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SAMPATH BANK PLC- Annual Report 2010

SAMPATH BANK PLC- Annual Report 2010

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Annual Report
Our Vision & Our Values 1 / Highlights in 2010 4 / Your Bank in 2010 6
Performance Highlights
Financial Highlights 8 / Operational Highlights 10
Key Messages
Chairman’s Vision 12 / MD’s Review 18
Management Team
Board of Directors 26 / Board of Directors - Profiles 28 / Corporate Management 32 / Chief Managers 34 / Senior
Managers 35
Management Discussion and Analysis
The Economy & the Banking Sector – How 2010 set the trend for 2011 40 / Financial Review 43 / Key Performance
Indicators 47 / Personal Banking 48 / The Ultimate Card 54 / Corporate Banking 58 / Recoveries 62 / Development
Banking 64 / Inclusive Banking 68 / Information Technology 70 / Treasury 74 / Marketing – Corporate & Product
Branding 76 / Mainstreaming the North & East 80 / The Capital Restructure 82 / Training 84 / Our Delivery
Channels 85 / Subsidiary Companies 88
Governance
Corporate Governance Report 90 / Risk Management & Compliance 126
Financial Reports
Audit Committee Report 152 / Nomination Committee Report 155 / Credit Committee Report 156 / Risk
Management Committee Report 158 / Human Resources and Remuneration Committee Report 160 / Strategic
Planning Committee Report 162 / Shareholder Relations Committee Report 163 / Annual Report of the Board of
Directors on the Affairs of the Company 164 / Directors’ Statement on Internal Control Report 184 / Managing
Director’s and Group Chief Financial Officer’s Responsibility Statement 186 / Directors’ Responsibility for Financial
Reporting 187 / Auditors’ Report 189 / Income Statement 190 / Balance Sheet 191 / Cash Flow & Reconciliation
Statement 192 / Statement of Changes in Equity 194 / Significant Account Policies 195 / Notes to the Financial
Statements 210
Supplementary Information
Income Statement in US$ 254 / Balance Sheet in US$ 255 / Ten Years at a Glance 256 / Capital Adequacy
258 / Sources & Distribution of Income 263 / Sources of Financing 264 / Utilisation of Funds 265 / Value Addition
266 / Share Information 267 / Debenture Information 272 / Branch Network 273 / Nostro Accounts Maintained
in Specific Currencies 277 / Correspondent Banks and Exchange Companies 278 / Milestones 280 / Glossary
of Financial and Banking Terms 282 / Notice of Annual General Meeting 284 / Notes 286 / Form of Proxy
287 / Corporate Information Back Inner Cover
Contents
“Signs of Continues Achievements...”
"The Growing Force
in Sri Lankan Financial Services"
Create a learning culture that
promotes individual and organisational
development as well as promoting
innovation and value for customers.
Treat all internal and external customers
the way we would like to be treated.
Encourage and promote teamwork in all
aspects of behaviour.
Open to feedback and demonstrate an
eagerness for personal development.
Monitor and demonstrate an impressive
commitment to results.
Uncompromising ethical and
professional standards of behaviour.
Our Vision
Our Values
Sampath Bank PLC 2
no
Sampath Bank PLC 3
boundaries
The dawn of 2010.
The turn of a decade where new boundaries were
etched for our nation. A year in which development
agenda were re-written beyond the confines of the
previous decades. An emerging economy - liberated in
spirit and freed from the borders of conflict.
As a truly national bank, we mirrored our nation’s
aspirations to reach higher. Innovating, expanding,
creating unprecedented value for everyone. Unbowed
by the surprisingly low credit demand that belied high
industry-expectations, we aggressively trail-blazed new
norms and surpassed benchmarks.

And delivered inspirational banking - that went beyond
conventional boundaries.
The dawn of 2010.
The turn of a decade where new boundaries were
etched for our nation. A year in which development
agenda were re-written beyond the confines of the
previous decades. An emerging economy - liberated in
spirit and freed from the borders of conflict.
As a truly national bank, we mirrored our nation’s
aspirations to reach higher. Innovating, expanding,
creating unprecedented value for everyone. Unbowed
by the surprisingly low credit demand that belied high
industry-expectations, we aggressively trail-blazed new
norms and surpassed benchmarks.

And delivered inspirational banking - that went beyond
conventional boundaries.
Sampath Bank PLC 4
Highlights in 2010
The most
aggressive branch
expansion in the
history of the banking
industry in Sri Lanka
branches new employees
proft after tax
40
405
3.3 bn
Created over
400 jobs
directly & thousands
more indirectly through
expansion
Highest profit growth
recorded in the history of the Bank
Sampath Bank PLC 5
return on assets
increase in advances
return on equity
Tailor-made financial
solutions that met the needs of
an emerging economy
3.9%
Successful strategies
that improved credit
portfolio quality
Returns that
surpassed
industry averages
Record breaking
returns
for our shareholders
1.9% 24.6%
NPL ratio
30.3%
Sampath Bank PLC 6
2010
Your Bank
in
Sampath Bank – which commenced operations in 1987 is now, the third largest private
sector commercial bank in Sri Lanka, among the 22 Licensed Commercial Banks operate
in Sri Lanka.
With a network of 171 branches spread across every province in the island, Platinum
Centres for premier customers, 222 Sampath Bank ATMs and 920 ATMs within the
inter-linked ATM network, we are one of the most accessible Banks to all Sri Lankans.
2010 marked the biggest expansionary phase in the history undertaken by the Bank
or by the entire banking sector. Staying committed to our role as the ‘Bank for all Sri
Lankans’, our strategies during the year were geared towards creating sustainable
development for all Sri Lankans, across every province.
Personal
Banking
Corporate
Banking
Trade
Services
Development
Banking
Our core areas of operation
Sampath Bank PLC 7
The Sampath Bank Group
The Bank
Contributes 94% of the Group’s pre tax profits
Sampath Leasing and Factoring Ltd
A fully owned subsidiary of Sampath Bank engaged in Leasing & Factoring Services
SC Securities (Pvt) Ltd
A Stock Brokering firm with a 51% ownership to Sampath Bank
Sampath Information Technology Solutions Ltd
A fully owned subsidiary of Sampath Bank providing IT related services
Sampath Centre Ltd
The property development arm, that owns the bank’s headquarters building in Colombo 02
with a 97% ownership to Sampath Bank
Credit &
Debit Cards
e-Banking Treasury
Operations
Sampath Bank PLC 8
Financial Highlights
Bank Group
2010 2009 Change 2010 2009 Change
(Rs. Mn.) (Rs. Mn.) % (Rs. Mn.) (Rs. Mn.) %
Profitability
Income 24,333 25,213 (3.5) 24,816 25,560 (2.9)
Operating income 14,380 12,048 19.4 14,780 12,088 22.3
Operating expenses 9,878 8,072 22.4 9,985 8,243 21.1
Profit before tax 4,502 3,976 13.2 4,794 4,005 19.7
Provision for taxation 1,199 1,878 (36.2) 1,274 1,921 (33.7)
Profit for the year 3,303 2,098 57.4 3,520 2,084 68.9
Assets & Liabilities
Deposits from customers 150,509 126,091 19.4 150,375 125,974 19.4
Loans & advances to customers
- Gross 128,595 98,685 30.3 129,321 99,682 29.7
- Net of IIS & Prov 122,627 93,177 31.6 123,194 94,004 31.1
Non-performing advances
- Gross 5,716 8,243 (30.7) 5,840 8,486 (31.2)
- Net of IIS 5,047 7,474 (32.5) 5,171 7,717 (33.0)
Total assets 185,081 156,162 18.5 187,886 158,002 18.9
Shareholders’ funds 15,019 11,846 26.8 16,918 12,707 33.1
Annual Report 2010 / Performance Highlights / Financial Highlights
Performance Highlights
0
700
1,400
2,800
3,500
2,100
06 07 08 09 10
1
,
0
2
8
1
,
0
5
2
1
,
4
1
4
2
,
0
9
8
3
,
3
0
3
Net Profit After Tax
Rs. Mn.
0 0
26,000 5.0
52,000 10.0
104,000 20.0
156,000
130,000
78,000
30.0
25.0
15.0
06 07 08 09 10
Total Deposits (Rs. Mn.)
Growth in Deposits (%)
8
1
,
4
3
2 9
9
,
4
1
9
Total Deposits and its growth
Rs. Mn. %
1
0
7
,
3
8
0
1
2
6
,
0
9
1 1
5
0
,
5
0
9
0 0
22,000 6.0
44,000 12.0
88,000 24.0
132,000
110,000
66,000
36.0
30.0
18.0
06 07 08 09 10
Total Advances (Rs. Mn.)
Growth in Advances (%)
7
5
,
9
7
0
Total Advances and its growth
Rs. Mn. %
9
5
,
6
5
5
9
8
,
6
8
5
1
2
8
,
5
9
5
9
3
,
4
3
0
Sampath Bank PLC 9
Annual Report 2010 / Performance Highlights / Financial Highlights
0
35,000
105,000
70,000
140,000
175,000
210,000
06 07 08 09 10
1
3
8
,
5
3
9
1
5
6
,
1
6
2
1
8
5
,
0
8
1
Total Assets and ROA
Rs. Mn.
0
0.5
1.0
2.0
3.0
2.5
1.5
%
Total Assets (Rs.Mn.)
ROA (After Tax) (%)
1
0
9
,
5
5
0
1
3
3
,
1
9
6
0
2
4
8
12
10
6
06 07 08 09 10
Dividends Per Share
Rs.
2
.
5
0
3
.
0
0
4
.
0
0
6
.
2
5
8
.
0
9
0
3,000
6,000
9,000
15,000
18,000
12,000
06 07 08 09 10
6
,
6
2
6
Shareholders’ Funds and ROE
Rs. Mn.
0
5.0
10.0
20.0
30.0
25.0
15.0
%
Shareholders’ Funds (Rs.Mn.)
ROE (After Tax) (%)
1
5
,
0
1
9
1
1
,
8
4
6
9
,
7
7
7
8
,
5
6
9
Bank Group
2010 2009 Change 2010 2009 Change
(Rs. Mn.) (Rs. Mn.) % (Rs. Mn.) (Rs. Mn.) %
Investor Informations
Net asset value per share (Rs.) 98.29 77.52 26.8 109.72 82.53 32.9
Market value at year end (Rs.) 271.90 204.25 33.1 271.90 204.25 33.1
Earnings per share (Rs.) - - - 22.80 13.56 68.1
Dividend yield (%) 3.0 3.1 (2.8) 3.0 3.1 (2.8)
Dividend per share (Rs.) 8.09 6.25 29.4 8.09 6.25 29.4
Dividend cover (Times) 4.7 7.6 (38.2) 5.0 7.6 (33.9)
Gross dividends 1,236 474 160.9 1,236 474 160.9
Key Indicators
Return on shareholders’
funds (%) - after tax 24.6 19.4 26.7 23.7 17.7 34.1
Return on average assets (%)
- before tax 2.6 2.7 (2.2) 2.8 2.7 3.9
- after tax 1.9 1.4 35.9 2.0 1.4 46.0
Cost to income ratio (%) 55.8 57.0 (2.2) 55.1 57.4 (4.0)
Liquid assets (%) 26.3 30.5 (13.8) - - -
Capital adequacy ratio
- Tier 1 10.7 10.4 2.7 11.0 10.6 3.5
- Tier 1 &11 12.9 13.5 (4.6) 13.3 13.9 (4.2)
RAM Rating AA (Stable)
Fitch Rating AA-(lka) AA-(lka)
(Positive) (Stable)
Operational Highlights
The quarterly highlights of the Bank, is a reflection of
its dynamism as a growing force in Sri Lankan financial
services
º Cpened 4 branches
º Jhe largest public sector
savings bank, National Savings
Bank was linked to our ATM
network
º Jhe frst public sector
e-services transaction was
completed through ‘Lanka
Gate’ - powered by Sampath
Bank technology, on 2nd
January
º Cpened 6 branches
º A major capital restructuring
plan for 2010 was approved
by the Board on 24th June,
which entails a scrip dividend,
a share sub-division and an
LSCP to the staff. which
offered 2% of the shares to
the staff
Q1 Q2
Annual Report 2010 / Performance Highlights / Operational Highlights
Performance Highlights contd...
