, financial inclusion and vision and working with us towards this
entrepreneurship. These efforts testify BOARD CHANGES common purpose.
to our purpose which is to first change Mr Deshal De Mel who served the Board
our people’s social standing by dignifying since 01st January 2012 as a Non My sincere gratitude also to our
their lives through access to basic human Executive, Non Independent Director shareholders - your patronage over the
needs and then secondly, empower them resigned from the Board on 01st July years has been a source of immense
economically so that they can break away 2017 to accept a position in the Finance strength for the Bank and I look forward to
from a detrimental poverty cycle. Ministry. Mr Ranjith Samaranayake who your continued support to enable the Bank
served the Board as an Executive Director to move forward in its journey of excellence
A WINNING BANK since 01st January 2009, also retired in the years ahead.
The year 2017 proved to be another w.e.f. 09th August 2017 upon reaching the
rewarding year for Sampath Bank. We mandatory retirement age of 70 years. On
were honoured as “Sri Lanka’s Best Bank” behalf of all my colleagues in the Board I
at the prestigious Euromoney Awards take this opportunity to thank them both CHANNA PALANSURIYA
for Excellence 2017. This is the 4th time for the yeomen service provided to the Chairman
Sampath Bank has been the recipient Bank and wish them good luck in their
of this award, itself a phenomenal future endeavours. Colombo, Sri Lanka
accomplishment. The award recognises
15th February 2018
the top performing financial institutions I am also pleased to welcome Mr Rushanka
in the world, based on stringent selection Silva who joined the Board on 01st
criteria to evaluate both quantitative and September 2017 as a Non Executive, Non
Independent Director.
MANAGING DIRECTOR’S REVIEW GRI 102-14
Rs 92.6 Bn
Gross
Income
+37% 2016 : Rs 67.6 Bn
the Rs 12 Bn mark in 2017, the first

time in the Bank’s history. While ROA
improved significantly in 2017, reporting
a year-on-year increase of 7.7%, ROE
slightly decreased by 0.5%, as a result of
increase in the equity base due to recently
concluded rights issue.
I AM OPTIMISTIC THAT WE ARE IN A STRONG
POSITION TO CAPITALISE ON OPPORTUNITIES THAT Cost to Income
COULD IMPROVE SCALABILITY AND ENHANCE

(%)
VALUE CREATED FOR ALL STAKEHOLDERS.
60
45
It gives me great pride to report that once 30

again in 2017, Sampath Bank PLC was able Net Interest Income
to continue the tradition of generating 15
54.8
47.8
52.7
42.3
consistent results, as it has done over the (Rs Bn)

0
past 30 years.
2017
2014
2015
2016
30
FINANCIAL HIGHLIGHTS 24
Gross income rose to Rs 92.6 Bn, 37.0% 18

I believe this performance is the result of
higher than in 2016, thanks to a strong
12 our unrelenting focus to create and sustain
86.0% contribution from Fund Based
long-term value by evolving in a way that
Income (FBI). Net Interest Income (NII), 6
is relevant to the environment in which we
15.7
22.8
17.4
28.4
the Bank’s main source of revenue grew

0 operate.
by 24.7% year-on-year to reach Rs 28.4
2017
2014
2015
2016
Bn supported by a strong increase in loans

OPERATING CONTEXT
and advances. Meanwhile, timely re-pricing
of the asset & the liability portfolios helped In 2017 the Bank benefited from
Total operating expenses grew by 9.4%, favourable macroeconomic conditions
to relieve the pressure on Net Interest
mainly due to increased personnel costs including the revival in global trade and
Margins (NIMs), resulting in a slight
and higher IT expenses. Despite the investment activities and reasonable GDP
increase in NIMs to 3.91% in 2017 from
increase in costs however, our cost-to- growth in Sri Lanka.
3.87% in 2016.
income ratio, at 42.3% for 2017, is the
lowest in the recent past. In yet another The Sri Lankan economy grew moderately
milestone achievement, PAT crossed by 3.7% during the first nine months
of the year, led by robust growth in
GRI 102-10
financial services, telecommunication Our progressive

Digital Banking Unit adds 10 dynamic The undisputed pioneer in digital innovation,
and insurance activities and satisfactory new services to its portfolio.
brings you another first for the New Year
growth in construction and manufacturing. that will revolutionize your Digital Banking experience.
OPERATIONAL RESULTS DIGITAL

SERVICES
Fuelled by private sector credit demand,

For the first time in Sri Lanka’s banking With the dawning of the new year, Sampath Bank launches 10 state of the art digital
our advances portfolio grew at a history, 10 digital banking services,

launched on a single day, for your
services that are set to save you time and money when it comes to your banking needs.
As we continue to revolutionize Sri Lanka’s banking sector, our products and services
will always strive to make your life simpler, today, tomorrow and into the future.
optimum convenience.
cumulative average of 22.5%, a much
First ever Bank to launch Ten Digital Products in a single day
faster pace than the industry growth
average of 16.1% for 2017. For the first
time, annual gross loans growth exceeded
Rs 100 Bn, driven by a 26.8% increase in
Our deposit strategies for the year were
corporate lending, mainly to high-growth Total Deposits
aimed at maintaining deposit growth at
sectors, while the SME and Retail books
above-industry-average levels. Targeted
too grew by 19.0%. Further, I am happy to
initiatives in this regard saw the deposit (Rs Bn)
report that, despite the growth in the credit
portfolio grow at a rate of 22.1%, higher
portfolio, credit quality remained strong, 750
than the industry average of 17.5%.
with Sampath Bank recording an NPL ratio
The total deposit portfolio registered 600
of 1.64% for 2017 which is only a marginal
an increase of Rs 114.2 Bn to reach Rs 450
deterioration compared to 2016.
630.4 Bn as at 31st December 2017. Our
market share too edged up to 8.5% as at 300
Credit Growth -
Industry vs Bank end December 2017, from 8.2% a year 150
342
516
409
630
ago. Strategic re-pricing skewed towards
(%) 0
mobilising larger volumes of low-cost
2017
2014
2015
2016
25 deposits enabled the Bank to retain the
21.1 CASA ratio above 34% and mitigate the
20
17.5 impact on low-cost deposits in a high-
15 interest rate environment. STRATEGIC DEVELOPMENTS
16.1
13.7 While our performance has continued to
10
CASA - improve year-on-year, to truly live up to our
5 Industry vs Bank role as a world-class bank in the future, we
14.6
24.0
21.3
22.5
(%) felt it was important to bring more clarity

0
and focus to our growth strategy.
2017
2014
2015
2016
50
47.3
Bank 45.9 Seeking to create a scalable platform from
Industry 45
which to grow the business sustainably,
40.3 in 2017 we rolled out what we call the
40
NPL - 38.4 “Paradigm Shift”, to reorient the business
39.3
Industry vs Bank 37.1 34.9 and put customers at the centre of our
35
(%) 34.2 focus. Opening ourselves up for easy
30 access by the customer, meeting their
5
2017
2014
2015
2016
expectations, dealing effectively with their

4.2
4 feedback, proactively communicating with
Bank
them, ensuring shorter turnaround times,
3 3.2
Industry
2.6
speedy resolution of issues raised and
2.5
2 provision of products and services that
are customer driven, are the long-term
1
objectives that we hope to achieve through
1.93
1.64
1.61
1.64
0 the “Paradigm Shift” programme.

2017
2014
2015
2016
Bank
Industry
Managing Director’s Review
Stemming from this, a major structural

revamp of our business activities was
carried out to bring greater clarity between
the corporate and consumer banking
models. I am excited to share with you
some of the ensuing changes which have
already begun to make a positive difference
in the way we serve our customers.
Widespread changes were made to the

Corporate Segment to augment our
advisory capacity and maintain industry
leadership in fast-growth sectors of
the economy. Sector specialisation was
introduced as a means of expanding
our exposure to priority sectors such as
Sampath Bank is honoured as “Sri Lanka’s Best Bank” by the prestigious Euromoney Awards for
agriculture, apparel, manufacturing and Excellence 2017 for the 4th phenomenal time
leisure. In parallel, the Consumer Banking
operational architecture was streamlined
to generate synergies for greater efficiency
and improved returns. Branches were
appointed as the sole custodians of driving
possible thanks to the functionality of the
new core-banking platform. Rs 28.4 Bn
the Consumer Banking proposition, with
the key strategic growth levers being
In addition we were able to keep pace Net Interest
with the Paradigm Shift programme by
channel diversification and increased
expediting our process integration and
Income
market penetration to the SME segment.
automation. These new ways of working +25% 2016 : Rs 22.8 Bn
have yielded substantial improvements
2017 was a landmark year for our
in efficiency, translating into a significant
Information Technology strategy.
reduction in operating costs. Further
Completing the 1st year of our four- Page 70
investments were made to commission
year transformational journey, the most
the Finacle Treasury system, strengthen Human Capital
noticeable achievement during this period
the credit evaluation system and enhance As a bank, Human Capital plays a crucial role in
was the investment made to upgrade our
the Bank’s risk optimization capacity. I find our success. Hence, our investments in Human
core banking system. We began the roll Capital are focused mainly on having the right
that these measures have significantly people, with the right skill set, at the right time.
out of the new Finacle 10 core banking
improved our overall resilience.
system to replace the Legacy systems we
have had in place for the past eleven years.
INVESTING IN TEAM SAMPATH
Our strategic investment in the Finacle
10 core banking system, with its agility While the Paradigm Shift and the core OUR STRATEGIC
banking system roll out are indeed bold
and added functionality, will expedite the
steps aimed at taking our business
INVESTMENT IN THE
way in which we respond to customer
needs and strengthen our ability to deliver forward, the true measure of their success FINACLE 10 CORE
cutting-edge digital banking solutions. We is contingent on our people – Team BANKING SYSTEM WILL
stayed on track with our implementation Sampath. And, given the broader scope
programme, and immediately began of these changes, change agents were EXPEDITE THE WAY WE
seeing benefit in our ability to exploit and appointed to manage the behavioural RESPOND TO CUSTOMER
challenges, while a series of special
innovate on our new agile platforms. In
onboarding initiatives were rolled out
NEEDS AND STRENGTHEN
fact, our ability to introduce the “10- digital
products” in a single day is testament to to assist employees to understand and OUR ABILITY TO DELIVER
cope with the change. Our goal was to
the agility of our core banking system.
ensure that employees feel vested in the
CUTTING-EDGE DIGITAL
The introduction of online legal registers,
the banking robot console, were all made performance and the future of the Bank. BANKING SOLUTIONS.
IN 2017 WE INVESTED
RS 70 MN IN TRAINING,
Investment in Training 42.3%
WHERE THE FOCUS (Rs Mn) Cost to
WAS ON IMPROVING 80 Income
SOFT SKILLS THROUGH 60 -12% 2016 : 47.8%
LOCAL AND OVERSEAS 40
OFFSHORE INVESTMENTS
TRAINING.
20 With our funding base firmly in place, we
felt it was time to explore offshore lending
42
47
70
70
0 opportunities, an area in which we had not
2017
2014
2015
2016
been aggressive in the past. Having revived
our offshore lending programme in 2017, I
A new board-approved structure was also am proud to announce that we reached a
introduced to ensure that the Bank has historical milestone by performing our first
a robust continuity plan to move forward official lending transaction to Myanmar
Page 78 in our growth journey. This programme through the Bank’s offshore banking unit.
Social and Relationship Capital exposes our employees to leadership
development programmes through cross- Meanwhile, more focused efforts to pursue
Our investments in Community Capital
stem from two material aspects: namely, functional roles that allow interaction offshore lending opportunities in other
Community Development and the
Promotion of Financial Inclusion. in different parts of the business, while regions saw the Bank venture into project
re-skilling and upskilling tactics are used financing activities in a number of East
to redeploy capable people in line with African countries, a hitherto untapped
changes in the business environment and market for the Bank.
One such initiative was the launch of the our business needs.
“MD’s blog” which provides the opportunity CORPORATE SOCIAL RESPONSIBILITY (CSR)
for any staff member to contribute with NEW REGULATORY REQUIREMENTS As a national bank serving the masses of
their ideas, suggestions and opinions. The BASEL III implementation, which the country for the past thirty years, we
commenced on 1st July 2017, was another have always been committed to sharing
I am happy to say these efforts were major challenge, especially given the need our success with the communities in which
100% successful. To give you an example, to progressively increase Tier I & Tier II we operate. It is our vision to empower
in the Paradigm Shift programme alone capital over a short period of one and a these communities through meaningful
we managed all 307 staff reassignments half years. Taking the first step towards socio-economic development which would
without a single incident or complaint compliance, Sampath Bank raised Rs 7.6 allow them to uplift their living standards.
being reported. Bn by way of a rights issue in November We proactively identify opportunities
2017 to boost Tier I Capital and a further arising from key social, developmental
Further we continued to invest in building Rs 6 Bn worth of Tier II Capital was raised and business issues when formulating our
the capacity of our team. In 2017 we by issuing Sri Lanka’s first BASEL III CSR programs, rather than just reacting
invested Rs 70 Mn in training, where compliant debenture in December 2017. to requests from charitable causes. Our
the focus was on improving soft skills CSR initiatives are anchored on four
through local and overseas training. In In parallel, the Bank also continued pillars: Education for All, Community
a world where all banks largely have the its SLFRS 9 journey, focusing mainly Capacity, Entrepreneur Development and
same products and the same access to on learning the applicability of the Environmental Protection & Conservation.
similar technology, I firmly believe that new Accounting Standard, developing
our investment to build staff capacity will mathematical models, educating staff In 2017, we invested in targeted
differentiate us from our competitors. and investing in the necessary control programmes under each pillar. Sampath
processes to facilitate full compliance by Pasala, the “Pahe Shishyathwa” – grade
the end of the next financial year. 5 scholarship support programme,
Managing Director’s Review
AS MARKET COMPETITION
INTENSIFIES, WE WILL
SEEK TO TRANSFORM
INTO A FULLY-DIGITAL
BANK, THAT WE EXPECT
TO BECOME THE KEY
DIFFERENTIATOR WHICH
SETS US APART FROM
PEERS.
MD’s Business Club - Corporate Journal of Mr Nanda Fernando
career guidance and internships for And as market competition intensifies, we

undergraduates are the key efforts
conducted under the Education for All pillar
will seek to transform into a fully- digital
bank, that we expect to become the key
1.67%
in 2017, while the “Wewata Jeewayak”, differentiator which sets us apart from Return on
tank restoration initiative (Phase II) was peers. Therefore the overarching goal for
the main catalyst of the Community the next three years is to drive the uptake
Assets
Capacity pillar. “Sampath Saviya”, our of our digital platforms and increase usage +8% 2016 : 1.55%
flagship CSR initiative, which comes by ensuring that the platforms are user-
under the Entrepreneur Development friendly and allow for the transactions that
pillar, has been ongoing since 2014 and customers need.
continues to gather momentum. A unique
initiative to promote financial inclusion by At the same time, we will intensify our
improving financial literacy and advocating focus to ensure that our people use these
I also take this opportunity to express my
a credit-plus culture among the masses, new systems efficiently in order to meet or
gratitude to the Governor of the CBSL and
the programme has benefited over 2,000 even exceed our customers’ expectations.
to all other regulatory bodies including SEC
entrepreneurs in the three years since its Meanwhile, our longer-term focus would be
& CSE for the vital role they play and their
launch. to ensure that IT and other infrastructure
contribution to the Banking Industry.
costs are kept under control and, even
OUTLOOK AND PROSPECTS more importantly, that they continue to
I also wish to thank our customers and
Based on current indications, the global make a sustained, positive contribution to
shareholders for supporting us throughout
economy is expected to remain stable, and the business in the years ahead.
our 30 years in business, and sincerely
the Sri Lankan economy is projected to
hope they continue to be a part of our
grow positively in 2018 and beyond. I am APPRECIATIONS
success in the coming years.
optimistic that we are in a strong position I would like to thank the Chairman and
to capitalise on opportunities that could all Directors for their wise counsel and
improve scalability and enhance value support during the year. I take this
created for all stakeholders. opportunity to thank our Corporate
NANDA FERNANDO
Management and team Sampath for their
We will execute our strategy by placing our Managing Director
hard work and dedication to our customers
customers at the centre of everything we and the Bank.
Colombo, Sri Lanka
do, working to earn their trust by doing the
15th February 2018
right business the right way and producing
a strong suite of financial products to
enhance the customer experience.
STRATEGIC SUSTAINABILITY FRAMEWORK
Sustainability is an integral part of the The framework is based on three key RESPONSIBLE BANKING
Bank’s ethos. We have put in place a pillars: Maintain the highest standards of business
sustainability framework to articulate our conduct by effectively managing the social
commitment to contribute to economic, SHARED GROWTH and environmental impacts of our business
environmental and social progress in Invest in real solutions that enrich the decisions.
line with the United Nations’ Sustainable lives of our customers, shareholders,
Development Goals (SDGs). An integrated employees, suppliers, business partners SOCIO-ECONOMIC DEVELOPMENT
3600 approach underpins our sustainability and the broader community. Work towards sustainable, nation-wide
framework and ensures our business
development in order to raise Sri Lanka’s
strategies reflect our aim to fully support
socio-economic status for the benefit of
the growth and development of our nation.
future generations.
STRATEGIC FOCUS ON TRIPLE BOTTOM LINE Strategy & Focus

y Internal restructuring of consumer banking
and corporate banking segments in order to
optimize growth potential
y Support high-growth sectors of the economy
PEOPLE PLANET PROFIT y Upgrade core IT infrastructure to support the

digitization agenda
y Keep pace with the latest trends in digital
banking
Stakeholder
Engagement y Leverage on technology to enhance customer
convenience
Shared Growth y Cost optimization through integration and
Product Strategy and
automation
Stewardship Focus
y Capital adequacy and liquidity management in
360 0 Responsible
Banking
line with new BASEL III requirements
y Ongoing development and re-skilling of human
APPROACH TO
SUSTAINABILITY capital to support the Bank’s growth strategies
Opportunities y Ongoing investments to develop the SME sector

Risk
and
Management Socio-economic
Challenges Opportunities
Development
y Rapid evolution in digital banking
Governance y National strategy to build a cashless society
y Need for greater financial inclusion in Sri Lanka
y Improved external trade and investment
activities
FOCUS ON SUSTAINABLE DEVELOPMENT GOALS y Government focus on developing the SME sector
Challenges
y Tightening monetary policy measures
y BASEL III regulatory changes
y Internal change management
y Cyber security threats
y Stiff competition from peers
y Declining demand for private sector credit
Strategic Sustainability Framework GRI 102–18, 19, 20, 21, 26, 29
CSR AND SUSTAINABILITY GOVERNANCE STRUCTURE GRI 103-2 In an effort to further streamline the Bank’s sustainability
strategy and strengthen stakeholder relationships, a dedicated
Senior DGM – Consumer Banking Corporate Sustainability Unit was set up in 2017. The CSR
& Corporate Sustainability Committee, which is led by the
Sustainability Unit
Managing Director
Board of Directors
Group Chief Financial Officer

Managing Director, oversees the initiatives to be carried out
Corporate
Group Chief Human Resource Officer under the Bank’s CSR framework. Development of strategies,
policies and goals related to sustainability are also part of their
DGM – Branch Banking
responsibilities. The Corporate Sustainability Unit is responsible
AGM – Human Resources for the evaluation, resource allocation, implementation, successful
completion, monitoring and review of these projects. In carrying
AGM – Recoveries
out its mandate, the Corporate Sustainability Unit uses a highly
transparent project management process.
PROJECT MANAGEMENT PROCESS (PMP) GRI 413-1
Identification of Community Grievances / Issues (Critical Concerns / Burden Issues)
Re-align Align to sustainability parameters Re-align
NO Generate Sustainable Benefits? Facilitate Stakeholder Engagement? NO
Decline YES YES Decline
Project Evaluation by the CSR & Corporate Sustainability Committee
Project Evaluation, Implementation, Monitoring & Stakeholder Engagement
Assigning a Unit Level CSR Committee, comprising Sampath team members, community leaders
Step 1 and customers / social (non-political) interested parties representing the area
Step 2 Preparation of a priority list based on our study findings / observations and community members' views
Assigning project objectives, key actions, resource requirements, time frame and
Step 3
involvement of Sampath team members
Step 4 Implementing the project in line with a detailed action plan and timeline
Step 5 Continuous monitoring and evaluation of project credentials
Social and Environmental

Grievance Solved? NO
Impact Assessment
YES
Reporting and Record Keeping

STAKEHOLDER ENGAGEMENT GRI 102–40, 42, 43, 44
At Sampath Bank, we work in the belief that our capacity to generate shared value. In Our Triple Bottom Line approach to
stakeholder relationships are critical for addition, we believe that cultivating mutual stakeholder engagement therefore aims
the Bank to be able to play a positive role in trust and respect with stakeholders paves to build and maintain ongoing business
society. Engagement with our stakeholders the way for sustainable performance. relationships with all material stakeholders
enables us to gain insight, to sharpen our of our business.
decision-making process and improve
STAKEHOLDER ENGAGEMENT PROCESS
TRIPLE BOTTOM LINE IMPACT ASSESSMENT
PEOPLE PLANET PROFIT
Classify
Determine impact on the
Identify key stakeholders Bank from each stakeholder Prioritize
category
Respond
Establish most effective Allocate necessary resources Use relevant engagement
engagement strategy for each to operationalise chosen mechanism to create
stakeholder group engagement methodologies ongoing dialogue
Assess
Identify key issues and Determine material aspects Obtain continuous feedback
concerns raised by and integrate into business to determine stakeholder
stakeholders processes satisfaction
STAKEHOLDER ENGAGEMENT MECHANISM

Shareholders and other investors
Management Philosophy: Ensuring long term shareholder value and upholding the rights of the shareholder and supporting a broader
shareholder constituency to ensure their Wealth Maximization
Engagement Mechanism Frequency Matters Relevant to the Stakeholders Our Strategic Response
Shareholder relations forums P yShareholder satisfaction regarding yMaintaining a consistent bottom
General meetings A/P the Bank’s financial position line
Annual Report A
yShareholder views on key yEnsuring sustainable return on
Interim Financial Statements Q
governance and policy matters investment (Rights issue 2017
Disclosures and announcements on CSE P
was concluded at a substantial
Corporate Website 24/7 yDevelopment of shareholder
discount)
General correspondence R communication channels
CSR projects R yEngaging in greater transparency
yReturn on equity
and responsible stewardship
yStrategy and continuity
yMaintaining the Bank’s reputation
yFinancial performance and credibility
ySafeguarding asset quality

A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 – 24 hours 7 days
Stakeholder Engagement
Employees
Management Philosophy: Commitment to create a conducive environment for the employees to develop and reach their potential, both
professionally and personally
Open-door policy R yEthical employment practices yCompetitive rewards and benefits
Employee forums P to attract best talent in the market
yCareer development opportunities
Employee suggestions schemes R
yPromote greater diversity and
Grievance-handling procedure R yEmployee communications &
inclusion
Employee social committees R feedback
Feedback forms A yDevelop from within through
yRewards / recognition
Business unit level meetings R training & development
Intranet 24/7 yEmployee wellbeing
yEncourage greater engagement
Memorandums / Directives R yWork-life balance
Newsletters Q yPerformance–based incentives
Training R yEffective handling of grievances
Get-togethers / Events R
Sampath Employee Notification System 24/7 yMaintain high standards of
(SENS) occupational health & safety
CSR projects R yEnsure employees’ welfare
Online groups 24/7
yFoster a sense of belonging
Customers
Management Philosophy: Uphold the customers’ right to demand a stable and progressive banking environment which provides a
superior service platform and promotes customer choice / convenience
One-on-one feedback from customers R yCustomer service yEffective complaint resolution
who visit the Bank
ySatisfaction on existing products yMaintain service excellence
Customer surveys conducted via P
traditional or non-traditional research yBrand perception and reputation yDeliver technology-driven banking
techniques solutions
yCustomer convenience
Social media interactions 24/7
yContinuous introduction of
Customer complaint handling 24/7 yNeed for innovations and
innovative products which promote
mechanism customized solutions
greater customer convenience
ATL, BTL & digital communications R yCommunication methods
Correspondence R yEffective marketing and
SMS alerts 24/7 ySpecial promotions communication
Corporate Website 24/7 yTimely and relevant information on yMaintaining data security and
Sampath Vishwa (Internet banking) 24/7 products and services customer privacy
portal
Customer Care Centre 24/7 yCustomer touch-points yPromoting island-wide customer
CSR projects R inclusiveness
yCustomer benefits and rewards
Feedback forms - paper based / R yBetter market share
yLoyalty recognition
electronic mediums

Suppliers and Service Providers

Management Philosophy: Striking the right balance between cost and quality and promoting ethical and transparent sourcing practices
Interactions through the purchasing R yDeveloping strategic partnerships yEngaging in fair and equitable
policy procurement
yPromoting transparent and
Feedback evaluations AW
ethically responsible business ySupplier Risk Assessment
Meetings AW
practices mechanism
Visits to supplier workshops / offices P
Written communications (letters & R yContinuous communication with yContractual agreements to
e-mails) suppliers & service providers promote sustainable procurement
Reviews & assessments P
yRegular reviews on quality of yLocal sourcing
goods and services
yRegistration of multiple suppliers
and service providers as a BCP
measure
y Maintenance of a suppliers &

service provider register
yDeveloping SME Entrepreneurs

whilst purchasing goods at lower
cost thus enjoying a win-win
situation for both Bank and the
supplier
A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 – 24 hours 7 days AW – As & when required
CBSL & Other Government Institutions directly related to Banking

Management Philosophy: Ensure compliance with all legal and regulatory requirements
Policy directives / circulars, guidelines R yPolicy decisions affecting the y Compliance with regulations
and operating instructions financial sector
yRectification actions on
Meetings and forums P
yFiscal consolidation laws supervisory concerns
Press releases R
Periodic and one-off returns P/AW ySubmission of returns y On-time submission of statutory
On-site and off-site supervision P/AW returns and statutory payments
yTaxes paid to the government
Training programmes R
y Response and contribution
at meetings / forums and to
initiatives of the regulators
yMicro, Small & Medium

Entrepreneurs lending &
Entrepreneurship Development
ySupporting the Non-Conventional

Renewable Energy sector
ySupport to maintain stability in

money and foreign exchange
markets
yHelp investors to make better

investment decisions
A – Annually P – Periodically Q – Quarterly R – Regularly 24/7 – 24 hours 7 days AW – As & when required
Stakeholder Engagement
Community
Management Philosophy: Working in tandem with global and local mandates which safeguard the environment and promote
community empowerment
Ground-level interactions with R yCommunity capacity building ySocially-responsive transformative
community leaders by staff CSR model
yCommunity empowerment
Interactions with social groups and R
yTransparency and governance
volunteer organisations ySocial welfare of communities
Feedback forms / environment grievance R yCommunity engagement
yEnvironmental degradation
handling mechanism
yEmployee volunteerism
Discussions with local government R yPreservation of local culture
representatives yBecome a catalyst for change
Discussion with other organisations, R
community and opinion leaders on
community development efforts
Media-based forums R
CSR projects R
GRI 102-49
STAKEHOLDER STUDY 2017
In 2017, we conducted a comprehensive stakeholder study covering all Sampath Bank’s key stakeholder groups, namely: Investors,
Customers, Employees and the Broader Community. Our main purpose in commissioning the survey was to ascertain stakeholder
perceptions regarding the level of transparency and the importance they attribute to information contained in the Bank’s Integrated
Annual Report.
While the results of the survey show a high level of stakeholder satisfaction regarding the data and information published in the
Bank’s Annual Report, the outcome also reveals stakeholder preference for more information on certain areas. The table below
indicates these areas along with a summary of the Bank’s response to these concerns.
Concerns expressed by How we have responded in Annual Report 2017

stakeholders
Competitive positioning, including We are working towards improving disclosures in this regard. However, due to the sensitive
a comparative analysis of the nature of the data, the information that can be disclosed is limited. (refer page 60 of the Annual
Bank’s performance and market Report)
share
Public Relations (PR) information Due to large volumes, all PR information is shown on the
Corporate Website – www.sampath.lk/en/news
Future plans Comprehensively captured in Chairman’s Message, MD’s Review and all relevant Business
Reviews.
Employees’ perceptions about the Please refer Employee Relations and Employee Engagement under Human Capital
Bank (pages 70 to 77 of this Annual Report)
Corporate culture We are working towards improving disclosures in this regard and are currently in the process of
ascertaining relevant information that can be published
Brand reputation Brand Equity Study was conducted in 2017 (refer page 68 of the Annual Report)
MATERIAL TOPICS GRI 102-32, 46, 47,
At Sampath Bank, what we consider in which we operate. To address each business context. The Bank has adopted
material is any topic that is perceived material topic and its topic boundary, we these as the material topics relevant for
as significantly more pertinent to our have formulated a management approach the business for the next three years.
operations, our social relevance and to guide the way we use our resources in
our relationships with our stakeholders. creating value through our day-to-day All material topics covered in this report
To determine what is material to our operations. along with the sustainability reporting
business, we start by understanding were reviewed and approved by the AGM
the expectations and concerns of our The stakeholder survey conducted in 2017 – Human Resources, who is heading the
has helped to identify the key material Corporate Sustainability Unit.
stakeholders, in cognizance with the social,
economic and environmental context topics that are relevant in our current
HOW WE DETERMINE OUR MATERIAL TOPICS
Internal Information Sources y Internal events such as branch managers’ meetings

y Employee surveys
y Policies/Directives
y Management discussions
y Research reports published by Research & Development Unit
External Information Sources

y Shareholders at the Annual General Meeting/ Extraordinary General Meetings
y Investor forums/ customer gatherings
y Industry research
y Reports and articles published by industry analysts and investors
y Directives issued by regulators
y Pre and post-budget discussions
y Stakeholder surveys
y Corporate Social Responsibility projects
Material Topic Management Approach Applicability Impact on Impact

to GRI Sampath Outside
Standard Bank Sampath
Bank
01 Profitability and Combine a robust business model, strong governance and GRI 201 High High
Financial Stability an integrated risk management framework to ensure long GRI 202
term profitability and financial stability in a highly competitive GRI 203
industry
02 Anti-Corruption Promoting a culture of honesty and fair dealing and GRI 205 High Medium
Practices encouraging employees to observe ethical business practices
at all times and not attempt to improperly influence others
or be influenced by others (directly or indirectly) by paying or
accepting bribes or kickbacks in any form
03 Business Continuity Building resilience, capability and triggering an effective N/A High High
Planning response to safeguard the interests of key stakeholders, the
Bank’s reputation, brand and business activities, in the event of
unforeseen disruptions
04 Brand Equity Position Sampath Bank as the only truly Sri Lankan Bank which N/A High High
provides the customer with a world-class experience through
innovative financial solutions
Material Topics
Material Topic Management Approach Applicability Impact on Impact

to GRI Sampath Outside
Standard Bank Sampath
Bank
05 Research and Gather intelligence, in order to be more proactive in developing N/A High High
Development new products or upgrading existing products in response to
our customers’ needs
06 Customer Access Strengthen visibility and enhance customer convenience N/A High High
through better accessibility (multi delivery )
07 Cheaper-Better- Investment in IT infrastructure to enhance technological N/A High High
Faster delivery to capabilities
the customer
08 Employee Relations Work towards creating an inclusive work environment GRI 402 High Medium
encompassing gender diversity and a multi-cultural, multi-
generational workforce GRI 403
09 Talent Acquisition Attract and retain the best people with the right mix of GRI 202 High Medium
and Management technical and behavioural competencies to meet targeted
business requirements in the long term GRI 401
GRI 405
10 Training and Provide employees with the relevant knowledge and skills which GRI 404 High Medium
Development encourage them to innovate and lead change in the industry
11 Employee Create a work environment where employees feel recognised N/A High Medium
Engagement for their talents and valued for their commitment to the Bank’s
strategic vision
12 Customer Ongoing refinement of the product development process to N/A High High
Convenience reflect the needs of specific customer segments and offer
customers the best-in-class banking convenience through
solutions that meet the needs of the customer at every stage
of their lives
13 Customer Health Anti-money-laundering policy and anti-fraud policy to enforce GRI 416 High High
and Safety controls and prevent our products and services from being
used to facilitate fraudulent or money-laundering activities
14 Marketing and Render fair, honest and equitable service to customers and in GRI 417 High High
Labelling doing so, ensure that their interests are protected throughout
their relationship with the Bank
15 Customer Privacy Ongoing investments in enhanced security systems and GRI 418 High High
verification protocols across all available channels of service
16 Complaint Reduce complaints by addressing the underlying causes GRI 418 High High
Management
17 Promoting Financial Ensure all Sri Lankans have access to financial services N/A High Medium
Inclusion regardless of where they live or socio-economic status, in turn
reducing poverty and increasing prosperity
18 Community Respond to Sri Lanka’s emerging socio-economic needs in a GRI 413 High Medium
Development manner that would trigger meaningful societal change in the
longer term
19 Environmental Find solutions to such global challenges as climate change, GRI 302 High Medium
Management resource scarcity and natural capital loss GRI 305
GRI 306
Note: Comprehensive management approaches of all above material topics have been published in a supplementary report for the
Annual Report 2017 available on the Sampath Bank’s corporate website (Please use the QR code in page 2).
2 8 9 10 11 1 3 4 5 6 7
17 18 19 12 13 14 15 16
High
Impact on the organisation
Medium
Low
Low Medium High
Impact outside the organisation
01 Profitability and Financial Stability 07 Cheaper-Better-Faster delivery to the 13 Customer Health and Safety
02 Anti-Corruption Practices customer 14 Marketing and Labelling
03 Business Continuity Planning 08 Employee Relations 15 Customer Privacy
04 Brand Equity 09 Talent Acquisition and Management 16 Complaint Management
05 Research and Development 10 Training and Development 17 Promoting Financial Inclusion
06 Customer Access 11 Employee Engagement 18 Community Development
12 Customer Convenience 19 Environmental Management
OUR VALUE-CREATING BUSINESS MODEL
Inputs Value-Creation Process
Financial Capital (Page 60)

Internal Environment
y Retained earnings: Rs 6.1 Bn
y Debenture issue: Rs 6.0 Bn
y Rights issue: Rs 7.6 Bn
y General reserves: Rs 33.7 Bn
Vision
(Page 12)
Manufactured Capital (Page 64)
y Opened FCBU Extension Office in the Katunayake Export
Processing Zone
y Introduced Recycler ATMs: 7
y New Deposit Kiosks: 75
y Introduced Banking Robot
Values
y Finacle 10 migration (Page 12)
Intellectual Capital (Page 68)

y Brand Equity Study
y Implementation of Brand Guideline
Enabling our Value Added Activities
y Market Study on deposit customers

Strategic Sustainability Framework
(Page 41)
Human Capital (Page 70)
y Special Leadership Development Programme through the
Sampath Leadership Academy
y Employee Talent Development Programme [ETDP]
y Competency Training: Rs 70.2 Mn
y Change Management programmes Risk Management
(Page 118)
Social & Relationship Capital (Page 78)

Customer Community
yLaunch of “10-Digital yInvestment in:
Products” yEducation for All:
yLaunch of Sampath PAYAPP Rs 15.0 Mn Governance
yRe-launch of Sampath yEntrepreneurship (Page 127)
PayEasy Development:
yRe-launch of X-SET Account Rs 8.8 Mn
yRe-launch of Pubudu yCommunity Capacity
Account Building: Rs 6.4 Mn
yStrengthening customer yEmergency Response:
complaint management Rs 1.0 Mn Opportunities and Challenges
process yEmployee volunteer (Page 41)
hours: 15,949 Hrs
Natural Capital (Page 86)

yEnergy Management
yWaste Management
yResponsible Lending
yEnvironmental CSR
External Environment
Outcome
For Shareholders
Return on Equity: 23.35%
Earning per Share: Rs 61.95
Dividend per Share: Rs 17.20
YoY increase in Share Price: 21.24%
Key Business Pillars: Market Capitalisation: Rs 68.57 Bn
Direct Economic Value Distributed: Rs 4.6 Bn
y Consumer Banking (Page 93)
y Corporate Banking (Page 96)
y Global Banking (Page 100)
For Customers
y Treasury (Page 103) Access to the possible range of banking channels (multi delivery)
Increased convenience to Bank on the go
Best-in-class customer service
Supporting Services:
Efficient complaint management
y Administration, Logistics &
Engineering Improved network security to ensure customer privacy and prevent
y Central Cash Department fraud
y Central Processing Units
For Employees
Value Created for our Stakeholders
y Business Support Centre (BSC)

y Central Credit Processing Unit Training hours per employee: 39 Hrs
(CCPU) Number of internal promotions: 377
y Credit Supervision Unit (CSU)
y Management Information System
For Government
Unit (MISU)
y Credit Control Unit (CCU)
Taxes paid (Direct & Indirect): Rs 9.4 Bn
yCompliance
yCorporate Sustainability Unit For Community
y Finance Entrepreneurs developed: 459
y Human Resources & Training Schools facilitated: 37
y Internal Audit Beneficiaries from Capacity Building Initiatives: 143,251
y IT Systems Development
y IT Electronic Data Processing
For Environment
y Legal
Carbon footprint indicator: 12,398.66(tCO2e)
y Marketing
Saving due to paper recycling
y Network Services Centre
y Number of trees: 722
y Operations
y Oil (litres): 74,573
y Recoveries
y Risk Management y Electricity (KWh): 169,968
y Strategic Planning, Research & y Water (litres): 1,350,396

Development y Landfill (m3): 127
Subsidiaries
(Page 105)
Impact Assessment
Review and Reporting

FOCUSING ON ALL THAT WE HAVE TO GAIN

53
MANAGEMENT DISCUSSION
AND ANALYSIS
Operating Environment ....................................... 54
Capital Management Reports ............................ 59
Business Reports .................................................. 91
OPERATING ENVIRONMENT
GLOBAL TRADE GROWTH GLOBAL ECONOMY

GDP Growth - Global Economy
Global GDP growth is estimated to have
IS ESTIMATED TO HAVE picked up from 2.4% in 2016 to around (%)
REACHED A STRONGER- 3.0% in 2017, higher than the June
forecast of 2.7%. The upturn is broad- 4
THAN-EXPECTED 4.3%, based, led by growth in more than half 3.0
THANKS TO A PARALLEL of the world’s economies as global trade 3
2.8 2.8
RECOVERY IN IMPORT strengthened significantly, benefiting from
2
2.4
a cyclical recovery in global manufacturing
DEMAND FROM BOTH and investment growth. Of particular note 1
ADVANCED ECONOMIES is the rebound in global investment in all
major economic regions, which was largely 0
AND EMERGING MARKET
2017*
2014
2015
2016
responsible for the acceleration in global
AND DEVELOPING GDP growth from 2016 to 2017. Favourable
* Estimated
financing costs, rising profits, and
ECONOMIES. improved business sentiment across both
advanced economies and emerging market
In contrast, in the Euro area, growth
and developing economies (EMDEs) were
gained substantial momentum in 2017,
the other supportive elements which
reaching an estimated 2.4%. Broad-based
fuelled growth in 2017.
improvements were recorded across
all member countries, supported by
3.0% Global trade growth is estimated to have
reached a stronger-than-expected 4.3%, policy stimulus and strengthening global
demand. In particular, private sector credit
thanks to a parallel recovery in import
Global GDP demand from both advanced economies continued to respond to the simulative
and EMDEs. On the export front, although stance of the European Central Bank as
Growth exports grew in many EMDE regions, a both domestic demand and import growth
+25% 2016 : 2.4% deceleration was observed in the Middle remained robust.
East and North Africa, partly reflecting cuts
East Asia
in oil production agreed by OPEC members.
Despite reporting falling growth rates
United States for the past few years, the region is still
Growth picked up in 2017 to an estimated expected to have grown by 7.0% in 2017,
2.3%, supported by strengthening private twice as high as the expected EMDE
investment, rising profits, a weakening average. This is believed to be the result
dollar, and robust external demand. of China’s robust economic performance,
where growth is estimated to have reached
UK and the Euro Area 6.8% in 2017, reflecting continued fiscal
support and the effects of reforms, as well
Stifled by the pressures arising from Brexit,
as a stronger-than-expected recovery of
the UK economy stumbled in 2017, with the
exports and a positive contribution from
growth rate falling below expected levels.
net trade. China’s trade flows recovered
The weaker Pound Sterling resulted in a
markedly in 2017, partly reflecting rising
rise in import costs and inflation, weighing
commodity imports amid tightly enforced
on domestic demand, while business
production cuts as well as strengthening
investment suffered from uncertainty
foreign demand.
surrounding the future framework
governing economic relations between the
Meanwhile in Japan, growth picked
United Kingdom and the European Union
up in 2017 to an estimated 1.7% as
(EU).
domestic demand firmed, supported
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE | FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 55
6.6%
Inflation
+65% 2016 : 4.0%
The Sri Lankan Economy grew moderately during 2017
by a gradual recovery in consumer the second half of 2017, while security Inflation (Based on CCPI) -
spending and investment, as well as concerns continued to weigh on activity Annual Average
the implementation of a fiscal stimulus in Afghanistan, with the number of civilian
(%)
package. Exports accelerated in response casualties and displaced people reaching
to strengthening global demand, but the record levels in 2017. 8
net trade contribution to growth remained 6.6
unchanged as imports picked up as well. SRI LANKA’S ECONOMIC PERFORMANCE 6
The Sri Lankan economy grew moderately 4.0

4
South Asia by 3.7% during the first nine months of 3.3
In South Asia, economic growth slowed the year, with the annual GDP for 2017 2
2.2
to an estimated 6.5% in 2017, marginally projected to reach just above 4.0%.
below the June 2017 forecast, owing mainly 0
2017
2014
2015
2016
to temporary disruptions from adverse Growth was fuelled mainly by the services
weather conditions across the region. sector, in particular, financial services,
telecommunication and insurance
In India, growth slowed for the fifth activities, which expanded by 19.6%, 19.5% EXTERNAL SECTOR DEVELOPMENTS
consecutive quarter to 5.7% (YoY) in the and 10.9% respectively in the first nine
On the external front, the benefit of low
first quarter of FY2017/18 (April-June months of 2017. The industry sector grew
oil prices was offset by greater imports of
2017), as businesses began preparing for marginally, driven by construction and
food and petroleum due to the drought,
the impending Goods and Services Tax manufacturing, which reported growth of
while the impact on agricultural exports
(GST) which came into effect in July 2017. 2.6% and 2.4% respectively for the same
was eased by higher global tea prices.
nine-month period in 2017. The country’s
In Pakistan, growth continued to core agricultural sector, however, once The country’s cumulative export earnings
accelerate in FY2016/17 (July-June) to again faltered in the face of both severe increased by 9.4% to USD 10,341 Mn
5.3%, somewhat below the government’s drought and intermittent flood conditions, during the first eleven months of 2017,
target of 5.7%, on the back of slower-than- in turn leading to a rapid deceleration in fuelled by higher earnings from tea, spices
expected industrial sector growth. agricultural output in 2017. and the apparel sector, which benefited
from the reinstatement of the European
Elsewhere in the region, activity in 2017 Consumer price inflation overshot the
Union’s GSP+ trade arrangement earlier in
was underpinned by strong construction, customary mid-single-digit target,
the year.
especially in Bhutan and the Maldives, mainly due to high food prices associated
where large-scale infrastructure projects with weather-related domestic supply At the same time, cumulative import
were implemented. In Nepal, floods in more disruptions, revisions to indirect taxes and expenditure increased by 9.0% to USD
than one-third of the country disrupted increased prices of imported commodities. 18,931 Mn during the first eleven months
the strong post-earthquake recovery in
of 2017, leading to an increase in the
Operating Environment
76.3% cumulative trade deficit for the first eleven

months of 2017, to USD 8,591 Mn from
Workers' Remittances
USD 7,916 Mn for the corresponding period

(USD Mn)
Industry Cost of 2016.
8,000
to Income
Import Expenditure &
+0.9% 2016 : 75.6% Export Earnings 6,000
(USD Bn) 4,000
20
2,000
7,018
7,242
6,980
6,080
15
THE BANKING SECTOR 0
2017
2014
2015
2016
Nov.
REPORTED AN INCREASE 10
IN PROFITS DURING 2017, 5 The Rupee remained relatively stable,

WHEN COMPARED WITH depreciating only 2.0% against the US
19.4
18.9
19.4
18.9
11.1
10.5
10.3
0 10.3
Dollar during the year 2017.
THE PREVIOUS YEAR.
2014
2015
2016
2017
Nov.
THIS PERFORMANCE Import Expenditure

Meanwhile, weak external liquidity was
mitigated by the sale of sovereign bonds
WAS MAINLY DUE TO THE Export Earnings
and by syndicated loans, as well as
HIGHER NET INTEREST Tourist arrivals for the January–December purchases by the monetary authority in
the foreign exchange market. Accordingly,
INCOME, WHICH 2017 period increased by 3.2% (YoY) to
cumulative net foreign inflows to the
2,116,407, while earnings were estimated
INCREASED BY at USD 3,631 Mn. Meanwhile, worker government securities market amounted
to USD 452.1 Mn till December 2017, while
RS 37.3 BN. remittances for the first eleven months of
the year witnessed an YoY decline of 7.3% foreign investments in the CSE (secondary
to USD 6,080 Mn. market) recorded a net inflow of USD 120.1
Mn up to December 2017.
Interest Rates
(%)
12
10
4
Dec 14
Dec 15
Dec 16
Dec 17
Jun 14
Jun 15
Jun 16
Jun 17
Standing Deposit Facility Rate (SDFR) Average Weighted Prime Lending Rate (AWPLR)
Standing Lending Facility Rate (SLFR) Average Weighted Fixed Deposit Rate (AWFDR)
2.5% y The Foreign Exchange Act approved

by Parliament in July 2017, which
accelerated assets growth. YoY industry-
wide asset growth for the year of 2017,
focuses on accumulating international was 13.8%, compared to 12.0% recorded
Industry NPL reserves and enhancing exchange rate in 2016.
flexibility thus reducing Sri Lanka’s
external vulnerability, in a bid to Asset Quality
-4% 2016 : 2.6% encourage the free flow of capital The asset quality of the banking sector
to/from the country. marginally improved during the year 2017.
y The new Inland Revenue Law passed Although the total Non-Performing Loans
FDI inflows, led by China, also witnessed in October 2017 aims to reduce (NPLs) increased by Rs 18.4 Bn to Rs 160.7
an increase during the ten months ending the fiscal deficit and make the tax Bn, NPL ratio declined from 2.6% in 2016
31st October 2017. system more efficient through the to 2.5% by 31st December 2017. Lower
introduction of a simpler, more NPLs were reported in transport, services,
FISCAL SECTOR DEVELOPMENTS equitable tax system to restore consumption and financial & business
macroeconomic stability and promote services sectors while tourism, agriculture
Positive developments were observed in
inclusive growth. and traders sectors reported higher NPLs
the fiscal sector in the first ten months
during the year.
of 2017. Revenue, as a percentage of
estimated GDP, increased to 11.3% (Rs Moreover, the progress made on fiscal
1,470.7 Bn) during the first ten months and monetary policy measures helped Industry - Credit Growth & NPL
of 2017 from 10.8% (Rs 1,332.7 Bn) in support the successful conclusion of
the corresponding period of 2016, thanks the second review of the IMF-supported (%)
to higher tax revenues from VAT, NBT and EFF programme in July 2017, leading to
25
SCL. Total expenditure and net lending the disbursement of the third tranche
21.1
increased to 15.8% of estimated GDP amounting to USD 167.2 Mn, soon followed 20
from 15.3% recorded in the same period by the fourth tranche of USD 251.4 Mn in 17.5 16.1
15
of 2016, driven by a 19.9% increase in December 2017. 13.7
interest payments during the first ten 10
months of 2017. BANKING INDUSTRY OVERVIEW

5
Credit Growth 4.2 3.2 2.6 2.5
Consequently, the overall budget deficit 0
Credit extended to the private sector
2014
2015
2016
2017
during the first ten months of 2017 by banks increased in 2017, albeit at a
increased only marginally to 4.5% slower pace than that seen in previous Credit Growth
of estimated GDP, from 4.4% in the years. The cumulative expansion in NPL
corresponding period of 2016. credit during the year was Rs 890 Bn or
16.1% compared to Rs 826 Bn or 17.5% Borrowings
As part of the Government’s efforts to reign reported in 2016. Credit to the Industry Following the CBSL’s decision to raise
in excess monetary growth and support and Agriculture sectors grew, while credit policy rates by 25 bps in March 2017,
external sector stability, the CBSL raised under the Personal Loans and Advances borrowings by the banking sector dropped
policy rates in March 2017 by 25 bps, category also increased, fuelled by a sharply and continued to decline steadily
with the Standing Deposit Facility Rate growth in Pawning Advances. Meanwhile, thereafter. The cumulative industry-wide
(SDFR) and Standing Lending Facility Rate credit extended to the Services sector borrowings reached only Rs 1,607 Bn for
(SLFR) increasing to 7.25% and 8.75% in particular slowed, largely due to the the year 2017, compared to Rs. 1,696 Bn
respectively. decline in credit flows to the Financial and in 2016.
Business Services sub-sector.
Significant progress was also made
Due to relatively high interest rates offered
towards introducing much-needed fiscal Despite the credit expansion slowing down by term deposit products, the industry
reforms, with Parliamentary approval being in 2017, the banking industry recorded an experienced difficulty maintaining CASA
granted for two major pieces of legislation.
ratios at 2016 levels. This resulted in the
Operating Environment
industry CASA ratio coming down from Profitability

34.5% as at 31st December 2016 to 34.2% The banking sector reported an increase
by 31st December 2017. in profits during 2017, when compared
with the previous year. This performance
Liquidity Levels was mainly due to the higher net interest
The liquidity position of the banking income, which increased by Rs 37.3 Bn. The
sector continued to be maintained at sector’s profit-after-tax was Rs 138.9 Bn,
healthy levels. Data available for the first an increase of Rs 22.4 Bn during 2017. For
eleven months of the year show that the the same period, Return on Assets (ROA)
Statutory Liquid Assets Ratios (SLAR) before tax was 2.0%, while the cost-to-
were maintained well above the minimum income ratio was 76.3%, compared to 1.9%
statutory requirement of 20%, while the and 75.6% respectively in 2016.
ratio of liquid assets to total assets stood
at 28.3%. Regulatory Developments
Having previously initiated the Liquidity
Industry SLAR & SRR Coverage Ratio under terms of the Banking
Act Direction issued with reference to
(%) the BASEL III Liquidity Standards, the
CBSL took the next step by issuing a new
50
directive requiring all licensed commercial
39.5
40 banks in the country to adopt the
33.9
29.9 31.1 BASEL III regulatory minimum capital
30
standards, with effect from 01st July 2017.
20 The main aim of the move is to strengthen
the capital position of all licensed banks
10
7.5 7.5 in the country and enable them to comply
6.0 6.0
0 with the stringent requirements of the
2017
2014
2015
2016
Sep.
BASEL III standards, in turn increasing the

Statutory Liquid Asset Ratio systemic capacity and overall stability of
(SLAR) - DBU the country’s financial system.
Statutory Reserve Ratio (SRR)
59
Capital Management Reports

Financial Capital.......................................................60
Manufactured Capital .............................................64
Intellectual Capital .................................................68
Human Capital .........................................................70
Social and Relationship Capital
Customer...............................................................78
Community ...........................................................80
Natural Capital ..........................................................86
Trade-off between Capitals ..................................90
FINANCIAL CAPITAL
asset & the liability portfolios to overcome the year ended 31st December 2017, led
the pressure on net interest margins. The mainly by an increase in realized exchange
removal of the ceiling imposed by the income. Consequently, other operating
CBSL on certain products also helped to income for the year 2017 increased to Rs
improve the Interest Income. Meanwhile, 3.0 Bn, from Rs 2.6 Bn reported for the
despite stiff price competition, the Bank year 2016.
managed to improve its NIM to 3.91% in
Scan this QR code for a more comprehensive 2017 from 3.87% in 2016. The CASA ratio Impairment Losses
view of our Management Approach on Impairment losses increased by 62.7%
however declined from 38.4% in 2016 to
Financial Capital
34.9% in 2017 as customers were found partly due to increase in the portfolio size
www.sampath.lk moving from savings to high yielding term and partly due to a few newly-impaired
deposits amidst a widening of the interest individual customers. The latter triggered
difference between the two, on the back of an increase of Rs 427.5 Mn in individually
an upward revision in interest rates by the significant impairment provision for the
year. The collective impairment provision
INCOME STATEMENT ANALYSIS CBSL in March 2017.
too showed an increase of 90.9%, on par
Gross Income with the increase in portfolio size and
The Gross income of the Bank improved Demand & Saving Deposits due to improvements done to the models
by Rs 25.0 Bn or 37.0% to Rs 92.6 Bn, during the last quarter of 2016.
helped by a strong 86.0% contribution (Rs Bn)
from Fund Based Income (FBI) where Operating Expenses
200
a robust increase in business volumes Total operating expenses recorded
were reported in 2017. The FBI to Total 150 a growth of 9.4% in 2017, being the
Operating Income (TOI) ratio, which consequence of higher personnel expenses
stood at 70.9% for 2017, showed a slight 100 resulting from salary increments, increase
increase over the previous year’s ratio of in other expenses due to higher VAT rate
32.8
34.9
35.6
& inflation and increase in IT expenses

25.5
70.3%. Non Fund Based Income (NFBI) too 50

131.5
160.7
163.3
184.4
recorded a strong growth of 21.1% from Rs owing to system upgrades etc. However,
9.6 Bn in 2016 to Rs 11.6 Bn in 2017. 0 it is noteworthy to mention that growth in
2017
2014
2015
2016
expenses remained well below the growth

in total operating income for the year.
Profit Before Tax Demand Deposits
Saving Deposits This resulted in a remarkable 550 bps
as a % of Gross Income
improvement in the Cost to Income Ratio
(%) (CIR) for 2017 which stood at 42.3% for
Non Fund Based Income (NFBI)
21
2017.
19.4 Net fee and commission income, which
18.6
largely comprises of credit, trade, card and
18 Operating Expenses &
17.9 electronic channel-related fees, increased Cost to Income
15
to Rs 8.2 Bn during the year, as opposed
15.1 to Rs 6.6 Bn recorded during 2016. The (Rs Bn) (%)
12 notable YoY growth of 23.9% is largely 20 60

54.8
the result of a strong uptick in advances, 52.7
47.8
9 expansion of credit card operations and 15 45
2017
2014
2015
2016
the growing demand for innovative value 42.3
additions, especially electronic channel 10 30
Net Interest Income (NII) offerings.

5 15
The Banks’ NII, which stood at Rs 22.8 Bn Net gains from financial investments
11.7
13.3
15.5
16.9
for the year 2016, recorded a growth of Rs also grew by 12.1%, bolstered by an 0 0
2014
2015
2016
2017
5.6 Bn (24.7%) to touch Rs 28.4 Bn in the increase in dividend income earned from
current year, supported by growth in loans financial assets. Other operating income
and advances and timely re-pricing of the Operating Expenses
too recorded a YoY increase of 12.6% for
Cost to Income (RHS)
Profit After Tax & Taxation NOTABLY, FOR FIRST

Dividend Per Share Due to increase in the income base as
well as the increased FSVAT rate being
TIME, THE BANK’S
(Rs Bn) (Rs)
applicable for the entire year, VAT & NBT on GROSS ANNUAL LOANS
15 20 financial services for the year recorded an
18.75
17.20
increase of 44.9% to Rs 4.1 Bn.
GROWTH EXCEEDED
12 16
RS 100 BN. THE
9 12 Profitability
11.00
13.00
CORPORATE LOAN
6 8 The Bank recorded Rs 16.6 Bn in Profit
before Tax (PBT), up by 31.8% against Rs BOOK GREW STEADILY,
3 4
12.6 Bn earned in 2016. Profit after Tax REPORTING AN
12.1
4.9
6.1
9.1
0 0 (PAT) too grew by 32.7% from Rs 9.1 Bn

INCREASE OF 26.8%
2017
2014
2015
2016
in 2016 to Rs 12.1 Bn in 2017. Achieving
Profit After Tax

a PAT figure in excess of Rs 10 Bn is an YEAR-ON-YEAR.
important milestone for the Bank, made
Dividend per Share (RHS)
more significant by the fact that Sampath
Bank holds the distinct honour of being
equivalents also increased by Rs 7.4 Bn and
probably the only bank in Sri Lanka to
Return on Equity (After Tax) Rs 5.3 Bn respectively. Placements with
surpass Rs 12 Bn PAT mark in just 30
banks contracted by Rs 5.6 Bn as at 31st
years.
December 2017, compared to the balances
(%)
ROA & ROE maintained as at 31st December 2016.
25
23.47 Higher PBT drove up Return on Assets
23.35 Total Assets
22 (ROA) to 2.29% in 2017, a significant
improvement on 2.14% reported in 2016.
19 (Rs Bn)
18.42 However, despite higher PAT, Return on
16
16.35 Equity (ROE) declined slightly, from 23.47% 800
12.8
13
in 2016 to 23.35% in 2017, mainly due to 10.8
219.4
the infusion of Rs 7.6 Bn to the equity base 600
188.9
9.1
10 by way of a rights issue in November 2017.
138.8
9.2
2017
2014
2015
2016
400
120.4
BALANCE SHEET ANALYSIS

200
Total Assets
302.4
458.8
377.4
562.9
Sampath Bank’s total assets crossed the 0

Return on Assets (Before Tax) Rs 750 Bn landmark in 2017, growing from
2017
2014
2015
2016
Rs 658.5 Bn as at 31st December 2016

Loans & Receivables
(%) to Rs 795.1 Bn by end of the year under Other Financial Assets
review, an increase of Rs 136.6 Bn (20.7%). Non Financial Assets
3.0
This is seen as a significant achievement,
2.5
given that the industry asset growth was Loan Growth
2.29 limited to 13.8% for the same period. The
2.14 In yet another landmark achievement, the
2.0 Bank’s market share in terms of total Bank’s net loan book surpassed Rs 0.5 Tn
1.69 1.90 assets improved from 7.3% in 2016 to mark in 2017. Gross loans, which stood at
1.5 7.7% by the year-end. Growth in net loans Rs 468.5 Bn as at 31st December 2016,
and receivables together with other loans
grew by Rs 105.4 Bn or 22.5% to reach Rs
1.0 and receivables, which amounted to Rs
574.0 Bn by end 2017. Notably, for the first
2017
2014
2015
2016
114.7 Bn, was the main contributor to

time, the Bank’s gross annual loan growth
the afore-mentioned total asset growth
exceeded Rs 100 Bn. The Corporate loan
of the Bank. The financial assets held for
book grew steadily, reporting an increase of
trading and AFS categories too contributed
26.8% year-on-year, supported by lending
positively towards the total asset growth by
to manufacturing, trading, infrastructure,
recording an increase of Rs 44.2 Bn, while
balances with CBSL and cash and cash
Financial Capital
and construction sectors. The SME & retail

ACHIEVING A PAT FIGURE book too grew by 19.0% year-on-year. Total Deposits &
IN EXCESS OF RS 10 BN Liquid Asset Ratio
IS AN IMPORTANT Advance Mix (Rs Bn) (%)
MILESTONE FOR THE (%)

800
24.5 22.4
25
BANK, MADE MORE 1

1
2
640 22.1 21.8 20
SIGNIFICANT BY THE FACT 2

2
480 15
3
THAT SAMPATH BANK 4
4
47
320 10
HOLDS THE DISTINCT 6 160 5
342
409
516
630
HONOUR OF BEING 10 0 0
2017
2014
2015
2016
PROBABLY THE ONLY
18 Total Deposits
BANK IN SRI LANKA TO Term loans Pawning Liquid Asset Ratio (RHS)
Overdraft Credit cards
SURPASS RS 12 BN PAT Import loans Money market loans
Housing loans Capital
MARK IN JUST 30 YEARS. Export loans
Staff loans
Refinance loans As discussed earlier, the CBSL introduced
Leasing Others
BASEL III to the Sri Lankan Banking
industry with effect from 1st July 2017. The
Liabilities
full implementation would take place in
Sampath Bank’s deposit base expanded three phases over a period of 18 months,
Rs 392.5 Bn by more than Rs 100 Bn for the second
consecutive year to surpass Rs 0.6 Tn mark
targeting to be complete by 1st January
2019, at which point Sampath Bank would
for the first time in its history. Growing at
need to maintain its Tier I Capital Adequacy
Total Term 22.1%, the Bank’s deposit growth for the
Ratio (CAR) at 10% and its Total CAR at
year surpassed the industry growth rate
Deposits of 17.5% for the same period. As a direct
14%. In order to fall in line with these new
regulatory requirements, the Bank raised
result, an improvement in the Bank’s
+30% 2016 : Rs 301.0 Bn market share was seen, rising from 8.2% Rs 7.6 Bn worth of Tier I Capital by way of a
in 2016 to 8.5% in 2017. The above- rights issue in November 2017 and
mentioned growth was driven by a robust Rs 6 Bn worth Tier II Capital by way
increase in term deposits and, to a lesser of a BASEL III compliant Debenture in
extent, by CASA products. Consequently, December 2017. Moreover, the Bank has
the Bank’s CASA ratio decreased slightly already made an announcement to raise
from 38.4% in 2016 to 34.9% in 2017. a further Rs 5 Bn by way of a BASEL III
Rs 63.6 Bn Deposit Growth -
compliant Debenture with an option to
go up to Rs 7.5 Bn to strengthen its Tier II
Industry Vs Bank Capital further. Simultaneously, in order to
Shareholders’ (%) strengthen the Tier I Capital requirements,
Fund 30
a second rights issue was announced in
December last year, to raise a further sum
+43% 2016 : Rs 44.5 Bn 26.1
of Rs 12.5 Bn.
25
19.7 22.1
20
16.5
13.1 17.5
15
15.3
12.4
10
2017
2014
2015
2016
Bank
Industry
Rs 293.02 Earnings per Share (EPS) for 2017 stood

at Rs 61.95, 30.8% higher than Rs 47.35
recorded in the previous year. Net assets
Net Asset Value value per share also increased by 22.6%
to Rs 293.02 per share in 2017 from Rs
per Share 238.94 per share in 2016.
+23% 2016 : Rs 238.94

EPS & DPS
(Rs)
80
Market Price as at 31st December 61.95

60
47.35
(Rs) 40
34.66
400 28.52 18.75
20
17.20
315.70 11.00 13.00
325
0
2017
2014
2015
2016
248.00 260.40
250
236.30
Earnings per Share
175 Dividend per Share
30,912
35,125
63,650
100
2017
2014
2015
2016
Dividend
Given the need to increase its capital base
Group Performance to comply with BASEL III requirements, the
Sampath Bank group consists of four fully Sampath Bank Board of Directors decided
owned subsidiaries, viz. Siyapatha Finance to declare a dividend of Rs 17.20 per share
PLC, SC Securities (Pvt) Ltd, Sampath for the year ended 31st December 2017, to
Centre Ltd and Sampath Information be satisfied in the form of scrip dividend.
Technology Solutions Ltd. However,
given the scale of operations of the core Net Asset Value per Share
business, the results of these four entities
are not material to the Bank and hence a (Rs)
brief review of their operations are given in
400
the section on Subsidiaries on Page 105 of
the Annual Report.
325
293.02
Performance of the Share

250
Sampath Bank’s share price as at 31st 238.94
179.39
December 2017 stood at Rs 315.70, which 175 198.47
is a growth of Rs 55.3 or 21.2% compared

to the last traded price of Rs 260.40 at the 100
2017
2014
2015
2016
end of 2016. The share price fluctuated

between Rs 253.50 at the lowest and Rs
352.20 at the highest during the year.
MANUFACTURED CAPITAL GRI 102-6
HAVING INVESTED HEAVILY OVER THE

YEARS TO BUILD THE ISLAND-WIDE
BRANCH FOOTPRINT, SAMPATH BANK
NOW LAYS CLAIM TO THE 3RD-LARGEST
Scan this QR code for a more comprehensive
BRANCH NETWORK AMONG PRIVATE
view of our Management Approach on
BANKS IN SRI LANKA.
www.sampath.lk
Scan this QR code for a more

comprehensive view of our
Branch and ATM network
Jaffna
District
229
8 10
Branches
www.sampath.lk
Kilinochchi District
BRANCH NETWORK
1 1 391
Mullaitivu ATMs
District
The branch network has been the 1 1
cornerstone of our success over the past
thirty years. Having invested heavily over 2 2
1 1
the years to build the island-wide branch Mannar Vavuniya
District District
footprint, Sampath Bank now lays claim
to the 3rd-largest branch network among Trincomalee
District
private banks in Sri Lanka. Our network of
229 fully-fledged branches is equipped to 6 7 4 4
offer the entire gamut of financial products Anuradhapura
District
services to all customer segments across
the country, while our 12 super branches
8 10 Polonnaruwa
in key strategic locations offer 365-day Puttalam
District
District 3 3
banking services and extended banking
Batticaloa
hours for customers who demand more. District
13 19 6 7
Kurunegala
Geographical Distribution District 3 4
Matale
of the Branch Network District
Kandy District
9 Kegalle 15 22
District 7 7
9 27 56 5 8 Ampara
13 Gampaha District
District Nuwara Eliya
14
100 District 5 7
17 Badulla
63 Colombo
148 District
District 4 5 4 5
21
Kalutara Ratnapura Monaragala
District District District
22
10 21 9 10
24
Western Northern
Southern North Central
Central Uva 12 15
Hambantota
District
North Western Galle
8 13 4 5
Eastern District
Sabaragamuwa Matara
District
ATM NETWORK
A strong ATM presence is a vital component
of our business as it remains one of the
most visited customer touch points among
consumer banking customers. Given the
immense popularity of the ATM, ongoing
investments to expand the network
continued in 2017 as well, with 11 new
ATMs being commissioned during the year,
bringing the total network to 391 as at
31st December 2017. While strengthening
our geographical footprint, more recently
we kicked off a programme to upgrade
all ATM units and bring the network on
Relocation of Gangodawila Branch par with international standards. The
programme made good progress in 2017,
With our geographical footprint Activity 2017 2016 2015 with 49 units being replaced with new
firmly in place, the current branch upgraded ATMs at a cost of USD 381,000.
Relocations 04 05 05
investment programme focuses mainly
(No. of branches)
on consolidating branch operations A pilot project to install cash re-cycler
New branch openings 01* 04 05
and strengthening service delivery hardware also commenced in November
Deposit Kiosk installation 51 66 38
mechanisms. Accordingly, with the 2017. The project is aimed at optimizing
completed (No. of
exception of the dedicated FCBU extension cash availability and streamlining the ATMs’
branches)
office in the Katunayake Export Processing cash accepting and dispensing process.
Banking Robot 1 _ _
Zone, no new branches were commissioned
installation completed The other major development for the year
in 2017. However, a number of branches
(No. of branches) was the launch of the “Drive-through” ATM
were relocated, in tandem with the
Branch refurbishment 16 12 12 in December 2017. Located securely within
strategic decision to strengthen visibility
programme completed the Dharmapala Mawatha Super branch
and enhance customer convenience
(No. of branches) premises, it provides an added layer of
through better accessibility. Ongoing
* FCBU Extension office at Katunayake EPZ safety and convenience, as patrons of the
investments to upgrade branch facilities
ATM can drive in through a dedicated entry
gathered momentum in 2017, notably the
driveway and access its services from
deposit kiosk installation effort. A number
of other groundbreaking developments
were rolled out, key among them being the
“Banking Robot”, an automated teller in
the form of a humanoid robot operating
on an advanced Artificial Intelligence (AI)
interface to perform tasks activated by the
customers’ vocal commands.
A new refurbishment programme

also commenced in 2017, aimed at
strengthening brand identity by bringing
interior and exterior design uniformity
across the entire network.
Sampath Bank unveils drive-through ATM at Colombo Super Branch

within their vehicles, 24 hours a day, 7 days

a week, 365 days a year.
2017 2016 2015
ATM network strength 391 381 370
(No. of ATMs)
ATM transaction 27.3 25.6 23.0
volume (Mn)
On-Site & Off-Site ATMs
400
82
83
77
41
300
Sampath PAYAPP - The Most Convenient Way of Making Payments
200
our physical and electronic distribution solution, providing an easy, safe and
100
channels to enable customers to transact secure way for users to make transactions
285
298
293
309
0 seamlessly across multiple touchpoints. online.

2017
2014
2015
2016
In testimony to our ongoing commitment We found these efforts to be gaining

On-Site ATMs to deliver simple, fast and relevant banking traction in the market, as evidenced by the
Off-Site ATMs solutions for the digital age, we launched strong customer uptake, and the resulting
“Ten Digital Products”, a new suite of increase in the number of digitally-
DIGITAL CHANNELS digital services that gives customers engaged customers in our portfolio.
access to convenient online cashless
In 2017 we made steady progress in
banking services. Our other digital offerings, the Sampath
advancing our digital journey. Through our
Mobile App and the Mobile cash P2P
digital transformation process, we expect
In 2017 we also launched the Sampath model, both having been in the market
to realize our strategic priority of building
PayApp. A strong contender for the for some time now, continued to gather
the next generation of digital channels,
promotion of a cashless society, the momentum in 2017, thanks to continuous
which would reinforce our reputation as an
Sampath PayApp uses complex digital improvements aimed primarily at
industry leader in next-gen digital banking
software to support the needs of both enhancing customer convenience.
services. Amidst stiff competition from
customers and merchants. Dual platform
peer banks and, more recently, from Fin- In general, we have experienced an
architecture is used to create a customer
techs, our intention is to develop cheaper, exponential increase in the usage of all
app, which serves as a payment gateway
better and faster solutions through which digital channels across the country. In
for customers, as well as a merchant app
we can secure first-mover advantage in the particular, usage volumes in Jaffna and
which allows merchants to easily collect
digital banking space and thereby position Mannar in the North, as well as in areas of
payments from PayApp users. Other key
Sampath Bank as the most digitally- the East, have risen sharply over the past
developments included the re-launch of
sophisticated bank in Sri Lanka. In doing two years. In response to this, we launched
the greatly enhanced Sampath Payeasy
so, we are also aligning our strategies to a project to incorporate a trilingual option
platform as a convenient and secure utility
support the national IT vision to make Sri across all our digital channels to facilitate
payment mechanism, where customers
Lanka a fully digitally-enabled nation. even greater customer convenience.
can now use any credit card (not just cards
issued by Sampath Bank) to make a range
We continued investing in our digital In the Sampath Vishwa corporate digital
of utility payments, donate to a charity of
capabilities to enhance customer interface, we rolled out a series of new
their choice etc. Other developments to
outcomes, specifically to improve service add-ons facilitated by our strategic tie-
expand our Internet presence included a
delivery speed, ultimately leading to a ups with Sri Lanka Customs and Sri Lanka
strategic partnership with AliPay, China’s
stronger customer experience. Our efforts Post to make Sampath Vishwa a one-
leading third-party online payment
for the year were centred on integrating
stop-shop for corporate payment, capable One of the main initiatives undertaken to support the changes ensuing from
of delivering an unprecedented level of during the year was to facilitate remote the paradigm shift programme, a new
convenience. Through these investments, access to the Bank’s core banking system, electronic Credit Approval System (CAS)
we also expect to boost Sri Lanka’s enabling the field sales force to connect was set up to expedite the delivery process
position on the ease-of-doing business to the core banking system through their to Corporate Credit clients. A central
global index. In testimony to the fact, we hand-held and mobile devices. As a result repository system was established at
have seen a sharp increase in the year- of this development, sales personnel are the Network Services Centre to give the
on-year usage volumes, with not only large now equipped to assist customers to open management access online real-time MIS
corporates, but also SMEs now signing up new accounts, update their repayment information regarding the consolidated
for the convenience offered through the schedules etc., thereby eliminating the portfolios of high-net-worth customers.
Sampath Vishwa portal. need to visit the branch for such matters.
The introduction of e-signatures to
IT INFRASTRUCTURE In an effort to leverage on emerging streamline the Accounts Opening process
technologies and to help drive the was another major initiative undertaken
The Bank’s ongoing digitization agenda
enhancement of the Bank towards in 2017, with the first phase of the project
continued at an accelerated pace in 2017.
digitalization, the Bank established a new being rolled out across 23% of the branch
Ongoing investments to revamp our IT
Artificial Intelligence based solution with network. The balance 77% is due to be
infrastructure and enhance our technology
a robot ATM. It is a breakthrough which covered in 2018.
capabilities continued throughout the year.
revolutionizes the industry.
The manual transfer of documents
The most significant development for
Other key efforts for the year included the between branches was also upgraded and
the year was the migration to the Finacle
roll-out of new lead management systems a new digitized inter-branch document
10 core banking system as part of the
for the Credit Control Unit (CCU) as well as transfer mechanism was introduced in
strategy to upgrade the existing system in
the Card Centre, aimed at strengthening 2017, all of which have led to a notable
place for the past 11 years. The Finacle 10
recovery efforts at both units. Meanwhile, reduction in administration costs.
core banking solution is a comprehensive
yet agile business solution, which allows us
to integrate our core banking needs quickly
and effectively in response to changes
in the market dynamic. The solution’s
readymade integration adaptors and strict
compliance to industry standards will also
contribute significantly towards reducing
integration costs, in turn helping to
advance our digitization agenda.
As a first step, we looked to leverage

on the functionality of the new core
banking solution to fast-track our process
automation strategy, which aims to ensure
that all internal workflow systems are
handled digitally. The ultimate goal here is
The Bank’s Ongoing Digitization Agenda Continued at an Accelerated Pace in 2017
to enable efficiency improvements which
will lead to lower, bank-wide operational
costs.
INTELLECTUAL CAPITAL

www. sampath.lk
Our intellectual capital consists of our

iconic brand identity as well as our IT
systems architecture, procedures and Celebrating 30 Years of Presenting Your Future
protocols, which, for the most part,
remains intangible when integrated into MATERIAL TOPICS Key Initiatives for 2017
our day-to-day operations. We have identified four key aspects to Brand Equity Study (2016/2017)
have a material impact on our Intellectual
INTELLECTUAL CAPITAL Capital. These are, namely, anti-corruption Key Findings of the Study
VALUE CREATION MODEL practices; Brand Equity; Research & y The Sampath brand is associated with
Development, and Business Continuity superior customer service which is
Key Inputs Planning. These material aspects, along considered uniquely different for its
with their respective Management “warm and friendly service”
Approaches, are captured in detail on our
yStewardship and Governance y The brand is rooted in culture, yet
website. Please use the above QR code.
yIntegrated Risk Mapping modern in its service delivery
yAnnual Strategic Planning Process STRATEGIC VALUE DRIVERS y The brand offers a unique and
yIndustry Memberships
Stemming from our material aspects, in differentiated experience at the
2017 we focused on the following strategic branch level
value drivers to achieve our targeted
Strategic Value Drivers for 2017
y The emphasis on culture ethics
Intellectual Capital outcomes;
are strongly reflected through the
Sampath brand name and logo
Building Brand Equity
yBuilding Brand Equity y Mass media communications highlight
Primary Objective
yTargeted Research and Development the following aspects about the brand
Take stock of the Bank’s current standing
vis-à-vis key competitors, and determine
y Importance of culture and
the health and standing of the Bank in
Target Outcomes for 2017 ethics
terms of brand mindshare, preference,
differentiation, competition, engagement, y Leadership in innovation and
experience, image and identity. the use of advanced technology
yBrand Leadership to facilitate greater customer
yAwards and Accolades convenience
y Availability of a comprehensive
suite of products to cater to
diverse customer segments at
each stage of their lives
Create a Distinctive Brand Image Scope of the Study

Primary Objective Key geographical areas covered under the
To build a unique brand identity which study are: Colombo, Gampaha, Kandy and
reflects the vision and values of the Bank Galle districts. The study methodology
in order to maintain a clear differentiation used included direct sampling to establish
that would give Sampath Bank a leading quantitative data together with a series
edge in an increasingly competitive market. of in-depth interviews and focus group
discussions to determine qualitative
Key Initiatives 2017 aspects. The findings of the study would
be used to sharpen the Bank’s focus on
Implementation of the Brand guidelines to
product responsibility, customer health
help all internal and external custodians of
& safety, customer service & customer
the brand to consistently deliver a singular,
privacy and marketing communication
professional brand image which reflects
aspects.
the unique role that Sampath Bank plays in
improving the customers’ financial futures.
The study was outsourced to an
independent third party and remains
A key component of the brand guidelines
ongoing as at 31st December 2017.
is the Brand Visual Guide, a formal
document that outlines the brand’s visual Be the Brand Custodian You are Required to be
architecture. It creates a framework that
binds all those who work with the Sampath
brand, and enforces them to adhere to the Key Initiatives for 2017
same set of uniform guidelines, thereby Market Study focused on Deposit
avoiding dilution of the brand resulting Customers in potential high growth
from inconsistencies in brand stylizing. locations across the country.
The main aim here is to present the Bank’s
stakeholders with a cohesive and unified Objectives of the Research
marketing message at all times.
y Explore customers’ views and
expectations with regard to selected
As ambassadors of the Sampath Brand,
Deposit products on features,
all employees too are expected to adhere
processes and service delivery
to, read, understand and strictly apply the
Brand Guidelines in their day-to-day work.
y Evaluate customer satisfaction to
The Brand guidelines are readily accessible
understand the service level of the
to all employees through the intranet.
Bank
Targeted R & D Initiatives

y Explore the new trends in consumer
Primary Objective banking to ascertain future banking
To better understand specific customer preferences
segments and respond through
customized value-additions to gain a
competitive edge in the market.
HUMAN CAPITAL

Human Capital
www.sampath.lk
As a bank, Human Capital plays a crucial

role in our success. Hence, our investments
in Human Capital are focused mainly on
having the right people, with the right skill Service Awards 2017
set, at the right time.
HUMAN CAPITAL
VALUE CREATION MODEL Material Topics for future opportunities. In addition to
Given the highly competitive market in general management and competency
Key Inputs which we operate, we have identified four development, the programmes were
key aspects that have a material impact structured to comprehensively cover areas
on our Human Capital, namely: Talent such as strategic thinking, creativity,
yStewardship and Governance innovation, change management, etc., in
Acquisition & Management, Training &
yStrong Value Culture
Development, Employee Relations & order to develop a new calibre of out-of-
yFair and Equitable Remuneration and
Diversity and Employee Engagement. the-box thinkers.
Benefits
yEqual Employment Opportunity These material aspects, along with their
respective Management Approaches, are There were 377 team members promoted
yCompetent Workforce
captured in detail on our website. Please to the next level during the year and
yRobust Training and Development
refer the above QR code. altogether 578 team members participated
Agenda
in special leadership development
yPeople Risk Management Mechanism
STRATEGIC VALUE DRIVERS programmes, including those who were
identified for future opportunities.
Stemming from our material aspects, in
Strategic Value Drivers for 2017 2017 we focused on the following strategic
Overall Competency Development
value drivers to achieve our targeted
Human Capital outcomes: A total of 235 Competency Development
yDevelop Employee Capabilities programmes, including internal, external,
yImprove Employee Productivity Develop Employee Capabilities overseas and distance learning were
yStrengthen Customer Orientation conducted based on the Training Need
Primary Objective
yStrengthen Employee Relations and Analysis and covering team members at
Employee Engagement Ensure continuous Leadership Pipeline and all levels. The average training hours per
Future-Ready Work Force. team member stood at 39 Hrs in 2017, an
increase of 15 % compared to last year.
Target Outcomes for 2017 Key Initiatives for 2017
“Leaders at All Levels” 82 team members of the management
Special Leadership Development team were nominated for overseas
yEnsure Leadership Pipeline training, 17 to AIT, Thailand and 01 to the
programmes were conducted through
yMaintain Employee Retention Ratio
“Sampath Leadership Academy” for Harvard Business School.
yImprove Profit-per-employee
employees who were promoted to
yStrengthen Customer Loyalty
supervisory and senior management
levels and for team members identified
Executive Talent Development Programme

(ETDP)
The programme was aimed at accelerating
employee’s internal career mobility by
sharpening their strategic insights and
strengthening leadership skills. Under the
ETDP initiative, potential candidates in
the senior executive to senior manager
grades (both inclusive) are earmarked and
assigned to lead key strategic projects
or offered rotational stints with various
business segments. ETDP has facilitated a
total of 234 Individual Development Plans.
Awareness programmes on “Core Banking Annual Health Conference 2017

System Migration”
To prepare our team for the migration of
the core banking system (Finacle 10) we Mentoring and Coaching Branch Bench Strength (BBS)
conducted a series of training programmes
Our mentoring and coaching system We continued our efforts to improve our
covering 2026 participants representing all
provides an excellent channel which BBS score by ensuring that effective job
Business Units.
empowers team members to be in rotation takes place within branches and
control of their careers by obtaining across the network. As a result of these
Distance Learning
feedback on their concerns regarding their efforts, the BBS index increased to 2.58.
With a view to enhancing productivity and leadership potential, career prospects and The BBS is an internally developed index
minimizing disruption to customer service competency development. that measures the cross-functional
we made a conscious effort to promote abilities of branch staff.
Distance Learning throughout 2017. Online Improve Employee Productivity
learning, E-learning, Regional training and
Primary Objective Profit per Employee
Branch/Department level training were
further strengthened during 2017. Towards Create a high-performance, result-
this end, 12 new “e-certification” courses oriented culture that is both competitive, (Rs Mn)
were also rolled out through the e-learning nurturing and, at the same time,
4
platform, covering Branch Operations, intellectually stimulating to give each
Compliance, Credit Operations, Leadership individual the opportunity to learn, perform 3
Development, Customer Relationship and continue to strive for excellence.
Management, and Working Capital 2
Key Initiatives for 2017
Financing.
Extending the Performance-Based Bonus 1
The above were targeted efforts to expand Scheme (PBBS) to all employees to create a
2.3
1.2
1.5
3.0
0
the number of Distance Learning hours, performance culture
2017
2014
2015
2016
carried with the intention of covering a Following its successful roll-out for
minimum of 50% of total training hours Corporate Management in 2015, the PBBS
for the year through Distance Learning. We was extended to all employees in 2016. Strengthen Customer Orientation
were able to achieve 52% training through The PBBS aims to drive the team members Primary Objective
distance learning programmes. towards higher levels of performance Reorient staff to further adopt a
and productivity in order to realize the “Customer-First” mindset, which would
Banks’ vision; “Growing force in Sri in turn help strengthen customer loyalty
Lankan financial services”. Based on team towards the Bank.
performance, the PBBS was launched
under the theme: “one for all and all for
one”.
Human Capital
STEPS WERE
TAKEN TO FURTHER
STRENGTHEN EMPLOYEE
COMMUNICATION BY
INTRODUCING NEW
COMMUNICATION
CHANNELS INCLUDING
VIDEO CONFERENCING
AND THE EMPLOYEE
HOTLINE, TO GIVE
Awards Ceremony - Sampath Daru Daskam and Rewards for Children
EMPLOYEES DIRECT
ACCESS TO SENIOR
Key Initiatives for 2017 knowledge with a view to improving service
Restructuring the Call Centre delivery. MANAGEMENT.
Renamed as the “Customer Care Centre
207 teams with 1,419 team members
(CCC)”, the aim of the restructuring
participated. A special two-way communication
initiative was to set up the CCC as a
programme was launched to coincide with
strategic business unit. The move was
Strengthen Employee Relations and the roll out of the PBBS. The move was
followed by a series of structural changes
Employee Engagement aimed at creating awareness, commitment
to develop a more service-oriented
Primary Objective for the desired outcomes and obtaining
mindset among the CCC team. To further
To ensure employee commitment and feedback from employees regarding the
support this, a new performance-based
engagement through effective HR PBBS.
reward scheme was rolled out to identify
and reward top performers. Operations practices.
Employee Communication
at the CCC were further segmented as
inbound and outbound in a bid to expedite Key Initiatives for 2017 Steps were taken to further strengthen
the response times for each segment and Change Management Programmes employee communication by introducing
to enhance the cross sell ratio. As a result new communication channels including
To facilitate a smooth transition and
of these changes, we have been able to video conferencing and the employee
prevent a blow-back from the Paradigm
maintain the call abandon ratio well below hotline, to give team members direct
Shift programme, a special task force was
the standard call centre ratios. access to senior management.
appointed within the HR department to
ensure that team members are committed
Continuous Training on CRM and Selling Skills “From MD’s desk” was a communication
to the change programme and continue
initiative to share vital information,
Identifying the need to be “Customer to stay motivated. In addition special
business progress, convey the
Centric” we conducted series of training attention was made to;
management expectations and to
programmes covering a total of 2,211
receive constructive feedback from team
front line and supervisory staff. Apart y Handle grievances of team members
members.
from classroom sessions, participants directly affected by the “Paradigm
were exposed to case studies and role- Shift”
Improvements were also made to enhance
play sessions based on real customer
existing communication channels,
experiences. y Redeploy employees through training
specifically; “Sampath Sandeshaya”; the
and re-skilling
Banks’ in-house employee magazine and
Introduction of Innovative Training Solutions
the “Sampath Emergency Notification
As an outcome of these effective change
An online quiz competition was introduced System” (SENS).
management strategies, we successfully
to encourage employees to advance their
managed over 307 staff reassignments
stemming from the paradigm shift.
HR Business Partner
Strengthened the role of HR Business
Partners with a view to assist the
management of respective zones in order
to achieve business targets by effective
implementation of HR policies and
procedures in the branches under their
purview. HR Business partners have visited
and conducted discussions with the staff
and attended to various requirements that
have surfaced during these visits.
Sampath STARS
Sampath Special Thanks and Recognition
Scheme (Sampath STARS) recognises the Annual Cricket Carnival 2017
outstanding individuals and teams who
have made exemplary contributions and
A special disaster relief programme Engagement with Children of Sampath Team
commitment in various spheres. The Bank
conducted in the aftermath of extreme The key effort in this regard is the “Daru
has recognised 184 individuals and teams
weather conditions experienced in 2017 Daskam” event held to showcase the
at the ceremony held on 22nd December
provided relief to 69 team members who talents of our employees’ children. 378
2017.
were affected. This included provision children between the ages of 4 to 17 years
Health and Wellbeing of essential items, transportation and participated in this year’s competition in
assistance in the recovery process. the areas of singing, dancing, instrumental,
Our programmes to uplift the health
and well-being of our team members art and speech. Further, the “Rewards for
Sports and Recreation Children” programme annually recognizes
encompass the Annual Health Conference,
Annual Athletic Meet was held on 6th children of team members who have
‘Health and You’; E-Magazine on health
August 2017 and the grand finale of the excelled in national examinations, sports
related topics and E-Communications
Annual Cricket & Netball Carnival was held and special achievements in different
on health and well-being. Annual Health
on 26th August 2017. Colours Nite and fields. 37 children were recognised this
Conference themed ‘Vigour to Move
Sampath Nite were held on 21st April 2017 year.
Forward’ was held on 11th November
and 9th December 2017 respectively. 180
2017 recorded a participation of over 250
teams participated in the quiz competition
team members where eminent medical
held on 19th February 2017.
professionals delivered sessions. Further,
we have in place “Helping Hands”, the
Counselling Cell to provide psychological
support for personal, family and work
related issues. Further Special yoga and
first aid programmes were conducted
during the year.
Human Capital
NEW RECRUITS 2017 GRI 401-1 TURNOVER 2017 GRI 401-1

NEW RECRUITS AGE GROUP AND GENDER TURNOVER - AGE AND GENDER
Age Group Male Female Grand Total Age Group Male Female Grand Total
18-20 16 8 24 Above 55 4 - 4
21-30 108 93 201 51 - 55 8 6 14
31-40 5 - 5 41 - 50 4 1 5
41-50 1 1 2 31 - 40 27 32 59
Grand Total 130 102 232 21 - 30 62 37 99
Percentage (%) 56 44 100 18 -20 - - -
Grand Total 105 76 181
Percentage (%) 58 42 100
NEW RECRUITS REGION AND GENDER TURNOVER - REGION AND GENDER

Province Male Female Grand Total Province Male Female Grand Total
Central Province 3 - 3 Central Province 6 5 11
Eastern Province 7 3 10 Eastern Province 6 2 8
North Central Province 6 2 8 North Central Province 2 1 3
North Western Province 8 3 11 North Western Province 4 3 7
Northern Province 6 2 8 Northern Province 7 1 8
Sabaragamuwa Province 4 1 5 Sabaragamuwa Province 2 1 3
Southern Province 3 2 5 Southern Province 3 2 5
Uva Province 3 1 4 Uva Province - - -
Western Province 90 88 178 Western Province 75 61 136
Grand Total 130 102 232 Grand Total 105 76 181
Percentage (%) 56 44 100 Percentage (%) 58 42 100
EMPLOYEE RELATIONS 2017 GRI 401-3

RETURN TO WORK AND RETENTION RATES AFTER PARENTAL
(MATERNITY) LEAVE REASON FOR TURNOVER VS GENDER
Description 2017 2016 Reason for Turnover Male Female Grand Total
Employees entitled to maternity leave 1,401 1,374 To join other competitor 13 5 18
Employees taking maternity leave 112 109 organisations
Employees returning to work after 110 108 To join other organisations 18 8 26
maternity leave Migration 36 17 53
Employees still employed 12 months 108 106 Higher studies 9 6 15
after taking maternity leave Personal reasons 8 24 32
Return to work rate 98.21% 99.08% Retirement 8 6 14
Retention rate 96.42% 97.24% Other 13 10 23
Grand Total 105 76 181
Percentage (%) 58 42 100
Lost days and absenteeism due to health and safety issues – NONE
COMPETENCY AREA WISE SUMMARY 2017

Number of Training
Participants Hours
(1) Operations (Cash/Accounts Opening/Pawning/Cheques/Clearing/Credit Cards) 1,297 11,327
(2) Credit and Recoveries 423 3,489
(3) International Operations (Trade/Foreign Currency Operations) 217 2,239
(4) Risk & Compliance 612 4,587
(5) Finance & Accounting 94 976
(6) Marketing (Products/Branding) 246 1,776
(7) Human Resource Management (HRM) 53 279
(8) Legal & Good Governance 68 821
(9) Other Technical Programmes (Treasury, etc.) 234 2,275
(10) Orientation Programmes 304 9,247
(11) Customer Service Excellence & Selling Skills 260 2,080
(12) Leadership & Management Programmes (Competency Development programs/Strategic Management/ 578 6,254
Change Management)
(13) IT Skills 2,472 35,139
(14) Communication Skills 145 1,176
(15) Health & Safety 118 944
(16) Other Non-Technical Skills 253 1,455
(17) E-learning and other online solutions 77,385 70,516
Grand Total 84,759 154,579
AVERAGE TRAINING HOURS PER YEAR PER EMPLOYEE BY GENDER AND EMPLOYEE CATEGORY GRI 404-2, 3
No. Competency Area Participants Training Hours Grade
Management
Management
Management
Management
Management
Other Grades
Operational
Grand Total
Corporate
Executive
Female
Female
Middle
Senior
Junior
Staff
Male
Male
(1) Operations (Cash/Accounts Opening/ 843 454 7,363 3,965 21 327 1,475 1,594 1,848 6,054 8 11,327
Pawning/Cheques/Clearing/Credit Cards)
(2) Credit and Recoveries 274 149 2,268 1,221 25 188 695 901 472 1,208 - 3,489
(3) International Operations (Trade/Foreign 141 76 1,455 784 147 136 174 338 465 979 - 2,239
Currency Operations)
(4) Risk & Compliance 397 215 2,982 1,606 58 383 656 1,557 1,014 920 - 4,587
(5) Finance & Accounting 61 33 634 342 69 141 120 184 326 136 - 976
(6) Marketing (Products/Branding) 159 87 1,154 622 28 - 109 621 650 368 - 1,776
(7) Human Resource Management (HRM) 34 19 181 98 - 150 39 58 7 23 2 279
(8) Legal & Good Governance 44 24 534 287 5 78 198 464 68 8 - 821
(9) Other Technical Programmes 152 82 1,479 796 120 785 378 395 333 265 - 2,275
(Treasury, etc.)
(10) Orientation Programmes 197 107 6,010 3,236 - - 45 170 304 8,712 16 9,247
(11) Customer Service Excellence & Selling Skills 169 91 1,352 728 - 144 82 245 418 1,192 - 2,080
(12) Leadership & Management (Competency 375 203 4,065 2,189 307 1,188 1,906 1,287 1,288 278 - 6,254
Development Programmes/Strategic
Management/Change Management)
(13) IT Skills 1,607 865 22,840 12,299 62 670 1,829 4,161 8,992 19,426 - 35,139
(14) Communication Skills 94 51 764 412 - - - 8 - 864 304 1,176
(15) Health & Safety 76 42 614 330 - 32 72 104 160 464 112 944
(16) Other Non-Technical Skills 164 89 946 509 115 433 226 175 105 79 324 1,455
(17) E-learning and other online solutions 50,300 27,085 45,836 24,680 - - 686 8,087 13,769 47,974 - 70,516
Grand Total 55,087 29,672 100,477 54,102 957 4,655 8,688 20,347 30,218 88,949 766 154,579
All employees receive regular feedback on performance and career development and their level of performance is assessed on annual basis.
Human Capital
AVERAGE TRAINING HOURS GRI 404-1 AVERAGE TRAINING HOURS PER EMPLOYEE - CATEGORY WISE
2017 2016 No. of Hours
Average training hours per employee 39 34 Corporate Management 38
Average training hours per female 39 35 Senior Management 42
Average training hours per male 39 34 Executive Management 35
Middle Management 38
Junior Management 38
Operational Staff 42
Other Grades 5
SAMPATH BANK BENEFIT STRUCTURE GRI 401-2

Permanent Contract Employees Differently Abled
Employees Employees
Profit Bonus 9 9 9
Salary Increment 9 On renewal of agreement 9
Allowances (As Applicable) 9 9 9
Reimbursement of Course Fees / Exam Fees 9 - 9
Medical Facilities 9 - 9
Holiday Bungalow Facilities 9 9 9
Special Non Technical Training 9 9 9
Special Programmes for Children of Employees 9 9 9
BASIC SALARY & REMUNERATION RATIO BY GENDER & EMPLOYEE CATEGORY GRI 405-2
Female Male
Corporate Management 1.00 1.18
Senior Management 1.00 1.06
Executive Management 1.00 0.94
Middle Management 1.00 0.97
Junior Management 1.00 0.99
Operational Staff 1.00 0.94
The Bank has given an equal opportunity for all employees and does not tolerate any form of unfair discrimination on the basis of race,
gender or disability. The ratio of basic salary at the entry level for male and female is 1:1. However, this ratio may change due to different
service period of employees in the Bank and at a particular salary grade.
Composition of Governance Bodies and Breakdown of Employees per Employee Category According to Gender, GRI 405-1
Age Group, Minority Group Membership, and Other Indicators of Diversity
Range Corporate Senior Executive Middle Junior Operational Other Grand
Management Management Management Management Management Staff Total
Female
Female
Female
Female
Female
Female
Female
Male
Male
Male
Male
Male
Male
Male
18-20 - - - - - - - - - - 16 9 - - 25
21-30 - - - - 1 - 6 4 50 31 1,165 420 4 10 1,691
31-40 - - 1 2 49 7 250 102 418 244 245 281 12 35 1,646
41-50 10 3 70 17 122 43 103 60 18 32 - 4 18 45 545
51-55 9 2 14 7 13 13 6 6 1 1 - - 9 22 103
Above 55 1 - - - - - - - - - - - - - 1
Grand Total 20 5 85 26 185 63 365 172 487 308 1,426 714 43 112 4,011
Percentage (%) 80 20 77 23 75 25 68 32 61 39 67 33 28 72 -
TYPE OF EMPLOYMENT GRI 102-8

2017 2016
Type of Employment Male Female Grand Total Male Female Grand Total
Fixed Term Contract 11 9 20 12 18 30
Permanent 2,383 1,273 3,656 2,424 1,270 3,694
Probationers 20 33 53 13 24 37
Trainees 197 85 282 137 62 199
Grand Total 2,611 1,400 4,011 2,586 1,374 3,960
REGION WISE STAFF ALLOCATION GRI 102-8

2017 2016
Province No.of Male Female Grand No.of Male Female Grand
Branches/ Total Branches/ Total
Units Units
Central Province 23 183 85 268 24 175 92 267
Eastern Province 18 124 26 150 19 123 27 150
North Central Province 9 85 17 102 10 89 17 106
North Western Province 22 168 82 250 22 158 81 239
Northern Province 13 70 29 99 15 85 27 112
Sabaragamuwa Province 16 107 40 147 15 110 36 146
Southern Province 23 181 89 270 27 191 90 281
Uva Province 9 78 8 86 10 79 14 93
Western Province 151 1,614 1,024 2,638 157 1,575 990 2,565
Overseas Operations 1 1 - 1 1 1 - 1
Grand Total 285 2,611 1,400 4,011 300 2,586 1,374 3,960
GRI 102-16, 17 / 205-2

IMPLEMENTING ETHICS AND INTEGRITY y The Code of Conduct and Governance corruption which amounts necessarily to a
To realise its vision to be “The growing requirements for Board of Directors violation of the Bank’s Code of Conduct is
force in Sri Lankan financial services”, dealt with through the Bank’s disciplinary
y The Whistle Blowing Policy
Sampath Bank is fully committed to inquiry procedure by the Disciplinary
conduct its business in an honest and y Policy on Managing Conflicts of Inquiry Committee.
ethical manner. Interest
The key driver in this regard is the Code
y Procedure on handling Related Party
Within the Bank, we promote a culture of of Conduct for Employees, which outlines
Transactions.
honesty and fair dealing, and encourage the Bank’s stance on fair dealing and
employees to observe ethical business compliance. Employees who violate the
In addition, in 2017 the Bank initiated
practices at all times by providing them Code will be dealt with summarily, resulting
implementation of a bank-wide policy on
with the necessary training to enable in appropriate disciplinary action that may
Gender Equality, with multiple responsibility
them to understand the corporate values, include termination of employment and
tiers; the Board of Directors at the top,
corporate culture, business principles, reporting such violations to appropriate
cascading down to the Human Resource
standards and norms of behaviour regulatory authorities.
Department and other Strategic Business
unique to Sampath Bank. Further, we Units.
have implemented a strict ethics and During the year, Bank conducted training
integrity control framework to ensure that & awareness programmes on Human
The values of the Bank are published
the highest level of ethical behaviour is Rights & Anti-Corruption for 2,647 team
in the Annual Report (both in English
practiced across the business. The key members, covering 66% of the total cadre.
and Sinhala) to make it available for all
aspects of the framework are: 52% of the Senior Management members
stakeholders (Please refer page 12).
were also exposed to these programmes.
y The Code of Conduct for all employees In addition to classroom type training
Anti-Corruption
interventions, a range of cloud-based
y The Code of Conduct for Key The Bank strictly adheres to best practices e-courses were introduced, which are
Management Personnel (KMPs) including all applicable laws, rules and readily available to the entire team 24 X 7
regulations with respect to anti-corruption across the network.
behaviour as well. Any act on bribery or
SOCIAL AND RELATIONSHIP CAPITAL

CUSTOMER
MATERIAL TOPICS is then able to perform tasks activated by
We have identified five key aspects that the customer’s vocal commands. As of now
have a material impact on our Customer the “Banking Robot” can assist customers
Capital, these are namely Customer with regard to cash withdrawals, balance
Convenience, Complaint Management, inquiries, exchange rate / interest
Customer Health and Safety, Marketing rate information, loan status, credit
Scan this QR code for a more comprehensive and Labelling and Customer Privacy. card information and account opening
view of our Management Approach on These material aspects along with their instructions.
Social and Relationship Capital - Customer
respective Management Approaches are
Launch of PAYAPP
www.sampath.lk captured in detail on our website. Please
use the above QR code. A revolutionary new payment platform
that enables customers to pay for their
STRATEGIC VALUE DRIVERS purchases either at a shop or on a website
CUSTOMER CAPITAL conveniently. PAYAPP is a self-activated
Stemming from our material aspects, in
VALUE CREATION MODEL mobile payment application which also
2017 we focused on the following strategic
Key Inputs value drivers to achieve our targeted facilitates account balance inquiry as well
Customer Capital outcomes; as fund transfers between PAYAPP users.
yStewardship and Governance Aligning with Current Market Trends

Enhance Customer Convenience through the
yIndustry-leading Products
Use of Breakthrough Technology Primary Objective
yResponsive Customer Service Model
yState-of-the-art IT Infrastructure Primary Objective Improving product relevance to keep pace
Respond to the customer’s demand for with current market trends.
greater convenience through the launch of
Strategic Value Drivers for 2017 new digital products and services. Key Initiatives for 2017
y Re-launch of X-SET Teen account,
Launch of “Banking Robot” equipped with additional features and
yEnhance Customer Convenience a host of financial planning tools to
An automated teller in the form of a
through the use of Breakthrough enable teenagers to better manage
humanoid robot operating on an advanced
Technology Align with Current Market
AI (Artificial Intelligence) interface to their money and benefit from greater
Trends
detect the presence of customers and financial freedom.
yTactical Marketing
yStrengthening Complaint start a conversation. The “Banking Robot”
Management Processes
yCyber Security Training
Launch of the “10 Digital Products”
Target Outcomes for 2017

Sampath Mobile App Sampath e-signature
yIndustry Leader in Customer

Sampath Safety Locker App Sampath e-ID
Convenience
yImproving Customer Satisfaction
Index
yEliminate Recurring Complaints Sampath Pawning e-pay Sampath e-loan application
Sampath Missed Call App Sampath Loan Card
Sampath e-enroll Sampath Pay Easy

y Redesigning the “Pubudu Account” y Reporting all customer complaints Analysis of Customer Call-ins 2017
gift scheme to match current market related to service issues at branches
trends and the emerging needs of the to DGM-Branch Banking.
target market.
y Compile and report credit card issues 100
y Discontinuation of the “Travel to AGM HR, GCHRO and Head of Card
80
Lite” card due to local regulatory Centre.
restrictions and technical issues. 60
y Compile and report issues at EOD, IT
40
Tactical Marketing related issues to AGM HR, GCHRO and
Primary Objective IT/EDP monthly. 20
6,585
5,287
8,156
Create awareness and increase visibility 0
y Report key customer issues of the Inquires Requests Complaints /
across target customer segments. Concerns
month to AGM HR & GCHRO.