Sampath Bank PLC 10
º Cpened 12 branches
º Cpened the 11th branch in the
North and the 13th branch in the
East
º Jhe second share sub-division of one
for one was done on 12th Cctober
º Another LSCP scheme was
introduced which offered 2% of the
shares to the staff
º Adjudged 'Jhe 8anker of the ¥ear
2010’ for the second successive year
º Jwo most exclusive Credit cards
issued by VISA International, Visa
Signature & Infinite was launched
for the first time in Sri Lanka
º Cpened 18 branches
º Chartered Marketer.
Mr. Deepal Sooriyaarachchi
joined Sampath Bank Board
of Directors on 5th August
º Recorded the highest
price per share in the
banking sector (Rs. 550/-) in
September 2010
Q3 Q4
Annual Report 2010 / Performance Highlights / Operational Highlights
11 Sampath Bank PLC
Sampath Bank PLC 12
Annual Report 2010 / Key Messages / Chairman’s Vision
Chairman’s Vision
Key Messages
Sampath Bank PLC 13
I W Senanayake
Chairman
“Gearing up for nation building”
Annual Report 2010 / Key Messages / Chairman’s Vision
We stimulated economic activity across the nation
and recorded a significantly high growth of 30.3% in
bank credit in 2010,
that far exceeded not only the industry-growth rate
but also those recorded by most of our peers in the
banking sector, thus maintaining the momentum
of our credit growth achieved in 2009 despite a
negative industry trend.
Sampath Bank PLC 14
57.4%
Record-breaking increase
in profit after tax
Dear Stakeholders
Twenty four years ago, 94 dedicated
employees and a few founder
shareholders, headed by the banking
visionary Mr. N U Jayawardene, notched
up a net profit of Rs. 4.8 Mn, and
revolutionized the banking industry
with Automated Teller Machines and
extended banking hours till 3.00 pm.
It gave our nation a glimpse of the
pioneering culture that became our
hallmark.
Over two decades later, a 2,688 strong
‘Team Sampath’ posted a net profit of
over Rs.3.3 Bn, with a record-breaking
57.4% increase in Profit after Tax (PAT),
and an impressive Return On Assets
(1.9 %) and Return On Equity (24.6%),
that by far, surpassed industry averages
and those recorded by most of our peers
in 2010.
As I welcome you to this year’s Annual
General meeting, your Bank has
stamped an indelible mark in 2010,
which augurs well for the industry and
the nation. Although our impressive
performance is dealt with in detail in the
MD’s message, permit me to give you a
glimpse of the stability we contributed
to the financial sector, as a whole -
and its knock-on effect in boosting
investor confidence across our emerging
economy.
Imposing financial stability
Our stability is not just an indication of
our own financial health. The financial
sector has a pivotal role to play in
rebuilding a post-conflict economy. And
as the ‘Bank for every Sri Lankan’, and
one of the top 3 private sector Banks
in the nation, our growth also reflects
on the positive outlook for the entire
economy and its appeal to external
markets.
Yet again we raised the bar in financial
services. We stimulated economic
activity across the nation and recorded
a significantly high growth of 30.3% in
bank credit in 2010, that far exceeded
not only the industry-growth rate but
also those recorded by most of our peers
in the banking sector, thus maintaining
the momentum of our credit growth
achieved in 2009 despite a negative
industry trend.
We also recorded a high percentage
growth of 19.4% in deposits, which too
exceeded the industry growth as well as
that of the peer Banks. We are proud
of our efforts during the year, which
culminated in a much stronger Balance
Sheet than ever before, where; not only
have we succeed in reducing our NPLs
in absolute terms by 32.5%, but also
achieved a significantly low NPL Ratio of
3.9% (from 7.6% recorded as at 31st
December 2009), as well as a record
breaking Provision Coverage Ratio of
88.9% - the highest among peer banks
as at 31st December 2010.
Our success in reducing the NPL’s, both
in absolute terms, as well as the NPL
ratio; reflects the keen balance we
have maintained between aggressive
credit expansion and management
of associated risks - a balance that is
imperative to maintain the stability of
the financial sector, strengthen investor
confidence and to avoid economic
recessions of the magnitude that we
have witnessed across the world in
recent years.
The regulatory framework and macro
environment within which we achieved
this performance is detailed within the
Management Discussion and Analysis.
Nation-building by ‘The Bank
of the Year 2010’
Yet, it was not simply this imposing
financial stability that won us the
much coveted title ‘Bank of the Year
2010’ conferred on us for the second
successive year by the London based
The Banker magazine of the Financial
Key Messages contd...
Annual Report 2010 / Key Messages / Chairman’s Vision
Chairman’s Vision contd...
Sampath Bank PLC 15
“Bank of the
¥ear 2010.
conferred on us
for the second
successive
year by the
London based
‘The Banker’
magazine of the
Financial Times
Group.”
Times Group. The award also stands
as testament to our innovation and
our attempts at creating value – both,
invaluable cornerstones of sustainable
national development.
The Central Bank of Sri Lanka has, once
again, shown its foresight in recognizing
the critical role required of Banks in
nation-building and acknowledged
that lending volumes should more than
double - to around 4 trillion rupees, as
a key prerequisite to a two-fold increase
in per capita income (to US$ 4,000) by
2016. This quantum leap would also
require a GDP growth of at least 8%
over the next few years. The budget
presented for 2011 has certainly set
the tone to achieve these economic
growth targets. The Government and
the Central Bank of Sri Lanka should
be commended for their progressive
outlook, and especially for developing
a framework for the financial sector to
reactivate the development process.
Although Sampath Bank has energized
the economy over the years, our efforts
at driving the nation to unveil its new
identity as a regional economic hub has
never been more evident than in the last
two years.
This year - as we did in 2009, we have
not only delivered value to all our
stakeholders, but also lived up to our
role as a truly national Bank. We made
clear inroads into reducing national
unemployment, boosted national
output, innovated technology-led
banking, paved new avenues for income
generation, and integrated backward
local economies into mainstream
development. We steered a course
to gear up for nation building and to
drive the nation to become a regional
powerhouse.
Bridging economic disparity
We expanded our customer reach
aggressively, by opening 40 new
branches in 2010 alone: a record in the
banking history of the country – adding
to the 19 that we set up last year, which
again was the highest among all banks.
And at least 40 more branches are on
the cards for 2011. Already recognized
as the largest private sector bank in
the East, we will continue to bridge
economic disparity within the provinces
by adding more branches to our existing
network of 11 branches in the North
and 13 in the East.
The industry has never witnessed
expansion of such magnitude into
largely under-banked areas and
communities. We channeled finance to
those who need it the most – financially
excluded segments of our society and
priority sectors of our economy.
Reducing national
unemployment
Our expansion this year resulted in job
opportunities for 405 Sri Lankans across
the country - adding to the 115 new
staff members that we employed last
year. We recruited large numbers of
unemployed Graduates, and cleared the
path for tremendous career progress for
our existing staff.
We provided indirect employment
to thousands more - not only by the
goods and services requisitioned for our
expansion but also by lending to start up
or expand businesses.
Investing in people and
processes
The best-in-class capacity building
efforts that we invested in this year
enabled our staff to absorb the best
practices in banking, locally and
internationally. It helped us build a team
that can deliver sustainable banking for
years to come.
Banking that is understood by
every Sri Lankan
As part of our drive to take customer
care to new levels, we innovated our
product portfolio tailoring specific
solutions to industries that were
challenged by slack markets and
Annual Report 2010 / Key Messages / Chairman’s Vision
Sampath Bank PLC 16
pioneered rate cuts to make financial
services more affordable to all Sri
Lankans. We introduced service levels
which went beyond the norms of
the industry ensuring uniformly
high standards of customer care
even in branches located within rural
communities. We took trade finance
to the door step of our customers and
introduced financial services to rural
customers in an easy-to-understand
manner. We set up a platinum branch
dedicated to our premier customers and
catered to their need for exclusivity in
financial solutions by becoming the first
bank in the island to issue the select
‘Visa Infinite’ credit cards.
It was our way of appreciating the
incredible patronage extended to the
Bank, over the years, by millions of loyal
customers from all walks of life.
Information technology-led
banking
The future of the industry lies in its
technology – as does the future of a
nation within this globalized world. Our
supremacy in information technology-
led banking remained unchallenged
in 2010. The Bank gained industry
wide recognition by becoming the
payment gateway for the e-government
initiative of the national ICT Agency,
who recognized our efforts by awarding
the e-Swabhimani award for the best
in-house developed business related
software application in Sri Lanka.
Several more automations enabled us
to streamline our operations and reduce
our cost to income ratio.
A focus on sustainable value
creation
Our efforts in the years to come would
be to create even more value that can
sustain our economy.
With the envisaged doubling of
per capita income, we will explore
lending opportunities in the housing,
infrastructure, agriculture and tourism
sectors. With the entire industry
challenged by an environment of low
interest rates, we will focus on trade
finance and fee based non-funding
income.
Our key off-shore investment in
Bangladesh - LankaBangla Finance Ltd.,
has already brought in Rs.666.3 Mn
worth of foreign exchange into Sri Lanka.
The Company is presently mulling an IPO
for their subsidiary, which should further
consolidate the return on our investment.
We are also pursuing more inorganic
growth opportunities.
Better Corporate Governance and
Risk management would continue
to be priorities for the Bank. We
have strengthened the Board with
the appointment of Mr. Deepal
Sooriyaarachchi with effect from 5th
August 2010. He brings with him over
30 years of experience in marketing,
management and human resource
development and is joining the Board at
an opportune hour as the Bank embarks
on a journey to create sustainable value.
I sincerely thank the entire Board for
their efforts in 2010 and believe that the
strengthened Board will be key to the
Bank’s strategic future and its role in the
larger economy.
The services rendered by the two
Directors who retired during the
year - Mr. Jayampathi Bandaranayake
(w.e.f. 17.07.2010) and Mr. Ernest A
Gunasekera (w.e.f. 17.07.2010), proved
to be invaluable in creating sustainable
value across the years. Their keen
insights, guidance and commitment to
Annual Report 2010 / Key Messages / Chairman’s Vision
Chairman, Mr. I W Senanayake receiving the ‘Bank of the Year - 2010’ award presented by Financial
Times, London.
Chairman’s Vision contd...
Key Messages contd...
Sampath Bank PLC 17
groundbreaking strategies that steered
the Bank to cross the conventional
boundaries of banking are appreciated
with gratitude. I wish them well in their
future endeavors.
A business-friendly climate
Key stakeholders of the economy each
have their distinct role to play in nation
building – a task, so vast, that if vested
solely with policymakers alone could
lead to decelerating rather than fast
tracking the trickle-down benefits of
national development.
A vibrant business environment enables
equal opportunities for each person to
achieve their goals.
We hope to see a more transparent role
within the development agenda for the
private sector, as well as more mature
capital markets in order to contribute to
the socioeconomic targets earmarked by
the budget for 2011. The Government
should be commended for reducing
the tax burden across the corporate
sector and for a progressive budget.
The business friendly climate that the
country is being steered towards would
require; on the one hand, the visionary
policies and large scale development
plans that have already been set
in motion, and in equal measure,
greater clarity than ever before in the
nation’s progress towards transparent
governance, as well as disciplined fiscal
spending. The massive people’s mandate
that has been given to the Government
reflects the expectation of all Sri Lankans
that these fundamentals – which are
essential to attract more investments
into the economy, will be addressed
sooner, rather than later.
Aligning stakeholder needs
with national needs
I believe the future of the industry lies in
aligning our banking strategies with the
needs of our stakeholders and the needs
of the nation.
As a Founder Director, I am immensely
proud of the pivotal role played by the
Bank in national development through
the efforts of all our stakeholders –
especially our employees. This year, we
implemented an ESOP where eligible
employees could exercise their option
within 3 years. This is just one, of many
initiatives that we took to appreciate the
tremendous efforts of our employees.
We will continue to invest in people
– our own workforce and the
communities we operate in. We will
invest in processes that will help us
innovate solutions to empower the
nation and deliver greater value to our
customers. And we will ensure that our
efforts in resource management will
minimize our environmental footprint.
For the first time in the history of the
bourse, the share value of a bank
crossed the Rs.500/- threshold when
Sampath Bank shares peaked at
Rs. 550/- in September 2010, A ground
breaking capital restructure with two
share sub-divisions within the year
created additional shares, stimulated
greater liquidity for trading and
Annual Report 2010 / Key Messages / Chairman’s Vision
produced tremendous shareholder-
value. We also pioneered the concept
of ‘scrip dividends’ in the industry
for the mutual benefit of the Bank
and our shareholders. Sampath Bank
Shareholders enjoyed the highest
returns given by the entire industry, as
a reward for placing their trust in our
fundamentals.
As we gear up for nation-building and
embark on a year leading upto our 25th
Anniversary in 2012, I envision Sampath
Bank at the pinnacle of private sector
banking, with all stakeholders enjoying
the benefits of a preeminent Bank and
of a resurgent Sri Lanka.
I W Senanayake
Chairman
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 18
MD’s Review
Annual Report 2010 / Key Messages / MD’s Review
Key Messages contd...
Sampath Bank PLC 19
G L H Premaratne
Managing Director
Annual Report 2010 / Key Messages / MD’s Review
“Creating history”
We approached 2010, with a mind set to cross all
conventional boundaries in banking.
And we did it with a finesse that raised the bar for the
entire industry. The vibrancy of our economy and the
momentum of our own success in 2010, has now geared
us to deliver beyond expectations in 2011.
Sampath Bank PLC 20
If one word could describe what we
achieved in 2010, it would be ‘epic’.
Never before in the history of the entire
banking sector has our nation witnessed
such an impressive balance between
the most aggressive expansion across
the island and the highest returns to
all stakeholders, that Sampath Bank
delivered in 2010.
The stability brought on by the end of
the conflict and the decisive people’s
mandate given to the Government
set the tone for 2010. The nation
embarked on an ambitious, but
achievable development agenda, which
was rewritten beyond the confines of
previously war-stricken years. And the
prudent banking strategies of the past
together with the aggressive capacity
expansion of 2010, helped us exploit
the opportunities thus presented, to
provide banking beyond conventional
boundaries.
A year of many ‘firsts’ for
‘The Bank of the Year 2010’
º The biggest branch expansion by any
Bank in the industry, in a single year
- 40 new branches island wide
º The largest banking presence by a
private bank in the Eastern province
- 13 Branches
º A record breaking PAT growth of
57.4% for the Bank and 68.9% for
the Group
º A Return on Assets (ROA) of 1.9 % ,
and a Return on Equity (ROE) of
24.6 % - both, far in excess of
MD’s Review contd...
industry averages and those
recorded by most of our peers
º A Credit growth of 30.3% and
a Deposit growth of 19.4%,
comfortably surpassing the industry
average and most of our peer
º One of the highest Net Interest
Margins (5.0%) recorded within the
industry
º NPL ratio of 3.9% reduced from
7.6% one year ago, well below
the industry average of 5.3%
consequent upon reducing the NPLs
in absolute terms from Rs.7.474 Bn
as at 31.12.2009 to Rs.5.047 Bn as
at 31.12.2010 by 32.5%
º A Provision Cover of 88.9% on
specific provisions alone, one of the
highest levels among the local banks
º The largest number of new job
opportunities created in the industry
- recruiting 405 persons within
12 months, including significant
numbers of unemployed graduates
º The highest number of internal staff
promotions within the Bank in our
entire history - 458 promotions in
2010 alone
º The first to introduce ‘scrip
dividends’ to the industry
º Offered one of the highest
dividends - of over Rs. 8.00 per
share, exclusively in the form of scrip
dividends
º Increased the value of our
shareholders’ investments by
undertaking two share sub-division,
which increased the number of
shares by 121%
º The first Bank in Sri Lanka to issue
the elite, Visa ‘Infinite’ and Visa
‘Signature’ Credit Cards
º Winner of ‘The Bank of the Year
2010’ award for the second
successive year
2010 was undoubtedly a year of
inspirational banking by Sampath Bank.
Annual Report 2010 / Key Messages / MD’s Review
19.4%
Above industry average
growth in deposits
Key Messages contd...
Sampath Bank PLC 21
“The significant
improvement
in our NPLs was
achieved through
several measures
initiated last year
and further fine
tuned in 2010.”
However, the year was not without its
fair share of challenges which became
industry wide risks. The Bank took
several strategic decisions to meet
these market trends and threats, to
achieve this tremendous success which
surpassed industry norms.
Thinning margins
Though we welcome the low interest
scenario, it was certainly a tough call
for the entire banking sector. Yet, the
resilience of the sector was evidenced
by its stability despite thinning margins
- faring far better than banking sectors
in most countries which are faced
by a debt crisis. Sampath Bank views
the reduction of interest as a healthy
formula for national development.
It is a prelude to larger business
volumes – where more banking
interventions will be sought by the
private sector and should off-set the
low net interest margins. During the
year, we strengthened the fund base
by balancing its composition, improved
the credit quality and returns on fund-
based asset products, and judiciously
managed our maturity patterns and
pricing strategies. The input of our
ALCO was invaluable in recording a Net
Interest Margin of 5.0% - well above the
industry average of 4.5%, and one of
the highest in the industry.
Poor national savings rate
However, Banks are essentially financial
intermediaries between borrowers
and depositors. Although low interest
rates were meant to encourage greater
borrowing, deposit mobilization proved
to be the biggest challenge for banks as
the year held little incentive for savings.
During the year, depositors shifted
funds from Banks and invested in more
attractive avenues – thus curtailing
national savings to around 16%, where,
ideally, the rate should hover around the
30% range for an emerging economy to
develop.
However, our unrelenting focus on
deposit-canvassing via our expanded
network, superlative service, innovative
low-cost deposit products and dynamic
product branding, helped Sampath Bank
record a nearly 19.4% deposit growth
rate during the year – one of the highest
in the industry.
Our Tier I Capital Adequacy Ratio
(CAR) of 10.7%, and Tier I+II CAR
of 12.9%, remained well above the
statutory requirements of 5% and 10%,
respectively, demonstrating the financial
stability of the Bank.
Unexpectedly low credit
demand in the industry
Despite the best efforts of the regulators
to maintain low interest rates, credit
demand surprisingly belied industry
expectation during most of 2010.
Credit growth was sluggish in the first
half of 2010, due to shrinking export
markets and market uncertainties
caused by the elections and until the
presentation of an interim budget. The
unexpectedly slow recovery of the US
market and the fresh debt crisis within
the European Union severely affected
the export sector, especially garments
and porcelain – two industries which
are unable to compete with Bangladeshi
producers who still enjoy GSP+
preferential tariffs.
We recorded one of the highest
percentage growths in credit among
most of our peers. The 30.3% growth
in our loan portfolio was achieved
through customer-specific credit
solutions for both corporate and retail
customers, and competitive pricing
that suited the diverse needs of an
emerging economy. Rates on pawning
advances were reduced from 16% to
14%, which benefited many rural Sri
Lankans, especially those from the North
and East who have traditionally used
it as a source of funding to start up
livelihoods and enterprises. We initiated
several process improvements using
our superior technology, to increase
the ease and speed of banking with
us. Our success in 2010 mirrored our
achievement in 2009, where we were
the only private commercial bank in the
industry to record a credit growth.
Annual Report 2010 / Key Messages / MD’s Review
Sampath Bank PLC 22
Rising NPLs
Economic growth which was slow to
pick up in the early part of the year, and
shrinking export markets caused NPLs
to rise initially, but gradually improved
towards the latter part of the year. The
significant improvement in our NPLs
was achieved through several measures
initiated last year and further fine tuned
in 2010. These strategies helped us lay
the foundation to double our lending in
line with the Government’s stated target
of doubling per capita income by 2016,
without compromising our credit-quality.
Specialized staff - with expertise in
credit evaluation and loan disbursement,
has significantly improved our pre-
sanctioning credit quality through
our credit model that is centralized
at regional offices, and at the head
office. Branches now have a greater
responsibility to monitor, recover and
know their customers better.
Secondly, our post-sanctioning
monitoring mechanisms were also
strengthened and automated to
expedite follow up action on early cases
of arrears before they became classified
as bad debts.
As a third measure, the central
recoveries department was strengthened
with measures that are explored within
our Management Discussion and
Analysis (MD&A). Bringing in a more
approachable ambience, and culture, we
attempted to reach amicable settlements
with those customers, such as exporters,
in genuine difficulty. Stringent legal
procedures were also initiated to recover
from hard core defaulters.
As a result, we not only reduced the NPL
ratio to well below industry standard
(3.9% against 5.3% for the industry)
this year, but most importantly reduced
our NPLs in absolute numbers by 32.5%.
Expansion beyond
conventional boundaries
40 branches within 12 months! Its never
happened in the entire banking sector,
ever.
We have set the Bank on course to
aggressively expand its branch network
– with 19 branches set up last year, 40
in 2010 and at least 40 more in 2011,
thus recording the highest expansion in
the industry in the last two years. Within
the year 2011, our branch network will
be on par with the largest private sector
banks in the nation.
Nearly 40,000 applicants vied for the
405 new jobs created across different
employment categories through this
expansion in 2010. Each application was
scrutinized to assess employability, while
the vacancies were filled by graduates
and even school leavers. We are
positioned to recruit a similar number
in 2011 as well. As the employer, who
created the largest number of new jobs
in the entire banking sector during the
year, we are proud of our efforts to
reduce national unemployment.
Raising the bar in banking
technology
Sampath Bank has remained the clear
industry leader in ICT based innovations
and banking technology - from
introducing uni-banking to the nation
in 1987, to becoming the sole banker
to provide on-line banking facilities
to ‘Lanka Gate’ - the government’s
initiative to take the nation towards an
era of e-Government.
Superior technology has also enabled
us to bring in operational efficiencies,
during the year, such as a low staff
per new branch ratio (currently
averaging around 6) and increased
branch profitability. Despite mass-scale
recruitment we succeeded in managing
33 branches out of 40 opened, with a
staff carder of only 6, that would result
substantially less number of employees
"Cur competitive
advantage within
the industry
continued
to be our
customer care,
which reflects
the warmth
of Sri Lankan
hospitality and
the most cutting
edge technology
in banking.”
Annual Report 2010 / Key Messages / MD’s Review
MD’s Review contd...
Key Messages contd...
Sampath Bank PLC 23
than other major private banks, and is
as much a reflection of the dedication
of our staff as the superiority of our
automation.
Our vision for the North & East
With virtually no presence in the North
until 2009, but now commanding the
largest branch network by a private
sector bank in the East at present, and
with at least 15 branches in operation
in the North by 2011, our vision is to
have the largest branch network in both
provinces.
We have channeled substantial
resources to these provinces and
initiated a training programme to
increase the trilingual proficiency of
our staff, to ensure that our superlative
service remains uncompromised. We
repositioned our senior staff and
innovated specialized small-scale
lending products that can empower and
develop sustainable local economies
- measures discussed in detail within
‘Mainstreaming the North and East’
review of the MD&A. However, we
strongly believe that large businesses
are a must to mainstream the North and
East into the development spectrum
and are looking to build partnerships to
support the hotels, mineral and other
industries of these provinces.