Many of the complaints received are
Target Market Campaign Month of one-off instances, as detailed above.
Implementation The Bank continuously engages with
Deposit January 1st savings promotion January customers to ensure all complaints
Customers Avurudu savings promotion April are promptly addressed and resolved
Grade 5 Scholarship Rewards campaign June to the complete satisfaction of the
Re-launch of Pubudu account October customer.
Re-launch of X-Set account October
Communication campaign on Thrift month October Cyber Security Training
Re-launch communication campaign for November Primary Objective
Double S
Create awareness among Team Sampath
Digital Users Launch of “10 Digital Products” January
and advocate the importance of
Launch of PAYAPP June
maintaining customer privacy.
Banking Robot October
Lending 14% Registered vehicle leasing campaign April / May
Customers Leasing quarter campaign June
Leasing campaign with Sathosa Motors August Training No. of Participants
Category Programmes
Leasing campaign with Porsche August
Card Customers Seasonal campaigns April & December Internal
Training 6 298
Town on Sale campaign August
Programmes
Strengthening Complaint Management External
y Initiatives taken to automate the
Training 4 9
Processes complaint handling process. Programmes
Primary Objective Total 10 307
y Value outcomes
Identify and address the root cause of
persistent issues raised through the Customer complaints as a percentage
customer complaint mechanism. of total customer call-ins is 1%.

Strengthening the existing complaint
management framework with the
introduction of a series of new changes,
key among them are:
COMMUNITY GRI 413-1 / 203-2
STRATEGIC VALUE DRIVERS

Stemming from our material aspects, in 2017 we focused on the following strategic value
drivers to achieve our targeted Community Capital outcomes;
Strategic Value Drivers Number of Projects Investment (Rs Mn) Beneficiaries
Scan this QR code for a more comprehensive Education for All 62 15.0 42,533
Social and Relationship Capital - Community Entrepreneurship
19 8.8 14,543
Development
www.sampath.lk
Community Capacity
8 6.4 79,667
COMMUNITY CAPITAL Building
VALUE CREATION MODEL
Emergency Response 8 1.0 6,508
Key Inputs
Note: Investment in other CSR initiatives and CSR communication: Rs 3.0 Mn
yStrategic Alignment with United

Nations Sustainability Development Key Initiatives
Goals (SDGs)
ySustainability Governance Framework EDUCATION FOR ALL
y Employee Volunteer Hours: 15,949
yTotal Investment in Community Capital PROJECT ECG (EFFECTIVE CAREER GUIDANCE) 1.0
(from CSR Fund): Rs 34.2 Mn
Primary Objective
PROJECT SUMMARY
Providing leadership and career development opportunities
Strategic Value Drivers for 2017 for undergraduates in order to develop the next generation of Rs 0.3 Mn
leaders. Investment from
yEducation for All Project Scope CSR Fund
yEntrepreneurship Development Undergraduates were provided guidance on how to identify the
yCommunity Capacity Building
strengths and weakness, how to reach your career aspirations, 05
yEmergency Response
how to adapt to the corporate world, the best way to prepare for Programmes
the interviews and effective communication skills. Workshops conducted
Target Outcomes for 2017 were conducted at four leading state universities; University of
Colombo, University of Peradeniya, University of Rajarata and
University of Sri Jayewardenepura.
>900
yDevelop 30 Underprivileged Schools Undergraduates
yConduct 05 Career Guidance Statistics for 2017 benefited
programmes for Undergraduates University Students
y Develop 300 Entrepreneurs Participation
yRestore a Tank in Dry Zone
University of Colombo (two programmes) 400
University of Peradeniya 325
Rajarata University of Sri Lanka 216
Department of Entrepreneurship Development, 20
University of Sri Jayewardenepura
MATERIAL TOPICS
Our investments in Community Capital
stem from two material aspects, namely,
Community Development and the
Promotion of Financial Inclusion. These
material aspects along with their respective
Management Approaches are captured in
detail on our website. Please use the above
QR code.
EDUCATION FOR ALL
PROJECT “PAHE SHISHYATHWA” - GRADE 5 SCHOLARSHIP SUPPORT PROGRAMME
Primary Objective
PROJECT SUMMARY
To provide grade 5 students with the requisite knowledge
Rs 5.6 Mn and skills to help them better prepare for their first public
Investment from examination.
CSR Fund
Project Scope
The “Pahe Sishyathwa” programme is an island-wide initiative,
07
which aims to prepare students for their first public examination.
Seminars The programme is intended not merely to improve the theoretical
conducted knowledge of students, but also offers key insights into critical
aspects of the examination process while also motivating
>6,400 students to aspire for success by envisioning broader life goals.
Children In addition, the programme also includes a session to encourage
benefited parental support in the child’s journey towards a meaningful
education. The “Pahe Shishyathwa” programme has been
successfully conducted for the past nine consecutive years by
>4,500
Sampath Bank in collaboration with Neth FM.
Parents
benefited Statistics for 2017
District Number of Students Number of Parents
Participated Participated
Batticaloa 834 252
Colombo 933 760
Galle 1,250 820
Gampaha 1,080 900
Kurunegala 935 740
Monaragala 818 700
Ratnapura 608 452
PROJECT “SOAR ABOVE THE REST, INTERN WITH THE BEST” – INTERNSHIP PROGRAMME FOR SCHOOL LEAVERS/UNDERGRADUATES
Primary Objective
PROJECT SUMMARY
Provide school leavers / undergraduates and exposure to the
Rs 37.7 Mn corporate environment.
Investment from
Project Scope
Bank’s Funds
During the eleven month programme, interns are assigned to
Branches / Departments and are expected to work in a range
553 of cross-functional areas, enabling them to gain knowledge,
School leavers develop their leadership skills and enhance their employability.
trained The internship programme is an ongoing initiative of the Bank.
251
Undergraduates
trained
EDUCATION FOR ALL
PROJECT “SAMPATH PASALA”
Primary Objective
PROJECT SUMMARY
Uplifting educational standards of underprivileged schools in Sri
Rs 7.1 Mn Lanka.
Investment from
Project Scope
CSR Fund
The project is a systematic intervention to assist underprivileged
37 schools from each province around the island by developing
the required infrastructure and providing other necessities. In
Schools
celebration of the Bank’s 30th anniversary, a total of Rs 7.1 Mn
facilitated
was invested to assist 37 schools in 19 districts.
>21,000
Progress
Students
benefited District No. of No. of District No. of No. of
Schools Students Schools Students
Facilitated Benefited Facilitated Benefited
Ampara 1 135 Kegalle 2 415
Anuradhapura 3 1,872 Kurunegala 3 380
Batticaloa 3 1,520 Mannar 1 945
Colombo 2 415 Matara 4 916
Galle 1 160 Monaragala 1 400
Gampaha 1 219 Polonnaruwa 2 1,000
Hambantota 2 500 Puttalam 1 219
Jaffna 2 571 Ratnapura 2 10,750
Kalutara 1 206 Trincomalee 1 420
Kandy 4 945
ENTREPRENEURSHIP DEVELOPMENT
PROJECT “SAMPATH SAVIYA” – ENTREPRENEURSHIP DEVELOPMENT PROGRAMME
Primary Objective
PROJECT SUMMARY
To break the cycle of poverty by providing solutions to address
Rs 3.2 Mn the problem of rural unemployment.
Investment from
Project Scope
CSR Fund
“Sampath Saviya”, which commenced in 2013, is an ongoing
initiative by Sampath Bank to offer both technical support and
12 financial assistance to start-ups as well as existing business
ventures that lack of the resources to commence or expand their
Workshops
own business. The focus of the “Sampath Saviya” programme
is to first develop the entrepreneurial skills of Micro, Small &
>450 Medium Entrepreneurs (MSMEs) through specially designed
financial literacy programmes aimed at inculcating smart
Entrepreneurs
business practices among participants. Under next stage of the
benefited “Sampath Saviya” programme, those who demonstrate progress
become eligible to obtain financial assistance to further their
entrepreneurial goals. In this context, additional focus is given to
encourage youth and women who own or want to start micro and
small enterprises.
In the long term, entrepreneurs developed through the

“Sampath Saviya” programme go on to contribute positively to
the nation’s Gross Domestic Product (GDP) whilst reducing the
unemployment rate in the country by providing employment
opportunities, in turn directly minimising poverty in the country.
PROJECT “SAVIYAKA ABHIMAN 2017” - SME FAIR
Primary Objective
PROJECT SUMMARY
To provide a networking platform for “Sampath Saviya”
Rs 5.2 Mn participants to promote their products to prospective buyers
and also to connect with industry experts, chambers and trade
Investment from
associations in order to facilitate their business expansion /
CSR Fund
diversification plans.
Project Scope
70
Held as a follow-up initiative to the “Sampath Saviya”
SME Stalls Entrepreneur Development Programme 2017, the SME fair
provided the opportunity for “Sampath Saviya” participants to
showcase their products to potential buyers as well as to the
06
general public. Fully funded and organised by the Bank, the
Advisory Services event, which took place on 25th and 26th of November at the
Stalls BMICH, was held with the participation of the Central Bank of
Sri Lanka, Export Development Board, National Chamber of
>10,000 Commerce Sri Lanka, CEFENET Sri Lanka and the Department
of Entrepreneurship - University of Sri Jayewardenepura.
Visitors
A notable feature of the event was the special emphasis
placed on supporting women entrepreneurs, differently abled
entrepreneurs, exporters, social entrepreneurs and youth.
ENTREPRENEURSHIP DEVELOPMENT
Sampath Saviya - Success Story After the workshop, approached Sampath

AWARDS Bank Bandaragama branch with my
Name : Mr. Sanath Janaka
Sooriyaarachchi business plan, which I prepared, based on
2011 the knowledge and guidance I received
Factory Location : Bandaragama
at the workshop. After evaluating my
Presidential Award for the Creativity Business Name : Smart Visual business plan, Sampath Bank provided
Enterprises me a loan worth Rs 400,000/-. I used this
2014 Website : http://www.smartvisual.lk as seed capital to start my company and
begin manufacturing my product on a
Sahasak Nimawum National Award
“I am the inventor of the Smart Power Savo, commercial scale. Since then, with support
a device used to monitor fluctuation range of the Bank, I have continued to expand my
2014 of voltage by detecting the overall standard business.
Smidex National Award at domestic or industrial electricity grid
with high precision. At first, I started out Now I have a factory in Bandaragama that
2017 by accepting individual orders (producing employs five people. I have expanded my
the product only on request) because I product range, which now consists seven
3rd place Best Entrepreneur (Western had no idea on how to market my product products, including the Smart AVS System
Province) by National Chamber of or how to run a business. Further, I had no (http://www.smartvisual.lk/smart-avs-
Commerce, Sri Lanka
knowledge on obtaining a loan from a Bank system/) for which I have received a patent
and therefore had no access to start-up license (Patent No: LK15341, Model No:
capital needed to expand my business. 1017), Smart TV guard – licensed under
Model No: SVE 1314, Smart Power Guard /
However, as an inventor, I was in touch Smart Refrigerator Guard - licensed under
with the Inventor Commission of Sri Lanka Model No: SVE 1215, Smart Booster with
and they advised me to participate in Antenna – licensed under Model No: SVE
the “Sampath Saviya” programme. This 2025 and others. I also have received a
workshop was the turning point of my life. number of awards in recognition of my
Through the “Sampath Saviya” programme, inventions. I am extremely thankful to
I learnt: Sampath Bank for their continuous support
over the past three years, which has made
y How to start a business / how to make me into an award winning inventor and
a business plan businessman.
y How to price my products properly
y How to market products / how to Recently I was even invited to participate
capture the market (I launched a in the “Saviyaka Abhiman 2017” SME
website & created FB pages to capture Fair organised by Sampath Bank, where I
the market) was able to tap into several opportunities
to help expand my business along
y Financial management / Cost
potential avenues to access the local and
management
international markets”.
y Invest within the business from what
we earn
y Overall business management
GRI 203-1
COMMUNITY CAPACITY BUILDING
PROJECT “WEWATA JEEWAYAK” PHASE 2 – TANK RESTORATION INITIATIVE
Primary Objective
PROJECT SUMMARY
Empower farming communities in Ambagaswewa in
Rs 3.1 Mn Kahatagasdigiliya with resources needed to generate a stable
livelihood and improve their living standards.
Investment from
CSR Fund Project Scope
Full restoration of the dilapidated Ambagaswewa tank in the
76 Anuradhapura district. Spread across 28 acres, the Ambagaswewa
is the primary source of irrigation for about 40 acres of
Families benefited paddy field belonging to the 76 families involved in farming in
Kahatagasdigiliya. However, the tank bed had become shallow
>300 due to the accumulation of sludge resulting from improper
maintenance. The retention capacity too had fallen drastically due
Direct beneficiaries to damages in the bund, sluice and spill gates leading to wastage
of water. The resulting water scarcity has restricted farmers in the
area to cultivating in only one crop season per annum.
After the full restoration under the “Wewata Jeewayak” initiative,

these farmer-families are provided access to an uninterrupted
supply of water to irrigate their paddy lands enabling cultivation
during both the ‘Yala’ and ‘Maha’ cropping seasons. It also allow
them to cultivate inter-crops that would serve as a source of
secondary income, further uplifting their quality of life.
“Wewata Jeewayak” is an ongoing initiative by Sampath Bank

with the guidance of Department of Agrarian Development and
Department of Irrigation to rebuild dilapidated irrigation tanks in
the nation’s dry zones.
EMERGENCY RESPONSE
PROJECT “HOPE FOR A LIFE” – ASSISTANCE FOR FLOOD VICTIMS
Primary Objective
PROJECT SUMMARY
To ensure the wellbeing of flood victims in the immediate
Rs 0.6 Mn aftermath of the May / June 2017 flood.
Investment from
Project Scope
CSR Fund
Sampath Bank partnered with “Manusath Derana” to conduct
a series of health camps in Rathnapura, Bandaragama, Galle,
04 Kalawana, the areas that were severely hit by floods in May /
Medical camps June 2017. The initiative was aimed at facilitating the emergency
medical needs of flood victims and preventing the spread of
disease. At the conclusion of each health camp, essential items
>6,000
were distributed among flood victims.
Beneficiaries
NATURAL CAPITAL
The natural resources we use during the solar power systems at Negombo,
course of business, and Sri Lanka’s natural Wellawatta Super, Anuradhapura
ecosystems and rich bio-diversity are Super and Kurunegala Super
considered as our Natural Capital. branches.
STRATEGIC VALUE DRIVERS y Installation of inverter type air

Stemming from our material aspects, in conditioners at our branches and
Scan this QR code for a more comprehensive 2017 we focused on the following strategic offsite ATMs
view of our Management Approach on value drivers to achieve our targeted y Installation of LED bulbs for our new
Social and Natural Capital Natural Capital outcomes; branches, relocations and renovations.
www.sampath.lk
Energy Management y Change the wall colour from grey to
We strive to use energy in the most white to improve the illumination level
NATURAL CAPITAL efficient, cost-effective and environmentally without increasing the number of
VALUE CREATION MODEL responsible manner, for we believe that bulbs.
proper energy management will not y Replacing 500W flasher lights with
Key Inputs
only boost our bottom line, but also 50W LED Flood Lights.
take us closer to our goal of becoming a
yEnvironmental & Social Risk “Green Bank”. Each day we work towards y Installing motion sensors to light
Management System (ESMS) improving our energy performance led by fittings at back office, passages and
y Strategic Partnerships our ESMS (Environmental and Social Risk wash rooms at head office
y Employee Volunteer Hours: 9,606 Management System). In addition, we have
yInvestment in Natural Capital (from y Replacing Illuminated sign board
undertaken the following investments,
CSR Fund) Rs 6.0 Mn florescent tube light to LED lights
as part of our ongoing efforts to improve
energy efficiency in our day-to-day Solar Power Generation
Strategic Value Drivers for 2017 operations; Colombo Super Branch
Yearly Energy Yield (kWh)

y Installation of energy efficient lighting
yEnergy Management solutions across the branch network 60,000
yCarbon Footprint Calculation
y Solar Energy project for selected 50,000
yWaste Management
yResponsible Lending branches. 40,000
yEnvironmental CSR
In 2017 we completed the installation 30,000
of solar energy system at our Kalutara 20,000
Target Outcomes for 2017 branch at a cost of Rs 4.0 Mn. The
10,000
Kalutara branch became the second
branch to be powered by solar energy, 0
2017
2015
2016
yEstablish Environmental & Social Risk after the Colombo Super branch in
Management System
2016. Also we have planned to install
yNew Initiatives to Reduce Energy GRI 302-1, 2, 3, 4
Consumption
yCarbon Footprint Management Energy Consumption
yNew Initiatives to Waste Management Sources : Renewable & Non Renewable
yIncrease lending to the NCRE sector
Electricity Heating Cooling Steam Solar Power
yPromote Green Inventions
Consumption 3,266,407kWh No No No No
(Head Office)
Sold No No No No No
Reductions / - - - - 49,173.7 kWh
MATERIAL TOPICS Savings
We have identified three key aspects to have Using any standards / methodology and assumptions used : No
a material impact on our Natural Capital, Using any conversion rates : No
namely; Energy, Emissions and Effluents & Energy used outside of the organisation : No
Waste. These material aspects along with
their Management Approaches are captured 2017 2016 Reduction
in detail on our website. Please use the Energy Intensity Ratio (Head Office) 2,969 kWh 3,340 kWh 371 kWh
above QR code. (Electricity consumption per employee per annum)
Carbon Footprint Calculation GRI 305-1, 2, 3, 4, 5 Responsible Lending

Assessment Type : Organisational Greenhouse Gas Assessment We realise that as a Bank, we have the
ability to play a bigger role in preserving
Applied Standards : ISO 14064-1:2006, IPCC 2006/revised guidelines,
the environment through our core lending
GHG protocol developed by WRI and WBCSD activities. Our aim is to promote green
Reporting Period : 01.01.2017 – 31.12.2017 ethics through the financial products and
Base Year : 2016 services that we offer. Accordingly, we
have put in place structured schemes to
Scope GHG Emissions (tonCO2e) in 2017 finance projects that bring positive impact
on the environment and thus, encourage
Total CO2 N2O CH4
corporates to invest in clean energy
Emissions
projects that will contribute to a reduction
Direct GHG Emissions (Scope 1) 312.41 305.92 6.04 0.45 in the environmental burden. Many of
Indirect GHG Emissions (Scope 2) 7,494.69 7,494.69 - - our efforts in the recent past have been
Other Indirect GHG Emissions (Scope 3) 4,591.56 4,481.98 40.81 68.76 focused on developing non-conventional
Total GHG Emissions 12,398.66 12,282.59 46.85 69.21 renewable energy (NCRE). In such cases,
GHG Emission per Employee 3.09 additional safeguards are imposed to
ensure funding approval is granted only for
We conduct periodic energy audits to Waste Management GRI 306-1, 2 projects that are fully compliant with the
assess our annual performance. To do this, environmental and social standards set by
During the course of our day-to-day
we have begun measuring the emissions the Central Environmental Authority (CEA)
operations, we generate large volumes
generated as a result of our energy of Sri Lanka.
of paper waste and to a lesser extent,
usage. In line with globally accepted best e-waste. Stemming from this, responsible Category Statistics for 2017
practices, since 2014 we calculate the waste management is deemed essential in No. of Capacity Investment
Bank’s Carbon Footprint using the GHG reducing our environmental footprint. Our projects (MW) Rs. Bn
Protocol to measure all direct emissions waste management initiatives are based Hydro 10 23.40 4.95
under Scope 1 and indirect emissions on the 3R (Reduce, Re-use and Recycle) Power
from purchased electricity under Scope 2. principles, reinforced through the ESMS Solar Power 01 10.00 2.50
Accordingly our annual Carbon Footprint as well through regular training to raise Bio Mass 01 2.00 0.79
is expressed in CO2e, with 2016 as the awareness among employees.
Waste to 01 13.20 10.00
base year. By accurately measuring
the GHG emissions associated with the energy
Further we have tied up with Central
Bank’s operations, we have been able to Environmental Authority (CEA) approved We also have a number of green lending
improve our carbon management strategy waste disposal contractors to ensure schemes to encourage our retail
on an ongoing basis and identify new the proper disposal of waste; Neptune customers to join the eco-movement and
opportunities for carbon reduction. Recyclers for paper waste and Think Green adopt renewable energy solutions to meet
(Pvt) Limited for e-waste. their day-to-day energy requirements.
In 2017, the calculation of GHG emissions
for the entire Bank, covering the Head
Savings from paper recycling
Office and all 229 branches, was handle by
RR Associates (Pvt) Limited. Our Carbon Year Recycled Savings
Footprint Calculation being verified in Paper (Kg) Number of Oil (litres) Electricity Water (litres) Landfill (cubic
accordance with ISO 14064-1:2006 by Sri Trees (KWh) meters)
Lanka Climate Fund, a national institution 2017 42,492 722 74,573 169,968 1,350,396 127
that operates under the Ministry of 2016 44,863 763 78,735 179,452 1,425,746 135
Mahaweli Development and Environment.
Water withdrawal by source
According to the current year review, the
2017 2016
GHG emission is 12,398.66 CO2e which is
an increase of 6.76% from the previous Water consumption & discharged 42,860 m 3
42,241 m3
(Head Office)
year’s GHG emission of 11,613.46. This is
due to an increase of other indirect GHG Water source Municipal Water Supply
emissions. Note: Being a service organisation, water is not a material aspect to us. Therefore, water is used only
for general purposes.
Natural Capital
Environmental CSR
We want to be known as a model
environmental steward. Through the
environmental initiatives that we chose to
invest in, we strive to elevate our status Environmental Investment Employee Engagement Number of
among our competitors and the broader Initiatives From CSR Volunteered Volunteer Beneficiaries
industry. Fund Employees Hours
10 Rs 6.0 Mn 170 9,606 > 400,000
WE REALISE THAT AS Key Initiatives for 2017 “Sampath Green School” Programme
“Sampath Green Inventor” Thurstan College, Colombo was selected
A BANK, WE HAVE THE as the first school to kick off the “Sampath
“Sampath Green Inventor” is the iconic
ABILITY TO PLAY A BIGGER green initiative of Sampath Bank launched Green School” project.
ROLE IN PRESERVING THE in 2017 to all undergraduates of any

Primary Objectives
state and private university approved by
ENVIRONMENT THROUGH University Grants Commission of Sri Lanka. y Create awareness regarding proper
OUR CORE LENDING An initiative launched to commemorate waste segregation techniques among
the Bank’s 30th anniversary; “Green students, academic and non-
ACTIVITIES. OUR AIM IS Inventor” offers a competitive platform academic staff.
TO PROMOTE GREEN for young innovators to showcase their
talent and demonstrate their commitment y Introduce appropriate recycling
ETHICS THROUGH THE towards environmental protection and processes to manage all types of
FINANCIAL PRODUCTS conservation. internally generated waste within the
school itself and minimise the volume
AND SERVICES THAT WE of waste handed over to the municipal
Primary Objective
OFFER. To encourage the younger generations waste disposal unit.
to develop sustainable environmental
Secondary Objectives
practices and work for a cleaner, greener
tomorrow and develop green entrepreneurs y To create clean and tidy school
to the nation. premises
y Acclimatise the new generation to

The project remains in progress as at 31st
manage waste
December 2017.
“Sampath Green Inventor” Workshop Tree Planting Project at Dee Elle Oya
y Implementing 3R (Reduce, Re-use Primary Objective y Polythene free campaign

and Recycle) principles. To encourage Team Sampath to opt for y Environmental awareness programme
The project remains in progress as at reusable bags for daily use instead of for undergraduates
31st December 2017. polythene / plastic. The theme of the
project: “Carry a bag from home for y Shramadana campaign for national
shopping and just say no to plastic”. Dengue prevention
“Parisarayata Vinadiyak”
An environmental awareness programme y Green conference
Secondary Objectives
broadcast on Sirasa FM commenced on y Initiating medicinal plant garden
March 2017 as a part of CSR initiatives y Provide a sustainable solution to
launched to celebrate 30th Anniversary of reduce polythene and plastic usage
The largest project conducted by BEEZ
the Bank. y To align Team Sampath and their during the year was the reforestation
families towards the Bank’s eco programme to plant 1,000 trees
Primary Objectives culture in Jaffna. A project of national
y To create public awareness regarding importance, the programme was a
y Contribute towards making Sri Lanka a
environmental issues. collaborative effort between BEEZ, the
polythene / plastic free country
Faculty of Science, University of Jaffna
y To promote an environmentally-
and the Forest Department of Sri
conscious social culture Assist in the green initiatives of BEEZ (Base
Lanka. Sampath Bank also extended
for Enthusiasts of Environmental Science
y To strengthen the brand image and its fullest support.
& Zoology), a student based society of
work towards positioning Sampath
Department of Zoology, University of
Bank as Sri Lanka’s first “Green Bank” Primary Objective
Colombo (UOC)
y To protect and enhance the current
“FABRIC ECO BAG” - A Project by Sampath The main aim of BEEZ is to support the
ecosystems in the Jaffna peninsula
Bank Nature Protection Club (SNaPC) UOC in achieving its goal to become an
eco-friendly higher education institution by y Improve the capacity of ecosystems
“SNaPC FABRIC ECO BAG” is a timely
2020. Accordingly, the Bank extended its as watersheds, economic drivers and
solution for proposed government policy
support to assist BEEZ in carrying out the important biodiversity habitats
in prohibiting use of polythene bags from
following projects in 2017;
1st September 2017. Through this project,
a handy fabric eco bag was introduced,
where employees can purchase an Eco Bag
at a nominal cost.
“Parisarayata Vinadiyak” Social Media Campaign Internal Campaign on “FABRIC ECO BAG”
TRADE-OFF BETWEEN CAPITALS
We make a conscious effort to allocate our so however, we have to often contend with
capital and resources efficiently to ensure a trade-off between our material capitals.
that we can continue to maximise long- Given below is a summary of the trade-offs
term value for all stakeholders vis-à-vis made in 2017, in our endeavour to reach
the Bank’s key strategic themes. In doing these goals.
Strategic Themes Trade-off Capitals Affected
Maintaining industry The business of banking is subject to numerous regulatory changes. Financial Capital
leadership in Implementing new directives sometimes prove to be costly and in turn impact
compliance the Bank’s short-term profits. However, leadership in compliance serves to
enhance stakeholder perceptions regarding the Bank and thereby contributes Intellectual Capital
towards strengthening brand equity in the long term.
Pursuing operational In the pursuit of excellence, the Bank is often required to balance the trade Financial Capital
excellence and cost off between short-term profit growth against safeguarding the long-term
leadership sustainability of the core business by investing in;
y Delivery channels : physical – branch and ATM expansions

digital : 10 digital products, Sampath PAYAPP, Sampath Payeasy etc.
y Primary business infrastructure : Finacle 10 core banking system.
However, cost optimisation strategies that are being implemented on an

ongoing basis, helps mitigate the tradeoff to some extent, as evidenced by the
Bank’s low cost-to-income ratio.
Be known as the Bank As a leading Bank in Sri Lanka, Sampath Bank serves all segments of the Financial Capital
for all Sri Lankans market. This means the Bank may on occasion be required to contend with
certain segments, which have lower levels of profitability. However despite
their low return, it is the Bank’s policy to build strong relationships with these
segments as well, as over time, they are likely to migrate to the middle-market
segment, in turn making a stronger contribution towards the Bank’s bottom line
in the long term.
Safeguard Continuous and ongoing investment in developing people is critical to Financial Capital
competitive maintaining the Bank’s market position as an employer of choice. While the
Human Capital
advantage in the added cost of people development has an impact on the Bank’s bottom line in
market the short term, in the long term, a highly motivated and engaged team would Intellectual Capital
give the Bank a competitive edge and add significantly to brand equity.
Reinforce the While, investments made towards the community and the environment are a Financial Capital
Bank’s position as a drawdown on the Bank’s profits in the short term, such efforts bring broader
responsible systemic change and go on to benefit both present and future generations
corporate citizen of Sri Lankans. In the long term, these efforts will strengthen overall brand Natural Capital
reputation as a responsible corporate citizen and a truly green Bank.
91
Business Reports
The Paradigm Shift .................................................92
Consumer Banking ..................................................93
Corporate Banking...................................................96
Global Banking ....................................................... 100
Nostro Accounts, Correspondent
Banks and Exchange Companies ................ 102
Treasury ................................................................... 103
Operational Support............................................. 104
Performance of Subsidiaries............................. 105
Investor Information ............................................ 106
CONSUMER BANKING
WITH ROBUST GROWTH Performance against Strategy y Increase customer retention through
Driving low-cost deposits (CASA) within a the provision of superior value-
REPORTED ACROSS rising interest rate environment proved to enhancements
BOTH CASA AND TERM be a challenge for the Bank. Nonetheless, y Providing cash-management
through continuous evaluation and
DEPOSITS, THE BANK’S proactive re-pricing strategies in
solutions to medium and large scale
entities
OVERALL DEPOSIT cognizance with market, the Bank was able
to grow CASA by more than Rs 21.8 Bn in y Focusing on overseas markets to drive
PORTFOLIO AS AT 2017 as compared to only Rs 4.7 Bn in foreign currency deposits
31ST DECEMBER 2017 2016.
LOANS AND ADVANCES
TOUCHED RS 630 BN, Notably, new value enhancements to Strategy and Focus
SIGNALLING AN boost the profile of the young saver, youth
Loan products are a critical component
and senior citizens products contributed
INCREASE OF 22.1% to a higher demand from these specific
of the core business model, with the
Bank heavily interested in growing the
YEAR-ON-YEAR. segments.
consumer-lending book. In fact, the
paradigm shift initiated in 2017 was partly
Reducing the volume of high-cost
to lay the foundation to sustainably grow
term deposits also proved to be more
challenging than initially anticipated. The the consumer-lending portfolio in the
DEPOSITS long-term. The focus for the year
Bank’s iconic reputation and financial
Strategy and Focus stability continued to attract large volumes pivoted on:
The key strategic thrust for the year of term deposits throughout 2017, despite
a conscious decision not to mobilise high- y Restructuring the workflow-
underscores the need to realign the
cost deposits. Term deposits mobilised management systems to improve
deposit mix and optimize the Bank’s long-
during the year exceeded Rs 85 Bn. operational efficiency
term yield curve by:
y Effective re-pricing and targeted
y Driving low-cost deposits in order With robust growth reported across both promotional initiatives to grow
to maintain the Bank’s CASA ratio at CASA and term deposits, the Bank’s overall volumes in each business line
levels above the industry average deposit portfolio as at 31st December
2017 touched Rs 630 Bn, signalling an
y Managing the deposit portfolio mix to increase of 22.1% year-on-year.
mitigate the impact on NIM caused by
rising interest rates Future Plans
y To maintain deposit growth at above As the Bank’s well-positioned
industry average levels deposit mobilisation strategies
continue to yield good results, the
Deposit Mix focus for the future would be to
improve scalability of the Deposit
(%)
portfolio by:
3 y Tapping into unbanked and

6
under-banked customer
segments with the use of cost-
62
29 effective digital technology,
which will provide potential
customers with simple,
user-friendly solutions that
encourage the savings culture
Fixed Deposits
Saving Deposits y Pursue integrated marketing
Demand Deposits and cross-selling opportunities
Certificates of Deposits to strengthen the stronghold in
existing primary markets
Sampath Pubudu Children’s Account
Consumer Banking
Gross Advances Vs aggressive mass media marketing CARDS

NPL Ratio campaign, the pawning portfolio registered Strategy and Focus
a year-on-year increase of 27.0%.
(Rs Bn) (%) Among the top rated card propositions
However, the pawning portfolio remains
in the country, SampathCards occupy a
600 2.0 under ongoing scrutiny to ensure the 5%
1.93
position of leadership in Sri Lanka’s card
1.64 1.61 1.64 exposure limit is strictly maintained at all
market. Nonetheless amidst intensifying
450 1.5 times. market competition, all strategies were
300 1.0
centred on further consolidating this
Bolstered by growth across all business
leadership position as well as improving
lines, the Bank’s gross advances portfolio returns. Accordingly, the key focus for the
150 0.5
reported an increase of 22.5%, year- year 2017 was on:
311
386
469
574
on-year to reach Rs 574.0 Bn as at 31st

0 0.0
December 2017. Despite the increases in
2017
2014
2015
2016
y Growing the card base to boost

volume however, NPLs remained under market share
Gross Advances control. Strict credit control measures
NPL (RHS) y Increasing usage levels to reduce
saw NPLs maintained at 1.64% by end-
cost-to-income ratio and safeguard
December 2017, compared to the industry
Performance Against Strategy margins
average of 2.5%.
Cascading from the paradigm shift, the
existing workflow management system Performance Against Strategy
Pawning Advances
was revamped with the branch being In the year 2017 too SampathCards
appointed as the primary volume driver maintained its above-industry-average
(Rs Bn) (%) growth trajectory, showing a steady
for consumer lending. Positioning the
branch as the primary customer touch- 25 10 improvement across all KPIs. The total
point has paved the way for a more card base grew by 11.6% year-on-year,
7.9
20 8 buttressed by widespread mass media
focused approach to grow the island-wide
customer base across each business line. 15 6 publicity to reinforce SampathCards as
“The responsible choice”. Also responsible
10 3.3 3.4 4 for the increase is the newly-rolled out
Targeted lending initiatives to boost the 3.5
retail and commercial lending segment 5 2 digital application procedure, which
included; special incentives for tourism, ensures the customer benefits from faster
25
13
15
20
0 0
construction and manufacturing sector- processing and quicker turnaround times.
2017
2014
2015
2016
related SMEs, which led to a 25.9% In yet another encouraging sign, total
year-on-year increase in the portfolio. In Pawning Advances card advances grew by 16.7% compared
Pawning as a % of Total Advances (RHS) to the previous year, a sign of the growing
the housing loan segment, the portfolio
acceptance and mainstream appeal of the
recorded a robust 27.2% year-on-year
SampathCards proposition as a convenient
growth, thanks to timely strategies
Future Plans lifestyle product rather than merely a
to capitalise on the ongoing boom in
credit facility.
Sri Lanka’s housing construction and With the operational architecture now in
condominium market. place, the way forward would be to ensure
consistent growth of the consumer- Credit Card Advance Portfolio
In the leasing and hire purchase segment lending book. Achieving this would require
too, the Bank’s multi-channel promotional the Bank: (Rs Mn)
campaigns covering both ATL and BTL
12,000
platforms and several promotional y Retain existing market shares in
campaigns jointly conducted with key current strongholds
9,000
industry stakeholders also contributed to a y Build technological capacity to derive
7.0% increase in the portfolio. a competitive edge and increase 6,000
overall market share in the long term

Meanwhile, supported by a Special Gift 3,000
Promotion launched in May 2017 and y Continue to optimize the lending mix
coupled with localised branch-level in tandem with market drivers 0
2017
2014
2015
2016
promotional campaigns as well as an

Promotional campaigns continued y Engaging in cross-selling

throughout the year to increase the through the branches
number of active debit and credit cards to encourage the wider
and drive local usage volumes. Key efforts public to perform cashless
for the year included: special initiatives to transactions through a
promote e-commerce and the seasonal suitable card proposition
town-on-sale promotion conducted at
y Investing in new products and
targeted locations across the island.
offering value enhancements
to existing products in
A bid to boost international transaction
order to seize opportunities
volumes saw the extended settlement plan
to expand / develop new
facility being offered for large overseas
markets and thereby grow
and local transactions, while security
market share
protocols were tightened and enhanced
safety features added to all card formats y Expand and aggressively
as part of the ongoing effort to promote promote the e-commerce
e-commerce. penetration
y Ensure customer retention

Consequently, a 16.9% year-on-year
and loyalty by rewarding
increase in usage volumes was seen for
cardholders via the newly-
the twelve months ending 31st December
launched advance loyalty
2017. Moreover, seemingly unaffected Seasonal Town-on-sale Promotion - Anuradhapura
programme
by regulatory changes, the overall cards
portfolio registered strong year-on-year
BANCASSURANCE Meanwhile, from an operational
growth.
Bancassurance is a value-added service perspective, the entire Bancassurance
offered to existing Sampath Bank processing mechanism was streamlined in
No. of Credit Cards
customers, for obtaining appropriate 2016, with the introduction of a centralised
insurance covers, better service and processing unit to handle a specialised,
a professional consultancy / advisory comprehensive, insurance-related
300,000 service at no additional cost. Through operation from the point of quotation
Bancassurance, customers receive a to claim settlement, thereby permitting
240,000
better assurance on financial value of their branch staff to focus on canvassing sales
180,000 assets of which the financial interest is of banking products.
pledged as collateral in the Bank’s loan
120,000
book. They also have the opportunity to From a cost perspective too, the
60,000 mitigate potential financial losses due to centralized operation has proved to be a
loss /permanent or partial disability of highly effective solution as evidenced by
0
own life, optionally with any life-related the significantly lower Cost to Income Ratio
2017
2014
2015
2016
insurance covers by investing in life reported by the Bancassurance segment

insurance schemes through the Bank. in 2017.
Future Plans
First established in 2002, Bancassurance
With the card operation already on a firm has demonstrated considerable growth
footing, the growth agenda for the future potential, prompting an added emphasis
would focus on: on significant increase in new business
acquisitions in 2016 and 2017, due to the
y Re-activating dormant cards through establishment of the new operating model
focused promotional campaigns and its work-flow in 2016.
96 SAMPATH BANK PLC ANNUAL REPORT 2017 MANAGEMENT DISCUSSION & ANALYSIS
CORPORATE BANKING
WITH THE FINANCIAL

SERVICES SECTOR
SPECIALIZATION BEING
A PRIORITY, A NUMBER
OF NEW LENDING
INSTRUMENTS DESIGNED
SPECIFICALLY FOR THE
SECTOR WERE ROLLED
OUT DURING THE YEAR.
Exchanging an Agreement for USD 100 Mn Senior Debt from China Development Bank
CORPORATE FINANCE Performance Against Strategy With the Financial Services sector
Strategy and Focus Following through on the reconfiguration specialization being a priority, a number
strategy, the Corporate Finance direct of new lending instruments designed
Corporate Finance expanded its core focus
lending portfolio was segmented into specifically for the sector were rolled
to meet the demands of the paradigm
several critical sectors: financial services, out during the year, to enable the sector
shift initiated in the early part of 2017.
power and energy, government exposures to access alternative funding sources,
Consequently, the strategic thrust for the
and margin trading, while the Special particularly as the viability of raising funds
year was to spearhead growth by:
Projects Unit under Corporate Finance via debentures may potentially diminish
continued to structure financing deals on the back of the new Inland Revenue Act
y Introducing a new sector
for customers both via syndications and/ abolishing the tax benefits on debenture
specialization model to service the
or specially structured bilateral loans income.
needs of customers from diverse
sectors. which fed the respective sector portfolios,
especially the off-shore banking unit. In the Power and Energy sector, a number
y Building capacity to serve the of mini hydropower biomass projects which
financial services, which were The move forms part of the effort to were in the pipeline were successfully
brought under the Corporate Finance migrate to a leaner operational model as concluded in 2017. With direct lending to
umbrella following the paradigm shift well as to address the need for sector- the Power and Energy sector an ongoing
programme. Given the structural specific expertise in structuring lending focus area for Corporate Finance, the
aspects of securitisations and other facilities. Bank took the lead in a 10 year syndication
debt products into which this sector deal to finance one of the first-ever PPP
generally taps, the key focus was to (Public-Private-Partnership) based Waste-
Sector-wise
strengthen expertise in designing Corporate Finance Loan Portfolio to-Energy projects in Sri Lanka, which is
bespoke solutions that add value expected to be a much-needed solution for
(%)
to clients in the financial services the waste disposal problem the country is
2 1
sector by safeguarding them against currently facing.
2
potential risk exposures. 2
In the Special Projects segment, the

y Expansion of the corporate lending
51 emphasis was on off-shore lending, where
portfolio through aggressive focus on
the Bank signed up as the lead financier on
syndicate lending & special projects
42 a number of large syndications to support
lending, both on-shore & off-shore,
tourism-related projects in the region.
complemented by Corporate Advisory
services.
The Margin Trading portfolio, having
y Expanding the Bank’s funding sources Financial & Business experienced a relatively passive period
Infrastructure Telecommunication
for both normal liquidity as well as for from January – September 2017, showed
Manufacturing & IT
Regulatory Capital requirements to Construction Others
support the growth.
encouraging signs of growth in the final y Strengthening sector specialization THE AGGRESSIVE
quarter, indicative of improved prospects in in order to position Sampath Bank as
the year ahead. the market leader in sector-specific INDUSTRY-FOCUSED
financial solutions and corporate ACTION STEMMING FROM
Other developments for the year included advisory services, for established as
the successful completion of an IPO for well as emerging sectors.
THE NEW OPERATIONAL
which Sampath Bank was a co-underwriter.
y Building long-term, well-coordinated
STRUCTURE HAD A
Further steps were also taken to enhance
customer access through a range of new
relationships with clients, in order DIRECT IMPACT ON THE
to deliver integrated solutions which
digital solutions, another strategic move to
would help them achieve their
BANK’S EXPOSURE TO
boost fee-based income.
strategic objectives PRIORITY SECTORS OF
Meanwhile as the key custodian of the y Selectively expanding offshore THE ECONOMY.
Bank’s funding base, the Corporate Finance exposures in East Africa and East
the Corporate Credit portfolio, the
unit continued to fulfill its mandate to raise Asia via a combination of strategies emphasis for the year shifted towards:
low-cost funds and also to strengthen such as collaborating with established
the Bank’s Tier II capital and drive growth. development financial institutions/ y Consolidating the advances portfolio
Efforts for the year culminated in the our correspondent banks operating in
successful conclusion of the issuance of y Maintaining / enhancing credit
these markets.
Sri Lanka’s first ever BASEL III compliant quality of the advances portfolio by
y Participating as a financier of strengthening both the pre and post
Debenture which raised Rs 6.0 Bn of Tier
government projects via pursuing disbursement mechanism
II capital for the Bank. Leveraging on
public-private-partnership
the Bank’s position as an economically y Concentrating on sector specialization
opportunities as well as via direct
significant bank in Sri Lanka, the Corporate whilst increasing exposure to priority
lending on a selective basis.
Finance unit also secured a further sectors of the economy
USD 100 Million senior debt from China y Further developing digital platforms y Fuelling growth through yield-based
Development Bank in a landmark off-shore which would enable growth of the fee- lending to manage the critical market
deal with a 5-year tenure. based activities. stresses on the portfolio
Future Plans CORPORATE CREDIT Performance Against Strategy

With the paradigm shift firmly in place, the Strategy and Focus As part of this broader portfolio
strategies for the future reflect the Bank’s With the paradigm shift and its ensuing consolidation strategy, a series of goal-
overall vision to be “The most sought-after systemic changes calling for a fresh oriented strategies were deployed in an
bank for the Corporate sector in Sri Lanka”. approach towards managing and growing effort to achieve these objectives. Using
the client-servicing model as a starting
Sector-wise
Corporate Credit Loan Portfolio
(%)
3 1
3
8
9 28
11
18 19
Traders Telecommunication & IT

Construction Infrastructure
Manufacturing Transport
Hotel Amari, Galle - Owned by Sino Lanka (Pvt) Ltd, Funded by Sampath Bank Tourism & Hotels
Corporate Credit Department Agriculture
Others
Corporate Banking
point, the functions of all Relationship identify and grow quality lending to this
Sector-wise
Managers (RMs) were streamlined to sector in order to maintain the sector FCBU Loan Portfolio
correlate with the industry-segmentation balance in the overall portfolio.
(%)
goals set out under the paradigm shift 2 1
programme. RMs were relieved of their However, the strain of sustaining a 2 1
volume-based strategy amidst interest 3
mixed portfolios and reassigned to
3
service clientele of a specific sector only. rate uncertainties saw the focus shift
55
To support the initiative, sector-specific from volume-based growth towards a 15
structures were established, giving more yield-based approach in order to

each RM the opportunity to become a build sector portfolios and ultimately fuel
18
specialized financial advisor for a specific long-term growth of the overall Corporate
sector. Resources were allocated to ensure Credit portfolio. Supporting this yield-
that each RM acquires in-depth knowledge based strategy saw the Bank leverage on Manufacturing Financial & Business
digital technology to improve efficiency and Agriculture Construction
of industry KPIs, market dynamics,
Tourism & Hotels Traders
risk factors, competitor profiles, trade productivity and enhance client experience. Infrastructure
prospects etc., thus enhancing their ability Steps taken in this regard included the Transport
to service a particular sector. Internally introduction of a new electronic Credit Telecommunication & IT
this means RMs are better equipped to Approval System (CAS) mechanism to
appraise proposals by applying industry- expedite the delivery process to Corporate
Credit clients with expeditious approvals y Grow the onshore lending portfolio
specific knowledge to minimize potential
together with new add-ons to the Sampath by actively seeking potential
risks to the Bank, while externally the
Vishwa corporate digital interface to opportunities in the macro-
clients benefit from customized solutions
facilitate seamless connectivity for environment
to support their specific business growth
plans. corporate payments. y Aggressively pursue off-shore lending
to overcome the limited growth
The aggressive industry-focused action Future Plans prospects in the local market
stemming from the new operational Moving forward, the main priority would
structure had a direct impact on the be to establish a scalable platform for the Performance Against Strategy
Bank’s exposure to priority sectors of growth of the Corporate Credit portfolio Operating within a highly saturated local
the economy. The resulting increase in through: market, the FCBU business continued to
new business volumes was led by the be challenged by stiff market competition,
Leisure and Manufacturing sectors, y The development of industry making it increasingly difficult to grow the
which remained strong growth drivers specialization as a key competitive onshore lending portfolio. Nonetheless,
of the Bank’s Corporate Credit Portfolio lever for the long term swift action taken to capitalise on
throughout 2017. A robust increase in emerging market opportunities, in
y Proactive risk mapping to determine
demand from the trading sector was also particular the lifting of the EU fish
the potential impact on the portfolio
seen, while the revival in government-led export ban on Sri Lanka, as well as the
caused by sector/ industry-specific
construction, especially infrastructure reinstatement of the GSP+ concessions
risk factors
development activities, added a led to an upswing in local lending activities
considerable boost to the Bank’s exposure y Strengthen the longstanding
from about mid-2017. Capitalizing on
in the construction sector. Emerging Corporate relationships with
such opportunities, FCBU was able to
sectors like IT, Healthcare and Education specialized advisory services and cost
strengthen and grow the relationships with
continued to maintain the growth effective delivery via digitalization
the existing clientele while approaching
momentum seen in the past few years. On initiatives.
new names in the market, mainly through
the other hand, challenged by unfavourable aggressive market penetration strategies
weather patterns, the agriculture sector FOREIGN CURRENCY BANKING UNIT (FCBU)
deployed by the business development
remained stressed, prompting renewed Strategy and Focus team.
rehabilitation and restructuring efforts Firmly anchored to the strategic objectives
to improve credit quality and minimize of the Bank’s Corporate Banking arm, the
sector-specific NPAs. At the same time, focus for the FCBU segment was to:
special efforts were also initiated to
CAPITALISING ON ITS
LOCATION WITHIN THE
ZONE, THE EXTENSION
OFFICE ALSO BEGAN
AGGRESSIVELY
CANVASSING UNTAPPED
CUSTOMER SEGMENTS,
SPECIFICALLY TO
BUILD LONG-TERM
RELATIONSHIPS
FCBU began tapping into potential lending opportunities in Myanmar via the Bank’s Rep office
WITH LARGE GLOBAL
EXPORTERS BASED IN door and to facilitate a dedicated service As a result of proactive efforts to drive
THE KATUNAYAKE BOI to the growing needs of the Country’s both on-shore and offshore lending,
ZONE. export sector. Capitalizing on its location the performance of the FCBU business
within the zone, the extension office also exceeded all expected targets for the year.
began aggressively canvassing untapped
customer segments, specifically to build Future Plans
Steps taken to widen client outreach
long-term relationships with large global With the onshore demand fast reaching
through the GT Nexus supply chain
exporters based in the Katunayake BOI saturation point, the key strategic
platform also added a further boost to
zone. imperatives for the FCBU business would
the FCBU’s onshore lending portfolio. The
be to:
partnership with GT Nexus allows complete
Meanwhile the FCBU’s offshore portfolio
transparency of the end-to-end export
received a considerable boost through y Overcome competitive pressures and
process, from the point of initiation to the
business operations as many of the Bank’s expand the onshore lending portfolio
point of final payment. And since all three
long-standing local corporate clients by securing first-mover advantage in
parties - the buyer, the manufacturer
began venturing overseas. The FCBU’s off- public-private partnership ventures
and the Bank - work on this common
shore portfolio grew steadily throughout
transparent platform, the counterparty y Leverage on expertise to deepen the
2017, making its entry into Ethiopia and
risk to the Bank is minimized to a greater penetration in off-shore territories
Kenya while increasing its expansion to
extent, leaving ample opportunity to grow
the Maldives, Bangladesh and Cambodia. y Prudently venture into new territories
the export advances mainly to the apparel
Leveraging on the emerging opportunities
sector.
in the East Asian Region, FCBU began
tapping into potential lending opportunities
To drive this objective, an FCBU extension
in Myanmar via the Bank’s Rep office,
office was opened within the Katunayake
which led to Sampath Bank becoming the
Free Trade Zone premises to deliver
first ever Sri Lankan bank to successfully
banking convenience to the exporter’s
conclude a lending transaction in
Myanmar.
GLOBAL BANKING
INTERNATIONAL OPERATIONS Meanwhile, continuous monitoring of THANKS TO THESE

The Telegraphic Transfers (TT) volumes currency fluctuations, accompanied by
handled by the Bank’s International efficiency improvements at all levels, saw STRATEGIES, THE BANK’S
Operations unit continued to grow the BNO’s topline and bottom-line, grow in INWARD REMITTANCE
during this year too. Underpinned by a substantial manner.
the growing global preference for open
VOLUMES FOR 2017
account payment terms, the Bank’s REMITTANCES REGISTERED A YEAR-
overall TT volumes registered a year-on- Strategy and Focus
ON-YEAR INCREASE OF
year increase of 7.0%, driven by localized A challenging year for the remittances
promotional activities conducted at branch business, as the protracted geopolitical
13.2%.
level. instability in the Middle East continued to
affect the volume of inward remittances
Consequently, fee income generated from to the country. In addition, the growing from the GCC region, the existing network
TTs also rose by 8.0% over and above the number of Fin-techs and Tel-cos providing in these captive markets was also further
figure reported in the previous year. speedier, faster solutions has further strengthened.
eroded of the demand for the conventional
Trade & remittance channel. In light of these Meanwhile, countermeasures to tackle the
Non-Trade Related TT Volumes developments, the overarching priority for competitive pressures from the Fin-techs
(Rs Bn) 2017 was to retain the Bank’s industry- and Tel-cos were led by strict cost control
leading market share by: coupled with efficiency improvements to
200 expedite delivery and ensure a cheaper,
y Diversifying the global reach to reduce faster service.
150
the dependency on the GCC region
Thanks to these strategies, the Bank’s
100 y Bringing down operational costs inward remittance volumes for 2017
in order to overcome the threat of registered a year-on-year increase of
50
cheaper alternatives offered by Fin- 13.2%. The achievement is significant as
119
113
142
162
174
165
techs and Tel-cos

93
85
0 it comes amidst the decline in national

2017
2014
2015
2016
inward remittance volumes, thus signalling

Performance against Strategy
an increase in the Bank’s market share.
Turnover - Trade Measures to widen the network saw the
Turnover - Non-Trade
Bank establishing its presence in three Higher volumes also translated into a 4.5%
new geographies, namely Jordan, Japan year-on-year increase in fee income.
and Canada. Moreover, given that over
BANK NOTES OPERATIONS
85% of the volumes for the year originate
Operating in a market where the demand
for currencies are dictated by the
availability of currency notes, Sampath
Bank once again became the #1 currency
exporter for 2017.
For the second consecutive year, the

Bank’s Bank Notes Operations (BNO) grew
steadily, with currency notes repatriation
volumes up by a considerable amount.
The results were due to a combination
of the right strategies, ongoing process
improvements and investments in new
technology, which helped to manage
the impact of market fluctuations and
increased responsiveness to changes in
the foreign currency market. Bank Notes Operations Department
Future Plans Performance against Strategy

Moving forward the focus remains the A new Business Development Unit (BDU)
same: to build volumes and maintain was established under the purview of the
market share. This would require the Bank Trade Services Department, to support
to; the Branches & Credit Departments in
accelerating Trade Business volumes.
y Continue to improve service levels The result was a notable increase in new
in order to sustain the demand for business volumes generated, which was
the conventional inward remittance approximately 10% of the total LC &
channel Collection volumes for 2017.
y Explore strategic partnerships with
Meanwhile, dedicated trade units were
Fin-techs to offer cost effective
set up at the Colombo and Matara Super
alternative solutions
Branches, to expedite import and export
y Explore and move into new markets processing for existing customers. This,
to capture a steady stream of foreign along with investments in technology and
currency inflow system upgrades, including improvements
to the functionality of Sampath Vishwa,
The New Trade Business Development Unit (BDU)
TRADE SERVICES upgrading the straight-through-
at Colombo Super Branch
Strategy and Focus processing mechanism for trade payments
and streamlining the workflow system of
Undeterred by the global trend to move Future Plans
the LC opening process, were all aimed at
away from documentary credit and The primary focus for the future would be
improving service delivery to the customer.
documentary collection methods, the to drive growth through direct and indirect
A dedicated Business Support Centre was
Trade Services unit intensified the focus strategies that would position Sampath
also established in January 2017, as part
on; Bank as the leading expert in trade
of a focused effort to assist customers by
providing them with customized solutions. services in Sri Lanka. This would require;
y Tapping into new regional markets in a
bid to fuel the demand for import and y Investing in digital technology to stay
In terms of performance, export trade
export services ahead of competitors
volumes reported strong growth
y Developing a distinct competitive throughout 2017, by building on the y Increasing delivery channels.
advantage to better serve existing growth momentum spurred by the
customers “Export Bonanza” campaign and the
“Export Direct” initiative, both launched
Fee & Commission Income - in 2016. The renewal of government-led
Trade Related Services infrastructure projects and removal of
(Rs Mn) trade sanctions against Myanmar, also
augured well for the Bank’s import trade
2,000 volumes in 2017.
1,500
1,000
500
1,156
1,461
1,454
1,616
0
2017
2014
2015
2016
NOSTRO ACCOUNTS, CORRESPONDENT

BANKS AND EXCHANGE COMPANIES
GRI 102-4
Scan this QR code for a more comprehensive view

of our Nostro Accounts, Correspondent Banks and
Exchange Companies
www.sampath.lk
76 11 14
21 6 2
138 16 69
11 1
10 2 12
36 258
Correspondent
97
Nostro Exchange
Accounts Banks Companies
TREASURY
STRATEGY AND FOCUS USD / LKR Movement in 2017

Marked by some degree of market
uncertainty, the key strategic thrust for the (Rs)
Treasury Department was twofold:
160
y Leverage on market opportunities
156
to maintain growth across all core 153.55 152.80 153.60 153.50
151.18 152.20 153.60
153.60
income-generating activities 152 150.00 151.95
152.98 153.10
150.45
y Deploy countermeasures to maintain 148
the Bank’s liquidity position 144
PERFORMANCE AGAINST STRATEGY 140

Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun 17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
The one year Treasury bill rate was mostly
on an upward trend until end April 2017,
followed by a steady decline, prompting the
Treasury Department to take swift action we provide in-depth market insights FUTURE PLANS
to capitalise on these market movements. and timely advice to our clients to help In the coming year, global markets are
Consequently, both NIMs and capital gains them make informed decisions in the predicted to stay volatile. Interest rates
registered robust year-on-year increases. volatile market environment. We work and currency market volatility is likely
closely with client segment relationship to continue through 2018 as well, due
Meanwhile the CBSL, at the March 2017
managers to develop effective solutions to political uncertainty and changes in
monetary policy meeting, increased both
that are customized to each client’s needs. the monetary and fiscal policy stance in
the SDFR and SLFR by 25 bps to 7.25% and
Access to latest information, insights and developed economies such as US, EU and
8.75% respectively. The AWPLR fluctuated
research provided by our foreign banking UK. The expected increase in interest rates
between a narrow range, recording a low of
partners ensure we are well equipped to by the US Federal Reserve and balance
11.30% and a high of 11.88% during 2017.
help our clients seize the right market sheet normalisation by the EU is also likely
Amidst this environment, the Treasury
opportunities. Our prudent and dedicated to have a major impact on global interest
took action to strengthen the Bank’s fixed
approach to the management of our rates and FX rates in many countries.
income portfolio by increasing investments
clients’ market risks has enabled us to In line with central banks in many Asian
in SLDB, a move that yielded positive
build enduring client relationships. countries, it is anticipated that the CBSL
returns for the Treasury’s bottom line.
too would introduce measures to manage
The Treasury unit succeeded in effectively the rising interest rates and volatility in the
In the foreign exchange business, the
managing the Bank’s liquidity levels local currencies stemming from the said
Rupee reported a nominal depreciation of
by prudently maintaining the liquidity developments. Amidst this environment,
2.46% against the USD for the year, while
at optimum levels above the required the focus of the Treasury would be to:
the REER was seen hovering around the
relevant to DBU and FCBU of the Bank.
105.00 level mark (low – 103.48 & high
Meanwhile, Rs 6 Bn was raised by way of y Continue to improve market
– 109.57). The USD/LKR Spot reported a
a subordinated, convertible debenture, responsiveness in order to strengthen
high of 153.85 on 25th October 2017 and
mainly to facilitate the increased capital core business activities
a low of 149.65 on 03rd January 2017.
adequacy requirements stipulated by the
Leveraging on these market nuances, y Introduce new customer-centric
BASEL III regulations.
Sampath Bank’s Treasury Department products, adding value to the Treasury
continued to offer a wide range of risk The Bank Notes Operation (BNO), which portfolio
management products and solutions to depends on the Treasury function for its
help clients manage their market risks day-to-day rate fixtures and for deploying
across foreign exchange (FX) and interest competitive pricing strategies, also
rates. Tapping our extensive knowledge performed well, recording robust profit
of FX markets and deep understanding growth in 2017.
of our clients’ unique financial needs,
OPERATIONAL SUPPORT
GIVEN THE RECOVERIES included the outsourcing of the Credit

Strategy and Focus Card recoveries function; a move aimed at
WIDESPREAD streamlining operations in order to speed
Asserting its mandate to improve credit
OPERATIONAL CHANGES quality and minimize the Bank’s NPA, the
up the credit card recovery process.
STEMMING FROM main priorities for the Recoveries unit in

Meanwhile, efforts to support customers
2017 were to:
THE PARADIGM SHIFT, in ailing sectors were led by the ‘Recovery
y Establish new parameters to Nursing Unit’ (RNU), which was introduced
STRENGTHENING strengthen the post-paradigm shift in 2017. ‘RNU’ is a unique scheme that
THE RECOVERY recovery framework and reduce the offers concessionary settlement terms in a
two-months arrears position bid to rehabilitate long overdue customers
FRAMEWORK WAS and help them avoid unproductive legal
y Outsource certain aspects of the
DEEMED IMPERATIVE. recovery function
proceedings.
y Initiate specific rehabilitation efforts These comprehensive credit control

for customers in ailing sectors & monitoring and hard core recovery
measures helped maintain the Bank’s NPA
Performance Against Strategy ratio below 2% for the fourth consecutive
NSC AND CCD
Given the widespread operational changes year.
Central Cash Department
stemming from the paradigm shift,
Offering critical support for the Bank’s strengthening the recovery framework was Future Plans
day-to-day functions, the Central deemed imperative to secure a reduction Moving forward too, the specific focus
Cash Department’s (CCD) cash sorting in the two-months arrears position. of the CCU and Regional Recovery Units
function was further rationalized in 2017. Accordingly, the entire ground level would be to prevent one-month arrears
Outsourcing of the cash sorting process monitoring mechanism was restructured customers from escalating to two months
and ATM replenishment, which began with new credit monitoring controls being arrears position. Doing so calls for:
in 2017 and 2016 respectively, were implemented at regional and branch level.
completed in the year under review. The y Tighter control measures and
ensuing efficiencies have contributed Further investments were also made in continuous monitoring to pre-empt
towards a more cost-effective cash new early warning software to enhance potential defaulters
management model that gives the Bank a credit control and monitoring systems
y Appointment of dedicated officers
competitive edge in the market. within the Credit Control Unit (CCU). Other
from CCU to each credit unit in the
operational improvements for the year
Network Services Centre retail and corporate sectors.
Streamlining of the Network Service Centre

(NSC) function continued this year as well.
Among the key activities for 2017 was the
Cheque Image Truncation System (CITS)
upgrade to expedite the cheque imaging
and capture mechanism. Other significant
investments included the implementation
of a sophisticated new digital archiving
system to overcome the limitations of the
existing file storage system. Phase 1 of the
project, which commenced in November
2017 is underway and is scheduled for
completion by June 2018.
Outsourcing of the cash sorting process and ATM replenishment

PERFORMANCE OF SUBSIDIARIES GRI 102-45
SIYAPATHA FINANCE PLC SC SECURITIES (PRIVATE) LIMITED above increase is the fair value gain on
Siyapatha Finance PLC which was SC Securities (Pvt) Ltd is the stockbroking investment property of Rs 345.3 Mn which
incorporated in May 2005 is a fully owned arm of the Sampath Bank Group and is is 58.4% growth over the previous year. The
subsidiary of the Bank. fully owned by the Bank. The company has rental income remained unchanged during
been in operation for over 25 years. the year 2017. The total assets base of the
The company performed well in 2017, company increased by 15% to reach Rs 5.0
recording a post-tax profit of Rs 511.1 Prompted by the decline in deposit interest Bn as at 31st December 2017 compared to
Mn, a 56.2% increase compared to the rates towards the latter part of 2017, Rs 4.4 Bn reported as at the year end 2016.
previous year. This is the highest ever profit local investors were seen increasing their
Due to the demand for additional building
recorded by the company in its twelve investments in the share market. Foreign
space by Sampath Bank, the Company’s
year history. The company’s net interest participation in the market also showed
Board decided to add six floors to the
income and net fee & commission income an increase, with net foreign purchases
existing structure.
increased by 50.6% and 77.1% respectively reaching an all-time high of Rs 17.6 Bn
compared to the previous year, while the in 2017. The All Share Price Index (ASPI)
This addition of six floors will increase the
lending portfolio grew by 42.3% to reach and the S&P Index stood at 6,369.3
floor area by a further 77,120 square feet.
Rs 27.5 Bn as at the year end. Despite the and 3,671.7 respectively by end 2017 New facilities and features to be added to
expansion in the loan book, the company showing a YoY increase of 2.3% and 5.0% the building include: a state-of-the-art,
was successful in maintaining its credit respectively. energy-efficient air conditioning plant, two
quality, as evidenced by the NPA ratio of standby generators, two capacitor banks,
2.9% compared to the industry average Under the aforesaid economic conditions, five elevators, a fire detection and alarm
of 6.0% as at 31st December 2017. The the company managed to increase its system, high pressure water pumps, an
Deposit base too has grown to Rs 9.3 Bn by turnover to Rs 30.6 Mn from Rs 22.1 Mn auditorium and a training centre with a
end 2017, compared to Rs 3.4 Bn reported reported in 2016, a growth of 38.7%. The seating capacity of 250.
a year ago. net loss reported by the company too has
decreased from Rs 58.6 Mn in the previous SAMPATH INFORMATION TECHNOLOGY
During the year, the company issued year to Rs 11.2 Mn in the year under review. SOLUTIONS LIMITED
subordinated debentures to the value of Rs Sampath Information Technology Solutions
1.0 Bn, which qualifies under Tier II capital. During the year 2017, Sampath Bank
Limited (SITS) is another fully-owned
Supported by additional funds raised, the made a capital infusion of Rs 100 Mn to
subsidiary of Sampath Bank. SITS mainly
company has mapped out strategies to the company with a view to restructuring
engages in renting of IT equipments to
catalyse its growth momentum further in the business operations. Accordingly, SC cater to the requirements of Sampath
2018. Securities has re-formulated its strategies Group and other financial and non-
to make a turnaround in its performance in financial companies.
Total Assets - subsequent years.
Siyapatha Finance PLC It was a year of transition for SITS where
SAMPATH CENTRE LIMITED the company focused on expanding its
(Rs Bn)
Sampath Centre Limited was established business operations, mainly through the
30 in 1996 as the first subsidiary of the introduction of a new enterprise business
24 Bank. The company owns and manages solutions model. At the same time, SITS
the building at No. 110, Sir James Peiris expanded its document management
18 services, backed by the new document
Mawatha, Colombo 02. Sampath Bank
12 occupies all eight floors of the building, management system. Furthermore, the
which houses the Bank’s head office and company kicked off a strategy to penetrate
6 the Point of Sales (POS) machine market,
the corporate branch. The main source of
10.4
20.8
14.6
29.7
0 income of the Sampath Centre Limited is which is currently a monopoly.

2017
2014
2015
2016
the rental income earned by leasing out

building space. The company has recorded a post-tax
loss of Rs 7.5 Mn for the year ended 31st
The company recorded a 28.0% growth in December 2017 as opposed to the profit of
Profit Before Tax (PBT) to achieve Rs 601 Rs 43.5 Mn recorded in the previous year.
Mn compared to the previous year PBT The company anticipates a sustainable
of Rs 470 Mn. The main reason for the improvement in its bottom line in 2018 as
a result of enhanced operations.
INVESTOR INFORMATION
VALUE CREATION FOR SHAREHOLDERS

2017 2016 Change %
Net asset value per share (Rs) 293.02 238.94 22.63
Group earnings per share - Basic (Rs) 64.91 49.28 31.72
Dividend per share (Rs) 17.20 18.75 (8.27)
Market price per share as at 31st December (Rs) 315.70 260.40 21.24
Bank’s Market Capitalisation Rank Dividend per Share Earnings & Highest Market
Price per Share
(Rs) (Rs) (Rs)
20 25 100 400
17 352.2
15 20 80 320
15 279.9 268.7
12 18.75 252.0
12 17.20
15 60 240
10 11.00 13.00
10 40 160
5
5 20 80
30.6
37.4
49.3
64.9
0 0 0 0
2017
2017
2017
2014
2015
2016
2014
2015
2016
2014
2015
2016
Earnings per Share - Group
Highest Market Price per Share
- Bank (RHS)
BANK’S MARKET CAPITALISATION IN COMPARISON TO CSE - AS AT 31ST DECEMBER

2017 2016 2015 2014 2013 2012
Sampath Bank’s market capitalisation (Rs Mn) 68,577 46,086 42,734 39,677 28,843 32,628
Increase / (decrease) % in market capitalisation 49% 8% 8% 38% (12%) 7%
CSE market capitalisation (Rs Mn) 2,899,291 2,745,410 2,938,000 3,104,860 2,459,900 2,167,581
As a % of CSE market capitalisation 2.37% 1.68% 1.45% 1.28% 1.17% 1.50%
Market capitalisation rank 12 12 15 17 16 13
Shareholders' Fund Composition of Share Ownership - 2017 Bank’s ROE &

(No. of Shareholders) Market Interest Rates
(Rs Mn) (%) (%)
75,000 4.8 25
23.47
4.4
23.35
60,000 20 18.42
16.35
53.3
45,000 15
37.5
30,000 10
30,912
44,489
35,125
63,650
15,000 5
11.5
10.0
10.1
9.1
7.2
8.9
6.6
6.6
0 0
Shares 500 & Less
2017
2014
2015
2016
2017
2014
2015
2016
Shares 501 - 5,000

Shares 5,001 - 10,000
More than 10,000 Shares Average of 12 Months AWFDR
Average of 12 Months T.B. Rate
ROE
ANALYSIS OF SHAREHOLDERS
Resident / Non Resident
31st December 2017 31st December 2016
No. of No. of % No. of No. of %
Shareholders Shares Shareholders Shares
Resident shareholders 17,099 171,726,298 79.06 17,107 147,341,639 83.25
Non resident shareholders 341 45,495,938 20.94 349 29,639,430 16.75
Total 17,440 217,222,236 100.00 17,456 176,981,069 100.00
Individuals / Institutions
No. of No. of % No. of No. of %
Individuals 16,871 74,564,057 34.33 16,887 59,556,386 33.65
Institutions 569 142,658,179 65.67 569 117,424,683 66.35
Total 17,440 217,222,236 100.00 17,456 176,981,069 100.00
Composition of Share Ownership

No. of % No. of % No. of % No. of %
Shares 500 & less 9,301 53.33 1,731,815 0.80 9,117 52.23 1,719,768 0.97
Shares 501-5,000 6,530 37.44 10,577,445 4.87 6,693 38.34 10,828,407 6.12
Shares 5,001-10,000 770 4.42 5,428,554 2.50 787 4.51 5,533,116 3.13
More than 10,000 shares 839 4.81 199,484,422 91.83 859 4.92 158,899,778 89.78
Total 17,440 100.00 217,222,236 100.00 17,456 100.00 176,981,069 100.00
Bank’s Market Capitalisation Composition of Share Ownership - 2017 Share Trading - Sampath Bank PLC
(No. of Shares) (No. of Shares Traded)
(Rs Mn) (%) (Mn)
0.8
80,000 4.9 40 38
2.5
64,000 35
48,000 30 28 27
91.8
32,000 25
39,677
46,086
42,734
68,577
16,000 20
19
0 15
Shares 500 & Less
2017
2017
2014
2015
2016
2014
2015
2016
Shares 501 - 5,000

Shares 5,001 - 10,000
More than 10,000 Shares
SHARE TRADING
Market
2017 2016 2015 2014 2013
No. of transactions 981,977 1,056,849 1,506,790 1,982,709 1,421,303
No. of shares traded 8,468,273,611 7,195,805,445 9,414,661,048 16,721,524,209 9,054,193,822
Value of shares traded (Rs Mn) 220,591 176,935 253,251 340,917 200,468
Bank
2017 2016 2015 2014 2013
No. of transactions 17,547 10,698 14,460 18,403 19,212
No. of shares traded 37,726,071 18,830,195 26,898,512 27,712,319 47,891,453
As a % of total shares in issue 17.37 10.64 15.61 16.50 28.54
Average daily turnover (Rs Mn) 48.94 18.77 29.22 24.34 39.75
Value of shares traded (Rs Mn) 11,793.39 4,484.95 6,982.39 5,866.37 9,620.18
Sampath Bank’s Share Price Fluctuation

2017 2016 2015 2014 2013
Lowest market price (Rs) 253.50 210.00 235.20 164.20 161.60
Highest market price (Rs) 352.20 268.70 279.90 252.00 242.00
Closing price as at 31st December (Rs) 315.70 260.40 248.00 236.30 171.90
Gross Dividend Shareholding of Individuals & Price Earning Ratio

Institutions As at 31st December
(Rs Mn) (%) (Rs)
5,000 100 400 10

8.3
4,000 80 320 8
7.2
3,000 60 240 6
5.1
64.5
66.2
66.3
65.7
5.5
2,000 40 160 4
61.95
47.35
34.66
28.52
236.30
248.00
260.40
315.70
1,000 20 80 2
1,847
3,362
2,240
4,598
35.5
33.7
33.8
34.3
0 0 0 0
2017
2017
2017
2014
2015
2016
2014
2015
2016
2014
2015
2016
Individuals Market Price per Share - Bank

Institutions Earnings per Share - Bank
Price Earning Ratio (Times)
- Bank (RHS)
Bank's Share Price Fluctuation Share Trading - Sampath Bank PLC Price to Book Value
As at 31st December
(Rs) (Mn) (Rs Mn) (Rs)
400 15 5,000 400 1.5

1.32
352.2 1.25
350 12 4,000 320 1.2
1.09 1.08
300 279.9 9 3,000 240 0.9
268.7
252.0
250 6 2,000 160 0.6
253.5
235.2
210.0
236.30
179.39
248.00
198.47
260.40
238.94
315.70
293.02
200 3 1,000 80 0.3
164.2
150 0 0 0 0.0
2017
2017
Dec-17
2014
2015
2016
2014
2015
2016
Dec-13
Dec-14
Dec-15
Dec-16
Highest Market Price Market Price per Share - Bank
Lowest Market Price Volume Traded (No. of Shares) Net Asset Value per Share - Bank
Closing Price as at 31st December Turnover (RHS) Price to Book Value Ratio (Times)
- Bank (RHS)
SAMPATH BANK PLC - ORDINARY SHARES

Frequency Distribution of Shareholders as at 31st December 2017
Share Range Resident Non Resident Total
Shareholders
Shareholders
Shareholders
Shares
Shares
Shares
No. of
No. of
No. of
No. of
No. of
No. of
%
%
1-250 5,173 29.66 352,898 0.16 79 0.45 6,550 0.00 5,252 30.11 359,448 0.17
251-500 4,003 22.95 1,356,560 0.62 46 0.26 15,807 0.01 4,049 23.22 1,372,367 0.63
501-1,000 2,682 15.38 1,914,177 0.88 50 0.28 36,142 0.02 2,732 15.67 1,950,319 0.90
1,001-2,000 2,024 11.60 2,978,119 1.37 37 0.21 53,648 0.02 2,061 11.82 3,031,767 1.40
2,001-5,000 1,696 9.72 5,458,732 2.51 41 0.24 136,627 0.06 1,737 9.96 5,595,359 2.58
5,001-10,000 746 4.28 5,265,278 2.42 24 0.15 163,276 0.08 770 4.42 5,428,554 2.50
10,001-20,000 386 2.21 5,381,368 2.48 18 0.11 263,819 0.12 404 2.32 5,645,187 2.60
20,001-30,000 142 0.81 3,413,997 1.57 5 0.03 114,219 0.05 147 0.84 3,528,216 1.62
30,001-40,000 70 0.40 2,427,057 1.12 3 0.02 107,816 0.05 73 0.42 2,534,873 1.17
40,001-50,000 29 0.17 1,302,685 0.60 2 0.02 87,269 0.04 31 0.18 1,389,954 0.64
50,001-100,000 62 0.35 4,317,757 1.99 7 0.04 540,783 0.25 69 0.40 4,858,540 2.24
100,001-1,000,000 71 0.41 21,386,943 9.85 15 0.08 7,012,568 3.23 86 0.49 28,399,511 13.07
1,000,001-Over 15 0.09 116,170,727 53.48 14 0.08 36,957,414 17.01 29 0.17 153,128,141 70.49
Total 17,099 98.03 171,726,298 79.06 341 1.97 45,495,938 20.94 17,440 100.00 217,222,236 100.00
SAMPATH BANK PLC (ORDINARY SHARES)

Top 20 Shareholders
No. Shareholder name 31st December 2017 31st December 2016*
No. of Shares Ratio (%) No. of Shares Ratio (%)
1 VALLIBEL ONE PLC 32,481,024 14.95 26,463,803 14.95
2 MR Y S H I SILVA 21,680,576 9.98 17,660,616 9.98
3 EMPLOYEES PROVIDENT FUND 21,662,695 9.97 17,649,607 9.97
4 ROSEWOOD (PVT) LIMITED-ACCOUNT NO.1 10,774,317 4.96 11,756,360 6.64
5 HSBC INTL NOM LTD-BBH-MATTHEWS INTERNATIONAL FUNDS-MATTHEWS
ASIA GROWTH FUND 9,955,478 4.58 8,111,192 4.58
6 HSBC INTL NOM LTD-BBH-MATTHEWS EMERGING ASIA FUND 5,289,790 2.44 3,087,719 1.74
7 AKBAR BROTHERS PVT LTD A/C NO. 1 4,043,928 1.86 2,681,122 1.51
8 HSBC INTL NOM LTD-STATE STREET LUXEMBOURG C/O SSBT -ABN AMRO
MULTI -MANAGER FUNDS 3,875,241 1.78 4,611,931 2.61
9 MR R S CAPTAIN 3,760,502 1.73 - -
10 MS L A CAPTAIN 3,566,206 1.64 - -
11 CITIBANK NEWYORK S/A NORGES BANK ACCOUNT 2 3,280,532 1.51 2,600,052 1.47
12 PROPERTEX DEVELOPMENT LIMITED 3,123,658 1.44 - -
13 SAMPATH BANK PLC ACCOUNT NO. 04 (SAMPATH BANK PENSION FUND) 3,032,917 1.40 2,882,902 1.63
14 MR S E CAPTAIN 2,873,808 1.32 - -
15 BNYMSANV RE-MAGNA UMBRELLA FUND PLC 2,264,203 1.04 - -
16 PHOENIX VENTURES PRIVATE LIMITED 2,183,435 1.01 - -
17 BNYMSANV RE-BUTTERFIELD TRUST (BERMUDA) LIMITED 1,871,413 0.86 1,382,148 0.78
18 UNION ASSURANCE PLC/NO-01A/C 1,866,391 0.86 1,264,695 0.71
19 MELLON BANK N.A.-UPS GROUP TRUST 1,759,207 0.81 1,433,309 0.81
20 JINADASA BROTHERS (PVT) LTD 1,733,871 0.80 1,683,422 0.95
141,079,192 64.95 103,268,878 58.35
Total No. of shares registered 217,222,236 100.00 176,981,069 100.00

Total No. of shares unregistered - - - -
Total No. of shares issued 217,222,236 100.00 176,981,069 100.00
Shares held by Directors 23,066 0.01 33,643 0.02

Shares held by Institutions 142,658,179 65.67 117,424,683 66.35
Balance held by Others 74,540,991 34.32 59,522,743 33.63
Total No. of shares issued 217,222,236 100.00 176,981,069 100.00
No. of Public shareholders 17,430 17,446

% Shares held by Public 88.59 83.36
% Shares held by Directors and Related Parties 11.41 16.64
* Shareholding as at 31st December 2016 of the top twenty shareholders as at 31st December 2017.
DIVIDEND PAYMENT DETAILS

Year Total Dividend Dividend per Profit for the Dividend Payout
Paid Rs Mn Share Rs Period 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 2,240.06 13.00 6,134 36.52%
2016 (Interim) 2,477.73
18.75 9,125 36.85%
2016 (Final) 884.41
2017 (Proposed) 4,598.43 17.20 12,104 38.00%
RECORD OF SCRIP ISSUES

Year Issue Basis/ No. of Shares Consideration Contribution to Stated Reason for issue
Proportion Issued per Share (Rs) Capital (Rs Mn)
2010 Interim Scrip dividend for 2010 1 for 120.74 627,596 326.00 204.6 Increase stated capital
2011 Final Scrip dividend for 2010 1 for 43.39 3,521,294 260.00 915.5 Increase stated capital
2016 Final Scrip dividend for 2015 1 for 36.91 4,668,414 233.44 1,089.8 Increase stated capital
2017 Interim Scrip dividend for 2016 1 for 19.22 9,209,419 242.55 2,233.7 Increase stated capital
RECORD OF BONUS ISSUES AND SUBDIVISIONS

Year Issue Basis/ No. of Shares Reason for Issue
Proportion Issued
2004 Bonus Issue 1 for 6 7,380,817 Benefit to shareholders
2010 Consolidation and Subdivision 11 for 10 6,888,762 Benefit to shareholders
2010 Subdivision 1 for 1 76,403,986 Benefit to shareholders
RECORD OF RIGHTS ISSUES

Year Issue Basis/ No. of Shares Price per Contribution to Stated
Proportion Issued Share (Rs) Capital (Rs Mn)
2005 Rights Issue 2005 1 for 3 held 17,221,907 60.00 NA
2017 Rights Issue 2017 1 for 6 held 31,031,748 245.00 7,602.8
NA - Not Applicable
EMPLOYEE SHARE OPTION PLAN

Capitalised Year Issue No. of Shares Price per Contribution to Stated Reason for Issue
Issued Share (Rs) Capital (Rs Mn)
2011 ESOP 2010 524,924 80.00 42.0 Benefit for staff members
2012 ESOP 2010 2,200,436 80.00 176.0 Benefit for staff members
RELATED PARTY TRANSACTIONS EXCEEDING 10% OF THE EQUITY OR 5% OF THE TOTAL ASSETS OF THE BANK (DISCLOSURE AS PER SECTION 9 OF
THE CSE LISTING RULES)
None of the transactions carried out by the Bank with the Related Parties have exceeded the aggregate monetary value of 10% of the
shareholders’ equity of the Bank or 5% of the total assets of the Bank as at 31st December 2017.
DEBENTURE INFORMATION
(A) MARKET VALUES
Debentures - 2012/2017 Highest (Rs) Lowest (Rs) Year End (Rs)
2017 2016 2017 2016 2017 2016
Fixed - 16.50% 100.00 106.60 80.00 101.50 100.00 102.00
Fixed - 15.00% 98.00 101.00 98.00 98.00 98.00 98.00
Floating NT NT NT NT NT NT
NT - Not Traded
Debentures - 2012/2017 were redeemed on 11th October 2017.