Becoming the industry leader
in Credit Cards
We were the first indigenous bank to
introduce credit cards to Sri Lanka in
1989.
This year, we re-positioned our credit
cards as ‘the most responsible choice’
– giving a range of exclusive benefits
to card holders and levying the lowest
number of charges, among all banks.
New cards increased by a phenomenal
25%. The successful strategies we
adopted in our quest to regain industry
leadership in credit cards by 2013, are
detailed within the MD&A titled, ‘The
Ultimate Card’.
Inclusive banking for all
Sri Lankans
As a truly national Bank with completely
home-grown roots, we take pride in our
efforts to empower Sri Lankans who
cannot easily access financial services to
build their livelihoods. ‘SampathSaviya’
– our micro finance model is explored
in greater detail within the MD&A. In
the year ahead, we will look to fine
tune our micro finance delivery model
to deliver more sustainable financial
intermediation to our customers from
low income communities across Sri
Lanka.
A landmark capital-restructure
In June 2010, the Board of Directors
approved a capital restructure that
delivered tremendous value to our
shareholders - with two share sub-
divisions within the year, a 10% sub-
division and another 100% sub-division
thereafter, more than doubling the
number of shares in their hands. An
ESOP was also offered to our staff,
which enabled eligible staff to exercise
their options within 3 years instead of at
the end of their tenure of service.
Specific details of the restructure are set
out in the MD&A.
‘There is someone to
take care’
Our competitive advantage within the
industry continued to be our customer
care, which reflects the warmth of Sri
Lankan hospitality and the most cutting
edge technology in banking. We took
this message across the country, not
only through our Corporate Branding
efforts themed on ‘There is someone
to take care’ but also by the uniformity
of our unparalleled service levels across
the entire network. It proved to be
one of our biggest challenges during
this expansionary phase. Significant
investments were therefore made in
2010, to build the skills of our new
recruits and to develop capacities of
our existing employees. The training
framework that was structured at 3
levels is explored in greater detail within
the Training Review, in the MD&A.
Effective and transparent
management
Risk management and corporate
governance continued to be under the
spotlight during the year.
We are currently working towards
adopting the Internal Risk Based (IRB)
approaches of Basel II with new rating
models being developed for Middle
Corporate borrowers, Banks, Financial
Institutions, SME and Start-up Projects,
in addition to the modifications enacted
to the Internal Borrower Rating model
used for Corporate customers.
We are making steady progress towards
improving our governance disclosures
to comply with the requirements of
the Central Bank of Sri Lanka. A risk
Annual Report 2010 / Key Messages / MD’s Review
Sampath Bank PLC 24
based framework of Internal Controls
Over Financial Reporting (ICOFR) was
developed during the year as required
by Section 3(8)(ii)(b) of the Banking Act
Direction No. 11 of 2007, and examined
by the External Auditors, as required
by the said direction, which would also
further strengthen the credibility of our
Financial Reports over the coming year.
Working Committees are currently
drafting recommendations to the
Steering Committee on measures to be
taken by the Bank to move towards a
global platform on financial reporting
by 2012, based on the new standards
issued by the Institute of Chartered
Accountants of Sri Lanka (ICASL) in
line with the International Financial
Reporting Standards (IFRS). During the
year, the Bank obtained the assistance of
our External Auditors in this regard. We
also identified gaps which exist between
current practices and the recommended
guidelines as per the SLAS 44 on
presentation of Financial Instruments,
and SLAS 45 on Recognition and
Measurement of Financial Instruments,
and conducted impairment tests on
loans and advances. Based on feedback
obtained from both the CBSL and the
ICASL, the Bank will move to develop
relevant accounting and operational
policies to bridge these gaps and align
its reporting with the IFRS by 1st January
2012.
The Bank’s Triple bottom line
approach in 2010
Throughout our aggressive expansion
we ensured that we stayed connected
with each of our stakeholders, acutely
aware that without them, we would not
be able to create economic benefits that
would filter across the nation.
Public-private partnerships
The private sector - especially the
Banking sector, will need to play a
catalytic role in national development.
Sampath Bank was the single largest
contributor - investing Rs. 435.7 Mn, in
the Rs.10 Bn Bond issued by the Urban
Development Authority (UDA) to build
apartments for low-income dwellers in
Colombo.
A regulatory framework that encourages
a more private-sector friendly approach
is now, beginning to emerge in view
of the government’s target to double
per capita income by 2016. The
development oriented budget with
its extensive tax relief measures was
a positive step in this regard. It will
enable Banks – such as ours and other
private entities which have capacities to
create jobs and greater wealth within
the economy, to allocate our expertise
towards national development; while
simultaneously, infrastructure is being
developed by the State.
A vibrant construction industry – quite
dormant over the last 3 years, will create
many opportunities for Public-Private
Partnerships. In addition to construction
of tourism related infrastructure,
opportunities exist for the banking
sector, to finance housing needs in
urban areas. Much capital is needed
to transform Colombo into an active
and an alluring hub with malls, leisure
centers and offices in the manner of
Singapore or Dubai.
However, it is imperative that this
emerging business friendly climate is
further consolidated with measures
to increase the purchasing power of
the people, better fiscal management,
improved capital markets, and more
transparent governance – in order to
drive the nation towards fulfilling its true
potential within the region.
National and global
recognition
We won ‘The Bank of the Year 2010’ for
the second successive year.
This prestigious award and the longest
running title in the international banking
Annual Report 2010 / Key Messages / MD’s Review
25.0%
A phenomenal increase
in new credit card issues
MD’s Review contd...
Key Messages contd...
Sampath Bank PLC 25
world presented by the London based
The Banker Magazine of the Financial
Times Group is awarded in recognition
of excellence in management,
governance and risk management.
Giant strides made to improve our
controls, systems and processes, helped
strengthen our credit rating to AA-(lka)
positive by Fitch Ratings Lanka Ltd and
AA stable by RAM Rating.
The Bank also gathered a triple at the
National Business Excellence Awards for
its superior financial performance. Our in-
house software, ‘Vishwa Corporate’ won
the National Best Quality Software Award
and the e-Swabhimani 2010 award.
What we achieved in 2010 was a
collective effort.
A loyal team of staff, who made it their
personal agenda to make the Bank
cross the boundaries of conventional
banking – were truly inspirational
in their performance. The visionary
leadership of a Board and team of
management. A discerning public, who
not only trusted our stability but also our
innovation. Shareholders who believed
in our fundamentals. And regulators
who maintained the buoyancy of the
economy with timely measures and
guidance to the industry. I thank you all,
for your efforts this year.
Vision 2011
º We will continue our aggressive
expansion and focus on deposit
canvassing
º We will work towards having the
largest banking presence in the
North and East
º As the pioneer in IT-led banking, we
will revamp existing products and
innovate new customer focused
products
º We will focus on delivery channels
based on an IT platform
º IT led operational efficiencies will
also enable us to record sustainable
profits – despite the large expansion
envisaged for 2011, and target a
substantial leap in our profitability
from 2011 onwards
º Our focus on re-positioning our
credit cards will continue in our
quest to regain industry leadership
by 2013
º Despite one of the highest net
interest margins in 2010, it is
envisaged that margins will thin
out even more in 2011. With
more banking interventions being
sought by the private sector, we will
strategise to improve our business
volumes to compensate for this
eventuality
º We expect a substantial increase in
our loan book for 2011, with the
impending upsurge in investments
sought by the private sector for
construction of tourism related
infrastructure, and to expand
existing industries
º We will maintain the soundness of
our asset quality, while pursuing a
steady growth in our loan book
º We will bring further improvements
to the pre-sanctioning credit quality
and our post-sanctioning monitoring
º We are actively looking for mergers
and strategic investments to
strengthen the Group
º The orientation of our staff to work
within a target-driven culture will be
completed
º An internal revamping will be
implemented to cater to the needs
of our diverse customer base – from
those who need exclusive banking
solutions to rural customers looking
to build their livelihoods
º The momentum in working towards
IFRS by 2012 and BASEL II by 2013,
will continue
º Fast track the internal process
re-engineering model with high
focus to maximise efficiencies and
reduction of operational costs
We approached 2010, with a mind set
to cross all conventional boundaries in
banking. And we did it with a finesse
that raised the bar for the entire
industry. The vibrancy of our economy
and the momentum of our own success
in 2010, has now geared us to deliver
beyond expectations in 2011.
G L H Premaratne
Managing Director
10th February 2011
Colombo, Sri Lanka
Annual Report 2010 / Key Messages / MD’s Review
Sampath Bank PLC 26
Board of Directors
Annual Report 2010 / Management Team / Board of Directors
Mr Denzil J Gunaratne
Director (Non-Executive)
Dr Saman Kelegama
Director (Non-Executive)
Mr Lakshman J K Hettiaratchi
Director (Non-Executive)
Mr I W Senanayake
Chairman (Non-Executive)
Mr Sunil G Wijesinha
Deputy Chairman (Non-Executive)
Mr Mohan A Abeynaike
Director (Non-Executive)
Management Team
Sampath Bank PLC 27
Annual Report 2010 / Management Team / Board of Directors
Mr Prasantha Lal De Alwis
Director (Non-Executive)
Mr Aravinda Perera
Deputy Managing Director (Executive)
Mr Ranjith Samaranayake
Executive Director / Group Chief Financial Offcer
Mr Dhammika Perera
Director (Non-Executive)
Mr Harris Premaratne
Managing Director (Executive)
Mr Deepal Sooriyaarachchi
Director (Non-Executive)
Sampath Bank PLC 28
Board of Directors - Profiles
Annual Report 2010 / Management Team / Board of Directors - Profles
Mr. I W Senanayake
Chairman (Non-Executive
Director)
Mr. I W Senanayake has been a Founder
Director of Sampath Bank since March
1987.
Deputy Chairman from April 1998 to
September 2008 and holds his current
title as Chairman of Sampath Bank since
October 2008.
He was also a past Honorary Trade
Representative for the Singapore Trade
Development Board in Sri Lanka and
currently serves as the Chairman of
American President Lines Lanka (Private)
Limited.
Mr. I W Senanayake is also the
Chairman and Chief Executive Officer
of IWS Holdings (Private) Limited,
a conglomerate, founded in 1984,
with diversified business interests in
trading activities such as commodities,
automobile franchisers, services and
support for the aviation industry,
shipping, warehousing and logistic
support services, project management
services, Telecommunications,
Broadcasting, Information Technology,
and Consultancy & Project Management
Services for the Telecommunications,
Packing and Food Processing Industries.
Mr. Sunil G Wijesinha
Deputy Chairman (Non-Executive
Director)
MBA, FCMA, FMS
Mr. Sunil G Wijesinha is a Director of
Sampath Bank since October 1996
and appointed as Deputy Chairman in
October 2008.
Nominee Director of the Employees’
Trust Fund Board from September 1990
to September 1994.
He holds a MBA from the Postgraduate
Institute of Management - University
of Sri Jayewardenapura, is a Fellow
Member of the Chartered Institute of
Management Accountants, UK, a Fellow
Member of the Institute of Management
Services, UK and an Associate Member
of the Institution of Engineers, Sri Lanka.
He counts extensive experience in
the fields of industry, finance and
management consultancy, spanning
both the public and private sectors in
Sri Lanka.
A former Chairman/ CEO of the
Employees’ Trust Fund Board and former
Managing Director of Merchant Bank
of Sri Lanka Limited. He now serves as
the Chairman/Managing Director of
Dankotuwa Porcelain PLC.
Mr. Wijesinha is the Vice President of
the National Chamber of Commerce
of Sri Lanka and the Chairman of its
Employment, Education and Training
Committee. He is also on the Committee
of the Ceylon Chamber of Commerce
and Vice Chairman of the Employers’
Federation of Ceylon. He is also a
member of the National Labour Advisory
Council and the Labour Law Reforms
Committee.