2017 2016 2017 2016 2017 2016
Fixed - 13.40% 100.50 98.50 100.50 98.50 100.50 98.50
Fixed - 13.00% 98.50 105.25 96.00 105.25 NT 105.25
NT - Not Traded

2017 2016 2017 2016 2017 2016
Fixed - 8.25% 87.00 90.00 87.00 87.00 87.00 87.00
Fixed - 8.10% NT 85.00 NT 85.00 NT 85.00
NT - Not Traded

2017 2016 2017 2016 2017 2016
Fixed - 9.90% NT NT NT NT NT NT
NT - Not Traded

2017 2016 2017 2016 2017 2016
Fixed - 12.75% 101.50 99.94 99.86 99.94 99.86 99.94
NT - Not Traded

2017 2016 2017 2016 2017 2016
Fixed - 12.50% NT NA NT NA NT NA
NT - Not Traded NA - Not Applicable
(B) INTEREST RATES

Debentures - 2012/2017 2017 2016
Coupon Rate Effective Rate Coupon Rate Effective Rate
Fixed - 16.50% 16.50% 16.50% 16.50% 16.50%
Fixed - 15.00% 15.00% 16.08% 15.00% 16.08%
Floating * * * *
*Floating rate is equivalent to the six months treasury bill rate (gross) plus 2.0% p.a. payable semi annually.
Debentures - 2013/2018 2017 2016

Fixed - 13.40% 13.40% 13.40% 13.40% 13.40%
Fixed - 13.00% 13.00% 13.42% 13.00% 13.42%
Debentures - 2014/2019 2017 2016

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 2017 2016

Fixed - 9.90% 9.90% 10.15% 9.90% 10.15%
Floating * * * *
*Floating rate is equivalent to the six month treasury bill rate (net) plus 1.25% p.a. payable semi annually.
Debentures - 2016/2021 2017 2016

Fixed - 12.75% 12.75% 12.75% 12.75% 12.75%
Floating * * * *
*Floating rate is equivalent to the six month treasury bill rate (gross) plus 1.0% p.a. payable semi annually.
Debentures - 2017/2022 2017 2016

Fixed - 12.50% 12.50% 12.89% NA NA
NA - Not Applicable
(C) INTEREST RATE OF COMPARABLE GOVERNMENT SECURITIES - GROSS RATES

As at 31st December 2017 2016
3 Months Treasury Bill 8.54% 9.69%
6 Months Treasury Bill 9.22% 10.70%
5 Years Treasury Bond 9.97% 12.21%
(D) CURRENT YIELD AND YIELD TO MATURITY

Debentures - 2012/2017 Fixed Fixed Floating
16.50% 15.00%
2017 2016 2017 2016 2017 2016
Current yield 16.50% 16.18% 16.41% 16.41% NT NT
Yield to maturity of last trade 14.94% 14.27% 18.60% 18.36% NT NT
NT - Not Traded
Debentures - 2013/2018 Fixed Fixed

13.40% 13.00%
2017 2016 2017 2016
Current yield 13.33% 13.60% NT 12.75%
Yield to maturity of last trade 12.80% 14.17% NT 10.84%
NT - Not Traded
Debentures - 2014/2019 Fixed Fixed

8.25% 8.10%
2017 2016 2017 2016
Current yield 9.48% 9.17% NT 9.72%
Yield to maturity of last trade 15.04% 11.55% NT 13.23%
NT - Not Traded
Debentures - 2015/2020 Fixed Floating

9.90%
2017 2016 2017 2016
Current yield NT NT NT NT
Yield to maturity of last trade NT NT NT NT
NT - Not Traded
Debentures - 2016/2021 Fixed Floating

12.75%
2017 2016 2017 2016
Current yield 12.56% 12.76% NT NT
Yield to maturity of last trade 12.25% 12.75% NT NT
NT - Not Traded
Debentures - 2017/2022 Fixed

12.50%
2017 2016
Current yield NT NA
Yield to maturity of last trade NT NA
NT - Not Traded NA - Not Applicable
(E ) RATIOS - BANK
2017 2016
Debt to equity ratio (%) 78.75 80.96
Interest cover (Times) 6.91 6.31
Quick asset ratio (%) 78.33 80.65
UTILISATION OF FUNDS RAISED VIA CAPITAL MARKETS

Funds raised in 2017
Funds raised from rights issue 2017
The funds raised through the rights issue amounts to Rs 7.6 Bn was fully utilised for the objectives stated in the Prospectus.
Funds raised from debenture issue 2017

Objective Objective as per Amount Proposed Amount Percentage Amount Percentage Clarification if not fully
No. Prospectus allocated date of allocated of total utilised as at of utilisation utilised
as per utilisation from proceeds 31.12.2017 against
Prospectus as per proceeds allocation
Prospectus as at
31.12.2017
[A] [B] [B/A]
Rs Bn Rs Bn Rs Bn
1 To increase the 6.0 21.06.2018 6.0 100% 4.4 73%* Only 10 days passed
loan portfolio from the date of
allotment. The
remaining funds
have been invested
in Treasury bills
temporarily. The Bank
intends to fully utilise
the funds within the
month of January
2018.
2 To increase the 6.0 21.06.2018 6.0 100% 6.0 100% Fully utilised.
Tier II capital base
of the Bank
* The Bank has fully achieved the objective 1 above as at 31st January 2018.
Funds raised in previous years

The funds raised via capital markets in the previous years were fully utilised for the objectives stated in the relevant Prospectuses.
ENABLING ACCESS TO A UNIVERSE OF VALUE

117
RISK & GOVERNANCE

Risk Management Report .................................118
Compliance ..........................................................126
Corporate Governance .......................................127
Board Audit Committee Report .......................167
Board Human Resources and
Remuneration Committee Report .............170
Board Nomination Committee Report ...........172
Board Integrated Risk Management
Committee Report .........................................173
Board Related Party Transactions
Review Committee Report ..........................175
RISK MANAGEMENT REPORT GRI 102-15
OVERVIEW RISK CULTURE and motivate employees to adopt

The success of a bank lies in its ability The success of the IRMF is largely appropriate risk management behaviours
to manage risk effectively in a way that dependent on a strong risk culture. We by:
would maximise the value created for believe a proactive risk intelligence culture
all stakeholders. The Board of Directors that helps to identify and effectively y Understanding risks associated with
provides an oversight to ensure manage potential risks that may have an individual roles
that all risks faced by the Bank are impact on the day-to-day operations of the y Taking personal accountability and
comprehensively evaluated, monitored and Bank, is the key to achieving our medium to proactively managing risk associated
controlled by management at all times. To long-term growth targets on a sustainable with their area of operation
achieve this, the Board sub-committee on basis.
y Aligning the day-to-day decision
Integrated Risk Management applies an
Robust risk practices are in place to making process to the Bank’s risk
Integrated Risk Management Framework
continually assess the risk culture across appetite
(IRMF) to identify, assess, monitor and
control risks within the Bank’s established all operations and ensure that Risk y Promptly escalating potential high-
risk appetite. At the heart of the IRMF Management goes hand in hand with the risk issues to relevant authorities
is the “three-lines-of-defence” model, way that our employees work, think and
y Reporting and communicating about
which underpins the symbiotic roles and respond to challenges. We encourage
identified risks transparently
responsibilities needed for the effective leaders to act as role models to develop
management of risk across the Bank.
FUNCTIONAL STRUCTURE OF THE INTEGRATED RISK MANAGEMENT FRAMEWORK OF THE BANK/GROUP
BOARD OF DIRECTORS
Board Integrated Risk Management

Managing Director
Committee (BIRMC)
Group Compliance Officer Group Chief Risk Officer
AML and Compliance Unit Integrated Risk Management Unit
Credit Risk Management Unit Market Risk Management Unit Operational Risk Management Unit
Credit Risk Management Function Credit Risk Review Function
Head of Risk & Compliance - Head of Finance and Compliance CEO - Sampath Information Manager -
Siyapatha Finance PLC Officer-SC Securities (Pvt) Ltd Technology Solutions Ltd Sampath Centre Ltd
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS RISK & GOVERNANCE FINANCIAL INFORMATION | SUPPLEMENTARY INFORMATION 119
GRI 102-30
Board of Directors and Board Integrated Risk Management Internal Audit Function
- Committees Unit y Independent and
y Identification, y Centralised supervision objective assurance of
management and to ensure the the Risk Management/
2nd line of defence
3rd line of defence

1st line of defence
reporting of both current implementation of Compliance processes

and potential risks to governance standards, and practices in
ensure that they are frameworks and policies place. Internal Audit
managed effectively for each type of risk that has the authority to
in response to its risk the Bank is exposed communicate with the
universe to while ensuring External Auditors, Board
consistency in Risk Audit Committee and
Management across all BIRMC
areas
RISK APPETITE Risk tolerance levels for each risk category MANAGING MATERIAL RISKS
A prudent and conservative risk appetite are set at different trigger levels, with We have analysed and identified the
is the mainstay of our Risk Management clearly defined escalation criteria to top risks that may impact our ability to
process. Determining our risk appetite report significant risks issues and/or limit grow sustainably. These Risks are the
bolsters effective Risk Management by breaches. The Board reserves the right to cornerstone of our overall risk control
ensuring emerging risk and risk taking revise Risk Tolerance Limits as and when strategy and as such are under continuous
activities are recognised, assessed, needed. scrutiny with ongoing improvements
escalated and addressed in a timely forming part of the Bank’s cohesive risk
manner. We believe that while prudent STRESS TESTING control framework.
and appropriately conservative, our risk Stress testing is an integral part of our risk
appetite creates an enabling environment management process. It helps determine CREDIT RISK
for our businesses to generate competitive the Bank’s potential vulnerability to adverse THE POTENTIAL LOSS THAT MAY RESULT
growth and returns. macro-economic scenarios, identify and OWING TO THE FAILURE BY A COUNTERPARTY
define mitigating actions before the onset OR CUSTOMER TO MEET THEIR OBLIGATIONS
Taking a comprehensive view of the of an adverse event. Stress testing is TO THE BANK IN ACCORDANCE WITH AGREED
risk factors affecting the Bank, the conducted at least quarterly for all major TERMS
risk appetite for each risk category is risk categories, while portfolio-specific
reviewed by the Board at least annually stress testing is conducted quarterly for Credit Risk Governance Model
with due consideration to Group strategy, highly sensitive aspects of the business;
Board of Directors
business environment and stakeholder mainly lending, foreign exchange, interest
requirements. sensitive asset/liability and liquidity. The
results of the stress tests are used to
The Bank ensures regular review of existing calibrate the thresholds and establish Board Sub Committees
appetite limits and introducing of new boundaries of the Bank’s Risk Appetite.
limits when the need arises.
Regular stress testing is also done in Executive Level Committees
RISK TOLERANCE LEVELS conjunction with the Internal Capital
Effective thresholds are essential in Adequacy Assessment Process (ICAAP).
managing specific risks within acceptable Credit Risk Management Unit
levels. Risk tolerance levels are therefore All stress tests are formally documented,
integral in driving Risk Appetite into our with all mitigating actions for different
operations. scenarios being recorded in detail and
reported to Management Committees and
Board.
Risk Management Report
y Structured and standardised credit

Sector-wise Analysis Goal : Planning and readiness for
sanction process
of the Advances Portfolio BASEL III Capital Adequacy
y Internal Risk Rating and Pre-Credit requirements
(%)
2.0
Risk Evaluation by specialised staff Activity: In preparation for adopting
1.5 0.1
2.0 at Credit Departments, Lending Units higher approaches of the
3.1 20.6 and Zonal Offices BASEL III, the Bank has
5.6
3.5 already strengthened its Risk
y Post-Credit Monitoring and Loan
7.5 Management Framework
Review Mechanism
15.8
9.6 In 2017, the Bank completed
Mitigating Actions seven years of calculating
7.2
y Annual review of Board approved Probability of Default (PD)
7.2 14.3
credit policies, procedures and based on internal ratings. During
Traders Other Services
Manufacturing (Education/Health/Media/Other) framework this time, an independent
Other customers Infrastructure validation of the internal rating
Financial & Business Pawning y Delegated authority levels
system was done on two
Services New Economy y Segregation of duties between loan separate occasions to confirm
Agriculture & Fishing (Telecommunication & IT)
Construction Transport origination, administration and risk the predictability of the rating
Tourism Credit Card models currently in use. Given
y Key inputs from the Credit Risk
Government Sector the positive outcomes of these
Management Unit for Pre/Post Credit
reports, we have begun using
Risk
Risk Grade-wise our Internal Rating Models to
Distribution of the Borrowers y Independent Pre-Credit Risk move forward in adopting the
(%)
Evaluation by CRMU for facilities over Foundation Internal Rating
Rs 100 Mn Based (FIRB) Approach for
6.0
calculating the Credit Risk
2.0 13.0
y Identification of Early Warning Signals
Capital Charge
(EWS) and watch listing
y Portfolio Risk Management and Credit Concentration Risk - Risk due to the
39.0
Reporting high exposure to specific sectors
40.0
SYSTEM IMPROVEMENTS IN 2017 Process Controls
y Ongoing review of the Bank’s
Goal : Strengthen Pre-Credit concentration risk in a number of
A+ to A
A- to B+ Evaluation procedure areas, such as; Top 20 exposure as a
B to C+ percentage of total portfolio, product-
Below C+ Activity: * Incorporating new borrower
wise, sector-wise region-wise,
Unrated parameters to strengthen the
collateral-wise etc.
“Internal Rating Model”
Managing Credit Risk * Broadening the Financial y Identify Principal Risk Factors
Credit Risk - Risk of Borrower Default Institutions rating model affecting the portfolio and carrying out
Process Controls with the inclusion of external stress testing
ratings and relative asset base y Concentration risk assessed, based on
y All Credit Risk Management functions
ratios to evaluate the macro- Herfindahl - Hirshman Index (HHI)
of the Bank have been formulated in
economic level factors
line with CBSL guidelines on Corporate
Governance and the Integrated * Modifications to the risk- Mitigating Actions
Risk Management Framework for based pricing model y Board approved limits on low/
Licensed Banks as well as the BASEL * Introduction of a new maximum exposure guidelines.
requirements Social and Environmental
y Setting of prudential limits, on low/
Management Policy to guide
y Review by BIRMC, Credit Policy, Risk maximum exposures, which are
lending to specific sectors
and Portfolio Review Committee, Risk reviewed annually
and Compliance Committee and Credit
Risk Management Unit (CRMU)
y Compliant to CBSL guidelines - single MARKET RISK Process Controls

borrower/ related party THE LIKELIHOOD OF LOSS IN EARNINGS y Board Approved Policies
y Classification of borrower – sector/ THAT COULD ARISE FROM THE POSSIBLE y Measurement through key ratios
subsector FALL IN VALUE OF INVESTMENT OR TRADING such as
PORTFOLIOS, AS A DIRECT CONSEQUENCE
y Monitoring of exposure against the y Net Loans to Total Assets
OF CHANGES IN MARKET VARIABLES SUCH
appetite limits on monthly basis AS INTEREST RATES, EQUITY PRICES AND y Total Loans to Customer Deposits
y Trend analysis reported to BIRMC FOREIGN EXCHANGE RATES y Liquid Assets to Short Term
Market Risk Governance Model Liabilities
y Results of Stress testing/Sensitivity
analysis report to Management/ BOARD OF DIRECTORS y Bulk Deposits to Total Deposits
BIRMC on quarterly basis for
y Purchased Funds to Total Assets
necessary action
y Commitments to Total Loans
SYSTEM IMPROVEMENTS IN 2017 Board Sub Committees
y Preparation of “Maturity of Assets and
Goal : Strengthen Post-Credit Liabilities Statement” into time bands
Evaluation procedure
Executive Level Committees y Measurement of liquidity in all major
Activity : Carry out detail analysis on risk
currencies
elevated industries
y Assessment of Liquidity Risk during
Market Risk Management Unit Economic Capital Calculation under
Goal : Create awareness to reinforce Internal Capital Adequacy Assessment
the Risk Culture Managing Market Risk Process (ICAAP)
Activity : Knowledge-sharing sessions, Process Controls
Mitigating Actions
developing case studies to be y Formulating the Bank’s Market
used as reference material y Monitoring of Board approved Liquidity
Risk Management functions in line
Risk appetite limits
with CBSL guidelines on Corporate
Country Risk Governance and the Integrated y Measuring of liquidity in all major
Risk Management Framework for currencies and reported to ALCO,
Political risk, exchange rate risk, economic
Licensed Banks as well as the BASEL analyse and decisions taken at ALCO
risk, sovereign risk and transfer risk etc.
requirements y Stress testing results on Liquidity Risk
associated with offshore lending
y Board approved Market Risk is reported to BIRMC and appropriate
Process Controls Management Policy, ALCO Policy, Risk mitigation decisions are made
y Sovereign risk rating Investment Policy and Treasury Policy y Board approved Liquidity Contingency
plan
y Monitoring of specific sanctions on y Board approved limit monitoring
countries framework for Market Risk Operation y Adopting BASEL III liquidity
requirements
y Assessment of political and economic Mitigating Actions
situations Interest Rate Risk
y Regular monitoring and reporting of
exceptions to BIRMC/Board Treasury Potential loss resulting from the Bank’s
Mitigating Actions
Committee (BTC)/ALCO. Assets and Liabilities having different re-
y Introduction of appetite limits/ caps pricing characteristics
on lending y Annual reviews of policies and limit
framework by BIRMC/BTC. Process Controls
y Monitoring of country/ region-wise
exposure Liquidity Risk y Board approved policies
Potential risk arising from the inability to y Prudential Loss Limits for Trading
meet obligations in a timely manner as and Book
when they become due, mainly on account
y Assessment of Interest Rate Risk
of mismatches between the maturities of
during Economic Capital Calculation
the Bank’s Assets and Liabilities.
under Internal Capital Adequacy
Assessment Process (ICAAP)
Mitigating Actions Mitigating Actions y Monitoring of Risk Appetite Limits for

y Preparation of “Sensitivity of Assets y Regular monitoring of the Equity Foreign Exchange Rate Risk and Board
& Liabilities Report” for various time Portfolio movement in the Stock approved VaR Limits
bands – residual term maturity (fixed Market
rate) / or next re-pricing (floating Capital Risk
y Stress testing results on Equity Risk
rate) Risk of insufficient capital resources, to
report to BIRMC and appropriate Risk
ensure the Bank is well capitalised relative
y Interest rate risk related limit mitigation decisions are made
to the minimum regulatory requirements
monitoring and reporting to ALCO and
Foreign Exchange Rate Risk
BIRMC
Risk arising from the mismatches in Process Controls
y Stress Testing and Scenario Analysis Assets and Liabilities in specific foreign y Regular computation of Capital
results are reported to BIRMC and currencies, where the value of such net Adequacy Ratios
appropriate decisions are made to exposures will fluctuate due to exchange
y Stress testing under various adverse
mitigate risks rate movements
scenarios
y VaR calculation results on Treasury
Bill/Bond portfolios are checked Process Controls
Mitigating Actions
against Board approved Limits and y Board approved Policies
y Fluctuation in Capital Adequacy ratios
reported to ALCO are monitored regularly (Finance
y Assessment of Foreign Exchange Rate
SYSTEM IMPROVEMENTS IN 2017 Risk, considered in setting Treasury Department)
Limits and Products
Goal : Mitigate the risk arising due to y Capital augmentation measures
market rate fluctuations y Revaluation of open positions on a are put in place depending on the
daily basis and analysis of the gains/ outcome of monitoring (Finance
Activity : Introduction of Loss Making
losses Department / ALCO)
Tolerance Limits for Trading
Security Portfolios y Assessment of Foreign Exchange y Regular Economic Capital Calculation
Rate Risk during Economic Capital under Internal Capital Adequacy
Moving away from the straight-
Calculation under Internal Capital Assessment Process (ICAAP) as per
line method for the calculation
Adequacy Assessment Process CBSL Guidelines
of mark-to-mark gains/losses
(ICAAP)
and introduction of Effective y Compliance of capital requirements
Interest Rate (EIR) method for y VaR calculation for Foreign Exchange under BASEL III commencing from 1st
such calculations Rate Sensitive portfolios July 2017
Mitigating Actions SYSTEM IMPROVEMENTS IN 2017

Equity Risk
y Continuous monitoring of Board
Impact to the value of the Bank’s Equity Goal : Planning and readiness for
approved Limit Framework as per
Portfolio due to adverse movements in BASEL III Capital requirements
CBSL recommendations and reporting
stock market prices all limit excesses to BIRMC/BTC Activity : The Bank continues to adhere
to the Minimum Capital
Process Controls y Stress Testing results on Foreign Requirements and Buffers
Exchange Rate Risk, are reported to under Pillar I, in line with the
y Board Approved Policies
BIRMC and appropriate risk mitigation BASEL III guidelines issued for
y Regular review of Equity Portfolio by decisions are made International Settlements and
the Investment Committee the Banking Act Directions of
y Segregation of responsibilities
y Mark-to-market of the Investment between Front Office, Middle Office CBSL
Portfolio and Back Office Under Pillar II Supervisory
y Assessment of Equity Risk during y IT system is in place to track and Review Process, the Bank has in
Economic Capital Calculation under monitor the exposures and excesses place a well-documented
Internal Capital Adequacy Assessment
y Monitoring of the maturity gaps of
Process (ICAAP)
Foreign Currency Assets and Liabilities
GRI 205-1
Operational Risk Governance Model Mitigating Actions

Internal Capital Adequacy
Assessment Process (ICAAP) BOARD OF DIRECTORS y Operational Risk Policies reviewed
that determines the level annually or more frequently based on
of capital to be maintained the need
against all risks and ensure Board Sub Committees y Risk Management monitoring
that the Bank has adequate through Operational Risk IT System.
capital to support all risks. Comprehensive operational loss
The Bank is in the process of Executive Level Committees database is maintained in the System
further developing the ICAAP in to track losses by Event Type and
accordance with the prudential Business Line as per BASEL II
requirements under BASEL III Operational Risk Management Unit
regulations, proportional to its y Material losses are regularly analysed
operations and risk profile by cause and action taken to improve
Managing Operational Risk
systems and controls to prevent
Pillar III Market Discipline aims Process Controls future recurrence
to complement the minimum y The Operational Risk Management
capital requirements and y Risk reviews on new products,
Policy, which has been developed
supervisory review process by processes and external suppliers/
in line with the Directions of CBSL,
developing a set of disclosure outsourced service providers.
Industry Best Practices, BASEL
requirements, which will allow Framework guidelines, Laws and other y Monitoring and reporting of
the market participants to applicable regulations operational Risk Appetite Limits and
gauge the capital adequacy Key Risk Indicator Limits
and risk exposures of the Bank y Adequacy and effectiveness of
under Pillar III the Bank has Operational Risk Policies are regularly
Operational Risk Review in 2017
complied with the Minimum assessed by Operational Risk
Disclosure Requirements and is Management Unit (ORMU) and at
(%)
in the process of developing the BIRMC meetings
8.0
disclosures related to Bank Risk y Operational Risk is managed by
Management business units in accordance with
12.0
internal control requirements 36.0
OPERATIONAL RISK
“THE DIRECT OR INDIRECT LOSSES y Risk and Control Self Assessments 14.0
RESULTING FROM INADEQUATE OR FAILED (RCSA) provided by the respective

INTERNAL PROCESSES, PEOPLE, SYSTEMS business units and Key Risk Indicators 14.0
OR EXTERNAL EVENTS”. ACCORDING TO (KRI) 16.0

BASEL II DEFINITION IT INCLUDES LEGAL Service Level Agreement
Procedure
RELATED RISK BUT EXCLUDES STRATEGIC
Risk of Sign Off
AND REPUTATIONAL RISK System Requirement Specifications/ NDA
Inadequate /
Failed Internal Directives
Policies/MOU/NPD
Processes
SYSTEM IMPROVEMENTS IN 2017
Risk from Goal : Strengthening of Risk and

People
External Risk Compliance Management
Events Operational processes across the business
Risk
Activity : Setting up of a Risk and
Compliance Committee (RCC),
under the supervision of the
BIRMC to monitor and report
IT Systems the progress of the operational
Legal Risk Risk processes implemented
monthly
Mitigating Activities Mitigating Activities

Goal : Improve overall Capital y Robust HR policies, governance y Technology planning as a part of
Adequacy Ratio structures, programmes and annual strategic planning process
Activity : Strengthening process processes in place and policies are which covers a three year period
controls and reviewing the applied in a consistent manner
y System audits are performed for
relevance of mitigating
y Recruitment, pre-employment every system before deploying into
actions with the aim of
screening, employer feedback/exit production environment
obtaining regulatory approval
interviews
to move away from the y Bank’s IT Department/ IT Steering
existing Basic Indicator y Proactive HR programmes to engage Committee together with the business
Approach (BIA) and migrating and receive feedback from staff lines, continuously review and analyse
towards the “Alternative throughout the Bank new cost efficient delivery channels
Standardise Approach”
y Strong staff development y Based on the outcome of the
(ASA) for the computation
programmes in place combining systems audit, necessary controls
of Operational Risk Capital
e-learning, classroom training and on are implemented before live
Charge
the job training. Programmes cover implementation
Outcome : Received CBSL approval in both general and specialised areas
principal to migrate to ASA in y External vulnerability assessment
and soft skills
calculating Operational Risk carried out by external consultants
Capital Charge y Maintaining a low staff turnover ratio based on the need
y Consistently applied disciplinary y Availability of updated IT Policies/

People Risk procedures procedures
Risk arising due to the lack of appropriate
y Investment in latest technology, IT
human resources, failure to manage Information Technology Risk
systems, in line with ISO standards to
performance and reward link, unauthorised Risk arising from non-availability of ensure competitive advantage
or inappropriate employee activity and IT systems, systems break downs and
failure to comply with employment related disruptions, or not keeping in line with the y Availability of updated Back-up and
requirements trends in technology and delivery channels Disaster Recovery Planning and
Testing. (BCP)
Process Controls Process Controls
SYSTEM IMPROVEMENTS IN 2017
y Integrated Human Resources y IT planning is conducted during the
framework to ensure manpower- annual strategic planning Goal : Create awareness among staff
planning activities are aligned with and encourage proactive risk
y Performing systems audits for
expansion and changes in business mitigating action
every system before deploying into
requirements
production environment Activity : A cyber-security training
y Upgrading of minimum qualifications programme titled “Managing IT/
y External/Internal vulnerability
and skill levels Information Security Risks” was
assessment with Risk Management
conducted in September 2017
y Recognition of specialised skills process of identifying and assessing
with the participation of over
risk
y Bi-annual reviews/ assessment of 275 senior team members
performance y IT and Systems Audit continuously
reviews and analyses new cost
y Performance management systems The Bank’s current IT Strategy along with
efficient delivery channels
in place to recognise and reward the closely monitored IT Governance
performance y IT Steering Committee meets to Mechanism has ensured a secured “Cyber
discuss on IT Policies, Strategic Plans, Security” background.
y Identify training needs
new Technology development, Budget
y Succession and development plans etc. Legal Risk
y Risk reviews on new / amended Legal Risk is the risk arising from non-
systems during requirement compliance with statutory and / or
specification or procurement stage regulatory provisions, uncertainty due
to legal actions or uncertainty in the
applicability or interpretation of relevant Managing Strategic Risk REPUTATIONAL RISK

laws or regulations applicable to the Bank Process Controls THE RISK TO THE BUSINESS CAUSED BY
during the course of its business and other NEGATIVE EFFECTS, PUBLIC PERCEPTIONS
y Board approved three year strategic
operations. AND CUSTOMER OPINIONS AND THE DAMAGE
plan covering all business units
CAUSED TO BRANDS BY FAILURE TO MANAGE
Process Controls
Mitigating Activities PUBLIC RELATIONS
y Independent Legal Department
y Board approved Strategic Risk Reputational Risk Governance Model
y Adequacy and effectiveness of the Management Policy
BOARD OF DIRECTORS
controls reviewed by the Legal
y Strategic risk assessment in line with
Department
ICAAP and provisions under economic
y Specialist legal advice obtained from capital Board Sub Committee
external consultants on a need basis
y Regular monitoring by business line
Heads/Strategic Planning Department
Mitigating Activities Integrated Risk Management Unit
y Board approved Legal Risk y Accuracy of financial reporting
Management Policy being applied in all ensured by internal controls and the
Managing Reputational Risk
legal matters adoption of Sri Lanka Accounting
Standards Process Controls
y Policies and procedures are in place y Complaint Handling Policy/ Procedure
to ensure that business activities with y Monthly/ quarterly reporting on
developed in line with the Customer
legal impact are risk assessed and the progress of the strategic plan
Charter issued by CBSL
executed properly achievements are submitted to the
Board of Directors y Availability of Reputational Risk
y All legal documents / service level Management Policy, and Procedure
agreements are specifically approved y Independent review of strategic
for receiving customer complaints and
by the respective Business Line Heads plans by the Risk Management Unit,
resolution mechanism
and the Chief Legal Officer, and also with comments/ recommendations
signed off by Risk and Compliance provided to the Board Strategic y Complaints and process of resolution
Departments Planning Committee and to the Board relating to operational risk/
compliance if significant, is escalated
y Company Secretary / Compliance y Periodic review actions/ plans
to the Corporate Management/ BIRMC
Department to ensure compliance depending on the assessment of
with specific regulatory requirements progress and any external, economic
Mitigating Actions
environment changes
y Timely and efficient communications
STRATEGIC RISK
SYSTEM IMPROVEMENTS IN 2017 among all stakeholders
RISK ARISING AS A RESULT OF THE FAILURE
TO MANAGE MEDIUM / LONG TERM STRATEGIC y Corporate Governance Practices
Goal : Formulate a framework to
GOALS OF THE BUSINESS continuously review the Bank’s y Availability of procedure for receiving
Strategic Risk Governance Model overall risk rating customer complaints and resolution
Activity : Ascertain on an ongoing basis, mechanism
BOARD OF DIRECTORS
the Bank’s positioning with y Reputational Risk Assessment in
regard to risk vulnerable areas ICAAP and provisions under Economic
through quarterly review and Capital
Board Sub Committee
reporting
y Business Continuity Planning
y Training and capacity building

Integrated Risk Management Unit
y Code of conduct for the Board and all
staff members
COMPLIANCE
Compliance is an integral component compliance model introduced with the aim Compliance Training
of Sampath Bank’s DNA and it reflects of promulgating the risk-based compliance The training plan was updated with
the Bank’s ongoing commitment to culture at branch, department and group a strong emphasis on Risk Based
professionalism and ethical conduct. level. Underpinned by the new compliance Compliance Modules to raise awareness,
model, the focus for 2017 was mainly specifically at senior and middle
The role of the Compliance function is to three-pronged. management levels. In addition to
ensure that, in conducting its day-to-day the above, training programmes were
functions, the Bank remains compliant Strengthening the Risk Assessment also deployed to improve compliance
with all laws and regulations currently Programme (RAP) awareness among all employees of the
applicable to the business. To achieve this, To improve the robustness of the current Bank.
the Compliance function shall proactively risk assessment methodology and sharpen
engage in building a corporate culture the alignment between the compliance Compliance Technology
based on ethical values, professional plan and the RAP, a comprehensive set of Steps were taken to leverage on the
conduct and the highest standards of Compliance Risk Assessment measures technology to update compliance
integrity, in turn ensuring that these (Risk Based Compliance Modules) were monitoring and testing mechanisms in
principles are applied to the Bank’s developed for Branches, Departments line with current global standards and best
activities at all times. as well as for the Group. Based on these practices. The main aim was to manage
modules, compliance risk assessments compliance risk more proactively through
NEW DEVELOPMENTS FOR 2017 were carried out throughout the year to automation of monitoring process of key
Stemming from previous years’ determine the risk profiles of branches, Compliance areas.
commitment to strengthen micro- departments and the Group.
level compliance, efforts for the year FUTURE PLANS
were spearheaded by a new eight pillar
Moving forward, the key priority would be
to use the new compliance model for the
effective management of Compliance risk.
Accordingly, the focus for the immediate
future would be to ensure that Compliance
Risk Management is integrated into
Risk the strategy development process
assessment at unit level, as a proactive measure
programme thereby strengthening the Banks’ overall
Regulatory Governance compliance culture.
interaction and
coordination
Compliance
monitoring
Compliance Compliance and testing
technology Focus 2017
Policies,
Compliance procedures,
training and related
controls
Reporting and
communication
CORPORATE GOVERNANCE
WE STRIVE TO DEVELOP A DEAR STAKEHOLDER cyber security threats. Meanwhile to

In this section of the Annual Report we build customer trust and loyalty in our
CULTURE OF OPENNESS provide details of our governance policies digitalisation drive, we took a series
AND TRANSPARENCY and practices together with highlights of steps to better manage the way we
of our governance activities for 2017. communicate with our customers.
TO EMBED OUR The aim is to provide shareholders and
GOVERNANCE AND other stakeholders with an appreciation Additionally, we also took action to
promote a compliance culture and
CONTROL PROCEDURES of how we manage our business and the
encourage responsible and ethical
governance and control framework in
THROUGHOUT THE which Sampath Bank operates. behaviour at all levels of our business.
And I am pleased to note that through
BUSINESS. these initiatives, we have been able to
We believe that good governance is an
essential part of the way we undertake improve transparency and accountability
our business on a day-to-day basis and and ensure that we better manage our
strive to develop a culture of openness and day-to-day roles and responsibilities.
transparency to embed our governance
and control procedures throughout the Compliance Statement
business. The Board remains strongly The Bank remains fully compliant with
committed maintaining and continuously all statutory requirements imposed by
improving the structures and processes all regulatory bodies concerning matters
to ensure the level of risk management, relevant to the Bank’s business.
internal control and accountability that
would support the Bank’s long-term Declaration by the Board
growth strategy. My fellow Directors and I remain firmly
committed to observing highest standards
Board Priorities for 2017 of Corporate Governance, integrity and
During the past year, we renewed our professionalism throughout all operations
focus on strengthening corporate across the Bank. Accordingly, I declare that
governance with the Board spending a all the members of the Board of Directors
significant proportion of its time examining and all Bank personnel have acted in
operational processes at all levels of the compliance with the applicable regulatory
business. and statutory requirements and have
discharged their duties in accordance with
Given the Bank’s accelerated digitalisation the polices, procedures and standards
agenda, special emphasis was given covered by the Bank’s internal Code of
towards enhancing our IT security Conduct.
protocols to safeguard from the growing
CHANNA PALANSURIYA
Chairman
Colombo, Sri Lanka

15th February 2018
Recoveries Dept. Legal Dept. Chief Legal Officer
AGM Recoveries
Siyapatha Finance PLC
Trade Services &
International Ops. Depts.
Sampath Centre Ltd

Treasury Treasury Front
AGM Treasury
Snr DGM
Investment Dept. Office
GOVERNANCE STRUCTURE
Corporate Banking
SC Securities (Pvt) Ltd
FCBU Dept. Corporate Finance Dept.
Board of Directors - Subsidiaries

AGM Corporate Credit DGM Sampath Information
Corporate Banking Technology Solutions Ltd
Corporate Governance
Corporate Credit Dept.

AGM DGM
Branch Network Branch Banking
Bancassurance & Branch Banking
Banking
Lending Products Depts.
Snr DGM Consumer

Deposit AGM Deposit
Mobilization Dept. Mobilization
Shareholders
Board Audit Committee
Managing Director
Marketing & Business
Board of Directors - Bank
Development Dept. Head

Board HR & Remuneration
of Marketing
Card Centre, E-Remittances Committee
Operations & BPR Dept. & BNO Depts.
AGM Board Nomination Committee
Operations DGM Operations
NSC & CCD Depts. Logistics, Administration

Board Integrated Risk
& Engineering Depts.
Management Committee
IT & DWH Depts.

Board Related Party
Transactions Review Committee
Group Chief
EBU & IT Business AGM IT Business
Information Officer
Development Depts. Development
Board Credit Committee
Strategic Planning
& Research Dept. AGM Strategic Planning Chief Strategy
Human Resources & Research Officer Board Strategic Planning
& Training Dept. Planning & Committee
Budgeting Dept.
Group Chief
Finance & Treasury Board Shareholder
AGM Human Resources HR Officer
Back Office Depts. Relations Committee
Compliance Dept. Group Compliance Board Treasury Committee

External Auditors
Officer
Group Chief
Board Sub Committees
Financial Officer
Risk Management & Treasury Board Marketing Committee

Group Chief Risk Officer
Middle Office Dept. Chief
Internal Auditor
Board IT Committee
Chief Manager
System Audit Dept. System Audit
Board Capital Planning
Committee
Company Secretary’s
GRI 102-18, 19, 20
Internal Audit Dept. Company Secretary

Office
CORPORATE GOVERNANCE FRAMEWORK

Sampath Bank is committed to the highest standards of ethics and integrity and has embraced globally accepted best practices that promote
transparency, fairness and accountability. These values are put into practice each day through a robust Corporate Governance Framework,
which provides a mechanism for prudent management and oversight of the business to adequately protect the interests of all stakeholders.
Best Practices for Corporate Governance
External (Voluntary) External (Statutory & Regulatory) Internal

yIntegrated Reporting Framework issued yCompanies Act No. 7 of 2007 yVision, Mission & Corporate Values
by the International Integrating Reporting yBanking Act No. 30 of 1988 and yMemorandum and Articles of Association
Council (IIRC) amendments thereto yRisk Management Framework
yGRI Standards for Sustainability reporting yAnti-Money Laundering Laws and yInternal Audit Framework
issued by the Global Reporting Initiative Regulations and Financial Transaction
yIT Governance Framework
yThe United Nations Sustainable Reporting Act
yCode of Conduct for Employees, Code of
Development Goals (SDGs) yBanking Act Direction No. 11 of 2007
Conduct and Governance Requirement for
on Corporate Governance for Licensed
Board of Directors
Commercial Banks
yWhistle Blowing Policy
yListing Rules of the Colombo Stock
yAnti-money Laundering Policy
Exchange
yProduct Policy
yCode of Best Practice on Corporate
Governance issued by the Institute of yCommunications Policy
Chartered Accountants of Sri Lanka and yPolicy on Managing Conflicts of Interest
the Securities and Exchange Commission
of Sri Lanka
yInland Revenue Act No. 10 of 2006 and
amendments thereto
yShop and Office Employees Act No. 19 of
1954 and amendments thereto
ySri Lanka Accounting and Auditing
Standards Act No. 15 of 1995
Sampath Bank PLC Corporate Governance Framework
Protect Stakeholder Rights
Shareholders Customers Employees Regulator Community

Right to demand Right to a progressive Right to an environment Right to demand full Right to benefit from
sustainable long-term banking atmosphere conducive for personal disclosure and statutory broader socio-economic
value and professional growth compliance development
Corporate Governance GRI 102-29
BOARD COMPOSITION
BOARD GENDER BALANCE

Chairman
Managing Director
3
Deputy Chairman
7
Senior Director Chairman BIRMC 1
BOARD OF DIRECTORS’ INDUSTRY/ BACKGROUND

Chairman BHRRC2 EXPERIENCE
Chairperson BRPTRC3
EXPERIENCE No. of
Chairperson BNC4 Directors
Banking 2
Chairman BAC5 Finance 2
Business & Management 5
HR Management 1
Law 2
Marketing 2
Engineering 2
Public Administration 3
Non Independent Director (NID) Independent Director (IND) An Individual Director may represent more than one discipline
BOARD BALANCE AGE GROUP WISE
9 Non Executive Directors 2 3 3 2

Total Directors
10
1 Executive Director
1 Board Integrated Risk Management Committee (BIRMC)

2 Board Human Resources and Remuneration Committee (BHRRC)
3 Board Related Party Transactions Review Committee (BRPTRC) 35-45 45-55 55-65 65-70
4 Board Nomination Committee (BNC)
5 Board Audit Committee (BAC)
Underpinning our Corporate Governance Framework are three key principles; Leadership, Accountability and Continuous Improvement.
LEADERSHIP ACCOUNTABILITY
The Board Board’s Responsibilities
The Board collectively provides effective leadership and The Board is responsible for providing leadership, oversight,
oversight to ensure that the Bank grows sustainably in the control, development and long-term success of the Bank.
long term in order to meet the interests of shareholders and all It is also responsible for instilling the appropriate culture,
other stakeholders. values and behaviour at all levels of operation.
Our Governance Structure establishes the fundamental In carrying out its duties, the Board is governed by the Banking
relationships between the Board, its sub committees, Act Direction No. 11 of 2007 issued by the Central Bank of
management, shareholders and other stakeholders. Sri Lanka, on Corporate Governance for Licensed Commercial
Banks and the Code of Conduct for Governance Requirements
for the Board of Directors, which sets out best practices for
ethical behaviour. The formal schedule of matters reserved for
consideration by the Board is disclosed below;
GRI 102-24
Governance Strategy and Direction Risk Management, CONTINUOUS IMPROVEMENT

Accountability and Control Continuous improvement remains the
cornerstone of our Corporate Governance
Review of governance Approval of strategy and Approval of financial Framework. It is how we keep abreast of
arrangements annual budgets statements, other updates to the best practices and ensure that our
market and recommendations policies and practices are constantly
on dividends evolving in tandem with the growing
needs of our business and those of our
Appointments to and Authorisation of Approval of authority levels, stakeholders.
removals from the Board acquisition and disposal financial and treasury policies
activity Efforts for 2017 focused on five key areas.
Detailed below are these areas along with
Terms of Reference for and Authorising Risk Review of internal control and the action taken during the year.
membership of Board Sub Management strategies risk management
Committees and determining risk Strengthening the overall Corporate
appetite limits Governance Framework
y Introduction of new guidelines for
Directors to conduct a self-evaluation
Appointment of External Approval of Health & Safety
of their contribution to the business
Auditors policies
during the year.
Appointment of Company Establishment of Disaster y Effecting further improvements to

Secretary Recovery Centres commence real time monitoring of
Related Party Transactions supported
by the new Finacle 10 core banking
system architecture.
Board Sub Committees y Conducting an independent

verification to identify possible
compliance gaps in the Bank’s existing
Corporate Governance Framework by
To enhance accountability of the Board and to ensure compliance with regulatory Internal Audit Department.
requirements, the Board has delegated certain matters to its Committees.
y Introduction of a performance
evaluation process of the
Management Committees, by their
To assist in managing key areas of the Bank, the Board has established 12 Board-level members.
committees and 12 Management-level committees. The Terms of Reference for each
Board Sub Committee is approved by the Board and reviewed and amended when Building a Risk Culture
necessary. y Review and redrafting of the
TOR of the Board Integrated Risk
Committee members are appointed by the Board and membership of each Board Sub Management Committee with
Committee is reviewed periodically, with due consideration on the mix of skills and provisions for establishing disciplinary
experience required to perform the functions of each Board Sub Committee. procedures to take action against
managers who fail to effectively
identify specific risks under their
purview
The reports of the five Mandatory Board Sub Committees are given in this Annual Report
Board Sub Committee Committee Report on Improving Compliance Mechanisms
page/s y Establishment of the DRI
Board Audit Committee (BAC) 167 to 169 (Disseminating Regulatory
Board Human Resources and Remuneration Committee (BHRRC) 170 to 171 Information) Committee to boost unit-
Board Nomination Committee (BNC) 172 level compliance
Board Integrated Risk Management Committee (BIRMC) 173 to 174
Board Related Party Transactions Review Committee (BRPTRC) 175
Board and Mandatory Board Sub Committee Attendance by Directors
Review Committee
Board Nomination
Risk Management
Party Transaction
Board Integrated
Board Meetings
Remuneration
Board Related
Classification
Board Audit
Board HR &
Committee
Committee
Committee
Committee
Directors
Mr Channa Palansuriya NED/NID 17/18 - 07/12 10/13 - -

Prof Malik Ranasinghe NED/IND 17/18 15/15 - - - 04/04
Mr Sanjiva Senanayake NED/IND 18/18 - - 13/13 07/07 04/04
Mr Deepal Sooriyaarachchi NED/IND 18/18 15/15 12/12 - 04/07 04/04
Mrs Dhara Wijayatilake NED/IND 18/18 14/15 12/12 12/13 - 04/04
Miss Annika Senanayake NED/IND 17/18 - 11/12 13/13 06/07 -
Mr Deshal De Mel 1
NED/NID 9/9 - 07/09 - - -
Mr Ranil Pathirana2 NED/IND 13/18 15/15 - - 00/02 -
Mrs Saumya Amarasekera NED/NID 17/18 - 09/12 13/13 06/07 -
Mr Rushanka Silva 3
NED/NID 6/6 - - - - -
Mr Nanda Fernando ED 17/17 - - - 06/07 01/01
Mr Ranjith Samaranayake4 ED 11/11 - - - 05/05 02/03
Total No. of Meetings 18 15 12 13 07 04
1 Resigned w.e.f. 01.07.2017

2 Served until 01.04.2017 in BIRMC
3 Appointed to the Board w.e.f. 01.09.2017
4 Retired w.e.f. 09.08.2017
Supporting IT Governance Priorities for the future

y Appointment of the Board IT y Strengthening the Bank’s Related
Committee Party Transactions Monitoring by
implementing an on-line monitoring
y Conducted training to create
system.
awareness among staff and
management regarding the y Considering the possibility of
importance of safeguarding against establishing a Board Sub Committee
Cyber Security threats on Corporate Governance.
Enhancing Stakeholder Relationships

y Compiled a social and environmental
procedure management manual NANDA FERNANDO
y Review and redrafting of the existing Managing Director
Communication Policy to incorporate
detailed guidelines for communicating Colombo, Sri Lanka
with each stakeholder category 15th February 2018
THE CODE OF BEST PRACTICE ON CORPORATE GOVERNANCE ISSUED JOINTLY BY THE SECURITIES AND EXCHANGE COMMISSION OF SRI
LANKA AND THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA
SEC & Principle, Compliance and Implementation Status
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A. DIRECTORS
A.1 THE BOARD
(1) A.1 Effective Board
The Board of Directors comprises Ten (10) Directors of whom Nine (09) are Non Executive Directors Complied
including the Chairman. The Executive Director is the Managing Director who is also part of the Corporate
Management to whom the day to day running of the organisation has been delegated. The Board has
appointed Board Sub Committees to assist in discharge of their collective duties and also approves
policies, governance structures and the delegation of authority to provide a conducive business
environment for effective performance of the Bank. The Board is closely involved in developing strategy
and setting the short, medium and long term goals of the Bank and regularly monitors performance
against pre-determined Key Performance Indicators (KPIs) which include both quantitative and
qualitative measures on a regular basis.
Attendance Percentage at Board Meeting During 2017
(%)
1. Mr Channa Palansuriya 17/18
100 2. Prof. Malik Ranasinghe 17/18
3. Mr Sanjiva Senanayake 18/18
80 4. Mr Deepal Sooriyaarachchi 18/18
5. Mrs Dhara Wijayatilake 18/18
60 6. Miss Annika Senanayake 17/18
7. Mr Deshal de Mel* 9/9
40 8. Mr Ranil Pathirana 13/18
9. Mrs Saumya Amarasekera 17/18
20 10. Mr Rushanka Silva** 6/6
11. Mr Nanda Fernando*** 17/17
100
100
100
100
100
100
100
94
94
94
72
94
0 12. Mr Ranjith Samaranayake**** 11/11

1 2 3 4 5 6 7 8 9 10 11 12
Meetings Attended Meetings Not Attended
* Resigned w.e.f 01.07.2017 ** Appointed to the Board w.e.f 01.09.2017
*** One of the meetings held on 28.09.2017 was only for Non Executive Directors **** Retired w.e.f 09.08.2017
(2) A.1.1 Regular Meetings

Board meetings are held monthly while special Board meetings are convened as the need arises. During Complied
2017 the Board held 18 scheduled meetings and 06 Strategic Planning Committee meetings. The
following Board Sub Committees met regularly during the year:
1 Board Audit Committee 7 Board Strategic Planning Committee

2 Board Human Resources & Remuneration Committee 8 Board Shareholder Relations Committee
3 Board Nomination Committee 9 Board Treasury Committee
4 Board Integrated Risk Management Committee 10 Board Marketing Committee
5 Board Related Party Transactions Review Committee 11 Board Capital Planning Committee
6 Board Credit Committee 12 Board IT Committee
The Board members use iPads to access Board papers via secure connections and are able to join
meetings even through remote access. Details of Board Meetings, Mandatory Board Sub Committee
Meetings and attendance are given on page 132 of this report.

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BOARD’S RESPONSIBILITIES: THE FOLLOWING PROCEDURES ARE CARRIED OUT TO STRENGTHEN THE
SAFETY AND SOUNDNESS OF THE BANK
(3) A.1.2 Ensure the Formulation and Implementation of Sound Business Strategy
The Board is responsible for setting strategy, policies and for monitoring performance against agreed Complied
goals and KPIs. During the year, the Board had 06 strategic planning sessions, where the Board reviewed
the progress of the Strategic Plan 2017 - 2019 and proposals of the Corporate Management and re-
aligned strategy and formulated and approved the medium term strategy for the period 2018 to 2020.
(4) A.1.2 Ensure that the Chief Executive Officer (CEO) /Managing Director (MD) and Management Team Possess
the Skills, Experience and Knowledge to Implement the Strategy
The Board Nomination Committee ensures that the Board Members and Key Management Personnel Complied
(KMPs) have the required skills, experience and knowledge to implement strategy.
(5) A.1.2 Ensure Effective CEO/MD and Senior Management Succession Strategy
A Board approved Procedure on Selection and Appointment of CEO and KMPs is in place. Complied
(6) A.1.2 Ensure Effective Systems to Secure Integrity of Information, Internal Controls and Risk Management
Board Audit Committee reviews Internal Audit reports submitted by the Internal Audit Department and Complied
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. A
descriptive account of the measures taken in this regard is contained in the Board Audit Committee
Report given on pages 167 to 169.
(7) A.1.2 Ensure Compliance with Laws, Regulations and Ethical Standards
An independent Compliance function headed by the Group Compliance Officer reporting directly to Complied
the Board Integrated Risk Management Committee, which has responsibility for compliance, has been
established.
(8) A.1.2 Ensure all Stakeholder Interests are Considered in Corporate Decisions
The Articles of Association of the Bank requires the Directors to take decisions, taking into account the Complied
interests of customers, shareholders, employees and the community. Additionally, the Customer Charter,
the Board Shareholder Relations Committee, HR Policy, the Policy on Managing Conflicts of Interest
as well as the Board Related Party Transactions Review Committee are in place in order to uphold the
interests of these key stakeholders.
(9) A.1.2 Ensure that the Company’s Values and Standards are set with Emphasis on Adopting Appropriate
Accounting Policies and Fostering Compliance with Financial Regulations
The Board Audit Committee and the Board review accounting policies annually or as and when required Complied
to ensure that they are in line with the business model of the Bank and evolving international and local
accounting standards and industry best practices.
(10) A.1.2 Fulfill such other Board Functions as are vital, given the scale, nature and complexity of the business
concerned
The Board is committed to fulfill its functions in line with the laws, regulations and good governance Complied
practices adopted by the Bank.
GRI 102-27

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(11) A.1.3 Act in Accordance with Laws Relevant to the Organisation and Procedure for Directors to Obtain
Independent Professional Advice at Company Expense
The Board has put in place, a framework of policies, procedures and a risk management framework to Complied
ensure compliance with relevant laws, CBSL guidelines and international best practices with regard to
the operations of the Bank. The Board obtains independent professional advice as and when necessary
in accordance with the Board approved Policy on Obtaining Independent Professional Advice and these
functions are coordinated through the Company Secretary. Independent professional advisory services
were sought on matters including the implementation of Cyber Security, SLFRS 9, Industrial Relations
and projected economic conditions stemming from the Budget Proposals during the year.
(12) A.1.4 Access to and Appointment or Removal of Company Secretary

All Directors have the opportunity to obtain the advice and services of the Company Secretary, Mrs Anuja Complied
Goonetilleke, who is an Attorney-at-Law. She is responsible for ensuring follow up of Board procedures,
compliance with relevant rules and regulations, directions and statutes, keeping and maintaining
minutes and relevant records of the Bank.
The Articles of Association of the Bank specify that the appointment and removal of the Company
Secretary should be by resolution involving the entire Board. The procedure to select and appoint Chief
Executive Officer and Key Management Personnel too support the discretionary power of the Board of
Directors to appoint the Company Secretary.
(13) A.1.5 Independent Judgement

The Directors of the Bank have no vested interest and take decisions on matters before them using Complied
independent judgement. The Bank’s policy on managing Conflicts of Interest, the review of relevant
transaction by the Board Related Party Transaction Review Committee and adherence to the provisions
of Section 47 of Banking Act No. 30 of 1988 further ensure this.
(14) A.1.6 Dedicate Adequate Time and Effort to Matters of the Board and the Company
Dates of regular Board meetings and regular Board Sub Committee meetings are scheduled well in Complied
advance and the relevant papers are circulated generally seven days prior to the meeting. There is
provision to circulate papers closer to the meeting on an exceptional basis.
It is estimated that Non Executive Directors dedicated not less than 90 hours during the year under
review for the affairs of the Bank and those Directors who are also members of Board Sub Committees
dedicated not less than 182.5 hours for the affairs of the Bank. The attendance at meetings for the Board
and its Sub Committees is given in page 132.
(15) A.1.7 Training for Directors

The Company Secretary in consultation with the Chairman recommends Directors to attend training Complied
sessions/seminars. During 2017 the following areas were covered
yCyber Security
yState of the economy and future outlook
yFamiliarisation and gap analysis on key new accounting standards to be implemented in the near
future (SLFRS 9)
Additionally, the Board encourages knowledge sharing among the Directors. They also participate in the
sessions organised by professional bodies and Sri Lanka Institute of Directors. One Director participated
in the Annual Corporate Governance & Directors’ Duties Excellence 2017 held in Paris. The annual self-
assessment by Directors also covers aspects on training to identify training needs.

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A.2 DIVISION OF RESPONSIBILITIES BETWEEN CHAIRMAN AND MD

(16) A.2 Conducting the business of the Board separately; to the executive responsibilities of the Management of
the Company
The positions of the Chairman and the MD have been separated in line with best practices in order to Complied
maintain a balance of power and authority. The Chairman is a Non Executive Director while the MD is an
Executive Director.
A.3 CHAIRMAN’S ROLE

(17) A.3 Chairman’s Role in preserving good Corporate Governance
The Chairman’s functions and responsibilities which include all aspects specified in the Code, the Complied
continuing listing requirements of the CSE and the Banking Act Direction No. 11 of 2007 on Corporate
Governance for Licensed Commercial Banks in Sri Lanka have been documented and duly approved by
the Board.
(18) A.3 Conduct Board proceedings in a proper manner

Board proceedings are conducted according to the Agenda. The papers for discussion and the Agenda Complied
are circulated seven days prior to the meeting.
(19) A.4 Availability of Financial Acumen and Knowledge to offer guidance on matters of finance
Financial acumen has been a key attribute of the successful careers of the following Directors who have Complied
held senior management positions related to finance in other leading financial institutions:
yMr Sanjiva Senanayake
yMr Deepal Sooriyaarachchi
yMr Ranil Pathirana
yMr Rushanka Silva
yMr Ranjith Samaranayake (retired w.e.f. 09.08.2017)

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A.5 BOARD BALANCE

(20) A.5.1 & Non Executive Directors of sufficient calibre and number
A.5.2
The Board comprises the nine Non Executive Directors including the Chairman and one Executive Director Complied
who is the CEO/MD. The Non Executive Directors are professionals/academics/business leaders, holding
senior positions in their respective fields and are therefore deemed to be of sufficient and appropriate
calibre. As the majority of the Board comprises Non Executive Directors, their opinions and views carry
significant weight in the Board decisions.
Mr Sanjiva Senanayake has served in key managerial positions in several local and foreign banks
including the International Finance Corporation. One Director holds a Doctorate in Civil Engineering
Economics. Six Directors, including the MD, hold Masters Degrees in Business Administration,
Science (Engineering) and Law respectively. Two members hold Bachelor’s degrees in Law and Art
(Management). One Director is a Fellow Member and another is an Associate Member of the Chartered
Institute of Management Accountants - UK, while the Director who resigned on 01.07.2017 possessed
a Masters’ Degree in Science (International Political Economics) and the Director who retired w.e.f.
09.08.2017 possessed a Bachelor’s Degree in Commerce (Accounting Special).
Executive Directors &

Non Executive Directors
Non Executive Directors

Executive Directors

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(21) A.5.3 Independence of Non Executive Directors

Six (06) of the Non Executive Directors are independent of management and free of any business or Complied
other relationship that could materially interfere with or could reasonably be perceived to materially
interfere with the exercise of their unfettered and independent judgement.
Independent Directors &

Non Independent Directors
Independent Directors
Non Independent Directors
(22) A.5.4 Annual Declarations of Independence from Directors

Annual declarations of independence or non-independence have been obtained from the Independent Complied
Directors for 2017.
(23) A.5.5 Annual Evaluation of Independence

The Board makes an annual evaluation of independence of the Directors based on the submission of the Complied
annual declarations. Based on these, the following Directors are deemed to be independent:
yProf Malik Ranasinghe
yMr Deepal Sooriyaarachchi
yMrs Dhara Wijayatilake
yMiss Annika Senanayake
yMr Ranil Pathirana
There were no Directors deemed Independent where all criteria were not met.
(24) A.5.6 & Senior Independent Director

A.5.7
Mr Sanjiva Senanayake has been appointed as Senior Independent Director (SID) in view of the Complied
requirements of the Banking Act Direction No. 11 of 2007.
(25) A.5.8 Senior Independent Director (SID) meeting with other Directors Complied
A meeting of the Directors was held with the SID during the year.
(26) A.5.9 Chairman to hold meetings with Non Executive Directors, without Executive Directors being present Complied
Chairman held one meeting with the Non Executive Directors without the Executive Director being
present during the year 2017.
GRI 102-24

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(27) A.5.10 Recording of Directors’ concerns in Board Minutes

Board Minutes are prepared in order to record any concerns of the Board as a whole or those of individual Complied
Directors regarding matters placed for their approval/ guidance/ action. These Minutes are circulated
and formally approved at the subsequent Board meeting, Additionally, Directors have access to the past
Board papers and minutes in case of need at all times, either through the secure link via iPads or through
the Company Secretary.
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. During the year 2017, there was no occasion to take such steps.
A.6 SUPPLY OF RELEVANT INFORMATION

(28) A.6.1 Provision of appropriate and timely information
The management provides comprehensive information including both quantitative and qualitative Complied
information for the monthly Board Meetings, generally seven 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) A.6.1 Chairman to ensure all Directors are properly briefed on issues arising at Board Meetings
All Directors are adequately briefed on matters arising at Board meetings through comprehensive Complied
Board papers. Additionally, the relevant members of the Management team are on standby for further
clarifications as may be required by Directors or will make presentations at Board meetings.
Any Director who does not attend a meeting is updated on proceedings prior to the next meeting
through:
yFormally documented minutes of meetings.
yA separate Board paper prepared highlighting the items which need to be completed and need follow-
up action of the previous meetings. (This is taken up immediately after confirmation of minutes.)
yArchived minutes and Board papers accessible electronically at the convenience of the Directors.
Non Executive Directors have an open invitation to attend the meetings of the Management Committees
and have the opportunity to interact with senior management after Board Meetings.
(30) A.6.2 Board Papers and Agenda to be circulated seven days prior to meetings
As described above, Board papers are generally circulated seven days before the meeting. There is Complied
provision for circulation of urgent papers and or papers on highly sensitive matters within a shorter
notice and also for approval of matters by circulation, but such instances are the exception and not the
rule.
A.7 APPOINTMENTS TO THE BOARD

(31) A.7.1 Formal and transparent procedure for new appointments through an established Nomination Committee
The Board has established a Board Nomination Committee whose Terms of Reference comply with the Complied
Specimen given in the Code and the Banking Act Direction on Corporate Governance. Membership of this
important Board Sub Committee is given on page 172 of the Annual Report. Accordingly, new Directors
(Executive and Non Executive) are appointed by the Board upon consideration of recommendations
by the Board Nomination Committee. To support this process a Board approved Policy on Selection,
Nomination, Appointment and Election of Directors is in place.

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(32) A.7.2 Annually assess Board composition

The Board annually assesses its composition to ascertain whether the combined knowledge and Complied
experience of the Board match the strategic demands facing the Bank and is satisfied that it complies
with the criteria and has taken steps to satisfy itself on same.
(33) A.7.3 Disclosure of information to Shareholders upon appointment of New Directors

All new appointments are communicated to the shareholders via the Colombo Stock Exchange in the Complied
English language. The profiles of the current Directors are given on pages 16 to 21 in this Annual Report
which has been translated into Sinhala as well, in keeping with the tradition of the Bank.
A.8 RE-ELECTION
(34) A.8 All Directors should submit themselves for re-election at regular intervals Complied
As per the Articles of Association of the Bank, 1/3rd of the Directors retire at each Annual General
Meeting subject to re-election. Such Directors who retire are those who held office for the longest time
period since their election/re-appointment. In accordance with this provision, the following Directors
retire and offer themselves for re-election at the Annual General Meeting:
yMrs Saumya Amarasekera
yMr Channa Palansuriya
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.
(35) A.8.1 Non Executive Directors are appointed for specified terms subject to re-election
Non Executive Directors are appointed with approval of the Central Bank of Sri Lanka (CBSL) and stand Complied
for election at the immediately succeeding Annual General Meetings in terms of Articles of Association of
the Company.
Mr Rushanka Silva, having been appointed to the Board during the year under review to fill up a casual
vacancy, offers himself for election by shareholders at the Annual General Meeting in accordance with
Article 93 of the Articles of Association of the Company.
(36) A.8.2 All Directors including Chairman to be subject to re-election at first opportunity after appointment and
re-election at least every three years thereafter
All Non Executive Directors stand for re-election at Annual General Meetings as described in response to Complied
A.8 above.
A.9 APPRAISAL OF BOARD PERFORMANCE

(37) A.9.1 Appraisal of Board Performance
The Board annually appraises its own performance to ensure that it is discharging its responsibilities Complied
satisfactorily. This process requires each Director to fill a Board Performance Evaluation Form in line with
the provisions of the relevant section of the Code. The responses are reviewed by the Company Secretary
who compiles a report which is submitted for discussion at a Board Meeting.
GRI 102-35,36

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(38) A.9.2 Appraisal of Board Sub Committees

The Board Sub Committees follow the same process and the reports are retained by the Company Complied
Secretary.
(39) A.9.3 Disclosure of the method of appraisal of the Board and Board Sub Committee performance
As explained in A.9.1 & A.9.2 above. Complied
A.10 DISCLOSURE OF INFORMATION IN RESPECT OF DIRECTORS

(40) A.10.1 Annual Report to disclose specified information regarding Directors
Information specified in the Code with regard to Directors are disclosed within this Annual Report as
follows:
yName, qualifications, expertise, material business interests and brief profiles are given on pages 16 to Complied
21
yDetails of whether a Director is Executive, Non Executive / or Independent, Non Independent are given Complied
on pages 16 to 21
yRelated Party Transactions are given on pages 285 to 289 Complied
yMembership of Board Mandatory Sub Committees is given on pages 167 to 175 and attendance at Complied
Board Meetings and Board Sub Committee meetings are given on page 132.
A.11 APPRAISAL OF CHIEF EXECUTIVE OFFICER / MANAGING DIRECTOR

(41) A.11.1 Set reasonable financial and non-financial targets to be met by the CEO/MD
The Board discussed and set financial and non-financial targets to be achieved during the year by the MD Complied
with reference to the short, medium and long term objectives of the Bank at the beginning of 2017. The
targets for 2018 were also set at the end of 2017.
(42) A.11.2 Evaluate performance of the CEO/MD with reference to targets

The performance evaluation of the Managing Director for 2016 was carried out by the Board HR & Complied
Remuneration Committee during the first quarter of 2017 with reference to targets and goals achieved
by the Bank which was reported to the Board. The performance evaluation of the Managing Director for
2017 will be carried out during the first quarter of 2018.
B. DIRECTORS’ REMUNERATION
B.1 REMUNERATION PROCEDURE
(43) B.1.1 Appointment of a Remuneration Committee
The Board has established a Board HR & Remuneration Committee to develop policies and determine Complied
remuneration for the Directors and KMPs respectively. No Director is involved in deciding his own
remuneration. The Terms of Reference of this Committee complies with Schedule C of the Code and
other investor guidelines.
In support of this requirement, a Board approved Reward Management Policy for Key Management
Personnel, as well as Board approved Directors’ Remuneration Policy are in place.
Further information regarding the Board HR & Remuneration Committee is given in the Board HR & Complied
Remuneration Committee Report on pages 170 & 171.

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(44) B.1.2 & Remuneration Committee to comprise exclusively Non Executive Directors
B.1.3
The Board HR & Remuneration Committee comprises the following Directors all of whom are Non Complied
Executive Directors.
yMr Deepal Sooriyaarachchi (Chairman)
yMr Channa Palansuriya
yMrs Dhara Wijayatilake
yMr Deshal De Mel ( who served on the Board until 01.07.2017)
yMrs Saumya Amarasekera
(45) B.1.4 Remuneration for Non Executive Directors

Remuneration of Non Executive Directors is recommended by the Board HR & Remuneration Complied
Committee for approval of the Board in line with market practice. A Board approved Policy on Directors’
Remuneration is in place.
(46) B.1.5 Remuneration of Executive Directors

Remuneration of Executive Directors is determined by the Board HR & Remuneration Committee who has Complied
access to professional advice from within or outside the Company in formulating their proposals which
are then discussed with the Chairman. A Reward Management Policy for KMPs (which includes Executive
Directors] approved by the Board is in place.
B.2 THE LEVEL AND MAKE UP OF REMUNERATION

(47) B.2.1 & Remuneration for Executive Directors should attract, retain and motivate
B.2.2
Remuneration for Executive Directors is designed to attract, retain and motivate the Executive Directors Complied
as determined by the Board HR & Remuneration Committee. Their remuneration comprises a fixed salary
component, which includes perquisites and allowances. The Board HR & Remuneration Committee takes
into account market practices and seeks professional advice when required in order to discharge its
responsibilities.
(48) B.2.3 Positioning Company remuneration levels relative to other companies

The Board HR & Remuneration Committee reviews the Bank’s remuneration levels in relation to Complied
other banks in the country annually. A salary survey of specific job positions held by the Corporate
Management followed by determination of salaries of the relevant job holders was done during the year
under review.
(49) B.2.4 Performance related elements of remuneration for Executive Directors

A performance related element of remuneration for Executive Directors has been implemented. Complied
(50) B.2.5 Share option schemes

No share option scheme was implemented or introduced during 2017. Complied
(51) B.2.6 Designing schemes of performance related remuneration

A scheme of team based performance related remuneration has been in force in the Bank since 2016. Complied

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(52) B.2.7 Early termination of employment of Directors

Not applicable to the Board except for the MD who is an employee of the Bank and his terms of Complied
employment are governed by the relevant contract of service.
(53) B.2.8 Dealing with early termination

As stated in B.2.7 above. Complied
(54) B.2.9 Levels of remuneration for Non Executive Directors

The Board HR & Remuneration Committee determines the levels of remuneration for Non Executive Complied
Directors taking into account the time commitment and responsibilities of their role and market
practices. Remuneration for Non Executive Directors does not include share options. A Board approved
policy on Directors’ Remuneration is in place.
B.3 DISCLOSURE OF REMUNERATION

(55) B.3.1 Composition of Board HR & Remuneration Committee, Remuneration Policy and Disclosure of Aggregate
Remuneration Paid to Directors
The composition of the Board HR & Remuneration Committee and its report is given on pages 170 & 171. Complied
The aggregate remuneration to Executive and Non Executive Directors are given in Note No. 49.3.1 to the Complied
Financial Statements on page 286.
Names of the Directors of the Board HR & Remuneration Committee are disclosed on pages 170 & 171 in Complied
this Annual Report.
C. RELATIONS WITH SHAREHOLDERS

C.1 CONSTRUCTIVE USE OF THE ANNUAL GENERAL MEETING (AGM) AND CONDUCT OF GENERAL MEETINGS
(56) C.1.1 Constructive use of the AGM & other general meetings
The Annual General Meeting is the main forum of contact between small shareholders and the Board. A Complied
separate Sub Committee of the Board, 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. In addition,
the Committee met thrice in order to follow up on the proposals submitted by shareholders at the
Shareholders’ forum in 2017, and from time to time.
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 a diverse group of shareholders. Additionally, the Chairman’s
and MD’s messages are translated into Tamil as well each year.
(57) C.1.2 Count of all proxy votes lodged

All proxy votes lodged, together with the votes of shareholders present at the AGM are considered for Complied
each resolution.
(58) C.1.3 Separate resolutions for each substantially separate Issue

A separate resolution is proposed at the AGM for each substantially separate issue. The adoption of the Complied
report and accounts is proposed as a separate resolution.
(59) C.1.4 Availability of Board Sub Committee Chairperson at AGM

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

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(60) C.1.5 Circulation of Notice of AGM and related documents to Shareholders

Notice of the AGM and related papers are sent to shareholders at least 15 working days prior to the Complied
meeting in accordance with the regulations.
(61) C.1.6 Summary of procedures governing voting at the AGM

A summary of the procedures governing voting at the AGM is provided in the Proxy Form, which is Complied
circulated to shareholders 15 working days prior to the AGM.
C.2 COMMUNICATION WITH SHAREHOLDERS

(62) C.2.1 Channel to reach all Shareholders of the Bank
The Board has appointed a Sub Committee on Shareholder Relations tasked with identifying and Complied
addressing the shareholders’ concerns. It is the first listed company in Sri Lanka boasting 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 MD’s messages are translated into Tamil
as well to facilitate further 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) C.2.2 Policy and methodology for communication with Shareholders

The Bank provides fair disclosures with emphasis on the integrity, accuracy, timeliness and relevance of Complied
the information provided. A Board approved Policy on Communication is in place, in which communication
with shareholders are specifically addressed.
(64) C.2.3 Implementation of the policy and methodology for communication with Shareholders
Shareholders are consulted on their preference to receive the Annual Report from the Bank either by Complied
means of a compact disk or in printed form. Shareholders may elect to receive the Annual Report from
the Bank in printed either in English or in Sinhala form free of charge at any time.
Interim Reports are published in all three languages (English, Sinhala and Tamil) in leading newspapers Complied
within 60 days of the quarter end.
(65) C.2.4 & Contact person in relation to Shareholder matters

C.2.6
Shareholders may, at any time, direct questions to and request for publicly available information from Complied
the Directors or management of the Bank. They may also provide their comments and suggestions to the
Directors or management through the Company Secretary.
(66) C.2.5 Process to make all Directors aware of major issues and concerns of Shareholders
The Company Secretary maintains a record of all correspondences received. She directs as soon as Complied
practicable such correspondence to the Board, individual Directors or the relevant officers as applicable.
(67) C.2.7 Process of responding to Shareholder matters

Please refer C.2.5 above. Complied

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C.3 MAJOR AND MATERIAL TRANSACTIONS

(68) C.3.1 Disclosure of major transactions
During the year 2017, the Bank did not engage in or commit any “Major Transaction” which materially Complied
affected the Bank’s net asset base. If the Bank enters into a Major Transaction, the same would be duly
disclosed, as required by regulators.
D. ACCOUNTABILITY AND AUDIT

(69) D.1 PRESENCE OF A BALANCED AND UNDERSTANDABLE ASSESSMENT OF THE BANK’S FINANCIAL POSITION,
PERFORMANCE AND PROSPECTS
The Bank’s position and prospects have been discussed in detail in the following sections of this Annual Complied
Report.
yChairman’s Message is given on pages 32 to 35.
yManaging Director’s Review is given on pages 36 to 40.
yManagement Discussion and Analysis are given on pages 53 to 115.
(70) D.1.1 Interim reports, price-sensitive public reports, regulatory reports and statutory information Complied
requirements
Interim reports were published within 45 days of each quarter end which included information to assist
shareholders gain an understanding of the state of affairs of the Bank.
Price sensitive information was disclosed in a comprehensive but concise manner to the Colombo Stock
Exchange on a timely basis.
Reports required by the regulators including Central Bank of Sri Lanka, Department of Inland Revenue,
Registrar of Companies, Colombo Stock Exchange were all filed in a timely manner in compliance with
the relevant requirements and these provided sufficient information for the user to obtain a balanced
assessment of the Bank`s operations.
(71) D.1.2 Declaration in Annual Report of the Board of Directors on the Affairs of the Company
The Annual Report of the Board of Directors on the Affairs of the Company on pages 179 to 188 contains Complied
the declarations as required by the Code.
(72) D.1.3 Responsibilities of the Board for the preparation and presentation of Financial Statements and
Statement by the Auditors about their reporting responsibilities
The Statement of Directors’ Responsibility for Financial Reporting and Report of the Auditors which Complied
includes a statement about their reporting responsibilities are provided on pages 193 & 194, and 195
respectively.

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(73) D.1.4 Include a Management Discussion & Analysis

The Management Discussion and Analysis contained in pages 53 to 115 covers the information specified Complied
in the Code as given below;
yIndustry structure and developments
yOpportunities and threats
yRisks and concerns
yInternal control systems and their adequacy
ySocial and environmental protection activities carried out by the Company
yFinancial performance
yMaterial developments in human resource/industrial relations and prospects for the future.
(74) D.1.5 Declaration of the Directors that the business is a Going Concern
This information is provided in the Annual Report of the Board of Directors on the Affairs of the Company Complied
given on pages 179 to 188.
(75) D.1.6 Notify Shareholders in case Net Assets of the Bank fall below 50%
This situation did not arise during the year under review. However, had the need arisen, the Bank would Complied
have duly notified the shareholders.
(76) D.1.7 Related Party Transactions

There is an approved documented process providing for identifying related parties, type of related party Complied
transactions and the mechanism to ensure that no favourable treatment is granted to said parties in
order to prevent the Bank from granting favourable treatment to Related Parties. Further, to prevent any
conflict of interest in this regard, a Board approved Policy on Managing Conflicts of Interest is in place, An
effective and comprehensive system of Internal Control for identifying, recording and disclosing related
party transactions too is in place.
A directive has been issued, explaining the procedure to be followed in granting accommodation to
Directors or to close relations of Directors, such accommodation requiring 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 condition 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 to the Bank on a quarterly and
annual basis.
All Related Party Transactions as defined in Sri Lanka Accounting Standards - LKAS 24 (Related Party
Transactions) are disclosed in Note No. 49 to the Financial Statements on pages 285 to 289.
D.2 INTERNAL CONTROL

(77) D.2.1 Maintain a sound system of internal control to safeguard Shareholders’ investments and the Bank’s
assets
The Board is responsible for formulating and implementing appropriate and adequate Internal Control Complied
Systems. The Board Audit Committee has responsibility to the Board to ensure that the system of
Internal Controls is sufficient and effective.

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(78) D.2.2 Need for review of Internal Audit function

The Bank has established an Internal Audit function over which Board Audit Committee has oversight. Complied
The Board Audit Committee reviews the Internal Audit function at regular intervals
D.3 AUDIT COMMITTEE

(79) D.3 Establish arrangements for selection and application of Accounting Policies, Financial Reporting and
Internal Control Principles
The Bank has established its Board Audit Committee in keeping with good governance since 1997. Complied
The principal responsibilities of the Board Audit Committee include oversight over Financial Reporting,
Internal Controls and monitoring Auditor Independence. Its duties include gaining assurance on control
over financial processes, integrity of the Bank’s financial reports, monitoring performance, objectivity and
independence of the External Auditors and reviewing work of the internal Audit function. The Board Audit
Committee Report is given on pages 167 to 169 in the Annual Report.
(80) D.3.1 Composition and Terms of Reference for Board Audit Committee
The Board Audit Committee consists of Non Executive Directors and is chaired by an Independent Non Complied
Executive Director. Members are selected to provide a broad set of financial, commercial and other
relevant experience to meet the Committee’s objectives. The MD, Group Chief Financial Officer, Chief
Internal Auditor or Chief Manager - Systems Audit and representatives of the External Auditors are invited
to attend the meetings. The Board Audit Committee has an external consultant to advice the Committee,
who attends the meetings on invitation.
(81) D.3.2 Review of External Audit function and relationship with External Auditors
The Committee has a key oversight role in relation to the External Auditors Messrs. Ernst & Young, whose Complied
primary relationship is with the Committee. The Bank’s Auditor Independence Policy ensures that the
independence and objectivity of the External Auditors is not impaired. The Committee has responsibility
for recommending to the Board, the appointment / re-appointment of the External Auditors and
reviewing the nature, scope and results of the annual External Audit. The audit fee is determined by the
Board Audit Committee which also assesses the effectiveness and the independence of the External
Auditors.
(82) D.3.3 Terms of Reference

The Terms of Reference of the Board Audit Committee complies with the Code of Best Practice on Complied
Corporate Governance issued by the SEC and CASL. 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. This document is available with the Company
Secretary.
(83) D.3.4 Disclosures regarding Board Audit Committee

The Annual Report of the Board of Directors on the Affairs of the Company given on pages 179 to 188 Complied
provides the following disclosures:
yThe composition of the Board Audit Committee
yA statement regarding the independence of the Auditors
D.4 CODE OF BUSINESS CONDUCT AND ETHICS

(84) D.4.1 Code of Business Conduct and Ethics for Directors and Staff
Codes of Conduct and Ethics are in place for the Directors and employees. Complied

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D.5 CORPORATE GOVERNANCE DISCLOSURES

(85) D.5.1 Corporate Governance Report
The Corporate Governance Report given on pages 127 to 166 provides information regarding Corporate
Governance practices in the Bank which are in compliance with:
yThe Code of Best Practice on Corporate Governance issued jointly by the Securities Exchange Complied
Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka
yThe Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks
issued by the CBSL
E. SHAREHOLDERS – INSTITUTIONAL INVESTORS

E.1 SHAREHOLDER VOTING
(86) E.1 Encourage voting at AGM
The Bank has a history of active shareholder involvement and participation at general meetings and all Complied
shareholders are regularly encouraged to state their intentions to vote and translate it into practice.
(87) E.1.1 Regular structured dialogues with institutional investors

The MD has regular structured meetings with institutional shareholders. Board members are briefed Complied
about the matters discussed at such meetings.
E.2 EVALUATION OF GOVERNANCE DISCLOSURES

(88) E.2 Encourage institutional investors to give due weight to relevant governance arrangements
Institutional investors are kept apprised of the Bank’s governance practices through the Annual Report Complied
and any new initiatives are highlighted at regular meetings to ensure that due weightage is given to good
corporate governance.
F. SHAREHOLDER RELATIONS – INDIVIDUAL SHAREHOLDERS

F.1 INVESTING / DIVESTING DECISION
(89) F.1 Individual Shareholders are encouraged to do their own analysis or seek independent advice
The Annual Report contains sufficient information for potential investors to carry out their own analysis. Complied
The Annual Report is published in both English and Sinhala to facilitate better comprehension of retail
investors. This, together with the interim financial statements provided each quarter, provide sufficient
information to enable retail investors to make informed judgements regarding the performance of the
Bank.
Additionally, a separate part of the company website is dedicated to Investor Relations which provides
relevant information online to all investors.
Shareholders can contact the Company Secretary for further information if required.
F.2 SHAREHOLDER VOTING

(90) F.2 Encourage Shareholders to participate and vote at the AGM
It is a tradition at Sampath Bank to encourage retail investors to participate and vote at the AGM. Complied
Additionally, they are encouraged to participate in the Bank’s affairs through submitting proposals
through Stakeholder Feedback Forms, and Shareholder Relation Forums.

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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 recognizing, 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) G.1.1 Economic Sustainability

Please refer pages 196 to 333. Complied
(92) G.1.2 The Environment

(93) G.1.3 Labour Practice

(94) G.1.4 Society

(95) G.1.5 Product and Service Responsibility

(96) G.1.6 Stakeholder Identification, Engagement and Effective Communication

(97) G.1.7 Sustainable Reporting and Disclosure

Corporate Governance GRI 102-16, 33
THE BANKING ACT DIRECTION NO. 11 OF 2007 AND SUBSEQUENT AMENDMENTS THERETO ON CORPORATE GOVERNANCE FOR LICENSED
COMMERCIAL BANKS IN SRI LANKA ISSUED BY THE CENTRAL BANK OF SRI LANKA (CBSL)
CBSL Principle, Compliance and Implementation Status
Section
3(1) Responsibilities of the Board
The Board has strengthened the safety and the soundness of the Bank in the following manner.
(1) 3(1)(i)(a) Setting strategic objectives and corporate values

The Bank’s strategic objectives and corporate values are determined by the Board and are given on Complied
pages 50, 51 & 12 in the Annual Report. These are communicated to all levels of staff through regular
briefing sessions and reinforced by the Corporate Management Team.
(2) 3(1)(i)(b) Overall business strategy including risk policy and management
The Bank’s strategy is set by the Board in consultation with the Corporate Management and the Complied
Strategic Plan for the period 2018 - 2020 has been approved by the Board. Risk 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 on a monthly basis.
(3) 3(1)(i)(c) Risk Management

The Board has appointed a Board Integrated Risk Management Committee tasked with approving the Complied
Bank’s Risk Policy, defining the risk appetite, identifying principal risks, setting governance structures
and implementing systems to measure, monitor and manage the principal risks. The following reports
provide further insights in this regard.
y Risk Management Report on pages 118 to 125.

y Board Integrated Risk Management Committee Report on pages 173 to 174.
A mechanism/process to identify and mitigate the risks arising out of new strategies are in place at
Board level.
(4) 3(1)(i)(d) Communication with all stakeholders

A Board approved Communication Policy is in place providing for communication with all Complied
stakeholders, including depositors, creditors, shareholders and borrowers.
The Board has approved and implemented the following communication channels:
yShareholders - The Board has appointed a Sub Committee on Shareholder Relations tasked with
identifying and addressing the shareholders’ concerns. It is the first listed company in Sri Lanka
to have such a Committee. This Committee conducts an annual Shareholder Relations Forum to
identify shareholder concerns. Additionally, the AGM is also a key forum to contact 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 extended communication with
shareholders.
yCustomers - Customers include depositors, creditors and borrowers. The Bank has a Board
approved Customer Complaints Handling Policy. The Customer Complaint Handling Procedure
has been printed in all three languages and disseminated to all customer contact points of the
Bank. This document outlines the Customer Complaints Handling procedure of the Bank, provides
relevant information on contact details of the Bank for this purpose and also of the Financial
Ombudsman. A 24 hour trilingual customer hotline to support customer queries has been
established and reports of complaints are reviewed by the relevant Board Sub Committees.
yStaff – Staff members are given access to the management to voice their concerns through the
Whistle Blowing Policy and the Grievance Handling Procedure.
GRI 102-25, 31

Section
(5a) 3(1)(i)(e) Internal Control System
The Board is tasked with reviewing the adequacy and the integrity of the Bank’s internal control Complied
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.
(5b) 3(1)(i)(e) Management Information Systems

The Bank has established a valid process to review the adequacy and accuracy of all financial and Complied
non-financial information. This process was further improved during 2017.
(6) 3(1)(i)(f) Key Management Personnel

The Board has identified members of the Corporate Management, Group Compliance Officer and Complied
the Exchange Control Compliance Officer as Key Management Personnel being “Officers Performing
Executive Functions of Licensed Commercial Banks (LCB)” as required by CBSL Guideline dated 2nd
December 2015 and the letter dated 17th June 2013 issued by the Controller of Exchange - CBSL
respectively. All appointments of designated Key Management Personnel (KMPs) are recommended
by the Board Nomination Committee and approved by the Board.
(7) 3(1)(i)(g) Define areas of authority and key responsibilities for Directors and Key Management Personnel
Areas of authority and key responsibilities have been defined for Directors and KMPs through Code of Complied
conduct and Governance Requirement for Directors and the relevant Position Description of the KMPs
respectively.
(8) 3(1)(i)(h) Oversight of affairs of the Bank by Key Management Personnel

KMPs make regular presentations to the Board on matters under their respective purviews and are Complied
regularly called in by the Board to explain matters relating to their areas when need arises.
(9) 3(1)(i)(i) Assesses effectiveness of own governance practices including selection and nomination of Directors
and KMPs, management of conflict of interest and determination of weaknesses
Selection, nomination and election of Directors are made by the Board Nomination Committee based Complied
on their field of expertise in accordance with the Board approved Procedure. Directors’ interests
are disclosed to the Board at the commencement of every meeting. A Director who has a particular
interest abstains from voting in such a situation and he/she is not counted in the quorum.
A Policy on Managing Conflicts of Interest is in place. Complied
The Board appraises its own performance though each Director completing the Self Evaluation Form Complied
in relation to business strategy and contributions of the members based on their field of expertise.
The responses are collated by the Company Secretary and submitted to the Board for review. Matters
of concern are brought to the attention of the Board by the Company Secretary.
(10) 3(1)(i)(j) Succession plan for Key Management Personnel

The structure of the Bank which was recommended by the Board Nomination Committee has been Complied
approved by the Board in principle. The succession plan is implemented based on the Board approved
Procedure for same.
(11) 3(1)(i)(k) Regular meetings with Key Management Personnel

KMPs are called on need basis for discussions at the meetings of the Board and its Sub Committees Complied
to review policy and other matters relating to their areas. Progress towards corporate objectives is a
regular agenda item in the Board and the KMPs are regularly involved in Board level discussions on
the same.

Section
(12) 3(1)(i)(l) Regulatory environment and maintaining an effective relationship with regulator
Directors are briefed about developments in the regulatory environment at Board Meetings to ensure Complied
that their knowledge is updated regularly to facilitate the effective discharge of their responsibilities.
Compliance Reports submitted to the CBSL which include all returns to regulators are presented to Complied
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 Complied
during 2017.
(13) 3(1)(i)(m) Hiring External Auditors

The Board Audit Committee carries out necessary due diligence regarding the hiring of the External Complied
Auditors and makes recommendations to the Board. The appointment of the External Auditor is
made at the AGM. Oversight of the External Auditors is carried out by the Board Audit Committee
(BAC) and the Board is briefed of any concerns in this regard if a necessity arises. To ensure greater
independence of the BAC, an independent consultant too has been appointed to the BAC.
(14) 3(1)(ii) Appointment of Chairman and CEO and their functions and responsibilities
The Board has appointed the Chairman and the Chief Executive Officer / MD and the Board has Complied
approved their respective functions and responsibilities, maintaining the balance of power between
the two roles.
(15) 3(1)(iii) Board Meetings

Regular Board Meetings are held and special meetings are scheduled if the need arises. The Board Complied
met 18 times during 2017. The Bank has minimised obtaining approval via circular resolutions and it
is done only on an exceptional basis and such resolutions are ratified by the Board at the subsequent
meeting.
(16) 3(1)(iv) Arrangements for Directors to include proposals in the agenda

A Board approved procedure is in place to enable all Directors to include matters and proposals in the Complied
agenda.
Monthly meetings are scheduled and informed to the Board at the beginning of each calendar year Complied
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) 3(1)(v) Notice of Meetings

Notice of Meetings and the agenda for the Board Meetings are circulated among the Directors seven Complied
days prior to the meeting, giving Directors time to attend and submit any urgent proposals.
Additionally, Notices, Agenda and all related Board papers are loaded through a secure link onto iPads Complied
for Directors to access.
(18) 3(1)(vi) Directors’ attendance

The Directors are apprised of their attendance in accordance with the Articles of Association of the Complied
Company and the Corporate Governance Code. Details of the Directors’ attendance is set out on page
132.
All Directors have attended at least 2/3rds of the total number of Board meetings during the year Complied
under review.
(19) 3(1)(vii) Company Secretary

The Board has appointed the Company Secretary of the Bank, who is an Attorney-at-Law of the Complied
Supreme Court of Sri Lanka, who satisfies the provisions of Section 43 of the Banking Act No. 30 of
1988. The Company Secretary’s primary responsibilities shall be to handle the secretarial services
to the Board and Shareholders and carry out other functions specified in the statutes and other
regulations.

Section
(20) 3(1)(viii) Directors’ access to advice and services of Company Secretary
All members of the Board have the opportunity to obtain the advice and services of the Company Complied
Secretary who is an Attorney- at-Law and who is responsible to the Board for follow up of Board
Procedures, Compliance with relevant Rules and Regulations, Directions and Statutes and keeping
and maintaining Minutes and relevant records of the Bank.
A Board approved procedure to provide for this is in place.
(21) 3(1)(ix) Maintenance of Board Minutes

The Company Secretary maintains the Minutes of the Board Meetings and circulates the same Complied
amongst all Board Members. Additionally, the Directors have access to the past Board papers and
Minutes through a secure electronic link via iPads.
(22) 3(1)(x) Minutes to be of sufficient detail and serve as a reference for regulators and supervisory authorities
The detailed minutes of the meetings include: Complied
yA summary of data and information used by the Board in its deliberations
yThe matters considered by the Board
yThe fact-finding discussions and the issues of contention or dissent
yThe testimonies and confirmations of relevant executives with regard to the Board’s strategies
and policies and adherence to relevant laws and regulations
yMatters regarding the risks to which the Bank is exposed and an overview of the risk management
measures including reports of the Board Integrated Risk Management Committee
yThe decisions and Board resolutions including reports of all Board Sub Committees.
(23) 3(1)(xi) Directors’ ability to seek independent professional advice
The Bank has adopted a Board approved Policy for “Directors’ Access to Independent Professional Complied
Advise” and the Board resorts to such advice when deemed necessary.
The Board Sub Committees and various professionals in Corporate and Senior Management advise Complied
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 meetings are
coordinated by the Company Secretary.
(24) 3(1)(xii) Dealing with Conflicts of Interest

The Directors are conscious of their obligation to deal with situations where there is a conflict of Complied
interest in accordance with the Articles of Association of the Bank and the Banking Act Direction
No. 11 of 2007. The Bank maintains registers of Directors’ and KMPs Interests which are regularly
updated which includes interests of the spouses, dependent children under 18 years of age and their
business concerns. Directors abstain from participating in the discussions, voicing their opinion or
approving in situations where there is a conflict of interest. Additionally Director concerned is not
counted in the quorum in such instances.
(25) 3(1)(xiii) Schedule of matters reserved for Board decision

The Board has a schedule of matters specifically reserved for its decision to ensure that the Complied
direction and control of the Bank is within its authority in line with regulatory codes, guidelines and
international best practices.

Section
(26) 3(1)(xiv) Inform Central Bank if there are solvency issues
The Board is aware of the need to inform the Director of Bank Supervision prior to taking any decision Complied
or action if the Bank is about to become insolvent or about to suspend payments to its depositors
and other creditors. If such a situation arises, the Bank will duly inform the Director of Bank
Supervision and such a situation has not arisen during the year 2017.
(27) 3(1)(xv) Compliance with Capital Adequacy

The Board monitors capital adequacy and other prudential measures viz-a-viz regulatory Complied
requirement, the Bank’s defined risk appetite and industry benchmarks on a quarterly basis. As at
31.12.2017 the Bank is in compliance with the minimum capital requirements.
(28) 3(1)(xvi) Publish Corporate Governance Report in Annual Report

The Board publishes the Corporate Governance Report in the Bank’s Annual Report. This report is Complied
given on pages 127 to 166.
(29) 3(1)(xvii) Self-assessment of Directors

The Board has adopted a scheme of self-assessment to be undertaken by each Director annually and Complied
records of these assessments are maintained with the Company Secretary. The assessments are
compiled by the Company Secretary and submitted to the Board of Directors for discussion.
3(2) Board Composition

(30) 3(2)(i) Number of Directors
As per CBSL Corporate Governance Direction, the number of Directors should not be less than seven Complied
or more than 13. The Bank’s Board comprised 11 Directors up to 01.07.2017, 09 Directors from
01.07.2017 until 08.08.2017 and 10 Directors from 01.09.2017, complying with the requirement.
(31) 3(2)(ii) Period of service of a Director

The period of service of a Director excluding the Managing Director and Executive Directors is limited Complied
to 9 years or until the seventieth birthday, whichever is earlier as per the Direction on Corporate
Governance. There are no Directors whose tenure of service has exceeded 9 years on the Board. One
Directer who reached his seventieth birthday, retired from the Board of Directors during the year.
Details of their respective tenure of service are given on pages 16 to 21.
(32) 3(2)(iii) Board balance

There are nine Non Executive Directors and one Executive Director, being well within the requirement Complied
to limit the number of Executive Directors to 1/3rd of the total.
(33) 3(2)(iv) Independent Non Executive Directors

The Board has six Independent Non Executive Directors which complies with the requirement. Complied
(34) 3(2)(v) Alternate Directors

There were no alternate Directors appointed during the year 2017. The Bank’s current policy is not to Complied
appoint any Alternate Directors to the Board.
(35) 3(2)(vi) Criteria for Non Executive Directors

Non Executive Directors are persons with credible track record who have necessary skills and Complied
experience to bring an independent judgment to bear on issues of strategy, performance and
resources. The profiles of the Non Executive Directors are detailed on pages 16 to 21.
The Board has approved a procedure to appoint Directors providing, inter-alia for appointment of
Independent Directors as well.

Section
(36) 3(2)(vii) Quorum for the Board Meeting is more than 50% of Directors and more than half the quorum to
comprise Non Executive Directors
This requirement is strictly observed and the attendance of the Board members at the meetings for Complied
the year 2017 evidence compliance with the requirement.
(37) 3(2)(viii) Identify Independent Non Executive Directors in communications and disclose the categories of
Directors in Annual Report
The Independent Non Executive Directors are expressly identified as such in all corporate Complied
communications that disclose the names of Directors of the Bank. The composition of the Board,
by category of Directors, including the names of the Chairman, Executive Directors, Non Executive
Directors and Independent Non Executive Directors are given on page 132 of the Corporate
Governance Report.
(38) 3(2)(ix) Succession planning and appointments to the Board

The Board has established a Board Nomination Committee, whose Terms of Reference comply with Complied
the Code of Best Practice on Corporate Governance and the Direction on Corporate Governance (the
CBSL Direction). Accordingly, new Directors including the Executive Directors are appointed by the
Board upon consideration of recommendations by the Board Nomination Committee.
(39) 3(2)(x) Re-election of Directors filling casual vacancies

In accordance with the provisions in the Articles of Association and CBSL Direction, Directors Complied
appointed to the Board after the last AGM will stand for election by the shareholders at the very next
AGM.
Mr Rushanka Silva, who was appointed to the Board w.e.f. 01.09.2017 will stand for election by
shareholders at the AGM.
(40) 3(2)(xi) Communication of reasons for removal or resignation of Director

Resignations of Directors and the reasons for same are informed to the regulatory authorities and Complied
shareholders as per CSE requirements together with a statement confirming whether or not there are
any matters that need to be brought to the attention of shareholders.
The resignation and retirement of directors during the year 2017 were duly informed to the CSE
accordingly
(41) 3(2)(xii) Prohibition of Directors or employees of a bank becoming a Director at another bank
The Board and the Board Nomination Committee take into account this requirement in their Complied
deliberations when considering appointments of Directors. The Employee Code of Conduct (Blue
Book) prohibits employees to be elected/nominated as a director of another bank.

Section
(42) 3(3) Criteria to Assess Fitness and Propriety of Directors
3(3)(i) Age of Director should not exceed 70 years
One Executive Director who reached the age of 70 years in 2017 retired during the year. Complied
(43) 3(3)(ii) Directors should not hold Directorships of more than 20 Companies
None of the Directors hold office as a director in more than 20 companies. Complied
(44) 3(4) Management Functions Delegated by the Board

3(4)(i) Understand and study delegation arrangements Complied
The Board consciously delegates authority to appropriate officers.
(45) 3(4)(ii) Extent of delegation should not hinder Board’s ability to discharge its functions
The Board delegates authority to Management to carry out certain duties from time to time. The Complied
management, who carry out duties on behalf of the Board under the provisions of such delegated
authorities report to the Board regularly on matters attended to by them.
(46) 3(4)(iii) Review delegation arrangements periodically to ensure relevance to operations of the Bank
The Board periodically reviews and approves the delegation arrangements in place and ensures that Complied
the extent of delegation addresses the needs of the Bank whilst enabling the Board to discharge their
functions effectively.
3(5) The Chairman and Chief Executive Officer/Managing Director

(47) 3(5)(i) Separation of roles
The roles of the Chairman and CEO/MD are separate and their respective duties are documented, and Complied
approved by the Board.
(48) 3(5)(ii) Non Executive Chairman and appointment of a Senior Independent Director
The Chairman is a Non Executive Director but not an Independent Director as he is also a Director of Complied
a fully owned subsidiary of the Bank as well as being a Director of another Company in which another
Director (Mr Rushanka Silva) is also a member. The Board has appointed Mr Sanjiva Senanayake as
Senior Independent Director with appropriate Terms of Reference to ensure the independent element
in decision making which has been disclosed in the Annual Report
(49) 3(5)(iii) Disclosure of the identity of the Chairman and CEO / MD and any relationships with the Board
Members
The identity of the Chairman and CEO/MD are disclosed in the Annual Report on pages 16 to 21 and Complied
there are many references to these roles throughout.
The Chairman and one Non Executive, Non Independent Director are Common Directors on the board
of another Company.
Same and except for their business relationship above, there is no material financial, business or Complied
family relationships between the Chairman, CEO/MD and other members of the Board other than
those disclosed on pages 16 to 21 and in Note No. 49 to the Financial Statements given on pages 285
to 289 as per annual declarations and the register of Directors Interests which is updated regularly.
(50) 3(5)(iv) Chairman to: (a) Provide leadership to the Board; (b) Ensure that the Board works effectively and
discharges its responsibilities; (c) Ensure that all key and appropriate issues are discussed by the
Board in a timely manner.
The Board approved the key responsibilities of the Chairman and this document includes the matters Complied
identified in relevant guidelines and codes. The self-evaluation process evidences that the Chairman
provides leadership to the Board, the Board works effectively and discharges its responsibilities and
all key and appropriate issues are discussed by the Board in a timely manner.
(51) 3(5)(v) Responsibility for Agenda lies with Chairman but may be delegated to the Company Secretary
The Company Secretary draws up the agenda for the meetings in consultation with the Chairman. Complied

Section
(52) 3(5)(vi) Ensure that Directors are properly briefed and provided with adequate information
The Chairman ensures that the Board is adequately briefed and informed regarding the matters Complied
arising at Board meetings. The following procedures are in place to ensure this:
yAgenda and Board papers are circulated 7 days prior to Board Meetings.
yRelevant members of the Management team are available for explanations and clarifications if
required.
yManagement information is provided in agreed formats on a regular basis to enable Directors to
assess the performance and stability of the Bank.
(53) 3(5)(vii) Encourage active participation by all Directors and lead in acting in the interests of the Bank.
The Board encourages all Directors to make a full and active contribution. This is evident in the self- Complied
evaluation forms submitted by each Director at the year end.
(54) 3(5)(viii) Encourage participation of Non Executive Directors and relationships between Non Executive and
Executive Directors
09 out of the 10 members of the Board are Non Executive Directors creating a conducive environment Complied
for active participation by the Non Executive Directors. All Non Executive Directors participate in Sub
Committees of the Board ensuring further opportunity for active participation. The Bank has also
appointed a Senior Independent Director which further supports the participation and strengthens
views of the Non Executive Directors.
(55) 3(5)(ix) Refrain from direct supervision of Key Management Personnel and executive duties
The Chairman does not get involved in the supervision of KMPs or any other executive duties. Complied
(56) 3(5)(x) Ensure effective communication with Shareholders
The Bank historically has active shareholder participation at the AGM and at the Shareholder Complied
Relations Meeting 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) 3(5)(xi) CEO/MD functions as the apex executive in charge of the day-to-day operations
The responsibility of day to day operations of the Bank have been delegated to the CEO/MD. Complied
3(6) Board Appointed Committees

(58) 3(6)(i) Establishing Board Sub Committees, their functions and reporting
12 Sub Committees have been established by the Board with oversight by the respective Complied
Chairpersons and written Terms of Reference for each. The Company Secretary serves as the
Secretary to all Sub Committees and maintains Minutes and records. The reports of the following
regulatory Sub Committees are included in the Annual Report
yBoard Audit Committee on pages 167 to 169.

yBoard Human Resources & Remuneration Committee on pages 170 & 171.
yBoard Nomination Committee on page 172.
yBoard Integrated Risk Management Committee on pages 173 to 174.
yBoard Related Party Transaction Review Committee on page 175.
The Chairpersons of the Sub Committees are present at the AGM to clarify any matters that may be
referred to them by the Chairman.

Section
3(6)(ii) Board Audit Committee (BAC)
(59) 3(6)(ii)(a) Chairman to be an Independent Non Executive Director with qualifications and experience in
accountancy and/or audit
The Chairman of the Board Audit Committee is an Independent Non Executive Director who is a Fellow Complied
member of the Chartered Institute of Management Accountants, UK.
(60) 3(6)(ii)(b) Committee to comprise solely of Non Executive Directors

All members of the Board Audit Committee are Non Executive Independent Directors. Complied
(61) 3(6)(ii)(c) Audit Committee functions

In accordance with the Terms of Reference, the Board Audit Committee has made the following Complied
recommendations on matters in connection with:
yThe appointment of the External Auditor for audit services to be provided in compliance with the
relevant statutes;
yThe implementation of the Central Bank guidelines issued to Auditors from time to time;
yThe application of the relevant accounting standards; and
yThe service period, audit fee and any resignation or dismissal of the Auditors
The Board Audit Committee ensures that the service period of the engagement of the External Audit
partner shall not exceed five years, and that the particular Audit partner is not re-engaged for the
audit before the expiry of three years from the date of the completion of the previous term.
(62) 3(6)(ii)(d) Review and monitor External Auditors’ independence and objectivity and the effectiveness of the
audit processes
The Board Audit Committee (BAC) obtains representations from the External Auditors on their Complied
independence and that the audit is carried out in accordance with the applicable Standards and best
practices.
(63) 3(6)(ii)(e) Provision of non-audit services by External Auditors

A policy is in place approved by the Board in this regard. When such services are obtained from Complied
External Auditors prior approval is obtained from the Board Audit Committee in accordance with
regulations.
(64) 3(6)(ii)(f) Determines scope of audit

The Committee discussed and finalised with the External Auditors, the nature and scope of the audit Complied
to ensure that it includes:
yAn assessment of the Bank’s compliance with the relevant Directions in relation to Corporate
Governance and Internal Controls Over Financial Reporting;
yThe preparation of financial statements for external purposes in accordance with relevant
accounting principles and reporting obligations;
As all audits within the group are carried out by the same External Auditor, there was no requirement
to discuss arrangements for coordinating activities with other auditors.

Section
(65) 3(6)(ii)(g) Review financial information of the Bank
The Board Audit Committee reviews the financial information of the Bank, in order to monitor the Complied
integrity of its Financial Statements, Annual Report, Accounts and Quarterly Reports prepared for
disclosure, and the significant financial reporting judgments contained therein. The review focuses on
the following:
yMajor judgemental areas

yAny changes in accounting policies and practices
ySignificant adjustments arising from the audit
yThe going concern assumption
yThe compliance with relevant accounting standards and other legal requirements.
The Board Audit Committee makes recommendations to the Board on the above on a quarterly basis.
(66) 3(6)(ii)(h) Discussions with External Auditor without the Executive Management on interim and final audits
The Board Audit Committee discusses issues, problems and reservations (if any) arising from the Complied
interim and final audits with the External Auditors. The Committee met the External Auditors in the
absence of executive management of the Bank on 02 occasions during the year 2017.
(67) 3(6)(ii)(i) Review of management letter and Bank’s response

The Board Audit Committee has reviewed the External Auditors Management Letter and the Complied
managements’ responses thereto.
(68) 3(6)(ii)(j) Review of Internal Audit function

The Board Audit Committee has oversight of the Internal Audit function and has the following Complied
responsibilities with regard to the same:
yReviews the adequacy of the scope, functions and resources of the Internal Audit Department,
and ensures that the Department has the necessary authority to carry out its work;
yReviews the Internal Audit programme and results of the audits and ensures that appropriate
actions are taken on the recommendations of the Internal Audit Department;
yReviews appraisals of the performance of the Head and senior staff members of the Internal Audit
Department;
yRecommends any appointment or termination of the Head and senior staff members of the
Internal Audit Department
yEnsures that the Committee is apprised of resignations of senior staff members of the Internal
Audit Department including the Chief Internal Auditor, and provides an opportunity to the resigning
senior staff members to submit reasons for resigning;
yEnsures that the Internal Audit function is independent of other activities it audits and that it is
performed with impartiality, proficiency and due professional care.
(69) 3(6)(ii)(k) Internal investigations

The Board Audit Committee has reviewed the major findings of internal investigations during the Complied
year and management’s responses thereto. It has also ensured that the recommendations of such
investigations are implemented.

Section
(70) 3(6)(ii)(l) Attendees at Audit Committee meetings
The Consultant to the Committee, CEO/MD, Group Chief Financial Officer, Chief Internal Auditor, Chief Complied
Manager - Systems Audit and representatives of the External Auditors usually 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. The Committee also meet the Internal Auditors without the External Auditors being
present.
(71) 3(6)(ii)(m) Explicit authority, resources and access to information

The Board Audit Committee has: Complied
yexplicit authority to investigate into any matter within its terms of reference;
ythe resources which it needs to do so;
yfull access to information; and
yauthority to obtain external professional advice and to invite outsiders with relevant experience to
attend, if necessary.
(72) 3(6)(ii)(n) Regular meetings

The Board Audit Committee has scheduled regular quarterly meetings and additional meetings are Complied
scheduled when required. Accordingly, the Committee met 15 times during the year. This includes
the meetings of the Committee with the External Auditors and the meetings of the Committee with
the Internal Auditors. 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) 3(6)(ii)(o) Disclosure in Annual Report

The Report of the Board Audit Committee is given on pages 167 to 169. The report includes the Complied
following:
yDetails of the activities of the Board Audit Committee;
yThe number of Board Audit Committee meetings held in the year; and
Details of attendance of each individual Director at such meeting is given on page 132.
(74) 3(6)(ii)(p) Maintain minutes of meetings

The Company Secretary and, in her absence the Chief Internal Auditor serves as the Secretary to the Complied
Board Audit Committee and maintains minutes of the Committee meetings.
(75) 3(6)(ii)(q) Whistle Blowing Policy and relationship with External Auditor
The Bank has a Board approved Whistle Blowing Policy whereby an employee of the Bank may, in Complied
confidence, raise concerns about possible improprieties in financial reporting, internal control or
other matters. The Company Secretary forwards all communications received in this regard, including
anonymous communications, to the Chairman of the Board Audit Committee who 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 Complied
External Auditors and meets the External Auditors on a regular basis to discharge this function.
3(6)(iii) Board Human Resources and Remuneration Committee (BHR & RC)
(76a) 3(6)(iii)(a) Policy to determine the remuneration of Directors.
A Board approved Policy to determine the remuneration relating to Directors is in place. Complied

Section
(76b) 3(6)(iii)(a) Policy to determine the remuneration for CEO and KMPs
A Board approved Policy to determine the remuneration (salaries, allowances and other financial Complied
payments) of CEO and KMPs is in place.
(77) 3(6)(iii)(b) Goals and targets for the Directors, MD and KMPs
Goals and targets for the CEO/MD and the KMPs for the year 2017 are documented under the Complied
Objective Setting for the year approved by the Committee. The Duties and responsibilities of the Non
Executive Directors are contained in the Bank’s Code of Conduct and the Governance Requirements
for Directors and the Terms of Reference of each Board Sub Committee approved by the Board of
Directors.
(78) 3(6)(iii)(c) Evaluation of the performance of the MD/CEO and KMPs against the set targets and goals.
Performance evaluations of the CEO/MD and KMPs for the year ended 31st December 2017 will be Complied
reviewed by the Committee.
The performance evaluations of the CEO/MD and KMP’s for the year ended 2016 was carried out Complied
within the first quarter of 2017. The performance evaluation for the year ended 31st December 2017
will be carried out within the first quarter of 2018.
(79) 3(6)(iii)(d) “Terms of Reference” provides that the MD is not present at meetings when matters relating to the
MD are being discussed
Terms of Reference of the Committee provides that the CEO/MD should not be a member of the Complied
Committee. MD/CEO attends meetings of the Committee on invitation and when matters relating
to him are discussed, he is not present. CEO/MD was not present when matters relating to him were
discussed during the year.
3(6)(iv) Board Nomination Committee (BNC)

(80a) 3(6)(iv)(a) Procedure to appoint Directors
The Board Nomination Committee has developed and implemented a Board approved procedure to Complied
appoint new Directors.
(80b) 3(6)(iv)(a) Procedure to appoint CEO and Key Management Personnel

A Board approved procedure to select, nominate and appoint CEO/ MD and KMPs is in place. Complied
(81) 3(6)(iv)(b) Re-election of Directors

The Committee makes recommendations regarding the re-election of current Directors, taking into Complied
account, the performance and contribution made by the Director concerned towards the overall
discharge of the Board’s responsibilities.
(82) 3(6)(iv)(c) Eligibility criteria for appointments to key managerial positions including the CEO
The Committee sets the eligibility criteria to be considered, including qualifications, experience Complied
and key attributes, for appointment or promotion to key managerial positions and the CEO/MD. The
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
KMPs.
(83) 3(6)(iv)(d) Fit and proper criteria for Directors, CEO and KMPs
The Committee obtains annual declarations from Directors, CEO/MD and HR Department obtains Complied
declarations from KMPs to ensure that they are fit and proper persons to hold office as specified in
the criteria given in Banking Act Direction No. 11 of 2007, Section 3(3) and as set out in the statutes.