Mr. Wijesinha has been actively involved
in the National Productivity Programme,
since the launch of the National
Productivity Year in 1996. The Asian
Productivity Organisation has honoured
him twice by conferring the APO
National Award – 2000 in recognition of
his efforts in promoting productivity in
Sri Lanka, and the APO Regional Award
– 2005 in recognition of his efforts
in promoting productivity in the Asia
Pacific Region.
Mr. Mohan A Abeynaike
Director (Non-Executive)
FCA
Director of Sampath Bank since July
1995.
Past President of the Institute of
Chartered Accountants of Sri Lanka.
Has been a member of the Securities
& Exchange Commission of Sri Lanka
and Chairman/Director of several
organisations in the Public and Private
sectors.
Management Team contd...
Sampath Bank PLC 29
Annual Report 2010 / Management Team / Board of Directors - Profles
Mr. Denzil J Gunaratne
Director (Non-Executive)
President’s Counsel
Director of Sampath Bank from 1994 to
1997. Re-joined the Bank as a Director
from 1998.
An Attorney-at-Law since 1973 and
served in the Attorney General’s
Department as a State Counsel. Joined
the Judiciary and was a Magistrate from
1979, having served in such capacity
at Kebithigollewa, Matara and Kegalle.
Joined the unofficial Bar in 1984.
Former Chairman of the Employees’
Trust Fund Board and Dankotuwa
Porcelain PLC.
He is the Chairman of Uni-East Agencies
(Pvt) Ltd., Bibile Trading & Forwarding
Agency and SC Securities (Pvt) Ltd
(Subsidiary of the Bank).
Appointed as a Director of Ascot
Holdings Ltd and Sampath Information
Technology Solutions Ltd (SITS - wholly
owned subsidiary of the Bank).
Dr. Saman Kelegama
Director (Non-Executive)
D. PHIL (OXON)
Director of Sampath Bank since 1998.
Director of Singer (Sri Lanka) PLC since
2006.
Director of Colombo Stock Exchange
since 2010.
Executive Director of the Institute of
Policy Studies of Sri Lanka.
Fellow, National Academy of Sciences of
Sri Lanka.
Former President of the Sri Lanka
Economic Association.
Has written extensively on the Sri Lankan
economy.
Mr. Lakshman J K Hettiaratchi
Director (Non-Executive)
LLB, FCMA, MBCS, CITP,
Attorney-at-Law
Director of Sampath Bank since
December 1998.
Management Consultant, Director of
several companies: Member of
the Council of University of Moratuwa;
Member of the National Education
Commission.
Former President of the Organization
of Professional Associations of Sri
Lanka, former President of Chartered
Institute of Management Accountants-
Sri Lanka Branch and the former
Country Manager of IBM World Trade
Corporation, Sri Lanka.
He is the Chairman of Sampath
Information Technology Solutions Ltd
(SITS – wholly owned subsidiary of the
Bank).
Mr. Prasantha Lal De Alwis
Director (Non-Executive)
LLB, LLM (Colombo), Attorney-at-Law,
ACIM (UK)
Director of Sampath Bank since January
2002 to January 2011. An Advisor
to the Board of Sampath Bank since
January 2011.
An Attorney-at-Law since 1983, was a
former State Counsel at the Attorney
General’s Department.
A Certified National Trainer in Human
Resource Management of the Junior
Chamber International.
Visiting lecturer, Faculty of Law,
University of Colombo.
Member - Commission of Official
Languages.
Director - Sri Lanka Foreign Employment
Agency.
Sampath Bank PLC 30
Mr. K D Dhammika Perera
Director (Non-Executive)
Director of Sampath Bank since 01st
August 2007.
Mr. Dhammika Perera is the Secretary to
the Ministry of Transport, Sri Lanka and
a well-known prominent entrepreneur
and investor whose business interests
include Hydropower Generation,
Manufacturing, Hospitality,
Entertainment, Banking and Finance.
He serves as the Chairman of LB Finance
PLC, The Fortress Resorts PLC, Vallibel
Power Erathna PLC, Vallibel Finance PLC,
Vallibel One Ltd and holds directorships in
his other private sector companies.
He is the Deputy Chairman of Royal
Ceramics Lanka PLC, & Amaya Leisure
PLC.
Director, Sri Lanka Insurance Corporation
LTD, Hayleys PLC, Haycarb PLC, Hayleys-
MGT Knitting Mills PLC, Hotel Services
(Ceylon) PLC which owns Ceylon
Continental Hotel, Colombo, Hunas
Falls Hotels PLC, Dipped Products PLC,
Nirmalapura Wind Power Pvt Ltd & Alutec
Anodising & Machine Tools (Private) Ltd.
He is also a Member of the Board
of Directors of Strategic Enterprise
Management Agency (SEMA).
Mr. Harris Premaratne
Managing Director (Executive)
ACIB (LOND)
Director of Sampath Bank since 25th
November 2008.
Joined Sampath Bank as Chief Executive
Officer (Designate) in October 2008.
Appointed as Chief Executive Officer from
1st January 2009. Appointed as Managing
Director from 1st January 2011.
He is an Associate Member of the
Chartered Institute of Bankers, London.
Prior to joining Sampath Bank he was
a Senior Deputy General Manager at
Commercial Bank of Ceylon PLC. He has
42 years of overall banking experience
with expertise in the areas of Trade
Services, Trade Finance, Corporate
Credit, Corporate Finance, Recoveries
and Correspondent Relations. He retired
from Commercial Bank as Senior Deputy
General Manager-Corporate Banking.
He was a Director of Sri Lanka Credit
Information Bureau and was the
Chairman of the Technical Advisory
Committee of the Sri Lanka Banks’
Association.
He is the present Chairman of the
Sri Lanka Banks’ Association (Guarantee)
Ltd & Chairman of the Financial
Ombudsman Sri Lanka (Guarantee) Ltd.
He is a Director of the Asiri Hospital
Group of Companies. He also held the
position of Director of Softlogic Group
of Companies.
Mr. Aravinda Perera
Deputy Managing Director
(Executive)
B.Sc (Engineering), C.Eng, MIE(SL), MBA,
FIB, FCMA
Director of Sampath Bank since 25th
November 2008.
He received his Degree in Engineering
from University of Moratuwa in 1981
and his MBA from the University of Sri
Jayawardenepura in 1989. He is also
a Fellow member of the Institute of
Bankers of Sri Lanka.
Previously he functioned as the Chief
Operatring officer, Deputy General
Manager (Corporate Banking), Assistant
General Manager (Corporate Banking),
Assistant General Manager (Credit) and
Senior Manager (Corporate Credit) of
Sampath Bank.
Prior to joining Sampath Bank, he served
at DFCC as a Senior Project Officer
and at Ceylon Tobacco Company,
as Departmental Manager & Service
Engineer. He commenced his career as
an Engineer at National Milk Board.
He is a Chartered Engineer and a
Member of the Institute of Engineers,
Sri Lanka and a Fellow Member of the
Chartered Institute of Management
Accountants, U.K.
He is also a Director of Credit
Information Bureau, Sri Lanka (CRIB) and
Lanka Clear (Pvt) Ltd.
Annual Report 2010 / Management Team / Board of Directors - Profles
Board of Directors - Profiles contd...
Management Team contd...
Sampath Bank PLC 31
Mr. Ranjith Samaranayake
Executive Director / Group Chief
Financial Cffcer
B.Com (Accountancy Special)
Director of Sampath Bank since January
2009.
Holder of a Bachelor of Commerce
(Accountancy Special) Degree from
the University of Peradeniya, where he
became the President of the Students
Council in 1970.
He commenced his banking career
in 1975 and headed the Finance &
Planning function at three Banks,
namely NSB, Commercial Bank and at
present Sampath Bank, for a period
of over 35 years. He joined NSB as
an Executive in 1975 and joined
Commercial Bank as an Executive in
1979. Rising up to the position of Senior
Deputy General Manager (Finance &
Planning) at Commercial Bank of Ceylon
PLC he retired in February 2008, after
serving for 28 years. In addition, he
served as a Director of many subsidiary
companies of Commercial Bank and
a member of several Management
Committees.
He joined Sampath Bank in February
2008, as Consultant (Finance &
Planning) and was subsequently
appointed as the Group Chief Financial
Officer. He was appointed as an
Executive Director of Sampath Bank
with effect from 1st January 2009. In
addition, he is working as a member
of several Board Sub-Committees and
Management Committees.
He has also functioned as the Chairman
of the SLBA Sub-Committee on Basel II
implementation in Sri Lanka and the
Chief Examiner of ‘Regulation and
Compliance’ of the Diploma
Examination, conducted by the Institute
of Bankers, Sri Lanka.
Mr. Deepal Sooriyaarachchi
Director (Non-Executive)
FCIM (UK), MBA ( Sri J), MSLIM,
Chartered Marketer
Director - AVIVA NDB Insurance PLC
(Earlier known as Eagle Insurance PLC)
former Managing Director of same
company.
Non Executive Independent Director
- Sampath Bank PLC, Panasian Power
PLC, Hemas Manufacturing (Pvt) Ltd.
Committee Member of National
Administrative Reforms Commission
(NARC) and Member of the Council
University of Kelaniya.
Served as a Member, Presidential Task
Force for English and ICT and National
Authority on Teacher Education (NATE)
from its inception.
Past President of the Sri Lanka Institute
of Marketing (SLIM).
Counts over thirty years of experience
in Sales, Advertising, Marketing, Human
Resource Development and Strategy.
In 1997, served UNDP in Nepal to
enhance service quality in travel trade.
During the period when Eagle Insurance
was a member of the Zurich Group,
served on the Asian Regional Practice
Boards for Personal Business and
e-commerce.
Was recognized by PIM, SLIM and
CIM Sri Lanka for the pioneering
efforts in disseminating marketing and
management thinking in simple Sinhala
through the book series ‘Sinhalen
Business’, print & electronic media and
leadership demonstrated in promoting
CSR.
Authored eleven books and a number
of professional articles published locally
and internationally. A much sort after
speaker on a wide range of topics from
management subjects to promoting
values.
Currently engages in Executive
Development and Management
Consultancy work locally and
Internationally.
Annual Report 2010 / Management Team / Board of Directors - Profles
Corporate Management
Annual Report 2010 / Management Team / Corporate Management
Mr Harris Premaratne
Managing Director
Mr Aravinda Perera
Deputy Managing Director
Mr Ranjith Samaranayake
Executive Director/Group Chief Financial Offcer
Mr Nimal Tillekeratne
Senior Deputy General Manager - Operations
Mr Vimal Indrasoma
Deputy General Manager
- Information Technology
Mr Nanda Fernando
Deputy General Manager - Personal Banking
Mr Saman Herath
Deputy General Manager
- International & Commercial Credit
Mr Lalith Jayakody
Deputy General Manager - Finance & Planning
Mrs Anoja Karunaratne
Chief Risk & Compliance Offcer
32 Sampath Bank PLC
Management Team contd...