Section
(84) 3(6)(iv)(e) Succession plan for retiring Directors, CEO/MD and KMPs
Structural changes of the Bank recommended by the Board Nomination Committee has been Complied
approved by the Board. Board approved procedures covering Succession Planning for retiring
Directors, CEO/MD and KMPs are in place.
(85) 3(6)(iv)(f) Committee Chairperson and other members

The Committee is chaired by an Independent Director. Among the other members, two members are Complied
Independent and other 2 members are not Independent. The MD attends meetings by invitation.
3(6)(v) Board Integrated Risk Management Committee (BIRMC)

(86) 3(6)(v)(a) Composition of Risk Management Committee
BIRMC comprises 04 Non Executive Directors, 01 Executive Director (02 Executive Directors until Complied
08.08.2017), Group Chief Risk Officer and Group Compliance Officer. The Committee works closely
with KMPs within the framework of authority and responsibility assigned to the BIRMC.
(87) 3(6)(v)(b) Risk assessment of the Bank, Subsidiary Companies and Associate Companies
Credit Risk, Market Risk, Liquidity Risk and the Operational Risk are assessed and the reports Complied
submitted to the BIRMC through the Group Chief Risk Officer. Risks are assessed at the BIRMC and
the relevant reports are submitted by the Risk Management Department to the BIRMC.
The Board has approved on recommendation of BIRMC, the policies on Credit Risk Management,
Market Risk Management and Operational Risk Management which provide a framework for
management and assessment of risks. Accordingly, quarterly information on pre- established risk
indicators are reviewed by the BIRMC.
The BIRMC has a process to assess and evaluate all risks of the Bank and the findings and issues are
submitted to the Board for their review and action if any. BIRMC evaluates the risk management of
Subsidiary companies both at the Bank level and Group level.
(88) 3(6)(v)(c) Review the adequacy and effectiveness of management level committees
BIRMC reviews the adequacy and the effectiveness of all management level committees including Complied
the Credit Policy Risk and Portfolio Review Committee and the ALCO to address specific risks and to
manage those risks within the laid down limits specified by the BIRMC as required by the Direction.
(89) 3(6)(v)(d) Corrective action to mitigate risks exceeding prudential levels

BIRMC takes prompt corrective action to mitigate the effects of specific risks in case such risks are Complied
at levels beyond the prudent risk levels decided by BIRMC on the basis of the Bank’s policies and
regulatory and supervisory requirements. The Key Risk Indicators of the Bank are approved by the
Committee and the Board on a regular basis.
(90) 3(6)(v)(e) Frequency of meetings

The BIRMC has regular meetings and schedules additional meetings when required. The agenda Complied
covers matters assessing all aspects of risk management including updated business continuity
plans. The BIRMC met seven times during the year.
(91) 3(6)(v)(f) Officers responsible for failure to identify specific risks or implement corrective action
Terms of Reference of the BIRMC provides for the BIRMC to recommend to Board to take corrective Complied
action as directed by Director of Bank Supervision in respect of officers identified to be responsible
for failure to identify specific risks, upon being informed by the MD/CEO.
GRI 102-25

Section
(92) 3(6)(v)(g) Risk assessment report to Board
A detailed report of the meeting is submitted to the Board after each meeting of the BIRMC by the Complied
Secretary to the Committee within seven market days for their information, views, concurrence or
specific directions.
(93) 3(6)(v)(h) Compliance function

The Compliance Department established, assesses the Bank’s compliance with laws, regulations, Complied
and regulatory guidelines. The Compliance Department assesses the Bank’s compliance with
internal controls and approved policies on all areas of business operations. This function is headed
by a dedicated Group Compliance Officer who reports to the Board Integrated Risk Management
Committee (BIRMC) and is responsible for providing the following:
yA detailed quarterly report on statutory and mandatory reporting requirements indicating the
status of compliance to the Board;
yA monthly compliance certificate with sign-off from all heads of business units to the BIRMC
3(7) Related Party Transactions

(94) 3(7)(i) Categories of Related Parties and avoidance of Conflict of Interest
A duly approved documented process is in place on identification of and dealing with categories Complied
of Related Parties in order for the Bank to avoid any conflicts of 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. The
avoidance of Conflict of Interest is further supported by the Board approved policy on Managing
Conflict of Interest.
(95) 3(7)(ii) Related Party Transactions covered by Direction

Related Party Transactions covered for the purpose of the above process with Directors and Key Complied
Management Personnel include:
y The grant of any type of accommodation, as defined in the Monetary Board’s Directions on
maximum amount of accommodation.
yThe creation of any liabilities of the Bank in the form of deposits, borrowings and investments.
yThe provision of any services of a financial or non-financial nature provided to the Bank or received
from the Bank.
yThe creation or maintenance of reporting lines and information flows between the Bank and any
Related Parties which may lead to the sharing of potentially proprietary, confidential or otherwise
sensitive information that may give benefits to such Related Parties
(96) 3(7)(iii) Monitoring of Related Party Transactions Defined as more favourable treatment
The Bank has to implement either a preventive or a detective system to ensure that no favourable Not
treatment is offered to Related Parties noted in 3(7)(i) above. Arrangements to implement a Complied
preventive system is presently under way.
(97) 3(7)(iv) Granting accommodation to a Director or close relation of a Director

A procedure is in place for granting accommodation to Directors or to close relations of Directors. Complied
Such accommodation requires approval at a meeting of the Board of Directors, by not less than
2/3rds of the number of Directors other than the Director concerned, voting in favour of such
accommodation. The terms and conditions of the facility include a provision that it will be secured by
such security as may from time to time be determined by the Monetary Board as well.

Section
(98) 3(7)(v) Accommodation granted to persons, or concerns of persons, or close relations of persons, who
subsequently are appointed as Directors of the Bank
The Company Secretary obtains declarations/affidavits from all Directors prior to their appointment Complied
and they are requested to declare any transactions, currently with the Bank.
Employees of the Bank are aware of the requirement to obtain necessary security as defined by the Complied
Monetary Board if the need arises.
A process to monitor compliance with this regulation has been established. Complied
(99) 3(7)(vi) Favourable treatment or accommodation to Bank employees or their close relations
No favourable treatment / accommodation are provided to Bank employees other than staff benefits Complied
provided in terms of the operating instructions issued by the Bank from time to time governing same.
Employees of the Bank are informed through operational circulars to refrain from granting favourable
treatment to other employees or their close relations or to any concern in which an employee or
close relation has a substantial interest except as provided in the Bank’s Operational Guidelines and
Directives.
(100) 3(7)(vii) Remission of accommodation subject to Monetary Board approval

The situation has not arisen in the Bank to date and operating instructions are issued to prevent Complied
non-compliance with this requirement.
3(8) Disclosures
(101) 3(8)(i) Publish Annual and Quarterly Financial Statements
Annual audited Financial Statements and quarterly Financial Statements are prepared and published Complied
in accordance with the formats prescribed by the supervisory and regulatory authorities and
applicable Accounting Standards.
3(8)(ii) Disclosures in Annual Report

(102) 3(8)(ii)(a) A statement to the effect that the Annual Audited Financial Statements have been prepared in line
with applicable accounting standards and regulatory requirements, inclusive of specific disclosures
A statement to this effect is included in the following: Complied
yAnnual Report of the Board of Directors on the Affairs of the Company given on pages 179 to 188.
(103) 3(8)(ii)(b) Report by the Board on the Bank’s internal control mechanism
The Annual Report includes the following reports where the Board confirms that the financial Complied
reporting system has been designed to provide reasonable assurance regarding the reliability of
financial reporting, and that the preparation of financial statements for external purposes has been
done in accordance with relevant accounting principles and regulatory requirements:
yDirectors’ Statement on Internal Control over Financial Reporting given on pages 189 & 190.
GRI 102-35

Section
(104) 3(8)(ii)(c) Assurance Report issued by the Auditors under ‘Sri Lanka Standard on Assurance Engagements
SLSAE 3050’
The Board has obtained an assurance report on the effectiveness of Internal Controls Over Financial Complied
Reporting which is published on page 191.
(105) 3(8)(ii)(d) Details of Directors

Details of Directors are given on pages 16 to 21. Complied
Directors’ interests in contracts with the Company are given below; (Including Executive Directors)
Category Amount
Rs 000
Loans 2,986
Deposits 275,649
Credit cards 571
Interest income 487
Interest expense 23,525
Share based payments
Cash dividend 292
Scrip dividend (Number of shares) 3,039
Aggregate value of remuneration / fee paid by the Bank 111,249

Post employment benefits paid 5,994
Termination benefits 22,043
(106) 3(8)(ii)(e) Total accommodation granted to each category of related parties and as a percentage of the Bank’s
regulatory capital
Related Party Transactions are given in Note No. 49 to the Financial Statement on pages 285 to 289. Complied
Net accommodation granted to Related Parties are given below;
Category of related party transaction As a % of regulatory Amount
capital of the Bank Rs 000
Director and close family members 0.08 66,187

KMPs & close family members 0.18 146,006
Subsidiaries 6.52 5,275,242
Shareholders owning material interest in the Bank - -
Concerns in which any of the Bank’s Directors or a close
relation of any of the Bank’s Directors or any of its material
shareholders has a substantial interest 2.53 2,050,000

Section
(107) 3(8)(ii)(f) Aggregate values of remuneration paid to, and transactions with Key Management Personnel
Nature of transaction Amount Complied
Rs 000
Short term employment benefits 364,235
Post - employment benefits 35,172
Loan & advance including credit cards 145,818
Deposit & investments 220,877
Cash dividend paid 1,438
Scrip dividend paid (Number of shares) 15,019
Interest income 8,015
Interest expenses 19,524
The remuneration paid to, and transactions with Executive Directors are included in 3(8)(ii)(d)
above.
(108) 3(8)(ii)(g) Confirmation by the Board on the Annual Corporate Governance Report
Board has confirmed in the Annual Report of the Board of Directors on the Affairs of the Company, Complied
that all the findings of the Factual Findings Report of Auditors have been incorporated in the Bank’s
Annual Corporate Governance Report.
(109) 3(8)(ii)(h) Report confirming compliance with prudential requirements, regulations, laws and internal controls
The Statement of Directors’ Responsibility on Financial Reporting given on pages 193 & 194 clearly Complied
sets out details regarding compliance with prudential requirements, regulations, laws and internal
controls. There were no instances of material non-compliance to report on corrective action taken
during the year.
(110) 3(8)(ii)(i) Measures taken to rectify non-compliant issues

There were no lapses inviting supervisory concerns in the Bank’s Risk Management System or non- Complied
compliance with these directions that have been pointed out by the Director of Bank Supervision
required to be disclosed by the Bank, during the year.
CHANNA PALANSURIYA NANDA FERNANDO

Colombo, Sri Lanka

15th February 2018
BOARD AUDIT COMMITTEE REPORT
The Board Audit Committee (The and the External Auditors also attended provisions, accounting standards
Committee), which was established on these meetings by invitation. 04 of these and accounting policies which are
10th April 1997, is appointed by and meetings were held to consider and consistently applied.
responsible to the Board of Directors recommend to the Board of Directors,
6. Reviewing Internal Audit reports and
(the Board). The Committee comprises the Bank’s quarterly and Annual Financial
liaising with Corporate Management
04 Non Executive Independent Directors, Statements.
of the Bank in taking precautionary
who conduct Committee proceedings in
measures to minimise and control
accordance with the Terms of Reference TERMS OF REFERENCE
weaknesses, procedure violations,
approved by the Board. The Committee’s The establishment, role and functions of frauds and errors.
composition as at 31st December 2017 is: the Board Audit Committee are regulated
by the Banking Act Direction No. 11 of 7. Assessing the independence and
Mr Ranil Pathirana 2007, the Mandatory Code of Corporate reviewing the adequacy of the scope,
(Chairman) (IND/NED) Governance for Licensed Commercial functions and resources of the
Banks issued by the Central Bank of Sri Internal Audit Department, including
Prof Malik Ranasinghe Lanka, the Rules on Corporate Governance the appointment of the Chief Internal
as per Section 7.10 of Listing Rules issued Auditor and the performance of the
(IND/NED)
by the Colombo Stock Exchange and Head and senior staff members of the
the Code of Best Practice on Corporate Internal Audit Department
Mr Deepal Sooriyaarachchi
(IND/NED) Governance issued jointly by the Securities 8. Overseeing the appointment,
and Exchange Commission of Sri Lanka compensation, resignation and
Mrs Dhara Wijayatilake (SEC) and the Institute of Chartered dismissal of the External Auditors,
Accountants of Sri Lanka (ICASL). The including review of the External Audit
(IND/NED)
Committee submits its minutes and function, its cost and effectiveness
reports on its activities to the Board and monitoring of the External
(IND - Independent Director, NED – Non
regularly. Committee also assists the Auditors’ independence and to ensure
Executive Director)
Board in its general oversight of financial that the engagement of the Audit
reporting, internal controls and functions partner shall not exceed five years and
Mrs Ranjani Joseph, a senior practicing
relating to internal and external audits. that the particular Audit partner is not
Chartered Accountant, serves the Board
Audit Committee in the capacity of a re-engaged for the audit before the
ROLE AND RESPONSIBILITIES expiry of three years from the date of
Consultant and is invited to attend the
meetings. The Committee is responsible for: the completion of the previous term.
9. Reviewing the effectiveness of the
Brief profiles of the members are given on 1. Reviewing financial information of the
Bank’s system of Internal Control
pages 16 to 21 of the Annual Report. The Bank, in order to monitor the integrity
Over Financial Reporting to provide
Company Secretary, and in her absence, of the Financial Statements of the
reasonable assurance regarding the
the Chief Internal Auditor functions as the Bank, its Annual Report, accounts
reliability of financial reporting and the
Secretary to the Committee. and quarterly reports prepared for
preparation of Financial Statements
disclosure.
for external purposes have been
The Chairman of the Committee, Mr Ranil 2. Reporting to the Board on the quality, done in accordance with applicable
Pathirana who is an Independent Non appropriateness and acceptability of accounting standards and regulatory
Executive Director, is a Fellow Member of the Bank’s accounting policies and requirements.
the Chartered Institute of Management practices.
Accountants, UK and counts many years 10. Engaging Independent Advisors for
of experience in the Financial Services 3. Assessing the reasonableness of the specialised functions where it deems
industry. underlying assumptions for estimates necessary.
and judgments made in preparing the
MEETINGS Financial Statements. ACTIVITIES IN 2017
The Committee met on 15 occasions 4. Reviewing accounting and financial Financial Reporting
during the year 2017. Attendance by the reporting, risk management processes The Committee, as part of its responsibility
Committee members at these meetings and regulatory compliance. to oversee the Bank’s financial reporting
is given in the table on page 132 of the process on behalf of the Board of
5. Reviewing the Financial Statements
Annual Report. The Managing Director, Directors, has reviewed and discussed
(including quarterly interim
Group Chief Financial Officer, Chief Internal with the Management and the External
statements) prior to publication to
Auditor, Chief Manager-System Audit
ensure compliance with statutory
Board Audit Committee Report
Auditors, the quarterly and the Annual The Bank assessed the effectiveness of its Commercial Banks issued by the Central
Financial Statements prior to their Internal Control Over Financial Reporting Bank of Sri Lanka, the Annual Corporate
release. The review included the quality, as of 31st December 2017 based on Governance Report for 2017 is provided on
appropriateness and acceptability of the criteria set out in the Guidance for pages 150 to 166. The External Auditors of
accounting policies and practices, the Directors of Banks on “The Directors’ the Bank have performed procedures set
clarity of the disclosures and the extent Statement of Internal Control”, issued by out in Sri Lanka Related Services Practice
of compliance with financial reporting the ICASL in 2010. Statement 4750 issued by the ICASL
standards, in terms of Companies Act No. (SLRSPS 4750), to meet the compliance
7 of 2007, Banking Act No. 30 of 1988 and The Bank’s assessment was based on requirement of the said Corporate
other relevant financial and governance processes documented by the respective Governance directive. Their findings
reporting requirements. To facilitate the process owners. For the successful presented in their report dated 15th
review, the Committee considered reports implementation of this task, a steering February 2018 addressed to the Board
from the Group Chief Financial Officer committee (Internal Control Over Financial are consistent with the matters disclosed
and reports from the External Auditors on Reporting Steering Committee) headed above and any inconsistencies to those
the outcome of the half-year review and by the Group Chief Financial Officer reported by the Board on pages 150 to 166
Annual Audit. comprising of Corporate Management have not been identified.
and other relevant Department Heads
ICASL has issued the Sri Lanka was formulated in 2010 with the guidance Internal Audit
Accounting Standard - SLFRS 9 (Financial of the Bank’s External Auditors (Ernst & During the year, the Board Audit
Instruments), which would be effective Young). At present, Group Chief Financial Committee continued to fulfill its mandate
from 1st January 2018. The Bank Officer, Chief Internal Auditor, Group Chief to monitor and review the scope, extent
commenced working towards this goal Risk Officer, Group Compliance Officer and effectiveness of the activities of the
during the year 2016 with the assistance and Company Secretary serve in the Bank’s Internal Audit Department, including
of an external consultant. The Bank has Internal Control Over Financial Reporting review of the progress made on Audit
Steering Committee. The Internal Audit activities and achievements against the
disclosed the relevant details on potential
Department carried out walk through tests Bank’s Audit Plan. The Committee reviewed
implications in the Financial Statements
on the documented processes to establish the Internal Audit Plan and monitored
for the year ended 31st December 2017
their adequacy and commented where its implementation through regular
as required by the reporting framework in
necessary. communications with the Chief Internal
Note No. 4.1 to the Financial Statements.
Auditor.
Based on Internal Auditors’ and External
Sri Lanka Accounting Standard - SLFRS
Auditors’ assessments, the Board has In parallel, reviews were also conducted to
15 (Revenue from Contracts with
concluded that, as of 31st December assess the efficiency of the Internal Audit
Customers) would also become effective
2017, the Bank’s Internal Control Over Function in its capacity as the “Third-line-
from 1st January 2018. The Bank, with
Financial Reporting is effective. Directors’ of-defense”. In its role as the “Third-line-
the assistance of an external consultant,
Statement on the Bank’s Internal Control of-defense”, the Internal Audit Department
carried out an impact assessment,
Over Financial Reporting is provided on is required to conduct system audits,
essentially focusing on the material fee
pages 189 & 190. The Bank’s External Branch, Zonal Office and Head Office
and commission income categories.
Auditors have audited the effectiveness of Departments’ audits as well as Forensic
After analysing the current accounting
the Bank’s Internal Control Over Financial / Fraud Investigations in order to provide
treatment with the requirements of SLFRS Reporting and have reported to the Board an independent, objective assurance and
15, it was established that the adoption of that nothing has come to their attention consulting services adding value and
this Accounting Standard in 2018 does not that causes them to believe that the improving the operations by bringing a
have a material impact on the Bank. financial reporting is inconsistent with systematic and disciplined approach to
their understanding of the processes evaluate and improve the effectiveness of
Internal Control Over Financial Reporting adopted by the Board in the review of the the Group’s governance, risk management
(ICOFR) design and effectiveness of the internal and internal controls. Accordingly, in 2017
The Bank is required to comply with control system of the Bank. The External the Internal Audit Department carried out
Section 3(8)(ii)(b) of the Banking Act Auditors’ Report on the Bank’s Internal comprehensive audits covering all aspects
Direction No. 11 of 2007 and assess the Control Over Financial Reporting is of the business. The areas covered and
effectiveness of Internal Control Over provided on page 191. the regularity of audits were dependent
Financial Reporting as of 31st December on the risk boundary for each section,
2017. Annual Corporate Governance Report with higher risk areas subject to more
As required by Section 3(8)(ii)(g) of the frequent audits. To further augment this
Banking Act Direction No. 11 of 2007,
on Corporate Governance for Licensed
GRI 102-34
process, the Internal Audit Department 4. Reviewed the Management Letter December 2018, subject to the approval of
commenced “Root Cause Analysis” in the issued by the External Auditors shareholders at the next Annual General
year under review, a new technique to together with management responses Meeting.
examine findings of Branch / Department thereto.
audits and isolate possible systemic Whistle Blowing
5. Met the External Auditors on two
issues to be escalated to the Board for The Bank’s Whistle Blowing Policy
occasions during the year without
corrective action. Of the Internal Audit continued to be implemented as a
the Executive Directors and the
reports prepared on this basis, 736 Branch component of the Corporate Fraud Risk
Management being present to ensure
reports, 32 Department reports and 05 Management Framework. The Policy allows
that there was no limitation of scope
reports on Subsidiaries, were reviewed by any team member who has a legitimate
in relation to the Audit and to allow for
the Board Audit Committee during 2017, concern on an existing or potential
full disclosure of any incidents, which
with recommendations made to Corporate “wrong doing”, by any person within the
could have had a negative impact on
Management along with follow up action Bank, to come forward voluntarily, and
the effectiveness of the External Audit.
to ensure that suggestions were applied in bring such concern to the notice of the
It was concluded that there was no
practice. Chairman of the Board Audit Committee
cause for concern.
through the Company Secretary. Concerns
The Committee also reviewed the major 6. Reviewed the Non-Audit Services raised are investigated and the identity
findings of Internal Investigations carried provided by the External Auditors and of the person raising the concern is kept
out during the year. was of the view that such services confidential, Even anonymous complaints
were not within the category of are investigated under the said policy.
All Internal Audit reports were made services identified as prohibited under: This procedure continues to be strictly
available to External Auditors as well. monitored by the Board Audit Committee.
y The guidelines issued by the
Central Bank of Sri Lanka for
The Committee reviewed the resource REPORTING TO THE BOARD
External Auditors relating to their
requirements of the Internal Audit
statutory duties in terms of Section The Minutes of the Committee meetings
Department and conducted performance
39 of the Banking Act No. 30 of are tabled at the Board meetings enabling
appraisals of 2016 for the Head and
1988. all Board members to have access to them.
senior staff members of the Internal Audit
Department. The performance evaluation y The Guideline for Listed Companies
PROFESSIONAL ADVICE
of the Head and the Senior staff members on Audit and Audit Committees
of the Internal Audit Department for issued by the Securities and The Committee has the authority to seek
the year 2017 will be carried out by the Exchange Commission of Sri Lanka. external professional advice on matters
committee during the first quarter of 2018. within its purview and from time to time.
7. Reviewed the Letter of Representation During the year, consultations were held
issued to the External Auditors by the with various parties, on matters under the
External Auditors
Board. Committee’s purview.
With regard to the External Audit Function
of the Bank, the role played by the 8. Reviewed the Letter of Independence
Confirmation issued by the External BOARD AUDIT COMMITTEE EVALUATION
Committee is as follows:
Auditors as required by the Companies The annual evaluation of the Committee
1. Undertook the annual evaluation of Act No. 7 of 2007, confirming that was conducted by the members of the
the Independence and Objectivity they do not have any relationship or Board Audit Committee during the year
of the External Auditor and the interest in the company, which may and concluded that its performance was
effectiveness of the audit process. have a bearing on their independence effective.
within the meaning of the Code of
2. Met with the External Auditors to On behalf of the Board Audit Committee
Conduct and Ethics of the ICASL.
discuss their audit approach and
procedure, including matters relating 9. Reviewed the service period of the
to the scope of the audit and Auditors’ engagement of the External Audit
Independence. partner to ensure that it has not
exceeded five years. RANIL PATHIRANA
3. Reviewed the audited Financial
Statements with the External Auditors The Committee has recommended to Chairman - Board Audit Committee
who are responsible for expressing an the Board, that Messrs Ernst and Young,
opinion on its conformity with the Sri Chartered Accountants, be reappointed Colombo, Sri Lanka
Lanka Accounting Standards. for the financial year ending 31st 15th February 2018
BOARD HUMAN RESOURCES AND

REMUNERATION COMMITTEE REPORT
The Board Human Resources and TERMS OF REFERENCE 5. The Committee shall take on any other
Remuneration Committee (the Committee) The role and functions of the Committee areas and enlarge its scope in cases
was established on 18th May 1988. are regulated by the Banking Act Direction where, in its view or in the Board’s
Mr Deepal Sooriyaarachchi chairs the No. 11 of 2007, the Mandatory Code view it is appropriate if it were to be
Committee as at this date. The Committee of Corporate Governance for Licensed handled by the Committee.
comprises 05 Non Executive Directors. The Commercial Banks issued by the Central PERFORMANCE
Committee’s composition during the period Bank of Sri Lanka.
ended 31st December 2017 is: Organisation Structure
ROLE AND RESPONSIBILITIES Structural changes were introduced in

Mr Deepal Sooriyaarachchi both retail and corporate banking areas in
The overall scope of the Committee is
(Chairman) (IND/NED) order to streamline the business processes
to provide strategic direction to build an
thus enhancing productivity and customer
Mr Channa Palansuriya effective and efficient Human Resource
service standards.
background for the Bank. Based on
(NID/NED)
the said Direction No. 11 of 2007, the
Career and Succession Planning
Mrs Dhara Wijayatilake Committee at its meeting held on 9th
August 2011 adopted the following scope Continued the Executive Talent
(IND/NED)
and responsibilities; Development Programme to ensure that
Miss Annika Senanayake at least 1:1 back up ratio is maintained
(IND/NED) SCOPE for the Key Management Positions of the
Bank.
Mr Deshal De Mel 1. The Committee shall determine the
remuneration policies (salaries,
(NID/NED) – Served on the Committee until Enhanced Competency Development
allowances and other financial
01.07.2017 The Bank’s competency development
payments) relating to Directors, Chief
Mrs Saumya Amarasekera Executive Officer (CEO / MD) and Key initiatives were mainly focused on
(NID/NED) Management Personnel (KMPs) of the developing ‘Leaders at all levels’ and
Bank. to inculcate a sales oriented culture. In
(NID - Non Independent Director, IND - support of the Bank’s digital readiness
Independent Director, NED – Non Executive 2. The Committee shall set goals and and team members’ convenience, 50% of
Director). targets for CEO / MD and KMPs. the competency development initiatives
3. The Committee shall evaluate the were channeled through online/distance
Brief profiles of the members are given on learning.
performance of the CEO and KMPs
pages 16 to 21 of the Annual Report. The
against set targets and goals
Company Secretary of the Bank functions Rewards for Innovation and Performance
periodically and determine the basis
as the Secretary to the Committee.
for revising remuneration, benefits Addenda were brought into the existing
and other payments of performance Rewards and Recognition Scheme in order
MEETINGS
based incentives. to recognise best business unit/s based on
During the financial year ended 31st pre-defined criteria. This is in addition to
December 2017, 12 meetings were held. 4. The Committee reviews
the existing criteria where individuals and
The attendance of the members of these recommendations by the Management
teams are recognised for their outstanding
meetings is given on page 132 of the with regard to remuneration and
performance.
Annual Report. The Managing Director other benefits afforded to the staff
(MD) and the Group Chief Human Resource and present same for approval of the
Introduction of a process where all Chief
Officer as well as other executive staff Board as well as providing guidance to
Managers were given an opportunity to
attend meetings by invitation on a need the Management on required changes
make brief presentation to the Board thus
basis and assist in the Committee’s to salaries and other benefits, having
giving the Board visibility to the depth of
deliberations by providing relevant considered the strategic priorities and
the Bank’s talent pool.
information and participating in the direction of the Bank.
analysis of information, except when their
own compensation packages or other
matters relating to them are reviewed.
Performance Management System BOARD HUMAN RESOURCES AND

Successful implementation of REMUNERATION COMMITTEE EVALUATION
Performance Based Team Bonus Scheme The annual evaluation of the Committee
rewarding 72% of team members with was conducted by the members of
maximum bonus entitlement. the Board Human Resources and
Remuneration Committee during the year
Special Recognitions/Achievements and concluded that its performance was
effective.
1 Award for Talent Management at Chief
Marketing Officer Asia Awards 2016
APPRECIATION
2. National HR Excellence Gold Award The Committee wishes to thank Mr Deshal
2016 De Mel who served on the Committee until
3. Best Employer Brand Award Sri Lanka 01st July 2017 and resigned during the
at South Asian Partnership Summit & year, for his valuable contributions over the
Business Excellence Awards 2016 years.
REPORTING TO THE BOARD On behalf of the Board Human Resources

The Minutes of the Committee meetings and Remuneration Committee
are tabled at Board meetings enabling all
Board members to have access to them.
PROFESSIONAL ADVICE
DEEPAL SOORIYAARACHCHI
The Committee has the authority to seek
Chairman – Board Human Resources and
external professional advice on matters
Remuneration Committee
within its purview.
Colombo, Sri Lanka
15th February 2018
BOARD NOMINATION COMMITTEE REPORT
The Board Nomination Committee (the also makes recommendations to the 9. The Committee is responsible
Committee) was formed on 10th January Board with regard to any changes it for ensuring that it is chaired by
2002 which comprises 05 Non Executive considers appropriate for the progress an Independent Director and is
Directors. The composition of the and success of the Bank. constituted with a majority of
Committee as at 31st December 2017 is: Independent Directors.
2. Recommends suitable persons after
careful consideration based on the 10. To make recommendations on any
Miss Annika Senanayake
competencies required for a particular other matter delegated by the Board
(Chairperson) (IND/NED) job and the Bank’s business need. of Directors.
Mr Channa Palansuriya 3. Considers and recommends the
PERFORMANCE
(NID/NED) requirements of additional/new
expertise of current Directors and The members of the Committee work
Mr Sanjiva Senanayake recommends succession planning for closely with the Board, in reviewing the
Directors resigning or relinquishing structure and skills needed for a steadfast,
(IND/NED)
their positions or retiring. strong and successful organisation.
Mrs Dhara Wijayatilake Further, the Committee also reviews its
4. Carefully reviews management own performance, constitution and Terms
(IND/NED) progression and succession planning of Reference to ensure that it is operating
for the Key Management Personnel effectively, and if required recommends
Mrs Saumya Amarasekera
(KMPs). The Committee ensures that necessary changes.
(NID/NED) management personnel of high calibre
are appointed to guide the Bank to During the year under review, the
(NID - Non Independent Director, IND
achieve greater heights. Committee has continued to focus on
- Independent Director and NED - Non
Executive Director) a progressive organisational plan in
5. The Committee sets criteria including
keeping with the forward and evolutionary
qualifications, experience and key
The Managing Director (MD) attends momentum of the Sri Lankan banking
attributes required for eligibility to
industry.
meetings by invitation. be considered for appointment or
promotion to the post of MD and other
REPORTING TO THE BOARD
Brief profiles of the members are given on KMPs.
pages 16 to 21 of the Annual Report. The The Minutes of the Board Nomination
6. The Committee is also responsible Committee meetings are tabled at Board
Company Secretary of the Bank functions
for recommending to the Board meetings enabling all Board members to
as the Secretary to the Committee.
of Directors, with regard to the have access to them.
positions of MD and KMPs as and
MEETINGS
when vacancies occur. It is mandatory PROFESSIONAL ADVICE
During 2017 the Committee held 13 for the Committee to evaluate the
meetings. Attendance by the Committee The Committee has the authority to seek
balance of skills, knowledge and
members at each of these meetings is external professional advice on matters
experience on the Board before
given in the table on page 132 of the under its purview.
such appointment. The Committee
Annual Report. is accountable for preparing a
BOARD NOMINATION COMMITTEE EVALUATION
description of the role / position that
TERMS OF REFERENCE is vacated; it should clearly analyse The annual evaluation of the Committee
The role and functions of the Committee the capabilities and skills required for was conducted by the members of the
are regulated by the Banking Act Direction a particular appointment. Board Nomination Committee during the
No. 11 of 2007, the Mandatory Code year and concluded that its performance
7. The Committee is accountable for was effective.
of Corporate Governance for Licensed
making recommendations after review
Commercial Banks issued by the Central
to re-appoint Non Executive Directors On behalf of the Board Nomination
Bank of Sri Lanka (CBSL).
annually as recommended by CBSL Committee
guidelines and when they are due for
ROLE AND RESPONSIBILITIES
re-appointment as per the Articles of
1. Continuously reviews the structure Association of the Bank.
and composition of the Board of
Directors (the Board). The Committee 8. The Committee is responsible for ANNIKA SENANAYAKE
also reviews the skills, knowledge, ensuring that Directors, MD and
Chairperson - Board Nomination
expertise and experience of the Board KMPs are fit and proper persons to
Committee
required in comparison to the current hold office in compliance with the
banking environment. The Committee regulatory and statutory provisions. Colombo, Sri Lanka
15th February 2018
BOARD INTEGRATED RISK GRI 102-30
MANAGEMENT COMMITTEE REPORT

The Board Integrated Risk Management Key Management Personnel (KMPs) 5. Monitoring adherence to Risk
Committee (the Committee) was supervising Credit, Market, Liquidity, Management policies of the Bank
established on 27th March 2008 as a Operational, Strategic and Reputational pertaining to Credit, Market, Liquidity
Sub-Committee of the Board of Directors Risks also attended meetings of the Operational, Reputational and
(the Board) in compliance with the Banking Committee, by invitation. Compliance Risks, Business Continuity
Act Direction No. 11 of 2007 on Corporate Plan and Disaster Recovery Plan and
Governance for Licensed Commercial Brief profiles of the Directors representing recommend to the Board as and when
Banks in Sri Lanka. A review of the the Committee are given on pages 16 to required.
Integrated Risk Management process of 21 of the Annual Report. The Company
Secretary functions as the Secretary to the 6. Ensuring effective design and
the Bank has been detailed in pages 118 to
Committee. implementation of a Risk Management
125 of the Annual Report.
Framework with respect to Integrated
MEETINGS Risk Management, Risk Appetite,
MEMBERS:
Internal Capital Adequacy Assessment
The Committee comprises four Non The Committee held seven meetings
Process (ICAAP) and Stress Testing.
Executive Directors, one Executive Director during the year 2017. The attendance of
and two members from the Management the Committee members at each of these 7. Encouraging a proactive, forward
as given below. meetings is given in the table on page 132 looking risk awareness culture within
of the Annual Report. the Bank
Board representatives:
TERMS OF REFERENCE GOVERNANCE
Mr Sanjiva Senanayake
The responsibilities of the Committee as The governance structure for the
(IND/NED) (Chairman)
mandated by the Board include: management of Risk at the Bank is set out
Mr Deepal Sooriyaarachchi in the Risk Management Report given on
1. Assessing all risks including credit, pages 118 to 125 of the Annual Report.
(IND/NED)
market, liquidity, operational and
Miss Annika Senanayake strategic risks to the Bank on a ROLE AND RESPONSIBILITIES
(IND/NED) monthly basis through appropriate The Committee receives periodic reports
risk indicators and management on the Bank’s performance against Key
Mr Ranil Pathirana information and in the instance of Risk Indicators from the Risk Management
(IND/NED) - served on the Committee until subsidiary companies, on Bank and Department and Key Performance
01.04.2017 Group basis. Indicators from Compliance Department.
2. Reviewing the adequacy and The reports and the relevant background
Mrs Saumya Amarasekera information have been reviewed in depth
effectiveness of all management level
(NID/NED) and necessary Risk Mitigation measures
committees such as Credit Policy,
Risk and Portfolio Review Committee, have been initiated where necessary, in
Mr Nanda Fernando
ALCO etc. to address specific risks and order to maintain the Bank’s exposure
(ED) to Risk within its Risk Appetite limits and
manage those risks within quantitative
and qualitative risk limits specified by to facilitate compliance with regulatory
Mr Ranjith Samaranayake
the Committee. requirements, while facilitating the
(ED) – retired w.e.f. 09.08.2017 achievement of sound business results.
3. Ensuring that processes are in
Management representatives: place to maintain risks within The Committee is supported by the
Mrs Achala Wickremaratne parameters set by the Bank’s policies Integrated Risk Management Department
(Group Chief Risk Officer) in compliance with regulatory, and Compliance Department of the Bank,
supervisory and Corporate Governance headed by the Group Chief Risk Officer and
Mr Lasantha Senaratne requirements the Group Compliance Officer respectively,
(Group Compliance Officer) in discharging its responsibilities.
4. Assessing all aspects of Risk
(NID - Non Independent Director, IND - Management and Compliance are
addressed in a comprehensive RISK APPETITE
Independent Director, NED – Non Executive
Business Continuity Plan. The Risk Appetite of the Bank in all key
Director and ED - Executive Director)
risk areas, namely, Credit Risk, Market
Board Integrated Risk Management Committee Report
Risk and Operational Risk, have been Operational Risk Management in the 10. Performing Evaluation of Senior Officers
defined and approved by the Board on Bank. The Committee carried out the
the recommendation of the Committee. performance evaluation of the Group
Regular reports have been provided to the 6. Internal Capital Adequacy Assessment Risk Officer and Group Compliance
Committee on the actual performance of Process (ICAAP): Officer for 2016 during 2017 and will
identified risk areas. ICAAP document for both the Bank carry out the performance evaluation
and the Group was developed for 2016 of the Group Risk Officer and Group
PERFORMANCE year end position, and was reviewed Compliance Officer for 2017 during
The Committee undertook the following and approved by the Committee the first quarter of 2018.
activities in discharging its responsibilities and the Board. This document was
during the year: forwarded to the Regulator in 2017, REPORTING TO THE BOARD
well before the regulatory timeline. The Minutes of the Committee meetings
1. Risk Appetite: are tabled at Board meetings.
Risk Appetite limits and Key Risk 7. Compliance:
Indicators for all key risk areas were The Committee received Compliance PROFESSIONAL ADVICE
set and periodically monitored. Reports from the Group Compliance The Committee has the authority to seek
Officer and reviewed same to assess external professional advice on matters
2. Risk Management Policies: the extent of compliance with the under its purview.
Policies related to Risk Management regulatory requirements.
and Compliance areas were BOARD INTEGRATED RISK MANAGEMENT
reviewed during the year, amended 8. Internal Controls: COMMITTEE EVALUATION
as appropriate and have been Internal Loss Event Reports and the The annual evaluation of the Committee
incorporated. adequacy of internal control and was conducted by the members of the
procedures (except Internal Controls Board Integrated Risk Management
3. Stress Testing: over Financial Reporting which is Committee during the year who concluded
The overall Stress Testing Framework handled by Board Audit Committee) that its performance was effective.
was reviewed during the year and the were reviewed regularly and
results of the tests were monitored. recommendations for improvements APPRECIATION
Necessary recommendations were made. Progress on The Committee wishes to thank Mr
to improve the Bank’s Stress implementation of recommendations Ranil Pathirana for his service on the
Tolerance levels were discussed and was also monitored. Committee until 01st April 2017 and Mr
implemented as required. Ranjith Samaranayake, who retired w.e.f.
9. Outsourced Activities: 09.08.2017, for their valuable contributions
4. Progress on BASEL II/BASEL III The implementation of the over the years.
Compliance: Outsourcing Policy was monitored
Progress on the implementation of to ensure compliance with CBSL On behalf of the Board Integrated Risk
key components of BASEL II/BASEL III directives and guidelines. Management Committee
against set targets was reviewed and
monitored to ensure that the Bank is The Committee actively
able to meet the timelines set by the encouraged all the participants in
Central Bank of Sri Lanka (CBSL). Committee meetings to view risks
unconventionally as well, going beyond SANJIVA SENANAYAKE
5. IT Systems Support: rules and regulations, focusing on the Chairman - Board Integrated Risk
future and taking into account event Management Committee
Recommendations were made to
enhance efficiency of monitoring and and circumstances external to the
Bank, which may not get captured in Colombo, Sri Lanka
to reduce/avoid risks through the use
standard risk measures. 15th February 2018
of IT Systems in respect of Credit and
BOARD RELATED PARTY TRANSACTIONS

REVIEW COMMITTEE REPORT
The Board Related Party Transactions MEETINGS REVIEW FUNCTION OF THE COMMITTEE
Review Committee (the Committee) During 2017, the Committee held 04 Review of the relevant Related Party
which was established on 30th July 2015 meetings. Attendance by the Committee Transactions by the Committee takes
comprises four Non Executive Directors members at each of these meetings is place quarterly. The Committee has
and 1 Executive Director. The above given in the table on page 132 of the communicated its observations to the
composition is in compliance with the Annual Report. Board on Related Party Transactions
provisions of the Code of Best Practices published in the Note 49 to the Financial
issued by the Securities & Exchange TERMS OF REFERENCE Statements.
Commission of Sri Lanka (the “Code”)
The Terms of Reference of the Committee
and Section 9 of the Listing Rules of the REPORTING TO THE BOARD
are based on the Code and the Rules and
Colombo Stock Exchange (the “Rules”)
contain its role and responsibilities which The Minutes of the Committee meetings
regarding the composition of the
are as follows- are tabled at Board meetings enabling all
Committee. Brief profiles of the members
Board members to have access to same.
are given on pages 16 to 21 of the Annual 1. Developing and maintaining principles
Report. The Company Secretary functions on dealing with Related Party PROFESSIONAL ADVICE
as the Secretary to the Committee. Transactions consistent with the The Committee has the authority to seek
provisions of the Code and the Rules, external professional advice on matters
Mrs Dhara Wijayatilake
for adoption and implementation within its purview.
(Chairperson) (IND/NED) Bank-wide.
BOARD RELATED PARTY TRANSACTIONS
Prof Malik Ranasinghe 2. Reviewing all proposed Related Party REVIEW COMMITTEE EVALUATION
Transactions in compliance with the
(IND/NED) The annual evaluation of the Committee
provisions of the Code and the Rules.
was conducted by the members of the
Mr Sanjiva Senanayake 3. Advising the Board on making Board Related Party Transactions Review
(IND/NED) immediate Market Disclosures and Committee during the year who concluded
Disclosures in the Annual Report that its performance was effective.
Mr Deepal Sooriyaarachchi where necessary, in respect of RPTs, in
(IND/NED) compliance with the provisions of the APPRECIATION
Code and the Rules, Procedures and The Committee wishes to thank Mr
Mr Nanda Fernando Directives/ Guidelines adopted by the Ranjith Samaranayake for his valuable
Committee for reviewing RPTs. contributions over the years.
(ED) appointed w.e.f. 01.09.2017
4. Ensuring that Procedures / Directives/
Mr Ranjith Samaranayake Guidelines are issued to compel all On behalf of the Board Related Party
RPTs, to be referred to the Committee Transactions Review Committee
(ED) retired w.e.f. 09.08.2017
for review.
(NID - Non Independent Director,
IND - Independent Director, NED - Non
Executive Director and ED - Executive DHARA WIJAYATILAKE
Director)
Chairperson – Board Related Party
Transactions Review Committee
Colombo, Sri Lanka

15th February 2018
EVOLVING YOUR BANK TO A NEW SET OF BENCHMARKS
FINANCIAL INFORMATION
Financial Calendar .............................................178 Statement of Directors’
Annual Report of the Board of Responsibility for Financial
Directors on the Affairs of Reporting .........................................................193
the Company ...................................................179 Independent Auditor’s Report to the
Directors’ Interest in Contracts Shareholders of Sampath Bank PLC .........195
with the Bank ..................................................188 Statement of Profit or Loss..............................196
Directors’ Statement on Internal Statement of Comprehensive Income...........197
Control Over Financial Reporting ...............189 Statement of Financial Position .....................198
Independent Assurance Report to Statement of Cash Flows..................................200
the Board of Directors of Statement of Changes in Equity .....................202
Sampath Bank PLC ........................................191 Notes to the Financial Statements ................204
Managing Director’s and Group
Chief Financial Officer’s
Responsibility Statement ............................192
FINANCIAL CALENDAR
Financial Calendar - 2017
2016 Annual Report and Audited Financial Statements signed on 13th February 2017
31st Annual General Meeting held on 31st March 2017
Rs 14.00 per share Interim Scrip Dividend for 2016 distributed on 28th February 2017
Rs 4.75 per share Final Cash Dividend for 2016 distributed on 31st March 2017
2017 Annual Report and Audited Financial Statements signed on 15th February 2018
32nd Annual General Meeting to be held on 29th March 2018
Interim Financial Statements published in terms of Rule 7.4 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
2016 4th Quarter interim results released on 14th February 2017 27th February 2017 27th February 2017 27th February 2017
2017 1st Quarter interim results released on 05th May 2017 09th May 2017 16th May 2017 16th May 2017
2017 2nd Quarter interim results released on 04th August 2017 11th August 2017 15th August 2017 15th August 2017
2017 3rd Quarter interim results released on 06th November 2017 10th November 2017 14th November 2017 14th November 2017
Proposed Financial Calendar - 2018
2018 Annual Report and Audited Financial Statements to be signed in February 2019
33rd Annual General Meeting to be held in March 2019
Dividend for 2018 to be payable in April 2019*
Interim Financial Statements to be published in terms of Rule 7.4 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
2017 4th Quarter interim results 28th February 2018 31st March 2018 31st March 2018 31st March 2018
to be released on or before
2018 1st Quarter interim results 15th May 2018 31st May 2018 31st May 2018 31st May 2018
2018 2nd Quarter interim results 15th August 2018 31st August 2018 31st August 2018 31st August 2018
2018 3rd Quarter interim results 15th November 2018 30th November 2018 30th November 2018 30th November 2018
2018 4th Quarter interim results 28th February 2019 31st March 2019 31st March 2019 31st March 2019
* Subject to confirmation by Directors and Shareholders

INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 179
ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE

AFFAIRS OF THE COMPANY
1 GENERAL Sampath Bank PLC (“the Bank”) is a 2 VISION, VALUES AND CORPORATE
The Board of Directors of Sampath Licensed Commercial Bank registered CONDUCT
Bank PLC has pleasure in presenting under the Banking Act No. 30 of 1988 The Bank’s Vision and Values are given
its Annual Report on the State (“Banking Act”) and was incorporated in page 12 of the Annual Report. The
of Affairs of the Company to the as a public limited liability company business activities of the Bank are
members of Sampath Bank PLC in Sri Lanka on 10th March 1986 conducted at a high level of ethical
for the financial year ended 31st under the Companies Act No. 17 of standards in achieving its Vision.
December 2017, together with the 1982 initially as “Investment and
audited Financial Statements of Credit Bank Limited”, subsequently 3 PRINCIPAL BUSINESS ACTIVITIES
the Bank, Consolidated Financial changed to Sampath Bank Limited. The principal business activities of the
Statements of the Group for that The Company was re-registered as per Bank and the Group during the year
year and the Auditors’ Report the requirements of the Companies are given below as required by the
on those Financial Statements, Act No. 7 of 2007 (“Companies Section 168 (1) (a) of the Companies
conforming to the requirements of Act”) on 28th April 2008 under the Act.
the Companies Act No. 7 of 2007 and name “Sampath Bank PLC” with the
the Banking Act No. 30 of 1988. The Registrar General of Companies. The 3.1 Bank
Financial Statements reviewed and re-registration number of the Bank is The principal activities of the Bank
recommended by the Board Audit PQ 144. include accepting deposits, corporate
Committee were approved by the and retail banking, project financing,
Board of Directors on 15th February The ordinary shares of the Bank trade financing, treasury and
2018. are listed on the main board of the investment services, issuing of local
Colombo Stock Exchange. The Bank’s and international credit and debit
This report includes the information unsecured subordinated redeemable cards, off-shore banking, resident
required by the Companies Act No. debentures including the recently and non-resident foreign currency
7 of 2007, Banking Act Direction No. issued BASEL III compliant debentures operations, electronic banking
11 of 2007 on Corporate Governance are also listed on the Colombo Stock services: such as telephone banking,
for Licensed Commercial Banks and Exchange. internet banking, mobile banking,
subsequent amendments thereto, payment gateway, money remittance
Listing Rules of the Colombo Stock Fitch Rating Lanka Limited has facilities, pawning, leasing, factoring,
Exchange and is also guided by the affirmed Bank’s National Long Term hire purchase, travel related services
recommended best practices on Rating of A+ (lka) with negative and dealing in Government Securities
Corporate Governance. outlook and subordinated debentures etc.
at ‘A(lka)’. Moody’s Investors Service
This Report was approved by the (“Moody’s”) has assigned an Issuer 3.2 Subsidiaries
Board of Directors on 15th February and Long Term Local Currency Deposit
The Bank has four subsidiaries as
2018. The appropriate number of Rating of B1 with negative outlook.
at 31st December 2017. Names of
copies of the Annual Report will be
the subsidiaries and their principal
submitted to the Colombo Stock The Registered Office as well as the
business activities are as tabulated
Exchange, Registrar of Companies Head Office of the Bank is located at
below:
and to the Sri Lanka Accounting and No. 110, Sir James Peiris Mawatha,
Auditing Standard Monitoring Board Colombo 02, Sri Lanka.
within the statutory deadlines.
Entity Principal Business Activities
Siyapatha Finance PLC Granting leasing, hire purchase, factoring & other loan facilities & accepting
deposits
Sampath Centre Ltd Renting of commercial property
S C Securities (Pvt) Ltd Stock broking
Sampath Information Technology Solutions Ltd Software development, renting of IT equipment, IT services outsourcing and
document management services.
Annual Report of the Board of Directors on the

Affairs of the Company
4 CHANGES TO THE GROUP STRUCTURE 7 FINANCIAL STATEMENTS carried out the audit on the Financial
The Bank invested additional The Financial Statements of the Statements of the Group and the Bank
Rs 75 Mn and Rs 25 Mn in S C Group and the Bank have been for the year ended 31st December
Securities (Pvt) Ltd on 17th April 2017 prepared in accordance with the 2017 and their report on those
and 26th December 2017 respectively Sri Lanka Accounting Standards Financial Statements, as required by
thus increasing its investment in this (SLFRSs & LKASs) laid down by the Section 168 (1) (c) of the Companies
fully owned subsidiary from Rs 78.9 Institute of Chartered Accountants Act is given on page 195.
Mn to Rs 178.9 Mn. There were no of Sri Lanka, and comply with the
other changes made to the Group requirements of the Companies Act 10 SIGNIFICANT ACCOUNTING POLICIES
structure during the year under review. No. 7 of 2007, the Banking Act No. 30 The significant accounting policies
of 1988 and regulatory requirements adopted in the preparation of the
5 REVIEW OF OPERATIONS inclusive of specific disclosures. The Financial Statements are given on
A review of the financial and aforementioned Financial Statements pages 204 to 333 which comply with
operational performance of the Bank for the year ended 31st December Section 168 (1) (d) of the Companies
and the Group together with important 2017 duly signed by the Group Chief Act.
events that took place during the Financial Officer, three Directors of the
year 2017 as required by the Section Bank and the Company Secretary are 11 FINANCIAL RESULTS AND
168 (1) (a) of the Companies Act are given on pages 196 to 333 which form APPROPRIATIONS
contained in the Chairman’s Message an integral part of this Annual Report 11.1 Income
(pages 32 to 35), the Managing of the Board of Directors (as per the The gross income of the Group for
Director’s Review (pages 36 to 40), Section 168 (1) (b) of the Companies 2017 was Rs 97,440,220,000/-
and Management Discussion and Act). (2016: Rs 70,445,341,000/-)
Analysis (pages 53 to 115). These whilst the Bank’s gross income was
reports form an integral part of 8 DIRECTORS’ RESPONSIBILITY FOR Rs 92,589,785,000/- (2016: Rs
the Annual Report of the Board of FINANCIAL REPORTING 67,584,689,000/-). An analysis of the
Directors. The Directors are responsible for the gross income is given in Note 6 to the
preparation of Financial Statements Financial Statements.
6 FUTURE DEVELOPMENTS of the Group and the Bank to reflect
The Bank focuses on a business a true and fair view of its state of 11.2 Profit and Appropriations
expansion drive through the existing affairs. The Directors are of the view The Group has recorded a 33%
Branch Network, concentrating that these Financial Statements growth in both profit before tax and
mainly on its core banking appearing on pages 196 to 333 have profit after tax in 2017. The Bank’s
operations to increase its market been prepared in conformity with profit before tax and profit after tax
share and profitability. This will be the requirements of the Sri Lanka for the year too recorded a growth
further supplemented by a more Accounting Standards, Companies of 32% and 33% respectively over
vigorous drive on innovative product Act, Sri Lanka Accounting and Auditing 2016. Group’s Total Comprehensive
development, process improvements Standards Act No. 15 of 1995, the Income (net of tax) for the year
and staff development, aimed Banking Act and amendments thereto, is Rs 12,685,200,000/- (2016:
at fulfilling the rapidly changing the Listing Rules of the Colombo Rs 11,760,912,000/-) whilst
customer needs in the challenging Stock Exchange and the Corporate the Bank has recorded a Total
market conditions and maximizing Governance Code for Licensed Comprehensive Income (net of tax)
the value we create for all the Commercial Banks issued by the of Rs 12,679,910,000/- (2016: Rs
stakeholders. No new branches were Central Bank of Sri Lanka (CBSL). The 10,484,794,000/-). A detailed breakup
opened during the year. As required Statement of Directors’ Responsibility of the profits & appropriations of the
under Section 168 (1) (a) of the for Financial Reporting is given on Bank is given below:
Companies Act, an overview of the pages 193 & 194 and forms an
future development of the Bank and integral part of the Annual Report of
the Group is given in the Chairman’s the Board of Directors.
Message (pages 32 to 35), the
Managing Director’s Review (pages 36 9 AUDITORS’ REPORT
to 40), and Management Discussion The Auditors of the Bank are
and Analysis (pages 53 to 115). Messrs Ernst & Young, Chartered
These reports form an integral part Accountants. Messrs Ernst & Young
of the Annual Report of the Board of
Directors.
For the year ended 31st December 2017 2016

Rs 000 Rs 000
Profit for the year after payment of all operating expenses and provision for 16,605,925 12,599,858
depreciation and contingencies
Less: Income tax expense 4,501,805 3,475,188
Net profit after taxation 12,104,120 9,124,670
Other comprehensive income (OCI)
Actuarial (losses) / gains on defined benefit plans (634,766) 564,648
Deferred tax effect on above 177,735 (158,102)
11,647,089 9,531,216
Unappropriated balance brought forward from previous year 4,397,449 3,066,297
Balance available before appropriation / adjustments 16,044,538 12,597,513
Appropriations
Transfer to Statutory Reserve Fund (610,000) (460,000)
Transfer to General Reserve (6,000,000) (5,500,000)
Dividend
Final cash dividend - 2015 (Rs 6.00 per share) - (1,033,876)
Final scrip dividend - 2015 (Rs 7.00 per share) - (1,206,188)
Interim scrip dividend - 2016 (Rs 14.00 per share) (2,477,734) -
Final cash dividend - 2016 (Rs 4.75 per share) (884,405) -
Unappropriated balance carried forward 6,072,399 4,397,449
Proposed dividend
Interim Scrip dividend - 2016 (Rs 14.00 per share) 2,477,734
Final cash dividend - 2016 (Rs 4.75 per share) 884,405
Final scrip dividend - 2017 (Rs 17.20 per share) 4,598,427
12 TAXATION 13 DIVIDEND The Board of Directors was satisfied

Income tax rate applicable on the The Board of Directors of the Bank has that the Bank would meet the solvency
Bank’s domestic operations and recommended a final scrip dividend of test immediately after the payment
on-shore and off-shore operations of Rs 17.20 per share to be paid for the of final dividend proposed, in terms of
the off-shore Banking Centre is 28% financial year ended 31st December the Section 31 (3) of the Companies
(2016: 28%). The Bank is also liable 2017, such right to the dividend Act. The Board provided the Statement
for VAT and NBT on financial services applying to the increased number of Solvency to the Auditors and
at 15% (2016: 11% & 15%) and 2% of shares allotted pursuant to the obtained Certificate of Solvency from
(2016: 2%) respectively. Rights Issue 2018 announced on 19th the Auditors in respect of the dividend
December 2017 as well. Further, in payment conforming to the statutory
The Group has also provided deferred compliance with the Bank’s Articles provision. Further details are given in
taxation on all known temporary of Association this dividend is to be Note 18 to the Financial Statements.
differences under the liability method, approved by the shareholders at the
as permitted by the Sri Lanka Annual General Meeting to be held on
Accounting Standard - LKAS 12 29th March 2018.
(Income Taxes).

14. RESERVES
A summary of the Group’s reserves is given below.
Rs 000 Rs 000
Statutory Reserve Fund 2,973,000 2,336,422

Revaluation Reserve 5,093,154 5,653,471
Available for Sale Reserve 2,299,721 1,271,319
General Reserve 33,701,026 27,694,236
Retained Profit 8,533,827 6,315,429
Total 52,600,728 43,270,877
15 CAPITAL EXPENDITURE prices into the Financial Statements value of Rs 6,000,000,000/- has an
The total capital expenditure on as at 31st December 2017. There option for conversion to ordinary
acquisition of property, plant and were no significant changes identified voting shares by the Bank, solely if
equipment and intangible assets of by the valuers relating to the market instructed by the Central Bank of Sri
the Group and the Bank amounted to values of other properties in the same Lanka in compliance with Basel III
Rs 2,487,506,000/- and class of assets in December 2017. The requirements.
Rs 2,009,300,000/- respectively (2016 Directors are of the opinion that the
Group: Rs 1,469,514,000/- and Bank: revalued amounts are not in excess The details of the debentures
Rs 762,508,000/-). Details are given of the current market values of such outstanding as at 31st December
in Notes 33 and 34 to the Financial properties. The details of freehold 2017 are given in Note 39.1 to
Statements. properties owned by the Bank are the Financial Statements. These
given in Note 33.4 to the Financial debentures are eligible for the Tier II
16 CAPITAL COMMITMENTS Statements. Capital of the Bank.
The capital expenditure approved and
contracted for, as at the reporting date 19 STATED CAPITAL, DEBENTURES AND The Bank has issued a deep
is given in Note 48.3 to the Financial BONDS discounted zero coupon bond with a
Statements. 19.1 Stated Capital - Bank maturity value of Rs 3,458,108,968/-
The Stated Capital of the Bank as at for 20 years. The present paid up value
17 PROPERTY, PLANT AND EQUIPMENT 31st December 2017 amounted to of this bond is Rs 2,120,767,000/-
(PPE) Rs 16,307,721,908.88 consisting of (2016: Rs 1,942,931,000/-) and this
Details of property, plant and 217,222,236 ordinary shares (2016: forms part of the Tier II Capital. The
equipment are given on Note 33 to the Rs 6,471,199,070.43 consisting of above Bond was issued in August
Financial Statements. 176,981,069 ordinary shares). The 2003 and will mature in August 2023.
number of shares in issue of the Bank The details are given in Note 39.2 to
18 MARKET VALUE OF FREEHOLD increased from 176,981,069 ordinary the Financial Statements.
PROPERTIES shares to 217,222,236 ordinary shares
All freehold lands and buildings of the as a result of the payment of interim 19.3 Issue of Shares and Debt Capital –
Group and the Bank were revalued Scrip Dividend for 2016 and the 1:6 Subsidiaries
in November / December 2016 by Rights Issue in 2017. The Subsidiaries of the Bank did not
professionally qualified independent make any share or debenture issues
valuers, and brought into the Financial The details of the shares issued are during the year other than those
Statements in that year. The Group given in Note 43.1 to the Financial mentioned below. Siyapatha Finance
reassessed the market values of the Statements. PLC issued 1,652,420 Ordinary Shares
entire class of freehold lands and by way of a scrip dividend during
buildings in December 2017 through 19.2 Debt Capital - Bank the year (2016: 1,624,726). As a
professionally qualified independent result its stated capital increased
The Bank has issued rated, unsecured,
valuers, to ensure that the carrying by Rs 58,942,000/- (2016: Rs
subordinated, redeemable debentures
amount of such properties reflects 51,975,000/-) from Rs 576,975,000/-
to the value of Rs 31,000,000,000/-
the current market prices. Accordingly, as at 31st December 2016 to Rs
as at 31st December 2017 (2016:
material market value changes 635,917,000/- as at 31st December
Rs 26,500,000,000/-), which
were identified pertaining to seven 2017. Siyapatha Finance PLC had
are listed on the Colombo Stock
properties and their values were issued rated, unsecured, subordinated,
Exchange. Out of the above, the
adjusted to bring the current market redeemable debentures to the value
debentures issued in 2017 to the
of Rs 1,000,000,000/- during the year, 22 EQUITABLE TREATMENT TO Mr Rushanka Silva was appointed
which are listed on the Colombo Stock SHAREHOLDERS to the Board with effect from 01st
Exchange (2016: Rs 2,500,000,000/-). The Bank has at all times ensured that September 2017 to fill up a casual
all shareholders are treated equitably. vacancy that occurred in the Board.
S C Securities (Pvt) Ltd increased its Mr Deshal De Mel (Director) resigned
share capital by Rs 100,000,000 from 23 THE BOARD OF DIRECTORS from the Board with effect from
Rs 78,921,000/- as at 31st December The Board of Directors of the Bank 01st July 2017 and Mr Ranjith
2016 to Rs 178,921,000/- as at 31st comprises ten (2016: eleven) with Samaranayake (Executive Director)
December 2017. wide financial and commercial retired from the Board with effect
knowledge and experience. The names from 09th August 2017.
20 SHARE INFORMATION of the Directors of the Bank during
Information relating to earnings, the period 1st January 2017 to 31st 25 RETIREMENT AND RE-ELECTION / RE-
dividends, net assets and market value December 2017 are given below APPOINTMENT OF DIRECTORS
per share is given in the Financial as per Section 168 (1) (h) of the In terms of Articles No. 86 and 87
Highlights on page 6. Information Companies Act. Their brief profiles are of the Articles of Association of the
on the trading of the shares and given on pages 16 to 21 of the Annual Company, Mr Sanjiva Senanayake,
movement in the number of shares Report. The classification of Directors Miss Annika Senanayake, Mrs
of the Bank is given in the Investor into Executive (ED), Non-Executive Saumya Amarasekera and Mr Channa
Information section on pages 106 to (NED) and Independent (IND), Non- Palansuriya retire by rotation and
115. Independent (NID) is given against being eligible, offer themselves
the names as per Listing Rules and for re-election on the unanimous
21 SHAREHOLDING Corporate Governance Rules of recommendation of the Board
There were 17,440 registered ordinary Colombo Stock Exchange and Banking Nomination Committee and approval
shareholders as at 31st December Act Direction No. 11 of 2007 issued by of the Board of Directors.
2017 (2016: 17,456). Information the Central Bank of Sri Lanka.
on the distribution of shareholding Mr Rushanka Silva having been
and the respective percentages are 24 CHANGES IN DIRECTORATE appointed to the Board with effect
given on pages 107 and 109 of the The Bank has disclosed the names of from 01st September 2017 to fill
Annual Report. Details of top twenty the persons holding office as Directors up a casual vacancy in the Board,
shareholders, percentages of their of the Bank as at the end of the offers himself for election by the
holdings and percentage holding of accounting period and the names of shareholders in terms of Article 93 of
the public too are given in the Investor any persons who ceased to hold office the Articles of Association.
Information section on page 110. as Directors of the Bank during the
accounting period in terms of Section
168 (1) (h) of the Companies Act.
Name of the Director Classification Remarks
Mr Channa Palansuriya NED/NID Director from 01.01.2012; Deputy Chairman from 26.01.2012 up to 12.11.2015. Re-
appointed as a Director on 28.04.2016 and Chairman since 01.08.2016
Prof Malik Ranasinghe NED/IND Director since 30.08.2011. Deputy Chairman since 01.08.2016
Mr Sanjiva Senanayake NED/IND Director since 01.01.2012; Senior Director since 26.01.2012
Mr Deepal Sooriyaarachchi NED/IND Director since 05.08.2010
Mrs Dhara Wijayatilake NED/IND Director since 30.08.2011
Miss Annika Senanayake NED/IND Director since 01.01.2012
Mr Deshal De Mel NED/NID Director since 01.01.2012 & Resigned w.e.f. 01.07.2017
Mr Ranil Pathirana NED/IND Director since 01.01.2012, Independent Director since 31.01.2015
Mrs Saumya Amarasekera NED/NID Director since 01.06.2012
Mr Rushanka Silva NED/NID Director since 01.09.2017
Mr Nanda Fernando ED Managing Director since 13.09.2016
Mr Ranjith Samaranayake ED Executive Director w.e.f 01.01.2009 & Retired w.e.f. 09.08.2017

Sections 210 and 211 of the 27 REGISTER OF DIRECTORS AND 28.3 Board Nomination Committee
Companies Act do not apply to the SECRETARIES Miss Annika Senanayake (Chairperson)
Bank, in view of the more stringent As required under Section 223 (1)
Mr Channa Palansuriya
provision contained in Section 3 (3) of the Companies Act, the Bank
(i) of Banking Act Direction No. 11 of maintains a Register of Directors Mr Sanjiva Senanayake
2007 on Corporate Governance for and Secretaries which contains the Mrs Dhara Wijayatilake
Licensed Commercial Bank, which name, surname, former name (if Mrs Saumya Amarasekera
restricts the age of a Director of a any), residential address, business,
Licensed Commercial Bank to 70 occupation, dates of appointment and 28.4 Board Integrated Risk Management
years. dates of resignation (if applicable) of Committee
each Director and the Secretary. Mr Sanjiva Senanayake (Chairman)
26 LIST OF DIRECTORS OF THE
SUBSIDIARIES OF THE BANK 28 BOARD SUB COMMITTEES
Names of the Directors of Subsidiary The Board, while assuming the overall
companies are as follows: responsibility and accountability Mr Ranil Pathirana (Until 01.04.2017)
for the management oversight of Mrs Saumya Amarasekera
26.1 Siyapatha Finance PLC the Bank, has also appointed Board Mr Nanda Fernando
Mr Channa Palansuriya (Chairman) Sub Committees to ensure that the Mr Ranjith Samaranayake
Mr W M P L De Alwis (Deputy Chairman) activities of the Bank at all times are (Retired w.e.f. 09.08.2017)
conducted with the highest ethical
Dr H S D Soysa (Senior Director)
standards and the best interests of 28.5 Board Related Party Transactions
Mr P M A Sirimane all its stakeholders. The Board formed Review Committee
Mr Tharaka Ranwala many Sub Committees including Mrs Dhara Wijayatilake (Chairperson)
Mr P S Cumaranatunga the following four mandatory Board
Prof Malik Ranasinghe
Sub Committees as required by
Ms Aroshi Nanayakkara Mr Sanjiva Senanayake
the Banking Act Direction No. 11 of
Mr K M S P Herath (Managing Director) 2007 and one mandatory Board Sub Mr Deepal Sooriyaarachchi
Committee as required by Section 9 Mr Nanda Fernando (w.e.f 01.09.2017)
26.2 Sampath Centre Ltd
of the Listing Rules of the Colombo Mr Ranjith Samaranayake (Retired
Mr I W Senanayake (Chairman) Stock Exchange. The composition of w.e.f. 09.08.2017)
Mr S G Wijesinha these five Sub Committees as at 31st
Mr Ranjith Samaranayake December 2017 were as follows: Apart from the above five mandatory
Board Sub Committees, the Board has
Mr Rushanka Silva
28.1 Board Audit Committee also appointed the following seven non
Mr D Ihalalanda - mandatory Board Sub Committees:
Mr Ranil Pathirana (Chairman)
Mr S P Kannangara
28.6 Board Credit Committee
26.3 S C Securities (Pvt) Ltd Mr Deepal Sooriyaarachchi Prof Malik Ranasinghe (Chairman)
Mr S G Wijesinha (Chairman) Mrs Dhara Wijayatilake Mr Channa Palansuriya
Mrs Ranjani Joseph (Consultant to the
Mr W M P L De Alwis Mrs Dhara Wijayatilake
Committee)
Mr Ranjith Samaranayake Mr Rushanka Silva (w.e.f 01.10.2017)
28.2 Board Human Resources and Mr Nanda Fernando
26.4 Sampath Information Technology Remuneration Committee Mr Ranjith Samaranayake (Retired
Solutions Ltd
Mr Deepal Sooriyaarachchi (Chairman) w.e.f. 09.08.2017)
Mr Ranjith Samaranayake (Chairman)
Mr Channa Palansuriya Mr Aravinda Perera (Consultant to the
Mr L J K Hettiaratchi Committee until 03.07.2017)
Mr D J Gunaratne
Miss Annika Senanayake 28.7 Board Strategic Planning Committee
Mr M V Indrasoma
Mr Deshal de Mel Mr Channa Palansuriya (Chairman)
Mr M A Salgado (Resigned w.e.f. 01.07.2017) Prof Malik Ranasinghe
Mrs Saumya Amarasekera Mrs Dhara Wijayatilake
Miss Annika Senanayake 28.12 Board Capital Planning Committee and in terms of Corporate Governance,
Mr Ranil Pathirana Prof Malik Ranasinghe (Chairman) Directors have refrained from voting
on matters in which they were
Mr Rushanka Silva (w.e.f 01.10.2017) Mr Sanjiva Senanayake
materially interested. The Directors
Mr Nanda Fernando Mr Ranil Pathirana have no direct or indirect interest in a
Mr Ranjith Samaranayake Mr Nanda Fernando contract or a proposed contract with
(Retired w.e.f. 09.08.2017) the Bank other than those disclosed.
Mr Deshal de Mel 29 DIRECTORS’ MEETINGS
(Resigned w.e.f. 01.07.2017) The details of Directors meetings 31 RELATED PARTY TRANSACTIONS
Mr Aravinda Perera (Consultant to the which comprise Board meetings and Directors have also disclosed
Committee until 03.07.2017) the Board Sub Committee meetings transactions if any, that could
and the attendance of Directors be classified as Related Party
28.8 Board Shareholder Relations at these meetings are given in the Transactions in terms of Sri Lanka
Committee Corporate Governance Report on page Accounting Standards - LKAS 24
Prof Malik Ranasinghe (Chairman) 132 of the Annual Report. (Related Party Disclosure) which
Mr Deepal Sooriyaarachchi is adopted in preparation of the
30 DIRECTORS’ INTEREST REGISTER AND Financial Statements. Those
Mr Rushanka Silva (w.e.f 01.10.2017) DIRECTORS’ INTEREST IN CONTRACTS transactions disclosed by the
Mr Nanda Fernando OR PROPOSED CONTRACTS Directors are given in Note 49 to the
Mr Deshal de Mel (Resigned w.e.f. The Bank maintains the Directors’ Financial Statements which form an
01.07.2017) Interest Register as required under integral part of the Annual Report of
the provisions of Section 168 (1) the Board of Directors.
28.9 Board Treasury Committee (e) of the Companies Act. Directors
Mr Sanjiva Senanayake (Chairman) of the Bank have made necessary Bank has complied with the
Prof Malik Ranasinghe declarations of their interest in requirement of the Code of Best
contracts or proposed contracts, in Practice issued by SEC, Listing
terms of the Sections 192 (1) and Rules of CSE and with all disclosure
Mr Nanda Fernando
192 (2) of the Companies Act. These requirement stipulated thereunder.
Mr Deshal de Mel interests have been recorded in the
(Resigned w.e.f. 01.07.2017) Interest Register which is available 32 DIRECTORS’ INTEREST IN ORDINARY
Mr Ranjith Samaranayake for inspection in terms of the Act. The SHARES AND DEBENTURES
(Retired w.e.f. 09.08.2017) particulars of the Directors’ Interest The shareholdings of Directors as at
in Contracts are given on page 188 31st December 2017 were as follows:
28.10 Board Marketing Committee of the Annual Report and form an
None of the Directors hold any
Mr Deepal Sooriyaarachchi (Chairman) integral part of the Annual Report of
Debentures issued by the Bank.
(w.e.f 02.07.2017) the Board of Directors. As a practice
Mr Channa Palansuriya
Miss Annika Senanayake Name of the Director No. of Shares as at 31st No. of Shares as at 31st
Mrs Saumya Amarasekera December 2017 December 2016
Mr Rushanka Silva (w.e.f 01.10.2017) Mr Channa Palansuriya - -

Mr Nanda Fernando (w.e.f 01.09.2017) Prof Malik Ranasinghe - -
Mr Deshal de Mel Mr Sanjiva Senanayake - -
(Resigned w.e.f. 01.07.2017)
Mr Deepal Sooriyaarachchi - -
28.11 Board IT Committee Mrs Dhara Wijayatilake - -
Prof Malik Ranasinghe (Chairman) Miss Annika Senanayake - -
Mr Sanjiva Senanayake Mr Ranil Pathirana 12,185 9,929
Mr Deepal Sooriyaarachchi Mrs Saumya Amarasekera - -
Mr Rushanka Silva Mr Rushanka Silva (Appointed to
Miss Annika Senanayake the Board w.e.f. 01.09.2017) - Not applicable
Mr Nanda Fernando Mr Nanda Fernando 10,881 1,250


33 DIRECTORS’ INTEREST IN SHARES AND and related to the employees have 2,417,000/- (2016: Rs 2,589,000/-)
DEBENTURES OF SUBSIDIARIES been paid on a timely basis. in terms of the resolution passed
Mr Channa Palansuriya is a Director of at the last Annual General Meeting.
Siyapatha Finance PLC and holds one 39 OUTSTANDING LITIGATION Out of the aforementioned sum,
share in the same. The share is held in In the opinion of the Directors and in the donations made by the Bank
trust for Sampath Bank. consultation with the Bank’s lawyers, to Government approved charities
litigation currently pending against the amounted to Rs Nil (2016: Rs Nil). The
34 DIRECTORS’ REMUNERATION Bank will not have a material impact Bank does not make donations for
As required under the Section 168 (1) on the reported financial results or the political purposes.
(f), details of Directors’ emoluments future operations of the Bank. Details
and other benefits paid in respect of litigation pending against the Bank 43 SIGNIFICANT SHAREHOLDINGS IN OTHER
of the Group and the Bank during are given in Note 48.2 to the Financial ORGANIZATIONS
the financial year under review are Statements. The Bank continues to hold 9.47%
given in Note 49.3.1 to the Financial shareholding in LankaBangla Finance
Statements. 40 EVENTS AFTER THE REPORTING PERIOD Limited in Bangladesh. Details are
No circumstances have arisen since given in Note 29.3 to the Financial
35 OUR TEAM MEMBERS the Statement of Financial Position Statements.
The Bank believes that its real date which would require adjustments
potential rests on the strength and to, or disclosure in, the accounts, 44 RISK MANAGEMENT AND INTERNAL
capabilities of its team members except those disclosed in Note 51 to CONTROL
in a rapidly changing environment. the Financial Statements. 44.1 Material Foreseeable Risk Factors
All efforts are directed at having a The Bank has an ongoing process in
motivated and competent team in 41 GOING CONCERN place to identify, evaluate and manage
order to grow and achieve results as The Directors, after making necessary the risks that are faced by the Bank.
projected in the Strategic Plan and inquiries and reviews including reviews This process is detailed in the Risk
the Budget. As at 31st December of the budget for the ensuing year, Management Report on pages 118 to
2017, the number of employees on the capital expenditure requirements, 125. The Directors, on a regular basis
payroll of the Bank was 4,011 (2016: future prospects and risks, cash flows review the above mentioned process
3,960). and such other matters required to be through the Board Integrated Risk
addressed in the Code of Best Practice Management Committee.
36 ESOPs on Corporate Governance issued
The Bank did not have any Employee jointly by the Institute of Chartered 44.2 Internal Controls
Share Ownership / Option Plans during Accountants of Sri Lanka and the
The Directors of the Bank have taken
the year. Securities and Exchange Commission
reasonable steps to safeguard the
of Sri Lanka and the Direction on
assets of the Group and the Bank
37 ENVIRONMENTAL PROTECTION Corporate Governance issued by the
and to prevent and detect frauds
To the best knowledge of the Board, CBSL, are satisfied that the Bank
and any other irregularities. For this
the Bank has not engaged in any has adequate resources to continue
purpose the Directors have instituted
activity that is harmful or hazardous operations into the foreseeable future.
effective and comprehensive systems
to the environment. The Directors Accordingly, they continue to adopt
of internal controls for identifying,
also confirm that to the best of the going concern basis in preparing
recording, evaluating and managing
their knowledge and belief the Bank the Financial Statements.
the significant risks faced by the Bank
has complied with the relevant
/ Group throughout the year and it is
environmental laws and regulations. 42 DONATIONS
being regularly reviewed by the Board
As required by the Section 168 (1)
of Directors.
38 STATUTORY PAYMENTS (g) of the Companies Act, information
The Directors, to the best of their pertaining to donations made by
This comprises internal reviews,
knowledge and belief, are satisfied the Bank during the year is given
internal audit and the whole system
that all statutory payments due to the below. During the year the Bank
of financial and other controls
Government, other regulatory bodies made donations to the value of Rs
required to carry on the operations
in an orderly manner, safeguard the Board of Directors confirm that the Based on the declaration provided
assets, prevent and detect frauds and Bank is compliant with prudential by Messrs Ernst & Young, and as
other irregularities and secure, as requirements, regulations, laws and far as the Directors are aware, the
far as practicable, the accuracy and internal controls and measures have Auditors do not have any relationship
reliability of the records. been taken to rectify any material with or interest with the Bank that in
non-compliances. their judgments, may reasonably be
45 CORPORATE GOVERNANCE thought to have a bearing on their
The Directors of the Bank are 46 AUDITORS independence within the meaning
committed towards maintaining The Auditors of the Bank during the of the Code of Professional Conduct
an effective Corporate Governance year were Messrs Ernst & Young, and Ethics issued by the Institute of
Framework and implementing Chartered Accountants. They also Chartered Accountants of Sri Lanka,
processes required to ensure that function as the Auditors for the applicable on the date of this report.
the Bank is compliant with the Bank’s Subsidiary companies namely,
Code of Best Practice on Corporate Sampath Centre Ltd, SC Securities The retiring Auditors, Messrs Ernst
Governance issued jointly by the (Pvt) Ltd, Siyapatha Finance PLC and & Young, have expressed their
Institute of Chartered Accountants Sampath Information Technology willingness to continue in office.
of Sri Lanka and the Securities and Solutions Ltd. Audit fees paid to They come up for re-election at the
Exchange Commission of Sri Lanka Messrs Ernst & Young for the year Annual General Meeting, with the
and the Direction on Corporate ended 31st December 2017 by the recommendation of the Board Audit
Governance issued by the CBSL. Group and the Bank amounted to Rs Committee and the Board of Directors.
Details are given on Corporate 16,919,000/- (2016: Rs 15,152,000/-) In accordance with the Companies
Governance Report on pages 127 to and Rs 13,888,000/- (2016: Rs Act, a resolution proposing the re-
166 of this Annual Report. 12,495,000/-) respectively. appointment of Messrs Ernst & Young,
Chartered Accountants, as Auditors is
As required by Section 3(8) (ii) (g) of Further, the Group and the Bank paid being proposed at the Annual General
the Banking Act Direction No. 11 of Rs 6,880,000/- (2016: Rs 6,293,000/-) Meeting.
2007 on Corporate Governance for and Rs 5,419,000/- (2016: Rs
Licensed Commercial Banks, issued 5,122,000/-) respectively to Messrs 47 NOTICE OF MEETING
by the CBSL, the Board of Directors Ernst & Young as audit related fees The 32nd Annual General Meeting
confirm that all the findings of the and expenses. In addition, they were of the Bank will be held at “The
“Factual Findings Report” of auditors paid Rs 12,245,000/- (2016: Rs Balmoral”, The Kingsbury, No. 48,
issued under “Sri Lanka Related 5,975,000/-) and Rs 10,127,000/- Janadhipathi Mawatha, Colombo 01
Services Practice Statement 4750” (2016: Rs 4,617,000/-) by the on 29th March 2018. The Notice of
have been incorporated in the annual Group and the Bank respectively for Meeting is given on page 368 of the
Corporate Governance Report on permitted non-audit related services Annual Report.
pages 150 to 166 of this Annual including tax consultancy services.
Report. Further, as required by Section Details of the audit fees paid are As required by Section 168 (1) (k)
3(8) (ii) (h) of the Banking Act given on Note 14.1 to the Financial of the Companies Act, the Board of
Direction No. 11 of 2007 on Corporate Statements. Directors hereby acknowledge the
Governance for Licensed Commercial contents of this report.
Banks, issued by the CBSL, the
For and on behalf of the Board of Directors,
CHANNA PALANSURIYA PROF MALIK RANASINGHE NANDA FERNANDO ANUJA GOONETILLEKE

Chairman Deputy Chairman Managing Director Company Secretary
Colombo, Sri Lanka

15th February 2018
DIRECTORS’ INTEREST IN CONTRACTS

WITH THE BANK
Related party disclosures as required by the Sri Lanka Accounting Standard – LKAS 24 (Related Party Disclosures) are detailed in Note 49
to the Financial Statements. In addition, the Bank carries out transactions in the ordinary course of business in an arm’s length basis with
entities where the Chairman or 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 31st as at 31st
December December
2017 2016
Rs 000 Rs 000 Rs 000
Mr Nanda Fernando
Institute of Bankers of Sri Lanka Director Deposits 2,623 1,659
Repo 29,983 16,664
Access Engineering PLC Independent Non Deposits 47,800 41,681
Executive Director Investment in debentures 303,707 303,707
Debentures issued by the Bank 100,000 100,000
Indirect facilities 3,100,000 529,589 527,603
United Motors Lanka PLC Independent Non Deposits 319 177
Executive Director
Resus Energy PLC Independent Non Loan & receivables - 964 -
Executive Director Deposits 4,566 4,495
Indirect facilities 12,344 12,344 -
AIA Insurance Lanka PLC Independent Non Deposits 7,694 -
Executive Director Debentures issued by the Bank 1,100,310 1,246,720
Singer Sri Lanka PLC Independent Non Loan & receivables 800,000 260,775 83,013
Executive Director Investment in debentures 617,378 754,621
Indirect facilities 300,000 165,320 226,675
Panasian Power PLC Independent Non Loan & receivables 693,203 693,203 700,000
Executive Director Deposits 254 2,536
Ceylon Chamber of Commerce Chief Executive Debentures issued by the Bank 767,000 707,000
Officer Deposits 37,512 -
Mr Ranil Pathirana
Windforce (Pvt) Ltd Non Executive Director Deposits 21,170 563
Repo 168,000 -
Renewgen (Pvt) Ltd Chairman Loan & receivables 5,459 5,459 -
Deposits 29,735 -
Star Packaging (Pvt) Ltd Non Executive Director Loan & receivables 407,000 109,258 55,785
Deposits 34 2,312
ODEL PLC Non Executive Director Loan & receivables 150,000 105,546 30,402
Deposits 10,060 4,964
Hirdaramani International Exports (Pvt) Ltd Managing Director Deposits 83,838 1,790
Hirdaramani Industries (Pvt) Ltd Director Deposits 485 491
Ceylon Knit Trend (Pvt) Ltd Director Deposits 252,537 123
Rosewood (Pvt) Ltd Director Deposits 217 2,725
Repo 75,000 -
Alumex PLC Director Loan & receivables 388,229 256,412 944
Deposits 5,114 3,717
Indirect facilities 250,000 185,275 244,051
Mr Rushanka Silva
Indra Property Development (Pvt) Ltd Director Deposits 159 -
Serendib Finance Ltd Director Loan & receivables 3,137,963 2,339,987 -
DIRECTORS’ STATEMENT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING
RESPONSIBILITY The Management assists the Board in the the adequacy and effectiveness of
In line with the Banking Act Direction No. implementation of the Board’s policies the risk management and internal
11 of 2007, Direction 3 (8)(ii)(b), the Board and procedures on risk and control control systems. It also reviews the
of Directors presents this report on Internal by identifying and assessing the risks internal audit function with particular
Control Over Financial Reporting. faced, and in the design, operation and emphasis on the scope of audits and
monitoring of suitable internal controls to quality of the same. The minutes of
The Board of Directors (“the Board”) mitigate and control these risks. the Board Audit Committee meetings
is responsible for the adequacy and are forwarded to the Board on a
effectiveness of the internal control KEY FEATURES OF THE PROCESS ADOPTED IN periodic basis. Further details of the
mechanism in place at Sampath Bank APPLYING AND REVIEWING THE DESIGN AND activities undertaken by the Board
PLC, (“the Bank”). In considering such EFFECTIVENESS OF THE INTERNAL CONTROL Audit Committee of the Bank are set
adequacy and effectiveness, the Board SYSTEM OVER FINANCIAL REPORTING out in the Board Audit Committee
recognises that the business of banking The key processes that have been Report on pages 167 to 169.
requires reward to be balanced with risk on established in reviewing the adequacy and y In assessing the internal control
a managed basis and as such the internal integrity of the system of internal controls system over financial reporting,
control systems are primarily designed with respect to financial reporting include identified officers of the Bank collated
with a view to highlight any deviations the following: all procedures and controls that are
from the limits and indicators which connected with significant accounts
comprise the risk appetite of the Bank. In y Sub Committees are established
and disclosures of the financial
this light, the system of internal controls by the Board to assist the Board in
statements of the Bank. These in
can only provide reasonable, but not ensuring the effectiveness of Bank’s
turn, were observed and checked by
absolute assurance, against material mis- daily operations and to ensure that the
the Internal Audit Department for
statement of financial information and Bank’s operations are in accordance
suitability of design and effectiveness
records or against financial losses or fraud. with the corporate objectives,
on an ongoing basis. The Internal Audit
strategies and the annual budget
Department also refers significant
The Board has established an ongoing as well as the policies and business
issues (if any) to the “Internal Control
process for identifying, evaluating and directions that have been approved.
Over Financial Reporting Steering
managing the significant risks faced
y The Internal Audit Division of the Bank Committee” before submitting their
by the Bank and this process includes
checks for compliance with policies final report on Internal Control Over
enhancing the system of Internal Control
and procedures and the effectiveness Financial Reporting to the Board
Over Financial Reporting as and when there
of the internal control systems on Audit Committee and the External
are changes to business environment
an ongoing basis using samples Auditors. The Bank adopted the new
or regulatory guidelines. The process
and rotational procedures and Sri Lanka Accounting Standards
is regularly reviewed by the Board and
highlights significant findings of any comprising LKAS and SLFRS in 2012.
is in accordance with the “Guidance
non-compliance. Audits are carried The processes and procedures initially
for Directors of Banks on the Directors’
out on all units and branches, the applied to adopt the aforementioned
Statement on Internal Control” issued by
frequency of which is determined by Accounting Standards were further
the Institute of Chartered Accountants
the level of risk assessed, to provide strengthened during the years 2013
of Sri Lanka. The Board has assessed the
an independent and objective report. to 2017 based on the feedback
Internal Control Over Financial Reporting,
The annual audit plan is reviewed received from the External Auditors,
taking into account, principles for the
and approved by the Board Audit Internal Audit Department, regulators
assessment of internal control system as
Committee. Findings of the Internal and the Board Audit Committee. The
given in that guidance.
Audit Department are submitted to Bank has documented procedures
the Board Audit Committee for review pertaining to these new requirements
The Board is of the view that the system of
at their periodic meetings. and updates the relevant procedure
Internal Control Over Financial Reporting
manuals as and when necessary. The
in place is sound and adequate to provide y The Board Audit Committee of
Board has also recognised the need
reasonable assurance regarding the the Bank reviews internal control
to introduce an automated financial
reliability of financial reporting, and that issues identified by the Internal
reporting process in order to comply
the preparation of financial statements Audit Department, the External
with the requirements of recognition,
for external purposes is in accordance Auditors, regulatory authorities and
measurement, classification and
with relevant accounting principles and the Management; and evaluates
disclosure of the financial instruments
regulatory requirements.
Directors’ Statement on Internal Control Over Financial Reporting
more effectively and efficiently. The for financial assets classifications, provide a reasonable assurance regarding
Management is currently reviewing measurement and impairment. the reliability of financial reporting and the
various options available to automate The models have been developed, preparation of financial statements for
the financial reporting process. The tested and submitted for External external purposes and is in accordance
assessment did not include subsidiary Auditors for verification. The Board with relevant accounting principles and
companies of the Bank. will continuously strengthen the regulatory requirements of the Central
processes required for validation and Bank of Sri Lanka.
y The Board has taken into
compliance with SLFRS 9 with the
consideration the requirements of
support of the External Consultant. REVIEW OF THE STATEMENT BY EXTERNAL
the Sri Lanka Accounting Standard
AUDITORS
SLFRS - 9 (Financial Instruments) y The comments made by the External
The External Auditors, Messrs Ernst &
which is effective from 1st January Auditors in connection with internal
Young, have reviewed the above Directors’
2018 by replacing the Sri Lanka control system over financial reporting
Statement on Internal Control over
Accounting Standard – LKAS 39 in previous years were reviewed during
Financial Reporting included in the Annual
(Financial Instruments: Recognition the year and appropriate steps have
Report of the Bank for the year ended
and Measurement). This will been taken to address any matters
31st December 2017 and reported to
have a significant impact on the raised. The recommendations made
the Board that nothing has come to their
calculation of impairment on financial by the External Auditors in 2017 in
attention that causes them to believe that
instruments as it uses forward looking connection with the internal control
the statement is inconsistent with their
‘expected credit loss model’ compared system over financial reporting will be
understanding of the process adopted
to the previously applied ‘incurred dealt with in the future.
by the Board in the review of the design
credit loss model’ under LKAS 39.
and effectiveness of the Internal Control
The Bank has obtained the services CONFIRMATION
Over Financial Reporting of the Bank.
of an External Consultant for SLFRS Based on the above processes, the Board
Their Report on the Statement of Internal
9 implementation. Multidisciplinary confirms that the financial reporting
Control over Financial Reporting is given on
implementation teams are formed system of the Bank has been designed to
page 191 of this Annual Report.
By order of the Board,
RANIL PATHIRANA CHANNA PALANSURIYA SANJIVA SENANAYAKE

Chairman - Board Audit Committee Chairman Senior Director
NANDA FERNANDO ANUJA GOONETILLEKE

Managing Director Company Secretary
Colombo, Sri Lanka

15th February 2018
INDEPENDENT ASSURANCE REPORT TO THE BOARD OF

DIRECTORS OF SAMPATH BANK PLC
INTRODUCTION SUMMARY OF WORK PERFORMED OUR CONCLUSION

We were engaged by the Board of Directors We conducted our engagement to assess Based on the procedures performed,
of Sampath Bank PLC (the “Bank”) to whether the Statement is supported by nothing has come to our attention
provide assurance on the Directors’ the documentation prepared by or for that causes us to believe that the
Statement on Internal Control over Directors; and appropriately reflected the Statement included in the annual report
Financial Reporting (the “Statement”) process the Directors have adopted in is inconsistent with our understanding
included in the annual report for the year reviewing the system of internal control of the process the Board of Directors
ended 31December 2017. over financial reporting of the Bank. has adopted in the review of the design
and effectiveness of internal control over
MANAGEMENT’S RESPONSIBILITY The procedures performed were limited financial reporting of the Bank.
Management is responsible for the primarily to inquiries of Bank personnel
preparation and presentation of the and the existence of documentation on a
Statement in accordance with the sample basis that supported the process
“Guidance for Directors of Banks on the adopted by the Board of Directors.
Ernst & Young
Directors’ Statement on Internal Control”
Chartered Accountants
issued in compliance with section 3(8) SLSAE 3050 does not require us to
(ii)(b) of the Banking Act Direction No. consider whether the Statement covers
15 February 2018
11 of 2007, by the Institute of Chartered all risks and controls or to form an opinion
Colombo
Accountants of Sri Lanka. on the effectiveness of the Bank’s risk and
control procedures. SLSAE 3050 also does
OUR RESPONSIBILITIES AND COMPLIANCE not require us to consider whether the
WITH SLSAE 3050 processes described to deal with material
Our responsibility is to issue a report to the internal control aspects of any significant
Board on the Statement based on the work problems disclosed in the annual report
performed. We conducted our engagement will, in fact, remedy the problems.
in accordance with Sri Lanka Standard on
Assurance Engagements SLSAE 3050 –
Assurance Report for Banks on Directors’
Statement on Internal Control issued by
the Institute of Chartered Accountants of
Sri Lanka.
MANAGING DIRECTOR’S AND GROUP CHIEF FINANCIAL OFFICER’S

RESPONSIBILITY STATEMENT
The Financial Statements of Sampath Statements. We confirm that to the best of The Financial Statements of the Group
Bank PLC (“the Bank”) and the our knowledge, the Financial Statements were audited by Messrs Ernst & Young,
Consolidated Financial Statements of the give a true and fair view of the assets, Chartered Accountants, the independent
Bank and its Subsidiaries (“the Group”) as liabilities, financial position, results of External Auditors. Their report is given on
at 31st December 2017 are prepared in the operations and the cash flows of the page 195 of this Annual Report.
compliance with the requirements of the Group. We have reasonable grounds to
following: believe that the Bank and its Subsidiaries The Board Audit Committee of the Bank
have adequate resources to continue in meets periodically with the Internal
y Sri Lanka Accounting Standards operational existence for the foreseeable Auditors and the independent External
issued by the Institute of Chartered future. Accordingly, we continue to adopt Auditors to review the manner in which
Accountants of Sri Lanka, the Going Concern basis in preparing the these auditors are performing their
Financial Statements. responsibilities and to discuss issues
y Companies Act No. 7 of 2007
relating to auditing, internal controls
(Companies Act),
The estimates and judgments relating to and financial reporting issues. To ensure
y Sri Lanka Accounting and Auditing the Financial Statements were made on a complete independence, the External
Standards Act No. 15 of 1995, prudent and reasonable basis; in order that Auditors and the Internal Auditors have
the Financial Statements reflect in a true full and free access to the members of
y Banking Act No. 30 of 1988 and
and fair manner, the form and substance of the Board Audit Committee to discuss
amendments thereto and Directions,
transactions and that the Bank’s state of any matter of substance. The Board Audit
Determinations and Guidelines issued
affairs is reasonably presented. To ensure Committee report is given on pages 167
by the Central Bank of Sri Lanka
this, the Bank and all of its Subsidiaries to 169.
(CBSL),
have taken proper and sufficient care in
y The Listing Rules of the Colombo installing a system of internal controls The Board Audit Committee approves the
Stock Exchange and and procedures for safeguarding assets, audit and non-audit services provided
preventing and detecting frauds and / or by Messrs Ernst & Young, in order to
y The Code of Best Practice on
errors as well as other irregularities which ensure that the provision of such services
Corporate Governance issued jointly by
are reviewed, evaluated and updated on does not impair Messrs Ernst & Young’s
the Institute of Chartered Accountants
an ongoing basis. Our Internal Auditors independence.
of Sri Lanka, the Securities and
Exchange Commission of Sri Lanka; have conducted periodic audits to provide
reasonable assurance that the established We confirm that to the best of our
and Section 3(8)(ii)(b) of the Banking
policies and procedures were consistently knowledge:
Act Direction No. 11 of 2007 on
Corporate Governance issued by the followed. However, there are inherent y The Group has complied with all
CBSL. limitations that should be recognised in applicable laws, regulations and
weighing the assurances provided by any prudential requirements;
The formats used in the preparation of system of internal controls and accounting.
y There are no material non
the Financial Statements and disclosures compliances; and
made comply with the formats prescribed We confirm, compliance with section 3(8)
by the Central Bank of Sri Lanka, which (ii)(b) of the Banking Act Direction No. 11 y There are no material litigations that
is also in compliance with the disclosure of 2007 on Corporate Governance (Internal are pending against the Group other
requirements of the Sri Lanka Accounting Control Over Financial Reporting - ICOFR) than those disclosed in Note 48.2
Standard - LKAS 1 (Presentation of issued by the Central Bank of Sri Lanka to the Financial Statements in the
Financial Statements). as of 31st December 2017 and that the Annual Report.
Bank’s Internal Controls Over Financial
The Accounting Policies used in the Reporting is adequate and effective. The
preparation of the Financial Statements Annual Report of the Directors on pages
are appropriate and are consistently 179 to 188 has briefly covered the Group’s
Internal Control Over Financial Reporting. NANDA FERNANDO
applied by the Group. The significant Managing Director
accounting policies and estimates that In addition, Directors’ Statement on
involve a high degree of judgment and Internal Control Over Financial Reporting
complexity were discussed with the Board is provided on pages 189 & 190. The
Audit Committee and External Auditors. Bank’s External Auditors, Messrs Ernst &
Comparative information has been Young, have audited the effectiveness of AJANTHA DE VAS GUNASEKARA
restated wherever necessary to comply the Bank’s Internal Controls Over Financial Group Chief Financial Officer
with the current presentation and material Reporting and have given an unqualified
departures, if any, have been disclosed and opinion on page 191 of this Annual Report. Colombo, Sri Lanka
explained in the note 55 to the Financial 15th February 2018
STATEMENT OF DIRECTORS’ RESPONSIBILITY FOR

FINANCIAL REPORTING
The responsibilities of the Directors in Statements of the Bank and the issued jointly by the Institute of Chartered
relation to the Financial Statements of Group have been signed by three Accountants of Sri Lanka (ICASL) & the
Sampath Bank PLC (“the Bank”) and the Directors and the Company Secretary Securities and Exchange Commission of
Consolidated Financial Statements of the in conformity with the requirements of Sri Lanka (SEC). Further these Financial
Bank and its Subsidiaries (“the Group”) the Companies Act. Statements comply with the prescribed
are set out in the following Statement. The format issued by the Central Bank of
In preparing these Financial
responsibility of the Auditors in relation to Sri Lanka (CBSL) for the preparation of
Statements, the Directors ensure
the Financial Statements is set out in the annual Financial Statements of Licensed
that:
Report of the Auditors given on page 195. Commercial Banks. Directors confirm
y The appropriate accounting policies that the financial reporting system has
As per the provisions of the Companies have been selected and applied in been designed to provide reasonable
Act No. 7 of 2007 (Companies Act), the a consistent manner and material assurance regarding the reliability of
Directors of the Bank are responsible for departures, if any, have been disclosed financial reporting and the Directors
ensuring that the Bank and the Group and explained; accept responsibility for the integrity and
keep proper books of account of all the objectivity of the Financial Statements
y The Financial Statements are
transactions and they are required to published in this Annual Report. The
presented in accordance with Sri
prepare Financial Statements that give a Directors confirm that in preparing the
Lanka Accounting Standards (SLFRS/
true and fair view of the financial position Financial Statements given on pages 196
LKAS) and are consistent with the
of the Bank and the Group as at end to 333, appropriate accounting policies
underlying books of account;
of each financial year and place them have been selected and applied based
before a general meeting. The Financial y Reasonable and prudent judgments on the new financial reporting framework
Statements comprise of the Statement of and estimates have been made on a consistent basis, while reasonable
Financial Position as at end of the financial so that the form and substance of and prudent judgments have been
year, the Statement of Profit or Loss, transactions are properly reflected; made so that the form and substance of
Statement of Comprehensive Income, transactions are properly reflected.
y The Financial Statements provide
Statement of Cash Flows, Statement of
the information required by the
Changes in Equity for the financial year The Directors have taken appropriate
Companies Act, Banking Act No. 30
ended and notes thereto. steps to ensure that the Bank and the
of 1988 (Banking Act) and the Listing
Rules of the Colombo Stock Exchange. Group maintain proper books of account
The Financial Statements are prepared and review the financial reporting system
under the supervision of the Group Chief y The companies within the Group directly at their regular meetings and also
Financial Officer who is a Corporate maintain sufficient accounting records through the Board Audit Committee. The
Management member of the Bank. The to disclose the financial position of the Report of the Board Audit Committee is
Directors confirm that the Financial Group with reasonable accuracy. given on pages 167 to 169. The Board
Statements of the Bank and the Group give of Directors also approves the Interim
The Directors ensure that the
a true and fair view of: Financial Statements prior to their release,
Bank and the Group have adequate
resources to continue in operation and following a review and recommendation by
y The state of affairs of the Bank and the Board Audit Committee.
to justify applying the going concern
the Group as at 31st December 2017:
basis in preparing these Financial
and The Directors have taken all reasonable
Statements.
y The financial performance of the Bank steps open to them to safeguard the
and the Group for the financial year Financial Statements for the year assets of the Bank and the Group and
ended 31st December 2017. 2017, prepared and presented in this to prevent and detect frauds and any
Annual Report are consistent with the other irregularities. For this purpose
The Financial Statements of the the Directors have instituted effective
underlying books of account and are in
Bank and the Group have been and comprehensive systems of internal
conformity with the requirements of Sri
certified by Group Chief Financial controls for identifying, recording,
Lanka Accounting Standards, Companies
Officer, the officer responsible for evaluating and managing the significant
Act, Sri Lanka Accounting and Auditing
their preparation, as required by the risks faced by the Bank throughout the
Standards Act No. 15 of 1995, Banking
Companies Act. The accounts have year and is under regular review of the
Act and amendments thereto, the
been circulated and reviewed by the Board of Directors. This comprises internal
continuing Listing Rules of the Colombo
Board Audit Committee and Board reviews, Internal Audit and the whole
Stock Exchange (CSE) and the Code of
of Directors. Further, the Financial system of financial and other controls
Best Practice on Corporate Governance
Statement of Directors’ Responsibility for Financial Reporting
required to carry on the operations Committee meetings and other Board Sub
in an orderly manner, safeguard the Committee meetings and expressed their
assets, prevent and detect frauds and opinion as reported by them in the Annual
other irregularities and secure as far as Report on page 195.
practicable the accuracy and reliability of
the records. COMPLIANCE REPORT
The Directors confirm that to the best of
Based on their assessment of Internal their knowledge, all taxes, duties and levies
Control Over Financial Reporting (ICOFR), payable by the Bank and its Subsidiaries,
in compliance with Direction 3(8)(ii)(b) of all contributions, levies and taxes
the Banking Act Direction No. 11 of 2007 payable on behalf of and in respect of the
on Corporate Governance, the Directors employees of the Bank and its Subsidiaries
have concluded that, as of 31st December and all other known statutory dues as
2017, the Group’s Internal Controls Over were due and payable by the Bank and its
Financial Reporting are effective. The Subsidiaries as at reporting date have been
Directors’ Statement on Internal Control paid or, where relevant, provided for, except
Over Financial Reporting and Annual as specified in Note No. 48 to the Financial
Report of the Board of Directors on the Statements covering contingent liabilities.
Affairs of the Company are provided on The Directors confirm that based on their
pages 189 to 190 and pages 179 to 188 assessment, the accounting controls
respectively of this Annual Report. The are adequate and nothing has come to
External Auditors’ Independent Assurance their attention to indicate any breakdown
Report on the “Directors’ Statement on in the functioning of these controls,
Internal Control Over Financial Reporting” resulting in material loss to the Bank.
is given on page 191 of this Annual Report. The Directors also confirm that the Bank
will have adequate resources to continue
As required by Section 56(2) of the in operational existence and as a going
Companies Act, the Directors have made concern for the foreseeable future.
an assessment of the Solvency of the
Bank, immediately after the proposed The Directors are of the view that they have
final dividends and confirm that the Bank discharged their responsibilities as set out
satisfies the Solvency Test required by the in the above statement.
Section 57 of Companies Act. The Directors
have also obtained the Certificates of By order of the Board,
Solvency from the External Auditors of the
Bank, Messrs Ernst & Young.
Messrs Ernst & Young, Chartered

ANUJA GOONETILLEKE
Accountants, the External Auditors
Company Secretary
of the Bank were provided with every
opportunity to undertake the inspections Colombo, Sri Lanka
they considered appropriate. They have 15th February 2018
examined the Financial Statements
made available to them by the Directors
together with all financial records, related
data, minutes of the Shareholders’
meetings, Directors’ meetings, Board Audit
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF

SAMPATH BANK PLC
REPORT ON THE FINANCIAL STATEMENTS An audit involves performing procedures REPORT ON OTHER LEGAL AND REGULATORY
We have audited the accompanying to obtain audit evidence about the REQUIREMENTS
financial statements of Sampath Bank amounts and disclosures in the financial As required by Section 163(2) of the
PLC, (the “Bank”), and the consolidated statements. The procedures selected Companies Act No. 7 of 2007, we state the
financial statements of the Bank and its depend on the auditor’s judgment, following:
subsidiaries (the “Group”), which comprise including the assessment of the risks of
the statement of financial position as at material misstatement of the financial a) The basis of opinion and scope and
31 December 2017, and the statement of statements, whether due to fraud or error. limitations of the audit are as stated
profit or loss, statement of comprehensive In making those risk assessments, the above.
income, statement of changes in equity auditor considers internal control relevant
and, statement of cash flows for the year to the bank’s preparation of the financial b) In our opinion :
then ended, and a summary of significant statements that give a true and fair view in
accounting policies and other explanatory order to design audit procedures that are y we have obtained all the information
information set out on pages 196 to 333. appropriate in the circumstances, but not and explanations that were required
for the purpose of expressing an opinion for the audit and, as far as appears
BOARD’S RESPONSIBILITY FOR THE on the effectiveness of the bank’s internal from our examination, proper
FINANCIAL STATEMENTS control. An audit also includes evaluating accounting records have been kept by
The Board of Directors (the “Board”) is the appropriateness of accounting the Bank,
responsible for the preparation of these policies used and the reasonableness of
financial statements that give a true and y the financial statements of the Bank
accounting estimates made by Board, as
fair view in accordance with Sri Lanka give true and fair view of the financial
well as evaluating the overall presentation
Accounting Standards, and for such position as at 31 December 2017,
of the financial statements.
internal controls as Board determines is and of its financial performance and
necessary to enable the preparation of We believe that the audit evidence we have cash flows for the year then ended in
financial statements that are free from obtained is sufficient and appropriate to accordance with Sri Lanka Accounting
material misstatement, whether due to provide a basis for our audit opinion. Standards, and
fraud or error.
OPINION y the financial statements of the Bank
AUDITORS’ RESPONSIBILITY In our opinion, the consolidated financial and the Group, comply with the
Our responsibility is to express an opinion statements give a true and fair view of requirements of Section 151 and 153
on these financial statements based the financial position of the Group as at of the Companies Act No. 7 of 2007.
on our audit. We conducted our audit 31 December 2017, and of its financial
in accordance with Sri Lanka Auditing performance and cash flows for the year
Standards. Those standards require that then ended in accordance with Sri Lanka
we comply with ethical requirements Accounting Standards.
and plan and perform the audit to obtain Ernst & Young
reasonable assurance about whether the Chartered Accountants
financial statements are free from material
misstatement. 15 February 2018
Colombo
STATEMENT OF PROFIT OR LOSS
Note Bank Group

For the year ended 31st December 2017 2016 Change 2017 2016 Change
Rs 000 Rs 000 % Rs 000 Rs 000 %
Gross income 6 92,589,785 67,584,689 37 97,440,220 70,445,341 38
Interest income 79,624,760 56,529,281 41 83,909,371 58,976,384 42

Less: Interest expense 51,261,317 33,775,753 52 53,612,130 35,021,019 53
Net interest income 7 28,363,443 22,753,528 25 30,297,241 23,955,365 26
Fee & commission income 9,504,988 8,049,148 18 9,776,971 8,202,842 19

Less: Fee & commission expense 1,349,362 1,464,601 (8) 1,355,353 1,467,464 (8)
Net fee & commission income 8 8,155,626 6,584,547 24 8,421,618 6,735,378 25
Net trading gain / (loss) 9 339,962 233,850 45 339,962 233,850 45

Net gain from financial investments 10 145,012 129,306 12 145,192 129,371 12
Other operating income 11 2,975,063 2,643,104 13 3,268,724 2,902,894 13
Total operating income 39,979,106 32,344,335 24 42,472,737 33,956,858 25
Less: Net impairment charge for loans & other

losses 12 2,375,793 1,459,825 63 2,633,673 1,535,014 72
Net operating income 37,603,313 30,884,510 22 39,839,064 32,421,844 23
Less: Operating expenses

Personnel expenses 13 8,036,008 7,332,627 10 8,701,904 7,834,670 11
Other operating expenses 14 8,882,479 8,138,002 9 9,317,543 8,431,122 11
Total operating expenses 16,918,487 15,470,629 9 18,019,447 16,265,792 11
Operating profit before value added tax (VAT) and

nation building tax (NBT) on financial services 20,684,826 15,413,881 34 21,819,617 16,156,052 35
Less: VAT & NBT on financial services 15 4,078,901 2,814,023 45 4,309,389 2,942,523 46
Profit before income tax 16,605,925 12,599,858 32 17,510,228 13,213,529 33
Less: Income tax expense 16 4,501,805 3,475,188 30 4,827,728 3,712,283 30

Profit for the year 12,104,120 9,124,670 33 12,682,500 9,501,246 33
Attributable to:
Equity holders of the Bank 12,104,120 9,124,670 33 12,682,500 9,496,073 34
Non - controlling interest - 5,173 (100)
12,104,120 9,124,670 33 12,682,500 9,501,246 33
Earnings per share : Basic / Diluted (Rs) 17 61.95 47.35 31 64.91 49.28 32
Dividend per share 18

Dividend per share: Gross (Rs) 17.20* 18.75
Dividend per share: Net (Rs) 14.80* 16.90
* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.
The Notes to the Financial Statements from pages 204 to 333 form an integral part of these Financial Statements.
STATEMENT OF COMPREHENSIVE INCOME
Bank Group
For the year ended 31st December 2017 2016 Change 2017 2016 Change
Rs 000 Rs 000 % Rs 000 Rs 000 %
Profit for the year 12,104,120 9,124,670 33 12,682,500 9,501,246 33
Other comprehensive income

Other comprehensive income to be reclassified
to profit or loss:
Gain arising on re-measuring available
for sale financial assets 1,017,636 382,982 166 1,017,636 382,982 166
Transfer of gain from available for sale
financial asset to profit or loss - (3,376) 100 - (3,376) 100
Exchange difference in translation 10,766 15,990 (33) 10,766 15,990 (33)
Net other comprehensive income to be
reclassified to profit or loss 1,028,402 395,596 160 1,028,402 395,596 160
Other comprehensive income not to be

reclassified to profit or loss:
Actuarial (loss) / gain on defined benefit plans (634,766) 564,648 (212) (646,194) 565,971 (214)
Deferred tax effect on above 177,735 (158,102) 212 180,809 (158,460) 214
(457,031) 406,546 (212) (465,385) 407,511 (214)
Surplus from revaluation of property, plant &

equipment 822,641 602,205 37 1,330,746 1,500,782 (11)
Deferred tax effect on revaluation surplus (818,222) (44,223) (1,750) (1,891,063) (44,223) (4,176)
4,419 557,982 (99) (560,317) 1,456,559 (139)
Net other comprehensive income not to be

reclassified to profit or loss (452,612) 964,528 (147) (1,025,702) 1,864,070 (155)
Other comprehensive income net of tax 575,790 1,360,124 (58) 2,700 2,259,666 (100)
Total comprehensive income for the year net
of tax 12,679,910 10,484,794 21 12,685,200 11,760,912 8
Attributable to:
Equity holders of the Bank 12,679,910 10,484,794 21 12,685,200 11,730,064 8
Non - controlling interest - 30,848 (100)
12,679,910 10,484,794 21 12,685,200 11,760,912 8
STATEMENT OF FINANCIAL POSITION
Note Bank Group

As at 31st December 2017 2016 Change 2017 2016 Change
Rs 000 Rs 000 % Rs 000 Rs 000 %
ASSETS
Cash & cash equivalents 20 22,334,315 17,064,013 31 22,612,939 17,221,809 31
Balances with Central Bank of Sri Lanka 21 41,100,364 33,724,856 22 41,100,364 33,724,856 22
Placements with banks 22 3,159,326 8,749,763 (64) 3,225,025 8,749,763 (63)
Reverse repurchase agreements 1,200,762 33,860,083 (96) 2,392,852 34,629,422 (93)
Derivative financial instruments 23 496,918 109,872 352 496,918 109,872 352
Financial assets - held for trading 24 19,910,621 28,109,193 (29) 19,977,657 28,117,789 (29)
Financial assets - held for trading pledged as
collaterals 25 591,886 10,380,213 (94) 524,850 10,371,617 (95)
Loans to & receivables from banks 26 2,084,507 2,641,733 (21) 2,084,507 2,641,733 (21)
Loans to & receivables from other customers 27 560,798,940 456,189,052 23 586,370,704 472,754,947 24
Other loans & receivables 28 49,352,443 38,708,440 28 49,352,443 38,708,440 28
Financial assets - available for sale 29 72,911,447 14,270,190 411 73,013,072 14,329,468 410
Financial assets - available for sale pledged as
collaterals 30 4,184,272 657,903 536 4,082,703 598,681 582
Financial assets - held to maturity 31 - - - 12,428 16,933 (27)
Investment in subsidiaries 32 1,356,075 1,227,896 10 - - -
Property, plant & equipment 33 7,269,942 5,971,517 22 12,631,442 10,709,207 18
Intangible assets 34 946,845 337,348 181 996,703 356,131 180
Current tax receivables 40 - - - 6,425 10,365 (38)
Deferred tax assets 35 - - - 401 857 (53)
Other assets 36 7,403,463 6,510,214 14 7,835,236 7,046,611 11
Total Assets 795,102,126 658,512,286 21 826,716,669 680,098,501 22
LIABILITIES
Due to banks 37 4,743,748 6,907,354 (31) 4,820,287 6,954,618 (31)
Derivative financial instruments 23 103,947 63,611 63 103,947 63,611 63
Securities sold under repurchase agreements 4,386,335 10,159,225 (57) 4,231,946 10,095,117 (58)
Due to other customers 38 625,814,313 509,683,233 23 634,641,381 512,550,404 24
Debt issued & other borrowed funds 39 76,098,240 72,128,237 6 91,257,152 84,179,232 8
Dividend payable 99,259 84,860 17 99,259 84,860 17
Current tax liabilities 40 5,527,323 4,316,297 28 5,630,670 4,386,251 28
Deferred tax liabilities 35 1,353,339 872,794 55 2,776,681 1,077,674 158
Other liabilities 41 11,742,147 9,059,401 30 12,612,529 10,182,582 24
Other provisions 42 1,583,558 748,440 112 1,634,367 782,075 109
Total Liabilities 731,452,209 614,023,452 19 757,808,219 630,356,424 20
Note Bank Group

As at 31st December 2017 2016 Change 2017 2016 Change
Rs 000 Rs 000 % Rs 000 Rs 000 %
EQUITY
Stated capital 43 16,307,722 6,471,200 152 16,307,722 6,471,200 152
Reserves
Statutory reserve 44 2,860,000 2,250,000 27 2,973,000 2,336,422 27
Other reserves 45 38,409,796 31,370,185 22 41,093,901 34,619,026 19
Retained earnings 46 6,072,399 4,397,449 38 8,533,827 6,315,429 35
Total equity attributable to equity holders of
the Bank 63,649,917 44,488,834 43 68,908,450 49,742,077 39
Non - controlling interest 47 - - -
Total Equity 63,649,917 44,488,834 43 68,908,450 49,742,077 39
Total Liabilities & Equity 795,102,126 658,512,286 21 826,716,669 680,098,501 22
Commitments & contingencies 48 383,506,087 343,980,307 12 384,063,090 345,115,627 11

Net asset value per share (Rs) 293.02 238.94 23 317.23 267.16 19
I certify that these Financial Statements are presented in compliance with the requirements of the Companies Act No. 07 of 2007.
AJANTHA DE VAS GUNASEKARA

Group Chief Financial Officer
The Board of Directors is responsible for these Financial Statements.

Approved and signed for and on behalf of the Board,
CHANNA PALANSURIYA NANDA FERNANDO PROF MALIK RANASINGHE ANUJA GOONETILLEKE

Chairman Managing Director Deputy Chairman Company Secretary
15th February, 2018

Colombo, Sri Lanka
STATEMENT OF CASH FLOWS
Note Bank Group

For the year ended 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Cash flows from operating activities

Interest receipts 77,912,746 54,848,251 82,159,492 57,238,318
Net commission receipts 8,399,739 6,674,692 8,665,731 6,825,523
Interest payments (45,140,391) (28,423,817) (47,368,065) (29,473,406)
Receipts from other operating activities 2,751,304 1,501,881 3,134,241 1,843,905
Cash payments to employees (7,225,299) (6,042,617) (7,878,011) (6,535,276)
Cash payments to other operating activities (8,059,690) (7,360,131) (7,803,256) (7,286,587)
VAT & NBT on financial services (4,012,679) (2,458,537) (4,243,167) (2,576,492)
Operating profit before changes in operating assets &
liabilities (Note a) 24,625,730 18,739,722 26,666,965 20,035,985
(Increase) / decrease in operating assets

Balances with Central Bank of Sri Lanka (7,375,508) (12,382,974) (7,375,508) (12,382,974)
Loans to & receivables from banks 556,851 (988,151) 556,851 (988,151)
Loans to & receivables from other customers (105,885,580) (80,775,123) (115,099,374) (86,797,280)
Other assets (558,772) (1,979,038) (555,561) (2,241,175)
(113,263,009) (96,125,286) (122,473,592) (102,409,580)
Increase / (decrease) in operating liabilities

Due to banks (2,036,206) 2,573,796 (2,036,206) 2,573,796
Re-purchase agreements (5,731,639) 843,683 (5,821,920) 1,432,767
Due to other customers 110,113,834 99,745,295 115,854,015 101,696,500
Other liabilities 1,642,950 386,357 1,600,415 646,217
103,988,939 103,549,131 109,596,304 106,349,280
Net cash generated from operating activities before

income tax 15,351,660 26,163,567 13,789,677 23,975,685
Income tax paid 40.1 (3,450,721) (3,741,142) (3,590,160) (3,891,183)
Net cash generated from operating activities 11,900,939 22,422,425 10,199,517 20,084,502
Cash flows from investing activities

Net cashflow from placements with banks (Maturity more
than three months) 976,185 (976,185) 976,185 (976,185)
Net cashflow from reverse repurchase agreements 32,637,001 (33,837,000) 32,214,250 (34,599,901)
Net cashflow from financial assets - held for trading 17,974,208 (33,849,866) 17,974,208 (33,849,865)
Net proceeds from financial assets - held to maturity - - 4,480 46,189
Net cashflow from other loans & receivables (10,572,524) (5,066,087) (10,572,524) (5,066,087)
Net cashflow from financial assets - available for sale (61,171,398) 43,902,279 (61,171,398) 43,902,279
Dividend received from financial assets 77,294 61,919 77,474 61,984
Dividend received from subsidiaries - 30,600 - -
Investment in subsidiary (100,000) (100,000) - (100,000)
Purchase of property, plant & equipment (742,213) (657,344) (1,640,617) (1,361,503)
Purchase of intangible assets (782,912) (105,164) (789,884) (108,011)
Proceeds from disposal of property plant & equipment 7,657 4,258 12,897 6,640
Net cash used in investing activities (21,696,702) (30,592,590) (22,914,929) (32,044,460)
Cash flows from financing activities

Dividend paid to non - controlling interest 47 - - - (1,000)
Net increase in debentures 56 4,500,000 6,000,000 5,500,000 8,500,000
Net increase in other borrowed funds 56 (318,808) 9,387,014 1,758,093 10,662,958
Proceeds from Rights issue 43 7,602,778 - 7,602,778 -
Dividend paid (1,128,395) (1,150,269) (1,128,395) (1,150,269)
Net cash generated from financing activities 10,655,575 14,236,745 13,732,476 18,011,689
Net cash generated during the year 859,812 6,066,580 1,017,064 6,051,731
Cash & cash equivalents at the beginning of the year 24,517,417 18,450,837 24,627,949 18,576,218
Cash & cash equivalents at the end of the year (Note b) 25,377,229 24,517,417 25,645,013 24,627,949
NOTE (a) RECONCILIATION OF OPERATING PROFIT BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES
Note Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Profit before income tax 16,605,925 12,599,858 17,510,228 13,213,529

Interest income accrued on impaired loans & receivables 7.1 (467,827) (261,567) (469,245) (261,580)
Net trading gain / (loss) 9
Forward exchange contract revaluation gain (346,710) (183,858) (346,710) (183,858)
Capital gain (24,118) (16,942) (24,118) (16,942)
Dividend income (5,943) (2,295) (5,943) (2,295)
Net mark to market loss / (gain) 36,809 (30,755) 36,809 (30,755)
Net gain from financial investments 10
Dividend income from available for financial assets (145,012) (125,052) (145,192) (125,117)
Capital gain - from available for sale assets - (3,376) - (3,376)
Capital gain - from other loans & receivables - (878) - (878)
Other operating income 11
Dividend income from subsidiaries (90,977) (82,575) - -
Loss / (profit) on disposal of property, plant & equipment 9,829 42 8,128 (298)
Net impairment charge for loans & other losses 12 2,375,793 1,459,825 2,633,673 1,535,014
Personnel expenses
Provision for gratuity & pension 13 337,199 372,602 350,383 382,082
Other non - cash personnel expenses 268,061 254,447 268,061 254,447
Other operating expenses 14
Depreciation of property, plant & equipment 719,548 599,081 1,014,533 845,172
Amortisation of intangible assets 173,415 110,009 182,317 120,249
Accrual for interest and commission income (1,000,074) (1,329,318) (1,036,521) (1,386,341)
Accrual for interest expense 6,120,926 5,351,936 6,244,065 5,547,613
Other accruals and non - cash income / expenses 58,886 28,538 446,497 149,319
Operating profit before changes in operating assets /
liabilities 24,625,730 18,739,722 26,666,965 20,035,985
NOTE (b) RECONCILIATION OF CASH & CASH EQUIVALENTS

Note Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Local currency in hand 20 11,664,978 6,822,773 11,937,788 6,971,898

Foreign currency in hand 20 2,967,552 594,551 2,967,552 594,551
Balances with local banks 20 319,606 458,375 325,420 467,046
Balances with foreign banks 20 5,329,492 2,709,271 5,329,492 2,709,271
Money at call and short notice 20 2,052,687 6,479,043 2,052,687 6,479,043
Placements less than three months 22 3,159,326 7,770,904 3,225,025 7,770,904
Unfavourable balances with local & foreign banks 37 (116,412) (317,500) (192,951) (364,764)
Cash & cash equivalents at the end of the year 25,377,229 24,517,417 25,645,013 24,627,949
Bank Stated Statutory Other Reserves Retained Total
Capital Reserve Revaluation Available General Earnings Equity
(Note 43) Fund Reserve for Sale Reserve (Note 46)
(Note 44) (Note 45.1) Reserve (Note 45.3)
(Note 45.2)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 2016 5,381,405 1,790,000 1,846,649 875,723 22,165,000 3,066,297 35,125,074
Total comprehensive income for the year 2016
Profit for the year - - - - - 9,124,670 9,124,670
Other comprehensive income - - 557,982 395,596 - 406,546 1,360,124
Total comprehensive income for the year 2016 - - 557,982 395,596 - 9,531,216 10,484,794
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders

Final dividend for 2015 : Cash - - - - - (1,033,876) (1,033,876)
Final dividend for 2015 : Scrip 1,089,795 - - - - (1,206,188) (116,393)
Unclaimed dividend adjustments - - - - 29,235 - 29,235
Total contributions by and distributions to equity holders 1,089,795 - - - 29,235 (2,240,064) (1,121,034)
Transfer to reserves during the year - 460,000 - - 5,500,000 (5,960,000) -
Balance as at 31st December 2016 6,471,200 2,250,000 2,404,631 1,271,319 27,694,235 4,397,449 44,488,834
Balance as at 1st January 2017 6,471,200 2,250,000 2,404,631 1,271,319 27,694,235 4,397,449 44,488,834
STATEMENT OF CHANGES IN EQUITY

Profit for the year - - - - - 12,104,120 12,104,120
Other comprehensive income - - 4,419 1,028,402 - (457,031) 575,790
Total comprehensive income for the year 2017 - - 4,419 1,028,402 - 11,647,089 12,679,910
Transactions with equity holders, recognised directly in equity,
contributions by and distributions to equity holders
Rights issue 7,602,778 - - - - - 7,602,778
Interim dividend for 2016 : scrip 2,233,744 - - - - (2,477,734) (243,990)
Final dividend for 2016 : cash - - - - - (884,405) (884,405)
Unclaimed dividend adjustments - - - - 6,790 - 6,790
Total contributions by and distributions to equity holders 9,836,522 - - - 6,790 (3,362,139) 6,481,173
Transfer to reserves during the year - 610,000 - - 6,000,000 (6,610,000) -
Balance as at 31st December 2017 16,307,722 2,860,000 2,409,050 2,299,721 33,701,025 6,072,399 63,649,917
Group Stated Statutory Other Reserves Retained Shareholders’ Non Total
Capital Reserve Revaluation Available for General Earnings Fund Controlling Equity
(Note 43) Fund Reserve Sale Reserve Reserve (Note 46) Interest
(Note 44) (Note 45.1) (Note 45.2) (Note 45.3) (Note 47)
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 2016 5,381,405 1,860,058 4,202,261 875,723 22,165,001 4,624,088 39,108,536 94,663 39,203,199
Profit for the year - - - - - 9,496,073 9,496,073 5,173 9,501,246
Other comprehensive income - - 1,430,885 395,596 - 407,510 2,233,991 25,675 2,259,666
Total comprehensive income for the year 2016 - - 1,430,885 395,596 - 9,903,583 11,730,064 30,848 11,760,912
Transactions with equity holders, recognised directly in
equity, contributions by and distributions to equity
holders
Final dividend for 2015 : Cash - - - - - (1,033,876) (1,033,876) (1,000) (1,034,876)
Final dividend for 2015 : Scrip 1,089,795 - - - - (1,206,188) (116,393) - (116,393)
Unclaimed dividend adjustments - - - - 29,235 - 29,235 - 29,235
Total contributions by and distributions to equity holders 1,089,795 - - - 29,235 (2,240,064) (1,121,034) (1,000) (1,122,034)
Transfer of remaining non - controlling interest to
parent's equity - - 20,325 - - 4,186 24,511 (124,511) (100,000)
Transfer to reserves during the year - 476,364 - - 5,500,000 (5,976,364) - - -
Balance as at 31st December 2016 6,471,200 2,336,422 5,653,471 1,271,319 27,694,236 6,315,429 49,742,077 - 49,742,077
Balance as at 1st January 2017 6,471,200 2,336,422 5,653,471 1,271,319 27,694,236 6,315,429 49,742,077 - 49,742,077
Profit for the year - - - - - 12,682,500 12,682,500 - 12,682,500
Other comprehensive income - - (560,317) 1,028,402 - (465,385) 2,700 - 2,700
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE
Total comprehensive income for the year 2017 - - (560,317) 1,028,402 - 12,217,115 12,685,200 - 12,685,200
Transactions with equity holders, recognised directly in
equity, contributions by and distributions to equity
holders
Rights issue 7,602,778 - - - - - 7,602,778 - 7,602,778
Interim dividend for 2016 : scrip 2,233,744 - - - - (2,477,734) (243,990) - (243,990)
Final dividend for 2016 : cash - - - - - (884,405) (884,405) - (884,405)

Unclaimed dividend adjustments - - - - 6,790 - 6,790 - 6,790
Total contributions by and distributions to equity holders 9,836,522 - - - 6,790 (3,362,139) 6,481,173 - 6,481,173
Transfer to reserves during the year - 636,578 - - 6,000,000 (6,636,578) - - -
Balance as at 31st December 2017 16,307,722 2,973,000 5,093,154 2,299,721 33,701,026 8,533,827 68,908,450 - 68,908,450
SUPPLEMENTARY INFORMATION
203
NOTES TO THE FINANCIAL STATEMENTS
1 REPORTING ENTITY investment services, issuing of credit 2.3 Approval of Financial Statements by
1.1 General cards and debit cards, off - shore Directors
Sampath Bank PLC (‘The Bank’), is banking, resident and non-resident The Financial Statements of the
a domiciled, public limited liability foreign currency operations, electronic Group as at and for the year ended
company incorporated in Sri Lanka banking services such as: telephone 31st December 2017 were authorized
on 10th March 1986 under the banking, internet banking, mobile for issue by the Board of Directors in
Companies Act No. 17 of 1982. It is a banking and money remittance accordance with the resolution of the
Licensed Commercial Bank registered facilities, pawning, leasing, factoring, Directors on 15th February 2018.
under the Banking Act No. 30 of 1988 hire purchase, travel related services
(Banking Act) and amendments and dealing in government securities 2.4 Basis of Measurement
thereto. The Bank was re-registered etc.
The Financial Statements of the Group
with the Registrar General of have been prepared on the historical
Companies as per the requirements 1.3.2 Subsidiaries
cost basis, except for the following
of the Companies Act No.7 of 2007 Ownership of Subsidiaries as of 31st material items in the Statement of
(Companies Act) on 28th April 2008 December 2017 and 31st December Financial Position:
under the name of Sampath Bank PLC. 2016 is given in Note 32 to the
The registered office of the Bank is Financial Statements. There were no y Derivative financial instruments are
located at No. 110, Sir James Peiris significant changes in the nature of measured at fair value (Note 23 )
Mawatha, Colombo 02. The shares the principal activities of the Group
of the Bank have a primary listing on during the financial year under review. y Available for sale financial assets are
the Colombo Stock Exchange. The measured at fair value
staff strength of the Bank as at 31st 2 BASIS OF PREPARATION (Note 29 & Note 30)
December 2017 was 4,011 (2016: 2.1 Statement of Compliance
3,960). The Consolidated Financial y Financial assets classified as fair value
Statements of the Group and the through profit or loss are measured at
1.2 Consolidated Financial Statements Separate Financial Statements of the fair value
The Consolidated Financial Bank, which comprise the Statement (Note 24 & Note 25)
Statements of the Bank as at and for of Financial Position, Statement
the year ended 31st December 2017 of Profit or Loss, Statement of y Land and buildings which are
comprise the Bank (Parent Company) Comprehensive Income, Statement measured at cost at the time of
and its Subsidiaries (together referred of Changes in Equity, Statement of acquisition subsequently measured at
to as the “Group” and individually as Cash Flows and Notes to the Financial revalued amounts, which are the fair
“Group entities”). The Subsidiaries Statements have been prepared values at the date of revaluation
of the Bank as at 31st December and presented in accordance with (Note 33)
2017 were Sampath Centre Ltd, Sri Lanka Accounting Standards
SC Securities (Pvt) Ltd, Siyapatha (SLFRSs and LKASs) laid down by the y Liabilities for defined benefit
Finance PLC and Sampath Information Institute of Chartered Accountants obligations are recognised at the
Technology Solutions Ltd. of Sri Lanka and in compliance with present value of the defined benefit
the requirements of the Companies obligation less the fair value of the
Sampath Bank PLC is the ultimate Act No. 7 of 2007. The presentation plan assets (Note 42)
parent of the Group. of the Financial Statements is also in
compliance with the requirements of 2.5 Functional and Presentation Currency
The Financial Statements of all the Banking Act No. 30 of 1988 and The Financial Statements of the Group
companies in the Group have a amendments thereto. are presented in Sri Lankan Rupees
common financial year which ends on (Rs), which is the currency of the
31st December. 2.2 Responsibility for Financial Statements primary economic environment in
The Board of Directors is responsible which Sampath Bank PLC operates.
1.3 Principal Activities and Nature of for the preparation and presentation Financial information presented in
Operations of Financial Statements of the Sri Lankan Rupees has been rounded
1.3.1 Bank Group and the Bank as per Sri Lanka to the nearest thousand unless
Accounting Standards and the indicated otherwise. There was no
The Bank provides a comprehensive
provisions of the Companies Act No. 7 change in the Group’s presentation
range of financial services
of 2007. and functional currency during the
encompassing accepting deposits,
year under review.
corporate and retail banking, project
financing, trade finance, treasury and
2.6 Presentation of Financial Statements finance activities and investing or to cease operations of the Group.
The assets and liabilities of the activities have been recognised. Therefore, the Financial Statements
Group presented in the Statement Cash and cash equivalents comprise continue to be prepared on the going
of Financial Position are grouped by short term, highly liquid investments concern basis.
nature and listed in an order that that are readily convertible to known
reflects their relative liquidity and amounts of cash and are subject to an 2.10.2 Impairment Losses on Loans and
maturity pattern. No adjustments have insignificant risk of changes in value. Advances
been made for inflationary factors The Group reviews its individually
affecting the Financial Statements. Cash and cash equivalents include significant loans and advances
An analysis on recovery or settlement cash in hand, balances with banks, at each reporting date to assess
within 12 months after the reporting placements with banks (less than whether an impairment loss should
date (current) and more than 12 3 months), money at call and short be recorded in the Statement of Profit
months after the reporting date notice, net of unfavourable local & or Loss. In particular, management’s
(non-current) is presented in the foreign bank balances. judgment is required in the estimation
Note 54. of the amount and timing of future
2.10 Significant Accounting Judgments, cash flows when determining the
2.7 Materiality and Aggregation Estimates and Assumptions impairment loss. These estimates
In compliance with Sri Lanka The preparation of Financial are based on assumptions about a
Accounting Standard - LKAS 01 Statements of the Group in number of factors and actual results
(Presentation of Financial conformity with Sri Lanka Accounting may differ, resulting in future changes
Statements), each material class of Standards requires the management to the impairment allowance made.
similar items is presented separately to make judgments, estimates
in the Financial Statements. Items and assumptions that affect the Loans and advances that have been
of dissimilar nature or functions too application of accounting policies assessed individually and found to
are presented separately unless they and the reported amounts of assets, be not impaired and all individually
are immaterial. Financial assets and liabilities, income and expenses. insignificant loans and advances
financial liabilities are offset and the Actual results may differ from these are then assessed collectively, by
net amount reported in the Statement estimates. categorising them into groups of
of Financial Position only when there assets with similar risk characteristics,
Estimates and underlying to determine whether a provision
is a legally enforceable right to offset
assumptions are reviewed on an should be made due to incurred loss
the recognised amounts and there
ongoing basis. Revisions to accounting events for which there is objective
is an intention to settle on a net
estimates are recognised in the period evidence, but the effects of which
basis, or to realise the assets and
in which the estimate is revised and in are not yet evident. The collective
settle the liability simultaneously.
any future periods affected. assessment takes account of data
Income and expenses are not offset
in the Statement of Profit or Loss from the loan portfolio such as credit
The most significant areas of quality, portfolio size, concentration
unless required or permitted by an
estimation, uncertainty and critical etc. as well as judgments based
Accounting Standard.
judgments in applying accounting on current economic conditions.
policies that have most significant Impairment of loans and advances is
2.8 Comparative Information
effect on the amounts recognised in discussed in detail under Note 3.3.8 to
The comparative information is
the Financial Statements of the Group the Financial Statements.
re-classified wherever necessary
are as follows:
to conform to the current year’s
2.10.3 Impairment of Available for Sale
presentation the details of which 2.10.1 Going Concern Investments
are given in Note 55 to the Financial
The Directors have made an The Group reviews its debt securities
Statements.
assessment of the Group’s ability to classified as available for sale, at each
continue as a going concern and are reporting date to assess whether they
2.9 Statement of Cash Flow
satisfied that it has the resources are impaired. Objective evidence that
The cash flow statement has been
to continue in business for the an available for sale debt security is
prepared by using the direct method
foreseeable future. Furthermore, impaired includes among other things
in accordance with the Sri Lanka
Board is not aware of any material significant financial difficulty of the
Accounting Standard - LKAS 7
uncertainties that may cast significant issuer, a breach of contract such as
(Statement of Cash Flows), whereby
doubt upon the Group’s ability to a default or delinquency in interest
gross cash receipts and gross cash
continue as a going concern and or principal payments etc. The Group
payments of operating activities,
they do not intend either to liquidate also records impairment charges on
Notes to the Financial Statements
available for sale equity investments requirements of new Inland Revenue freehold land and buildings including
when there is a significant or Act No. 24 of 2017 which was methods of valuation are given in Note
prolonged decline in fair value below substantively enacted as at the 33.3 to the Financial Statements.
their cost. The determination of what reporting date, except treatment on
is ‘significant’ or ‘prolonged’ requires finance lease transactions and new 2.10.9 Useful Life-time of the Property, Plant
judgment. The Group generally capital allowance rates. The relevant and Equipment
treats ‘significant’ as 20% or more transitional provisions are not yet The Group reviews the residual
and ‘prolonged’ as greater than introduced by the Department of values, useful lives and methods of
six months. In addition, the Group Inland Revenue. depreciation of property, plant and
evaluates, among other factors, equipment at each reporting date.
historical share price movements, The details of deferred tax Judgment of the management is
duration and extent up to which the computation is given in Note 35 to the exercised in the estimation of these
fair value of an investment is less than Financial Statements. values, rates, methods and hence they
its cost. are subject to uncertainty.
2.10.7 Defined Benefit Plans
2.10.4 Fair Value of Financial Instruments The cost of the defined benefit 2.10.10 Commitments and Contingencies
The determination of fair values plans and the present value of their All discernible risks are accounted
of financial assets and financial obligations are determined using for in determining the amount of
liabilities recorded on the Statement actuarial valuations. all known liabilities. Contingent
of Financial Position for which there liabilities are possible obligations
is no observable market price are The actuarial valuation involves whose existence will be confirmed
determined using a variety of valuation making assumptions about discount only by uncertain future events
techniques that include the use of rates, future salary increases, or present obligations where the
mathematical models. The valuation mortality rates and possible future transfer of economic benefit is
of financial instruments is described pension increases if any. Due to the not probable or cannot be reliably
in more detail in Note 52. long term nature of these plans, such measured. Contingent liabilities are
estimates are subject to significant not recognised in the Statement of
The Group measures fair value using uncertainty. All assumptions are Financial Position but are disclosed
the fair value hierarchy that reflects reviewed at each reporting date. unless they are remote. Details of
the significance of input used in commitments and contingencies are
making measurements. The fair value In determining the appropriate given in Note 48.
hierarchy is given in Note 52.4. discount rate, management considers
the interest rates of Sri Lanka 2.10.11 Classification of Investment
2.10.5 Financial Assets and Liabilities government bonds with maturities Properties
Classification corresponding to the expected
Management requires using its
The Group’s accounting policies duration of the defined benefit
judgment to determine whether a
provide scope for assets and liabilities obligation. The mortality rate is based
property qualifies as an investment
to be classified, at inception into on publicly available mortality tables.
property. The Group has developed
different accounting categories. Future salary increases and pension
criteria so it can exercise its judgment
The classification of financial increases are based on expected
consistently. A property that is held to
instruments is given in Note 19, future inflation rate and expected
earn rentals or for capital appreciation
‘Analysis of Financial Instruments by future salary increase rates of the
or both and which generates cash
Measurement Basis’. Group.
flows largely independently of the
other assets held by the Group
2.10.6 Taxation 2.10.8 Fair Value of Property, Plant and
are accounted for as investment
Equipment
The Group is subject to income tax properties. On the other hand, a
and judgment is required to determine The freehold land and buildings property that is used for operations or
the total provision for current, of the Group are reflected at fair in the process of providing services or
deferred and other taxes due to the value at the date of revaluation less for administrative purposes and which
uncertainties that exist with respect any accumulated depreciation and do not directly generate cash flows as
to the interpretation of the applicable impairment losses. The Group engages a standalone asset are accounted for
tax laws, at the time of preparation of independent valuation specialists to as property, plant and equipment. The
these Financial Statements. determine fair value of freehold lands Group assesses on an annual basis
and buildings in terms of the Sri Lanka the accounting classification of its
For the calculation of deferred Accounting Standard –SLFRS 13, (Fair properties taking into consideration
tax, the Group has adopted the Value Measurement). The details of the current use of such properties.
Currently the Group does not have any transferred does not include amounts sale equity instruments, financial
investment property. related to the settlement of pre- liabilities designated as a hedge of a
existing relationships. Such amounts net investment in a foreign operation,
3 GENERAL ACCOUNTING POLICIES are generally recognised in profit or or qualifying cash flow hedges are
The accounting policies set out below loss. Transaction costs, other than recognised in other comprehensive
have been applied consistently to all those associated with the issue of income.
periods presented in these Financial debt or equity securities, that the
Statements, unless otherwise Group incurs in connection with a Forward exchange contracts are
indicated. business combination are expensed valued at the forward market rates
as incurred. ruling on the reporting date. Resulting
3.1 Basis of Consolidation net unrealised gains or losses are
The Group’s Financial Statements 3.2 Foreign Currency Transactions and dealt within the Statement of Profit or
comprise consolidation of the Balances Loss under ‘Net trading gain / loss’.
Financial Statements of the Bank All foreign currency transactions
and its Subsidiaries in terms are translated into the functional 3.3 Financial Instruments - Initial
of the Sri Lanka Accounting currency, which is Sri Lankan Rupees, Recognition, Classification and
Standard - SLFRS 10 (Consolidated using the exchange rates prevailing Subsequent Measurement
Financial Statements). The Bank’s at the dates of the transactions were 3.3.1 Date of Recognition
Financial Statements comprise affected. All financial assets and liabilities are
the amalgamation of the Financial initially recognised on the trade date,
Statements of the Domestic Banking Monetary assets and liabilities i.e. the date that the Group becomes a
Unit and the 0ff-Shore Banking Unit. denominated in foreign currencies at party to the contractual provisions of
the reporting date are translated to Sri the instrument. This includes ‘regular
3.1.1 Business Combinations and Goodwill Lankan Rupees using the spot foreign way trades’. Regular way trade means
Business combinations are accounted exchange rate ruling at that date purchases or sales of financial assets
for using the acquisition method as and all differences arising on non- that require delivery of assets within
per the requirements of Sri Lanka trading activities are taken to ‘Other the time frame generally established
Accounting Standard - SLFRS 03 operating income’ in the Statement by regulation or convention in the
(Business Combinations). of Profit or Loss. The foreign currency market place.
gain or loss on monetary items is
The Group measures goodwill as the difference between amortised 3.3.2 Recognition and Initial Measurement of
the fair value of the consideration cost in the functional currency at the Financial Instruments
transferred including the recognised beginning of the period, adjusted for
The classification of financial
amount of any non-controlling effective interest and payments during
instruments at the initial recognition
interest in the acquiree, less the the period, and the amortised cost
depends on their purpose and
net recognised amount (generally in foreign currency translated at the
characteristics and the management’s
fair value) of the identifiable assets rates of exchange prevailing at the
intention in acquiring them. Further
acquired and liabilities assumed, end of the reporting period.
details on classification of financial
all measured as of the acquisition assets and financial liabilities are
date. When the excess is negative, a Non - monetary items in a foreign
given under Note 3.3.3 & Note 3.3.4
bargain purchase gain is recognised currency that are measured in terms
respectively. All financial instruments
immediately in profit or loss, if of historical cost are translated using
are measured initially at their fair
controlling power is acquired. the exchange rates as at the dates
value plus transaction costs that are
of the initial transactions. Non -
directly attributable to acquisition or
The changes in parent’s ownership monetary items in foreign currency
issue of such financial instruments
interest in a subsidiary that do not measured at fair value are translated
except in the case of financial assets
result in the parent losing control of using the exchange rates at the date
and financial liabilities at fair value
the subsidiary are equity transactions. when the fair value was determined.
through profit or loss, as per the
Sri Lanka Accounting Standard -
The Group elects on a transaction- Foreign exchange differences arising
LKAS 39 (Financial Instruments:
by- transaction basis whether to on the settlement or reporting of
Recognition and Measurement).
measure non-controlling interest at monetary items at rates different from
Transaction cost in relation to
its fair value, or at its proportionate those which were initially recorded are
financial assets and financial liabilities
share of the recognised amount of dealt with in the Statement of Profit
at fair value through profit or loss are
the identifiable net assets, at the or Loss. However foreign currency
dealt with in the Statement of Profit
acquisition date. The consideration differences arising on available-for-
or Loss.
3.3.2 (a) ‘Day 1’ Profit or Loss or repurchasing in the near term or 3.3.3 (a) (ii) Financial Assets Designated at
When the transaction price differs holds as a part of a portfolio that is Fair Value through Profit or Loss
from the fair value of other observable managed together for short-term The Group designates financial assets
current market transactions in the profit or position taking. This category at fair value through profit or loss in
same instrument, or based on a also includes derivative financial the following circumstances:
valuation technique whose variables instruments entered into by the Group
include only data from observable that are not designated as hedging y Such designation eliminates or
markets, the Group recognises the instruments in hedge relationships significantly reduces measurement or
difference between the transaction as defined by Sri Lanka Accounting recognition inconsistency that would
price and fair value (a ‘Day 1’ profit Standard - LKAS 39 (Financial otherwise arise from measuring the
or loss) in the Statement of Profit or Instruments: Recognition and assets
Loss over the tenor of the financial Measurement).
y The assets are part of a group of
instrument using the effective interest financial assets, financial liabilities
rate method. In cases where fair value Financial assets held for trading are
recorded in the Statement of Financial or both, which are managed and
is determined using data which is not their performance evaluated on a
observable, the difference between Position at fair value. Changes in fair
value are recognised in ‘Net trading fair value basis, in accordance with
the transaction price and model value a documented risk management or
gain / loss’. Dividend income is
is only recognised in the Statement of investment strategy
recorded in ‘Net trading gain / loss’
Profit or Loss when the inputs become
when the right to receive the payment y The asset contains one or more
observable, or when the instrument is
has been established. Interest income embedded derivatives that
derecognised.
earned from financial assets held for significantly modify the cash flows
3.3.3 Classification and Subsequent trading is recorded under ‘Interest that would otherwise have been
Measurement of Financial Assets income: Financial assets held for required under the contract
trading’ using the effective interest
At the inception, a financial asset is Financial assets designated at fair
rate.
classified into one of the following: value through profit or loss are
The Group evaluates its held for recorded in the Statement of Financial
a. Financial assets at fair value trading asset portfolio, other than Position at fair value. Changes in fair
through profit or loss derivatives, to determine whether value are recorded in ‘Net gain or loss
i. Financial assets held for the intention to sell them in the on financial instruments designated at
trading near future is still appropriate. When fair value through profit or loss’ in the
ii. Financial assets designated the Group is unable to trade these Statement of Profit or Loss. Interest
at fair value through profit or financial assets due to inactive earned is accrued under ‘Interest
loss markets and management’s intention income’, using the effective interest
to sell them in the foreseeable future rate method, while dividend income
b. Held to maturity financial assets
significantly changes, the Group may is recorded under ‘Other operating
c. Loans and receivables elect to reclassify these financial income’ when the right to receive the
d. Financial assets available for sale assets. payment has been established.
The subsequent measurement of Financial assets held for trading The Group has not designated
financial assets depends on their include instruments such as any financial assets upon initial
classification. government securities and equity recognition as designated at fair value
instruments that have been acquired through profit or loss.
3.3.3 (a) Financial Assets at Fair Value principally for the purpose of selling
through Profit or Loss or repurchasing in the near term 3.3.3 (b) Held to Maturity Financial Assets
A financial asset is classified as fair and derivatives, including separated Held to maturity financial assets are
value through profit or loss if it is held embedded derivatives unless they non-derivative financial assets with
for trading or is designated at fair are designated as effective hedging fixed or determinable payments and
value through profit or loss. instruments. fixed maturities, which the Group has
the intention and ability to hold to
3.3.3 (a) (i) Financial Assets Held for Trading Details of ‘financial assets held for maturity. After the initial recognition,
trading’ are given in Notes 24 & 25 to held to maturity financial investments
Financial assets are classified as
the Financial Statements. are subsequently measured at
held for trading if they are acquired
principally for the purpose of selling amortised cost using the effective
interest rate, less impairment. The ‘Available for sale’ are those which are a. Financial liabilities at fair value
amortisation is included in ‘Interest neither classified as ‘Held for trading’ through profit or loss
income’ in the Statement of Profit nor ‘designated at fair value through i. Financial liabilities held for
or Loss. The losses arising from profit or loss’. Debt securities in this trading
impairment of such investments are category are intended to be held for an
ii. Financial liabilities designated
recognised in the Statement of Profit indefinite period of time and may be
at fair value through profit
or Loss. sold in response to needs for liquidity
or loss
or in response to changes in the
Details of ‘Financial investments - market conditions. The Group has not b. Financial liabilities at amortised
held to maturity’ are given in Note 31 designated any loans and receivables cost
to the Financial Statements. as available for sale.
3.3.4 (a) Financial Liabilities at Fair Value
3.3.3 (c) Loans and Receivables After initial measurement, available through Profit or Loss
Loans and receivables include non- for sale financial investments are Financial liabilities at fair value
derivative financial assets with fixed or subsequently measured at fair value. through profit or loss include financial
determinable payments that are not Unrealised gains and losses are liabilities held for trading and financial
quoted in an active market, other than: recognised directly in equity through liabilities designated upon initial
‘Other comprehensive income / recognition as fair value through
y Those that the Group intends to sell expense’ in the ‘Available for sale profit or loss. Subsequent to initial
immediately or in the near term and reserve’. When the investment is recognition, financial liabilities at
those that the Group, upon initial disposed of, the cumulative gain or fair value through profit or loss are
loss previously recognised in equity measured at fair value and changes
recognition, designates as fair value
is recognised in the Statement there in are recognised in profit or
through profit or loss
of Profit or Loss under ‘Net gain loss.
y Those that the Group, upon initial
from financial investments’. Where
recognition, designates as available 3.3.4 (a) (i) Financial Liabilities held for
the Group holds more than one
for sale Trading
investment in the same security,
y Those for which the Group may not they are deemed to be disposed of Financial liabilities are classified as
recover substantially all of its initial on a first-in first-out basis. Interest held for trading if they are acquired
investment through contractual cash earned whilst holding ‘Available for principally for the purpose of selling
flows, other than because of credit sale financial investments’ is reported or repurchasing in the near term or
deterioration as ‘Interest income’ using the effective holds as a part of a portfolio that
interest rate. Dividend earned whilst is managed together for short-
After initial measurement, loans holding ‘Available for sale financial term profit or position taking. This
and receivables are subsequently investments’ are recognised in the category includes derivative financial
measured at amortised cost using the Statement of Profit or Loss as ‘Net instruments entered into by the Group
effective interest rate, less allowance gain from financial investments’ when that are not designated as hedging
for impairment. The amortisation the right to receive the payment has instruments in hedge relationships as
is included in ‘Interest income’ in been established. The losses arising defined by the Sri Lanka Accounting
the Statement of Profit or Loss. The from impairment of such investments Standard - LKAS 39 (Financial
Instruments: Recognition and
losses arising from impairment are are recognised in the Statement of
Measurement).
recognised in ‘Impairment charge / Profit or Loss under ‘Impairment
reversal for loans and other losses’ in charge for loans and other losses’ and
3.3.4 (a) (ii) Financial Liabilities Designated at
the Statement of Profit or Loss. removed from the ‘Available for sale
Fair Value through Profit or Loss
reserve’.
Loans and receivables include cash The Group designates financial
& cash equivalents, balances with Details of ‘Financial assets - available liabilities at fair value through profit or
Central Bank, placement with banks, for sale’ are given in Note 29 & Note loss in the following circumstances:
reverse repurchase agreements, loans 30 to the Financial Statements.
to & receivables from banks and other y Such designation eliminates or
customers etc. 3.3.4 Classification and Subsequent significantly reduces measurement or
Measurement of Financial Liabilities recognition inconsistency that would
3.3.3 (d) Financial Assets Available for Sale otherwise arise from measuring the
At the inception, the Group determines
liabilities
Available for sale financial assets the classification of its financial
include equity and debt securities. liabilities. Accordingly financial
Equity investments classified as liabilities are classified as:
y The liabilities are part of a group of Note 39 (Debt issued and other as a result of increased recoverability
financial liabilities, financial assets borrowed funds) to the Financial of those cash receipts, the effect of
or both, which are managed and Statements. that increase is recognised as an
their performance evaluated on a adjustment to the effective interest
fair value basis, in accordance with 3.3.5 Reclassification of Financial rate from the date of the change in
a documented risk management or Instruments estimate rather than an adjustment
investment strategy 3.3.5 (a) Reclassification of Financial to the carrying amount of the asset at
Instruments ‘At fair value through profit the date of change in estimate.
y The liability contains one or or loss’
more embedded derivatives that The Group does not reclassify any
The Group does not reclassify
significantly modify the cash flows financial instrument into the ‘Fair
derivative financial instruments out
that would otherwise have been value through profit or loss’ category
of the fair value through profit or loss
required under the contract after initial recognition.
category while it is held or issued.
The Group has not designated 3.3.5 (b) Reclassification of ‘Available for sale’
Non derivative financial instruments
any financial liabilities upon initial Financial Instruments
designated at fair value through profit
recognition as fair value through profit The Group may reclassify financial
or loss upon initial recognition are not
or loss. assets out of available for sale
reclassified subsequently out of fair
value through profit or loss category. category as a result of change
3.3.4 (b) Financial Liabilities at Amortised
in intention or ability or in rare
Cost
The Group may, in rare circumstances, circumstances that a reliable measure
Financial instruments issued by of fair value is no longer available.
reclassify financial instruments out
the Group that are not classified as
of fair value through profit or loss
fair value through profit or loss are A financial asset classified as available
category if such instruments are
classified as financial liabilities at for sale that would have met the
no longer held for the purpose of
amortised cost under ‘Due to banks, definition of loans and receivables
selling or repurchasing in the near
‘Due to other customers’, ‘Securities at the initial recognition may be
term notwithstanding that such
sold under repurchase agreements’ reclassified out of available for sale
financial instruments may have been
and ‘Debt issued and other borrowed category to the loans and receivables
acquired principally for the purpose
funds’ as appropriate, where the category if the Group has the intention
of selling or repurchasing in the near
substance of the contractual and ability to hold such asset for the
term. Financial assets classified as
arrangement results in the Group foreseeable future or until maturity.
fair value through profit or loss at
having an obligation either to deliver
the initial recognition which would
cash or another financial asset The fair value of financial instruments
have also met the definition of ‘loans
to another entity, or to exchange at the date of reclassification is
and receivables’ as at that date is
financial assets or financial liabilities treated as the new cost or amortised
reclassified out of the fair value
with another entity under conditions cost of the financial instrument after
through profit or loss category only if
that are potentially unfavourable to reclassification. Difference between
the Group has the intention and ability
the entity or settling the obligation by the new amortised cost and the
to hold such asset for the foreseeable
delivering variable number of entity’s maturity value is amortised over the
future or until maturity.
own equity instruments. remaining life of the asset using
The fair value of financial instruments the effective interest rate. Any gain
After initial recognition, such financial or loss already recognised in Other
at the date of reclassification is
liabilities are subsequently measured Comprehensive Income in respect of
treated as the new cost or amortised
at amortised cost using the effective the reclassified financial instrument
cost of the financial instrument after
interest rate method. Amortisation until the date of reclassification is
reclassification. Any gain or loss
is included in ‘Interest expenses’ in accounted as follows.
already recognised in respect of the
the Statement of Profit or Loss. Gains
reclassified financial instrument until
and losses are recognised in the i) Financial assets with fixed maturity:
the date of reclassification is not
Statement of Profit or Loss when the Gain or loss recognised up to the date
reversed to the Statement of Profit or
liabilities are derecognised. of reclassification is amortised to
Loss.
profit or loss over the remaining life
The details of the Group’s financial of the investment using the effective
If a financial asset is reclassified, and
liabilities at amortised cost are shown interest rate. If the financial asset is
if the Group subsequently increases
in Note 37 (Due to banks), Note 38 subsequently impaired, any previous
its estimates of future cash receipts
(Due to other customers) and gain or loss that has been recognised
in other comprehensive income is Above reclassifications are at associated liability. The transferred
reclassified from equity to profit or the election of management and asset and the associated liability are
loss. determined on an instrument by measured on a basis that reflects the
instrument basis. The Group has not rights and obligations that the Group
ii) Financial assets without fixed maturity: reclassified any financial instrument has retained.
Gain or loss recognised up to the date during the year.
of reclassification is recognised in When the Group’s continuing
profit or loss only when the financial 3.3.6 Derecognition of Financial Assets and involvement that takes the form
asset is sold or otherwise disposed of. Liabilities of guaranteeing the transferred
If the financial asset is subsequently 3.3.6 (a) Derecognition of Financial Assets asset, the extent of the continuing
impaired, any previous gain or loss involvement is measured at the lower
The Group derecognises a financial
that has been recognised in other of the original carrying amount of the
asset (or, where applicable a part of
comprehensive income is reclassified asset and the maximum amount of
a financial asset or part of a group of
from equity to profit or loss. consideration received by the Group
similar financial assets) when:
that the Group could be required to
If a financial asset is reclassified, and repay.
y the rights to receive cash flows from
if the Group subsequently increases the asset have expired; or
its estimates of future cash receipts 3.3.6 (b) Derecognition of Financial Liabilities
as a result of increased recoverability y the Group has transferred its rights to A financial liability is derecognised
of those cash receipts, the effect receive cash flows from the asset when the obligation under the liability
of that increase is recognised as an or is discharged or cancelled or expired.
adjustment to the effective interest y has assumed an obligation to pay the Where an existing financial liability is
rate from the date of the change in received cash flows in full without replaced by another from the same
estimate rather than an adjustment material delay to a third party under lender on substantially different terms
to the carrying amount of the asset at a ‘pass-through’ arrangement and or the terms of an existing liability
the date of change in estimate. either the Group has transferred are substantially modified, such an
substantially all the risks and rewards exchange or modification is treated as
3.3.5 (c) Reclassification of ‘Held to maturity’ of the asset or the Group has neither a derecognition of the original liability
Financial Instruments transferred nor retained substantially and the recognition of a new liability.
As a result of a change in intention all the risks and rewards of the asset,
or ability,if it is no longer appropriate but has transferred control of the The difference between the carrying
to classify an investment as held asset. value of the original financial liability
to maturity, Group may reclassify and the consideration paid is
such financial assets as available On derecognition of a financial asset, recognised in profit or loss.
for sale and remeasured at fair value. the difference between the carrying
Any difference between the carrying amount of the asset (or the carrying 3.3.6 (c) Repurchase and Reverse
value of the financial asset before amount allocated to the portion of the Repurchase Agreements
reclassification and fair value is asset derecognised) and the sum of Securities sold under agreement
recognised in equity through other the consideration received (including to repurchase at a specified future
comprehensive income. any new asset obtained less any new date are not derecognised from the
liability assumed) and any cumulative Statement of Financial Position as
However, if the Group were to sell or gain or loss that had been recognised the Group retains substantially all of
reclassify more than an insignificant in other comprehensive income is the risks and rewards of ownership.
amount of held to maturity recognised in profit or loss. The corresponding cash received
investments before maturity [other is recognised in the Statement of
than in certain specific circumstances When the Group has transferred its Financial Position as a liability with
permitted in the Sri Lanka Accounting rights to receive cash flows from an a corresponding obligation to return
Standard - LKAS 39 (Financial asset or has entered into a pass- it, including accrued interest under
Instruments: Recognition and through arrangement and has neither ‘Securities sold under repurchase
Measurement], the entire category transferred nor retained substantially agreements’, reflecting the
would be tainted and would have all of the risks and rewards of the transaction’s economic substance to
to be reclassified as ‘Available for asset nor transferred control of the the Group. The difference between the
sale’. Furthermore, the Group would asset, the asset is recognised to sale and repurchase prices is treated
be prohibited from classifying any the extent of the Group’s continuing as interest expense and is accrued
financial asset as ‘Held to maturity’ involvement in the asset. In that over the life of the agreement using
during the following two years. case, the Group also recognises an the effective interest rate. When the
Group has the right to sell or repledge group of financial assets is deemed y A significant downgrading in credit
the securities, the Group reclassifies to be impaired if and only if there is rating by an external credit rating
those securities in its Statement of objective evidence of impairment as a agency.
Financial Position as ‘Financial assets result of one or more events, that have
held for trading pledged as collateral occurred after the initial recognition If there is objective evidence that an
(Note 25)’ or ‘Financial assets of the asset (an ‘incurred loss event’) impairment loss has been incurred,
available for sale pledged as collateral and that loss event (or events) has the amount of the loss is measured by
(Note 30)’, as appropriate. an impact on the estimated future discounting the expected future cash
cash flows of the financial asset or the flows of a financial asset at its original
Conversely, securities purchased group of financial assets that can be effective interest rate and comparing
under agreements to resell at reliably estimated. the resultant present value with the
a specified future date are not financial asset’s current carrying
recognised in the Statement of 3.3.8 (a) Impairment of Financial Assets amount. The impairment allowances
Financial Position. The consideration carried at Amortised Cost on individually significant accounts
paid, including accrued interest, For financial assets carried at are reviewed more regularly when
is recorded in the Statement of amortised cost, such as amounts circumstances require. This normally
Financial Position, under ‘Reverse due from banks, loans and advances encompasses re-assessment of the
repurchase agreements’ reflecting the taken by customers, held to maturity enforceability of any collateral held
transaction’s economic substance to investments etc., the Group first and the timing and amount of actual
the Group. The difference between the assesses individually whether and anticipated receipts. Individually
purchase and resale prices is recorded objective evidence of impairment assessed impairment allowances
as ‘Interest income’ and is accrued exists for financial assets that are are only released when there is
over the life of the agreement using individually significant or collectively reasonable and objective evidence of
the effective interest rate. If securities for financial assets that are not a reduction in the established loss
purchased under agreement to resell individually significant. estimate. Interest on impaired assets
are subsequently sold to third parties, continues to be recognised through
the obligation to return the securities In the event the Group determines the unwinding of the discount.
is recorded as a short sale within that no objective evidence of
‘Financial liabilities held for trading’ impairment exists for an individually When impairment losses are
and measured at fair value with any assessed financial asset, it includes determined for those financial
gains or losses included in ‘Net trading the asset in a group of financial assets assets where objective evidence
gain / loss’. with similar credit risk characteristics of impairment exists, the following
and collectively assesses them for factors are considered:
3.3.7 0ffsetting of Financial Instruments impairment. However assets that are
Financial assets and financial individually assessed for impairment y Bank’s aggregate exposure to the
liabilities are offset and the net and for which an impairment loss is customer;
amount presented in the Statement or continues to be recognised are not y The viability of the customer’s
of Financial Position only when the included in a collective assessment of business model and their capacity to
Group has a legal right to set off the impairment. trade successfully out of financial
recognised amounts and it intends difficulties and generate sufficient
either to settle on a net basis or to 3.3.8 (a) (i) Individually Assessed Financial cash flows to service debt obligations;
realise the asset and settle the liability Assets
simultaneously. Income and expenses y The amount and timing of expected
The criteria used to determine
are presented on a net basis only receipts and recoveries;
whether there is objective evidence of
when permitted under LKASs / SLFRSs impairment include and not limited to: y The extent of other creditors’
or for gains and losses arising from a commitments ranking ahead of, or
group of similar transactions such as y Known cash flow difficulties pari-passu with the Bank and the
in the Group’s trading activity. experienced by the borrower; likelihood of other creditors continuing
to support the company;
3.3.8 Impairment of Financial Assets y Past due contractual payments of
either principal or interest; y The complexity of determining the
The Group assesses at each reporting
aggregate amount and ranking of
date, whether there is any objective y Breach of loan covenants or
all creditor claims and the extent
evidence that a financial asset or a conditions;
to which legal and insurance
group of financial assets not carried
y The probability that the borrower will uncertainties are evident;
at fair value through profit or loss
enter bankruptcy or other financial
is impaired. A financial asset or a y The realisable value of security (or
reorganisation; and
other credit mitigants) and likelihood
of successful repossession;
y The likely deduction of any costs y Management’s experienced judgment stages of delinquency and ultimately
involved in recovery of amounts as to whether current economic and prove irrecoverable.
outstanding; credit conditions are such that the
actual level of inherent losses at the Current economic conditions
y The ability of the borrower to obtain
reporting date is like to be greater or and portfolio risk factors are also
and make payments in the currency
less than that suggested by historical evaluated when calculating the
of the loan if not denominated in local
experience. appropriate level of allowance
currency; and
required to cover inherent loss. These
y The likely dividend available on Homogeneous groups of financial additional macro and portfolio risk
liquidation or bankruptcy assets factors may include:
Statistical methods are used to
3.3.8 (a) (ii) Collectively Assessed Financial determine impairment losses on a y Recent loan portfolio growth and
Assets collective basis for homogeneous product mix
Impairment is assessed on a collective groups of financial assets. Losses in y Unemployment rates
basis in two circumstances: these groups of financial assets are
recorded on an individual basis when y Gross Domestic Production (GDP)
y To cover losses which have been individual financial assets are written growth
incurred but have not yet been off, at which point they are removed y Inflation
identified on loans subject to from the group.
individual assessment; and y Exchange rates
Two alternative methods are used to y Interest rates
y For homogeneous groups of loans
calculate historical loss experience on
that are not considered individually y Changes in government laws and
a collective basis:
significant. regulations
y When the group of financial assets
Incurred but not yet identified 3.3.8 (a) (iii) Reversal of Impairment
by nature long term, the Group uses
impairment
migration analysis method. Under If the amount of an impairment loss
Individually assessed financial assets this methodology the movements decreases in a subsequent period
for which no evidence of loss has been in number of customers into bad and the decrease can be related
specifically identified on an individual categories over the periods are used objectively to an event occurring after
basis are grouped together according to estimate the amount of financial the impairment was recognised, the
to their credit risk characteristics assets that will eventually be written excess is written back by reducing the
for the purpose of calculating an off as a result of the events occurring financial asset impairment allowance
estimated collective loss. This reflects before the reporting date which the account accordingly. The write-back is
impairment losses that the Group Group is not able to identify on an recognised in the Statement of Profit
has incurred as a result of events individual financial asset basis and or Loss.
occurring before the reporting date, that can be reliably estimated.
which the Group is not able to identify 3.3.8 (a) (iv) Write-off of Financial Assets
on an individual loan basis and that y When the group of financial assets Carried at Amortised Cost
can be reliably estimated. by nature short term, the Group uses Financial assets (and the related
net flow rate method. Under this impairment allowance accounts) are
These losses will only be individually methodology the movement in the normally written off either partially
identified in the future. As soon as outstanding balance of customers or in full, when there is no realistic
information becomes available which into bad categories over the periods prospect of recovery. Where financial
identifies losses on individual financial are used to estimate the amount of assets are secured, this is generally
assets within the group, those financial assets that will eventually be after receipt of any proceeds from the
financial assets are removed from the written off as a result of the events realisation of security.
group and assessed on an individual occurring before the reporting date
basis for impairment. which the Group is not able to identify 3.3.8 (a) (v) Impairment of Rescheduled
on an individual loan basis and that Loans and Advances
The collective impairment allowance is can be reliably estimated.
determined after taking into account: Where possible, the Group seeks
to reschedule loans rather than to
Under both methodologies, loans take possession of collateral. This
y Historical loss experience in portfolios are grouped into ranges according
of similar credit risk; and may involve extending the payment
to the number of days in arrears and arrangements and the agreement
statistical analysis is used to estimate of new loan conditions. Once the
the likelihood that loans in each range
terms have been renegotiated, any
will progress through the various
impairment is measured using the there is objective evidence that an 3.3.9 Hedge Accounting
original effective interest rate as investment is impaired. In the case The Group designates certain
calculated before the modification of debt instruments classified as derivatives as either:
of terms and the loan is no longer available for sale, the Group assesses
considered past due. Management individually whether there is objective y Hedges of the fair value of recognised
continually reviews renegotiated loans evidence of impairment based assets, liabilities or firm commitments
to ensure that all criteria are met on the same criteria as financial (fair value hedge);
and that future payments are likely assets carried at amortised cost. y Hedges of highly probable future cash
to occur. The loans continue to be However, the amount recorded for flows attributable to a recognised
subjected to individual or collective impairment is the cumulative loss asset or liability, or a forecast
impairment assessment, calculated measured as the difference between transaction (cash flow hedge); or
using the loan’s original effective the amortised cost and the current
interest rate. fair value, less any impairment y Hedges of the net investment of a
loss on that investment previously foreign operation (net investment
3.3.8 (a) (vi) Collateral Valuation recognised in the Statement of Profit hedges)
The Group seeks to use collateral, or Loss. Future interest income
is based on the reduced carrying Hedge accounting is used for
where possible, to mitigate its risks
amount and is accrued using the derivatives designated in this way
on financial assets. The collateral
rate of interest used to discount the provided certain criteria are met. The
comes in various forms such as cash,
future cash flows for the purpose of Group documents, at the inception
gold, securities, letters of credit/
measuring the impairment loss. If, in of the transaction, the relationship
guarantees, real estate, receivables,
a subsequent period, the fair value of between hedging instruments
inventories, other non-financial assets
a debt instrument increases and the and hedged items, as well as its
and credit enhancements such as
increase can be objectively related risk management objective and
netting agreements. The fair value of
to a credit event occurring after the strategy for undertaking various
collateral is generally assessed, at a
impairment loss was recognised, the hedge transactions. The Group also
minimum, at inception and based on
impairment loss is reversed through documents its assessment, both at
the guidelines issued by the Central
the Statement of Profit or Loss. hedge inception and on an ongoing
Bank of Sri Lanka.
basis, of whether the derivatives that
In the case of equity investments are used in hedging transactions are
To the extent possible, the Group uses
classified as available for sale, highly effective in offsetting changes
active market data for valuing financial
objective evidence would also include in fair values or cash flows of hedged
assets, held as collateral. Other
a ‘significant’ or ‘prolonged’ decline items.
financial assets which do not have
readily determinable market value are in the fair value of the investment
below its cost. The determination The Group did not designate any
valued using models. Non-financial
of ‘significant’ and ‘prolonged’ is derivative as a hedging instrument
collateral, such as real estate, is
explained in Note 2.10.3. Where during the year ended 31st December
valued based on data provided by third
there is evidence of impairment, the 2017.
parties such as independent valuers,
Audited Financial Statements and cumulative loss measured as the
difference between the acquisition 3.3.10 Amortised Cost Measurement
other independent sources.
cost and the current fair value, The amortised cost of a financial
3.3.8 (a) (vii) Collateral Repossessed less any impairment loss on that asset or liability is the amount at
investment previously recognised in which the financial asset or liability is
The Group’s policy is to determine
profit or Loss is removed from equity measured at initial recognition, minus
whether a repossessed asset is best
and recognised in the Statement principal repayments, plus or minus
used for its internal operations or
of Profit or Loss. However, any the cumulative amortisation using
should be sold. Assets determined to
subsequent increase in the fair value the effective interest method of any
be useful for the internal operations
of an impaired available for sale difference between the initial amount
are transferred to the relevant
equity security is recognised in other recognised and the maturity amount,
asset category at the lower of the
comprehensive income. minus any reduction for impairment.
repossessed value or the carrying
value of the original secured asset.
The Group writes-off certain available 3.3.11 Fair Value Measurement
for sale financial investments ‘Fair value’ is the price that would be
3.3.8 (b) Impairment of Financial Assets -
when they are determined to be received to sell an asset or paid to
Available for Sale
uncollectible. transfer a liability (exit price) in an
For available for sale financial
orderly transaction between market
investments, the Group assesses
participants at the measurement date
at each reporting date whether
in the principal or, in its absence, the
most advantageous market to which liquidity risk or model uncertainties; When the Group is a lessee under
the Group has access at that date. to the extent that the Group believes a finance leases, the leased assets are
The fair value of a liability reflects its third-party market participant would capitalised and included in ‘Property,
non-performance risk. When available, take them into account in pricing a plant and equipment’ and the
the Group measures the fair value of transaction. corresponding liability to the lessor is
an instrument using the quoted price included in ‘Other liabilities’. A finance
in an active market for that instrument The fair value of a demand deposit is lease and its corresponding liability
(Level 01 valuation). A market is not less than the amount payable on are recognised initially at the fair value
regarded as active if transactions for demand, discounted from the first of the asset or if lower, the present
the asset or liability take place with date on which the amount could be value of the minimum lease payments.
sufficient frequency and volume to required to be paid. Finance charges payable are
provide pricing information on an recognised in ‘Interest expenses’ over
ongoing basis. A fair value measurement of a non- the period of the lease based on the
financial asset takes into account a interest rate implicit in the lease so as
If there is no quoted price in an market participant’s ability to generate to give a constant rate of interest on
active market, then the Group uses economic benefits by using the asset the remaining balance of the liability.
valuation techniques that maximise in its highest and best use or by
the use of relevant observable selling it to another market participant 3.4.2 Operating Lease
inputs and minimise the use of that would use the asset in its highest All other leases are classified as
unobservable inputs. The chosen and best use. operating leases. When acting
valuation technique incorporates all of as lessor, the Group includes the
the factors that market participants The Group recognises transfers assets subject to operating leases
would take into account in pricing a between levels of the fair value in ‘Property, plant and equipment’
transaction. hierarchy as of the end of the and accounts for them accordingly.
reporting period during which the Impairment losses are recognised
The best evidence of the fair value change has occurred. to the extent that residual values
of a financial instrument at initial are not fully recoverable and the
recognition is normally the transaction 3.4 Finance and Operating Leases carrying value of the assets is thereby
price - i.e. the fair value of the The determination of whether an impaired.
consideration given or received. If the arrangement is a lease, or it contains
Group determines that the fair value a lease, is based on the substance When the Group is the lessee, leased
at initial recognition differs from the of the arrangement and requires an assets are not recognised on the
transaction price and the fair value is assessment of whether the fulfilment Statement of Financial Position.
evidenced neither by a quoted price of the arrangement is dependent on
in an active market for an identical the use of a specific asset or assets Rentals payable and receivable under
asset or liability (Level 01 valuation) and the arrangement conveys a right operating leases are accounted for on
nor based on a valuation technique to use the asset. a straight-line basis over the periods
that uses only data from observable of the leases and are included in
markets (Level 02 valuation), then 3.4.1 Finance Lease ‘Other operating expenses’ and ‘Other
the financial instrument is initially operating income’, respectively.
Agreements which transfer to
measured at fair value, adjusted to
counterparties substantially all
defer the difference between the fair 3.5 Fiduciary Assets
the risks and rewards incidental to
value at initial recognition and the
the ownership of assets, but not The Group provides fiduciary services
transaction price. Subsequently, that
necessarily legal title, are classified that result in the holding of assets on
difference is recognised in profit or
as finance leases. When the Group behalf of its customers. Assets held in
loss on an appropriate basis over the
is the lessor under finance leases fiduciary capacity are not reported in
life of the instrument but not later
the amounts due under the leases, the Financial Statements, as they are
than when the valuation is wholly
after deduction of unearned interest not assets of the Group.
supported by observable market data
income, are included in Note 26,
or the transaction is closed out.
‘Loans to & receivables from banks 3.6 Provisions
and Note 27, ‘Loans to & receivables A provision is recognised if, as a
Fair values reflect the credit risk of the
from other customers’, as appropriate. result of a past event, the Group
instrument and include adjustments
Interest income receivable is has a present legal or constructive
to take account of the credit risk of
recognised in ‘Net interest income’ obligation that can be estimated
the Group entity and the counterparty
over the periods of the leases so as to reliably, and it is probable that an
where appropriate. Fair value
give a constant rate of return on the outflow of economic benefits will
estimates obtained from models are
net investment in the leases. be required to settle the obligation.
adjusted for any other factors, such as
The amount recognised is the best 3.9 Other Taxes c) deposit liabilities to Directors, key
estimate of the consideration required 3.9.1 Withholding Tax (WHT) on Dividend management personnel and other
to settle the present obligation related parties as defined in Banking
Dividend distributed out of taxable
at the reporting date, taking in to Act Direction No. 11 of 2007 on
profit of the local Subsidiaries attracts
account the risks and uncertainties Corporate Governance of Licensed
WHT at source and is not available
surrounding the obligation at that Commercial Banks
to set off against the tax liability of
date. Where a provision is measured
the Bank. Thus, the WHT deducted at d) deposit liabilities held as collateral
using the cash flows estimated to
source, on the dividends distributed against any accommodation granted
settle the present obligation, its
by the Subsidiaries is charged to the
carrying amount is determined e) deposit liabilities falling within the
Consolidated Statement of Profit or
based on the present value of those meaning of abandoned property in
Loss as a consolidation adjustment.
cash flows. A provision for onerous terms of the Banking Act and dormant
contracts is recognised when the deposits in terms of the Finance
WHT that arise from the distribution
expected benefits to be derived by the Business Act, funds of which have
of dividend by the Bank are recognised
Group from a contract are lower than been transferred to Central Bank of Sri
at the same time as the liability to pay
the unavoidable cost of meeting its Lanka.
the related dividend is recognised.
obligations under the contract. The
provision is measured as the present Licensed Commercial Banks are
3.9.2 Economic Service Charge (ESC)
value of the lower of the expected cost required to pay a premium of 0.10%
of terminating the contract and the As per provisions of the Economic on eligible deposit liabilities if the Bank
expected net cost of continuing with Service Charge (ESC) Act No. 13 of maintains a capital adequacy ratio
the contract. 2006 and subsequent amendments of 14% or above as at the end of the
thereto, ESC is payable on liable gross immediately preceding financial year
Before a provision is established, the turnover of the Bank at 0.5% and is and a premium of 0.125% on eligible
Group recognises any impairment deductible from income tax payable. deposit liabilities for all other Licensed
loss on the assets associated with Commercial Banks calculated on the
that contract. The expense relating 3.10 Regulatory Provisions total amount of eligible deposits as at
to any provision is presented in the 3.10.1 Deposit Insurance and Liquidity the end of the quarter within a period
Statement of Profit or Loss net of any Support Scheme of 15 days from the end of the quarter.
reimbursement. In terms of the Banking Act Direction
No. 5 of 2010 “Insurance of Deposit 3.10.2 Crop Insurance Levy
3.7 Operational Risk Events Liabilities” issued on 27th September In terms of the Finance Act No. 12
Provisions for operational risk events 2010 and subsequent amendments of 2013, all institutions under the
are recognised for losses incurred by there to, all Licensed Commercial purview of Banking Act No. 30 of 1988,
the Bank which do not relate directly Banks are required to insure their Finance Business Act No. 42 of 2011
to amounts of principal outstanding deposit liabilities in the Deposit and Regulation of Insurance Industry
for loans and advances. The amount Insurance Scheme operated by Act No. 43 of 2000 are required to
recognised as a provision is the the Monetary Board in terms of Sri pay 1% of the profit after tax as
best estimate of the expenditure Lanka Deposit Insurance Scheme Crop Insurance Levy to the National
required to settle the present Regulations No. 1 of 2010 issued Insurance Trust Fund effective from
obligation as at the reporting date, under Sections 32A to 32E of the 01st April 2013.
taking into account the risks and Monetary Law Act with effect from 1st
uncertainties that surround the events October 2010. The said scheme was 4 STANDARDS ISSUED BUT NOT YET
and circumstances that affect the renamed as the “Sri Lanka Deposit EFFECTIVE AS AT 31ST DECEMBER 2017
provision. Insurance and Liquidity Support The following Sri Lanka Accounting
Scheme” as per the Sri Lanka Deposit Standards have been issued by the
3.8 Recognition of Income Insurance and Liquidity Support Institute of Chartered Accountants
Revenue is recognised to the extent Scheme Regulation No. 1 of 2013. of Sri Lanka which are not yet
that it is probable that the economic effective as at 31st December
benefits will flow to the Group and the Deposits to be insured include 2017. Accordingly these accounting
revenue can be reliably measured. demand, time and savings deposit standards have not been applied
Specific recognition criteria that must liabilities and exclude the following; in the preparation of the Financial
be met before revenue is recognised Statements for the year ended 31st
is discussed under Note 7 -Net a) deposit liabilities to member December 2017.
Interest Income, Note 8 - Net Fee and institutions
Commission Income, Note 9 - Net b) deposit liabilities to government of Sri
Trading Gain / Loss and Note 10 - Net Lanka
Gain from Financial Investments.
4.1 SLFRS 9- Financial Instruments In contrast, contractual exposures According to the diagnostic findings,
SLFRS 9 - Financial Instruments that introduce a more than classification and measurement
will replace LKAS 39 for annual de minimis exposure to risk or outcomes are similar to LKAS 39
periods on or after 1 January 2018 volatility in the contractual cash flows in many instances. However, the
with early adoption permitted. that are unrelated to basic lending combined effect of the application
The improvements introduced by arrangement, do not give rise to of the business model and the
SLFRS 9 includes a logical model for contractual cash flows that are solely contractual cash flow characteristic
classification and measurement, a the payment of principal and interest tests has resulted in some differences
single, forward-looking ‘expected loss’ on the amount outstanding. In such in the population of financial assets
impairment model and a substantially cases the financial asset is required to measured at amortised cost and
reformed approach to hedge be measured at FVPL. fair value compared to LKAS 39. The
accounting which are detailed under classification of financial liabilities
Note 4.1.1 to Note 4.1.3. 4.1.1 (b) Business Model Assessment remains unchanged.
The Group determines its business
4.1.1 Classification & Measurement model at the level that best reflects The Bank / Group does not have
how it manages the financial a material impact from the new
From a classification and
assets to achieve its objectives. classification and measurement
measurement perspective, the new
The Group’s business model principles introduced by SLFRS 9.
Standard will require all financial
assets, except equity instruments and is not assessed on an instrument by
instrument basis, but at a higher level 4.1.2 Impairment of Financial Assets
derivatives, to be assessed based on
a combination of the entity’s business of aggregated portfolios and is based 4.1.2 (a) Overview of Expected Credit Loss
model for managing the assets and on observable factors such as: Principle (ECL)
the instruments’ contractual cash SLFRS 9 will principally change
flow characteristics. Accordingly, y How the performance of the business the Group’s loan loss provision
financial assets are measured at model and the financial assets held method by replacing LKAS 39
amortised cost, fair value through within that business model are (Financial Instrument Recognition &
other comprehensive income (‘FVOCI’) evaluated and reported to the entity’s Measurement) incurred loss approach,
or fair value through profit or loss key management personnel. with a forward looking ECL approach.
(‘FVPL’). y The risks that affects the performance
of the business model (and the ECL allowance will be based on credit
4.1.1 (a) Contractual Cash flow financial assets held within that losses expected to arise over the life
Characteristic Test business model) and, in particular, the of the asset (Lifetime Expected Credit
The Group assesses the contractual way those risks are managed. Loss (LTECL), unless there has been
terms of the financial assets to no significant increase in credit risk
y How managers of the business are since origination, in which case the
identify whether they meet the
compensated (for example, whether loss allowance will be based on a 12
condition of Solely the Payment of
the compensation is based on the fair month expected credit loss (12mECL).
Principal & Interest (SPPI).
value of the assets managed or on the
contractual cash flows collected). 12mECL is the portion of LTECL
‘Principal’, for the purpose of this
test is defined as the fair value of the y The expected frequency, value and that represents the ECL that results
financial asset at initial recognition timing of sales are also important from default events on a financial
and may change over the life of aspects of the Group’s assessment. instrument that are possible within 12
the financial asset (for example, if months after the reporting date.
there are repayments of principal The business model assessment
or amortisation of the premium/ is based on reasonably expected The Group has established a policy to
discount). scenarios without taking ‘Worst perform an assessment, at the end
Case’ or ‘Stress Case’ scenarios in of each reporting period, whether a
The most significant elements of to account. If cash flows after initial financial instrument’s credit risk has
interest within a lending arrangement recognition are realised in a way increased significantly since initial
are typically the consideration for that is different from the Group’s recognition. Based on the assessment
the time value of money and credit original expectation, the Group does process, loans are grouped in to stage
risk. To make SPPI assessment, not change the classification of the 1, stage 2, stage 3 as described below:
the Group applies judgment and remaining financial assets held in
considers relevant factors such as that business model, but incorporates y Stage 1 : When loans are first
currency in which the financial asset is such information when assessing recognised, the Bank recognises an
denominated and the period for which newly originated or newly purchased allowance based on 12mECL. Stage
the interest rate is set. financial assets. 1 loans also include the facilities
where the credit risk has improved
and have been reclassified from Stage y Re-structured facilities y Other information such as changes
2. Assessment of Stage 1 will be in the price of the borrower’s debt /
y Secondary / qualitative indicators
performed collectively. equity instruments.
triggering a significant increase in
y Stage 2 : When a loan has shown credit risk of an asset.
4.1.2 (e) Grouping Financial Assets Measured
a significant increase in credit risk
on a Collective Basis
since origination, the Bank records an 4.1.2 (d) Individually Significant Assessment
allowance for the LTECL. Stage 2 loans and Not Impaired Individually As explained above, the Group
also include facilities where the credit calculates ECL either on a collective
Loans which are individually significant
risk has improved and have been or individual basis. Asset classes
but not impaired will be assessed
reclassified from stage 3. Assessment where the Group calculates ECL on an
collectively for impairment either
of stage 2 will be performed individual basis includes all individually
under Stage 1 or Stage 2 based on
collectively. significant assets which are
the criteria whether there have been
categorised in to stage 3. All assets
y Stage 3 : Loans considered to be significant credit deterioration since
which belong to stage 1, 2 & 3 (which
credit impaired/contains objective origination.
are not impaired under individually
evidence of incurred losses are significant category) will be assessed
grouped in to stage 3. Assessment While establishing significant credit
collectively for impairment.
of stage 3 loans are performed both deterioration the Bank will consider
individually and on collective basis. An the following factors:
The exposures assessed for collective
allowance is recognised for such loans impairment are categorised in to
based on the LTECL. y Significant changes in external market
smaller homogeneous groups based
indicators of credit risk for a particular
on a combination of internal &
4.1.2 (b) Definition of Default financial instrument or similar
external characteristics described
financial instruments.
Under SLFRS 9, Group considers below.
financial assets to be in default when: y An actual / expected internal credit
y Product type
rating downgrade of the borrower or
y Borrower is unlikely to pay it’s credit decrease in behavioural score used to y Type of collateral
obligation to the Group in full, without assess credit risk internally.
y Days past due
recourse by the Group to action such
y Existing or forecast adverse changes
as realising security (if any is held) or y Industry
in business, financial or economic
y Borrower is more than 90 days past conditions that are expected to cause
4.1.2 (f) The Calculation of ECL
due on any material credit obligation a significant change in the borrower’s
to the Group ability to meet its obligation. When estimating the ECL, the Group
considers 3 scenarios (Base Case,
y An actual or expected significant Best Case & Worst Case). Each of
In assessing whether a borrower is in
change in the operating results of these scenarios are associated with
default, the Group considers similar
the borrower, for example; actual different loss rates. The maximum
indicators to those which have been
/ expected decline in revenue, period of which the credit losses are to
reported under Note 3.3.8.(a).(i).
increase in operational risk, working be determined is the contractual life
capital deficiency, decrease in asset of the financial instrument.
4.1.2 (c) Significant Increase in Credit Risk
quality, increase in gearing, liquidity
The Group continuously monitors management problems etc. The key elements of the ECL
all assets subject to ECL, in order to
y Significant increase in credit risk on calculation are outlined below:
determine whether an instrument or
a portfolio of instruments is subject other financial instruments of the
same borrower. y PD: The Probability of Default is an
to 12mECL or LTECL. (i.e. whether
estimate of the likelihood of default
there has been a significant increase y An actual or expected significant over a given time horizon. A default
in credit risk since initial recognition). adverse change in the regulatory, may only happen at a certain time
The Group considers an exposure to economic or technological over the assessed period, if the facility
have a significantly increased credit environment of the borrower that has not been previously derecognised
risk, when either of the following result in a significant change in the and is still in the portfolio.
criteria are met: borrower’s ability to meet the debt
y Facilities exceeding 30 days past due obligation. y EAD: Exposure At Default is the
y Counterparties / facilities are coded to y Rates or terms of an existing financial estimate of the exposure at a future
any of the elevated risk industries as instrument that would be significantly default date, taking in to account
per the assessment performed by the different if the instrument was newly expected changes in the exposure
Credit Risk Management Team originated. after the reporting date, including
repayment of the principal and implementation of hedge accounting The Bank intends to perform a parallel
interest, whether scheduled by under SLFRS 9 does not have an run during the year 2018 to gain a
contract or otherwise, expected draw impact on the Consolidated / Separate better understanding of the potential
downs on committed facilities. Financial Statements of the Group / effect of the new standard and for
Bank respectively. the governance framework to gain
y LGD: Loss Given Default is an estimate experience. The Bank may publicly
of the loss arising in the event of a 4.1.4 Transition Process of the Bank disclose the potential impact, when
default, occurs at a given time. It In 2016, the Bank set up a it is practicable to provide reliable
is based on the difference between multidisciplinary implementation team estimates.
the contractual cash flows due and (‘the Team’) with members from its
those that the lenders would expect Finance, Credit, Risk and Operations Although the SLFRS 9 is effective from
to receive, including realisation of any teams to prepare for SLFRS 9 01st January 2018, the Institute of
collateral. It is usually expressed as a implementation (‘the Project’). The Chartered Accountants of Sri Lanka
% of the EAD. Project is sponsored by the Group has granted an exemption from
Chief Financial Officer. The Project has preparation of the interim Financial
4.1.2 (g) Forward Looking Information clear individual work streams within Statements for 2018, applying
In its ECL model, the Group relies two sub-teams for classification & LKAS 39 - Financial Instruments:
on a broad range of qualitative measurement and impairment. Recognition & Measurement instead
/ quantitative forward looking of SLFRS 9. Accordingly the Bank
information as economic input such The Bank performed the Diagnostic will be better placed to provide the
as: Phase (Preliminary Impact required disclosures by the second
Assessment) of SLFRS 9 in 2016, half of the ensuing financial year, for
Quantitative Qualitative with the assistance of an External which all required steps are being
Consultant. Working committees were taken.
GDP Growth
y Government
y
Policies formed under each of the two main
sub teams referred to above, covering 4.2 SLFRS 15 - Revenue from Contracts
Inflation
y Status of the
y all significant aspects of SLFRS 9, with Customers
Industry / prior to the commencement of the The objective of this Standard is
Business Implementation Phase. to establish the principles that an
Unemployment
y Regulatory
y entity shall apply to report useful
Impact The committees have regularly met information to users of Financial
during 2017 to select appropriate Statements about the nature, amount,
Interest Rates
y
classifications, develop suitable timing and uncertainty of revenue and
Exchange Rates
y models which fit to the Bank and to cash flows arising from contracts with
fine tune the models based on the test customers.
4.1.3 Hedge Accounting calculations.
SLFRS 9 introduces a substantially SLFRS 15 introduces a five step
reformed model for hedge accounting The two sub teams, driving the approach for revenue recognition
with enhanced disclosures about classification & measurement and the from contracts with customers and
risk management activity. The new impairment respectively, have already replaces all other currently applicable
model represents a substantial taken accounting policy decisions at revenue Standards and related
overhaul of hedge accounting that a broader level, some of which are interpretations.
aligns the accounting treatment disclosed under Note 4.1.2.
with risk management activities, SLFRS 15 will become effective on 1st
enabling entities to better reflect The Bank has performed a provisional January 2018. The Bank carried out an
these activities in their Financial SLFRS 9 calculation as at 31st impact analysis with the assistance
Statements. In addition, as a result December 2016 & 31st December of an external consultant during the
of these changes, users of the 2017 and has a directional idea of the year ended 31st December 2016. The
Financial Statements will be provided potential impact of SLFRS 9. Currently Bank performed a further analysis for
with better information about risk the risk modelling methodologies used the year 2017 as well. The analysis
management and the effect of for impairment computations are basically focused on the material fee
hedge accounting on the Financial being further tested and fine-tuned & commission income categories
Statements. by the Bank with the inputs from the such as credit cards, operation
Consultant and the management. related, e-remittance, electronic
The Bank is not presently banking and Bancassurance. The
following hedge accounting for its
derivatives portfolio and hence the
relevant agreements were analysed 5. AMENDMENTS TO EXISTING in combination with all of its other
and compared the current accounting ACCOUNTING STANDARDS EFFECTIVE deductible temporary differences.
treatment with the requirements of FROM 1ST JANUARY 2017 However, if tax law restricts the
SLFRS 15. According to the above 5.1 LKAS 7 - Statement of Cash Flows utilisation of losses to deduction
analysis the Bank does not have any against income of a specific type,
The amendment requires an entity
material impact from the adoption of a deductible temporary difference
to disclose information that enables
SLFRS 15 in the year 2018. is assessed in combination only
users of financial statements to
with other deductible temporary
evaluate changes in liabilities arising
4.3 SLFRS 16 – Leases differences of the appropriate type.
from financing activities, including
SLFRS 16 sets out the principles both changes arising from cash
for the recognition, measurement, Further the amendment requires
flows and non-cash changes.
presentation and disclosure of leases an entity to compare the deductible
for both parties to a contract, i.e. the temporary differences with future
Accordingly an entity shall disclose
customer (‘Lessee’] and the supplier taxable profit that excludes tax
the following changes in liabilities
(‘Lessor’]. SLFRS 16 will replace Sri deductions resulting from the
arising from financing activities:
Lanka Accounting Standard – LKAS 17 reversal of those deductible
(Leases) and related interpretations. temporary differences, when
y changes from financing cash flows
SLFRS 16 introduces a single evaluating whether the entity will
accounting model for the lessee, y changes arising from obtaining or have sufficient taxable profit in
eliminating the present classification losing control of subsidiaries or other future periods. This comparison
of leases in LKAS 17 as either businesses shows the extent to which the
operating leases or finance leases. future taxable profit is sufficient for
y the effect of changes in foreign
the entity to deduct the amounts
exchange rates
The new Standard requires a lessee to: resulting from the reversal of those
y changes in fair values and deductible temporary differences.
y recognise assets and liabilities for all
leases with a term of more than 12 y other changes
According to the amendment
months, unless the underlying asset is introduced, the estimate of probable
of low value Necessary disclosures have been
future taxable profit may include
given under Note 56 to the Financial
y present depreciation of lease assets the recovery of some of an entity’s
Statements.
separately, from interest on lease assets for more than their carrying
liabilities in the income statement. 5.2 LKAS 12 - Income Taxes amount if there is sufficient evidence
that it is probable that the entity will
When an entity assesses whether
SLFRS – 16 substantially carries achieve this. For example, when an
taxable profits will be available
forward the lessor accounting asset is measured at fair value, the
against which it can utilise a
requirement in LKAS – 17. Accordingly, entity shall consider whether there
deductible temporary difference,
a lessor continues to classify its is sufficient evidence to conclude
the entity shall consider whether tax
leases as operating lease or finance that it is probable that the entity will
law restricts the sources of taxable
lease, and to account for those two recover the asset for more than its
profits against which it may make
types of leases differently. carrying amount.
deductions on the reversal of that
deductible temporary difference. The Bank did not have a material
SLFRS -16 will become effective on
1st January 2019. The impact on the impact from the above amendment
If tax law imposes no such
implementation of the above Standard during the year ended 31st
restrictions, entity may assess the
has not been quantified yet. December 2017.
deductible temporary difference
6 GROSS INCOME
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Interest income (Note 7.1) 79,624,760 56,529,281 83,909,371 58,976,384

Fee & commission income (Note 8.1) 9,504,988 8,049,148 9,776,971 8,202,842
Net trading gain / (loss) (Note 9) 339,962 233,850 339,962 233,850
Net gain from financial investments (Note 10) 145,012 129,306 145,192 129,371
Other operating income (Note 11) 2,975,063 2,643,104 3,268,724 2,902,894
92,589,785 67,584,689 97,440,220 70,445,341
7 NET INTEREST INCOME
ACCOUNTING POLICY
Recognition of Interest Income and Interest Expense

For all financial instruments measured at amortised cost, interest bearing financial assets classified as available for sale and
financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the effective
interest rate method. Effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts
through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the
financial asset or financial liability.
The calculation of effective interest rate takes into account all contractual terms of the financial instrument (for example,
prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an
integral part of the effective interest rate, but not future credit losses.
The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or
receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying
amount is recorded as interest income for financial assets and interest expense for financial liabilities. However, for a
reclassified financial asset for which the Group 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.
Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss,
interest income continues to be recognised using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss.
7.1 Interest Income

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Placements with other banks 272,610 341,160 274,346 341,160

Financial assets - held for trading 5,250,735 1,722,065 5,250,735 1,722,065
Loans to & receivables from other customers 67,895,051 47,926,907 72,048,822 50,351,904
Other loans & receivables 2,868,552 2,476,058 2,868,552 2,476,058
Interest income accrued on impaired loans &
receivables (Note 27.2.1) 467,827 261,567 469,245 261,580
Reverse repurchase agreements 311,833 419,358 437,791 439,965
Financial assets - held to maturity - - 1,728 1,486
Financial assets - available for sale 2,558,152 3,382,166 2,558,152 3,382,166
79,624,760 56,529,281 83,909,371 58,976,384
7 NET INTEREST INCOME CONTD.