Annual Report 2010 / Management Team / Corporate Management
Mr Jayanta Jayaratna
Consultant
- Head of Human Resource Management
Mr Wije Dambawinne
Deputy General Manager - Treasury
Mr Tharaka Ranwala
Deputy General Manager
- Marketing & Business Development
Mrs Hiranthi De Silva
Assistant General Manager
- Corporate Credit
Mr K L G Pradeep
Assistant General Manager - Branch Credit I
Mr Dinusha Ihalalanda
Assistant General Manager - Operations
Mr S Sudarshan
Assistant General Manager/Company Secretary
Mr Najill Farouk
Assistant General Manager - Branch Credit II
33 Sampath Bank PLC
Annual Report 2009 / Performance Highlights / Senior Management
Annual Report 2010 / Management Team / Chief Managers
Mr Rohana Dissanayake
Chief Manager - Deposits & Remittances
Mr Aruna Jayasuriya
Chief Manager - Trade Services
Mr Deepal Samarasekera
Chief Manager - Commercial Credit
Mr Upali Dharmasiri
Chief Manager - Recoveries
Mrs Nimali Abeyratne
Chief Manager - Branch Credit
Mrs Nirosha De Silva
Chief Manager - Card Centre
Mr Rajendra Ranasinghe
Chief Manager - Systems & Procedures
Mr Pununuwan Wickremasekera
Chief Manager - Legal
Mrs Shashi Kandambi Jassim
Chief Manager - Corporate Finance & FCBU
Chief Managers
Mr Amanda Abeyweera
Chief Manager - Branch Credit
Mrs Anuja Goonetilleke
Chief Legal Offcer
Mr H P Amaratunge
Chief Manager - Area VIII
34 Sampath Bank PLC
Management Team contd...
Annual Report 2010 / Management Team / Senior Managers
Mr Sanath Abhayaratne
Senior Manager - International Operations
Mr Mangala P Wickremasinghe
Head of Enterprise IT Solutions
Mr Manoj Akmeemana
Senior Regional Manager
Mr Sujith Abeyratne
Senior Manager - Branch Supervision
Mr Ajith Jayasekera
Senior Manager - Planning
Mr Dushyantha Dassanayake
Senior Manager - Systems Development
Mr Ananda Wijitha
Senior Manager - IT/ Communication &
Networks
Mr Asoka Manikgoda
Senior Manager - Recoveries
Mr Jawana Atukorale
Senior Manager - Compliance
Senior Managers
Mr Harsha De Alwis
Head of Remittances
Mrs Pali Jayasekera
Senior Manager - IT (EDP)
Mr Prasad Polwatte
Head of Internal Audit
35 Sampath Bank PLC
Annual Report 2009 / Performance Highlights / Senior Management
Annual Report 2010 / Management Team / Senior Managers
Mr Vijith Peiris
Senior Manager - Computer Operations (IT-EDP)
Mr Saman De Silva
Senior Manager - Lending Products
Mr Priam Kasturiratne
Senior Manager - Operational Risk
Mr Sanjaya Gunawardena
Senior Regional Manager
Mrs Achala Wickremaratne
Senior Regional Manager
Mr Prasada Gooneratne
Senior Manager
- Database Administration (IT-EDP)
Mr Amal Kirihena
Senior Regional Manager
Mr H B Keerthiratne
Senior Manager - Finance
Mr Sisira Dabare
Senior Regional Manager
Senior Managers contd...
Mr Thilak Abeysinghe
Senior Manager - Branch Network Development
Mr Maheel Kuragama
Senior Manager - Operations
Mr Upul Nawaratne Bandara
Senior Manager - Marketing
36 Sampath Bank PLC
Management Team contd...
Annual Report 2010 / Management Team / Senior Managers
Mr Nalaka Gunawardena
Senior Manager - Systems Audit
Mr Prasantha De Silva
Chief Dealer
Mrs Ayodhya Iddawela Perera
Senior Manager - Corporate Credit
Mr Hemantha Marasinghe
Senior Manager - Engineering Services
Mr Ajith Salgado
Senior Manager - System Administration (IT-EDP)
Mr Chathura Rudesh
Senior Manager - Trade Services
Mrs Chamila Bandara
Senior Regional Manager
Mr Nayana Peiris
Senior Regional Manager
Mr Thusitha Nakandala
Senior Manager - Development Banking
37 Sampath Bank PLC
Sampath Bank PLC 38
Inspirati
Sampath Bank PLC 39
onal
Banking
M
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Sampath Bank PLC 40
Management Discussion and Analysis
The Economy & the Banking Sector – How 2010
set the trend for 2011
Annual Report 2010 / Management Discussion and Analysis / The Economy & the Banking Sector
Economic performance and its
impact on the banking sector
The stability brought by the strong
mandate given at the elections in
2010, has begun to pave the way for
accelerated development.
The post-war momentum within the
economy continued in force with the
most significant growth starting from
the 2nd quarter (Q2) of 2010, which
recorded a GDP growth of 8.5%. The
GDP growth in 2010 has far surpassed
the average growth of around 6% that
was recorded over the last 4 years. This
momentum augurs well for the nation’s
target of doubling per capita income
from the current level of US$ 2,400 to
US$ 4,000 by 2016.

The growth within each sector was
significant compared to the previous
year and reflects the buoyancy across
the economy. Agriculture sector growth
of 6.2% by Q3 of 2010 (compared
to 3.2% in Q3 of 2009) was largely
attributable to the increase in export
crops and a better paddy harvest. The
general recovery of the economy is
reflected in the growth of the Industrial
Sector which amounted to 8.8% by
Q3 of 2010 (compared to 4.4% in
Q3 of 2009). The significant growth
of 8.0% by Q3 of 2010 in the Service
Sector (compared to 5.1% in Q3 of
2009), was due to the combined effects
of the expansion in local economic
activities and the recovery of sorts within
international markets, subsequent to the
global recession.
As expected, annual average inflation
rose gradually towards the end of 2010,
but still remained within single digits at
around 5.9%.
Worker remittances recorded a YoY
growth of 23.1%, while the most
significant impact of the post-war
economic climate continued to be on
tourism. Tourist arrivals recorded a
large increase every month with the
YoY increase being a massive 46.1%.
The influx of tourists will certainly ease
the NPL ratio of the tourism sector –
which was devastated by the decades
of conflict. NPLs of all key sectors
of the economy (trading, transport,
manufacturing, construction, agriculture
and fisheries), except for the tourism
sector have improved in 2010.
Thus despite a widening of the trade
deficit, the country’s reserves position
continued to be a healthy 5 to 6 months
of imports.
Sri Lanka’s sovereign rating was
upgraded by Standard & Poor and a
stable outlook has assigned by Moody’s
Investors Service.
In September 2010, the national
economy was cushioned by the
5th tranche under the IMF-Stand
By Arrangement amounting to
approximately USD 212.5 Mn, which
was in addition to the previous
0
1
5
4
2
9
7
8
6
3
2
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0
9

Q
1
Q
2
Q
3
Q
4
2
0
1
0

Q
1
Q
3
Q
2
Q
4
Quarterly GDP Growth
%
7
.
1
8
.
0
1
.
6
2
.
1
6
.
2
4
.
2
8
.
5
6
.
4
LSBs inc. RDB RFCs LCBs Overall
40
35
30
25
20
15
10
5
0
-5
-10
D
e
c
-
0
8
J
a
n
-
0
9
F
a
b
-
0
9
M
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-
0
9
A
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r
-
0
9
M
a
y
-
0
9
J
u
n
-
0
9
J
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0
9
A
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g
-
0
9
S
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p
-
0
9
O
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t
-
0
9
N
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-
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D
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-
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9
J
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-
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F
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-
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-
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A
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N
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-
1
0
D
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-
1
0
Private sector credit growth (y-o-y growth)
%
Sampath Bank PLC 41
Annual Report 2010 / Management Discussion and Analysis / The Economy & the Banking Sector
two tranches received in June 2010
amounting to around USD 407.8 Mn,
while the Government also issued a USD
1 billion sovereign bond in September
2010.
The initial hesitance of the private
sector to take credit for investments
gradually wore off during the year, with
the stability brought on by the healthy
reserves and the upgraded sovereign
rating. Government policy to continue
with low market interest rates also
contributed to the YoY credit growth to
the private sector of 18.3% by October
2010, and the momentum is expected
to continue in 2011 with significant
investments being made to develop
infrastructure, especially in the hotels
and tourism sector.

A credit line was approved by the
World Bank of US$ 57.4 million to
help develop SMEs while technical
assistance is to be provided to banks
to develop their lending and technical
advisory capacities to assist SMEs.
The Government has also requested
Banks to increase credit to SMEs and
implement measures to bring in a more
SME customer focus to their operations
and among staff. Policy makers are
on track to ensure that the benefits of
development are enjoyed by citizens
of all communities – both urban
and rural, which augurs well for the
nation’s progress towards achieving its
Millennium Development Goals.
Impact of regulatory &
policy changes on the Bank’s
performance in 2010
º The savings that occurred due to the
reduction in the General Provision on
loan losses from 1.0% to 0.9% at
the end of 2010 enabled the Bank
to reduce the charge on general
provision by Rs. 90.4Mn in 2010
º A new Deposit Insurance Scheme
was implemented by the Central
Bank of Sri Lanka (CBSL) effective
from 1st October 2010 with a view
to improving overall stability of the
financial system in the country. The
Bank paid Rs. 43.9Mn as its liability
under this scheme for the 4th
quarter of 2010, i.e. 0.125% p.a.
on the total eligible deposit liability,
liable for this requirement
º Continuous reduction of policy
rates by the CBSL in line with the
Government’s policy to sustain a
low interest rate scenario within the
economy, compelled all financial
institutions to reduce interest rates
on both deposits and advances. A
significant increase was recorded in
the advances portfolio of the Bank,
partly due to this downward shift in
rates. Nevertheless, the Bank was
able to maintain Net Interest Margin
(NIM) at an average level of 5.0%,
for 2010
º The minimum capital requirements of
all Banks were enhanced as follows;
Rs. 3 Bn by 31 December 2011
Rs .4 Bn by 31 December 2013
Rs. 5 Bn by 31 December 2015
The changes in capital requirement
will ensure a stronger and sound
banking system. However, the new
regulations did not impact on the
capital of the Bank, as the bank
has maintained the Core Capital
significantly above the minimum
stipulated amounts
º The reduction of Customs Duty on
luxury items, especially on motor
vehicles in July 2010, stimulated
imports across the nation and
contributed to a large increase in the
import turnover volumes of the Bank

º Relaxation of Exchange Control
Regulations which commenced in
2009 and continued throughout
2010, significantly increased
the volumes of foreign currency
transactions recorded by the Bank
as well as Foreign Direct Investments
(FDIs) routed through the banking
system
Impact of the budget 2011
proposals, on the banking
sector and the general
economy
Specific proposals impacting Banks
include;
º Bank debit tax abolished
º VAT on financial services reduced
from 20% to 12%
º Corporate tax on profits of banks
and financial institutions reduced
from 35% to 28%
Sampath Bank PLC 42
º Tax savings to be transferred to an
investment fund account maintained
by the Central Bank of Sri Lanka,
with regulations to be introduced
for Banks to utilise such funds to
lend at low market rates and longer
maturity periods
The budget is being viewed in a
favourable light by companies and
by banks, in particular, due to the
various tax concessions, tax deductable
expenses such as on advertising
and research and largely due to the
reduction in corporate tax from 35% to
28%.
The reduction of the financial VAT
from 20% to 12% coupled together
with the savings on corporate tax
will substantially increase the internal
reserves of Banks. Profit retention -
which was a tremendous challenge in an
environment of high taxation, low credit
demand and narrow interest margins,
will be greatly eased by this progressive
budget. 2011 will witness greater credit
and expanded lending capacities within
the banking sector.
The tax savings will also, more than
offset the increase in the tax on offshore
profits of Foreign Currency Banking
Units (FCBU’s) from 20% to 28%.
The 8% of the value addition calculated
for financial services 5% of the taxable
income computed for income tax
purposes will be maintained within a
special investment fund account by the
CBSL and reserved for long term lending
at concessionary rates, although the
lending purposes are yet to be specified.
The balance saving on the corporate tax
will be held as a low yielding, tax free
asset within a bank’s balance sheet, thus
strengthening the long term lending
power of banks. It will contribute to
increasing the unilateral capital buffer
needed for credit expansion under the
BASEL II requirement and also falls in
line with the governments focus to
increase bank lending to stimulate a
significant leap in per capita GDP.
Thus, this measure is intended to not
only assist Banks but would be a long
term funding source created in the best
interest of the entire economy, and will
be in place for 3 years.
The reduction in both corporate and
personal taxes will present opportunities
for banks, as it will stimulate larger
national savings, and with inflation
projected to remain at current levels, it
will also increase disposable income for
consumption.
The overall focus of the budget 2011
is on a regime of low taxes and low
interest rates. Although adopting a
completely different approach than in
the past, it is an extremely development
oriented budget and has fulfilled the
need of an emerging economy.
(Data sourced from the Central Bank of
Sri Lanka, Department of Census and
Statistics and Budget Proposals 2011)
Management Discussion and Analysis contd...
Annual Report 2010 / Management Discussion and Analysis / The Economy & the Banking Sector
The Economy & the Banking Sector – How 2010 set the trend for 2011 contd...
Sampath Bank PLC 43
Overview
2010 was another exceptional year for
our Bank, with post tax profits reaching
Rs. 3.3 Bn and a rapid expansion
program that added 40 branches to the
network.
Our growth in earnings per share of
68.1% was driven by operational
efficiencies and improved credit quality.
Our primary sources of earnings
were enhanced during the year, by
a lending growth of 30.3% and a
deposit growth of 19.4%, both,
above industry averages, and which
generated a net interest income of Rs.
8.5 Bn. In addition, the provision of
other financial services generated a fee
income of Rs 1.4 Bn. Profit before tax
in 2010, increased 13.2% to Rs.4.5 Bn
from Rs.4.0 Bn in 2009. Profit after tax
increased 57.4% to Rs.3.3 Bn in 2010
from Rs. 2.1 Bn in 2009.
We achieved record results in
2010, despite investing significantly
throughout the year to expand the
sustainability of the Bank’s future by;
opening 40 new branches, employing
over 400 new recruits, and to offer an
ESOP scheme to every eligible team
member in appreciation of their efforts.
Financial Review
Annual Report 2010 / Management Discussion and Analysis / Financial Review
Despite the subdivision of shares twice
during the year: which increased the
shares by 121%, the Sampath share hit
a record high, closing at Rs. 271.90 on
December 31, 2010, from the pre-share
sub-division price of Rs. 204.25 as at
December 31, 2009.
Income
As interest rates were reduced by the
Central Bank of Sri Lanka, the Bank’s
net interest margin was compressed due
to reduced interest earned on advances
and debt securities, as a result, net
interest margin for 2010 decreased to
5.0% from 5.3% in 2009. The decrease
was primarily due to lower yields on
new investments in treasury bills,
following maturities and prepayments
of higher yielding bills and the addition
of new corporate and commercial loans
with yields below the existing portfolio
average. These factors were partially
offset by the increase of low interest
bearing deposit mobilization in 2010.
The continuation of the low interest rate
regime reduced our income by 3.5% to
Rs. 24.3 Bn for 2010 from Rs. 25.2 Bn in
2009, despite achieving an asset growth
of 18.5 %. Nevertheless, net interest
income (NII) in 2010 increased by 9.2%
to Rs. 8.5 Bn from Rs. 7.8 Bn in 2009.
The increase in the NII, was primarily
due to a strong loan growth particularly
in overdrafts, term loan and pawning
products, healthy deposit mobilization
and a satisfactory net interest margin
of 5.0% for 2010. The benefit of this
growth was partially offset by lower
yields on treasury bills and bonds, and
money market instruments, compared to
the portfolio average.
Interest income on customer advances
decreased by 8.0% to Rs. 14.4 Bn
compared to Rs. 15.6 Bn the previous
year, while interest income on treasury
bills and bonds and money market
instruments decreased by 23.9% to
Rs. 4.0 Bn in 2010, compared to Rs.5.2
Bn in 2009. However, Interest expenses
on deposits also decreased by 23.1% to
Rs. 8.9 Bn in 2010 from Rs. 11.6 Bn in
2009.
Interest earning assets increased by
Rs. 26.1 Bn in 2010 from 2009, due
to increases in loans and investment
securities, which was partially offset by
a decline in investments in treasury bills
& bonds.
Operating income was Rs.14.3 Bn
in 2010, compared to Rs. 12.0 Bn in
2009, recording an increase of 19.4%
driven by the growth in fee income
generating turnover, particularly on
L.Cs , guarantees, credit and debit card
fees, loan processing and gains on the
investment portfolio.
2010
Rs. Bn.
2009
Rs. Bn.
Growth
%
Operating income 14.3 12.0 19.4
Operating expenses 9.8 8.0 22.4
Profit before tax 4.5 4.0 13.2
Profit for the year 3.3 2.1 57.4
Sampath Bank PLC 44
Financial Review contd...
Annual Report 2010 / Management Discussion and Analysis / Financial Review
Management Discussion and Analysis contd...
Fee and commission income increased
by 12.9% to Rs. 1.4 Bn in 2010 from
Rs. 1.2 Bn in 2009, due to the growth
in lending, credit and debit cards, trade
related services and other fee-based
activities. Professional service fees and
trade related fees increased by 12.0%
and 23.9% respectively to Rs.491.1
Mn and Rs. 399.3 Mn in 2010 from Rs.
438.4 Mn and Rs.322.2 Mn respectively
in 2009 due to the increase in loan and
trade related fees as a result of growth
in the turnover volumes.
Fees from Sampath Cards increased by
21.0% to Rs. 230.5 Mn in 2010, from
Rs.190.5 Mn in 2009 predominantly
due to the increase in the number of
new credit and debit cards issued, and
the resulting increase in card transaction
volumes.
Cost to Income
The cost to income ratio improved by
1.2% to 55.8% in 2010 compared to
57.0% in 2009, despite the additional
investment on the rapid branch
expansion. This improvement was
primarily due to the 9.2% increase in
net interest income, a 12.9% increase in
fees and commission income and a
76.6% increase in other income.
Overhead expenses, excluding credit
losses, totaled Rs.8.0 Bn in 2010,
compared with Rs.6.9 Bn in 2009 - an
increase of 16.8%, which included the
additional costs incurred on setting up
40 new branches and to recruit 400
additional team members.
Credit Loss Provision
The provision for specific credit losses
increased by 444.7% to Rs.1.8 Bn in
2010, compared to Rs.0.3 Bn in 2009.
The increase was primarily due to, an
additional loan loss provision made
against certain identified NPLs as a
prudent measure, over and above the
prevailing time–based provisioning
requirements and without considering
the collateral held and including an
additional impairment provision of
Rs. 275.9 Mn made on the ordinary
share investment in Union Bank as
instructed by the Central Bank of Sri
Lanka.
Balance Sheet
Interest rate and market risks inherent in
our assets and liabilities were managed
within prudent limits, while ensuring
adequate liquidity and funding sources
were available to sustain the growth of
the Bank.
We also took significant measures to
reposition our balance sheet in 2010,
by improving our interest earning assets
and by reducing non interest earning
assets by 0.4% from 2009.
Treasury Bills and Bonds
Our portfolio of treasury bills and
bonds held primarily for liquidity,
interest rate risk management
and yield enhancement purposes
included extremely liquid, high-
quality Government debt securities.
The portfolio comprised Rs. 31.4 Bn
of treasury bills and bonds as at 31
December 2010, compared with Rs.
31.8 Bn as at 31 December 2009.
In addition, we held Rs. 899.1 Mn
worth marketable Dealing securities
available for sale as at 31 December
2010 compared to Rs. 276.2 Mn as at
31December 2009.
Loans and Advances
Loans and advances amounted to
Rs. 128.6 Bn as at 31 December 2010,
compared with Rs. 98.7 Bn at the end
of 2009. The increase was largely due to
the growth in overdrafts, term loans and
pawning products. Overdrafts and term
loans increased by Rs. 7.6 Bn (45.3%),
and Rs. 11.7 Bn (22.1%), respectively,
in 2010 compared to last year. Pawning
advances too increased by Rs. 9.7 Bn
in 2010 over the previous year. The
deflated demand for leasing recorded in
the first three quarters of 2010, caused
leasing advances to decrease by
Rs. 157.5 Mn (a drop of 4.5%), to
Rs. 3.3 Bn in 2010 from Rs. 3.5 Bn in
2009.
2010
Rs. Bn.
2009
Rs. Bn.
Growth
%
Deposits 150.5 126.1 19.4
Loans & Advances 128.6 98.7 30.3
Non-performing (Net of IIS) 5.0 7.5 32.5
Credit Loss Provision 4.5 4.1 10.5
Total Assets 185.1 156.2 18.5
Shareholders’ funds 15.0 11.8 26.8
Sampath Bank PLC 45
Annual Report 2010 / Management Discussion and Analysis / Financial Review
Deposits
Deposit growth is an important
contributor to the growth in net interest
income and the net interest margin.
Deposits which stood at Rs. 150.5 Bn as
at 31 December 2010, compared to
Rs. 126.1 Bn at the end of 2009, funded
81.3% of total assets in 2010 compared
to 80.7% 2009. Total interest-bearing
deposits increased to Rs.136.7 Bn in
2010 from Rs.116.4 Bn a year ago. Total
non interest-bearing deposits increased
to Rs.13.7 Bn in 2010 from Rs. 9.6 Bn a
year ago.
Low cost deposits increased from
Rs. 51.8 Bn to Rs. 73.6 Bn in 2010,
reflecting a sound growth in corporate,
consumer and business account
relationships. This low-cost source of
funding rose to 48.9% in 2010 from
41.1% in 2009.
Liquidity and Funding
Effective liquidity management is
needed to ensure that sufficient
funding is available to meet customer
loan requests, customer deposit
maturities/withdrawals and other cash
commitments, under both normal
operating conditions and unpredictable
industry or market circumstances
without any delay. The Bank’s ALCO
establishes and monitors liquidity
guidelines that require sufficient asset
based liquidity to cover potential
funding requirements.
The portfolio of treasury bills and bonds
provided sufficiently liquid assetswhich
augmented the readily liquid resources
of cash and dues from banks, as well
securities purchased under resale
agreements. Of the Rs. 31.4 Bn worth
debt securities held in this portfolio as
at 31December 2010, Rs. 7.8 Bn, or
25.0%, is expected to mature or be
prepaid within three months in 2011
and an additional 23.6 Bn, or 75.0%
within three to twelve months in 2011.
Customer deposits have historically
provided a sizeable source of relatively
stable and low-cost funds. Deposits
and shareholders’ equity funded 89.4%
of total assets in 2010 compared to
88.3% in 2009. The remaining assets
were funded by long-term debt, short-
term borrowings, securities sold under
repurchase agreements and other
liabilities. Other liabilities amounted to
Rs. 5.4 Bn in 2010 as compared to
Rs. 5.5 Bn in 2009, whereas other
liabilities evidenced by paper amounted
to Rs. 3.2 Bn and Rs.3.1 Bn in 2010 and
2009, respectively.
Credit Quality
As we continue to grow our operations
as a premier financial services provider.
it is critically important to maintain
a well-managed loan portfolio. We
manage our credit risk by maintaining
prudent credit policies and continuously
examining our credit process. In 2010,
non-performing loans as a percentage of
loans outstanding substantially declined
in comparison to the previous year. Asset
quality improved in 2010 compared with
a year ago, with net non-performing
assets decreasing by 30.7 % to Rs. 5.0
Bn in 2010 compared to Rs. 7.5 Bn in
2009.
Gross non-performing ratio improved
by 3.9% to 4.5% in 2010 compared to
8.4% in 2009. NPL Ratio net of Interest
in suspense (IIS) too improved by 3.7%
to 3.9% in 2010, compared to 7.6% in
2009. NPL Ratio net of specific provision
was significantly lower than in 2009,
recording 0.4% in 2010 compared to
3.5% in 2009. Non-performing asset
cover improved tremendously, both
on gross and net basis by 29.3% and
34.6% to record 78.5% (gross NPA) and
88.9% (net NPA) in 2010 compared to
49.3% and 54.3% in 2009.