7.2 Interest Expense
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000

Term borrowings 1,757,441 1,618,890 3,138,385 2,525,166
Refinance borrowings 415,810 273,722 415,810 273,722
Finance leases 127,593 - - -
Securities sold under repurchase agreements 764,116 574,016 751,216 514,130
Redeemable debentures (Note 39.1) 2,905,372 2,592,619 3,359,244 2,778,210
51,261,317 33,775,753 53,612,130 35,021,019
Net interest income 28,363,443 22,753,528 30,297,241 23,955,365
7.3 Net Interest Income from Sri Lanka Government Securities

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Interest income 10,072,260 6,903,853 10,199,946 6,925,946

Less: Interest expense 764,116 574,016 751,216 514,130
Net interest income 9,308,144 6,329,837 9,448,730 6,411,816
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 interest income earned from secondary market transactions in government securities for the year by the Bank &
it’s subsidiaries has been grossed up in the Financial Statements and the resulting notional tax credit amounted to Rs 233.18 Mn
(2016: Rs 110.88 Mn) and Rs 247.24 Mn (2016: Rs 119.08 Mn) for the Bank and the Group respectively.
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.
Expenses on Account of Customer Loyalty Programmes

Award credits under customer loyalty programmes are accounted for as a separately identifiable component of the transaction
in which they are granted. The fair value of the consideration received in respect of the initial sale is allocated between the award
credits and the other components of the sale. Expense incurred for customer loyalty programmes is accounted under ‘Fee and
commission expense’.
Other Fee and Commission Expense

Other fee and commission expense relates mainly to transactions and services fees which are expensed as the services are
received. Fee and commission expenses are recognised on an accrual basis.
8.1 Fee and Commission Income

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Trade related services 1,616,459 1,461,386 1,616,459 1,461,386

Foreign remittance related services 256,307 247,399 256,307 247,399
Credit & debit card services 3,344,987 3,017,176 3,344,987 3,017,176
Other banking & financial services 4,287,235 3,323,187 4,559,218 3,476,881
9,504,988 8,049,148 9,776,971 8,202,842
8.2 Fee and Commission Expense

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Credit & debit card services 1,192,598 1,316,476 1,192,598 1,316,476

Other banking & financial services 156,764 148,125 162,755 150,988
1,349,362 1,464,601 1,355,353 1,467,464
Net fee & commission income 8,155,626 6,584,547 8,421,618 6,735,378
9 NET TRADING GAIN / (LOSS)
ACCOUNTING POLICY
Net trading gain / loss includes all gains and losses from changes in fair value, related capital gains / losses and dividend from
financial assets ‘Held for trading’. Dividend income is recognised when the Group’s right to receive the payment is established.
This category also includes foreign exchange differences arising from derivative contracts which are not designated as hedging
instruments.
Bank & Group

Rs 000 Rs 000
Forward exchange contract revaluation gain

Inter bank 313,411 160,814
Others 33,299 23,044
Capital gain 24,118 16,942
Dividend income 5,943 2,295
Net mark to market (loss) / gain (36,809) 30,755
339,962 233,850
10 NET GAIN FROM FINANCIAL INVESTMENTS
ACCOUNTING POLICY
Net gain from financial investments include capital gain / loss and dividend income from available for sale financial assets and
financial assets classified as other loans & receivables. Dividend income is recognised when the Group’s right to receive the
payment is established.
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Dividend income from available for sale financial assets 145,012 125,052 145,192 125,117
Capital gain - Available for sale financial assets - 3,376 - 3,376
Capital gain - Other loans & receivables - 878 - 878
145,012 129,306 145,192 129,371
11 OTHER OPERATING INCOME

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Exchange income
Inter bank 902,571 457,736 902,571 457,736
Others 1,883,095 1,947,391 1,878,231 1,947,391
Dividend income from subsidiaries 90,977 82,575 - -
(Loss) / profit on disposal of property, plant & equipment (9,829) (42) (8,128) 298
Rental & other income 108,249 155,444 496,050 497,469
2,975,063 2,643,104 3,268,724 2,902,894
11.1 Exchange income represents both revaluation gain / (loss) on the Bank’s net open position and realised exchange gain / (loss) on
foreign exchange contracts including the Bank’s currency notes operation. Gain on forward exchange contracts amounting to
Rs 346.7 Mn (2016 : gain of Rs 183.9 Mn) is reported under Note 9, ‘Net trading gain / (loss)’ as required by the Sri Lanka
Accounting Standard LKAS 39 (Financial Instruments - Recognition and Measurement). Accordingly total exchange income of the
Bank / Group for the year ended 31st December 2017 amounted to Rs 3,132.4 Mn and Rs 3,127.5 Mn respectively
(2016 : Rs 2,589.0 Mn).
12 NET IMPAIRMENT CHARGE FOR LOANS AND OTHER LOSSES

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Banks - - - -
Other customers
Individually significant customer loan impairment (Note 27.2.1) 1,357,566 930,035 1,429,271 949,745
Collective loan impairment (Note 27.2.2) 955,267 500,311 1,122,605 559,790
Property plant & equipment (Note 33.3) 161 (2,036) 161 (2,036)
Investment in subsidiary (Note 32.1) 62,799 4,000 - -
Financial assets - available for sale (Note 29.4) - 27,515 - 27,515
Others - - 81,636 -
2,375,793 1,459,825 2,633,673 1,535,014
13 PERSONNEL EXPENSES
ACCOUNTING POLICY
Short Term Employee Benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing plans if the
Group has a present 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.
Defined Contribution Plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient
assets to pay all employee benefits relating to employee services in the current and prior periods, as defined in the Sri Lanka
Accounting Standard - LKAS 19 (Employee Benefits).
The contribution payable by the employer to a defined contribution plan is in proportion to the services rendered to the Group by
the 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 41.
The Group contributes 3% of the salary of each employee to the Employees’ Trust Fund. Further, the Subsidiary companies
contribute 12% on the salary of each employee to the Employees’ Provident Fund. The above expenses are identified as
contributions to “Defined Contribution Plans” as defined in the Sri Lanka Accounting Standard - LKAS 19 (Employee Benefits).
Defined Benefit Plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Accordingly, the pension
fund, staff gratuity and the Employees’ Provident Fund of the Bank were considered as defined benefit plans as per Sri Lanka
Accounting Standard - LKAS 19 (Employee Benefits).
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. The
Bank measures the present value of the pension obligation, which is a defined benefit plan with the advice of an independent
professional actuary using the Projected Unit Credit (PUC) method as required by Sri Lanka Accounting Standard - LKAS 19
(Employee Benefits).
An actuarial valuation is carried out at every year end to ascertain the full liability under the Fund.
The Bank’s obligation in respect of defined benefit pension plan is calculated by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods and discounting that benefit to determine its
present value, then 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 defined benefit asset is restricted to the present value of any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank. An economic
benefit is available to the Bank if it is realisable during the life of the plan, or on settlement of the plan liabilities.
The Bank determines the net interest expense / (income) on the net defined benefit liability / (asset) by applying the discount
rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability
/ (asset) at the beginning of the annual period. The discount rate is the yield at the reporting date on government bonds (30
years) 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 year ended 31st December 2017 (current service cost) has been recognised in the Statement of Profit or Loss under
‘Personnel expenses’ together with the net interest income / expense.
13 PERSONNEL EXPENSES CONTD.
The Bank recognises the total actuarial gain / 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
In compliance with the Gratuity Act No. 12 of 1983, provision is made in the accounts from the first year of service, for gratuity
payable to employees who joined the Bank on or after 1st June 2003, as they are not in pensionable service of the Bank.
Provision is not made in the accounts for gratuity payable to employees who joined prior to 1st June 2003 and completed five or
more years of continuous service, as the Bank has its own non-contributory pension scheme in force. However, if employees who
are eligible for pension resign before retirement age, the Bank is liable to pay gratuity to such employees.
An actuarial valuation is carried out at every year 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.
The Group determines the interest expense on the defined benefit liability by applying the discount rate used to measure the
defined benefit liability at the beginning of the annual period to the defined benefit liability at the beginning of the annual period.
The discount rate is the yield at the reporting date on government bonds (10 years) 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 2017
(current service cost) has been recognised in the Statement of Profit or Loss under ‘Personnel expenses’ together with the net
interest expense. The Group recognises the total actuarial gain / 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 the fund, entitle to receive interest at a guaranteed rate of National Savings Bank one year fixed deposit rate
(net of WHT) on their balance even if the fund earns a lower return from its investment in a given financial year. Accordingly, this
obligation was treated as a defined benefit 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 treated as other long-term employee benefits. The Bank’s net obligation towards unutilised accumulated leave is
calculated by discounting the amount of future benefit that employees have earned in return for their service in the current
and prior periods to determine the present value of such benefits. 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 obligation. The calculation is performed
using the Projected Unit Credit method. Net change in liability for unutilised accumulated leave including any actuarial gain /
(loss) is recognised in the Statement of Profit or Loss under ‘Personnel expenses’ in the period in which they arise.
The Group’s net obligation to pension fund, gratuity, EPF interest guarantee and unutilised accumulated annual leave is
disclosed under Note 42 to the Financial Statements.
Share Based Payment Transactions

The Group does not have any share based payment transactions in force as at 31st December 2017.
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Salaries & bonus 6,443,339 5,779,461 6,988,135 6,188,418

Contributions to EPF & ETF 607,797 557,806 661,565 595,256
Provision for gratuity & pension 337,199 372,602 350,383 382,082
Others 647,673 622,758 701,821 668,914
8,036,008 7,332,627 8,701,904 7,834,670
14 OTHER OPERATING EXPENSES
ACCOUNTING POLICY
Depreciation of Property, Plant and Equipment

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 line basis over the periods appropriate to the estimated useful lives based on the pattern in which the asset’s
future economic benefits are 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.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset
is derecognised. Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully
depreciated.
Asset Category Depreciation Rate per Annum (%)

2017 2016
Freehold buildings 2.00 - 6.67 2.00 - 2.50

Improvements to leasehold properties 20.00 - 25.00 20.00 - 25.00
Computer equipment - Freehold 15.00 - 25.00 15.00 - 25.00
Computer equipment - Leasehold 25.00 -
Motor vehicles 12.50 - 20.00 12.50 - 20.00
Office equipment 2.50 - 25.00 2.50 - 25.00
Fixtures & fittings 12.50 - 20.00 12.50 - 20.00
Amortisation of Intangible Assets

Intangible assets, except for goodwill, are amortised on a straight line basis in the Statement of Profit or Loss from the date
when the asset is available for use, over the best estimate of its useful economic life based on a pattern in which the asset’s
economic benefits are consumed by the Group. The Group assumes that there is no residual value for its intangible assets.
Asset Category Depreciation Rate per Annum (%)
2017 2016
Computer software 10.00 - 25.00 10.00 - 25.00

Licenses 5.00 - 20.00 5.00 - 20.00
14 OTHER OPERATING EXPENSES CONTD.
Changes in Estimates
Depreciation / amortisation methods, useful lives and residual values are reassessed at each reporting date and adjusted if
appropriate. During the year ended 31st December 2017, the Group conducted an operational efficiency review and estimates
were revised accordingly.
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Directors' fees & expenses 59,696 52,697 90,667 77,073

Auditors' remuneration (Note 14.1) 29,434 22,234 36,044 27,420
Professional & legal expenses 111,965 75,373 130,925 90,697
Depreciation of property, plant & equipment (Note 33) 719,548 599,081 1,014,533 845,172
Amortisation of intangible assets (Note 34) 173,415 110,009 182,317 120,249
Deposit insurance premium 661,192 533,919 669,227 537,376
Donations 2,417 2,589 2,417 2,589
Operating lease expenses 1,093,430 1,053,242 916,459 853,533
Office administration & establishment expenses 3,132,404 2,753,527 3,228,713 2,811,701
Other expenses (Note 14.2) 2,898,978 2,935,331 3,046,241 3,065,312
8,882,479 8,138,002 9,317,543 8,431,122
14.1 Auditors’ Remuneration

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Audit fees 13,888 12,495 16,919 15,152

Audit related fees & expenses 5,419 5,122 6,880 6,293
Non - audit expenses 10,127 4,617 12,245 5,975
29,434 22,234 36,044 27,420
14.2 Other expenses include advertising and business promotion expenses, credit card related expenses and other overhead expenses
incurred on day to day operations of the Bank / Group.
15 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 (VAT) Act No. 14 of 2002 and subsequent
amendments thereto. The base for the computation of value added tax on financial services is the accounting profit before VAT
and income tax adjusted for the economic depreciation and emoluments payable to employees including cash benefits, non-
cash benefits & provisions relating to terminal benefits.
Nation Building Tax

NBT on financial services is calculated in accordance with Nation Building Tax (NBT) Act No. 09 of 2009 and subsequent
amendments thereto with effect from 1st January 2014. NBT on financial services is calculated based on the value addition
used for the purpose of VAT on financial services.
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Value added tax on financial services 3,599,030 2,425,799 3,800,159 2,534,832

Nation building tax on financial services 479,871 388,224 509,230 407,691
4,078,901 2,814,023 4,309,389 2,942,523
16 INCOME TAX EXPENSE
ACCOUNTING POLICY
As per Sri Lanka Accounting Standard - LKAS 12 (Income Taxes), tax expense is the aggregate amount included in
determination of profit or loss for the period in respect of current and deferred taxation. Income tax expense is recognised in the
Statement of Profit or Loss, 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.
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.
Accordingly, provision for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the
provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto at the rates specified in Note 16.1.1 & 16.1.2
to the Financial Statements.
Deferred Taxation
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes for all Group entities. Deferred tax liabilities are recognised for all taxable
temporary differences, except:
y Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss.
y 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 any), to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, carried forward unused tax credits and unused tax losses can be utilised except:
y Where the deferred tax asset relating to the deductible temporary differences arising from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
y In respect of deductible temporary differences associated with investments in Subsidiaries, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
16 INCOME TAX EXPENSE CONTD.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is probable that
sufficient taxable profit will be available to allow the deferred tax asset to be utilised. Unrecognised deferred tax assets are
reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will
allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting
date.
Current 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 liabilities / (assets) are given in Note 40 and Note 35
to the Financial Statements respectively.
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Current tax expense

Current tax based on profit for the year 5,596,868 3,691,014 5,775,580 3,825,441
Over provision in respect of previous years (Note 40.1) (935,121) (573,114) (937,061) (577,485)
Current tax expense (Note 16.1) 4,661,747 3,117,900 4,838,519 3,247,956
Deferred tax expense
Transfers (from) / to deferred taxation (Note 35.1) (159,942) 357,288 (10,791) 464,327
Income tax expense 4,501,805 3,475,188 4,827,728 3,712,283
Effective tax rate 27.1% 27.6% 27.6% 28.1%
16.1 Reconciliation of the Accounting Profit to Current Tax Expense

Bank Group
% Rs 000 % Rs 000 % Rs 000 % Rs 000
Profit before tax 16,605,925 12,599,858 17,510,228 13,213,529
Tax effect on accounting profit

before tax 28.0 4,649,659 28.0 3,527,960 28.0 4,902,864 28.0 3,699,788
Tax effect on turnover liable for
income tax - - - - - 5,608 - 5,622
Tax effect on
Disallowable expenses 17.0 2,826,602 11.8 1,484,362 17.0 2,979,576 12.0 1,580,894
Tax deductible expenses (6.2) (1,033,391) (5.0) (628,249) (7.1) (1,236,274) (5.5) (723,789)
Exempt income (5.1) (846,002) (5.5) (693,059) (4.8) (846,002) (5.2) (693,059)
Income from other sources - - - - - 2,058 - 362
Elimination of profit liable for turnover
based tax - - - - (0.2) (31,530) (0.3) (44,256)
Tax losses - - - - - (720) - (121)
Taxation based on profit for the year 33.7 5,596,868 29.3 3,691,014 33.0 5,775,580 29.0 3,825,441
Over provision in respect of previous
years (Note 40.1) (5.6) (935,121) (4.6) (573,114) (5.4) (937,061) (4.4) (577,485)
28.1 4,661,747 24.7 3,117,900 27.6 4,838,519 24.6 3,247,956
16.1.1 Applicable Income Tax Rates

2017 2016
Sampath Bank PLC 28% 28%

Siyapatha Finance PLC 28% 28%
S C Securities (Pvt) Ltd 28% 28%
Sampath Information Technology Solutions Ltd 28% 28%
16.1.2 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 commencing from the first year of assessment. The first year of assessment is the year in which the company commenced
making profits in relation to its transactions in that year, or any year of assessment not later than five years from the date of its first
commercial operations, whichever is earlier. Accordingly, 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 the rate of 28%.
17 EARNINGS PER SHARE
ACCOUNTING POLICY
The Group presents basic and diluted Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary equity share holders of the Bank by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by adjusting both the profit attributable to the ordinary equity share
holders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares,
if any.
17.1 Earnings per Share: Basic / Diluted

Bank Group
2017 2016 2017 2016
Amount used as the numerator

Profit after tax for the year attributable to equity holders (Rs) 12,104,120,350 9,124,670,243 12,682,500,228 9,496,073,323
No. of ordinary shares used as the denominator

Weighted average number of ordinary shares (Note 17.1.1) 195,393,739 192,707,155 195,393,739 192,707,155
Basic / diluted earnings per ordinary share (Rs) 61.95 47.35 64.91 49.28
17.1.1 Weighted Average Number of Ordinary Shares for Basic / Diluted EPS
Bank & Group
Outstanding No. of Shares Weighted Average No. of Shares
2017 2016 2017 2016
Number of shares in issue as at 1st January 176,981,069 172,312,655 176,981,069 172,312,655

Add: Number of shares issued due to scrip dividend 2015 - 4,668,414 - 4,668,414
176,981,069 176,981,069 176,981,069 176,981,069
Add: Number of shares issued due to scrip dividend 2016 9,209,419 9,209,419 9,209,419 9,209,419
186,190,488 186,190,488 186,190,488 186,190,488
Add : Number of shares issued under rights issue 2017 31,031,748 - 2,686,584 -
Add : Bonus element on number of shares issued under
rights issue 2017 - - 6,516,667 6,516,667
Number of shares in issue / weighted average number
of shares as at 31st December 217,222,236 186,190,488 195,393,739 192,707,155
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
the completion of these financial statements which would require the restatement of EPS.
18 DIVIDEND PAID AND PROPOSED
ACCOUNTING POLICY
Provision for final dividend and interim dividend (scrip) are recognised at the time the dividend is recommended and declared
by the Board of Directors, and approved by the shareholders. However, interim cash dividend is recognised when the Board
approves such dividend in accordance with Companies Act No. 7 of 2007.
2017 2016
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 2016 & 2015

respectively
Out of dividend received - free of tax - - - 78,465 - 78,465
Out of normal profit 884,405 88,441 795,964 2,161,599 214,472 1,947,127
Scrip / cash dividend paid 884,405 88,441 795,964 2,240,064 214,472 2,025,592
Dividend per Ordinary Share (Rs) 4.75 4.28 13.00 11.75
Interim dividend paid for the year 2016

Out of dividend received - free of tax 37,832 - 37,832 - - -
Out of normal profit 2,439,902 243,990 2,195,912 - - -
Scrip dividend paid 2,477,734 243,990 2,233,744 - - -
Dividend per Ordinary Share (Rs) 14.00 12.62 - -
Interim dividend proposed for the year 2016

Out of dividend received - free of tax - - - 37,832 - 37,832
Out of normal profit - - - 2,439,902 243,990 2,195,912
Scrip dividend paid - - - 2,477,734 243,990 2,233,744
Dividend per Ordinary Share (Rs) - - - 14.00 12.62
Final dividend proposed for the years 2017 &

2016 (Note 18.1) respectively
Out of dividend received - free of tax 10,933 - 10,933 - - -
Out of normal profit 4,587,494 642,249 3,945,245 884,405 88,441 795,964
Scrip / cash dividend payable 4,598,427 642,249 3,956,178 884,405 88,441 795,964
Dividend per Ordinary Share (Rs) 17.20 14.80 4.75 4.28
Total dividend per Ordinary Share (Rs) 17.20 14.80 18.75 16.90
Note 18.1
The Directors of the Bank have recommended a first and final scrip dividend of Rs 17.20 per share for the financial year ended 31st
December 2017, a distribution of approximately Rs 4,598.4 Mn. The right to receive the dividend will also apply to the increased
number of shares allotted pursuant to the Rights Issue 2018 announced on 19th December 2017. The entitlement date for the
dividend will be notified subsequently.
Note 18.2
In accordance with Sri Lanka Accounting Standard - LKAS 10 (Events after the Reporting Period), above proposed final dividend
has 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 reporting period” as required by the said Standard.
19 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 each category of financial instruments is measured and how income and expenses, including fair value gains and losses,
are recognised. The following table analyses the carrying amounts of the financial instruments by category as defined in Sri
Lanka Accounting Standard - LKAS 39 (Financial Instruments: Recognition & Measurement) under headings of the Statement of
Financial Position.
19.1 Analysis of Financial Instruments by Measurement Basis - Bank

As at 31st December 2017
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 20 - 22,334,315 - - 22,334,315
Balances with Central Bank of Sri Lanka 21 - 41,100,364 - - 41,100,364
Placements with banks 22 - 3,159,326 - - 3,159,326
Reverse repurchase agreements - 1,200,762 - - 1,200,762
Derivative financial instruments 23 496,918 - - - 496,918
Financial assets - held for trading 24 19,910,621 - - - 19,910,621
collaterals 25 591,886 - - - 591,886
Loans to & receivables from banks 26 - 2,084,507 - - 2,084,507
Loans to & receivables from other customers 27 - 560,798,940 - - 560,798,940
Other loans & receivables 28 - 49,352,443 - - 49,352,443
Financial assets - available for sale 29 - - - 72,911,447 72,911,447
collaterals 30 - - - 4,184,272 4,184,272
Financial assets - held to maturity 31 - - - - -
Other assets - 4,123,185 - - 4,123,185
Total Financial Assets 20,999,425 684,153,842 - 77,095,719 782,248,986
Financial Liabilities
Due to banks 37 - 4,743,748 4,743,748
Derivative financial instruments 23 103,947 - 103,947
Securities sold under repurchase agreements - 4,386,335 4,386,335
Due to other customers 38 - 625,814,313 625,814,313
Debt issued & other borrowed funds 39 - 76,098,240 76,098,240
Dividend payable - 99,259 99,259
Other liabilities - 8,262,267 8,262,267
Total Financial Liabilities 103,947 719,404,162 719,508,109
19 ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD.

19.2 Analysis of Financial Instruments by Measurement Basis - Bank
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
collaterals 25 10,380,213 - - - 10,380,213
collaterals 30 - - - 657,903 657,903
Financial assets - held to maturity 31 - - - - -
Other assets - 3,257,948 - - 3,257,948
Total Financial Assets 38,599,278 594,195,888 - 14,928,093 647,723,259
Due to banks 37 - 6,907,354 6,907,354
19.3 Analysis of Financial Instruments by Measurement Basis - Group

Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
collaterals 25 524,850 - - - 524,850
collaterals 30 - - - 4,082,703 4,082,703
Financial assets - held to maturity 31 - - 12,428 - 12,428
Other assets - 4,285,587 - - 4,285,587
Total Financial Assets 20,999,425 711,424,421 12,428 77,095,775 809,532,049
Due to banks 37 - 4,820,287 4,820,287
19 ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS CONTD.

19.4 Analysis of Financial Instruments by Measurement Basis - Group
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
collaterals 25 10,371,617 - - - 10,371,617
collaterals 30 - - - 598,681 598,681
Financial assets - held to maturity 31 - - 16,933 - 16,933
Other assets - 3,507,676 - - 3,507,676
Total Financial Assets 38,599,278 611,938,646 16,933 14,928,149 665,483,006
Due to banks 37 - 6,954,618 6,954,618
20 CASH AND CASH EQUIVALENTS
ACCOUNTING POLICY
Cash and cash equivalents comprise cash in hand, balances with banks, money at call and short notice that are subject to an
insignificant risk of changes in their value. Cash and cash equivalents are carried at amortised cost in the Statement of Financial
Position.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and short term deposits as defined
above, placements with banks (less than 3 months), net of unfavourable balances with local & foreign banks.
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Local currency in hand 11,664,978 6,822,773 11,937,788 6,971,898

Foreign currency in hand 2,967,552 594,551 2,967,552 594,551
Balances with local banks 319,606 458,375 325,420 467,046
Balances with foreign banks 5,329,492 2,709,271 5,329,492 2,709,271
Money at call & short notice 2,052,687 6,479,043 2,052,687 6,479,043
22,334,315 17,064,013 22,612,939 17,221,809
21 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 2017, the minimum cash reserve requirement was 7.5% (2016: 7.5%) 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

Rs 000 Rs 000
Statutory reserve requirement 41,100,364 33,724,856

41,100,364 33,724,856
22 PLACEMENTS WITH BANKS

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Maturity less than three months

Placements - in Sri Lanka 76,750 2,251,564 142,449 2,251,564
Placements - out side Sri Lanka 3,082,576 5,519,340 3,082,576 5,519,340
3,159,326 7,770,904 3,225,025 7,770,904
Maturity more than three months

Placements - in Sri Lanka - - - -
Placements - out side Sri Lanka - 978,859 - 978,859
- 978,859 - 978,859
3,159,326 8,749,763 3,225,025 8,749,763
23 DERIVATIVE FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
Derivatives are financial instruments that derive their value in response to changes in interest rates, financial instrument
prices, commodity prices, foreign exchange rates, credit risk and indices. Derivatives are categorised as trading unless they are
designated as hedging instruments.
All derivatives are initially recognised and subsequently measured at fair value, with all revaluation gains recognised in the
Statement of Profit or Loss (except where cash flow or net investment hedging has been achieved, in which case the effective
portion of changes in fair value is recognised within other comprehensive income). Fair values may be obtained from quoted
market prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow models
and option pricing models, as appropriate. Where the initially 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 the same initial recognition accounting policy
as for other financial assets and liabilities. All derivatives are carried as assets when fair value is positive and as liabilities when
fair value is negative.
Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond held, are valued
as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and
the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value, with
changes in fair value recognised in the Statement of Profit or Loss. Embedded derivatives continue to be presented with the host
contract and are not separately disclosed or included within derivatives. The Group did not have separated embedded derivatives
as at 31st December 2017.
The table below shows the fair values of derivative financial instruments of the Bank / Group, recorded as assets or liabilities,
together with their notional amounts. The notional amounts indicate the volume of transactions outstanding at the year end and
are indicative of neither the market risk nor the credit risk.
Bank & Group

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 68,278 35,093 10,552,488 27,007 19,386 7,896,836
Purchases 24,973 13,318 4,869,342 5,617 15,389 3,351,722
Currency SWAPS
Sales 367,245 6,708 29,964,055 12,781 27,882 9,985,909
Purchases 36,422 48,828 15,822,929 64,467 954 9,444,636
496,918 103,947 61,208,814 109,872 63,611 30,679,103
24 FINANCIAL ASSETS - HELD FOR TRADING

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Government securities - treasury bills (Note 24.1) 19,821,312 28,011,024 19,888,348 28,019,620
Quoted equity securities (Note 24.2) 89,309 98,169 89,309 98,169
19,910,621 28,109,193 19,977,657 28,117,789
24.1 Government Securities - Treasury Bills

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 19,791,886 27,971,916 19,858,916 27,980,501
Gain / (loss) from mark to market valuation as at 1st January 39,108 (205) 39,119 (203)
Movement during the year (9,682) 39,313 (9,687) 39,322
Gain from mark to market valuation as at 31st December 29,426 39,108 29,432 39,119
Market value 19,821,312 28,011,024 19,888,348 28,019,620
24.2 Quoted Equity Securities

Bank & Group
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

Banks, Finance & Insurance
National Development Bank PLC 622,884 111,437 84,961 600,000 107,943 93,600
111,437 84,961 107,943 93,600
Diversified Holdings
Vallibel One PLC 245,600 6,140 4,348 245,600 6,140 4,569
6,140 4,348 6,140 4,569
Total 117,577 89,309 114,083 98,169
(Loss) / gain from mark to market valuation as

at 1st January (15,914) 7,658
Movement during the year (12,354) (23,572)
Loss from mark to market valuation as at 31st
December (28,268) (15,914)
Market value 89,309 98,169
25 FINANCIAL ASSETS HELD FOR TRADING PLEDGED AS COLLATERALS

The Bank pledges assets that are in its Statement of Financial Position in day to day transactions 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 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 591,195 10,364,749 524,165 10,356,164
Gain from mark to market valuation as at 1st January 15,464 450 15,453 448
Movement during the year (14,773) 15,014 (14,768) 15,005
Gain from mark to market valuation as at 31st December 691 15,464 685 15,453
Market value 591,886 10,380,213 524,850 10,371,617
26 LOANS TO AND RECEIVABLES FROM BANKS

Bank & Group
Rs 000 Rs 000
Gross loans & receivables (Note 26.1) 2,084,507 2,641,733

Provision for impairment losses - -
Net loans & receivables 2,084,507 2,641,733
26.1 At Amortised Cost:

Rs 000 Rs 000
Leasing 9,612 11,134

Term loans 2,074,895 2,283,124
Overdraft - 47,229
Money market loans - 300,246
2,084,507 2,641,733
27 LOANS TO AND RECEIVABLES FROM OTHER CUSTOMERS

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Gross loans & receivables 571,875,296 465,875,708 598,133,233 482,883,380

Staff loan fair value adjustment (Note 36.1) (2,433,049) (1,960,290) (2,446,286) (1,966,756)
569,442,247 463,915,418 595,686,947 480,916,624
Individually significant customer loan impairment (Note 27.2.1) (3,421,074) (3,385,046) (3,579,835) (3,473,520)
Collective impairment (Note 27.2.2) (5,222,233) (4,341,320) (5,736,408) (4,688,157)
Total impairment (Note 27.2) (8,643,307) (7,726,366) (9,316,243) (8,161,677)
Net loans & receivables 560,798,940 456,189,052 586,370,704 472,754,947
27.1 At Amortised Cost:

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 % Rs 000 % Rs 000 % Rs 000 %
Bills of exchange 3,240,461 0.57 3,630,345 0.78 3,240,461 0.54 3,630,345 0.75
Leasing (Note 27.4) 20,890,560 3.65 19,214,862 4.12 41,141,068 6.88 33,314,624 6.90
Housing loans 32,275,877 5.64 25,374,582 5.45 32,275,877 5.40 25,374,582 5.25
Export loans 24,237,483 4.24 19,809,405 4.25 24,237,483 4.05 19,809,405 4.10
Import loans 59,859,744 10.47 50,853,973 10.92 59,830,438 10.00 50,839,778 10.53
Refinance loans 8,162,888 1.43 9,016,678 1.94 8,162,888 1.36 9,016,678 1.87
Term loans 265,959,814 46.51 205,751,571 44.16 269,431,823 45.05 205,841,301 42.63
Hire purchases (Note 27.5) 208,596 0.04 499,323 0.11 530,795 0.09 1,408,369 0.29
Loans against investment fund
account (IFA) 400,026 0.07 742,281 0.16 400,417 0.07 744,922 0.15
Overdraft 103,118,503 18.03 85,032,667 18.26 103,047,002 17.23 84,700,187 17.54
Staff loans 8,528,002 1.49 7,140,851 1.53 8,635,805 1.44 7,222,750 1.50
Pawning 19,665,969 3.44 15,479,487 3.32 19,665,969 3.29 15,479,487 3.21
Credit cards 11,050,973 1.93 9,468,068 2.03 11,050,973 1.85 9,468,068 1.96
Money market loans 10,186,376 1.78 11,042,976 2.37 10,186,376 1.70 11,042,976 2.29
Factoring 3,911,169 0.68 2,564,273 0.55 5,970,574 1.00 4,635,379 0.96
Others 178,855 0.03 254,366 0.05 325,284 0.05 354,529 0.07
571,875,296 100.00 465,875,708 100.00 598,133,233 100.00 482,883,380 100.00
Staff loan fair value adjustment
(Note 36.1) (2,433,049) (1,960,290) (2,446,286) (1,966,756)
569,442,247 463,915,418 595,686,947 480,916,624
Provision for impairment losses
(Note 27.2) (8,643,307) (7,726,366) (9,316,243) (8,161,677)
560,798,940 456,189,052 586,370,704 472,754,947
27.2 Provision for Impairment Losses

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Individually significant customer loan impairment (Note 27.2.1) 3,421,074 3,385,046 3,579,835 3,473,520
Collective loan impairment (Note 27.2.2) 5,222,233 4,341,320 5,736,408 4,688,157
Total impairment (Note 27.3) 8,643,307 7,726,366 9,316,243 8,161,677
27.2.1 Individually Significant Customer Loan Impairment

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 3,385,046 3,019,615 3,473,520 3,095,730

Net charge to profit or loss (Note 12) 1,357,566 930,035 1,429,271 949,745
Write-off during the year (1,047,867) (467,113) (1,047,867) (467,113)
Interest income accrued on impaired loans & receivables (Note 7.1) (467,827) (261,567) (469,245) (261,580)
Other movements 194,156 164,076 194,156 156,738
Balance as at 31st December 3,421,074 3,385,046 3,579,835 3,473,520
Gross amount of loans individually determined to be impaired,

before deducting the individually assessed impairment provision 8,691,517 7,541,722 9,080,464 7,958,764
27 LOANS TO AND RECEIVABLES FROM OTHER CUSTOMERS CONTD.

27.2.2 Collective Loan Impairment
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Net charge to profit or loss (Note 12) 955,267 500,311 1,122,605 559,790
Write-off during the year (67,809) (142,155) (67,809) (156,930)
Other movements (6,545) 5,489 (6,545) 4,550
27.3 Movement in Provision for Impairment Losses - by Product

Bank
Leasing & Hire Loans & 2017 2016
Purchase Receivables Total Total
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 387,680 7,338,686 7,726,366 6,997,290

Net (reversal) / charge to profit or loss (3,000) 2,315,833 2,312,833 1,430,346
Write-off during the year - (1,115,676) (1,115,676) (609,268)
Interest income accrued on impaired loans & receivables (Note 7.1) - (467,827) (467,827) (261,567)
Other movements - 187,611 187,611 169,565
Balance as at 31st December 384,680 8,258,627 8,643,307 7,726,366
Group
Leasing & Hire Loans & 2017 2016
Purchase Receivables Total Total
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 709,679 7,451,998 8,161,677 7,376,477

Net charge to profit or loss 122,629 2,429,247 2,551,876 1,509,535
Write-off during the year - (1,115,676) (1,115,676) (624,043)
Interest income accrued on impaired loans & receivables (Note 7.1) - (469,245) (469,245) (261,580)
Other movements - 187,611 187,611 161,288
Balance as at 31st December 832,308 8,483,935 9,316,243 8,161,677
27.4 Leasing
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total lease rentals receivable 25,336,431 22,975,713 52,474,737 41,502,703

Unearned lease interest income (4,445,871) (3,760,851) (11,333,669) (8,188,079)
Gross lease receivable 20,890,560 19,214,862 41,141,068 33,314,624
Impairment allowance for lease receivable (372,386) (378,137) (749,558) (628,650)
Net lease receivable 20,518,174 18,836,725 40,391,510 32,685,974
Gross lease receivable within one year (Note 27.4.1) 7,614,872 6,506,345 14,078,786 10,493,297
Gross lease receivable after one year (Note 27.4.2) 13,275,688 12,708,517 27,062,282 22,821,327
20,890,560 19,214,862 41,141,068 33,314,624
27.4.1 Gross Lease Receivable within One Year

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total lease rentals receivable within one year from reporting date 9,827,350 8,363,553 19,388,045 14,333,611
Gross lease receivable within one year (Note 27.4) 7,614,872 6,506,345 14,078,786 10,493,297
Net lease receivable within one year 7,475,819 6,378,304 13,747,706 10,221,086
27.4.2 Gross Lease Receivable after One Year

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total lease rentals receivable after one year from reporting date 15,509,081 14,612,160 33,086,692 27,169,092
Gross lease receivable after one year (Note 27.4) 13,275,688 12,708,517 27,062,282 22,821,327
Net lease receivable after one year 13,042,355 12,458,421 26,643,804 22,464,888
27.5 Hire Purchase

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase rentals receivable 233,933 580,808 583,697 1,629,819

Unearned hire purchase interest income (25,337) (81,485) (52,902) (221,450)
Gross hire purchase receivable 208,596 499,323 530,795 1,408,369
Impairment allowance for hire purchase receivable (12,294) (9,543) (82,750) (81,029)
Net hire purchase receivable 196,302 489,780 448,045 1,327,340
Gross hire purchase receivable within one year (Note 27.5.1) 125,696 235,539 386,000 721,919
Gross hire purchase receivable after one year (Note 27.5.2) 82,900 263,784 144,795 686,450
208,596 499,323 530,795 1,408,369
27.5.1 Gross Hire Purchase Receivable within One Year

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase rentals receivable within one year from

reporting date 144,319 286,958 428,685 873,880
Gross hire purchase receivable within one year (Note 27.5) 125,696 235,539 386,000 721,919
Net hire purchase receivable within one year 118,288 231,037 316,200 663,856

27.5.2 Gross Hire Purchase Receivable after One Year
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Total hire purchase rentals receivable after one year from

reporting date 89,614 293,850 155,012 755,939
Gross hire purchase receivable after one year (Note 27.5) 82,900 263,784 144,795 686,450
Net hire purchase receivable after one year 78,014 258,743 131,845 663,484
27.6 Loans to & Receivables from Other Customers - by Currency

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Sri Lankan Rupee 499,999,909 407,416,379 526,257,846 424,424,051

United States Dollar 67,740,371 53,937,502 67,740,371 53,937,502
Euro 2,747,877 1,999,707 2,747,877 1,999,707
Great Britain Pounds 947,625 2,229,461 947,625 2,229,461
Australian Dollar 439,514 277,491 439,514 277,491
United Arab Emirates Dirham - 15,168 - 15,168
571,875,296 465,875,708 598,133,233 482,883,380
27.7 Loans to & Receivables from Other Customers - by Product

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 % Rs 000 % Rs 000 % Rs 000 %
By Product - LKR
Bills of exchange 583,061 0.10 910,851 0.20 583,061 0.10 910,851 0.19
Leasing 20,890,560 3.65 19,214,862 4.12 41,141,068 6.88 33,314,624 6.90
Housing loans 31,665,910 5.53 25,071,539 5.38 31,665,910 5.30 25,071,539 5.19
Export loans 970,206 0.17 994,794 0.21 970,206 0.16 994,794 0.20
Import loans 55,112,266 9.64 47,175,388 10.13 55,082,960 9.21 47,161,193 9.77
Refinance loans 8,162,888 1.43 9,016,678 1.94 8,162,888 1.36 9,016,678 1.87
Term loans 228,209,145 39.91 175,744,276 37.72 231,681,154 38.74 175,834,006 36.42
Hire purchase 208,596 0.04 499,323 0.11 530,795 0.09 1,408,369 0.29
Loans against investment fund
account (IFA) 400,026 0.07 742,281 0.16 400,417 0.07 744,922 0.15
Overdraft 100,361,862 17.55 82,285,004 17.67 100,290,361 16.77 81,952,524 16.97
Staff loans 8,528,002 1.49 7,140,851 1.53 8,635,805 1.44 7,222,750 1.50
Pawning 19,665,969 3.44 15,479,487 3.32 19,665,969 3.29 15,479,487 3.21
Credit cards 11,050,973 1.93 9,468,068 2.03 11,050,973 1.85 9,468,068 1.96
Money market loans 10,186,376 1.78 11,042,976 2.37 10,186,376 1.70 11,042,976 2.29
Factoring 3,911,169 0.68 2,564,273 0.55 5,970,574 1.00 4,635,379 0.96
Others 92,900 0.01 65,728 0.01 239,329 0.04 165,891 0.03
Sub total 499,999,909 87.42 407,416,379 87.45 526,257,846 88.00 424,424,051 87.90
By Product - Foreign Currency

Bills of exchange 2,657,400 0.47 2,719,494 0.58 2,657,400 0.44 2,719,494 0.56
Housing loans 609,967 0.11 303,043 0.07 609,967 0.10 303,043 0.06
Export loans 23,267,277 4.07 18,814,611 4.04 23,267,277 3.89 18,814,611 3.90
Import loans 4,747,478 0.83 3,678,585 0.79 4,747,478 0.79 3,678,585 0.76
Term loans 37,750,669 6.60 30,007,295 6.44 37,750,669 6.31 30,007,295 6.21
Overdraft 2,756,641 0.48 2,747,663 0.59 2,756,641 0.46 2,747,663 0.57
Others 85,955 0.02 188,638 0.04 85,955 0.01 188,638 0.04
Sub total 71,875,387 12.58 58,459,329 12.55 71,875,387 12.00 58,459,329 12.10
Total 571,875,296 100.00 465,875,708 100.00 598,133,233 100.00 482,883,380 100.00

27.8 Loans to & Receivables from Other Customers - By Industry
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 % Rs 000 % Rs 000 % Rs 000 %
Agriculture & related (Note 27.8.1) 45,989,887 8.04 43,832,852 9.41 47,743,634 7.98 45,202,464 9.36
Manufacturing 92,609,937 16.19 68,034,295 14.60 94,763,251 15.84 69,391,132 14.37
Tourism 43,942,733 7.68 36,269,354 7.79 44,566,727 7.45 36,628,630 7.59
Transport 8,515,303 1.49 6,099,152 1.31 8,612,594 1.44 6,121,094 1.27
Construction 93,925,607 16.42 72,751,253 15.62 95,055,918 15.89 73,621,495 15.25
Traders 138,835,049 24.28 113,974,071 24.46 144,031,352 24.08 117,633,201 24.36
Financial and business services
(Note 27.8.2) 31,529,987 5.51 35,245,615 7.57 30,527,001 5.10 32,991,815 6.83
Government 9,778,500 1.71 617,236 0.13 9,778,500 1.63 617,236 0.13
Infrastructure 23,562,392 4.12 18,853,554 4.05 23,562,392 3.94 19,702,294 4.08
Other services 20,627,761 3.62 19,465,960 4.17 34,350,664 5.74 28,460,268 5.88
Consumers 62,558,140 10.94 50,732,366 10.89 65,141,200 10.91 52,513,751 10.88
571,875,296 100.00 465,875,708 100.00 598,133,233 100.00 482,883,380 100.00
27.8.1 As per the Central Bank of Sri Lanka (CBSL) requirement, a minimum of 10% of the loans and receivables shall be granted to the
agriculture sector. The Bank has complied with the said requirement as at 31st December 2017 and 31st December 2016. The
computation method used to derive the industry-wise exposure in Note 27.8 above is different from the method used for CBSL
minimum lending requirement calculation to agriculture sector.
27.8.2 Loans granted to government banks have been classified under “Financial and business services”.
28 OTHER LOANS AND RECEIVABLES

Bank & Group
Rs 000 Rs 000
Debentures - quoted (Note 28.1) 6,397,209 7,171,286

Sri Lanka Development Bonds (SLDBs) 40,888,766 28,389,925
Lease backed trust certificates (Note 28.2) 2,066,468 2,629,514
Commercial papers (Note 28.3) - 517,715
49,352,443 38,708,440
28.1 Debentures - Quoted

Bank & Group
Amortised Amortised
Cost Cost
Rs 000 Rs 000
Name of the Company

Banks, Finance & Insurance
Alliance Finance PLC 146,633 146,666
Central Finance Company PLC 291,148 303,052
Commercial Leasing & Finance PLC 495,159 495,280
DFCC Bank PLC 224,916 224,916
Housing Development Finance Corporation Bank of Sri Lanka 318,485 318,694
Lanka Orix Leasing Company PLC 511,342 511,311
Orient Finance PLC 418,745 400,595
Pan Asia Banking Corporation PLC 50,067 50,147
People’s Leasing & Finance PLC 447,302 742,482
Senkadagala Finance PLC - 20,121
Singer Finance PLC 247,387 247,449
Softlogic Finance PLC 426,464 426,340
3,577,648 3,887,053
Constructions & Engineering

Access Engineering PLC 303,707 303,707
MTD Walkers PLC 512,421 512,421
816,128 816,128
Diversified Holdings
Abans PLC 277,669 604,886
Hayleys PLC 507,685 507,911
Hemas Holdings PLC 12,662 12,662
Singer Sri Lanka PLC 617,378 754,621
1,415,394 1,880,080
Others
Kotagala Plantations PLC 78,146 78,131
Lion Brewery Ceylon PLC 509,893 509,894
588,039 588,025
Total 6,397,209 7,171,286

Provision for impairment - -
6,397,209 7,171,286
28 OTHER LOANS AND RECEIVABLES CONTD.

28.2 Lease Backed Trust Certificates
Bank & Group
Amortised Amortised
Cost Cost
Rs 000 Rs 000
People's Leasing & Finance PLC 997,723 2,167,427

Associate Motor Finance Company PLC 19,239 114,532
Commercial Credit & Finance PLC 24,341 179,197
Senkadagala Finance PLC 1,025,165 -
UB Finance Company Ltd - 168,358
2,066,468 2,629,514
2,066,468 2,629,514
28.3 Commercial Papers

Bank & Group
Amortised Amortised
Cost Cost
Rs 000 Rs 000
First Capital Holdings PLC - 517,715

- 517,715
- 517,715
29 FINANCIAL ASSETS - AVAILABLE FOR SALE

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Government securities - treasury bills (Note 29.1) 69,411,143 7,723,232 69,512,712 7,782,454
Government securities - treasury bonds (Note 29.2) 809,874 4,786,690 809,874 4,786,690
Quoted equity security (Note 29.3) 2,659,822 1,729,560 2,659,822 1,729,560
Unquoted equity securities (Note 29.4) 30,608 30,708 30,664 30,764
72,911,447 14,270,190 73,013,072 14,329,468

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 69,309,547 7,710,836 69,411,016 7,769,928
Gain / (loss) from mark to market valuation as at 1st January 12,396 (3,637) 12,526 (4,184)
Movement during the year 89,200 18,237 89,170 18,914
Transfer of gain from available for sale financial assets to profit or
loss - (2,204) - (2,204)
Market value 69,411,143 7,723,232 69,512,712 7,782,454
29.2 Government Securities - Treasury Bonds

Bank & Group
Rs 000 Rs 000
Amortised cost 839,178 4,894,918
Loss from mark to market valuation as at 1st January (108,228) (1,384)

Movement during the year 78,924 (105,672)
Transfer of gain from available for sale financial assets to profit or loss - (1,172)
Loss from mark to market valuation as at 31st December (29,304) (108,228)
Market value 809,874 4,786,690
29.3 Quoted Equity Security

Quoted equity security represents the investment in ordinary shares of LankaBangla Finance Ltd in Bangladesh.
Bank & Group
2017 2016
No. of No. of
Shares Rs 000 Shares Rs 000
Cost of the investment as at 1st January 26,211,685 434,815 22,792,770 355,544

Exchange gain 10,766 15,990
Scrip dividend received during the year 3,931,752 72,572 3,418,915 63,281
Cost of the investment as at 31st December 30,143,437 518,153 26,211,685 434,815
Gain from mark to market valuation as at 1st January 1,294,745 862,067

Movement during the year 846,924 432,678
Gain from mark to market valuation as at 31st December 2,141,669 1,294,745
Market Value 2,659,822 1,729,560
29 FINANCIAL ASSETS - AVAILABLE FOR SALE CONTD.

29.4 Unquoted Equity Securities
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 293,485 45,641 1,007 266,805 44,600 1,107
Credit Information Bureau 1,700 170 170 1,700 170 170
SWIFT 26 6,556 6,556 26 6,556 6,556
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 - 1,241,263 15,516 -
Total 90,758 30,608 89,717 30,708
Impairment provision as at 1st January (59,009) (31,494)

Net charge to profit or loss (Note 12) - (27,515)
Other movements during the year (1,141) -
Impairment provision as at 31st December (60,150) (59,009)
Group
Name of the Company
LankaBangla Securities Ltd 293,485 45,641 1,007 266,805 44,600 1,107
Credit Information Bureau 1,800 226 226 1,800 226 226
SWIFT 26 6,556 6,556 26 6,556 6,556
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 - 1,241,263 15,516 -
Total 90,814 30,664 89,773 30,764
Impairment provision as at 1st January (59,009) (31,494)

Net charge to profit or loss (Note 12) - (27,515)
Other movements during the year (1,141) -
Impairment provision as at 31st December (60,150) (59,009)
Directors of the Bank carried out an impairment assessment of the unquoted share investments held by the Bank as at 31st
December 2017 and concluded that there is no further impairment required for any of the investments.
Unquoted available for sale equity securities are recorded at cost less accumulated impairment losses, since it is the most
reasonable value available to represent the market value of these investments as at the reporting date.
30 FINANCIAL ASSETS - AVAILABLE FOR SALE PLEDGED AS COLLATERALS

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Government securities - treasury bills (Note 30.1) 4,184,272 657,903 4,082,703 598,681
Government securities - treasury bonds (Note 30.2) - - - -
4,184,272 657,903 4,082,703 598,681

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Amortised cost 4,180,527 656,746 4,079,058 597,654
Gain / (loss) from mark to market valuation as at 1st January 1,157 (869) 1,027 (322)
Movement during the year 2,588 2,026 2,618 1,349
Market value 4,184,272 657,903 4,082,703 598,681
30.2 Government Securities - Treasury Bonds

Bank & Group
Rs 000 Rs 000
Amortised cost - -
Loss from mark to market valuation as at 1st January - (35,713)

Movement during the year - 35,713
Gain / (loss) from mark to market valuation as at 31st December - -
Market value - -
31 FINANCIAL ASSETS - HELD TO MATURITY

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Government securities - treasury bills & bonds - - 12,428 16,933

- - 12,428 16,933
32 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 date of transfer of title. The acquired identifiable assets, liabilities and contingent liabilities are measured at their
fair values at the date of 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. The total profit or loss for the year of the Subsidiaries is included in the Consolidated Statement of Profit or
Loss. The non-controlling interest is presented in the Consolidated Statement of Financial Position within equity, separately
from the equity attributable to the equity holders of the Bank. Non-controlling interest in the profit or loss of the Group is
disclosed in the Consolidated Statement of Comprehensive Income. Total comprehensive income is allocated to the owners of
the parent and to the non-controlling interest even if this results in non- controlling interest having a deficit balance.
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 date of disposal. Upon the loss of control,
the Group derecognises the assets and liabilities of the Subsidiary, any non-controlling interests and the other components of
equity related to the Subsidiary. Any surplus or deficit arising on the loss of control is recognised in the 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. Subsequently it is accounted for as an equity-accounted investee or in accordance with the Group’s accounting policy for
financial instruments depending on the level of influence retained.
The Group did not acquire / dispose any Subsidiaries during the year ended 31st December 2017.
There are no significant restrictions on the ability of the Subsidiaries to transfer funds to the Bank in the form of cash dividends
or repayment of loans and advances.
All Subsidiaries of the Bank have been incorporated in Sri Lanka.

32.1 Bank
Subsidiary Principal Activities Ownership Cost Directors’ Ownership Cost Directors’
Valuation Valuation
Rs 000 Rs 000 Rs 000 Rs 000
Siyapatha Finance PLC Granting leasing, hire 100% 635,917 2,490,561 100% 576,975 1,930,355
purchase, factoring &
other loans facilities
& accepting deposits
Sampath Centre Ltd Renting of 100% 579,036 3,880,909 100% 547,000 4,357,835
commercial property
S C Securities (Pvt) Ltd Stock broking 100% 178,921 112,947 100% 78,921 75,154
Sampath Information Software 100% 29,000 120,670 100% 29,000 105,068
Technology Solutions development, renting
Ltd of IT equipments, IT
services outsourcing
and document
management services
1,422,874 1,231,896
Impairment provision as
at 1st January (4,000) -
Movement during the
year (Note 12) (62,799) (4,000)
Impairment provision as
at 31st December (66,799) (4,000)
Net investment in
subsidiaries 1,356,075 1,227,896
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 as at 31st December 2017 and
accordingly the Bank has recognised a further impairment charge of Rs 62.8 Mn (2016 : Rs 4.0 Mn) against the investment in SC
Securities (Pvt) Ltd during the year.
33 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 recognised if it is probable that future economic benefits associated with the asset will flow to the Group and
the cost of the asset can be reliably measured.
Measurement
An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes
expenditure 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.
33 PROPERTY, PLANT AND EQUIPMENT CONTD.
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 by independent professional valuers
every three years or more frequently if the fair values are substantially different from carrying amounts, to ensure that the
carrying amounts do not differ from the fair values as at the reporting date. The Group revalued its freehold lands and buildings
as at 31st December 2017, the details of which are given in Note 33.3.
On revaluation of an asset, any increase in the carrying amount is recognised in ‘Other comprehensive income’ and accumulated
in equity, under revaluation reserve or used to reverse a previous revaluation decrease relating to the same asset, which was
charged to the Statement of Profit or Loss. In this circumstance, the increase is recognised as income to the extent of the
previous write down. Any decrease in the carrying amount is recognised as an expense in the Statement of Profit or Loss or
debited to the other comprehensive income to the extent of any credit balance existing in the revaluation reserve in respect of
that asset.
The decrease recognised in other comprehensive income reduces the amount accumulated in equity under revaluation 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 if it is probable that the future economic benefits embodied within that part will flow to the Group and its cost can be
reliably measured. The costs of day to day servicing of property, plant and equipment are charged to the Statement of Profit or
Loss as incurred.
Derecognition
The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic
benefits are 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 of Profit or Loss when the item is derecognised. When replacement costs are recognised in
the carrying amount of an item of property, 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 inspection is derecognised.
Capital Work in Progress

These are expenses of capital nature directly incurred in the construction of buildings, major plant, 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 all the activities necessary to prepare the qualifying asset for its intended use are
completed. Other borrowing costs are recognised in profit or loss in the period in which they are incurred.
There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year.
Rates of depreciation for each category of property, plant and equipment is given in Note 14, ‘Other operating expenses’.
33.1 Bank
Freehold Improvements Computer Office Fixtures Motor Leased Capital 2017 2016
Land to Leasehold Equipment Equipment & Vehicles Assets Work-in Total Total
& Buildings Properties Fittings Progress
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Cost / Valuation
Balance as at 1st January 4,109,225 1,114,903 2,568,632 1,986,896 210,295 249,887 - 37,403 10,277,241 9,119,522
Additions & improvements 8,666 54,627 415,239 168,555 56,039 9,491 484,175 29,596 1,226,388 657,344
Disposals during the year - (1,947) (89,231) (19,650) (4,984) (38,481) - - (154,293) (27,584)
Written off during the year - - (4,543) (42,384) (4,498) - - - (51,425) (1,547)
Revaluation adjustment on
accumulated depreciation (10,915) - - - - - - - (10,915) (75,015)
Revaluation surplus 822,480 - - - - - - - 822,480 604,243
Transfers / adjustments - - - - - - - - - 278
Cost / valuation as at 31st
December 4,929,456 1,167,583 2,890,097 2,093,417 256,852 220,897 484,175 66,999 12,109,476 10,277,241
Accumulated Depreciation
Balance as at 1st January 3,005 908,090 1,794,516 1,326,240 142,837 131,036 - - 4,305,724 3,806,031
Charge for the year 35,688 82,115 236,055 195,738 28,399 24,255 117,298 - 719,548 599,081
Disposals during the year - (1,453) (87,531) (17,600) (4,775) (25,451) - - (136,810) (23,284)
Written off during the year - - (3,480) (31,211) (3,322) - - - (38,013) (1,484)
accumulated depreciation (10,915) - - - - - - - (10,915) (75,015)
Transfers / adjustments - - - - - - - - - 395
Accumulated depreciation
as at 31st December 27,778 988,752 1,939,560 1,473,167 163,139 129,840 117,298 - 4,839,534 4,305,724
Net book value as at 31st
December 2017 4,901,678 178,831 950,537 620,250 93,713 91,057 366,877 66,999 7,269,942
Net book value as at 31st
December 2016 4,106,220 206,813 774,116 660,656 67,458 118,851 - 37,403 5,971,517
33.1 (a) The carrying amount of Bank’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation,
would be as follows:
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Freehold lands 855,934 - 855,934 855,934 - 855,934

Freehold buildings 1,011,792 197,575 814,217 1,003,126 172,349 830,777
Total 1,867,726 197,575 1,670,151 1,859,060 172,349 1,686,711

33.2 Group
Freehold Improvements Computer Office Fixtures Motor Capital 2017 2016
Land to Leasehold Equipment Equipment & Vehicles Work-in Total Total
& Buildings Properties Fittings Progress
Cost / Valuation
Balance as at 1st January 8,066,913 1,114,903 3,520,904 2,146,216 324,751 280,465 37,403 15,491,555 12,877,356
Additions & improvements 9,101 54,627 943,253 194,559 75,050 9,491 354,536 1,640,617 1,361,503
Disposals during the year - (1,947) (97,581) (19,832) (4,984) (53,450) - (177,794) (31,919)
Written off during the year - - (4,543) (42,384) (4,498) - - (51,425) (1,547)
accumulated depreciation (93,033) - - - - - - (93,033) (216,936)
Revaluation surplus 1,330,585 - - - - - - 1,330,585 1,502,820
Transfers / adjustments - - - - - - - - 278
Cost / valuation as at 31st December 9,313,566 1,167,583 4,362,033 2,278,559 390,319 236,506 391,939 18,140,505 15,491,555
Accumulated Depreciation
Balance as at 1st January 11,475 908,090 2,146,521 1,381,144 183,767 151,351 - 4,782,348 4,180,779
Charge for the year 119,246 82,115 519,325 214,178 52,214 27,455 - 1,014,533 845,172
Disposals during the year - (1,453) (95,503) (17,697) (4,775) (37,344) - (156,772) (25,578)
Written off during the year - - (3,480) (31,211) (3,322) - - (38,013) (1,484)
accumulated depreciation (93,033) - - - - - - (93,033) (216,936)
Transfers / adjustments - - - - - - - - 395
Accumulated depreciation as at 31st
December 37,688 988,752 2,566,863 1,546,414 227,884 141,462 - 5,509,063 4,782,348
Net book value as at 31st December
2017 9,275,878 178,831 1,795,170 732,145 162,435 95,044 391,939 12,631,442
Net book value as at 31st December
2016 8,055,438 206,813 1,374,383 765,072 140,984 129,114 37,403 10,709,207
33.2 (a) The carrying amount of Group’s revalued freehold land and buildings, if they were carried at cost less accumulated depreciation,
would be as follows:
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Freehold land 1,195,013 - 1,195,013 1,195,013 - 1,195,013

Freehold buildings 1,752,596 385,507 1,367,089 1,743,495 345,464 1,398,031
Total 2,947,609 385,507 2,562,102 2,938,508 345,464 2,593,044
33.3 Details of the Bank’s / Group’s Land and Buildings Stated at Valuation
Freehold land and buildings of the Group are revalued by independent professional valuers every three years or more frequently,
to ensure that the carrying amount does not differ materially from that which would be determined using the fair value at the end
of the reporting period. The Group revalued its entire class of freehold land and buildings as of 31st December 2016, the details of
which are given in Note 33.3 (b).
The Group reassessed the fair values of its entire class of freehold land and buildings as of 31st December 2017 using
professionally qualified independent valuers and determined that fair values of freehold land and buildings do not materially differ
from the carrying values as of 31st December 2017, except for the properties given in Note 33.3 (a).
Accordingly, the Bank / Group recognised a revaluation surplus amounting to Rs 822.6 Mn and Rs 1,330.8 Mn respectively in the
revaluation reserves, on account of the properties referred to in Note 33.3 (a). Further, a net impairment charge of Rs 0.16 Mn had
been recognised in the Income Statement.
33.3 (a) Details of the Revaluation Performed in 2017

Location Date of Method of Valuation Net Book Value Revaluation Revaluation Revaluation Gain /
Valuation before Revaluation Amount Gain / (Loss) (Loss) Recognised in
Land Building Land Building Land Building Total Profit or OCI
Loss
Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn
Bank
Valuer -M/S Prathap Chartered Valuation
& Consultancy (Pvt) Ltd
No. 1022, Maradana Road, Borella 28.12.2017 Market Comparable Method 255.00 97.01 246.80 95.26 (8.20) (1.75) (9.95) - (9.95)
"Nuwarawewakele", Maithreepala
Senanayake Mw, Anuradhapura 29.12.2017 Market Comparable Method 164.97 67.13 171.70 66.97 6.73 (0.16) 6.57 (0.16) 6.73
No. 29, Cross Street, Kandy 29.12.2017 Market Comparable Method 240.00 94.48 257.00 98.68 17.00 4.20 21.20 - 21.20
No. 05, Hakmana Road, Matara 27.12.2017 Market Comparable Method 166.91 36.76 173.74 40.66 6.83 3.90 10.73 - 10.73
Valuer - G W G Abeygunawaradana
No. 103, Dharmapala Mawatha,
Hunupitiya, Colombo 7 28.12.2017 Market Comparable Method 700.00 67.55 1,492.50 68.98 792.50 1.43 793.93 - 793.93
Total - Bank 1,526.88 362.93 2,341.74 370.55 814.86 7.62 822.48 (0.16) 822.64
Subsidiaries
Valuer - P B Kalugalagedara
Sampath Centre - No. 110, Sir James
Peiris Mawatha, Colombo 2 31.12.2017 Income Basis 1,972.00 1,642.31 2,367.00 1,676.50 395.00 34.19 429.19 - 429.19
Valuer - C Wellappili
Siyapatha Finance PLC - No. 534,
Bauddhaloka Mawatha, Colombo 08 31.12.2017 Market Comparable Method 204.08 - 283.00 - 78.92 - 78.92 - 78.92
Total - Group 3,702.96 2,005.24 4,991.74 2,047.05 1,288.78 41.81 1,330.59 (0.16) 1,330.75

33.3 (b) Details of the Revaluation Performed in 2016
Location Date of Method of Valuation Net Book Value Revaluation Revaluation Revaluation Gain /
Valuation before Revaluation Amount Gain / (Loss) (Loss) Recognised in
Land Building Land Building Land Building Total Profit or OCI
Loss
Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn
Bank
No. 261, Galle Road, Ratmalana 30.11.2016 Market Comparable Method 22.00 20.05 30.00 23.00 8.00 2.95 10.95 - 10.95
No. 1022, Maradana Road, Borella 29.11.2016 Market Comparable Method 140.25 65.44 255.00 100.11 114.75 34.67 149.42 - 149.42
No. 05, Wakwella Road, Galle 01.12.2016 Market Comparable Method 78.66 20.42 104.88 29.84 26.22 9.42 35.64 - 35.64
No. 42, Anguruwatota Road, Horana 12.11.2016 Market Comparable Method 31.00 - 41.50 - 10.50 - 10.50 - 10.50
No. 81 & 81 A, High Level Road,
Maharagama 29.11.2016 Market Comparable Method 46.35 24.65 67.30 35.89 20.95 11.24 32.19 - 32.19
Valuer - E M Wimalasena
Senanayake Mw, Anuradhapura 30.11.2016 Market Comparable Method 123.85 69.21 165.00 69.00 41.15 (0.21) 40.94 (0.21) 41.15
Valuer - G M Gamage
No. 69, Main Street, Deniyaya 01.12.2016 Market Comparable Method 16.64 26.74 21.90 25.78 5.26 (0.96) 4.29 (0.96) 5.26
No. 117, Hapugahawalawatta,Ihalagama
Road, Deniyaya 01.12.2016 Market Comparable Method 6.00 - 0.60 - (5.40) - (5.40) (0.33) (5.07)
No. 05, Hakmana Road, Matara 01.12.2016 Market Comparable Method 131.15 29.00 166.92 37.59 35.77 8.59 44.36 - 44.36
No. 25-27, Main Street, Thissamaharama. 01.12.2016 Market Comparable Method 14.43 26.93 17.76 33.49 3.33 6.56 9.89 - 9.89
Valuer - Sarath Fernando

No. 7/5, Giriulla Road, Alawwa 21.11.2016 Market Comparable Method 16.52 20.06 20.50 26.50 3.98 6.44 10.42 - 10.42
No. 103, Dharmapala Mawatha, Hunupitiya,
Colombo 7 02.12.2016 Market Comparable Method 645.40 67.37 700.00 68.00 54.60 0.63 55.23 - 55.23
No. 150, Colombo Road, Gampaha 02.12.2016 Market Comparable Method 49.80 40.14 62.00 41.00 12.20 0.86 13.06 - 13.06
No. 312/A, Galle Road, Kalutara 21.11.2016 Market Comparable Method 67.50 61.00 75.00 68.00 7.50 7.00 14.50 - 14.50
No. 29, Cross Street, Kandy 21.11.2016 Market Comparable Method 228.50 87.53 240.00 97.50 11.50 9.97 21.47 - 21.47
No. 187, Madawala Road, Katugastota 21.11.2016 Market Comparable Method 63.80 61.24 69.60 66.70 5.80 5.46 11.26 - 11.26
No. 31 & 33, Negombo Road, Kurunegala 03.12.2016 Market Comparable Method 121.80 89.68 130.50 91.00 8.71 1.32 10.03 - 10.03
No. 475, Elvitigala Mawatha, Narahenpita 21.11.2016 Market Comparable Method 85.00 56.00 94.00 63.00 9.00 7.00 16.00 - 16.00
No. 408, Main Street, Negombo 21.11.2016 Market Comparable Method 72.63 - 103.75 - 31.13 - 31.13 - 31.13
No. 371, Old Moor St, Masangasweediya,
No. 373 A, Galle Road, Panadura 21.11.2016 Market Comparable Method 54.00 47.16 61.50 52.50 7.50 5.34 12.84 1.42 11.42
No. 85/87, Panchikawatta Road,
No. 180(part), Bodiraja Mawatha, Pettah 21.11.2016 Income Basis - 58.28 - 69.89 - 11.62 11.62 - 11.62
No. 61A, Moratuwa Road, Piliyandala 21.11.2016 Market Comparable Method 56.00 30.97 65.00 34.00 9.00 3.03 12.03 - 12.03
No. 1/87, Victoria Range, Digana, Kandy 21.11.2016 Market Comparable Method 5.50 9.65 7.00 10.80 1.50 1.15 2.65 - 2.65
No. 256/1, Negombo Road, Wattala 03.12.2016 Market Comparable Method 80.00 38.87 89.00 41.00 9.00 2.13 11.13 2.13 9.00
No. 591, Galle Road, Wellawatta 21.11.2016 Market Comparable Method 113.00 57.43 118.00 60.00 5.00 2.57 7.57 - 7.57
Total Bank 2,460.78 1,044.20 2,904.71 1,204.53 443.94 160.34 604.27 2.05 602.23
Subsidiaries
Sampath Centre - No. 110, Sir James
Peiris Mawatha, Colombo 2 31.12.2016 Income basis 1,265.00 1,532.42 1,972.00 1,724.00 707.00 191.58 898.58 - 898.58
Siyapatha Finance PLC - No. 534,
Bauddhaloka Mawatha, Colombo 8 31.12.2016 Market Comparable Method 204.08 - 204.08 - - - - - -
Total Group 3,929.86 2,576.62 5,080.79 2,928.53 1,150.94 351.92 1,502.85 2.05 1,500.81
33.4 Freehold Land and Buildings

Location Land Buildings Cost / Cost / Total Accumulated 2017 As a % 2016
Extent Revaluation Revaluation Value Depreciation Net Book of Total Net Book
of Land of Buildings Value NBV Value
Perches Sq.ft Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Bank
1 Pettah - 5,124 - 69,891 69,891 3,033 66,858 0.7% 69,655
No. 180 (part), Bodiraja Mawatha, Pettah
2 Borella 24.7 15,876 246,800 95,256 342,056 - 342,056 3.7% 354,870
No. 1022, Maradana Road, Borella
3 Kurunegala 37.4 16,202 130,500 97,098 227,598 3,039 224,559 2.4% 221,279
No. 31 & 33, Negombo Road, Kurunegala
4 Wattala 42.5 5,314 89,000 41,000 130,000 1,112 128,888 1.4% 129,913
No. 256/1, Negombo Road, Wattala
5 Matara 47.6 11,431 173,740 40,660 214,400 - 214,400 2.3% 204,420
No. 05, Hakmana Road, Matara
6 Maharagama 13.5 6,310 67,300 36,081 103,381 1,115 102,266 1.1% 103,101
No. 81 & 81 A, High Level Road,
Maharagama
7 Deniyaya 17.5 5,325 21,900 25,780 47,680 699 46,981 0.5% 47,625
No. 69, Main Street, Deniyaya
8 Deniyaya 40.0 BareLand 600 - 600 - 600 0.0% 600
No. 117, Hapugahawalawatta, Ihalagama
Road, Deniyaya
9 Ratmalana 10.9 5,520 30,000 23,000 53,000 657 52,343 0.6% 52,949
No. 261, Galle Road, Ratmalana
10 Piliyandala 37.5 8,138 65,000 34,000 99,000 1,057 97,943 1.1% 98,917
No. 61A, Moratuwa Road, Piliyandala
11 Anuradhapura 40.4 8,929 171,700 66,968 238,668 - 238,668 2.6% 233,853
Senanayake Mw, Anuradhapura
12 Panadura 27.3 6,020 61,500 52,500 114,000 1,627 112,373 1.2% 113,873
No. 373 A, Galle Road, Panadura
13 Old Moor Street 24.0 10,180 132,000 28,000 160,000 2,025 157,975 1.7% 159,841
No. 371, Old Moor St, Masangasweediya,
Colombo 12
14 Tissamaharama 22.2 10,815 17,760 33,485 51,245 908 50,337 0.5% 51,174
No. 25-27, Main Street, Tissamaharama
15 Katugastota 23.2 7,811 69,600 66,700 136,300 1,809 134,491 1.4% 136,158
No. 187, Madawala Road, Katugastota
16 Galle 17.5 5,400 104,880 29,835 134,715 925 133,790 1.4% 134,643
No. 05, Wakwella Road, Galle
17 Wellawatte 21.5 7,776 118,000 60,000 178,000 1,713 176,287 1.9% 177,866
No. 591, Galle Road, Wellawatta
18 Narahenpita 18.9 9,600 94,000 63,000 157,000 1,799 155,201 1.7% 156,859
No. 475, Elvitigala Mawatha, Narahenpita
19 Kalutara 30.0 8,715 75,000 68,781 143,781 1,948 141,833 1.5% 142,848
No. 312/A, Galle Road, Kalutara
20 Alawwa 20.7 8,190 20,500 26,500 47,000 1,438 45,562 0.5% 46,887
No. 7/5, Giriulla Road, Alawwa
21 Horana 20.8 BareLand 41,500 - 41,500 - 41,500 0.4% 41,500
No. 42, Anguruwatota Road, Horana
22 Kandy Metro 25.7 17,398 257,000 98,679 355,679 - 355,679 3.8% 337,263
No. 29, Cross Street, Kandy
Location Land Buildings Cost / Cost / Total Accumulated 2017 As a % 2016

Extent Revaluation Revaluation Value Depreciation Net Book of Total Net Book
of Land of Buildings Value NBV Value
Perches Sq.ft Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Bank
23 Dharmapala Mawatha 119.4 7,300 1,492,500 68,970 1,561,470 - 1,561,470 16.8% 767,856
No. 103, Dharmapala Mawatha,
Hunupitya, Colombo 7
24 Gampaha 25.0 5,680 62,000 41,000 103,000 1,112 101,888 1.1% 102,913
No. 150, Colombo Road, Gampaha
25 Victoria Range 20.1 2,320 7,000 10,800 17,800 335 17,465 0.3% 17,774
No. 1/87, Victoria Range, Digana, Kandy
26 Panchikawatta 9.8 7,020 66,000 31,940 97,940 1,427 96,513 1.1% 97,833
No. 85/87, Panchikawatta Road,
Colombo 10
27 Negombo 41.5 WIP 103,750 - 103,750 - 103,750 1.1% 103,750
No. 408, Main Street, Negombo
Total - Bank 779.4 202,394 3,719,530 1,209,926 4,929,456 27,778 4,901,678 52.8% 4,106,220
Subsidiaries
Sampath Centre
28 Slave island
No. 110, Sir James Peiris Mawatha,
157.8 220,301 2,367,000 1,734,110 4,101,110 9,910 4,091,200 44.1% 3,745,139
Colombo 2

29 Borella 29.1 BareLand 283,000 - 283,000 - 283,000 3.1% 204,079
No. 534, Bauddhaloka Mawatha,
Colombo-08
Total - Group 966.3 422,695 6,369,530 2,944,036 9,313,566 37,688 9,275,878 100.0% 8,055,438
33.5 (a) Improvement to Leasehold Properties

Bank & Group
As at 31st December Cost of Accumulated 2017 2016
Buildings Depreciation Net Book Net Book
Value Value
Rs 000 Rs 000 Rs 000 Rs 000
01 - 05 years 188,883 166,141 22,742 31,617

06 - 10 years 657,908 578,973 78,935 88,041
Above 10 years 320,792 243,638 77,154 87,155
Total 1,167,583 988,752 178,831 206,813
33.5 (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 / Group which are still in use
as at reporting date is as follows.
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Asset class
Improvements to leasehold properties 767,465 672,383 767,465 672,383
Computer equipment & software 2,079,202 1,842,189 2,249,309 1,882,420
Office equipment 764,423 541,405 782,071 551,869
Fixtures & fittings 102,071 92,333 111,185 95,856
Motor vehicles 60,518 44,592 66,657 53,034
Total 3,773,679 3,192,902 3,976,687 3,255,562
33.5 (c) Temporarily Idle Property, Plant and Equipment - Bank & Group
The Bank holds Horana land worth of Rs 41.5 Mn with the intention of constructing a branch in the near future. The Bank does not
intend to construct a branch in Deniyaya land as it was severely earth slipped. Any future construction on this land is subjected to
NBRO (National Building Research Organisation) certification.
33.5 (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 (2016: NIL)
33.5 (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 2017 (2016: NIL).
33.5 (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.
33.5 (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 (2016: Nil).
34 INTANGIBLE ASSETS
ACCOUNTING POLICY
Recognition
An intangible asset is an identifiable non-monetary asset without physical substance, held for use in the production or supply
of goods or services, for rental to others or for administrative purposes. An intangible asset is recognised if it is probable that
the future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured
reliably. An intangible asset is 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 associated hardware, which can be clearly identified, reliably measured and it’s probable that they will lead to future
economic benefits, are 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 economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured
and attributed to the asset reliably. All other expenditure is expensed as incurred.
Goodwill is measured at cost less accumulated impairment losses.
Derecognition of Intangible Assets

The carrying amount of an item of intangible asset is derecognised on disposal or when no future economic benefits are
expected from its use. The gain or loss arising from de-recognition of an item of intangible asset is included in the Statement of
Profit or Loss when the item is 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.
Intangible assets reported below only include computer software and cost of licenses. Rates of amortisation for computer
software and licenses are given in Note 14, ‘Other operating expenses’.
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Cost
Additions & improvements 782,912 105,164 846,889 108,011
Disposal / write off during the year - - (38) -
Cost as at 31st December 2,077,871 1,294,959 2,206,151 1,359,300
Accumulated Amortisation & Impairment

Balance as at 1st January 957,611 847,602 1,003,169 882,920
Charge for the year (Note 14) 173,415 110,009 182,317 120,249
Impairment for the year - - 24,000 -
Disposal / write off during the year - - (38) -
Accumulated amortisation & impairment as at 31st December 1,131,026 957,611 1,209,448 1,003,169
Net book value as at 31st December 946,845 337,348 996,703 356,131
35 DEFERRED TAX LIABILITIES / (ASSETS)

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Recognised under assets - - (401) (857)

Recognised under liabilities 1,353,339 872,794 2,776,681 1,077,674
1,353,339 872,794 2,776,280 1,076,817
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.
35 DEFERRED TAX LIABILITIES / (ASSETS) CONTD.

35.1 MOVEMENT IN DEFERRED TAX LIABILITIES / (ASSETS)
Bank
Accelerated Depreciation Provision Revaluation Retirement Tax Losses Others Total
for Tax Purposes for Loan on Land & Benefit on Leasing
Property, Leased Losses Buildings Obligation Operation
Plant & Assets
Equipment
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 01st January

2016 300,077 817,937 - 74,410 (297,021) (397,184) (185,038) 313,181
Profit or loss (Note 16) 40,721 89,497 - - (31,861) 89,165 169,766 357,288
Other comprehensive
income - - - 44,223 158,102 - - 202,325
Balance as at 31st
December 2016 340,798 907,434 - 118,633 (170,780) (308,019) (15,272) 872,794

2017 340,798 907,434 - 118,633 (170,780) (308,019) (15,272) 872,794
Profit or loss (Note 16) 65,503 112,277 (391,189) - (94,881) 164,673 (16,325) (159,942)
Other comprehensive
income - - - 818,222 (177,735) - - 640,487
Balance as at 31st
December 2017 406,301 1,019,711 (391,189) 936,855 (443,396) (143,346) (31,597) 1,353,339
Group
Accelerated Depreciation Provision Revaluation Retirement Tax Losses Others Total
for Tax Purposes for Loan on Land & Benefit on Leasing
Property, Leased Losses Buildings Obligation Operation
Plant & Assets
Equipment

2016 300,077 1,219,942 - 74,410 (294,281) (645,956) (244,385) 409,807
Profit or loss (Note 16) 77,021 349,770 - - (43,768) (109,867) 191,171 464,327
Other comprehensive
income - - - 44,223 158,460 - - 202,683
Balance as at 31st
December 2016 377,098 1,569,712 - 118,633 (179,589) (755,823) (53,214) 1,076,817

2017 377,098 1,569,712 - 118,633 (179,589) (755,823) (53,214) 1,076,817
Profit or loss (Note 16) 66,147 531,224 (391,189) - (96,322) (104,780) (15,871) (10,791)
Other comprehensive
income - - - 1,891,063 (180,809) - - 1,710,254
Balance as at 31st
December 2017 443,245 2,100,936 (391,189) 2,009,696 (456,720) (860,603) (69,085) 2,776,280
36 OTHER ASSETS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Pre-paid expenses 403,130 480,434 459,403 530,250

Reimbursement receivable under special senior citizen deposit
scheme 1,991,372 2,045,253 1,991,372 2,045,253
Other debtors 2,386,161 1,686,734 2,802,475 2,211,133
Net assets of pension fund (Note 42.4.1) - 138,511 - 138,511
Pre-paid staff cost (Note 36.1) 2,433,049 1,960,290 2,446,286 1,966,756
Refundable deposit at fair value 81,685 80,902 26,212 36,618
Pre-paid cost on refundable deposit 3,015 2,720 4,437 2,720
Commission receivable on financial guarantees (Note 36.2) 105,051 115,370 105,051 115,370
7,403,463 6,510,214 7,835,236 7,046,611
36.1 The Movement in the Pre-Paid Staff Cost

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Add : Adjustment for new grants (net of settlements) 724,642 289,247 732,297 298,130
Charge to personnel expenses (251,883) (240,516) (252,767) (242,933)
Balance as at 31st December (Note 27) 2,433,049 1,960,290 2,446,286 1,966,756
36.2 Commission Receivable on Financial Guarantees

Bank & Group
2017 2016
Rs 000 Rs 000
Balance as at 1st January 115,370 124,109

Interest income 9,390 10,212
Commission received (19,709) (18,951)
Balance as at 31st December 105,051 115,370
37 DUE TO BANKS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Local Currency Deposits

Demand deposits 50,832 15,790 50,832 15,790
Savings deposits 532 514 532 514
Term deposits 3,745,272 5,684,199 3,745,272 5,684,199
Total local currency deposits 3,796,636 5,700,503 3,796,636 5,700,503
Foreign Currency Deposits

Demand deposits 830,700 889,351 830,700 889,351
Total foreign currency deposits 830,700 889,351 830,700 889,351
Total deposits 4,627,336 6,589,854 4,627,336 6,589,854
Unfavourable balances with local & foreign banks 116,412 317,500 192,951 364,764
4,743,748 6,907,354 4,820,287 6,954,618
38 DUE TO OTHER CUSTOMERS

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Local Currency Deposits

Demand deposits 32,128,199 30,561,191 32,124,527 30,557,062
Saving deposits 165,844,789 147,256,035 165,648,008 147,127,848
Call deposits 126,358 272,092 126,358 272,092
Term deposits 354,757,444 269,073,258 363,798,498 272,074,535
Certificates of deposits 15,500,048 14,842,324 15,500,048 14,842,324
Margin deposits 1,558,972 1,201,267 1,545,480 1,199,517
Total local currency deposits 569,915,810 463,206,167 578,742,919 466,073,378
Foreign Currency Deposits

Demand deposits 2,639,248 3,423,257 2,639,248 3,423,257
Saving deposits 18,548,653 16,087,604 18,548,612 16,087,564
Call deposits 660,943 659,389 660,943 659,389
Term deposits 34,017,317 26,291,326 34,017,317 26,291,326
Margin deposits 32,342 15,490 32,342 15,490
Total foreign currency deposits 55,898,503 46,477,066 55,898,462 46,477,026
Total deposits 625,814,313 509,683,233 634,641,381 512,550,404
38.1 Current Accounts and Savings Accounts (CASA)

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
CASA
Local currency deposits 198,024,352 177,833,530 197,823,899 177,701,214
Foreign currency deposits 22,018,601 20,400,212 22,018,560 20,400,172
220,042,953 198,233,742 219,842,459 198,101,386
Total Deposits
Due to banks - Demand, savings & term deposits (Note 37) 4,627,336 6,589,854 4,627,336 6,589,854
630,441,649 516,273,087 639,268,717 519,140,258
CASA as a percentage (%) of total deposits 34.9 38.4 34.4 38.2
39 DEBT ISSUED & OTHER BORROWED FUNDS

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Redeemable debentures (Note 39.1) 31,532,803 27,009,027 36,192,070 30,624,287

Long term bond (Note 39.2) 2,120,767 1,942,931 2,120,767 1,942,931
Call borrowings 2,264,332 552,712 2,264,332 552,712
Term borrowings - 3,176,712 10,499,645 11,612,447
Foreign currency borrowings 35,756,777 35,363,132 35,756,777 35,363,132
Refinance borrowings 4,423,561 4,083,723 4,423,561 4,083,723
76,098,240 72,128,237 91,257,152 84,179,232
The Bank / Group has not had any default of principal, interest or other breaches with regard to any liability during 2016 and 2017.
39.1 Redeemable Debentures

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Debentures issued 6,000,000 6,000,000 7,000,000 8,500,000
Debentures redeemed (1,500,000) - (1,500,000) -
31,509,027 26,581,099 36,124,287 30,101,700
Interest accrued during the year (Note 7.2) 2,905,372 2,592,619 3,359,244 2,778,210
Interest paid (2,881,596) (2,164,691) (3,291,461) (2,255,623)
39 DEBT ISSUED & OTHER BORROWED FUNDS CONTD.

Details of debentures issued
Amortised Cost
Note No. of Face Value 2017 2016
Debentures
Rs 000 Rs 000 Rs 000
Debentures issued by the Bank

Debentures issued in 2012 39.1.1 15,000,000 1,500,000 - 1,500,000
Debentures issued in 2013 39.1.2 50,000,000 5,000,000 5,000,000 5,000,000
Debentures issued in 2017 39.1.6 60,000,000 6,000,000 6,022,603 -
Total debentures issued by the Bank 31,532,803 27,009,027
Debentures issued by the Subsidiary,

Debentures issued in 2017 39.1.9 10,000,000 1,000,000 1,030,479 -
Total debenture issued by the Subsidiary 4,659,267 3,615,260
Total debentures issued by the Group 36,192,070 30,624,287
DEBENTURES ISSUED BY THE BANK :

39.1.1 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.
No. of Face Amortised Cost Allotment Maturity Date Rate of Interest
Debentures Value 2017 2016 Date
Rs 000 Rs 000 Rs 000
10,776,800 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 12-Oct-12 11-Oct-17 Fixed - 15.0 % per annum
payable monthly
1,745,300 174,530 - 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
The Bank has redeemed the above debentures on 11th October 2017.

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
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

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
payable semi annually
70,000,000 7,000,000 7,000,000 7,000,000

Rs 000 Rs 000 Rs 000
67,412,700 6,741,270 6,821,722 6,821,502 18-Nov-15 18-Nov-20 Fixed - 9.90% per annum
payable semi annually
2,587,300 258,730 261,905 262,092 18-Nov-15 18-Nov-20 Floating rate is equivalent to the
six months treasury bill rate
(net) plus 1.25 % per annum
70,000,000 7,000,000 7,083,627 7,083,594
39 DEBT ISSUED & OTHER BORROWED FUNDS CONTD.

Rs 000 Rs 000 Rs 000
59,526,500 5,952,650 6,378,917 6,377,752 10-Jun-16 10-Jun-21 Fixed - 12.75% per annum
payable annually
473,500 47,350 47,656 47,681 10-Jun-16 10-Jun-21 Floating rate is equivalent to
the six months treasury bill
rate (gross) plus 1 % per annum
60,000,000 6,000,000 6,426,573 6,425,433

Basel III Compliant - Tier II, rated unsecured subordinated redeemable 5 year debentures with a non - viability conversion, at a par
value of Rs 100/- each, issued in 2017. The debentures are quoted on the Colombo Stock Exchange.
Rs 000 Rs 000 Rs 000
60,000,000 6,000,000 6,022,603 - 21-Dec-17 21-Dec-22 Fixed - 12.50% per annum

payable semi - annually
60,000,000 6,000,000 6,022,603 -
DEBENTURES ISSUED BY THE SUBSIDIARY, SIYAPATHA FINANCE PLC:

Rs 000 Rs 000 Rs 000
payable annually
10,000,000 1,000,000 1,035,555 1,022,027

Rated unsecured senior transferable fully paid redeemable in 5 year & 3 year debentures of Rs 100/- each issued in 2016. The
debentures are quoted on the Colombo Stock Exchange.
Rs 000 Rs 000 Rs 000
14,219,900 1,421,990 1,474,156 1,474,156 20-Sep-16 20-Sep-19 Fixed - 13.00% per annum
payable annually
10,780,100 1,078,010 1,119,077 1,119,077 20-Sep-16 20-Sep-21 Fixed - 13.50% per annum
payable annually
25,000,000 2,500,000 2,593,233 2,593,233

Rated unsecured subordinated transferable fully paid redeemable in 5 year debentures of Rs 100/- each issued in 2017. The
debentures are quoted on the Colombo Stock Exchange.
Rs 000 Rs 000 Rs 000
10,000,000 1,000,000 1,030,479 - 04-Oct-17 04-Oct-22 Fixed - 12.50% per annum

payable annually
10,000,000 1,000,000 1,030,479 -
39.2 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
2017 2016
Rs 000 Rs 000
Balance as at 1st January 1,942,931 1,780,008

Interest accrued 177,836 162,923
Balance as at 31st December 2,120,767 1,942,931
40 CURRENT TAX LIABILITIES / (RECEIVABLES)

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Current tax liabilities 5,527,323 4,316,297 5,630,670 4,386,251

Current tax receivables - - (6,425) (10,365)
Net current tax liability (Note 40.1) 5,527,323 4,316,297 5,624,245 4,375,886
40.1 Current Tax Liabilities / (Receivables)

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Current tax based on profit for the year (Note 16) 5,596,868 3,691,014 5,775,580 3,825,441
Over provision in respect of previous years (Note 16) (935,121) (573,114) (937,061) (577,485)
Payment of tax (3,450,721) (3,741,142) (3,590,160) (3,891,183)
41 OTHER LIABILITIES
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Deposit insurance premium 176,522 143,654 177,583 144,035

Deferred income 589,123 364,726 589,123 364,773
Lease payable 436,478 - - -
Bills payable 2,277,242 1,947,686 2,277,242 1,947,686
Items in transit 1,289,087 790,531 1,289,087 790,531
Accrued expenses 3,060,849 2,827,915 3,231,737 3,654,849
Other payable 3,912,846 2,984,889 5,047,757 3,280,708
11,742,147 9,059,401 12,612,529 10,182,582
42 OTHER PROVISIONS
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Provision for gratuity (Note 42.1) 618,639 497,993 669,448 531,628

Leave accrual plan (Note 42.2) 196,979 167,503 196,979 167,503
EPF Interest guarantee plan (Note 42.3) 101,890 82,944 101,890 82,944
Liability for pension fund (42.4) 666,050 - 666,050 -
1,583,558 748,440 1,634,367 782,075
42.1 Provision for Gratuity

Net Liability Recognised in the Statement of Financial Position
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 497,993 414,373 531,628 446,214

Provision made during the year (Note 42.1.1) 164,636 133,678 189,248 141,835
662,629 548,051 720,876 588,049
Benefits paid by the plan (43,990) (50,058) (51,428) (56,421)
Balance as at 31st December (Note 42.1.2) 618,639 497,993 669,448 531,628
42.1.1 Provision made during the year

Amounts Recognised in Profit or Loss
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Current service cost 59,546 48,856 68,588 55,046

Net interest on the net defined benefit liability 59,261 40,609 63,403 43,899
Total amount recognised in profit or loss 118,807 89,465 131,991 98,945
Amounts Recognised in Other Comprehensive Income

Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Actuarial loss due to changes in assumptions*

- Financial assumptions 10,459 18,600 19,776 14,318
- Demographic assumptions - 5,203 - 4,974
Actuarial experience loss arising during the year 35,370 20,410 37,481 23,598
Total actuarial loss recognised in other comprehensive income 45,829 44,213 57,257 42,890
Provision made during the year 164,636 133,678 189,248 141,835
*Significant assumptions used for the actuarial valuation are given in Note 42.1.3
42.1.2 Movement of Defined Benefit Obligation during the year

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 497,993 414,373 531,628 446,214

Current service cost 59,546 48,856 68,588 55,046
Interest cost 59,261 40,609 63,403 43,899
Benefits paid from plan (43,990) (50,058) (51,428) (56,421)
Actuarial loss due to changes in assumptions
- Financial assumptions 10,459 18,600 19,776 14,318
- Demographic assumptions - 5,203 - 4,974
Actuarial experience loss arising during the year 35,370 20,410 37,481 23,598
Balance as at 31st December 618,639 497,993 669,448 531,628
An Actuarial valuation of the gratuity fund of the Bank was carried out as at 31st December 2017 by Mr. Piyal S Goonetilleke (Fellow
of the Society of Actuaries - USA) of Messrs Piyal S Goonetilleke & Associates, a firm of professional actuaries. The valuation
method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by Sri Lanka Accounting
Standard - LKAS 19 (Employee Benefits).
42.1.3 Actuarial Assumptions - Bank

Financial assumptions
Discount rate 10.29% 11.90%
Future salary increment rate 9.82% 11.30%
Demographic assumptions
Mortality RP 2000 Mortality Table RP 2000 Mortality Table
Retirement age 55 years 55 years
Expected average future working life of the active participants is 11.1 years.
42 OTHER PROVISIONS CONTD.

42.1.4 Sensitivity of assumptions employed in gratuity valuation - Bank
Reasonably possible changes at the reporting date to one of the significant actuarial assumptions, holding other assumptions
constant, would have affected the gratuity liability / Statement of Comprehensive Income by the amounts shown below.
Increase / Increase / 2017 2016
(Decrease) in (Decrease) in Sensitivity Effect Sensitivity Effect Sensitivity Effect Sensitivity Effect
Discount Salary Increment on Comprehensive on Gratuity Liability on Comprehensive on Gratuity Liability
Rate Rate Income Statement Increase/ Income Statement Increase/
Increase/ (Decrease) in Increase/ (Decrease) in
(Decrease) in Liability (Decrease) in Liability
Comprehensive Comprehensive
Income for the Year Income for the Year
1% - 66.7 (66.7) 52.0 (52.0)

(1%) - (80.2) 80.2 (62.5) 62.5
- 1% (78.4) 78.4 (61.2) 61.2
- (1%) 66.6 (66.6) 52.0 (52.0)
All Subsidiaries of the Group carry out actuarial valuations to ascertain their respective gratuity liabilities. However assumptions and
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.
42.2 Leave Accrual Plan

42.2.1 Net Liability Recognised in the Statement of Financial Position
Bank & Group
2017 2016
Rs 000 Rs 000

Provision made during the year 29,476 27,317
42.3 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 of the fund are entitled to receive interest at a guaranteed rate of National Savings Bank’s one year fixed deposit rate
(net of WHT) on their balance, even if the fund earns a lower return from its investment in a given financial year. As per Section 8
of the EPF Constitution, the Bank 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 the 12% contribution
referred to above and accordingly the fund was treated as a defined benefit liability as per Sri Lanka Accounting Standard - LKAS
19 (Employee Benefits). An actuarial valuation was carried out by Mr. Piyal S Goonetilleke (Fellow of the Society of Actuaries - USA)
of Messrs Piyal S Goonetilleke & Associates, a firm of professional actuaries, to value the Bank’s additional obligation arising from
Section 8 of the EPF constitution as at 31st December 2017.

Bank & Group
Rs 000 Rs 000
Fund obligation 10,337,918 9,048,799

Fair value of plan assets (10,236,028) (8,965,855)
Net liability recognised in the Statement of Financial Position 101,890 82,944
42.3.2 Amounts Recognised in Profit or Loss

Bank & Group
Rs 000 Rs 000
Current service cost 6,308 6,190

Interest expense on defined benefit liability 9,870 7,741
Total amount recognised in profit or loss 16,178 13,931
42.3.3 Amounts Recognised in Other Comprehensive Income

Bank & Group
Rs 000 Rs 000
Actuarial loss / (gain) due to changes in assumptions*

- Financial assumptions 9,900 (4,509)
- Demographic assumptions - 93
Actuarial gain due to experience adjustments (7,132) (5,563)
Total amount recognised in other comprehensive income 2,768 (9,979)
* Significant assumptions used for the actuarial valuation are given in Note 42.3.5
42.3.4 Movement of the Net Liability Recognised in the Statement of Financial Position
Bank & Group
2017 2016
Rs 000 Rs 000

Current service cost and interest cost 16,178 13,931
Actuarial loss / (gain) 2,768 (9,979)

Return from EPF investments 9.87% 10.75%
Long term guaranteed EPF interest rate (net of tax) 10.12% 11.00%
Expected average future working life of the active participants is 11.1 years.

42.3.6 Sensitivity of Assumptions Employed in EPF Interest Guarantee Plan Valuation
constant, would have affected the EPF interest guarantee liability / Statement of Comprehensive Income by the amounts shown
below.

Discount Rate Salary on Comprehensive on Employment on Comprehensive on Employment
Increment Rate Income Statement Benefit Liability Income Statement Benefit Liability
Increase/ Increase/ Increase/ Increase/
(Decrease) in (Decrease) in (Decrease) in (Decrease) in
Comprehensive Liability Comprehensive Liability
1% - 10.4 (10.4) 8.2 (8.2)

(1%) - (12.2) 12.2 (9.5) 9.5
- 1% (1.9) 1.9 (1.5) 1.5
- (1%) 1.7 (1.7) 1.4 (1.4)
42.4 Pension Fund

Bank & Group
Rs 000 Rs 000
Defined benefit obligation (Note 42.4.4) 6,986,957 5,587,056

Fair value of plan assets (Note 42.4.5) (6,320,907) (5,725,567)
Funded status 666,050 (138,511)
Present value of unfunded benefit obligation - -
Net liability / (asset) recognised in the Statement of Financial Position 666,050 (138,511)
42.4.2 Amounts Recognised in Profit or Loss

Bank & Group
Rs 000 Rs 000

Net interest (income) / expense on the net defined benefit asset / liability (6,930) 48,531
Total amount recognised in profit or loss 218,392 283,137
42.4.3 Amounts Recognised in Other Comprehensive Income

Bank & Group
Rs 000 Rs 000
Actuarial loss / (gain) due to changes in assumptions*

- Demographic assumptions - 82,300
Actuarial loss due to experience adjustments 53,675 178,743
Actuarial (gain) / loss from plan assets (52,888) 69,627
Total amount recognised in other comprehensive income 586,169 (598,882)
*Significant assumptions used for the actuarial valuation are given in Note 42.4.6
42.4.4 Defined Benefit Obligation Reconciliation

Bank & Group
2017 2016
Rs 000 Rs 000
Defined benefit obligation as at 1st January 5,587,056 5,597,014

Interest cost 687,208 548,507
Actual benefits paid from plan (151,686) (124,562)
Actuarial loss / (gain) due to changes in assumptions
- Demographic assumptions - 82,300
Actuarial loss due to experience adjustments 53,675 178,743
Defined benefit obligation as at 31st December 6,986,957 5,587,056
42.4.5 Fair Value of Plan Assets Reconciliation

Bank & Group
2017 2016
Rs 000 Rs 000
Fair value of plan assets as at 1st January 5,725,567 5,169,780

Income on plan assets 694,138 499,976
Actual employer contributions - 250,000
Actual benefits paid from plan (151,686) (124,562)
Actuarial gain / (loss) from plan assets 52,888 (69,627)
Fair value of plan assets as at 31st December 6,320,907 5,725,567
An actuarial valuation of the Pension Fund was carried out as at 31st December 2017 by Mr. Piyal S Goonetilleke (Fellow of the
Society of Actuaries - USA) of Messrs Piyal S Goonetilleke & Associates, a firm of professional actuaries. The valuation method used
by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by Sri Lanka Accounting Standard - LKAS 19
(Employee Benefits).

Expected return on assets 10.82% 12.30%
Retirement age Normal retirement age or age Normal retirement age or age
on valuation date, if greater on valuation date, if greater
y The plan assets consists of term deposits, repurchase agreements , investments in listed debentures and listed equity.
y Expected average future working life of the active participants is 8.5 years.
yExpected average future life of the active & retired participants is 34.4 years.
42.4.7 Sensitivity of Assumptions Employed in Pension Fund Valuation

constant, would have affected the net pension liability/ Statement of Comprehensive Income by the amounts shown below.

Discount Rate Salary on Comprehensive on Employment on Comprehensive on Employment
Increment Rate Income Statement Benefit Liability Income Statement Benefit Liability
Increase/ Increase/ Increase/ Increase/
(Decrease) in (Decrease) in (Decrease) in (Decrease) in
Comprehensive Liability Comprehensive Liability
1% - 744.0 (744.0) 583.8 (583.8)

(1%) - (887.0) 887.0 (692.2) 692.2
- 1% (389.2) 389.2 (335.5) 335.5
- (1%) 359.2 (359.2) 308.2 (308.2)
43 STATED CAPITAL
Bank & Group
2017 2016
Rs 000 Rs 000
Balance as at 1st January 6,471,200 5,381,405

Rights issue 7,602,778 -
Scrip dividend 2,233,744 1,089,795
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.
43.1 Reconciliation of Number of Shares

Bank & Group
2017 2016
Ordinary shares as at 1st January 176,981,069 172,312,655

Number of shares issued under Rights issue 2017 31,031,748 -
Number of shares issued due to scrip dividend 2016 & 2015 9,209,419 4,668,414
Ordinary shares as at 31st December 217,222,236 176,981,069
44 STATUTORY RESERVE FUND

Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Transfer during the year 610,000 460,000 636,578 476,364
The statutory reserve fund is maintained as required by the section 20 (1) of the Banking Act No. 30 of 1988. A sum equivalent
to not less than 5% of the profit after tax before any dividend is declared or any profits are transferred to elsewhere, should be
transferred to above reserve until the reserve is equal to 50% of the Bank’s stated capital. Thereafter a further sum equivalent to
2% of such profits should be transferred to the statutory reserve fund until the amount of the said reserve fund is equal to the
stated capital of the Bank.
45 OTHER RESERVES
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Revaluation reserve (Note 45.1) 2,409,050 2,404,631 5,093,154 5,653,471

Available for sale reserve (Note 45.2) 2,299,721 1,271,319 2,299,721 1,271,319
General reserve (Note 45.3) 33,701,025 27,694,235 33,701,026 27,694,236
38,409,796 31,370,185 41,093,901 34,619,026
45 OTHER RESERVES CONTD.

45.1 Revaluation Reserve
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Revaluation surplus 822,641 602,205 1,330,746 1,475,108
Deferred tax effect on revaluation surplus (818,222) (44,223) (1,891,063) (44,223)
Transfer of non - controlling interest to shareholders’ funds - - - 20,325
45.2 Available for Sale Reserve

Bank & Group
2017 2016
Rs 000 Rs 000
Balance as at 1st January 1,271,319 875,723

Gain arising on re-measuring available for sale financial assets 1,017,636 382,982
Transfer of gain from available for sale financial asset to profit or loss - (3,376)
Exchange difference in translation 10,766 15,990
45.3 General Reserve

The Board of Directors decides the amount to be transferred to general reserve from retained earnings after retaining a substantial
amount to pay proposed dividend. The purpose of setting up the general reserve is to meet the potential future unknown
commitments.
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Unclaimed dividend adjustments 6,790 29,235 6,790 29,235
Transfer during the year 6,000,000 5,500,000 6,000,000 5,500,000
46 RETAINED EARNINGS
Bank Group
2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000

Profit for the year 12,104,120 9,124,670 12,682,500 9,496,073
Actuarial (loss) / gain on defined benefit plans (634,766) 564,648 (646,194) 565,970
Deferred tax effect on defined benefit plans 177,735 (158,102) 180,809 (158,460)
Final dividend for 2015 : Cash - (1,033,876) - (1,033,876)
Final dividend for 2015 : Scrip - (1,206,188) - (1,206,188)
Interim dividend for 2016 : Scrip (2,477,734) - (2,477,734) -
Final dividend for 2016 : Cash (884,405) - (884,405) -
Transfer of non - controlling interest to shareholders’ funds - - - 4,186
Transfers to reserves during the year (6,610,000) (5,960,000) (6,636,578) (5,976,364)
47 NON - CONTROLLING INTEREST

Non - controlling interest represented 2.86% of net assets of the subsidiary, Sampath Centre Ltd. The Bank acquired the NCI in
2016.
Group
2017 2016
Rs 000 Rs 000
Balance as at 1st January - 94,663

Profit for the year - 5,173
Other comprehensive income for the year - 25,675
Dividend paid - (1,000)
Total consideration paid to acquire non - controlling interest - (100,000)
Transfer of non - controlling interest to shareholders’ funds - (24,511)
Balance as at 31st December - -
48 COMMITMENTS AND CONTINGENCIES
ACCOUNTING POLICY
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present
obligations where the transfer of economic benefits is not probable or cannot be reliably measured as defined in the Sri Lanka
Accounting Standard – LKAS 37 (Provisions, Contingent Liabilities and Contingent Assets).
To meet the financial needs of customers, the Bank enters into various irrevocable commitments and contingent liabilities.
These consist of financial guarantees, letters of credit and other undrawn commitments to lend. Letters of credit, guarantees
and acceptances commit the Bank to make payments on behalf of customers in the event of a specific act, generally related to
the import or export of goods. They 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. 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 recognised less cumulative amortisation recognised in the Statement of Profit or Loss, and the best
estimate of expenditure required to settle any financial obligation arising as a result of the guarantee.
Any increase in the liability relating to financial guarantees is recorded in the Statement of Profit or Loss under ‘Impairment
charge for loans & other losses’. The premium received is recognised in the Statement of Profit or Loss under ‘Net fee and
commission income’ on a straight line basis over the life of the guarantee.
48.1 Commitments and Contingencies

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Commitments
Commitment for unutilised facilities - Direct credit facilities 161,377,222 170,943,636 161,059,499 171,144,119
- Indirect credit facilities 66,325,717 54,074,330 66,325,717 54,074,330
Capital commitments (Note 48.3) 708,532 391,732 2,241,858 1,591,962
Operating lease commitments - as the lessee (Note 48.4) 3,614,072 3,447,346 2,954,872 3,148,053
232,025,543 228,857,044 232,581,946 229,958,464
Contingent Liabilities
Acceptances 19,182,917 16,092,406 19,182,917 16,092,406
Documentary credit 19,796,716 21,855,180 19,796,716 21,855,180
Guarantees 51,292,097 46,496,574 51,292,697 46,530,474
90,271,730 84,444,160 90,272,330 84,478,060
Forward exchange contracts 15,421,830 11,248,558 15,421,830 11,248,558
Currency SWAPs 45,786,984 19,430,545 45,786,984 19,430,545
61,208,814 30,679,103 61,208,814 30,679,103
Total commitment & contingencies 383,506,087 343,980,307 384,063,090 345,115,627
48.2 OTHER CONTINGENT LIABILITIES

48.2.1 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 makes adjustments to account for adverse effects which the claims may have on its financial standing. At the
year end, the Bank had several unresolved legal claims.
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 the hearing will be on 13th July 2018.
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 Appellate 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 illegally handed over the Certificate of Registration pertaining to the vehicle leased under the Lease
Agreement No L / 0 / 16 / SBL / Kuli, to the spouse and the consent letter given by the spouse is challenged 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 interest in respect of the housing loan obtained by him and he suffered damages as a result of that. However the Letter of
Offer confirms that the Bank has the right to increase the rate of interest.
(d) Case No. - 58032 / MR

The Plaintiff has filed this action against the Bank as well as the CRIB, claiming Rs 100 Mn as damages, on the basis that his
Company namely Jagath Robotics (Pvt) Ltd has been reported to the CRIB, under an irrelevant reference due to negligence of
the Bank. After the Trial Court has dismissed the Plaintiff’s action on 8th February 2017. However the Plaintiff has filed and appeal
against same judgment to the Civil Appellate Court in Colombo. Up to now the Appeal has not commenced.
(e) 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.
(f) DC Colombo Case No. 891 / 13 - Jayantha Dadigama

The plaintiff has filed a case against the Bank claiming damages of Rs 143 Mn on the basis that the Bank has unlawfully auctioned
his property under the provisions of Act No. 04 of 1990. Though the claim is large, 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.
(g) CHC Colombo Case No. 29 / 13 / MR - R J Technology Systems

The above case was filed by D L D P Roshan Jayasinghe, the proprietor of R J Technology Systems against the Bank by claiming
damages of 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 utilised
by the customer and the Bank is defending this action on the right of set off recognised by law relating to banking facilities.
48 COMMITMENTS AND CONTINGENCIES CONTD.

(h) CHC Colombo Case No. 299 / 13 / MR – R J Technology Systems
The above case was filed by D L D P Roshan Jayasinghe, the proprietor of R J Technology Systems, against the Bank, claiming
damages of 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.
(i) 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.
Since there is no merit of the case, Bank is confident that the Bank can defend and safeguard it’s position in court.
iii. The following cases are filed against the Bank in order to prevent the Bank from enforcing the mortgages to recover its dues:
(a) Seven actions have been filed in Supreme Court in Case Nos. SC 19 / 10, SC 57 / 12, SC 196 /11, SC 5 / 10, SC 14 / 11, 24 /
2008 SC, SC 234 / 16.
(b) Two actions have been filed in Court of Appeal in Case Nos. CALA / 320 / 2001, 401 / 13 CA.
(c ) Two actions have been filed in Civil Appeal in Case Nos. 53 / 11 CALA, CALA - 172 / 12 LA.
(d) Twenty actions have been filed in Commercial High Court in Case Nos. 440 / 13 / MR, 12 / 2014 MR, 224 / 14 MR, 588 / 2014
/ MR, 153 / 11 MR, 427 / 15 / MR, 169 / 16 / MR, 270 / 16 / MR, 269 / 16 / MR, 278 / 16 / MR, 305 / 16 / MR, 477 / 16 / MR,
492/16/MR, 68/2017/MR, 194/2017/MR, 266/2017/MR, 470/17/MR, 531/17/MR, 532/17MR, 553/17/MR.
(e) Sixteen actions have been filed in District Court of Colombo in Case Nos. 173 / 2012 DSP, 05 / 10 DLM, 222 / 13 MR, 38 /
2014 DSP, 84 / 14 / DSP, 146 / 15 DSP, 721 / 15 MR, 11 / 15 DSP, 151 / 16 / DLM, 127 / 16 / DSP, 9 / 16 / Claim, 189 / 16
DLM, 2920/16/DMR, 50/17/DLM, 47/2017/DLM, 49/2017/DLM 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, Six in District Court of Kandy in Case Nos. 228 /
10 DPA, 36599 / MR, 401 / 14 DMR, 1365 / 16 / MR, 33/17/DSP, 78/17/DSP 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, Three in District Court of Galle in Case Nos. 3480 / SP, 3589 / SP,
3625 / SP Three in District Court of Gampaha in Case Nos. 1885 / L, 735 / L, 3066 / L, One in District Court of Batticaloa in
Case No. 5487 / L / 11, One in District Court of Anuradhapura in Case No. 28736 / L 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, Two in the District Court of Ruwanwella in Case Nos. 168 / P, 262 / P, Two in the District court of
Wariyapola in Case Nos. 16 / L, 248/P One in the District court of Nawalapitiya in Case No. 62 / 14 / P, One in the District court
of Homagama in Case No. 7948 / P, One in the District court of Polonnaruwa in Case No. 16139 / L, Two in the District Court
of Attanagalla in Case Nos. 1093 / L, 1204 / L, One in the District Court of Kalmunai in Case No. 3053 / L, One in the District
Court of Walasmulla in Case No. 193 / S, Two in the District Court of Mount Lavinia in Case Nos. 390 / 16 / Claim, 392 / 16 /
Claim, One in the District Court of Kesbewa in Case No. 90 / SP, Two in the District Court of Dambulla in Case Nos. 170 / L, 172
/ L, One in the District Court of Theldeniya in Case No. 58/16/SPL, One in the District Court of Kuliyapitiya in Case No. 177/P,
One in the District Court of Kaduwela in Case No. 378/SPL, One in the District Court of Negombo in Case No. 8071/L, One in
the District Court of Panadura in Case No. 3446 / SPL, One in the District Court of Matara in Case No. 957 / SPL.
48.2.2 Litigation against the Group

Other than those disclosed above there is no case filed against the Group which would have material impact on the financial
position of the Group.
48.3 Capital Commitments

Capital expenditure approved by the Board of Directors, for which provisions have not been made in the accounts are detailed
below.
Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Approved & contracted for 213,610 227,339 1,453,166 1,419,619

Approved but not contracted for 494,922 164,393 788,692 172,343
708,532 391,732 2,241,858 1,591,962
48.4 Operating Lease Commitments - As the Lessee

Bank Group
As at 31st December 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000
Less than 1 year 931,717 993,139 704,929 730,510

1 - 5 years 2,112,296 2,011,278 1,582,291 1,913,636
More than 5 years 570,059 442,929 667,652 503,907
3,614,072 3,447,346 2,954,872 3,148,053
49 RELATED PARTY DISCLOSURES

The Bank and the Group carry out transactions in the ordinary course of business with the parties who are defined as related
parties in the Sri 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 / Group and its unrelated customers with similar credit standing.
49.2 Parent and Ultimate Controlling Party

The Bank does not have an identifiable parent of its own.
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 and responsibility for planning, directing and controlling the activities of the entity. According to the above definition,
a person can not be considered as a KMP unless such person has both the authority and responsibility to carry out all the three
activities mentioned in the above definition (i.e. planning, directing and controlling the activities of the entity).
Accordingly the Board of Directors of the Bank are considered as KMP of the Bank and the Group.
49 RELATED PARTY DISCLOSURES CONTD.

49.3.1 Compensation to KMP
Bank Group
Rs 000 Rs 000 Rs 000 Rs 000
Short term employment benefits

Directors' fees & expenses 59,696 52,697 64,704 55,132
Short term benefits 51,553 58,532 51,553 58,532
Post - employment benefits 5,994 16,799 5,994 16,799
Termination benefits* 22,043 - 22,043 -
Total 139,286 128,028 144,294 130,463
In addition to the above, the Bank has also paid non - cash benefits such as fuel, medical benefits to KMP who are employees of the
Bank in line with the approved benefit plans of the Bank.
* Termination benefits include, Ex-gratia payment of Rs 10 Mn paid to the former Managing Director of the Bank, Rs 7 Mn paid
to the former Group Finance Director and 50% of the net book values of the vehicles transferred to them, as approved by the
shareholders at the Annual General Meeting held on 31st March 2017.
49.3.2 Transactions with KMP and their Close Family Members (CFMs)
CFMs of the KMP are those family members who may be expected to influence the KMP or be influenced by that KMP in their
dealings with the entity. They may include KMP’s spouse, children, domestic partner, children of the KMP’s spouse / domestic
partner and dependents of the KMP. Aggregate value of the transactions with KMP and their CFMs are disclosed below.

Limit Closing Average Limit Closing Average
Balance Balance Balance Balance
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans & receivables 56,836 2,986 4,502 5,770 1,770 2,030

Credit cards 12,575 571 863 7,850 806 1,202
Deposits 275,649 359,661 222,877 278,192

Rs 000 Rs 000
Interest income 487 180

Interest expenses 23,525 18,513
Cash dividend paid 292 775
Scrip dividend paid (Number of shares) 3,039 3,494
No losses have been recorded against loan balances outstanding with KMP during the period and no provisions have been made for
impairment losses against such balances as at the reporting date.
49.4 Transactions with Subsidiaries

Details of the Subsidiaries are given in Note 32. Aggregate value of transactions with Subsidiaries are disclosed below.
2017 2016
Subsidiary Company Nature of Facility / Transaction Average 31st Average 31st
Balance December Balance December
Rs 000 Rs 000 Rs 000 Rs 000
Siyapatha Finance PLC As at

Loans & receivables 2,260,005 1,511,523 2,785,509 2,538,010
Deposits 153,738 681 17,288 11,577
Other liabilities 9,504 9,388 436,827 8,824
Commitment & contingencies 60,000 10,000 107,500 110,000
For the year ended

Dividend income (Gross) 65,491 57,750
Income & fees received 232,211 282,568
Expenses & fee paid 2,298 57,722
Sampath Centre Ltd As at
Loans & receivables 331 - 1,271 1,324
Other assets 62,754 62,754 62,754 62,754
Deposits 551,847 487,552 420,189 490,036
For the year ended

Dividend income (Gross) 35,595 34,000
Income & fees received 13 29
Expenses & fees paid 336,438 319,116
S C Securities (Pvt) Ltd As at
Loans & receivables 24,627 - 56,886 53,772
Deposits 5,422 4,805 463 1,775
Other liabilities 92,333 84,000 - -
For the year ended

Expenses & fees paid 4,932 -
Sampath Information As at
Technology Solutions Ltd Loans & receivables 526,395 464,439 415,248 526,170
Deposits 2,732 13,523 476 40
Finance lease payable (Note 41) 351,456 436,478 - -
For the year ended

Expenses & fees paid 239,978 172,055
Purchase of computer hardware
& software 30,397 21,585
The Directors’ valuation of investments in Subsidiaries has been carried out on net asset basis as at 31st December 2017 and
accordingly the Bank has recognised an impairment charge of Rs 62.8 Mn against the investment in SC Securities (Pvt) Ltd during
the year ended 31st December 2017 (2016: Rs 4 Mn). Apart from the above, no provisions have been made for impairment losses
against balances with Subsidiaries as at the reporting date.
49 RELATED PARTY DISCLOSURES CONTD.

49.5 Transactions with Other Related Parties
49.5.1 Transactions with Entities Controlled and / or Jointly Controlled by KMP or their CFMs
Average Closing Average Closing
Balance Balance Balance Balance
Rs 000 Rs 000 Rs 000 Rs 000
Credit card facilities - - 858 -

Other loans & receivables - - 3,666,766 -
Documentary credits 46,554 16,534 410,307 -
Bills of acceptance - - 599,084 -
Guarantees - - 475,884 -
Deposits 6,910 27,729 175,564 1,651

Rs 000 Rs 000
Interest income 43 209,888

Interest expense 303 8,630
Payment for credit card promotional activities - 309
Expenses on goods & services purchased - 44,023
Cash dividend paid - 154,594

Scrip dividend paid (Number of shares) - 698,063
In addition to the above, Siyapatha Finance PLC has paid Rs 173 Mn (2016 - Rs 18.1 Mn) to entities which are controlled / jointly
controlled by KMP / CFMs of KMP during their ordinary course of business.
No losses have been recorded against loan balances outstanding with the entities controlled / jointly controlled by KMP / CFMs of
KMP during the period and no provisions have been made for impairment losses against such balances as at the reporting date.
49.5.2 Transactions with Post Employment Benefit Plans of the Bank

2017 2016
Name of the Post Employment Nature of Transactions Average 31st Average 31st
Benefit Plan Balance December Balance December
Rs 000 Rs 000 Rs 000 Rs 000
Sampath Bank Employees’ As at

Provident Fund Deposits 3,242,117 3,257,417 2,817,684 2,919,006
Investment in repo 45,871 - 130,069 60,253
Debentures 777,604 668,302 784,193 809,277
Interest payable 109,951 133,875 105,537 122,722
Other liabilities 2,258 - 1,653 2,417
For the year ended

Interest expenses 500,308 413,281
Sampath Bank Employees' As at

Pension Fund Deposits 2,043,407 2,118,043 1,665,495 1,930,788
Debentures 605,362 589,400 577,349 610,682
Investment in Sampath Bank
Shares - market value* 872,053 957,492 695,140 749,555
Investment in repo 898,112 226,078 2,041,159 1,480,481
Interest payable 105,747 103,188 95,694 105,881
Net liability / (asset) in the
Bank’s Financial Statements
(Note 42.4.1) 89,012 666,050 282,872 (138,511)
For the year ended

Dividend paid - Cash (Gross) 12,966 16,841
Interest expense 377,567 386,272
Dividend paid - Scrip

(Number of shares) 150,015 76,045
* The fund subscribed for the Rights issue of the Bank during the year ended 31st December 2017. Accordingly 430,000 new shares
were acquired by way of Rights at a total cost of Rs 105.35 Mn.
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, and for which discrete financial information is available.
For management purposes, the Group has identified four operating segments based on products and services, as follows:
y Banking
y Leasing, hire purchase & factoring
y Dealing / Investment
y Others
Leasing, hire purchase & factoring represents the finance leasing, hire purchase & factoring businesses of the Bank as well
as the above activities of its subsidiary, Siyapatha Finance PLC. Dealing / Investment involves activities such as stock broking,
securities dealing, investment banking and foreign currency related services.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profits or losses which, in
certain respects, are measured differently from operating profits or losses in the Consolidated Financial Statements. Income
taxes are managed on a group basis and are not allocated to operating segments.
Interest income is reported net as management primarily relies on net interest income 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 2017 or 2016.
The following table presents income, profit, total assets, total liabilities & cash flow information of the Group’s operating
segments.
50 SEGMENT INFORMATION CONTD.
Banking Leasing, Hire Purchase & Dealing / Investment Other Eliminations/Unallocated Total
Factoring
For the year ended 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Net interest income 23,501,967 18,643,540 2,782,366 2,112,606 4,012,908 3,212,946 - (13,727) - - 30,297,241 23,955,365
Dividend income - - - - 151,135 127,412 - - - - 151,135 127,412
Net fee & commission income 8,009,147 6,485,136 385,061 234,862 27,410 16,416 - (1,036) - - 8,421,618 6,735,378
Foreign exchange profit 694,929 768,460 - - 2,437,447 1,820,525 (4,864) - - - 3,127,512 2,588,985
Other income 96,871 153,649 222,504 175,406 (11,260) 51,443 167,116 169,220 - - 475,231 549,718
Total revenue from external customers 32,302,914 26,050,785 3,389,931 2,522,874 6,617,640 5,228,742 162,252 154,457 - - 42,472,737 33,956,858
Inter segment revenue 130,955 86,179 - - - 3,300 519,101 401,689 (650,056) (491,168) - -
Total operating income 32,433,869 26,136,964 3,389,931 2,522,874 6,617,640 5,232,042 681,353 556,146 (650,056) (491,168) 42,472,737 33,956,858
Less: Impairment charge for loans & other losses 2,321,209 1,185,307 230,828 326,192 - 23,515 81,636 - - - 2,633,673 1,535,014
Net operating income 30,112,660 24,951,657 3,159,103 2,196,682 6,617,640 5,208,527 599,717 556,146 (650,056) (491,168) 39,839,064 32,421,844
Less : Total operating expenses 14,006,631 12,771,374 1,602,405 1,169,160 2,623,011 2,398,408 399,169 330,268 (611,769) (403,418) 18,019,447 16,265,792
Segment result 16,106,029 12,180,283 1,556,698 1,027,522 3,994,629 2,810,119 200,548 225,878 (38,287) (87,750) 21,819,617 16,156,052
Less: VAT & NBT on financial services 4,309,389 2,942,523
Less: Income tax expenses 4,827,728 3,712,283
Profit for the year 12,682,500 9,501,246
Non - controlling interest - (5,173)
Profit attributable to equity holders of the Bank 12,682,500 9,496,073
As at 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Segment assets 592,023,659 489,717,010 50,527,973 40,117,244 151,980,498 126,302,687 6,273,320 5,340,408 (4,639,883) (4,751,726) 796,165,567 656,725,623
Unallocated assets - - - - - - - - 30,551,102 23,372,878 30,551,102 23,372,878
Total assets 592,023,659 489,717,010 50,527,973 40,117,244 151,980,498 126,302,687 6,273,320 5,340,408 25,911,219 18,621,152 826,716,669 680,098,501
Segment liabilities 492,960,028 412,906,102 56,420,005 46,052,362 209,440,253 174,044,283 2,271,741 877,507 (3,283,808) (3,523,830) 757,808,219 630,356,424
Unallocated liabilities - - - - - - - - - - - -
Total liabilities 492,960,028 412,906,102 56,420,005 46,052,362 209,440,253 174,044,283 2,271,741 877,507 (3,283,808) (3,523,830) 757,808,219 630,356,424
For the year ended 31st December 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Cash flows from operating activities 11,900,939 22,422,424 (7,142,738) (5,000,666) 28,785 (18,473) 340,908 367,910 5,071,623 2,313,307 10,199,517 20,084,502
Cash flows from investing activities (100,000) (69,400) (1,265,091) (277,013) (20,071,079) (29,763,064) (828,934) (427,655) (649,825) (1,507,328) (22,914,929) (32,044,460)
Cash flows from financing activities 10,655,575 14,236,746 7,837,191 5,195,790 100,000 - 164,140 (204,379) (5,024,430) (1,216,468) 13,732,476 18,011,689
Capital expenditure - - 74,443 279,002 323 349 830,610 427,655 1,525,125 762,508 2,430,501 1,469,514
291
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.
No circumstances have arisen since the reporting date which would require adjustments to, or disclosure in the financial statements, other
than those disclosed below.
51.1 Bank
51.1.1 Proposed Dividends
The Directors of the Bank have recommended a first and final scrip dividend of Rs 17.20 per share for the financial year ended 31st
December 2017. The right to receive the dividend will also apply to the increased number of shares allotted pursuant to the Rights Issue
2018 announced on 19th December 2017. The entitlement date for the dividend will be notified subsequently. Further in compliance with
the Bank’s Articles of Association this dividend is to be approved by the shareholders at the Annual General Meeting to be held on 29th
March 2018.
In accordance with Sri Lanka Accounting Standard - LKAS 10 (Event after the Reporting Period), this proposed final dividend has not been
recognised as a liability as at 31st December 2017. As required by section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors
has confirmed that the Bank has satisfied the ‘solvency test’ in accordance with section 57 of the Companies Act No. 7 of 2007, having
obtained a certificate from the External Auditors, prior to recommending the final dividend for the year.
Under the Inland Revenue Act No. 24 of 2017, a Withholding Tax of 14% will be imposed on the dividend declared.
51.1.2 Investments in Subsidiary Companies

The Bank invested additional Rs 250 Mn each in Sampath Information Technology Solutions Ltd and Siyapatha Finance PLC on 02nd
January and 12th January 2018 respectively. Both Sampath Information Technology Solutions Ltd and Siyapatha Finance PLC are fully
owned subsidiaries of the Bank.
51.1.3 Additional Investment in LankaBangla Finance Ltd

The Bank subscribed for the Rights issue of LankaBangla Finance Ltd on 03rd January 2018. Accordingly, the Bank further invested Rs 280
Mn in LankaBangla Finance Ltd to acquire 15,071,718 new shares issued by way of Rights. These shares were allotted on 31st January
2018. The total investment in LankaBangla Finance Ltd amounts to Rs 798 Mn (45,215,155 shares) subsequent to the above investment.
51.1.4 Already Announced Rights Issue and Debentures Issue

Rights Issue
The Bank has announced to issue 50,128,208 number of ordinary voting shares (three new shares for every thirteen (13) existing shares)
by way of a Rights issue on 19th December 2017, at an issue price of Rs 250/- each. This Rights issue is subject to the approval of the
Shareholders of the Bank at the Extraordinary General Meeting to be held on 07th March 2018.
Debenture Issue
Also the Bank has announced a debentures issue on 19th December 2017, to issue 50,000,000, listed, 5 year, rated, unsecured,
subordinated, redeemable, Basel III compliant convertible debentures at an issue price (par value) of Rs 100/- each. This issue includes an
option to issue up to a further 25,000,000 debentures in the event of over subscription. The debentures issue is subject to the approval of
the shareholders of the Bank at the Extraordinary General Meeting to be held on 26th February 2018.
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

Available for sale financial assets primarily consist of quoted / unquoted equity securities and government securities. Government
securities 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 are carried at cost less accumulated impairment losses since it is the most reasonable value available
to represent the price of such securities.
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 the 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.
52.2 Valuation Model

For all financial instruments where fair values are determined by referring to externally quoted prices or observable pricing inputs
to models, independent price determination or validation is obtained. In an inactive market, direct observation of a traded price may
not be possible. In these circumstances, the Bank uses alternative market information to validate the financial instrument’s fair
value, with greater weight given to information that is considered to be more relevant and reliable.
Fair value of freehold land and buildings was determined by using Market Comparable Method or Income Basis. These valuations
performed by the valuers are based on active market prices, significantly adjusted for difference in the nature, location or condition
of the specific property. Management determined that freehold land and buildings constitute one class of asset under Sri Lanka
Accounting 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 identical or similar assets and liabilities in inactive markets and are valued using models where all significant
inputs are observable.
Level 3 – Valuation technique with significant unobservable inputs: assets and liabilities valued using valuation techniques where
one or more significant inputs are unobservable.
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 other significant assets and liabilities. Specific controls include:
y A review and approval process involving the Board Audit Committee for significant judgement and assumptions, new models,
changes to existing judgements, assumptions and models.
y Periodic (at least quarterly) reviewing of fair value measurements against observable market data.
y Periodic (at least annually) reviewing of fair value measurement models against changes in market conditions, significant
judgments and assumptions.
y Use of sophisticated software for fair value measurements of trading and investment securities and derivatives.
y Independent analysis and investigation of significant daily valuation movements in trading and investment securities and
derivatives.
y A dual verification process for market data inputs to the fair value measurement software.
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.
52 FAIR VALUE OF ASSETS & LIABILITIES CONTD.
52.4.1 Bank
Fair Value Measurement Using Fair Value Measurement Using
Date of Quoted Prices Significant Significant Total Quoted Prices Significant Significant Total
Valuation in Active Observable Unobservable in Active Observable Unobservable
Markets Inputs Inputs Markets Inputs Inputs
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Financial assets measured at fair value

Derivative financial instruments 31st December
Currency SWAPs - 403,667 - 403,667 - 77,248 - 77,248
Forward foreign exchange contracts - 93,251 - 93,251 - 32,624 - 32,624
Sub Total - 496,918 - 496,918 - 109,872 - 109,872
Financial assets - held for trading 31st December

Government securities 19,821,312 - - 19,821,312 28,011,024 - - 28,011,024
Quoted equity securities 89,309 - - 89,309 98,169 - - 98,169
Sub Total 19,910,621 - - 19,910,621 28,109,193 - - 28,109,193
Financial assets - held for trading pledged as collaterals 31st December

Government securities 591,886 - - 591,886 10,380,213 - - 10,380,213
Sub Total 591,886 - - 591,886 10,380,213 - - 10,380,213
Financial assets - available for sale 31st December

Quoted equity securities 2,659,822 - - 2,659,822 1,729,560 - - 1,729,560
Unquoted equity securities - - 30,608 30,608 - - 30,708 30,708
Sub Total 72,880,839 - 30,608 72,911,447 14,239,482 - 30,708 14,270,190
Financial assets - available for sale pledged as collaterals 31st December

Government securities 4,184,272 - - 4,184,272 657,903 - - 657,903
Sub Total 4,184,272 - - 4,184,272 657,903 - - 657,903
Total financial assets measured at fair value 97,567,618 496,918 30,608 98,095,144 53,386,791 109,872 30,708 53,527,371
Non - financial assets measured at fair value 31st December

Freehold land & buildings (included under property, plant & equipment) * - - 4,901,678 4,901,678 - - 4,106,220 4,106,220
Total non-financial assets measured at fair value - - 4,901,678 4,901,678 - - 4,106,220 4,106,220
Financial liabilities measured at fair value

Currency SWAPs - 55,536 - 55,536 - 28,836 - 28,836
Total financial liabilities measured at fair value - 103,947 - 103,947 - 63,611 - 63,611
There were no material transfers between levels of fair value hierarchy during 2017 and 2016.
* The fair values exist in the recent valuations less subsequent accumulated depreciation and impairment losses are considered as the fair values as at the reporting date (31st December 2017).
52 FAIR VALUE OF ASSETS AND LIABILITIES CONTD.
52.4.2 Group
Fair Value Measurement Using Fair Value Measurement Using
Date of Quoted Prices Significant Significant Total Quoted Prices Significant Significant Total
Valuation in Active Observable Unobservable in Active Observable Unobservable
Markets Inputs Inputs Markets Inputs Inputs
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Financial assets measured at fair value

Currency SWAPs - 403,667 - 403,667 - 77,248 - 77,248
Sub Total - 496,918 - 496,918 - 109,872 - 109,872
Financial assets - held for trading 31st December

Quoted equity securities 89,309 - - 89,309 98,169 - - 98,169
Sub Total 19,977,657 - - 19,977,657 28,117,789 - - 28,117,789
Financial assets - held for trading pledged as collaterals 31st December

Government securities 524,850 - - 524,850 10,371,617 - - 10,371,617
Sub Total 524,850 - - 524,850 10,371,617 - - 10,371,617
Financial assets - available for sale 31st December

Quoted equity securities 2,659,822 - - 2,659,822 1,729,560 - - 1,729,560
Unquoted equity securities - - 30,664 30,664 - - 30,764 30,764
Sub Total 72,982,408 - 30,664 73,013,072 14,298,704 - 30,764 14,329,468
Financial assets - available for sale pledged as collaterals 31st December

Government securities 4,082,703 - - 4,082,703 598,681 - - 598,681
Sub Total 4,082,703 - - 4,082,703 598,681 - - 598,681
Total financial assets measured at fair value 97,567,618 496,918 30,664 98,095,200 53,386,791 109,872 30,764 53,527,427
Non - financial assets measured at fair value 31st December

Freehold land & buildings (included under property, plant & equipment) * - - 9,275,878 9,275,878 - - 8,055,438 8,055,438
Total non-financial assets measured at fair value - - 9,275,878 9,275,878 - - 8,055,438 8,055,438
Financial liabilities measured at fair value

Currency SWAPs - 55,536 - 55,536 - 28,836 28,836
Forward foreign exchange contracts - 48,411 - 48,411 - 34,775 34,775
Total financial liabilities measured at fair value - 103,947 - 103,947 - 63,611 - 63,611
There were no material transfers between levels of fair value hierarchy during 2017 and 2016.
* The fair values exist in the recent valuations less subsequent accumulated depreciation and impairment losses are considered as the fair values as at the reporting date (31st December 2017).
295

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 2016 56,057 3,480,030 56,113 6,370,147

Additions 2,166 50,044 2,166 262,578
Revaluation surplus credited to revaluation reserve 602,205 1,500,782
Total gains / (loss) recognised in
profit or loss:
Impairment (charge) / reversal for the year (Note 12) (27,515) 2,036 (27,515) 2,036
Depreciation of buildings (28,095) (80,105)
Balance as at 31st December 2016 30,708 4,106,220 30,764 8,055,438
Additions 1,041 8,666 1,041 9,101
Revaluation surplus credited to revaluation reserve 822,641 1,330,746
Total gain / (loss) recognised in profit or loss:
Impairment charge for the year (Note 12) - (161) - (161)
Depreciation of buildings (35,688) (119,246)
Transfers and other adjustments (Note 29.4) (1,141) - (1,141) -
Balance as at 31st December 2017 30,608 4,901,678 30,664 9,275,878
52.5.2 Unobservable Inputs Used In Measuring Fair Value

The table below sets out information about significant unobservable inputs used in measuring fair value of the assets categorised
under Level 3 of the fair value hierarchy.
Type of Asset Bank Group Valuation Significant Weighted Average Fair Value
Fair Value Fair Value Technique Unobservable Range of Estimates for Measurement
as at 31st as at 31st Inputs Unobservable Inputs Sensitivity to
December December Unobservable
2017 2017 Inputs
Rs 000 Rs 000
Property, plant &

equipment
- Freehold land 3,719,530 6,369,530 Market Estimated price
comparable per perch
method Rs 15,000 - 12,500,000 *
- Freehold buildings 1,182,148 2,906,348 Market Estimated price
comparable per sq.ft
method Rs 2,750 - 13,640 *
Income basis Estimated rental
value per sq.ft
Bank Rs 100 - 175 *
Subsidiary Rs 156 *
Expected market
rental growth
Bank 1% *
Subsidiary 0% - 5% *
Discount rate
Bank 6.50% **
Subsidiary 5.75% **
* Significant increases / (decreases) in any of these inputs in isolation would result in a significantly higher / (lower) fair value.
** Significant increases / (decreases) in this input in isolation would result in a significantly (lower) / higher fair value.
52.6 Fair Value of Financial Assets and Liabilities Carried at Amortised Cost
The following describes the methodologies and assumptions used to determine fair values of those financial instruments which are
not already recorded at fair value in the Financial Statements.
Assets of which Fair Value Approximates Carrying Value

For financial assets and liabilities that have a short term maturity, it is assumed that the carrying amounts approximate their fair
values. This assumption is also applied to demand deposits and savings deposits which do not have a specific maturity.
Fixed Rate Financial Instruments

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest
rates when they were first recognised with current market rates for similar financial instruments. The estimated fair value of fixed
interest bearing deposits is based on discounted cash flows using prevailing market interest rates for debts with similar credit risk
and maturity. For quoted debt issued, the fair values are determined based on quoted market prices. For variable rate instruments
with a fixed credit spread, an adjustment is made to reflect the change in credit spread since the instrument was first recognised.
Variable Rate Financial Instruments

Variable rate is a fair measure which reflects market movements. Hence the carrying value represents the fair value of the variable
rate instruments.
Set out below is a comparison of the carrying amounts and fair values of the Bank’s financial instruments by classes that are not
carried at fair value in the Financial Statements. This table does not include the fair values of non financial assets and non financial
liabilities.
52.6 Fair Value of Financial Assets & Liabilities Carried at Amortised Cost
As at 31st December 2017 Bank Group
Fair Value Carrying Fair Value Carrying
Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total Value
Financial Assets
Loans to & receivables from banks - 2,084,079 - 2,084,079 2,084,507 - 2,084,079 - 2,084,079 2,084,507
Loans to & receivables from other customers - 557,046,812 - 557,046,812 560,798,940 - 582,805,470 - 582,805,470 586,370,704
Other loans & receivables - 49,182,374 - 49,182,374 49,352,443 - 49,182,374 - 49,182,374 49,352,443
Financial assets - held to maturity - - - - - 12,336 - - 12,336 12,428
- 608,313,265 - 608,313,265 612,235,890 12,336 634,071,923 - 634,084,259 637,820,082
Due to other customers - Call, fixed & certificate

of deposits - 405,005,482 - 405,005,482 405,062,110 - 414,427,236 - 414,427,236 414,103,164
Debt issued & other borrowed funds - 76,160,135 - 76,160,135 76,098,240 - 91,310,595 - 91,310,595 91,257,152
- 481,165,617 - 481,165,617 481,160,350 - 505,737,831 - 505,737,831 505,360,316
The following table lists those financial instruments for which their carrying amounts are a reasonable approximation of fair values because, for example, they are short term in nature or re-priced to
current market rates frequently.
Assets Liabilities
Cash & cash equivalents Due to banks

Balances with Central Bank of Sri Lanka Securities sold under repurchase agreements
Placements with banks Savings, demand & margin deposits in "Due to other customers"
Reverse repurchase agreements Dividend payable
Other financial assets Other financial liabilities
As at 31st December 2016 Bank Group
Fair Value Carrying Fair Value Carrying
Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total Value
Financial assets
Loans to & receivables from banks - 2,641,050 - 2,641,050 2,641,733 - 2,641,050 - 2,641,050 2,641,733
Loans to & receivables from other customers - 453,175,076 - 453,175,076 456,189,052 - 469,472,893 - 469,472,893 472,754,947
Other loans & receivables - 38,150,120 - 38,150,120 38,708,440 - 38,150,120 - 38,150,120 38,708,440
Financial assets - held to maturity - - - - - 16,502 - - 16,502 16,933
- 493,966,246 - 493,966,246 497,539,225 16,502 510,264,063 - 510,280,565 514,122,053
Financial liabilities
Due to other customers - Call, fixed & certificate
of deposits - 311,092,171 - 311,092,171 311,138,389 - 317,187,722 - 314,187,722 314,139,666
Debt issued & other borrowed funds - 70,293,075 - 70,293,075 72,128,237 - 82,329,431 - 82,329,431 84,179,232
- 381,385,246 - 381,385,246 383,266,626 - 399,517,153 - 396,517,153 398,318,898
The following table lists those financial instruments for which their carrying amounts are a reasonable approximation of fair values because, for example, they are short term in nature or re-priced to current
market rates frequently.
Assets Liabilities
Cash & cash equivalents Due to banks

Balances with Central Bank of Sri Lanka Securities sold under repurchase agreements
Placements with banks Savings, demand & margin deposits in "Due to other customers”
Reverse repurchase agreements Dividend payable
Other financial assets Other financial liabilities
52.7 Reclassification of Financial Assets & Liabilities

There were no reclassifications during the years 2016 & 2017.

299
53 RISK MANAGEMENT
53.1 Introduction
Risk is inherent in the Bank’s activities but is managed through a process of ongoing identification, measurement and monitoring
subject to risk limits and other controls. This process of risk management is critical to the Bank’s continuous profitability and each
individual within the Bank is accountable for the risk exposures relating to his or her responsibilities. The Bank is mainly exposed to
Credit Risk, Liquidity Risk, Market Risk and Operational Risk which has been disclosed in this note as summarised below.
Page No
53.2 Credit Risk 301

53.2.1 Impairment Assessment 301
53.2.2 Credit–related Commitments Risks 301
53.2.3 Collateral and Other Credit Enhancements 301
53.2.4 Credit Quality by Class of Financial Assets 304
53.2.5 Credit Risk Exposure for Each Internal Credit Risk Rating 308
53.2.6 Analysis of Risk Concentration 309
53.2.6.1 Country Risk - Geographical Analysis 309
53.2.6.2 Industry Analysis 313
53.2.7 Commitments and Contingencies 317
53.3 Liquidity Risk and Fund Management 317

53.3.1 Statutory Liquid Assets Ratio (SLAR) 317
53.3.2 Loans to & receivables from banks and other customers (Advances) to Due to banks and other
customers (Deposits) Ratio 317
53.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities 318
53.3.4 Remaining Contractual Maturities of Commitments and Contingencies 322
53.4 Market Risk 324

53.4.1 Interest Rate Risk 324
53.4.2 Currency Risk 329
53.4.3 Equity Price Risk 330
53.5 Operational Risk 330

53.6 Capital Management 330
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 controls and to monitor adherence to established limits. Risk management policies and systems are reviewed regularly
to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards
and procedures, continuously updates and maintains a disciplined and constructive control environment, in which all employees are
assigned and made to understand their respective roles and responsibilities.
Integrated Risk Management Unit

The Business units (i.e. Credit Departments, Branches, Regional Offices, Treasury etc.) have primary responsibility for Risk
Management. The Integrated Risk Management Unit, which has no responsibility for profit or volume targets, acts as the 2nd line of
defense and reports to the Group Chief Risk Officer (GCRO) who in turn directly reports to the BIRMC.
Asset / Liability Management Committee (ALCO)

ALCO is chaired by the Managing Director and has representatives from Treasury Department, Credit Departments, Marketing
Department, Finance Department and Planning Department. The Group Chief Financial Officer and the Group Chief Risk Officer are
also members of the ALCO. The Committee meets regularly to monitor and manage the assets & liabilities of the Bank and 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 (BIRMC) on a periodic basis.
Monitoring and controlling risks is primarily performed based on policies, limits and thresholds established by the Bank. These
limits reflect the business strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept
(Risk Appetite).
Risk 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 collateral that could be accepted, required security margin etc. are clearly defined in the Credit Policy of the Bank and any
deviations that require specific approval. However, respective approving authorities would take into account the availability of
security only as the secondary source of repayment.
53.2 Credit Risk

Credit risk is the risk of financial loss to the Bank, if a borrower or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Bank’s loans and advances to customers/other banks and investments in
debt securities. In addition to the credit risk from direct funding 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.
Derivative Financial Instruments

Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the
Statement 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) commit the Bank to make payments on behalf of customers in the event of a specific act, generally related to the import
or export of goods. Such commitments expose the Bank to risks similar to loans and are mitigated by the same control processes
and policies.
53.2.3 Collateral and Other Credit Enhancements

53.2.3 (a) Net exposure to credit risk
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
53 RISK MANAGEMENT CONTD.

The Bank also obtains guarantees from parent companies as securities against loans guaranteed 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.
The following table shows the maximum exposure and net exposure (Net of fair value of any collaterals held) to credit risk by class
of financial asset.
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 20 22,334,315 7,701,785 17,064,013 9,646,689
Placements with banks 22 3,159,326 3,159,326 8,749,763 8,749,763
Reverse repurchase agreements 1,200,762 - 33,860,083 -
Derivative financial instruments 23 496,918 496,918 109,872 109,872
Financial assets - held for trading 24 19,910,621 19,910,621 28,109,193 28,109,193
Financial assets - held for trading pledged as collaterals 25 591,886 591,886 10,380,213 10,380,213
Loans to & receivables from banks 26 2,084,507 1,536,253 2,641,733 1,819,516
Loans to & receivables from other customers 27 560,798,940 247,198,663 456,189,052 202,415,036
Other loans & receivables 28 49,352,443 45,952,577 38,708,440 34,722,921
Financial assets - available for sale 29 72,911,447 72,911,447 14,270,190 14,270,190
Financial assets - available for sale pledged as collaterals 30 4,184,272 4,184,272 657,903 657,903
Other assets 4,123,185 4,123,185 3,257,948 3,257,948
Total 741,148,622 407,766,933 613,998,403 314,139,244
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 20 22,612,939 7,707,599 17,221,809 9,655,360
Placements with banks 22 3,225,025 3,225,025 8,749,763 8,749,763
Reverse repurchase agreements 2,392,852 - 34,629,422 -
Derivative financial instruments 23 496,918 496,918 109,872 109,872
Financial assets - held for trading 24 19,977,657 19,977,657 28,117,789 28,117,789
Financial assets - held for trading pledged as collaterals 25 524,850 524,850 10,371,617 10,371,617
Loans to & receivables from banks 26 2,084,507 1,536,253 2,641,733 1,819,516
Loans to & receivables from other customers 27 586,370,704 250,264,137 472,754,947 203,806,278
Other loans & receivables 28 49,352,443 45,952,577 38,708,440 34,722,921
Financial assets - available for sale 29 73,013,072 73,013,072 14,329,468 14,329,468
Financial assets - available for sale pledged as collaterals 30 4,082,703 4,082,703 598,681 598,681
Financial assets - held to maturity 31 12,428 12,428 16,933 16,933
Other assets 4,285,587 4,285,587 3,507,676 3,507,676
Total 768,431,685 411,078,806 631,758,150 315,805,874
53.2.3 (b) Offsetting financial assets & liabilities

Financial assets and financial liabilities are offset and the net amount is presented in the Statement of Financial Position when the
Group 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.
53.2.3 (c) Financial assets & liabilities not subject to offsetting

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.
The amount of the financial collateral received or pledged subject to netting arrangements but not qualified for offsetting are
disclosed below.
Bank

Gross Amount subject Net Gross Amount subject Net
amount to netting but do amount amount to netting but do amount
not qualify for not qualify for
offsetting offsetting
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Loans to & receivables from
other customers 61,426,422 39,586,513 21,839,909 51,850,212 34,472,696 17,377,516
Securities sold under
repurchase agreements 4,386,335 4,386,335 - 10,159,225 10,159,225 -
Group

Gross Amount subject Net Gross Amount subject Net
amount to netting but do amount amount to netting but do amount
not qualify for not qualify for
offsetting offsetting
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Loans to & receivables from
other customers 62,917,895 40,361,767 22,556,128 51,850,212 34,472,696 17,377,516
Securities sold under
repurchase agreements 4,231,946 4,231,946 - 10,095,117 10,095,117 -
53.2.4 Credit Quality by Class of Financial Assets
The Bank manages the credit quality of financial assets using internal credit ratings. The tables below show the credit quality by the class of asset for all financial assets exposed
to credit risk, based on the Bank’s internal credit rating system. The amounts presented are gross of impairment allowances.
53.2.4.1 Comparative information were restated due to the change in the data source for better presentation.
Definition of Past Due

The Bank considers that any amount uncollected one day or more beyond their contractual due date as ‘past due’.
(a) Bank - as at 31st December 2017
Neither Past Due nor Impaired Past Due but Individually Total
High Grade Standard Grade Sub Standard Unrated Exposures Not Impaired Impaired
Grade Not Subject to
Ratings
Financial Assets
Cash & cash equivalents 20,545,164 1,488,950 - 300,201 - - - 22,334,315
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - - 41,100,364
Placements with banks 237,925 2,921,401 - - - - - 3,159,326

Reverse repurchase agreements 1,200,762 - - - - - - 1,200,762
Derivative financial instruments 412,616 49,015 - 35,287 - - - 496,918
Financial assets - held for trading 19,906,273 - - 4,348 - - - 19,910,621
Financial assets - held for trading pledged as collaterals 591,886 - - - - - - 591,886
Loans to & receivables from banks 2,084,507 - - - - - - 2,084,507
Loans to & receivables from other customers 196,960,627 100,533,335 2,153,913 24,109,031 34,825,912 202,167,912 8,691,517 569,442,247
Other loans & receivables 47,110,515 2,163,782 78,146 - - - - 49,352,443
Financial assets - available for sale

Government securities 70,221,017 - - - - - - 70,221,017
Quoted equity securities 2,659,822 - - - - - - 2,659,822
Unquoted equity securities - - - - 29,601 - 61,157 90,758
Financial assets - available for sale pledged as collaterals 4,184,272 - - - - - - 4,184,272

Financial assets - held to maturity
Government securities - - - - - - - -
Other assets 2,017,268 116,319 - - 1,989,598 - - 4,123,185
Total 409,233,018 107,272,802 2,232,059 24,448,867 36,845,111 202,167,912 8,752,674 790,952,443
Age analysis of past due (i.e. facilities in arrears of 1 day and above) but not impaired loans by class of financial assets
Past Due but Not Impaired
1 - 30 Days 31 to 60 Days 61 to 90 Days More than 90 Days Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Loans to & receivables from other customers 156,187,845 34,891,275 6,184,074 4,904,718 202,167,912
Other assets - - - - -
Total 156,187,845 34,891,275 6,184,074 4,904,718 202,167,912
(b) Bank - as at 31st December 2016
Ratings
Financial Assets
Cash & cash equivalents 16,791,063 21,594 - 251,356 - - - 17,064,013
Placements with banks 7,248,965 1,500,798 - - - - - 8,749,763
Financial assets - held for trading pledged as collaterals 10,380,213 - - - - - - 10,380,213
Loans to & receivables from banks 1,422,978 1,218,755 - - - - - 2,641,733
Other loans & receivables 36,065,910 2,642,530 - - - - - 38,708,440

Financial assets - available for sale pledged as collaterals 657,903 - - - - - - 657,903

Government securities - - - - - - - -
Other assets 2,055,749 89,938 - 19,566 1,092,695 - - 3,257,948
Total 343,653,193 92,940,290 2,615,920 22,307,114 29,371,396 157,018,883 7,601,838 655,508,634
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Other assets - - - - -
Total 117,622,058 29,783,108 5,380,945 4,232,772 157,018,883

305
(c) Group - as at 31st December 2017
Ratings
Financial Assets
Cash & cash equivalents 20,823,788 1,488,950 - 300,201 - - - 22,612,939
Placements with banks 303,624 2,921,401 - - - - - 3,225,025
Financial assets - held for trading pledged as collaterals 524,850 - - - - - - 524,850

Loans to & receivables from banks 2,084,507 - - - - - - 2,084,507
Other loans & receivables 47,110,515 2,163,782 78,146 - - - - 49,352,443

Financial assets - available for sale pledged as collaterals 4,082,703 - - - - - - 4,082,703

Government securities 12,428 - - - - - - 12,428
Other assets 2,017,268 116,319 - 60,107 2,000,374 101,347 102,906 4,398,321
Total 408,853,078 107,272,802 2,232,059 39,922,937 36,950,509 214,545,264 9,244,527 819,021,176
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Other assets 4,881 3,684 14 92,768 101,347
Total 162,044,002 38,974,195 7,706,199 5,820,868 214,545,264
(d) Group - as at 31st December 2016
Ratings
Financial Assets
Cash & cash equivalents 16,948,859 21,594 - 251,356 - - - 17,221,809
Placements with banks 7,248,965 1,500,798 - - - - - 8,749,763
Financial assets - held for trading pledged as collaterals 10,371,617 - - - - - - 10,371,617
Loans to & receivables from banks 1,422,978 1,218,755 - - - - - 2,641,733
Other loans & receivables 36,065,910 2,642,530 - - - - - 38,708,440

Financial assets - available for sale pledged as collaterals 598,681 - - - - - - 598,681

Government securities 16,933 - - - - - - 16,933
Other assets 2,055,749 89,938 - 48,333 1,150,233 112,227 107,940 3,564,420
Total 343,210,642 92,940,291 2,615,920 34,081,772 29,504,424 163,280,567 8,126,820 673,760,436
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Other assets 13,657 7,742 11,004 79,824 112,227
Total 120,545,912 31,907,832 6,150,098 4,676,725 163,280,567

307
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 Fitch Rating Historical Total Historical Total
Default Rate Default Rate
As at 31st December 2017 2017 2016 2016
% Rs 000 % Rs 000
High Grade
A+ AAA to AA+ 0.26 20,762,624 - 17,338,491
A AA to AA- 0.45 52,751,826 0.47 66,733,069
A- A+ to A 0.50 99,700,573 0.21 61,719,732
B+ A- to BBB+ 1.24 116,258,785 0.72 90,703,104
Standard Grade
B BBB to BBB- 1.29 96,172,081 0.85 74,790,220
B- BB+ to BB 1.61 70,193,220 1.07 54,506,464
C+ BB- to B+ 2.01 29,545,606 2.27 22,185,801
Sub Standard Grade

C B to B- 5.16 3,875,304 3.54 3,833,480
C- CCC to CC 4.28 475,717 - 1,127,659
Unrated 0.71 36,880,905 0.65 35,753,031
Impaired
D C to D 3.51 7,554,016 15.79 6,422,834
Exposures Not Subject for Ratings

Pawning 19,665,969 15,479,487
Others 17,690,128 15,963,779
Total 571,526,754 466,557,151
53.2.5.1 Comparative information were restated due to the change in the data source for better presentation.
53.2.6 Analysis of Risk Concentration
Risk concentrations: maximum exposure to credit risk without taking into account 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 14,500 Mn and Rs 15,502 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.
53.2.6.1 Country Risk - Geographical Analysis

Sri Lanka Europe America South Asia Asia Pacific Middle East Total
& Africa
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 17,004,822 418,545 3,820,867 145,915 545,655 398,511 22,334,315
Balances with Central Bank of Sri Lanka 41,100,364 - - - - - 41,100,364
Placements with banks 76,764 - 779,774 - 2,302,788 - 3,159,326
Reverse repurchase agreements 1,200,762 - - - - - 1,200,762
Derivative financial instruments 468,599 28,319 - - - - 496,918
Financial assets - held for trading 19,910,621 - - - - - 19,910,621
Financial assets - held for trading pledged as collaterals 591,886 - - - - - 591,886
Loans to & receivables from banks 2,084,507 - - - - - 2,084,507
Loans to & receivables from other customers** 553,132,105 187,137 495,452 5,749,046 1,177,299 57,901 560,798,940
Other loans & receivables 49,352,443 - - - - - 49,352,443
Financial assets - available for sale 70,250,617 - - 2,660,830 - - 72,911,447
Financial assets - available for sale pledged as collaterals 4,184,272 - - - - - 4,184,272
Financial assets - held to maturity - - - - - - -
Other assets 3,587,081 165,236 116,268 616 5,933 248,051 4,123,185
Total 762,944,843 799,237 5,212,361 8,556,407 4,031,675 704,463 782,248,986
** Provincial breakdown for loans to & receivables from other customers within Sri Lanka
Province Rs 000
Central 35,618,138
Eastern 11,093,394
North Central 12,843,992

North Western 29,025,034
Northern 9,998,350
Sabaragamuwa 11,859,291
Southern 26,676,226
Uva 11,326,665
Western 404,691,015
Total 553,132,105
309
& Africa
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 2,251,564 1,112,436 1,785,062 - 544 3,600,157 8,749,763
Derivative financial instruments 90,921 18,928 - - 23 - 109,872
Financial assets - held for trading pledged as collaterals 10,380,213 - - - - - 10,380,213

Loans to & receivables from other customers** 448,268,807 172,507 472,509 6,613,341 244,321 417,567 456,189,052
Financial assets - available for sale pledged as collaterals 657,903 - - - - - 657,903
Other assets 3,137,060 19,566 89,938 2,270 9,114 - 3,257,948

Total 628,725,028 1,581,302 3,630,517 8,696,655 740,376 4,349,381 647,723,259
Province Rs 000
Central 27,336,447
Eastern 8,423,743
Northern 6,900,437
Southern 21,988,342
Uva 8,563,024
Western 334,833,994
Total 448,268,807
& Africa
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 142,463 - 779,774 - 2,302,788 - 3,225,025
Derivative financial instruments 468,599 28,319 - - - - 496,918
Loans to & receivables from other customers** 578,703,872 187,137 495,452 5,749,045 1,177,298 57,900 586,370,704
Financial assets - held to maturity 12,428 - - - - - 12,428
Other assets 3,749,482 165,236 116,269 616 5,933 248,051 4,285,587
Total 790,227,910 799,237 5,212,362 8,556,404 4,031,674 704,462 809,532,049
Province Rs 000
Central 38,768,934
Eastern 13,501,722
Northern 10,238,855
Southern 28,350,723
Uva 11,630,423
Western 417,340,878
Total 578,703,872
311
& Africa
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 2,251,564 1,112,436 1,785,062 - 544 3,600,157 8,749,763
Derivative financial instruments 90,921 18,928 - - 23 - 109,872

Loans to & receivables from other customers** 464,834,702 172,507 472,509 6,613,341 244,321 417,567 472,754,947
Financial assets - available for sale pledged as collaterals 598,681 - - - - - 598,681
Financial assets - held to maturity 16,933 - - - - - 16,933
Other assets 3,386,788 19,566 89,938 2,270 9,114 - 3,507,676

Total 646,484,775 1,581,302 3,630,517 8,696,655 740,376 4,349,381 665,483,006
Province Rs 000
Central 29,674,965
Eastern 9,986,819
Northern 7,093,710
Southern 23,052,378
Uva 8,764,463
Western 342,145,895
Total 464,834,702
53.2.6.2 Industry Analysis
The following tables show the risk concentration by industry for the components of the Statement of Financial Position.

Agriculture Manufac- Tourism Transport Construc- Traders Banks, Govt. Infra- Other Consumers Total
and Related turing tion Financial structure Services
and
Business
Services
Financial Assets
Cash & cash equivalents - - - - - - 22,334,315 - - - - 22,334,315
Balances with Central Bank of Sri Lanka - - - - - - - 41,100,364 - - - 41,100,364
Placements with banks - - - - - - 3,159,326 - - - - 3,159,326
Reverse repurchase agreements - - - - - - 1,200,762 - - - - 1,200,762
Derivative financial instruments - - - - - 34,257 462,661 - - - - 496,918
Financial assets - held for trading
Government securities - - - - - - - 19,821,312 - - - 19,821,312
Quoted equities - - - - - 4,348 84,961 - - - - 89,309
collaterals - - - - - - - 591,886 - - - 591,886
Loans to & receivables from banks - - - - - - 2,084,507 - - - - 2,084,507
Loans to & receivables from other customers 44,638,250 91,455,200 43,039,520 8,304,092 90,745,885 136,249,276 31,359,360 9,710,813 23,279,064 20,419,452 61,598,028 560,798,940
Other loans & receivables 78,146 509,893 - - 816,128 1,415,394 5,644,116 40,888,766 - - - 49,352,443
Other equity securities - - - - - - 2,659,822 - - 30,607 - 2,690,429
collaterals - - - - - - - 4,184,272 - - - 4,184,272
Financial assets - held to maturity - - - - - - - - - - - -
Other assets - - - - - - 1,132,489 1,991,371 - 999,325 - 4,123,185

Total 44,716,396 91,965,093 43,039,520 8,304,092 91,562,013 137,703,275 70,122,319 188,509,802 23,279,064 21,449,384 61,598,028 782,248,986
313
and
Business
Services
Financial Assets
Cash & cash equivalents - - - - - - 14,663,090 2,400,923 - - - 17,064,013
Reverse repurchase agreements - - - - - - 20,854,768 13,005,315 - - - 33,860,083

Quoted equities - - - - - 4,569 93,600 - - - - 98,169
collaterals - - - - - - - 10,380,213 - - - 10,380,213
Loans to & receivables from other customers 42,767,078 66,905,338 35,711,497 6,018,945 70,312,523 111,463,491 34,878,742 608,225 18,414,722 19,260,714 49,847,777 456,189,052
collaterals - - - - - - - 657,903 - - - 657,903
Financial assets - held to maturity - - - - - - - - - - - -
Other assets - - - - - - 334,367 2,045,253 - 878,328 - 3,257,948
Total 42,845,209 67,415,232 35,711,497 6,018,945 71,128,651 113,355,631 91,082,286 131,733,560 18,414,722 20,169,749 49,847,777 647,723,259
and
Business
Services
Financial Assets
Cash & cash equivalents - - - - - - 22,612,939 - - - - 22,612,939
Reverse repurchase agreements - - - - - - 2,392,852 - - - - 2,392,852
Quoted equities - - - - - 4,348 84,961 - - - - 89,309
collaterals - - - - - - - 524,850 - - - 524,850
Loans to & receivables from other customers 46,287,881 93,550,757 43,629,940 8,401,310 91,863,895 141,215,711 30,343,939 9,710,814 23,279,065 33,926,011 64,161,381 586,370,704
collaterals - - - - - - - 4,082,703 - - - 4,082,703
Financial assets - held to maturity - - - - - - - 12,428 - - - 12,428
Other assets - - - - - - 1,266,895 1,991,372 - 1,027,320 - 4,285,587
Total 46,366,027 94,060,650 43,629,940 8,401,310 92,680,023 142,669,710 70,777,717 188,522,231 23,279,065 34,983,995 64,161,381 809,532,049
315
and
Business
Services
Financial Assets
Cash & cash equivalents - - - - - - 14,820,886 2,400,923 - - - 17,221,809
Reverse repurchase agreements - - - - - - 21,624,107 13,005,315 - - - 34,629,422

Government debt securities - - - - - - - 28,019,620 - - - 28,019,620
Quoted equities - - - - - 4,569 93,600 - - - - 98,169
collaterals - - - - - - - 10,371,617 - - - 10,371,617
Loans to & receivables from other customers 44,049,080 68,233,095 36,037,089 6,040,887 71,095,470 115,018,122 32,624,943 608,225 19,257,121 28,174,216 51,616,699 472,754,947
collaterals - - - - - - - 598,681 - - - 598,681
Financial assets - held to maturity - - - - - - 4,288 12,645 - - - 16,933
Other assets - - - - - - 446,547 2,045,253 - 1,015,876 - 3,507,676
Total 44,127,211 68,742,989 36,037,089 6,040,887 71,911,598 116,910,262 89,872,090 131,746,205 19,257,121 29,220,855 51,616,699 665,483,006
53.2.7 Commitment and Contingencies

To meet the financial needs of customers, the Bank enters into various commitments and contingent liabilities. Even though these
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.
The maximum exposure to credit risk relating to a financial guarantee is the maximum amount the Bank should have to pay
if the guaranteeis called upon. The maximum exposure to credit risk relating to a loan commitment is the full amount of the
commitment. In both cases, the maximum risk exposure is significantly grater than the amount recognised as a liability in the
Statement of Financial Position. The Bank’s maximum credit risk exposure for commitments and contingencies are disclosed in the
Note No. 48.1.
53.3 Liquidity Risk and Funding Management

Liquidity risk is the risk that the Bank will encounter difficulties in meeting its financial commitments that are settled by delivering
cash or another financial asset. Hence the Bank may be unable to meet its payment obligations when they fall due under both
normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core
deposit base, and adopted a policy of continuously managing assets with liquidity in mind and monitoring future cash flows and
liquidity on a daily basis. The Bank has developed internal control processes and contingency plans for managing liquidity risk.
This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure
additional funding if required.
The Bank maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an
unforeseen interruption of expected cash flow. The Bank also has committed lines of credit that could be utilized to meet liquidity
needs. Further, the Bank maintained a statutory deposit with the Central Bank of Sri Lanka equal to 7.5% of customer deposits.
In accordance with the Bank’s policy, the liquidity position is assessed and managed under a variety of scenarios, giving due
consideration to stress factors relating to both the market in general and specific to the Bank. The most important of this is to
maintain the required ratio of liquid assets to liabilities, 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 2017 is as follows.
53.3.1 Statutory Liquid Assets Ratio (SLAR)

For the month of December 2017 : 22.38% (2016 : 21.84%)
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 2017 : 90.65% (2016 : 90.37%)

53.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities
The tables below summarise the maturity profile of the undiscounted cash flows of the Bank’s financial assets and financial
liabilities as at 31st December 2017. Repayments which are subject to notice are treated as if notice were to be given immediately.
However, the Bank expects that many customers will not request repayment on the earliest date it could be required to pay and the
tables do not reflect the expected cash flows indicated by its deposit retention history.
Contractual Maturities of Undiscounted Cash Flows of Financial Assets and Financial Liabilities
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 22,346,640 - - - - 22,346,640
Balances with Central Bank of Sri Lanka 23,720,784 15,013,592 841,857 1,026,699 497,432 41,100,364
Placements with banks 3,159,526 - - - - 3,159,526
Reverse repurchase agreements 1,201,269 - - - - 1,201,269
Derivative financial instruments 317,442 178,576 900 - - 496,918
Financial assets - held for trading 19,910,621 - - - - 19,910,621
collaterals 591,886 - - - - 591,886
Loans to & receivables from banks 230,880 651,790 1,338,701 325,491 - 2,546,862
Loans to & receivables from other customers 258,434,330 106,664,521 153,049,982 85,134,760 77,597,223 680,880,816
Other loans & receivables 8,054,707 9,049,778 27,492,162 11,726,774 - 56,323,421
Financial assets - available for sale 61,986,538 7,459,409 151,502 518,562 2,795,436 72,911,447
collaterals 4,184,272 - - - - 4,184,272
Financial assets - held to maturity - - - - - -
Other assets 3,674,139 338,784 47,078 47,637 50,350 4,157,988
Total Financial Assets 407,813,034 139,356,450 182,922,182 98,779,923 80,940,441 909,812,030
Due to banks 3,095,152 1,690,482 - - - 4,785,634
Securities sold under repurchase agreements 4,046,691 359,868 - - - 4,406,559
Due to other customers 366,962,472 229,784,102 13,049,236 16,378,049 7,201,357 633,375,216
Debt issued & other borrowed funds 3,991,519 26,438,226 32,889,494 27,046,806 4,214,590 94,580,635
Dividend payable 99,259 - - - - 99,259
Other liabilities 4,290,457 2,672,234 705,130 124,119 256,608 8,048,548
Total Financial Liabilities 382,557,158 260,977,177 46,643,934 43,548,974 11,672,555 745,399,798
Total Net Financial Assets / (Liabilities) 25,255,876 (121,620,727) 136,278,248 55,230,949 69,267,886 164,412,232

Up to 3 3 - 12 1-3 3-5 Over 5 Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Balances with Central Bank of Sri Lanka 22,470,630 10,050,488 706,833 162,270 334,635 33,724,856
Placements with banks 7,772,998 984,483 - - - 8,757,481
Derivative financial instruments 53,743 56,129 - - - 109,872
collaterals 10,380,213 - - - - 10,380,213
collaterals - 657,903 - - - 657,903
Financial assets - held to maturity - - - - - -
Other assets 2,185,254 580,812 43,388 45,247 446,715 3,301,416
Due to banks 6,509,984 565,000 - - - 7,074,984
Securities sold under repurchase agreements 9,223,433 1,000,953 - - - 10,224,386
Other liabilities 2,662,221 2,217,986 309,359 - 253,015 5,442,581
Total Net Financial Assets / (Liabilities) (15,832,058) (63,115,738) 100,396,148 44,226,122 53,753,852 119,428,326

Up to 3 3 - 12 1-3 3-5 Over 5 Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Balances with Central Bank of Sri Lanka 23,720,784 15,013,592 841,857 1,026,699 497,432 41,100,364
Placements with banks 3,225,540 - - - - 3,225,540
Reverse repurchase agreements 1,819,603 597,599 - - - 2,417,202
collaterals 524,850 - - - - 524,850
collaterals 4,082,703 - - - - 4,082,703
Financial assets - held to maturity 2,403 5,967 - 4,300 - 12,670
Other assets 3,674,139 535,659 47,078 47,637 15,877 4,320,390
Due to banks 3,171,691 1,690,482 - - - 4,862,173
Other liabilities 5,452,674 2,492,258 291,624 13,495 248,199 8,498,250
Total Net Financial Assets / (Liabilities) 23,189,764 (118,181,052) 142,827,611 55,304,187 69,305,385 172,445,895

Up to 3 3 - 12 1-3 3-5 Over 5 Total
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Balances with Central Bank of Sri Lanka 22,470,630 10,050,488 706,833 162,270 334,635 33,724,856
Placements with banks 8,542,336 984,483 - - - 9,526,819
collaterals 10,371,617 - - - - 10,371,617
collaterals - 598,681 - - - 598,681
Financial assets - held to maturity 2,400 11,077 - 4,300 - 17,777
Other assets 2,287,116 584,087 227,001 49,885 383,960 3,532,049
Due to banks 6,811,412 565,000 - - - 7,376,412
Other liabilities 3,603,789 2,143,002 309,359 - 253,371 6,309,521
Total Net Financial Assets / (Liabilities) (14,305,356) (62,381,781) 101,103,079 45,138,823 53,762,870 123,317,635

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 financial
guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be
called.

On Less than 3 3 to 12 1 to 5 Over 5 Total
Demand Months Months Years Years
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies
Guarantees 6,867,637 11,840,270 18,271,936 11,576,952 2,735,302 51,292,097
Acceptance 49,494 12,206,404 6,896,475 30,544 - 19,182,917
Forward contracts - 41,016,433 19,129,706 1,062,675 - 61,208,814
Documentary credit 1,686,058 13,892,514 4,028,991 175,609 13,544 19,796,716
Total Contingencies 8,603,189 78,955,621 48,327,108 12,845,780 2,748,846 151,480,544
Commitments
Undrawn - Direct credit facilities 161,377,222 - - - - 161,377,222
Undrawn - Indirect credit facilities 66,325,717 - - - - 66,325,717
Capital Commitments 708,532 - - - - 708,532
Operating lease commitments - Bank as lessee - 239,035 692,682 2,112,296 570,059 3,614,072
Total Commitments 228,411,471 239,035 692,682 2,112,296 570,059 232,025,543
Total Commitments & Contingencies 237,014,660 79,194,656 49,019,790 14,958,076 3,318,905 383,506,087

Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies
Guarantees 2,985,664 13,327,547 16,664,462 10,752,667 2,766,234 46,496,574
Acceptance 33,065 9,277,247 6,767,694 14,400 - 16,092,406
Forward contracts 10,119 20,101,293 10,567,691 - - 30,679,103
Documentary credit 2,688,732 15,129,792 3,840,939 195,717 - 21,855,180
Commitments
Capital Commitments 391,732 - - - - 391,732

Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies
Guarantees 6,867,637 11,840,270 18,272,536 11,576,952 2,735,302 51,292,697
Acceptance 49,494 12,206,404 6,896,475 30,544 - 19,182,917
Forward contracts - 41,016,433 19,129,706 1,062,675 - 61,208,814
Documentary credit 1,686,058 13,892,514 4,028,991 175,609 13,544 19,796,716
Commitments
Capital Commitments 1,015,471 251,918 767,292 207,177 - 2,241,858
Total Commitments 228,400,687 434,679 1,289,458 1,777,373 679,749 232,581,946

Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Contingencies
Guarantees 2,985,664 13,327,547 16,698,362 10,752,667 2,766,234 46,530,474
Acceptance 33,065 9,277,247 6,767,694 14,400 - 16,092,406
Forward contracts 10,119 20,101,293 10,567,691 - - 30,679,103
Documentary credit 2,688,732 15,129,792 3,840,939 195,717 - 21,855,180
Commitments
Capital Commitments 1,591,962 - - - - 1,591,962

53.4 Market Risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market
variables such as interest rates, foreign exchange rates, commodity prices and equity prices. The Bank classifies exposures to
market risk into either trading or non–trading portfolios and manages each of those portfolios separately.
53.4.1 Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial
instruments. The Bank’s policy is to continuously monitor positions on a daily basis and hedging strategies are used to ensure
positions are maintained within prudential levels.
The following tables demonstrate the sensitivity of the Bank’s Statement of Profit or Loss for the year ended 31st December 2017
and 31st December 2016 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
2017 2016
Rs 000 Rs 000
Rate Sensitive Assets (RSA)* 588,201,327 498,292,137

Rate Sensitive Liabilities (RSL)* 635,838,264 522,875,543
GAP (RSA - RSL) (47,636,937) (24,583,406)
Impact on Statement of Profit or Loss due to Interest Rate Shocks as at 31st December
2017 2016
Rs 000 Rs 000
Interest Rate Shock

0.50% 184,032 133,792
1.00% 368,064 267,584
(0.50%) (184,032) (133,792)
(1.00%) (368,064) (267,584)
* The above computation is based on the rate sensitive assets and liabilities which are matured or repriced within one year.
Interest Rate Sensitivity Analysis

The tables below analyse the Bank’s interest rate risk exposure on financial assets and liabilities. The Bank’s assets and liabilities
are included at carrying amount and categorised by the earlier of contractual re–pricing or maturity dates.
Up to 3 3 - 12 1-3 Years 3 - 5 Years Over 5 Years Non Interest Total
Months Months Bearing
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Cash & cash equivalents 2,052,687 - - - - 20,281,628 22,334,315
Balances with Central Bank of Sri Lanka - - - - - 41,100,364 41,100,364
Placements with banks 3,159,326 - - - - - 3,159,326
Derivative financial instruments - - - - - 496,918 496,918
Financial assets - held for trading 19,821,312 - - - - 89,309 19,910,621
Loans to & receivables from banks 2,074,895 125 8,336 1,151 - - 2,084,507
Loans to & receivables from other customers 379,839,192 60,019,742 52,443,967 32,307,028 36,000,544 188,467 560,798,940
Other loans & receivables 40,693,392 5,117,789 3,523,067 18,195 - - 49,352,443
Financial assets - available for sale 61,986,538 7,459,409 151,502 518,562 105,006 2,690,430 72,911,447
Other assets - - - - - 4,123,185 4,123,185
Total Financial Assets 515,604,262 72,597,065 56,126,872 32,844,936 36,105,550 68,970,301 782,248,986
Due to banks 2,083,540 1,662,264 - - - 997,944 4,743,748
Securities sold under repurchase agreements 4,042,682 343,653 - - - - 4,386,335
Due to other customers 350,327,888 232,695,968 3,607,073 2,812,940 4,084 36,366,360 625,814,313
Debt issued & other borrowed funds 15,295,116 29,387,153 15,688,863 12,857,199 2,869,909 - 76,098,240
Dividend payable - - - - - 99,259 99,259
Other liabilities - - - - - 8,262,267 8,262,267
Total Financial Liabilities 371,749,226 264,089,038 19,295,936 15,670,139 2,873,993 45,829,777 719,508,109
Interest Rate Sensitivity Gap 143,855,036 (191,491,973) 36,830,936 17,174,797 33,231,557 23,140,524 62,740,877
325
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 7,770,903 978,860 - - - - 8,749,763

Loans to & receivables from banks 2,631,240 2,067 5,736 2,690 - - 2,641,733
Other loans & receivables 17,633,238 14,928,933 4,960,729 1,185,540 - - 38,708,440
Financial assets - available for sale pledged as collaterals - 657,903 - - - - 657,903

Other assets - - - - - 3,257,948 3,257,948
Due to banks 5,159,068 525,644 - - - 1,222,642 6,907,354
Due to other customers 314,972,370 150,025,590 8,695,429 760,917 25,009 35,203,918 509,683,233
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 3,225,025 - - - - - 3,225,025
Reverse repurchase agreements 1,809,634 583,218 - - - - 2,392,852
Loans to & receivables from banks 2,074,897 125 8,336 1,149 - - 2,084,507
Other loans & receivables 40,693,391 5,117,790 3,523,067 18,195 - - 49,352,443
Financial assets - held to maturity 2,400 5,725 - 4,303 - - 12,428
Other assets - - - - - 4,285,587 4,285,587
Due to banks 2,160,079 1,662,264 - - - 997,944 4,820,287
Due to other customers 354,139,223 235,927,949 4,441,425 3,779,486 4,098 36,349,200 634,641,381
327
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Financial Assets
Placements with banks 7,770,903 978,860 - - - - 8,749,763

Loans to & receivables from banks 2,631,240 2,067 5,736 2,690 - - 2,641,733
Other loans & receivables 17,633,238 14,928,933 4,960,729 1,185,540 - - 38,708,440
Financial assets - available for sale pledged as collaterals - 598,681 - - - - 598,681

Financial assets - held to maturity 2,400 10,245 - 4,288 - - 16,933
Other assets - - - - - 3,507,676 3,507,676
Due to banks 5,206,333 525,643 - - - 1,222,642 6,954,618
Due to other customers 316,253,600 151,279,046 8,868,474 926,225 25,009 35,198,050 512,550,404
53.4.2 Currency Risk

Currency risk arises as a result of fluctuations in the value of a financial instrument due to changes in foreign exchange rates. The
Bank’s Board has set limits on positions by currency. In accordance with the Bank’s policy, positions are monitored on a daily basis
and hedging strategies are used to ensure positions are maintained within established limits.
The tables below indicate the currencies to which the Bank had significant exposures as at 31st December 2017 and 31st
December 2016 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 Profit or Loss (due to the fair value of currency sensitive non trading monetary assets and liabilities)
and equity (due to change in fair value of currency swaps and forward exchange contracts used as cash flow hedges). A negative
amount in the “Impact on Statement of Profit or Loss “ column of the table reflects a potential net reduction in Statement of Profit
or Loss or equity, while a positive amount reflects a net potential increase.
Foreign Exchange Position as at 31st December 2017 2016

Net Overall Net Overall Net Overall Net Overall
Long Short Long Short
Rs 000 Rs 000 Rs 000 Rs 000
Currency
USD 471,139 - 1,186,602 -
GBP - 1,249 11,892 -
EUR 39,917 - 33,192 -
JPY 16,112 - 7,917 -
AUD 23,062 - 15,048 -
CAD 5,164 - 22,601 -
CHF 9,321 - 24,779 -
SGD 16,001 - 4,066 -
HKD 8,097 - 7,245 -
Sub Total 588,813 1,249 1,313,342 -
Other Currencies 77,668 - 78,338 -
Grand Total 666,481 1,249 1,391,680 -
Higher of Long or Short 666,481 - 1,391,680 -
2017 2016
Impact on Statement of Profit or Loss due to Exchange Rate Net Open Impact on Net Open Impact on
Shocks Position Statement of Position Statement of
(after Rate Profit or Loss (after Rate Profit or Loss
Shocks) for the period Shocks) for the period
ended ended
31st 31st
December December
Rs 000 Rs 000 Rs 000 Rs 000
5% 699,805 33,324 1,461,264 69,584

10% 733,129 66,648 1,530,848 139,168
-5% 633,157 (33,324) 1,322,096 (69,584)
-10% 599,833 (66,648) 1,252,512 (139,168)

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 2017 is Rs. 89,308,497/- (2016: Rs 98,168,160/-).
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 controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to
financial loss. Strategic and Reputational Risks are not covered in Operational Risk. Operational Risks of the Bank are mitigated
and managed through a Board approved Operational Risk Management Policy control framework which consists of monitoring and
responding to potential risks such as segregation of duties, access, authorisation and reconciliation procedures, staff education
and assessment processes, Business Continuity Planning etc. Operational Risk Management Unit reports to Group Chief Risk Officer
and the Board Integrated Risk Management Committee which maintains a high level overall supervision of managing Operational
Risks of the Bank.
53.6 Capital Management

The Bank’s capital management objectives can be summarised as follows:
y Maintain sufficient capital to meet minimum regulatory capital requirements
y Hold sufficient capital to support the Bank’s risk appetite
y Provide additional capital to business segments of the Bank to achieve the overall strategic objectives
y 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 Domestic
Systemically Important Bank’s (D-SIB) in Sri Lanka need to maintain minimum Tier I capital adequacy ratio (including capital
buffers) of 7.75% and minimum Total capital adequacy ratio of 11.75% as at 31st December 2017. The Bank has always
maintained the Capital Adequacy Ratios above the minimum regulatory requirements.
54 MATURITY ANALYSIS
(a) Maturity Gap Analysis as at 31st December 2017
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 22,334,315 - 22,334,315 22,612,939 - 22,612,939
Balances with Central Bank of Sri Lanka 38,734,375 2,365,989 41,100,364 38,734,375 2,365,989 41,100,364
Placements with banks 3,159,326 - 3,159,326 3,225,025 - 3,225,025
Reverse repurchase agreements 1,200,762 - 1,200,762 2,392,852 - 2,392,852
Derivative financial instruments 496,018 900 496,918 496,018 900 496,918
Financial assets - held for trading 19,910,621 - 19,910,621 19,977,657 - 19,977,657
collaterals 591,886 - 591,886 524,850 - 524,850
Loans to & receivables from banks 654,592 1,429,915 2,084,507 654,592 1,429,915 2,084,507
Other loans & receivables 10,958,210 38,394,233 49,352,443 10,958,210 38,394,233 49,352,443
Financial assets - available for sale 69,445,947 3,465,500 72,911,447 69,547,516 3,465,556 73,013,072
collaterals 4,184,272 - 4,184,272 4,082,703 - 4,082,703
Financial assets - held to maturity - - - 8,125 4,303 12,428
Investment in subsidiaries - 1,356,075 1,356,075 - - -
Property, plant & equipment - 7,269,942 7,269,942 - 12,631,442 12,631,442
Intangible assets - 946,845 946,845 - 996,703 996,703
Current tax receivables - - - 6,425 - 6,425
Deferred tax assets - - - - 401 401
Other assets 4,738,072 2,665,391 7,403,463 5,210,659 2,624,577 7,835,236
Total Assets 501,717,667 293,384,459 795,102,126 515,709,019 311,007,650 826,716,669
Liabilities
Due to banks 4,743,748 - 4,743,748 4,820,287 - 4,820,287
Derivative financial instruments 103,873 74 103,947 103,873 74 103,947
Securities sold under repurchase agreements 4,386,335 - 4,386,335 4,231,946 - 4,231,946
Dividend payable 99,259 - 99,259 99,259 - 99,259
Current tax liabilities 5,527,323 - 5,527,323 5,630,670 - 5,630,670
Deferred tax liabilities - 1,353,339 1,353,339 - 2,776,681 2,776,681
Other liabilities 10,681,306 1,060,841 11,742,147 11,870,502 742,027 12,612,529
Other provisions - 1,583,558 1,583,558 - 1,634,367 1,634,367
Total Liabilities 640,557,245 90,894,964 731,452,209 654,455,131 103,353,088 757,808,219
Maturity Gap (138,839,578) 202,489,495 63,649,917 (138,746,112) 207,654,562 68,908,450
Cumulative Gap (138,839,578) 63,649,917 - (138,746,112) 68,908,450 -

54 MATURITY ANALYSIS CONTD.

(b) Maturity Gap Analysis as at 31st December 2016
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 17,064,013 - 17,064,013 17,221,809 - 17,221,809
Balances with Central Bank of Sri Lanka 32,521,118 1,203,738 33,724,856 32,521,118 1,203,738 33,724,856
Placements with banks 8,749,763 - 8,749,763 8,749,763 - 8,749,763
Reverse repurchase agreements 33,860,083 - 33,860,083 34,629,422 - 34,629,422
Derivative financial instruments 109,872 - 109,872 109,872 - 109,872
Financial assets - held for trading 28,109,193 - 28,109,193 28,117,789 - 28,117,789
collaterals 10,380,213 - 10,380,213 10,371,617 - 10,371,617
Loans to & receivables from banks 979,426 1,662,307 2,641,733 979,426 1,662,307 2,641,733
Other loans & receivables 27,047,545 11,660,895 38,708,440 27,047,545 11,660,895 38,708,440
Financial assets - available for sale 11,796,905 2,473,285 14,270,190 11,856,127 2,473,341 14,329,468
collaterals 657,903 - 657,903 598,681 - 598,681
Financial assets - held to maturity - - - 12,645 4,288 16,933
Investment in subsidiaries - 1,227,896 1,227,896 - - -
Property, plant & equipment - 5,971,517 5,971,517 - 10,709,207 10,709,207
Intangible assets - 337,348 337,348 - 356,131 356,131
Current tax receivables - - - 10,365 - 10,365
Deferred tax assets - - - - 857 857
Other assets 3,880,939 2,629,275 6,510,214 4,278,320 2,768,291 7,046,611
Total Assets 444,530,667 213,981,619 658,512,286 453,482,412 226,616,089 680,098,501
Liabilities
Due to banks 6,907,354 - 6,907,354 6,954,618 - 6,954,618
Derivative financial instruments 63,611 - 63,611 63,611 - 63,611
Securities sold under repurchase agreements 10,159,225 - 10,159,225 10,095,117 - 10,095,117
Dividend payable 84,860 - 84,860 84,860 - 84,860
Current tax liabilities 4,316,297 - 4,316,297 4,386,251 - 4,386,251
Deferred tax liabilities - 872,794 872,794 - 1,077,674 1,077,674
Other liabilities 7,995,942 1,063,459 9,059,401 9,119,124 1,063,458 10,182,582
Other provisions - 748,440 748,440 - 782,075 782,075
Total Liabilities 551,192,614 62,830,838 614,023,452 559,238,658 71,117,766 630,356,424
Maturity Gap (106,661,947) 151,150,781 44,488,834 (105,756,246) 155,498,323 49,742,077
Cumulative Gap (106,661,947) 44,488,834 - (105,756,246) 49,742,077 -

55 COMPARATIVE INFORMATION
The comparative information is reclassified wherever necessary to conform to the current year’s presentation and details are given
below.
55.1 Statement of Profit or Loss

There were no reclassifications during the year.
55.2 Statement of Financial Position

As at 31st December Bank Group
Note Reclassified As disclosed Adjustment Reclassified As disclosed Adjustment
in 2016 in 2016
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Due to banks 55.2.1 6,907,354 6,023,932 883,422 6,954,618 6,071,196 883,422

Due to other customers 509,683,233 510,566,655 (883,422) 512,550,404 513,433,826 (883,422)
55.2.1 Demand deposit balances which were reported under due to other customers have been reclassified under due to banks.
56 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES

Sri Lanka Accounting Standard - LKAS 7 (Statement of Cash flows), requires an entity to disclose information that enables users of
Financial Statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash
flows and non-cash changes. Accordingly, changes in liabilities arising from financing activities for the year ended 31st December
2017 are disclosed below together with the comparative figures for the year ended 31st December 2016.
The funds borrowed by the Bank and the Group are given in Note 39.
Bank Group
Debentures Other Debentures Other
Borrowed Borrowed
Funds Funds
Rs 000 Rs 000 Rs 000 Rs 000
Balance as at 1st January 2016 20,581,099 36,435,185 21,601,700 43,569,277

Net cash flows from financing activities 6,000,000 9,387,014 8,500,000 10,662,958
Non cash changes
Foreign exchange movements - (1,058,690) - (1,058,690)
Net accrual for interest expense 427,928 355,701 522,587 381,400
Balance as at 31st December 2016 27,009,027 45,119,210 30,624,287 53,554,945
Balance as at 1st January 2017 27,009,027 45,119,210 30,624,287 53,554,945

Net cash flows from financing activities 4,500,000 (318,808) 5,500,000 1,758,093
Non cash changes
Foreign exchange movements - (142,611) - (142,611)
Net accrual for interest expense 23,776 (92,354) 67,783 (105,345)
Balance as at 31st December 2017 31,532,803 44,565,437 36,192,070 55,065,082
CHANGING OUR PARADIGM TO INCREASE WEALTH

335
Statement of Profit or Loss in US$ ................336 Independent Assurance Report
Statement of Comprehensive to the Shareholders of
Income in US$.................................................337 Sampath Bank PLC ........................................359
Statement of Financial Glossary of Financial and
Position in US$ ...............................................338 Banking Terms ................................................360
Economic Value Addition ..................................339 Abbreviations .......................................................366
Ten Years at a Glance .........................................340 Notice of Annual General Meeting ..................368
Quarterly Statistics ............................................341 Notes......................................................................369
Capital Adequacy ................................................343 Stakeholder Feedback Form ............................371
BASEL III Disclosure Requirements ................344
GRI Content Index ...............................................353
STATEMENT OF PROFIT OR LOSS IN US$
Bank Group
US$ 000 US$ 000 US$ 000 US$ 000
Gross income 603,192 450,565 634,791 469,636
Interest income 518,728 376,862 546,641 393,176

Less: Interest expense 333,950 225,172 349,265 233,474
Net interest income 184,778 151,690 197,376 159,702
Fee & commission income 61,922 53,661 63,694 54,686

Less: Fee & commission expense 8,791 9,764 8,830 9,783
Net fee & commission income 53,131 43,897 54,864 44,903
Net trading gain / (loss) 2,215 1,559 2,215 1,559

Net gain from financial investments 945 862 946 862
Other operating income 19,382 17,621 21,295 19,353
Total operating income 260,451 215,629 276,696 226,379
Less: Net impairment charge for loans & other losses 15,477 9,732 17,157 10,233
Net operating income 244,974 205,897 259,539 216,146
Less: Operating expenses

Personnel expenses 52,352 48,885 56,690 52,231
Other operating expenses 57,866 54,253 60,701 56,208
Total operating expenses 110,218 103,138 117,391 108,439
Operating profit before value added tax (VAT) and nation building tax
134,756 102,759 142,148 107,707
(NBT) on financial services
Less: VAT & NBT on financial services 26,573 18,760 28,074 19,617
Profit before income tax 108,183 83,999 114,074 88,090
Less: Income tax expense 29,328 23,168 31,451 24,748

Profit for the year 78,855 60,831 82,623 63,342
Attributable to:
Equity holders of the Bank 78,855 60,831 82,623 63,308
Non - controlling interest - 34
78,855 60,831 82,623 63,342
Earnings per share : Basic / Diluted (US$) 0.40 0.32 0.42 0.33
Dividend per share

Dividend per share: Gross (US$) 0.11* 0.12
Dividend per share: Net (US$) 0.10* 0.11
Exchange rate of US$ was Rs 153.50 as at 31st December 2017 (Rs 150.00 as at 31st December 2016)
* Calculated based on proposed dividend, which is to be approved at the Annual General Meeting.
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION SUPPLEMENTARY INFORMATION 337
STATEMENT OF COMPREHENSIVE INCOME IN US$
Bank Group
US$ 000 US$ 000 US$ 000 US$ 000
Profit for the year 78,855 60,831 82,623 63,342
Other comprehensive income

Other comprehensive income to be reclassified to profit or loss:
Gain arising on re-measuring available for sale financial assets 6,630 2,553 6,630 2,553
Transfer of gain from available for sale financial asset to profit or loss - (23) - (23)
Exchange difference in translation 70 107 70 107
Net other comprehensive income to be reclassified to profit or loss 6,700 2,637 6,700 2,637
Other comprehensive income not to be reclassified to profit or loss:
Actuarial gain on defined benefit plans (4,135) 3,764 (4,210) 3,773

Deferred tax effect on above 1,158 (1,054) 1,178 (1,056)
(2,977) 2,710 (3,032) 2,717
Surplus from revaluation of property, plant & equipment 5,359 4,015 8,669 10,005
Deferred tax effect on above (5,330) (295) (12,320) (295)
29 3,720 (3,651) 9,710
Net other comprehensive income not to be reclassified to profit or loss (2,948) 6,430 (6,683) 12,427
Other comprehensive income net of tax 3,752 9,067 17 15,064

Total comprehensive income for the year net of tax 82,607 69,898 82,640 78,406
Attributable to:
Equity holders of the Bank 82,607 69,898 82,640 78,200
Non - controlling interest - - - 206
82,607 69,898 82,640 78,406
STATEMENT OF FINANCIAL POSITION IN US$
Bank Group
As at 31st December 2017 2016 2017 2016
US$ 000 US$ 000 US$ 000 US$ 000
ASSETS
Cash & cash equivalents 145,500 113,760 147,316 114,812
Balances with Central Bank of Sri Lanka 267,755 224,832 267,755 224,832
Placements with banks 20,582 58,332 21,010 58,332
Reverse repurchase agreements 7,823 225,734 15,589 230,863
Derivative financial instruments 3,237 732 3,237 732
Financial assets - held for trading 129,711 187,395 130,148 187,452
Financial assets - held for trading pledged as collaterals 3,856 69,201 3,419 69,144
Loans to & receivables from banks 13,580 17,612 13,580 17,612
Loans to & receivables from other customers 3,653,413 3,041,260 3,820,005 3,151,700
Other loans & receivables 321,514 258,056 321,514 258,056
Financial assets - available for sale 474,993 95,135 475,655 95,530
Financial assets - available for sale pledged as collaterals 27,259 4,386 26,597 3,991
Financial assets - held to maturity - - 81 113
Investment in subsidiaries 8,834 8,186 - -
Property, plant & equipment 47,361 39,810 82,290 71,395
Intangible assets 6,168 2,249 6,493 2,374
Current tax receivables - - 42 69
Deferred tax assets - - 3 6
Other assets 48,231 43,403 51,044 46,978
Total Assets 5,179,817 4,390,083 5,385,778 4,533,991
LIABILITIES
Due to banks 30,904 46,050 31,403 46,364
Derivative financial instruments 677 424 677 424
Securities sold under repurchase agreements 28,575 67,728 27,570 67,301
Debt issued & other borrowed funds 495,754 480,855 594,509 561,195
Dividend payable 647 566 647 566
Current tax liabilities 36,009 28,775 36,682 29,242
Deferred tax liabilities 8,816 5,819 18,089 7,184
Other provisions 10,316 4,990 10,647 5,214
Total Liabilities 4,765,159 4,093,491 4,936,863 4,202,377
EQUITY
Stated capital 106,239 43,141 106,239 43,141
Reserves
Statutory reserve 18,632 15,000 19,368 15,576
Other reserves 250,227 209,135 267,713 230,794
Retained earnings 39,560 29,316 55,595 42,103
Total equity attributable to equity holders of the Bank 414,658 296,592 448,915 331,614
Non - controlling interest - -
Total Equity 414,658 296,592 448,915 331,614
Total Liabilities & Equity 5,179,817 4,390,083 5,385,778 4,533,991
Commitments & contingencies 2,498,411 2,293,202 2,502,040 2,300,771

Net asset value per share (US$) 1.91 1.59 2.07 1.78
ECONOMIC VALUE ADDITION
ECONOMIC VALUE ADDITION - BANK

Rs Mn Rs Mn
Average shareholders' funds 54,069 39,807

Provision for impairment losses 8,643 7,726
62,712 47,533
Profit attributable to shareholders 12,104 9,125

Net impairment charge for loans & other losses 2,376 1,460
Amounts written off - loans & other losses (1,116) (609)
13,364 9,976
Economic cost (12 months average Treasury Bill rate plus 2% risk premium) 12.1% 11.9%
Economic cost 7,565 5,669
Economic value addition 5,799 4,307
The economic value created by the Bank to its shareholders during the period is reflected in the above analysis.
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.
Rs Mn Rs Mn
Direct Economic Value Generated

Interest income 79,625 56,529
Foreign exchange income 3,132 2,589
Commission income 9,505 8,049
Investment income 266 231
Other income 98 155
92,626 67,553
Economic Value Distributed
To Depositors and Lenders
Interest expense 48,356 31,183
48,356 31,183
Operating Costs
Depreciation & amortisation set aside 893 709
Fee & commission expense 1,349 1,465
Other operating expense 7,822 7,312
10,064 9,486
To Employees
Salaries 5,092 4,599
Other benefits 2,944 2,734
8,036 7,333
Payments to Government
Income tax expense 4,662 3,118
VAT & NBT on financial services 4,079 2,814
Crop insurance levy 125 95
8,866 6,027
To Community
Social responsibility projects 40 19
Donations 2 3
42 22
Payments to Providers of Capital
Interest to debenture holders 2,905 2,593
Dividend to shareholders 4,598 3,362
7,503 5,955
Economic Value Distributed 82,867 60,006
Economic Value Retained (after payment of dividend to shareholders) 9,759 7,547
92,626 67,553
TEN YEARS AT A GLANCE
SLAS SLFRS
For the year ended 31st December 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating results (Rs Mn)

Gross income 22,243 25,213 24,333 27,577 38,796 47,509 44,597 47,032 67,585 92,590
Interest income 19,451 20,970 18,477 21,111 31,882 41,892 38,059 37,944 56,529 79,625
Interest expenses 12,801 13,165 9,953 12,168 20,269 26,556 22,335 20,542 33,776 51,261
Net interest income 6,650 7,805 8,525 8,943 11,613 15,336 15,724 17,402 22,754 28,363
Exchange income 647 774 498 837 2,154 520 1,283 2,466 2,589 3,132
Other income 2,144 3,469 5,357 4,792 4,105 4,901 4,387 5,421 7,002 8,484
Total operating income 9,441 12,048 14,380 14,572 17,872 20,757 21,394 25,288 32,344 39,979
Operating expenses 4,662 5,484 6,320 8,059 9,248 10,634 11,729 13,339 15,471 16,918
Impairment losses 1,252 1,203 1,944 618 65 4,736 1,401 944 1,460 2,376
Profit before income tax 2,564 3,976 4,502 4,994 7,401 4,491 6,727 9,101 12,600 16,606
Income tax expense 1,150 1,878 1,199 1,606 2,170 1,061 1,813 2,967 3,475 4,502
Profit after tax 1,414 2,098 3,303 3,388 5,231 3,430 4,914 6,134 9,125 12,104
SLAS SLFRS
As at 31st December 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Assets (Rs Mn)

Cash & cash equivalents including placements 6,923 5,868 6,048 16,073 19,220 10,094 13,348 18,781 25,814 25,494
Loans & Advances 95,655 98,685 - - - - - - - -
Loans to & receivables from banks - - - 442 816 638 935 1,651 2,642 2,085
Loans to & receivables from other customers - - 124,067 169,681 208,184 259,402 301,435 375,697 456,189 560,799
Investment in associates & subsidiaries 970 992 992 1,055 1,060 1,060 1,060 1,080 1,228 1,356
Property, plant & equipment 3,289 3,420 4,278 4,528 4,560 5,135 5,142 5,313 5,972 7,270
Other assets 31,702 47,197 55,929 55,879 75,570 105,713 110,106 122,755 166,667 198,098
Total assets 138,539 156,162 191,314 247,658 309,410 382,042 432,026 525,277 658,512 795,102
Liabilities (Rs Mn)

Due to banks & other customers (Deposits Only) 107,380 126,091 153,310 195,900 243,575 302,429 341,946 409,411 516,273 630,442
Refinance borrowings 4,592 4,819 - - - - - - - -
Other liabilities evidenced by paper 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 72,446 76,215
Other liabilities 12,276 10,304 8,311 10,189 10,985 12,000 22,322 23,394 25,304 24,795
Total liabilities 128,762 144,316 170,323 226,314 283,766 353,623 401,114 490,152 614,023 731,452
Shareholders' Fund (Rs Mn)

Stated capital 1,582 1,582 1,786 2,744 3,564 4,460 4,470 5,381 6,471 16,308
Reserves 8,195 10,265 19,204 18,600 22,080 23,958 26,442 29,744 38,018 47,342
Dividend paid / proposed (Rs Mn) 275.6 473.6 1,235.8 1,427.0 1,954.1 1,342.6 1,847.0 2,240.0 3,362.1 4,598.4
Dividend cover (times) 5.1 4.4 2.7 2.4 2.6 2.6 2.6 2.7 2.7 2.6
Net asset value per share (Rs) 141.92 77.52 131.18 129.00 152.96 169.37 179.39 198.47 238.94 293.02
Market price per share (Rs) - High 120.00 205.00 550.00 307.00 216.00 242.00 252.00 279.90 268.70 352.20
Market price per share (Rs) - Low 65.00 65.00 201.00 191.00 148.50 161.60 164.20 235.20 210.00 253.50
Market price as at 31st December (Rs) 68.00 204.25 271.90 195.00 200.50 171.90 236.30 248.00 260.40 315.70
Other Information
Exchange rate (US $) 113.00 114.47 110.95 113.90 127.65 130.75 131.20 144.20 150.00 153.50
Number of staff as at 31st December 2,364 2,388 2,688 3,230 3,455 3,688 4,000 3,993 3,960 4,011
Number of branches as at 31st December 112 131 171 206 209 212 220 225 229 229
Ratios
Growth of income (%) 27.8 13.4 (3.5) 13.3 40.7 22.5 (6.1) 5.5 43.7 37.0
Cost to income ratio with VAT and NBT on financial
services (%) 59.6 57.0 55.8 61.5 58.2 55.5 62.0 60.3 56.5 52.5
Cost to income ratio without VAT and NBT on financial
services (%) 49.4 45.5 44.0 55.3 51.7 51.2 54.8 52.7 47.8 42.3
Growth of deposits (%) 8.1 17.5 19.4 27.8 24.3 24.2 13.1 19.7 26.1 22.1
Growth of advances (%) 2.4 3.2 30.3 37.1 22.9 24.4 16.3 24.8 21.6 22.7
Dividend per share (Rs) 4.00 6.25 8.09 9.00 12.00 8.00 11.00 13.00 18.75 17.20
Return on average assets (after tax) (%) 1.04 1.42 1.94 1.55 1.88 0.98 1.23 1.28 1.55 1.67
Return on average equity (after tax) (%) 15.41 19.41 24.59 16.17 22.26 12.88 16.35 18.42 23.47 23.35
Property plant & equipment to shareholders' fund (%) 33.6 28.9 20.4 21.2 17.8 18.1 16.6 15.1 13.4 11.4
Total assets to shareholders' fund (Times) 14.2 13.2 9.1 11.6 12.1 13.4 14.0 15.0 14.8 12.5
Liquid assets ratio (%) 29.5 30.5 26.3 25.0 22.4 27.6 24.5 22.1 21.8 22.4
(As specified in Banking Act No. 30 of 1988)
Capital adequacy ratios (%) Basel II Basel III

- Common equity Tier I (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A 10.26
- Total Tier I (%) 8.10 10.40 10.71 10.24 11.80 10.08 8.83 7.90 8.31 10.26
- Total capital (Tier I + Tier II) (%) 11.95 13.45 12.91 11.45 13.61 14.22 13.62 12.26 12.87 14.41
Comparative information for the year 2016 have been restated & reclassified wherever necessary to conform to the current year’s presentation.
2017 2016
As at 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn
Statement of Financial Position

Total assets 795,102 752,771 725,280 692,120 658,512 617,383 583,581 555,836
Loans to & receivables from banks 2,085 2,247 2,437 2,672 2,642 1,453 1,329 1,426
Loans to & receivables from other customers 560,799 536,169 512,370 485,914 456,189 431,394 413,686 395,114
Due to other customers 625,814 605,842 571,398 537,526 510,567 488,892 450,816 433,559
Total equity 63,650 53,450 50,482 47,131 44,489 41,056 38,175 35,581
2017 2016
For the three months ended 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn
Statement of Profit or Loss

QUARTERLY STATISTICS
Net interest income 7,912 7,303 6,811 6,337 6,634 5,924 5,539 4,657
Net fee & commission income 2,285 2,078 1,854 1,939 1,880 1,702 1,539 1,464
Net trading gain / (loss) 49 251 46 (6) (59) 148 285 (140)
Net gain from financial investments 1 8 136 - 23 35 68 3
Other operating income 636 539 1,024 776 908 565 445 725
Total operating income 10,883 10,179 9,871 9,046 9,386 8,374 7,876 6,709
Less : Net impairment charge for loans & other
losses 261 760 655 700 553 346 345 216
Net operating income 10,622 9,419 9,216 8,346 8,833 8,028 7,531 6,493
Less: Total operating expenses 4,705 4,346 3,917 3,950 4,206 4,080 3,777 3,408
VAT & NBT on finance services 1,148 1,020 1,006 905 999 677 613 525
Income tax expenses 1,127 1,296 928 1,151 1,208 790 657 820
Profit for the period 3,642 2,757 3,365 2,340 2,420 2,481 2,484 1,740
Other comprehensive income for the period (1,045) 211 (14) 1,424 1,013 380 103 (136)
Total comprehensive income for the period 2,597 2,968 3,351 3,764 3,433 2,861 2,587 1,604
INTRODUCTORY INFORMATION | MANAGING OUR BUSINESS | MANAGEMENT DISCUSSION & ANALYSIS | RISK & GOVERNANCE | FINANCIAL INFORMATION
341
2017 2016
For the three months ended 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Market price per share (Rs)

Highest 352.20 311.00 300.00 285.00 268.70 266.90 240.00 253.00
Lowest 305.00 266.20 253.50 256.00 253.00 227.60 217.50 210.00
Closing 315.70 308.50 286.40 259.00 260.40 266.30 228.00 226.00
2017 2016
As at 31st December 30th September 30th June 31st March 31st December 30th September 30th June 31st March
Quarterly Statistics
Profitability
Interest margin ( % ) 3.91 3.87 3.83 3.81 3.87 3.77 3.69 3.47
Return on assets (before tax) ( % ) 2.29 2.24 2.27 2.10 2.14 2.10 2.07 1.90
Return on equity (after tax) ( % ) 23.35 23.14 24.29 20.72 23.47 23.89 23.40 19.78
Basel III
Common Equity Tier I Capital Ratio ( % ) 10.26 8.46 N/A N/A N/A N/A N/A N/A
Tier I Capital Ratio ( % ) 10.26 8.46 N/A N/A N/A N/A N/A N/A
Total Capital Ratio ( % ) 14.41 11.85 N/A N/A N/A N/A N/A N/A
Basel II
Core Capital Adequacy Ratio ( % ) N/A N/A 8.21 7.68 8.31 7.68 7.97 7.36
Total Capital Adequacy Ratio ( % ) N/A N/A 12.17 11.93 12.87 11.92 12.35 11.46
Assets Quality
Gross NPA ratio ( % ) 1.64 1.74 1.77 1.73 1.61 1.67 1.80 1.67
Net NPA ratio ( % ) 0.75 0.84 0.88 0.73 0.62 0.62 0.69 0.51
Regulatory Liquidity
Domestic Banking Unit (%) 22.22 21.15 21.30 21.43 21.19 21.72 20.50 20.77
Off-Shore Banking Unit (%) 24.90 24.51 40.27 28.36 33.45 29.16 23.13 27.65
Liquidity Coverage Ratio (%) - Rupee 133.52 122.23 127.42 124.04 94.15 100.34 76.18 110.18
(Minimum Requirement - 2017 -80%,
2016 - 70%)
Liquidity Coverage Ratio (%) - All Currency 118.81 104.01 110.31 94.18 77.69 89.00 73.63 126.89
(Minimum Requirement - 2017 - 80%,
2016 - 70%)
N/A - Not Applicable

CAPITAL ADEQUACY
Capital Adequacy is one of the key financial BASEL III TRANSITION PHASE-IN-ARRANGEMENT OF CAPITAL REQUIREMENT
indicators which illustrates the soundness
and the stability of a bank. The Capital The calibration of capital framework and transitional phased-in-arrangement of Basel III
Adequacy Ratio is a measure used to capital adequacy requirement for Domestic Systemically Important Banks in Sri Lanka is
determine if the Bank has sufficient capital tabulated below:
to withstand unexpected losses arising
from various risks during the course of Components of Capital Standard in Force
business, such as credit risk, market risk, 01.07.2017 01.01.2018 01.01.2019
operational risk etc. Thus the Capital Common Equity Tier I (CET I) Capital Ratio with 6.25% 7.375% 8.50%
Adequacy acts as a “cushion” or “buffer” Buffers ( CCB & D-SIBs )
in absorbing potential losses arising Total Tier I Capital Ratio with Buffers ( CCB & 7.75% 8.875% 10.00%
from these risks and safeguarding the D-SIBs )
depositors’ funds. Total Capital Ratio with Buffers ( CCB & D-SIBs ) 11.75% 12.875% 14.00%
At present, Capital Adequacy Ratios of the TIER I CAPITAL their risks, with each asset class assigned
licensed banks in Sri Lanka are computed Tier I Capital consists of followings, a different risk weightage.
based on the Banking Act Direction No. 1 of y Common Equity Tier I capital (CET I)
2016 issued by Central Bank of Sri Lanka The three pillars under the BASEL III
y Additional Tier I capital (AT I)
(CBSL) based on the “Basel III Accord : framework
Global Regulatory Framework for More
The Common Equity Tier I capital mainly
Resilient Banks and Banking System”. The Three pillars introduced under the Basel II
consists of stated capital, other capital and
Basel III Accord was issued by the Basel regime continue to be applied in the Basel
revenue reserves. CET I is the element of
Committee on Banking Supervision (BCBS) III regime as mentioned below,
capital which has the highest quality and
of the Bank for International Settlement Pillar 1 - Minimum Capital Requirements
the most effective in absorbing losses.
(BIS) in December 2010 (Revised in June
2011). Pillar 2 - Supervisory Review Process
The Additional Tier I (AT I) capital is a
supplementary form of Total Tier I capital. Pillar 3 - Market Discipline
INTRODUCTION TO “BASEL III ACCORD”
AT I includes capital instruments other
In the aftermath of 2008/2009 financial PILLAR 1 – MINIMUM CAPITAL REQUIREMENT
than the instruments included in CET I
crisis, the BCBS agreed on reforms to Pillar-1 deals with maintenance of
capital.
“strengthen global capital and liquidity regulatory capital needed to support the
rules with the goal of promoting a more CAPITAL BUFFERS Banks’ three major risk categories, namely:
resilient banking sector”, giving rise to. The Basel III has introduced new capital buffers credit risk, market risk and operational risk.
Basel III Accord is in effect a regulatory as mentioned below:
response to strengthen the resilience of Pillar 1 capital requirements shall be
banks, with the objective of minimizing y Capital Conservation Buffer (CCB)
maintained as a percentage of Risk
the possibility of occurrence of a financial y Surcharge for Domestic Systemically
Weighted Assets (RWA) calculated based
crisis. Important Banks (D-SIBs) (Banks with
on the following approaches:
total assets of Rs 500 Bn and above)
Under the Basel III framework, banks are y Countercyclical Buffer y The Standardised Approach for Credit
required to compute Capital Adequacy All banks are required to hold additional Risk
Ratios (CARs) in three tiers as mentioned capital buffers over & above the minimum y The Standardised Measurement
below, CET I & Total Capital Adequacy levels. Method for Market Risk
y The Basic Indicator Approach, The
i. Common Equity Tier I (CET I) Capital TIER II CAPITAL
Standardised Approach or the
Ratio Tier II Capital includes revaluation reserve
Alternative Standardised Approach for
ii. Total Tier I Capital Ratio approved by CBSL, general loan loss
Operational Risk
provisions, and subordinated term debts
iii. Total Capital Ratio
approved by CBSL. Sampath Bank PLC has adopted the
Alternative Standardised Approach (ASA)
RISK WEIGHTED ASSETS (RWA)
in calculating the Operational Risk after
Risk Weighted Assets are a measure of the
receiving the approval in principle from
value of the bank’s assets and off-balance
CBSL in November 2017.
sheet exposures, weighted according to
Capital Adequacy
PILLAR 2 – SUPERVISORY REVIEW PROCESS y Continuously evaluate the bank’s the internal computation procedures
Pillar - 2 sets forth the framework for Internal Capital Adequacy Assessment followed within the bank. Disclosures
the Supervisory Review Process (SRP) to Process (ICAAP) to determine the level under these requirements broadly include;
assess the Banks’ capital adequacy and of capital to be maintained against all the regulatory capital requirements and
to determine whether bank should hold risks and ensure adequate capital is liquidity, risk weighted assets, linkages
additional capital to cover risks that are available to support all risks. between financial statements and
not covered or adequately covered by the regulatory exposures.
minimum capital requirements under PILLAR 3 – MARKET DISCIPLINE
Pillar I. The process encourages banks to; Pillar - 3 presents a number of disclosure Shown below are the Basel III disclosure
requirements aimed at raising the level requirements with regard to regulatory
y Utilise better risk management of market discipline by increasing the capital, liquidity and risk management
techniques level of transparency. Pillar 3 disclosures linkages with the published financial
y Enhance the risk-based supervision in give external stakeholders a better statements along with comparative
order to accurately assess the capital understanding of capital adequacy information (individual and consolidated).
adequacy calculations by providing an insight into
BASEL III DISCLOSURE REQUIREMENTS

TABLE - 1 : KEY REGULATORY RATIOS - CAPITAL AND LIQUIDITY
Bank Group
As at 31st As at 30th As at 31st As at 30th
December September December September
2017 2017 2017 2017
Regulatory Capital (Rs 000)

Common Equity Tier I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Tier I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Capital 80,909,517 65,208,713 85,126,975 68,231,845
Regulatory Capital Ratios (%)

Common Equity Tier I Capital Ratio (minimum requirement - 6.25%) 10.26 8.46 10.21 8.53
Tier I Capital Ratio (minimum requirement - 7.75%) 10.26 8.46 10.21 8.53
Total Capital Ratio (minimum requirement - 11.75%) 14.41 11.85 14.33 11.85
Regulatory Liquidity
Statutory Liquid Assets (Rs 000) - Bank 157,291,328 144,518,286 N/A N/A
Statutory Liquid Assets Ratio (minimum requirement -20%)
Domestic Banking Unit (%) 22.22 21.15 N/A N/A
Off-Shore Banking Unit (%) 24.90 24.51 N/A N/A
Liquidity Coverage Ratio (%) – Rupee
(minimum requirement - 2017-80%) 133.52 122.23 N/A N/A
Liquidity Coverage Ratio (%) – All currency
(minimum requirement - 2017-80%) 118.81 104.01 N/A N/A
Basel III Disclosure Requirements
TABLE - 2 : BASEL III COMPUTATION OF CAPITAL RATIOS

Bank Group
As at 31st As at 30th As at 31st As at 30th
December September December September
2017 2017 2017 2017
Rs 000 Rs 000 Rs 000 Rs 000
Common Equity Tier I (CET I) Capital after adjustments 57,623,760 46,558,321 60,632,711 49,131,453
Common Equity Tier I (CET I) Capital 58,677,652 47,715,669 61,647,651 50,115,641
Stated capital 16,307,722 8,704,944 16,307,722 8,704,944
Statutory reserves 2,860,000 2,250,000 2,973,000 2,341,026
Published retained earnings/(Accumulated retained losses) 5,756,827 577,718 8,613,825 2,886,664
Published accumulated other comprehensive income (OCI) 52,078 19,820 52,078 19,820
General and other disclosed reserves 33,701,025 27,701,033 33,701,026 27,701,033
Unpublished current year's profit/loss and gains reflected in OCI - 8,462,154 - 8,462,154
Ordinary shares issued by consolidated banking and financial
subsidiaries of the Bank and held by third parties - - - -
Total adjustments to CET I Capital 1,053,892 1,157,348 1,014,940 984,188
Goodwill (net) - - - -
Intangible assets (net) 946,845 839,089 996,703 857,892
Others (Investments in the capital of banking & financial institutions) 107,047 318,259 18,237 126,296
Additional Tier I (AT I) Capital after adjustments - - - -
Additional Tier I (AT I) Capital - - - -
Qualifying Additional Tier I Capital instruments - - - -
Instruments issued by consolidated banking and financial subsidiaries
of the Bank and held by third parties - - - -
Total adjustments to AT I Capital - - - -
Investment in own shares - - - -
Others (specify) - - - -
Tier II Capital after adjustments
Tier II Capital 23,285,757 18,650,392 24,494,264 19,100,392
Qualifying Tier II capital instruments 20,320,767 15,599,837 21,529,274 16,049,837
Revaluation gains 453,703 630,143 453,703 630,143
Loan loss provisions 2,511,287 2,420,412 2,511,287 2,420,412
Instruments issued by consolidated banking and financial subsidiaries
of the Bank and held by third parties - - - -
Total adjustments to Tier II - - - -
Investment in own shares - - - -
Others (specify) - - - -
CET I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Tier I Capital 57,623,760 46,558,321 60,632,711 49,131,453
Total Capital 80,909,517 65,208,713 85,126,975 68,231,845
Total Risk Weighted Assets (RWA) 561,583,770 550,109,037 594,068,734 575,680,960

RWAs for Credit Risk (refer table No. 3) 533,061,406 505,838,753 562,707,814 529,530,091
RWAs for Operational Risk (refer table No. 5) 24,969,975 39,529,015 27,808,531 41,409,600
RWAs for Market Risk (refer table No. 6) 3,552,389 4,741,269 3,552,389 4,741,269
CET I Capital Ratio (including Capital Conservation Buffer,

Countercyclical Capital Buffer & Surcharge on D-SIBs) (%) 10.26 8.46 10.21 8.53
of which: Capital Conservation Buffer (%) 1.25 1.25 1.25 1.25
of which: Countercyclical Buffer (%) - - - -
of which: Capital Surcharge on D-SIBs (%) 0.50 0.50 0.50 0.50
Total Tier I Capital Ratio (%) 10.26 8.46 10.21 8.53
Total Capital Ratio (including Capital Conservation Buffer,
Countercyclical Capital Buffer & Surcharge on D-SIBs) (%) 14.41 11.85 14.33 11.85
of which: Capital Conservation Buffer (%) 1.25 1.25 1.25 1.25
of which: Countercyclical Buffer (%) - - - -
of which: Capital Surcharge on D-SIBs (%) 0.50 0.50 0.50 0.50
TABLE - 3 (A) BANK : CREDIT RISK UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS
Exposures before Credit Exposures post CCF and CRM RWA and RWA density
Conversion Factor (CCF) and
CRM
Asset class On- balance Off- balance On- balance Off- balance RWA RWA density
sheet amount sheet amount sheet amount sheet amount
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 %
Claims on central government and CBSL 94,277,000 - 94,277,000 - - 0%

Claims on public sector entities 225,031 580,644 225,031 324,564 549,595 100%
Claims on banks exposures 14,080,823 2,200,000 14,080,823 2,200,000 8,055,592 49%
Claims on financial institutions 24,889,041 1,141,485 24,889,041 1,126,742 16,512,294 63%
Claims on corporates 295,512,179 244,501,912 295,512,179 49,915,367 338,495,487 98%
Retail claims 158,610,695 8,002,743 158,610,695 4,126,333 121,662,364 75%
Claims secured by residential property 37,408,184 - 37,408,184 - 26,294,397 70%
Non-performing assets (NPAs) 6,794,327 - 6,794,327 - 9,533,767 140%
Higher-risk categories 577,308 - 577,308 - 1,443,270 250%
Cash items and other assets 67,793,972 - 25,274,646 - 10,514,640 42%
Total 700,168,560 256,426,784 657,649,234 57,693,006 533,061,406 75%
TABLE - 3 (B) GROUP : CREDIT RISK UNDER STANDARDISED APPROACH – CREDIT RISK EXPOSURES AND CREDIT RISK MITIGATION (CRM) EFFECTS
Exposures before Credit Exposures post CCF and CRM RWA and RWA density
Conversion Factor (CCF) and
CRM
Asset class On- balance Off- balance On- balance Off- balance RWA RWA density
sheet amount sheet amount sheet amount sheet amount
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 %
Claims on central government and CBSL 95,481,518 - 95,481,518 - - 0%

Claims on public sector entities 225,031 580,644 225,031 324,564 549,595 100%
Claims on banks exposures 14,181,538 2,200,000 14,181,538 2,200,000 8,097,721 49%
Claims on financial institutions 23,380,112 1,141,485 23,380,112 1,126,742 15,757,829 64%
Claims on corporates 322,062,565 244,501,912 322,062,565 49,915,367 365,045,873 98%
Retail claims 158,610,695 8,002,743 158,610,695 4,126,333 121,662,364 75%
Claims secured by residential property 37,408,184 - 37,408,184 - 26,294,397 70%
Non-performing assets (NPAs) 6,295,528 - 6,295,528 - 9,034,968 144%
Higher-risk categories - - - - - 0%
Cash items and other assets 73,817,209 - 31,297,883 - 16,265,067 52%
Total 731,462,380 256,426,784 688,943,054 57,693,006 562,707,814 75%
TABLE - 4 (A) BANK : CREDIT RISK UNDER STANDARDISED APPROACH: EXPOSURES BY ASSET CLASSES AND RISK WEIGHTS
As at 31st December 2017 (Post CCF & CRM)
Risk weight 0% 20% 50% 60% 75% 100% 150% >150% Total credit
exposures
Asset class amount
Claims on central government and Central Bank of

Sri Lanka 94,277,000 - - - - - - - 94,277,000
Claims on public sector entities - - - - - 549,595 - - 549,595
Claims on banks exposures - 4,246,912 9,655,403 - - 2,378,507 - - 16,280,822
Claims on financial institutions - 2,052,678 15,722,694 - - 8,240,411 - - 26,015,783
Claims on corporates - 4,848,589 6,684,160 - - 333,317,013 577,784 - 345,427,546
Retail claims 6,019,790 13,646,179 - 19,566,471 65,245,367 58,259,220 - - 162,737,027
Claims secured by residential property - - 22,227,574 - - 15,180,609 - - 37,408,183
Non-performing assets (NPAs) - - 26,602 - - 1,262,243 5,505,482 - 6,794,327
Higher-risk categories - - - - - - - 577,308 577,308
Cash items and other assets 14,632,530 159,345 - - - 10,482,771 - - 25,274,646
Total 114,929,320 24,953,703 54,316,433 19,566,471 65,245,367 429,670,369 6,083,266 577,308 715,342,237
TABLE - 4 (B) GROUP : CREDIT RISK UNDER STANDARDISED APPROACH: EXPOSURES BY ASSET CLASSES AND RISK WEIGHTS
As at 31st December 2017 (Post CCF & CRM)
Risk weight 0% 20% 50% 60% 75% 100% 150% >150% Total credit
exposures
Asset class amount
Claims on central government and Central Bank of

Sri Lanka 95,481,518 - - - - - - - 95,481,518
Claims on public sector entities - - - - - 549,595 - - 549,595
Claims on banks exposures - 4,316,389 9,661,411 - - 2,403,738 - - 16,381,538
Claims on financial institutions - 2,052,678 14,213,765 - - 8,240,411 - - 24,506,854
Claims on corporates - 4,848,589 6,684,160 - - 359,867,399 577,784 - 371,977,932
Retail claims 6,019,790 13,646,179 - 19,566,471 65,245,367 58,259,220 - - 162,737,027
Claims secured by residential property - - 22,227,574 - - 15,180,609 - - 37,408,183
Non-performing assets (NPAs) - - 26,602 - - 763,444 5,505,482 - 6,295,528
Higher-risk categories - - - - - - - - -
Cash items and other assets 14,905,340 159,345 - - - 16,233,198 - - 31,297,883
Total 116,406,648 25,023,180 52,813,512 19,566,471 65,245,367 461,497,614 6,083,266 - 746,636,058
347
TABLE - 5 : OPERATIONAL RISK UNDER THE ALTERNATIVE STANDARDISED APPROACH
Bank Group
Capital charge Fixed Gross income/ Average loans & advances for the Capital charge Fixed Gross income/ Average loans & advances for the
factor factor period ended 31st December 2017 factor factor period ended 31st December 2017
Business lines 1st Year 2nd Year 3rd Year 1st Year 2nd Year 3rd Year
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
The Alternative Standardised Approach

Corporate finance 18% 350,108 1,536,935 2,145,909 18% 350,108 1,536,935 2,145,909
Trading and sales 18% 3,122,444 3,501,194 4,194,261 18% 4,576,140 5,113,377 6,687,222
Payment and settlement 18% (116) 1,680 2,793 18% (116) 1,680 2,793
Agency services 15% 3,944 5,978 6,177 15% 3,944 5,978 6,177
Asset management 12% (127) (574) (60) 12% (127) (574) (60)
Retail brokerage 12% - - - 12% - - -
Retail banking 12% 3.50% 155,244,951 191,485,574 233,051,857 12% 3.50% 155,244,951 191,485,574 233,051,857
Commercial banking 15% 3.50% 130,451,596 157,389,080 202,489,014 15% 3.50% 130,451,596 157,389,080 202,489,014
Capital charge for Operational Risk (Rs 000) 2,933,972 3,267,502
Risk Weighted Amount for Operational Risk (Rs 000) 24,969,975 27,808,531
TABLE - 6 : MARKET RISK UNDER STANDARDISED MEASUREMENT METHOD

RWA as at
31st December 2017
Item Bank Group
Rs 000 Rs 000
(a) RWA for Interest Rate Risk 332,601 332,601

General interest rate risk 332,601 332,601
Net long or short position 332,601 332,601
Specific interest rate risk - -
(b) RWA for Equity 17,590 17,590

General equity risk 10,494 10,494
Specific equity risk 7,096 7,096
(c) RWA for foreign exchange & gold 67,214 67,214
(d) Capital charge for Market Risk (a) + (b) + (c) 417,405 417,405
RWA for Market Risk (d) * 100/11.75 3,552,389 3,552,389
SUMMARY DISCUSSION ON ADEQUACY/ 2019 international time line for the by migrating to better risk measuring
MEETING CURRENT AND FUTURE CAPITAL implementation of Basel III. approaches. As a result of these efforts,
REQUIREMENTS
Overview Capital Management Process 1. The Bank successfully issued the first
In order to comply with the new ever Basel III compliant debenture
Having understood that proper “Capital
Basel III guidelines, Sampath Bank’s Capital in Sri Lanka with the “convertibility
management” is vital in ensuring the
Management Process was also revamped option” in December 2017.
long-term stability of the business,
Sampath Bank has continued to maintain and the three-year (2018 – 2020) Capital
Management Plan was rolled out. 2. The Bank’s November 2017 Rights
Capital Adequacy Ratios at healthy
Issue was oversubscribed.
levels by keeping a significant margin
The Capital Management Plan has been
over and above the regulatory minimum 3. The Bank received principle
integrated with the Internal Capital
requirements. approval from CBSL in November
Adequacy Assessment Process (ICAAP) as
well as the Bank’s Strategic Plan, taking 2017, to migrate to the Alternative
Increasing competition and growing market
cognizance of the estimated negative Standardised Approach (ASA) for
complexity in recent times have called for
impact to the Bank’s capital structure measuring the operational risk of
stricter regulatory requirements to bring
arising from changes in new regulations the Bank, which led to a significant
greater focus on the Capital Management
such as SLFRS 9, Inland Revenue Act, etc. improvement in the Bank’s capital
function. The Basel III Capital Standards
adequacy ratios as at 31st December
introduced by the CBSL with effect
The timely implementation of the Capital 2017.
from 1st July 2017 provides stringent
Management Plan comes under the
framework for Banks to enhance the Moving Forward
purview of the new “Board Capital Planning
quality, consistency and the transparency
Committee”. Established in 2017, the Moving forward with the Capital
of their “capital” through the introduction
“Board Capital Planning Committee” Management plan, the Bank will execute
of new capital buffers, new mandatory
consists of the most senior and specific medium term and long term
disclosure requirements and revised
experienced Directors of the Bank. strategies to raise both Tier I and
definitions for capital instruments. Under
Tier II capital in line with Basel III minimum
the new directive, minimum Regulatory
Proactive efforts to comply with the regulatory requirements. In addition,
Requirements for Tier I Capital Ratio (5%)
Basel III regulations saw the Bank timely actions have been identified and will
and Total Capital Ratio (10%) have been
increases its capital levels by issuing be executed during the coming years to
increased significantly to 10% and 14%
Basel III compliant instruments. Steps were optimise the Risk Weighted Assets for the
respectively, with Banks required to comply
also taken to optimize the capital ratios purpose of improving the capital allocation
with these requirements over a period
by reducing Risk Weighted Assets (RWA) of the Bank.
of 18 months, to meet the 01st January
TABLE - 7 : BASEL III COMPUTATION OF LIQUIDITY COVERAGE RATIO - ALL CURRENCY

As at 31st December 2017 As at 30th September 2017
Item Total Total Total Total
un-weighted weighted un-weighted weighted
value value value value
Rs 000 Rs 000 Rs 000 Rs 000
Total Stock of High-Quality Liquid Assets (HQLA) 106,931,037 106,340,392 94,072,648 93,257,780
Total adjusted level 1A assets 105,049,760 105,274,160 91,899,251 91,899,251
Level 1 assets 105,049,760 105,049,760 91,742,926 91,742,926
Total adjusted level 2A assets 999,980 849,983 999,980 849,983
Level 2A assets 999,980 849,983 999,980 849,983
Total adjusted level 2B assets 881,297 440,649 1,329,742 664,871
Level 2B assets 881,297 440,649 1,329,742 664,871
Total Cash Outflows 761,156,509 167,634,094 730,526,425 147,207,586

Deposits 490,594,003 49,059,400 480,544,249 48,054,425
Unsecured wholesale funding 126,745,095 66,570,104 123,906,330 64,919,019
Secured funding transactions 3,444,004 - 3,813,255 -
Undrawn portion of committed (irrevocable) facilities and other
contingent funding obligations 103,269,608 14,900,791 102,839,121 14,810,672
Additional requirements 37,103,799 37,103,799 19,423,470 19,423,470
Total Cash Inflows 87,574,177 78,131,751 65,842,757 57,542,714

Maturing secured lending transactions
backed by collateral 34,950,526 33,420,261 34,880,340 32,317,562
Committed facilities - - - -
Other inflows by counterparty which are
maturing within 30 days 10,014,364 7,427,794 7,806,679 5,841,438
Operational deposits 5,325,591 - 3,772,024 -
Other cash inflows 37,283,696 37,283,696 19,383,714 19,383,714
Total net cash outflows 673,582,332 89,502,343 664,683,668 89,664,872

Liquidity Coverage Ratio (%) (Stock of High Quality Liquid Assets/Total
net cash outflows over the Next 30 calendar days) * 100 118.81 104.01
TABLE - 8 : MAIN FEATURES OF REGULATORY CAPITAL INSTRUMENTS
Capital instruments issued by the Bank Capital instruments issued by the Subsidiary
2013-2018 2014-2019 2015-2020 2016-2021 2017-2022 2014-2019 2016-2021
Description of the capital instrument Listed Rated Listed Rated Listed Rated Listed Rated Basel III Tier II Listed Rated Listed Rated
Unsecured Unsecured Unsecured Unsecured compliant Listed Unsecured Unsecured Senior
Subordinated Subordinated Subordinated Subordinated Rated Unsecured Subordinated Redeemable
Redeemable Redeemable Redeemable Redeemable Subordinated Redeemable Debentures
Debentures Debentures Debentures Debentures Redeemable Debentures
Debentures
Issuer Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Sampath Bank PLC Siyapatha Finance PLC Siyapatha Finance PLC
Unique identifier D0246- D0308- D0365- D0389- D0426- D0319- D0394-
LK0090D20774 LK0090D22713 LK0090D23281 LK0090D23521 LK0090D23893 LK0432D22816 LK0432D23582
D0247- D0309- D0366- D0390- D0395-

LK0090D20790 LK0090D22739 LK0090D23299 LK0090D23539 LK0432D23574
Governing law(s) of the instrument Companies Act No. 07 of 2007/ CSE listing rules/ Banking Act No. 30 of 1988/ Securities Exchange Commission Act
Original date of issuance 04th December 2013 15th December 2014 18th November 2015 10th June 2016 21st December 2017 24th December 2014 20th September 2016
Par value of instrument Rs 100/- per Rs 100/- per Rs 100/- per Rs 100/- per Rs 100/- per Rs 100/- per Rs 100/- per
Debenture Debenture Debenture Debenture Debenture Debenture Debenture
Perpetual or dated Dated Dated Dated Dated Dated Dated Dated
Original maturity date, if applicable 04th December 2018 14th December 2019 18th November 2020 10th June 2021 21st December 2022 24th December 2019 D0394-20th
September 2019
D0395-20th
September 2021
Amount recognised in regulatory capital 1,000,000 2,800,000 4,200,000 4,200,000 6,000,000 400,000 808,508
(in Rs 000 as at the reporting date)
Accounting classification (Equity/Liability) Liability Liability Liability Liability Liability Liability Liability
Issuer call subject to prior supervisory approval
Optional call date, contingent call dates and N/A N/A N/A N/A N/A N/A N/A
redemption amount (Rs 000)
Subsequent call dates, if applicable N/A N/A N/A N/A N/A N/A N/A
Coupon/Dividend
Fixed or floating dividend/coupon D0246-Fixed rate D0308-Fixed rate D0365-Fixed rate D0389-Fixed rate D0426-Fixed rate D0319-Fixed rate D0394-Fixed rate
D0247-Fixed rate D0309-Fixed rate D0366-Floating rate D0390-Floating rate D0395-Fixed rate
Coupon rate and any related index D0246-13% p.a. D0308-8.25% p.a. D0365-9.90% p.a. D0389-12.75%p.a. D0426-12.50% p.a. D0319-8.90% p.a. D0394-13% p.a.
D0247-13.40% p.a. D0309-8.10% p.a. D0366-6 months net D0390-6 months D0395-13.50 % p.a.
T bill rate + 1.25% gross T bill rate + 1.0%
Non-cumulative or cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative

Convertible or Non-convertible Non-convertible Non-convertible Non-convertible Non-convertible Convertible Non-convertible Non-convertible
If convertible, conversion trigger (s) N/A N/A N/A N/A * N/A N/A
If convertible, fully or partially N/A N/A N/A N/A * N/A N/A
If convertible, mandatory or optional N/A N/A N/A N/A * N/A N/A
If convertible, conversion rate N/A N/A N/A N/A ** N/A N/A
* In the event of an occurrence of a Trigger Event as determined at the sole discretion of the Central Bank of Sri Lanka, there would be a conversion of Debentures to ordinary voting shares by the Company without any
requirement of approval by the Debenture Holders, in compliance with BASEL III requirements. Upon the occurrence of a Trigger Event, the outstanding balance of the Debentures including the total par value of the
Debentures and Debenture Interest accrued and unpaid as at that date will be permanently converted to ordinary voting shares at the Conversion Price.
** The price based on the simple average of the daily Volume Weighted Average Price(VWAP) of an ordinary voting share during the three months (03) period, immediately preceding the date of the Trigger Event
351
TABLE - 9 : DIFFERENCES BETWEEN ACCOUNTING AND REGULATORY SCOPES AND MAPPING OF FINANCIAL STATEMENT CATEGORIES WITH
REGULATORY RISK CATEGORIES - BANK
Item Carrying values Carrying values Subject to credit Subject to market Not subject
as reported in under scope risk framework risk framework to capital
published of regulatory requirements
financial reporting or subject to
statements deduction from
capital
Rs 000 Rs 000 Rs 000 Rs 000 Rs 000
Assets 795,102,126 793,584,180 700,168,561 94,873,015 (1,457,396)

Cash and cash equivalents 22,334,315 22,331,628 22,331,628 - -
Balances with Central Bank of Sri Lanka 41,100,364 41,100,364 41,100,364 - -
Placements with banks 3,159,326 3,159,024 3,159,024 - -
Reverse repurchase agreements 1,200,762 1,200,000 1,200,000 - -
Derivative financial instruments 496,918 - - - -
Financial assets - held for trading 20,502,507 20,502,507 - 20,502,507 -
Loans to & receivables from banks 2,084,507 - - - -
Loans to & receivables from other customers 560,798,940 566,463,359 568,974,646 - (2,511,287)
Other loans & receivables 49,352,443 48,196,629 48,196,629 - -
Financial assets - available for sale 77,095,719 74,919,266 501,320 74,370,508 47,438
Financial assets - held to maturity - - - - -
Investment in subsidiaries 1,356,075 1,216,952 1,157,344 - 59,608
Property, plant & equipment 7,269,942 7,269,942 7,269,942 - -
Intangible assets 946,845 946,845 - - 946,845
Deferred tax assets - - - - -
Other assets 7,403,463 6,277,664 6,277,664 - -
Liabilities 731,452,209 730,584,712 - - -

Due to banks 4,743,748 - - - -
Derivative financial instruments 103,947 - - - -
Securities sold under repurchase agreements 4,386,335 4,366,453 - - -
Due to other customers 625,814,313 613,815,507 - - -
Other borrowings 42,444,670 42,229,106 - - -
Dividend payable 99,259 99,259 - - -
Current tax liabilities 5,527,323 5,527,323 - - -
Deferred tax liabilities 1,353,339 1,353,339 - - -
Other provisions 1,583,558 - - - -
Other liabilities 11,742,147 30,072,958 - - -
Subordinated term debts 33,653,570 33,120,767 - - -
Off-Balance Sheet Liabilities 383,506,087 383,506,087 379,183,483 - -

Guarantees 51,292,097 51,292,097 51,292,097 - -
Documentary credit 19,796,716 19,796,716 19,796,716 - -
Acceptance 19,182,917 19,182,917 19,182,917 - -
Other contingent items 61,208,814 61,208,814 61,208,814 - -
Commitment for unutilised facilities 227,702,939 227,702,939 227,702,939 - -
Other commitments 4,322,604 4,322,604 - - -
Shareholders' Equity 63,649,917 62,999,468 - - -

Stated capital 16,307,722 16,307,722 - - -
of which amount eligible for CET I 16,307,722 16,307,722 - - -
of which amount eligible for AT I - - - - -
Retained earnings 6,072,399 5,423,981 - - -
Accumulated other comprehensive income 2,299,721 - - - -
Other reserves 38,970,075 41,267,765 - - -
GRI CONTENT INDEX GRI 102-55
GLOBAL REPORTING INITIATIVE (GRI) CONTENT INDEX – ‘IN ACCORDANCE COMPREHENSIVE’

GRI 102: GENERAL DISCLOSURES
GRI Standard Disclosures Page number(s) and/or URL(s) Remarks
1. ORGANIZATIONAL PROFILE
102-1 Name of the organization Inner Back Cover
102-2 Activities, brands, products and services 13-15
102-3 Location of headquarters Inner Back Cover
102-4 Location of operations 102
102-5 Ownership and legal form Inner Back Cover
102-6 Markets served 64
102-7 Scale of the organization 6,8
102-8 Information on other employees and other 77
workers
102-9 Supply chain Procurement Practices-(Please use the
QR code in page 2)
102-10 Significant changes to the organization and its 35,37 There are no significant
supply chain changes to the supply chain
during the reporting period.
102-11 Precautionary principle or approach Environmental Management/Customer
Convenience-(Please use the QR code
in page 2)
102-12 External initiatives 3
102-13 Membership of associations 4
2. STRATEGY
102-14 Statement from senior decision-maker 36-40
102-15 Key impacts risks, and opportunities 118-125
3. ETHICS AND INTEGRITY
102-16 Values, principles, standards and norms of 12,77,150
behaviour
102-17 Mechanisms for advice and concerns about 77
ethics
4. GOVERNANCE
102-18 Governance structure 42,128
102-19 Delegating authority 42,128
102-20 Executive-level responsibility for economics, 42,128
environmental and social topics
102-21 Consulting stakeholders on economic, 42
environmental and social topics
102-22 Composition of the highest governance body and 18-21,138
its committees
102-23 Chair of the highest governance body 18
102-24 Nominating and selecting the highest 131,139-140
governance body
102-25 Conflicts of interest 146,151,163
102-26 Role of highest governance body in setting 42
purpose, values and strategy
102-27 Measures taken to develop and enhance the 135 The Bank takes measures
collective knowledge of the highest governing to develop and enhance
body on economic, environmental and social collective knowledge of its
topics highest governing body as
102-28 Processes and actions taken in response to 140-141 well as evaluating its overall
evaluation of the performance of the highest performance. However, no
governance body’s in respect to governance of specific focus has been on the
performance economic, environmental and social areas related to environment
topics and social topics.
GRI Content Index
GRI Standard Disclosures Page number(s) and/or URL(s) Remarks

102-29 Identifying and managing economic, 42,130
environmental, and social impacts
102-30 Effectiveness of risk management processes 119,173
102-31 Review of economic, environmental, and social 151 Environmental and social
topics related projects and concerns
are reviewed by the Board of
Directors as and when required.
102-32 Highest governance body’s role in sustainability 47
reporting
102-33 Communicating critical concerns 144,150
102-34 Nature and total number of critical concerns 169 During the year, 03 Whistles
were blown and addressed in
accordance with the Whistle
Blowing Policy. (This Indicator is
partially disclosed).
102-35 Remuneration policies 141-142, 165-166
102-36 Process for determining remuneration 141-142
102-37 Stakeholders’ involvement in remuneration *
102-38 Annual total compensation ratio of highest paid *
individual
102-39 Percentage increase in annual total *
compensation ratio of highest paid individual
5. STAKEHOLDER ENGAGEMENT
102-40 List of stakeholder groups 43-46
102-41 Collective bargaining agreements There is no Collective
bargaining agreement exists
between the Bank & SBEA.
However, the relationship
between two parties remain
excellent.
102-42 Identifying and selecting stakeholders 43-46 The parties who make
significant influence / impact to
/ from the Bank are identified
as Bank’s key stakeholders.
102-43 Approach to stakeholder engagement 43-46
102-44 Key topics and concerns raised 43-46
6. REPORTING PRACTICE
102-45 Entities included in the consolidated financial 105
statements
102-46 Defining report content and topic boundaries 47
102-47 List of material topics 47-49
102-48 Restatements of information There are no restatements in
sustainability reporting criteria.
102-49 Changes in reporting 46 Material topics are changed
from the previous year due to
the Stakeholder Survey 2017.
102-50 Reporting period 3
102-51 Date of most recent report 4
102-52 Reporting cycle 3
102-53 Contact point for questions regarding the report 3
102-54 Claims of reporting in accordance with the GRI 3
Standards
102-55 GRI content index 353-358
102-56 External assurance 3, 359
* Information cannot be disclosed due to confidentiality reasons
SPECIFIC DISCLOSURES
GRI Specific Disclosures Page number(s) and/or URL(s) Remarks

ECONOMIC TOPICS
GRI 201: Economic Performance
103-1 Explain the material topics & its boundary Profitability and Financial Stability-
103-2 The Management Approach and its components (Please use the QR code in page 2),
103-3 Evaluation of the Management Approach 47
201-1 Direct Economic Value generated and distributed 339
201-2 Financial implications and other risks and Being in the business of
opportunities due to climate change Banking, climate change does
not have a significant impact
on our business. Accordingly
during the reporting period, no
records were maintained to
catalogue the effect of climate
change on our business.
201-3 Defined benefit plan obligations and other 206, 225-226
retirement plans
201-4 Financial assistance received from government As we are a private sector
organization, there is no direct
or indirect financial assistance
(grants) received from the
government.
GRI 202: Market Presence
202-1 Ratios of standard entry level wage by gender There is no entry level wage rate
compared to local minimum wage imposed on banking sector.
However, Sampath Bank’s entry
level wage is higher than the
national minimum wage rate.
202-2 Proportion of senior management hired from the Profitability and Financial Stability- All senior managers of the Bank
local community (Please use the QR code in page 2) are local hires (Sri Lankan).
GRI 203: Indirect Economic Impacts
203-1 Infrastructure investments and services 85
supported
203-2 Significant indirect economic impacts 80-85
GRI 205: Anti - Corruption
103-1 Explain the material topics & its boundary Anti-Corruption Practices-(Please use
103-2 The Management Approach and its components the QR code in page 2),
205-1 Operations assessed for risks related to Customer Health and Safety-(Please
corruption use the QR code in page 2), 123
205-2 Communication and training about anti- 77
corruption policies and procedures
205-3 Confirmed incidents of corruption and actions No incidents of corruption
taken were reported in 2017.
GRI Content Index

ENVIRONMENTAL TOPICS
GRI 302: Energy
103-1 Explain the material topics & its boundary Environmental Management-(Please
103-2 The Management Approach and its components use the QR code in page 2),
302-1 Energy consumption within the organization 86
302-2 Energy consumption outside the organization 86
302-3 Energy intensity 86
302-4 Reduction of energy consumption 86
302-5 Reduction of energy requirements of products This cannot be accurately
and services calculated or measured in
relation to specific products or
services of the Bank.
GRI 305: Emissions
305-1 Direct (Scope 1) GHG emissions 87
305-2 Energy indirect (Scope 2) GHG emissions 87
305-3 Other indirect (Scope 3) GHG emissions 87
305-4 GHG emissions intensity 87
305-5 Reduction of GHG emissions 87
305-6 Emissions of ozone-depleting substances (ODS) Emissions of Ozone Depleting
Substances (ODS) are
insignificant, considering the
nature of our business.
305-7 Nitrogen oxides (NOx), sulphur oxides (SOx) and Air emissions on business
other significant air emissions travels is 47.32 tCO2e which
contains 47.18 tCO2e of CO2 and
0.13 tCO2e of N2O.
GRI 306: Effluents and Waste
306-1 Water discharge by quality and destination 87
306-2 Waste by type and disposal method 87
306-3 Significant spills Not Relevant to the business of
Banking.
306-4 Transport of hazardous waste Not Relevant to the business of
Banking.
306-5 Water bodies affected by water discharges and/ No water bodies affected by
or runoff water discharges and / or
runoff.

SOCIAL TOPICS
GRI 401: Employment
103-1 Explain the material topics & its boundary Talent Acquisition and Management-
401-1 New employee hires and employee turnover 74
401-2 Benefits provided to full-time employees that 76
are not provided to temporary or part time
employees
401-3 Parental leave 74
GRI 402: Labour / Management Relations
103-1 Explain the material topics & its boundary Employee Relations-(Please use the QR
103-2 The Management Approach and its components code in page 2),
402-1 Minimum notice periods regarding operational No collective agreement in
changes force, operational changes are
informed in advance depending
on the requirement.
GRI 403: Occupational Health and Safety
103-1 Explain the material topics & its boundary Employee Relations-(Please use the QR
103-2 The Management Approach and its components code in page 2),
403-1 Workers representation in formal joint We do not have an occupational
management-worker health and safety health and safety committee,
committees we have set-out clear
guidelines to ensure the safety
of all those within our premises
at any given time.
403-2 Types of injury and rates of injury, occupational No reported incidents during
diseases, lost days and absenteeism, and the reporting period.
number of work-related fatalities
403-3 Workers with high incidence or high risk of Being a Bank, no such
diseases related to their occupation employee categories observed.
No reported incidents during
the reporting period.
403-4 Health and safety topics covered in formal No collective agreement in
agreements with trade unions force. Health and Safety is
covered from the Employee
Relations Policy & Employee
Welfare Policy.
GRI 404: Training and Education
103-1 Explain the material topics & its boundary Training and Development-(Please use
404-1 Average hours of training per year per employee 76
404-2 Programmes for upgrading employee skills and 75
transition assistance programmes
404-3 Percentage of employees receiving regular 75
performance and career development reviews
GRI Content Index

GRI 405: Diversity and Equal Opportunity
103-1 Explain the material topics & its boundary Talent Acquisition and Management-
405-1 Diversity of governance bodies and employees 76
405-2 Ratio of basic salary and remuneration of women 76
to men
GRI 413: Local Communities
103-1 Explain the material topics & its boundary Community Development-(Please use
413-1 Operations with local community engagement, 42, 80-85
impact assessments and development
programmes
413-2 Operations with significant actual and potential No any incident reported during
negative impacts on local communities the reporting period.
GRI 416 : Customer Health and Safety
103-1 Explain the material topics & its boundary Customer Health and Safety-(Please
416-1 Assessment of the health and safety impacts of As a service organization,
product and service categories health and safety impacts
416-2 Incidents of non-compliance concerning the of our products & service
health and safety impacts of products and categories cannot be assessed.
services
GRI 417 : Marketing and Labelling
103-1 Explain the material topics & its boundary Marketing and Labelling-(Please use the
103-2 The Management Approach and its components QR code in page 2),
417-1 Requirements for product and service Marketing and Labelling-(Please use the
information and labelling QR code in page 2)
417-2 Incidents of non-compliance concerning product No any incident reported during
and service information and labelling the reporting period in this
regard.
417-3 Incidents of non-compliance concerning No any incident reported during
marketing communications the reporting period in this
regard.
GRI 418 : Customer Privacy

103-1 Explain the material topics & its boundary Complaint Management/Customer
103-2 The Management Approach and its components Privacy-(Please use the QR code in
103-3 Evaluation of the Management Approach page 2),
48
418-1 Substantiated complaints concerning breaches Received 09 complaints (not
of customer privacy and losses of customer data critical) and all have been
resolved by respective branches
and departments.
INDEPENDENT ASSURANCE REPORT TO THE SHAREHOLDERS OF

SAMPATH BANK PLC
Independent Assurance Report to Sampath enable to obtain assurance that we would y Checking the calculations performed
Bank PLC on the Sustainability Reporting become aware of all significant matters that by the bank on a sample basis through
Criteria Presented in the Integrated Annual might be identified in a reasonable assurance recalculation.
Report- 2017 engagement. Accordingly, we do not express
an opinion providing reasonable assurance. yReconciling and agreeing the data on
INTRODUCTION AND SCOPE OF THE financial performance are properly
ENGAGEMENT MANAGEMENT OF THE BANK’S RESPONSIBILITY derived from the bank’s audited financial
The management of Sampath Bank PLC (“the FOR THE REPORT statements for the year ended 31
Bank”) engaged us to provide an independent The management of the bank is responsible December 2017.
assurance on the following elements of the for the preparation of the self-declaration,
sustainability reporting criteria presented in the information and statements contained y Comparison of the content of the Report
the annual report- 2017 (“the Report”). within the Report, and for maintaining against the criteria for a Global Reporting
adequate records and internal controls Initiative, GRI Standards: In accordance’ -
y Reasonable assurance on the information that are designed to support the sustaining Comprehensive guidelines.
on financial performance as specified on reporting process in line with the GRI
page 339 of the Report. Sustainability Reporting Guidelines. Our procedures did not include testing
electronic systems used to collect and
y Limited assurance on other information ERNST & YOUNG’S RESPONSIBILITY aggregate the information.
presented in the Report, prepared in Our responsibility is to express a conclusion
accordance with the requirements of the as to whether we have become aware of any LIMITATIONS AND CONSIDERATIONS
Global Reporting Initiative GRI Standards: matter that causes us to believe that the Environmental and social performance data
‘In accordance’ - Comprehensive Report is not prepared in accordance with are subject to inherent limitations given
guidelines. the requirements of the Global Reporting their nature and the methods used for
Initiative, GRI Standards: ‘In accordance’ determining, calculating and estimating such
BASIS OF OUR WORK AND LEVEL OF - Comprehensive guidelines. This report is data
ASSURANCE made solely to the Bank in accordance with
We performed our procedures to provide our engagement letter dated 30 August CONCLUSION
limited assurance in accordance with Sri 2017. We disclaim any assumption of Based on the procedures performed, as
Lanka Standard on Assurance Engagements responsibility for any reliance on this report described above, we conclude that;
(SLSAE 3000): ‘Assurance Engagements to any person other than the bank or for any
Other than Audits or Reviews of Historical purpose other than that for which it was
y The information on financial performance
Financial Information’, issued by the Institute prepared. In conducting our engagement,
as specified on page 339 of the Report are
of Chartered Accountants of Sri Lanka we have complied with the independence
properly derived from the audited financial
(“CASL”). requirements of the Code for Ethics for
statements of the Bank for the year ended
Professional Accountants issued by the CASL.
31 December 2017.
The evaluation criteria used for this limited
assurance engagement are based on the KEY ASSURANCE PROCEDURES
y Nothing has come to our attention
Sustainability Reporting Guidelines (“GRI We planned and performed our procedures
that causes us to believe that other
Guidelines”) and related information in to obtain the information and explanations
information presented in the Report
particular, the requirements to achieve GRI considered necessary to provide sufficient
are not fairly presented, in all material
Standards ‘In accordance’ - Comprehensive evidence to support our limited assurance
respects, in accordance with the Bank’s
guideline publication, publicly available at conclusions. Key assurance procedures
sustainability practices and policies some
GRI’s global website at “www.globalreporting. included:
of which are derived from Sustainability
org”. Reporting Guideline, GRI Standards- ‘In
yInterviewing relevant the bank’s personnel accordance’ Comprehensive.
Our engagement provides limited assurance to understand the process for collection,
as well as reasonable assurance. A limited analysis, aggregation and presentation of
assurance engagement is substantially data.
less in scope than a reasonable assurance
engagement conducted in accordance with y Reviewing and validation of the Ernst & Young
SLSAE-3000 and consequently does not information contained in the Report. Chartered Accountants
15 February 2018
Colombo
GLOSSARY OF FINANCIAL AND BANKING TERMS
A Asset and Liability Committee (ALCO) global regulatory standards on bank capital
Acceptances A risk-management committee in a bank adequacy and liquidity.
The signature on a Bill of Exchange that generally comprises the senior-

management levels of the institution. The Bills sent for Collection
indicates that the person on whom it is
drawn accepts the conditions of the Bill. ALCO’s primary goal is to evaluate, monitor A bill of exchange drawn by an exporter
In other words a Bill of Exchange that has and approve practices relating to risk due usually at a term, on an importer overseas
been accepted. to imbalances in the capital structure. and brought by the exporter to his bank
Among the factors considered are liquidity with a request to collect the proceeds.
Accounting Policies risk, interest rate risk, operational risk and
external events that may affect the bank’s C
The specific principles, bases, conventions,
rules and practices adopted by an entity forecast and strategic balance-sheet Capital Adequacy Ratio
in preparing and presenting Financial allocations. The percentage of risk-adjusted assets
Statements. supported by capital as defined under the
Associate Company
framework of risk-based capital standards
Accrual Basis An associate is an entity, including developed by the Bank for International
Recognition of the effects of transactions an unincorporated entity such as a Settlement (BIS) and as modified to suit
and other events when they occur without partnership, over which the investor has local requirements by the Central Bank of
waiting for receipt or payment of cash or significant influence and that is neither a Sri Lanka.
its equivalents. subsidiary nor an interest in a joint venture.
Capital Conservation Buffer (CCB)
Actuarial Assumptions Available For Sale (AFS) Financial Assets It is designed to ensure that banks build
An entity’s unbiased and mutually Non derivative financial assets that are up capital buffers outside periods of stress
compatible best estimates of the designated as available for sale or are not which can be drawn down as losses are
demographic and financial variable that will classified as (a) loans and receivables, incurred.
determine the ultimate cost of providing (b) held to maturity investments or (c)
post-employment benefits. financial assets at fair value through profit Cash Equivalents
or loss. Cash equivalents are short-term, highly
Additional Tier I (AT I) Capital liquid investments that are readily
Average Weighted Deposit Rate (AWDR) convertible to known amounts of cash and
It is a supplementary form of Tier I capital.
AT I includes capital instruments other AWDR is calculated by the Central Bank which are subject to an insignificant risk of
than the instruments included in CET I monthly based on the weighted average of changes in value.
capital. all outstanding interest bearing deposits of
commercial banks and the corresponding Cash Flows
Amortisation interest rates. Cash flows are inflows and outflows of cash
The systematic allocation of the and cash equivalents.
Average Weighted Prime Lending Rate
depreciable amount of an intangible asset
(AWPLR) Collectively Assessed Loan Impairment
over its useful life.
AWPLR is calculated by the Central Bank Provisions
Amortised Cost weekly based on commercial banks’ Also known as portfolio impairment
lending rates offered to their prime provisions. Impairment assessment
The amortised cost of a financial asset or
customers during the week. on a collective basis for homogeneous
financial liability is the amount at which
the financial asset or financial liability groups of loans that are not considered
B individually significant and to cover losses
is measured at initial recognition minus
principal repayments, plus or minus Basel II that has been incurred but has not yet
the cumulative amortisation using the The capital adequacy framework issued been identified at the reporting date.
effective interest method of any difference by the Basel Committee on Banking Typically assets within the consumer
between that initial amount and the Supervision (BCBS) in the form of the banking business (housing, personal,
maturity amount, and minus any reduction ‘International Convergence of Capital vehicle loans, credit cards etc) are
(directly or through the use of an allowance Measurement and Capital Standards’. assessed on a portfolio basis.
account) for impairment or uncollectability.
Basel III Commercial Paper (CP)
The BCBS issued the Basel III rules text, An unsecured, short-term debt instrument
which presents the details of strengthened issued by a corporation, typically for
the financing of accounts receivable, Correspondent Bank Currency Risk

inventories and meeting short-term A bank in a foreign country that offers The risk that the fair value or future
liabilities. The debt is usually issued at banking facilities to the customers of a cash flows of a financial instrument will
a discount, reflecting prevailing market bank in another country. fluctuate because of changes in foreign
interest rates. exchange rates.
Cost Method
Common Equity Tier I (CET I) Capital Currency SWAPs
A method of accounting whereby the
Consists of stated capital, other capital investment is recorded at cost. The The simultaneous purchase of an amount
and revenue reserves. CET I is the element Income Statement reflects income from of a currency for spot settlement and the
of capital which has the highest quality and the investment only to the extent that sale of the same amount of the same
the most effective in absorbing losses. the investor receives distributions from currency for forward settlement.
accumulated net profits of the investee
Commitments arising subsequent to the date of Customer Deposits
Credit facilities approved but not yet acquisition. Money deposited by account holders. Such
utilized by the clients as at the reporting funds are recorded as liabilities.
date. Cost-Push Inflation
A continuous increase in average price D
Consolidated Financial Statements levels due to an increase in production Deferred Tax
Consolidated financial statements are the costs.
Sum set aside in the financial statements
financial statements of a group in which
for taxation that may become payable/
the assets, liabilities, equity, income, Cost to Income Ratio
receivable in a financial year other than the
expenses and cash flows of the parent and Operating expenses excluding impairment current financial year. It arises because of
its subsidiaries are presented as those of a charge for loans and other losses as a temporary differences between tax rules
single economic entity. percentage of total operating income. and accounting conventions.
Contingencies Country Risk Delinquency

A condition or situation, the ultimate The risk that a foreign government will A debt or other financial obligation is
outcome of which (gain or loss) will be not fulfil its obligations or obstructs the considered to be in a state of delinquency
confirmed only on the occurrence or non- remittance of funds by debtors, either for when payments are overdue. Loans and
occurrence of one or more uncertain future financial reasons (transfer risk) or for other advances are considered to be delinquent
events. reasons (political risk). when consecutive payments are missed.
Also known as ‘Arrears’.
Contract Credit Rating
An agreement between two or more An evaluation of a corporate’s ability to Depreciation
parties that creates enforceable rights and repay its obligations or likelihood of not The systematic allocation of the
obligations. defaulting, carried out by an independent depreciable amount of an asset over its
rating agency. useful life.
Control
An investor controls an investee when Credit Risk Derecognition
the investor is exposed, or has rights, to Credit risk is the risk of financial loss to Derecognition is the removal of a
variable returns from its involvement with the Bank if a customer or counter party previously recognised financial asset or
the investee and has the ability to affect to a financial instrument fails to meet financial liability from an entity’s statement
those returns through its power over the its contractual obligations, and arises of financial position.
investee. principally from the loans and advances
to customers and other banks and Derivatives
Corporate Governance investment debt securities.
A derivative is a financial instrument or
The process by which corporate entities
other contract, the value of which changes
are governed. It is concerned with the Credit Risk Mitigation
in response to some underlying variable
way in which power is exercised over the A technique to reduce the credit risk (e.g. an interest rate), that has an initial
management and direction of entity, associated with an exposure by application net investment smaller than would be
the supervision of executive actions and of credit risk mitigants such as collateral, required for other instruments that have a
accountability to owners and others. guarantee and credit protection. similar response to the variable, and that
will be settled at a future date.
Glossary of Financial and Banking Terms
Discount Rate Equity Instrument F

A rate used to place a current value on An equity instrument is any contract Fair Value
future cash flows. It is needed to reflect that evidences a residual interest in the Fair Value is the price that would be
the fact that money has a time value. assets of an entity after deducting all of its received to sell an asset or paid to transfer
liabilities. a liability in an orderly transaction between
Dividend Cover
market participants at the measurement
Profit after tax divided by gross dividend. Equity Method date.
This ratio measures the number of times The equity method is a method of
dividend is covered by the current year’s accounting whereby the investment is Finance Lease
distributable profits. initially recognised at cost and adjusted A finance lease is a lease that transfers
thereafter for the post-acquisition change substantially all the risks and rewards
Dividend Yield in the investor’s share of net assets of the incidental to ownership of an asset. Title
Dividend earned per share as a percentage investee. The profit or loss of the investor may or may not eventually be transferred.
of its market value. includes the investor’s share of the profit
or loss of the investee. Financial Guarantee Contract
Documentary Letters of Credit (LCs)
A financial guarantee contract is a contract
Written undertakings by a bank on ESOP (Employee Share Ownership Plan)
that requires the issuer to make specified
behalf of its customers, authorising a A method of giving employees shares in payments to reimburse the holder for a
third party to draw on the Bank up to a the business for which they work. loss it incurs because a specified debtor
stipulated amount under specific terms fails to make payment when due in
and conditions. Such undertakings are Events after the Reporting Period accordance with the original or modified
established for the purpose of facilitating Events after the reporting period are those terms of a debt instrument.
international trade. events, favourable and unfavourable, that
occur between the end of the reporting Financial Instrument
Domestic Systemically Important Banks period and the date when the financial Financial instrument is any contract that
(D-SIBs) statements are authorised for issue. gives rise to a financial asset of one entity
Licensed banks with total assets equal to and a financial liability or equity instrument
or greater than Rs 500 billion Expected Credit Losses (ECLs) of another entity.
ECLs are probability-weighted estimate of
E the present value of cash shortfalls (i.e. Firm Commitment
Earnings per Share (EPS) the weighted average credit losses, with A firm commitment is a binding agreement
The profit attributable to each ordinary respective risks of defaults occurring in for the exchange of a specified quantity
share in the Bank, based on the profit for a given time period used as the weights). of resources at a specified price on a
the period after tax and after deducting ECL measurements are unbiased (i.e. specified future date or dates.
minority interest and preference share neutral, not conservative and not biased
Dividend. towards optimism or pessimism) and Foreign Exchange Income
are determined by evaluating a range of
The realised gain recorded when assets
Economic Value Added (EVA) possible outcomes.
or liabilities denominated in foreign
A measure of productivity which takes into currencies are translated into Sri Lankan
Exposure at Default (EAD)
consideration cost of total invested equity. Rupees on the reporting date at prevailing
This is an estimate of the exposure at a rates which differ from those rates in force
Effective Interest Rate (EIR) future default date, taking into account at inception or on the previous reporting
Rate that exactly discounts estimated expected changes in the exposure after date. Foreign exchange income also arises
future cash payments or receipts the reporting date, including repayments from trading in foreign currencies.
through the expected life of the financial of principal & interest and expected
instruments or, when appropriate, a drawdowns of committed facilities. Forward Exchange Contract
shorter period to the net carrying amount Agreement between two parties to
Exposure
of the financial asset or financial liability. exchange one currency for another at a
A claim, contingent claim or position which future date at a rate agreed upon today.
Effective Tax Rate (ETR) carries a risk of financial loss.
Provision for taxation excluding deferred
tax divided by the profit before taxation.
G sold or used as collateral to obtain Interest Rate SWAP

Global Reporting Initiative (GRI) funds in a range of stress scenarios and An agreement between two parties where
are unencumbered, i.e., without legal, one stream of future interest payments is
GRI is a leading organization in the
regulatory or operational impediments. exchanged for another stream of future
sustainability field. GRI promotes the
use of sustainability reporting as a interest payments based on a specified
I principal amount.
way for organizations to become more
sustainable and contribute to sustainable Impaired Loans
Impaired loans are loans where the Interest Spread
development.
Group does not expect to collect all This represents the difference between
Going Concern the contractual cash flows or expects the average interest rate earned and the
The financial statements are normally to collect them later than they are average interest rate paid on funds.
prepared on the assumption that an contractually due.
Investment Properties
entity is a going concern and will continue
in operation for the foreseeable future. Impairment Investment property is property (land or a
Hence, it is assumed that the entity has This occurs when recoverable amount of building - or part of a building - or both)
neither the intention nor the need to an asset is less than its carrying amount. held (by the owner or by the lessee under a
liquidate or curtail materially the scale of finance lease) to earn rentals or for capital
its operations. Impairment Provisions appreciation or both, rather than for use
Impairment provisions are provisions held in the production or supply of goods or
Gross Dividend on the Statement of Financial Position as services or for administrative services; or
The portion of profits distributed to the a result of the raising of a charge against sale in the ordinary course of business.
shareholders including the tax withheld. profit for the incurred loss.
K
Group Individually Significant Loan Impairment Key Management Personnel
A group is a parent and its subsidiaries. Provision (Specific Impairment Provision) Key management personnel are those
persons having authority and responsibility
Guarantees Impairment is measured individually for for planning, directing and controlling the
assets that are individually significant to activities of the entity.
A promise made by a third party
the Group.
(guarantor), who is not a party to a
contract between two others, that the L
Intangible Asset
guarantor will be liable if the guarantee Lifetime Expected Credit Losses
An intangible asset is an identifiable
fails to fulfil the contractual obligations. The expected credit losses that result
non-monetary asset without physical
from all possible default events over the
H substance.
expected life of a financial instrument.
Hedging
Interest Cover
A strategy under which transactions Liquidity Coverage Ratio (LCR)
A ratio showing the number of times
are effected with the aim of providing Banks are required to maintain an
interest charges is covered by earnings
cover against the risk of unfavourable adequate level of unencumbered High
before interest and tax.
price movements (interest rate, foreign Quality Liquid Assets (HQLA) that can be
exchange rate, commodity prices, etc) converted into cash to meet their liquidity
Interest Margin
needs for a 30 calendar day time horizon
Net interest income expressed as a
Held to Maturity (HTM) Financial Assets under a significantly severe liquidity stress
percentage of average interest earning
Held to maturity investments are non- scenario. LCR is computed by dividing
assets.
derivative financial assets with fixed the stock of HQLA by the total net cash
or determinable payments and a fixed outflows over the next 30 calendar days.
Interest Rate Risk
maturity that an entity has the positive
The risk that the fair value or future Liquid Assets
intention and ability to hold to maturity.
cash flows of a financial instrument will
Assets that are held in cash or in a form
fluctuate because of changes in market
High Quality Liquid Assets (HQLA) that can be converted to cash readily,
interest rates.
HQLA are assets that can be easily and such as deposits with other banks, bills of
immediately converted into cash at little exchange and treasury bills and bonds.
or no loss of value, that can be readily
Glossary of Financial and Banking Terms
Liquidity Risk Net-Interest Income (NII) service or as the benefit/years of service

The risk that an entity will encounter The difference between what a bank earns method). Prudence
difficulty in meeting obligations associated on assets such as loans and securities and
with financial liabilities. what it pays on liabilities such as deposits, Inclusion of a degree of caution in the
refinance funds and inter-bank borrowings. exercise of judgment needed in making
Loans and Receivables the estimates required under conditions
Non derivative financial assets with fixed Nostro Account of uncertainty, such that assets or income
or determinable payments that are not A bank account held in foreign country are not overstated and liabilities or
quoted in an active market other than by a domestic bank, denominated in the expenses are not understated.
those intends to sell immediately or in the currency of that country. Nostro accounts
R
near term and designated as fair value are used to facilitate the settlement of
through profit or loss or available sale on foreign exchange trade transactions. Relevant Activities
initial recognition. Relevant activities are activities of the
Non-Controlling Interest investee that significantly affect the
Loss Given Default (LGD) Non controlling interest is the equity in investee’s returns.
LGD is the percentage of an exposure a subsidiary not attributable, directly or
that a lender expects to lose in the event indirectly to a parent. Repurchase Agreement
of obligor defaults. It is based on the This is a contract to sell and subsequently
difference between the contractual cash O repurchase government securities at a
flows due and those that the lender would Operational Risk given price on a specified future date.
receive including any collateral.
Operational risk refers to the losses arising
Return on Average Assets (ROA)
from fraud, negligence, oversight, human
M Profit after tax expressed as a percentage
error, process errors, system failures,
Market Capitalisation external events, etc. of average total assets, used along with
The value of a company obtained by ROE, as a measure of profitability and as
multiplying the number of ordinary shares P a basis of intra-industry performance
in issue by its market value as at a date. Parent comparison.
A parent is an entity that controls one or Return on Average Equity (ROE)

Market Risk
more entities.
Market risk is the risk that changes in Profit after tax less preferred share
market prices, such as interest rates, Power dividends if any, expressed as a percentage
equity prices, foreign exchange rates and of average ordinary shareholders’ equity.
The Power is the existing rights that give
credit spreads (not relating to changes in
the current ability to direct the relevant Revenue Reserves
the obligor’s/issuer’s credit standing) will
activities.
affect the Bank’s income or the value of its Reserves set aside for future distribution
holdings of financial instruments. Price Earnings Ratio (P/E Ratio) and investment.
The current market price of the share is Reverse Repurchase Agreement

Materiality
divided by the earnings per share of the
The relative significance of a transaction Transaction involving the purchase of
Bank.
or an event, the omission or misstatement government securities by a bank or dealer
of which could influence the decisions of Probability of Default (PD) and resale back to the seller at a given
users of financial statements. price on a specific future date.
PD is an estimate of likelihood of default
over a given time horizon. Rights Issue
N
Net Asset Value Per Share Projected Unit Credit Method (PUC) Issue of shares to the existing
Shareholders’ funds divided by the number shareholders at an agreed price, generally
An actuarial valuation method that sees
of ordinary shares in issue. lower than market price.
each period of service as giving rise to an
additional unit of benefit entitlement and
measures each unit separately to build up
the final obligation.(sometimes known as
the accrued benefit method pro-rated on
Risk-weighted Assets T Y
Used in the calculation of risk-based Tier I Capital Yield to Maturity
capital ratios. The face amount of lower Tier I Capital consists of Common Equity Discount rate at which the present value of
risk assets is discounted using risk Tier I Capital (CET I) and Additional Tier I future payments would equal the security’s
weighting factors in order to reflect a Capital (AT I). current price.
comparable risk per rupee among all types
of assets. The risk inherent in commitment Total Capital (Capital Base)
& contingencies is also recognised, first by Capital base is summation of the core
adjusting notional values to Statement of capital (Tier I) and the supplementary
Financial Position (or credit) equivalents capital (Tier II).
and then by applying appropriate risk
weighting factors. Twelve Month Expected Credit Losses
The portion of lifetime expected credit
S
losses that represent the expected credit
Segmental Analysis losses that result from default events on
Analysis of financial information by a financial instrument that are possible
segments of an enterprise specifically, within the 12 months after the reporting
the different industries and the different date.
geographical areas in which it operates.
U
Shareholders’ Funds Unit Trust
Total of issued and fully paid share capital An undertaking formed to invest in
and capital and revenue reserves. securities under the terms of a trust deed.
Single Borrower Limit Useful Life

30% of capital base. Useful life is the period over which an
asset is expected to be available for use by
Statutory Reserve Fund
an entity or the number of production or
A capital reserve created as per the similar units expected to be obtained from
provisions of the Banking Act No. 30 of the asset by an entity.
1988.
V
Subsidiary
Value Added
A Subsidiary is an entity that is controlled
Wealth created by providing banking and
by another entity.
other services less the cost of providing
such services. The value added is allocated
Substance over Form
among the employees, the providers of
The consideration that the accounting capital, to government by way of taxes and
treatment and the presentation in financial retained for expansion and growth.
statements of transactions and events
should be governed by their substance and Vostro Account
financial reality and not merely by legal
A local currency account maintained by a
form.
local bank for a foreign (correspondent)
bank. For the foreign bank, it is a Nostro
account. The domestic bank acts as
custodian or manages the account of a
foreign counterpart.
ABBREVIATIONS
12mECL Twelve Month Expected Credit BTL Below the Line EPF Employee Provident Fund
Loss CAR Capital Adequacy Ratio EPS Earnings per Share
ACS Advanced Card System / CAS Common ATM Switch / Credit ESMS Environmental & Social Risk
Access Control Server Approval System Management System
AFS Available for Sale CASA Current Accounts and Savings ESOP Employee Share Option Plan
AGM Assistant General Manager/ Accounts ETDP Executive Talent Development
Annual General Meeting (as CASL Chartered Accountants of Sri Programme
appropriate) Lanka (ICASL) ETF Employee Trust Fund
AI Artificial Intelligence CBSL Central Bank of Sri Lanka EU European Union
ALCO Asset & Liability Management CCB Capital Conservation Buffer EVE Economic Value of Equity
Committee CCD Central Cash Department EWS Early Warning Signals
AML Anti Money Laundering
CCPU Central Credit Processing Unit FATCA Foreign Account Tax Compliant
APD Association of Primary Dealers
CCU Credit Control Unit Act
APP A self-contained program or
CEA Central Environmental FBI Fund Based Income
piece of software designed
Authority FCBU Foreign Currency Banking Unit
to fulfill a particular purpose;
CEO Chief Executive Officer FD Fixed Deposit
an application, especially as
CET I Common Equity Tier I FDI Foreign Direct Investments
downloaded by a user to a
mobile device. CFMs Close Family Members Fin-tech Financial Technology
ASA Alternative Standard Approach CH4 Methane FIRB Foundation Internal Rating
ASPI All Share Price Index CIR Cost to Income Ratio Based
AT 1 Additional Tier 1 CITS Cheque Image Truncation FSVAT Financial Services Value Added
ATL Above the Line System Tax
CO2 Carbon Dioxide FVOCI Fair Value through Other
ATM Automated Teller Machine
CO2e Carbon Dioxide equivalent, is Comprehensive Income
AWDR Average Weighted Deposit Rate FVPL Fair Value through Profit or
a standard unit for measuring
AWPLR Average Weighted Prime Loss
carbon footprints
Lending Rate CRIB Credit Information Bureau of FX Foreign Exchange
BAC Board Audit Committee GCC Gulf Cooperation Council
Sri Lanka
BBS Branch Bench Strength CRMU Credit Risk Management Unit GCFO Group Chief Financial Officer
BCBS Basel Committee on Bank CSE Colombo Stock Exchange GCHRO Group Chief Human Resources
Supervision CSR Corporate Social Responsibility Officer
BCP Business Continuity Plan GDP Gross Domestic Production
CSU Credit Supervision Unit
BDU Business Development Unit GHG Green House Gas
DBU Domestic Banking Unit
BEEZ Base for Enthusiasts of GRI Global Reporting Initiative
Dept. Department
Environmental Science &
DGM Deputy General Manager HHI Herfindahl - Hirshman Index
Zoology
BIA Basic Indicator Approach DPS Dividend per Share HR Human Resources
BIA Business Impact Analysis DRI Disseminating Regulatory HRM Human Resources
Information Management
BIRMC Board Integrated Risk
DRP Disaster Recovery Procedure hrs Hours
Management Committee
BIS Bank for International D-SIB Domestic Systemically HTM Held to Maturity
Settlements Important Banks i.e. That is
Bn Billions EAD Exposure at Default IBC Inner Back Cover
BNO Bank Note Operation ECG Effective Career Guidance ICAAP Internal Capital Adequacy
BOD Board of Directors ECL Expected Credit Loss Assessment Process
BOI Board of Investment ED Executive Director ICASL The Institute of Chartered
EFC Employee Federation of Ceylon Accountants of Sri Lanka
bps Basis Point
(CASL)
BRPTRC Board Related Party EFF Extended Fund Facility
ICC International Chamber of
Transaction Review Committee EIR Effective Interest Rate
Commerce
BSC Business Support Center EMDE Emerging market and ICOFR Internal Control Over Financial
BTC Board Treasury Committee developing economies Reporting
IFA Investment Fund Account NIM Net Interest Margin SDGs Sustainability Development
IIRC International Integrated NPA Non Performing Advances Goals
Reporting Council NPL Non Performing Loans SEC Securities and Exchange
IMF International Monetary fund Commission of Sri Lanka
NSC Network Service Centre
IND Independent Director SENS Sampath Employee Notification
OCI Other Comprehensive Income
System
IPO Initial Public Offer OPEC Organization of the Petroleum SGD Sustainable Development
<IR> Integrated Reporting Exporting Countries Goals
IRMF Integrated Risk Management pa Per Annum SID Senior Independent Director
Framework P/E Ratio Price Earnings Ratio SITS Sampath Information
IRMU Integrated Risk Management P2P Person to Person Technology Solutions Ltd
Unit SLAR Statutory Liquid Asset Ratio
PAT Profit After Tax
ISO International Standards
PBBS Performance Based Bonus SLAS Sri Lanka Accounting Standard
Organization
IT Information Technology Scheme SLASSCOM Sri Lanka Association of
PBT Profit Before Tax Software & Service Companies
Kg Kilogram
PD Probability of Default SLDB Sri Lanka Development Bonds
Km Kilometer
PIN Personal Identification Number SLFA Sri Lanka Forex Association
Km2 Square kilometer
PLC Public Limited Company SLFR Standing Lending Facility Rate
KMP Key Management Personnel
PLR Prime Lending Rate SLFRS Sri Lanka Accounting Standard
KPI Key Performance Indicator
PMP Project Management Process SLIPS Sri Lanka Interbank Payments
KPO Katunayake Pay Office
POS Point of Sale System
KRI Key Risk Indicator SME Small & Medium Enterprises
PPE Property, Plant & Equipment
KWh Kilowatt-hour SMS Short Message Service
PPP Public-private-partnership
KYC Know Your Customer SNaPC Sampath Nature Protection
PR Public Relations
LC Letter of Credit Club
PUC Projected Unit Credit Snr Senior
LCB Licensed Commercial Bank
R&D Research & Development SPPI Solely the Payment of Principal
LGD Loss Given Default
RCC Risk and Compliance & Interest
LKAS Sri Lanka Accounting Standard
Committee SRR Statutory Reserve Ratio
LSFB Lanka Financial Services RCSA Risk and Control Self
Bureau SWIFT Society for Worldwide Interbank
Assessments Financial Telecommunication
LSUG Lanka SWIFT User Group REER Real Effective Exchange Rate tCO2e Tonnes of carbon dioxide
LTECL Life Time Expected Credit Loss RHS Right Hand Side equivalent
LTV Ratio Loan to Value Ratio RM Relationship Manager Tel-cos Telecommunications
m3 Cubic meter RNU Recovery Nursing Unit Companies
MD Managing Director ROA Return on Average Assets Tn Trillion
MISU Management Information ROCE Return on Capital Employed TOI Total Operating Income
System Unit TOR Terms of Reference
ROE Return on Equity
Mn Millions TT Telegraphic Transfer
RPT Related Party Transaction/(s)
MoM Month on Month UK United Kingdom
Rs Rupees
MSME Micro, Small and Medium Scale UN United Nations
Entrepreneur RSA Rate Sensitive Assets
RSL Rate Sensitive Liabilities UOC University of Colombo
Mw Megawatt
RTO Recovery Time Objectives US United States of America
N2O Nitrous Oxide
RWA Risk- Weighted Assets USD / US$ United States Dollar
NBFI Non-Bank Financial Institution
S&P Standard & Poor VaR Value at Risk
NBT Nations Building Tax
SBEA Sampath Bank Employee VAT Value Added Tax
NCRE Non-Conventional Renewable
Energy Association Vis-à-vis in relation to, counterpart
NED Non Executive Director SBU Strategic Business Unit Viz. Namely
NFBI Non Fund Based Income SCL Special Commodity Levy W Watt
NID Non Independent Director SDFR Standing Deposit Facility Rate WHT Withholding Tax
NII Net Interest Income SDGM Senior Deputy General Manager YoY Year on Year
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the 32nd 5. To re-elect Miss Annika Senanayake Note:-
Annual General Meeting of Sampath Bank who retires at the Annual General A member is entitled to appoint a Proxy
PLC will be held at the “Balmoral” Hall, The Meeting as a Director in terms of to attend and vote on his/her/its behalf
Kingsbury, No. 48, Janadhipathi Mawatha, Article No. 87 of the Articles of and a Proxy need not be a member of the
Colombo 01, on 29th March 2018 at 9.30 Association of the Company. Company. A Form of Proxy is enclosed for
a.m. for the following purposes: this purpose. The instrument appointing a
6. To re-elect Mrs Saumya Amarasekera
who retires at the Annual General Proxy must be deposited at the Registered
1. To receive and consider the Annual Office of the Company at No. 110, Sir
Meeting as a Director in terms of
Report of the Board of Directors on James Peiris Mawatha, Colombo 02, not
Article No. 87 of the Articles of
the affairs of the Company and the less than forty eight (48) hours before the
Association of the Company.
Statement of Audited Accounts for the time fixed for holding of the Meeting.
year ended 31st December 2017 with 7. To re-elect Mr Channa Palansuriya
the Report of the Auditors thereon. who retires at the Annual General You are kindly requested to bring with
Meeting as a Director in terms of you, your National Identity Card or any
2. To approve the recommended
Article No. 87 of the Articles of valid source of identification. (eg. Driving
dividend of Rs. 17.20 per share as the
Association of the Company. license, Passport)
first and final dividend for the financial
year 2017, such right to the dividend 8. To approve the donations and
applying to the increased number contributions made by the Directors
of shares allotted pursuant to the during the year under review.
Rights Issue 2018 announced on 19th
9. To re-appoint Messrs Ernst & Young,
December 2017 as well, subject to
Chartered Accountants as Auditors
the entitlement date for the dividend
of the Company for the ensuing year
being notified subsequently.
and to authorize the Directors to
3. To elect Mr Yonmerenne Simon determine their remuneration.
Hewage Rushanka Sulakshana Silva
who was appointed to the Board to fill By Order of the Board
up a casual vacancy in the Board in
terms of Article No. 93 of the Articles
of Association of the Company.
4. To re-elect Mr Sanjiva Senanayake ANUJA GOONETILLEKE

who retires at the Annual General Company Secretary
Meeting as a Director in terms of
Article No. 87 of the Articles of Colombo, Sri Lanka
Association of the Company. 15th February 2018
NOTES
Notes
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,
Colombo 02, Sri Lanka.
e-mail: company_secretary@sampath.lk
Tel: +94 11 4730418 / 420 / 548
We also appreciate your comments on this Annual Report.
WHICH STAKEHOLDER GROUP/S DO YOU BELONG TO? (YOU MAY TICK MORE THAN ONE)
Employee Public Authority
Shareholder Regulatory Body
Investor Student
Customer Journalist
Supplier NGO
Service Provider Special Interest Group
Community Other
RATE YOUR OVERALL IMPRESSION OF THIS REPORT IN TERMS OF:
Excellent Good Fair Poor

Content and Scope
Informative
Transparent
Trustworthy
Comprehensive
User Friendly
Design and Layout

STAKEHOLDER FEEDBACK FORM
COMMENTS / QUERIES
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YOUR DETAILS
Name : .........................................................................................................................................
Address : .........................................................................................................................................
.........................................................................................................................................
.........................................................................................................................................
CONTACT NUMBERS
Residence : .........................................................................................................................................
Office : .........................................................................................................................................
Mobile : .........................................................................................................................................
Fax : .........................................................................................................................................
E-mail : .........................................................................................................................................
FORM OF PROXY
THIRTY SECOND 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 Channa Palansuriya of No. 118/1, Dr N. M. Perera Mawatha, Colombo 08, failing him Prof Malik Ranasinghe of No.
18, Layards Road, Colombo 05, failing him Mr Sanjiva Senanayake of No. 164/16, Nawala Road, Nugegoda, failing him Mr Deepal
Sooriyaarachchi of No. 28/10 Birnamwood, Wijesekera Mawatha, Mirihana, Nugegoda, failing him Mrs Dhara Wijayatilake of No. 78/1, Old
Road, Nawala, failing her Miss Annika Senanayake of No. 18/1, Alfred Place, Colombo 03, failing her Mr Ranil Pathirana of No. 243/5, Lake
Gardens, Sri Jayawardenapura Mawatha, Rajagiriya, failing him Mrs Saumya Amarasekera of No. 03, Sravasti Place, Colombo 07, failing
her Mr Rushanka Silva of No. 90/4, Galkanda Road, Aniwatte, Kandy, failing him Mr Nanda Fernando of No. 91, Sri Dhammadara Road,
Ratmalana, as my/our proxy to attend and vote for me/us on my/our behalf at the Thirty Second Annual General Meeting of the Company
to be held at the “Balmoral” Hall, The Kingsbury, No. 48, Janadhipathi Mawatha, Colombo 01, on 29th March 2018 at 9.30 a.m. and at any
adjournment thereof.
FOR AGAINST
1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company and the
Statement of Audited Accounts for the year ended 31st December 2017 with the Report of the Auditors
thereon.
2. To approve the recommended dividend of Rs. 17.20 per share as the first and final dividend for the financial
year 2017, such right to the dividend applying to the increased number of shares allotted pursuant to the
Rights Issue 2018 announced on 19th December 2017 as well, subject to the entitlement date for the
dividend being notified subsequently.
3. To elect Mr Yonmerenne Simon Hewage Rushanka Sulakshana Silva who was appointed to the Board to fill up
a casual vacancy in the Board in terms of Article No. 93 of the Articles of Association of the Company.
4. To re-elect Mr Sanjiva Senanayake who retires at the Annual General Meeting as a Director in terms of Article
No. 87 of the Articles of Association of the Company.
5. To re-elect Miss Annika Senanayake who retires at the Annual General Meeting as a Director in terms of
Article No. 87 of the Articles of Association of the Company.
6. To re-elect Mrs Saumya Amarasekera who retires at the Annual General Meeting as a Director in terms of
Article No. 87 of the Articles of Association of the Company.
7. To re-elect Mr Channa Palansuriya who retires at the Annual General Meeting as a Director in terms of Article
No. 87 of the Articles of Association of the Company.
8. To approve the donations and contributions made by the Directors during the year under review.
9. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year
and to authorise the Directors to determine their remuneration.
Please mark your preference with “X”
Signed on this ………………………………………day of …………………………………. 2018
Signature ……………………………………………………………………………………………………
Note: 1. Proxy need not be a member of the Company

2. Instructions regarding completion of Proxy are given in next page
INSTRUCTIONS AS TO COMPLETION
1. Kindly perfect the form of Proxy, after filling in legibly your full name and address and by signing in the space provided.
2. The completed form of Proxy should be deposited at the Registered Office of the Company at No. 110, Sir James Peiris
Mawatha, Colombo 02, not less than 48 hours before, the appointed time for the holding of the Annual General Meeting.
3. If you wish to appoint a person other than Chairman, Deputy Chairman or a Director of the Company as your Proxy, please insert
the relevant details in the space provided before 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 person as it thinks fit to act as its representative
at any meeting of the Company or of any class of members of the Company, and the person so authorised shall be entitled to
exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual member of the
Company”.
5. Please indicate with an ‘x’ in the space provided, how your Proxy is to vote on each resolution. If no indication is given, the Proxy,
at his/her discretion, will vote as he/she thinks fit.
6. In the case of a Company / Corporation, the Proxy must be under its Common Seal which should be affixed and attested in the
manner prescribed by its Articles of Association.
7. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at the Registered Office of the Company
for registration.
Name of Shareholder : …………………………………………………………………………………………………………………………………
NIC No of Shareholder : …………………………………………………………………………………………………………………………………
Membership No. /Share Certificate No. : ………………………………………………………………………………………………………………………………
CDS A/C No. [if applicable] : …………………………………………………………………………………………………………………………………
No of shares : …………………………………………………………………………………………………………………………………
Name of Proxy holder : …………………………………………………………………………………………………………………………………
N.I.C. No. of Proxy holder : …………………………………………………………………………………………………………………………………

CORPORATE INFORMATION
NAME OF COMPANY STOCK EXCHANGE LISTINGS Mrs Dhara Wijayatilake

Sampath Bank PLC 217,222,236 Ordinary Shares Independent, Non-Executive Director
LEGAL FORM 50,000,000 Listed Rated Unsecured Miss Annika Senanayake

A Public Limited Liability Company Subordinated Redeemable Debentures of Independent, Non-Executive Director
incorporated in Sri Lanka on 10th March Rs 100/- each - 2013/2018
1986 under the Companies Act No. 17 of Mr Ranil Pathirana
1982 and listed on the Colombo Stock Independent, Non-Executive Director
70,000,000 Listed Rated Unsecured
Exchange, Re-registered on 28th April Subordinated Redeemable Debentures of Mrs Saumya Amarasekera
2008 under the Companies Act No. 7 of Rs 100/- each - 2014/2019
2007. A Licensed Commercial Bank under Non-Independent, Non-Executive Director
the Banking Act No. 30 of 1988.
70,000,000 Listed Rated Unsecured Mr Rushanka Silva
COMPANY REGISTRATION NUMBER Subordinated Redeemable Debentures of Non-Independent, Non-Executive Director
PQ 144 Rs 100/- each - 2015/2020
Mr Nanda Fernando
HEAD OFFICE & REGISTERED OFFICE 60,000,000 Listed Rated Unsecured Managing Director
No.110, Sir James Peiris Mawatha, Subordinated Redeemable Debentures of
SUBSIDIARY COMPANIES
Colombo 02, Sri Lanka Rs 100/- each - 2016/2021
Name of the Holding Nature of
TELEPHONE 60,000,000 Basel III compliant - Tier 2 Company % Business
+94 (011) 2300260 Listed Rated Unsecured Subordinated Sampath 100.00 Renting of
+94 (011) 2358358 Redeemable Debentures with a Non- Centre Ltd commercial
+94 (011) 4730630 Viability Conversion of Rs 100/- each - property
+94 (011) 5331441 2017/2022 SC Securities 100.00 Stock broking
+94 (011) 5600600 (Pvt) Ltd
VAT REGISTRATION NUMBER Siyapatha 100.00 Granting leasing,
FAX 134001194 - 7000 Finance PLC hire purchase,
+94 (011) 2303085 factoring & other
CREDIT RATING loan facilities
SWIFT CODE
Fitch Rating: Fitch Rating Lanka Limited & accepting
BSAMLKLX has affirmed National Long Term Rating of deposits
E-MAIL A+ (lka) negative outlook to Sampath Bank Sampath 100.00 Software
PLC Information development,
oper.mgr@sampath.lk
info@sampath.lk Technology renting of IT
Moody’s Rating: Moody’s Investors Services Solutions Ltd equipments,
WEB PAGE has issued Long Term Local Currency
IT services
Deposit Rating of B1 with negative outlook
www.sampath.lk outsourcing
and document
AUDITORS BOARD OF DIRECTORS
management
Messrs Ernst & Young Mr Channa Palansuriya
services
Chartered Accountants Chairman / Non-Independent, Non-
Executive Director FOR INVESTOR RELATIONS AND
LAWYERS
CLARIFICATIONS ON THE REPORT, PLEASE
Messrs Nithya Partners Prof Malik Ranasinghe
Attorneys-at-Law Deputy Chairman / Independent, Non- CONTACT
Executive Director The Company Secretary,
COMPANY SECRETARY
Sampath Bank PLC,
Mrs Anuja Goonetilleke Mr Sanjiva Senanayake
Attorney-at-Law Senior Director / Independent, Non-
Colombo 02, Sri Lanka
Executive Director
Mr Deepal Sooriyaarachchi E-mail: company_secretary@sampath.lk
Designed & produced by Independent, Non-Executive Director Tel: +94 (011) 4730418/420/548
Printed by Gunaratne Offset (Pvt) Ltd

Photography by Taprobane Street
Jayaranga Mayadunne

WHO Stake Holder Analysis

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1

As we celebrate our thirtieth anniversary of business operations, we know we are a

Report Proﬁle .................................................... 3 BUSINESS REPORTS FINANCIAL INFORMATION

REPORTING FRAMEWORKS GRI 102-12, 54

OUR PROGRESS IN SUSTAINABILITY REPORTING GRI 102-51

MEMBERSHIPS OF ASSOCIATIONS GRI 102-13

SAMPATH BANK PLC

As part of the ongoing commitment to achieving a Net Zero Carbon Footprint,

Proﬁtability (Rs Mn)

Assets & Liabilities (Rs Mn)

Fitch rating A+ (lka) A+ (lka)

FINANCIAL GOALS AND ACHIEVEMENTS - BANK

Proﬁt Before Tax &

Proﬁt Before Tax Total Assets 2016

0 60 0 +22% 2016 : Rs 516.3 Bn

Total Advances - Gross

Social & Relationship Capital

Proﬁt After Tax &

No. of Staﬀ Members Male

SOCIAL AND RELATIONSHIP CAPITAL

EDUCATION FOR ALL ENTREPRENEURSHIP COMMUNITY CAPACITY EMERGENCY RESPONSE

Investment Investment Investment Investment

15.0 8.8 6.4 1.0

Environmental Investment Employee Engagement Number of

10 Rs 6.0 Mn 170 9,606 > 400,000 12,398.66 tCO2e

RELEASING OUR POTENTIAL TO TRANSFORM OUR WORLD

OUR VISION AND VALUES GRI 102-16

ABOUT THE BANK GRI 102-2

OVER THE YEARS SAMPATH BANK HAS CONTINUED

Rs 68.6 Bn Sampath Bank has continued to break

PRODUCT PORTFOLIO GRI 102-2

Current Accounts y Sampath General Current Account

Savings y Regular Savings y X-SET

y Regular Deposits y Fixed Deposits

y Sevana Housing Loan

y Sampath Samachara Loan

Accounts for Professionals y Sampath Professional Account

Pawning y Sampath Randiriya

Branchless Banking y My Bank

Gift Vouchers y Sampath Thilina

Foreign Remittances y e-Remittance y Sampath Instant Loan

CORPORATE BANKING TREASURY

Financing y Corporate Credit Spot Contract

International Trade y Trade Services Repo & Reverse Repo

Sampath PAYAPP Banking Robot

MR CHANNA PALANSURIYA MR NANDA FERNANDO

PROF MALIK RANASINGHE MR SANJIVA SENANAYAKE

MR DEEPAL SOORIYAARACHCHI MRS DHARA WIJAYATILAKE

MISS ANNIKA SENANAYAKE MR RANIL PATHIRANA

MRS SAUMYA AMARASEKERA MR RUSHANKA SILVA

MRS ANUJA GOONETILLEKE

Board of Directors GRI 102-22, 23

MR CHANNA PALANSURIYA MR NANDA FERNANDO

PROF MALIK RANASINGHE MR SANJIVA SENANAYAKE

MR DEEPAL SOORIYAARACHCHI MRS DHARA WIJAYATILAKE MISS ANNIKA SENANAYAKE

MR RANIL PATHIRANA MRS SAUMYA AMARASEKERA MR RUSHANKA SILVA

MR AJITH SALGADO MR ARUNA JAYASEKERA MR DINUSHA IHALALANDA MR PRADEEP PERERA

MR MANOJ AKMEEMANA MRS AYODHYA IDDAWELA PERERA MR THUSITHA NAKANDALA

MRS ANUJA GOONETILLEKE MR RAJENDRA RANASINGHE MR PUNUNUWAN WICKREMASEKERA MR SANATH ABHAYARATNE

MR SANJAYA GUNAWARDENA MR MAHEEL KURAGAMA MR AMAL KIRIHENE MR PRASANTHA DE SILVA

MS NADI B DHARMASIRI MR SISIRA DABARE MRS ACHALA WICKREMARATNE MR LALITH WERAGODA

MR DUSHYANTHA DASSANAYAKA MR ASOKA MANIKGODA MR ANANDA WIJITHA MR HEMANTHA MARASINGHE

MR PRIAM KASTURIRATNA MR CHATURA RUDESH MR NALAKA GUNAWARDENA MR PRASANNA MULLEGAMA

MR JANAKA JAYASURIYA MRS KUMARI JAYASURIYA MR PASAN MANUKITH MR HALIN HETTIGODA