Taxation
The effective tax rate for 2010
decreased to 26.6% from 47.2% in
2009. The decrease was primarily due
to tax exempt income offsetting the
effects of add-backs and the benefits
from deferred tax liability adjustments.
Tax exempt income increased to Rs.3.1
Bn in 2010, compared with Rs. 2.1
Bn in 2009. The increase was largely
due to the recovery made against an
impairment provision on account of
the bond investment and the capital
gains on sale of bonus shares issued by
LankaBangla Finance Ltd.
The Bank recorded a net deferred
tax liability of Rs. 196.4 Mn as at 31
December 2010, as against Rs. 481.2
Mn at the end of 2009. The tax effects
of temporary differences that gave
rise to significant portions of deferred
tax assets and liabilities are presented
in Note No. 26.1 to the Financial
Statements.
Sampath Bank PLC 46
Annual Report 2010 / Management Discussion and Analysis / Financial Review
Financial Review contd...
Management Discussion and Analysis contd...
Return on Assets (ROA) and
Return on Equity (ROE)
Profitability ratios for 2010 were
impressive, as evidenced by increase
in after tax Return On Assets (ROA) to
1.9% from 1.4% in 2009 and after tax
Return On Equity (ROE) of 24.6%, which
increased from 19.4% in 2009.
Shareholders’ Funds
Over the years, the Bank has succeeded
in increasing our shareholders’ value
through several efficient measures
including sustaining customer
satisfaction, strong financial results,
reinvestment in our businesses and
prudent risk management. Our main
source of capital in 2010, continued to
be retained earnings, which increased by
Rs. 3.1 Bn in 2010.
The Bank’s total risk-based capital ratio
stood at 12.9%, while the Tier 1 Capital
ratio was 10.7% as at 31 December
2010, exceeding the minimum
2010 2009 Change %
Net Asset Value per share (Rs.) 98.3 77.5 26.8
ROA - After Tax (%) 1.9 1.4 36.6
ROE - After Tax (%) 24.6 19.4 26.7
Cost to Income (%) 55.8 57.0 (2.2)
Net NPA (%) 3.9 7.6 (48.2)
Open Credit Exposure (%) 3.6 26.6 (86.5)
Capital adequacy (%)
- Tier 1 10.7 10.4 2.7
- Tier 1 &11 12.9 13.5 (4.6)
Dividend per share (Rs.) 8.09 6.25 29.4
regulatory limits of 10% and 5%,
respectively compared to Bank’s Capital
ratios as at 31 December 2009 which
were 13.5% and 10.4%, respectively.
The Bank undertook two sub-divisions
of shares in March and October 2010. In
the first share sub-division, shareholders
received one share for every ten shares
held by them. In the second share sub-
division was a share split of one for one,
aimed at further increasing the market
liquidity of Sampath Bank shares. The
ratio of shareholders’ equity to total
assets was 8.11% as at 31 December
2010, compared to 7.58% at 31
December 2009.
Dividends
The Bank declared an interim dividend
for 2010 in the form of fully paid shares
of the Bank, allotted on the basis of
Rs. 3/- per existing share, valued at
Rs. 326/- per share, after providing for
withholding tax of 10%.
A Final dividend for 2010 too is
proposed in the form of fully paid shares
on the basis of Rs. 6.60 per existing
share valued at Rs. 300/- per share, less
a withholding tax of 10.0%.
Sampath Bank PLC 47
Annual Report 2010 / Management Discussion and Analysis / Key Performance Indicators
Goal Achievements
¥ear ended J1st December 2010 2009 2008 2007 2006
Annual post-tax profit growth >20% 57.44 48.40 34.43 2.30 25.19
Return on equity >18% 24.59 19.41 15.41 13.84 16.78
Return on assets >1.25% 1.94 1.42 1.04 0.87 1.06
Total capital adequacy ratio >12.5% 12.91 13.45 11.95 11.58 10.82
Key Performance Indicators
10
0
10
20
40
60
50
30
06 07 08 09
Profit Growth
%
Profit Growth
Target
0
2.5
5.0
10.0
7.5
12.5
15.0
06 07 08 09 10
Capital Adequacy
%
Tier - 1 (Required)
Tier - 1+11 (Required)
Tier - 1
Tier - 1 + 11
0
0.25
0.75
1.25
1.75
1.50
2.00
06 07 08 09 10
Return on Assets
%
ROA
Target
0.50
1.00
0
6
12
24
18
30
06 07 08 09 10
Return on Equity
%
ROE
Target
Sampath Bank PLC 48
“We ensured that our aggressive expansion did not
compromise the quality of our customer service”
Personal Banking
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
Management Discussion and Analysis contd...
Sampath Bank PLC 49
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
Expansion beyond
conventional boundaries
For two consecutive years, Sampath
Bank has recorded the biggest branch
expansion drives within the industry.
In 2010 alone, we opened 40 branches
and we are accessible to Sri Lankans in
all 9 provinces. Out of our total network
of 171 branches, we have 76 branches
across the Western Province, 9 in Uva,
15 in the South, 9 in Sabaragamuwa,
14 in the North West, 8 in the North
Central, 11 in the North, 13 in the East
and 16 in the Central Province.
With the success of our centralized
credit model at regional offices, we
also expanded our regional focus this
year, especially in the North and East.
It helped us expedite credit processing
and improve credit quality, despite the
aggressive expansion. We opened 2
Regional offices in the North and the
East, 1 in North Central and 2 more in
Colombo – increasing the total number
of Regional Offices from 11 last year
to 16 this year. It enabled Regional
Managers to visit branches more
frequently and accelerated decision
making on specialized facilities to suit
the diverse needs of customers in their
respective localities.
Growth in the Deposit Base
During the year, we surpassed Rs.150
Bn in our deposit base by adding
Rs.24.4 Bn worth of new deposits.
This increase of 19.4% is a remarkable
achievement, especially given the low
interest rate regime that prevailed in
the market and compared well with
the growth of Rs.18.7 Bn (17.5%
increase) recorded last year.
The thrust during the year continued
to be on attracting Saving and Current
Account deposits in order to control
interest costs and this enabled the Bank
to maintain competitive lending rates
within the market. The rapid Branch
expansion proved to be a catalyst to
the growth in our deposit base, and
which, together with the introduction
of new current account based products,
continuous marketing campaigns on
Current and Savings accounts, and
timely strategic decisions improved the
‘low cost-high cost’ deposit ratio from
41:59 to 49:51 by the end of 2010.
Although the Bank was compelled
to offer higher rates to attract more
deposits to fund the surge in lending
towards the latter part of the year,
prudent management of our assets and
liabilities enabled the Bank to manage
the cost of deposits and even surpass
the targeted profitability set for the year.
ATM Network
During the year, we added 39 new
ATMs to our network which now stands
at a total of 222 machines. Our ATM
network is by far the most reliable
within the industry recording a 99.6%
ATM up-time this year, and catering
not only to our own customers but
also to the card holders of other banks.
During the year, we also increased our
interbank links by adding HDFC, PABC
and NDB Bank to the links we already
maintain with BOC, Union Bank, DFCC
Vardhana and NSB; to increase our
interbank ATM network to 920, from a
linked network of 730 last year. Special
value added features innovated to the
Sampath ATM network to improve
customer convenience during the year,
have been detailed in the Information
Technology review.
e-Delivery Channels
Internet payment gateway (IPG)
We continued to lead the market in
the IPG domain space, entrenching
ourselves as the preferred service
provider for both the Private and Public
Sectors. ‘Lanka Gate’ - the Public Sector
e-services hub which selected the
Sampath IPG as their payment gateway
has become a tremendous success,
offering services such as e-revenue
licenses, with plans underway to offer
many more technology-led public
services. Trailblazing yet another first in
the industry, we have become the first
Private Bank to be mandated to manage
public funds, through this IPG.
We are in the process of upgrading
the IPG application to secure it from
internet based security threats, as
well as to integrate mobile Commerce
(m-Commerce) and Interactive Voice
Response (IVR) based services. A
comprehensive IVR based solution has
already been offered to Sri Lankan
Airlines.
A new m-Commerce Platform
We are in the process of identifying
and evaluating a robust and secure
m-commerce solution with improved
user friendliness, the ability to run on
virtually any mobile phone, be mobile
operator independent and bank
independent.
Sampath Bank PLC 50
This solution could lead to capturing the
market leadership in the m-commerce
space and would enable us to reach
the un-banked communities, more
effectively.
Sampath PayEasy
With a rapidly expanding network
of service providers and currently
consisting of over 60 merchants, the
‘Sampath PayEasy’ portal, continues
to be the market leader and the
preferred e-service provider for utility
bill payments. The Bank continues
to explore new tie-ups with service
providers, the most recent being the
integration of on-line payment of school
fees, while the bank is also currently
collaborating to integrate with the
systems of the Colombo Municipal
Council, to facilitate the online payment
of rates.
Sampathnet
Leveraging on the upward trend in the
Stock Market during 2010, Sampathnet
has integrated with several leading Stock
Brokers in the nation - such as Acuity
Stock Brokers, Ceylinco Stock Brokers,
Asha Philip Securities and Capital Trust
Securities to facilitate real time payment
services.
It is proposed that the new Sampathnet
application developed in-house with
enhanced features and security levels
would be launched in 2011.
B2B Integration offering total
solutions
Our B2B solutions aim to integrate with
our customer’s payment systems, in
order to provide online management of
their cash positions and related services.
Currently, we have successfully linked
up with several Insurance Companies to
provide online collection and payout of
policies.
We are currently working on taking
our B2B solutions to a higher plateau,
by providing customised solutions to
manage total financial supply chains of
Companies, as well as wholesale and
retail merchants.
Cnline Facility Management
Service
The existing ticket booking engine -
which facilitated online ticket booking
and facility management for the IIFA
event held in Sri Lanka in 2010, has
been revamped as a comprehensive
facility management service.
Facilitating Hospitality
Management Services
Maximizing the extensive market
opportunities that currently prevail in the
hospitality management industry, the
Bank is exploring avenues to offer its IPG
with extended features, to the industry,
with ‘Roomsnet’, a comprehensive
online travel related site connected to
the global travel industry, becoming the
first customer to avail this service.
Personal Banking contd...
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
Money Transfer Facilities Foreign Currency Accounts
Savings Accounts Current Accounts Term Deposits
Credit & Debit Cards
Personal Banking Products and Services
Management Discussion and Analysis contd...
Sampath Bank PLC 51
SMS Alertz
The Bank is promoting SMS Alertz as
a fraud detection module among its
customers, and is currently revamping
the product to be re-launched in early
2011, with advanced features based on
a study of market dynamics and through
consumer insights. Currently, over
56,000 customers enjoy this facility.
Migrant Worker Remittances
A significant quantum of migrant
worker remittances to Sri Lanka, are
generated from the Gulf Region. Despite
the downturn in the economy within the
region, inward remittances channeled
through Sampath Bank by migrant
workers across the world continued to
grow in 2010, reflecting an increase of
18.0% over the previous year.
Claiming over 6.0% of the total inward
remittance market share during the
year, the Bank contributed US$ 216
Mn to the nation’s balance of payment
position - a commendable growth in
comparison to the US$ 183 Mn remitted
in 2009. Our competitive advantage is in
our ability to offer immediate proceeds
for collection on most remittances
channeled through Sampath Bank
and has contributed to our success
in securing a large percentage of
remittance customers. Several measures
were initiated during the year to
strengthen this market share, including;
establishing 4 new correspondence
arrangements with Exchange Houses
in destinations with a high potential
for remittances, strengthening existing
arrangements with many leading
Exchange Companies across the world
including setting up correspondence
arrangement with international service
providers such as MoneyGram, Coinstar
(formally Travelex) and RIA Financial
services as their co-partners in Sri Lanka.
We also enhanced the services offered
to our customers residing in UK and
Canada by signing an MOU with the
ICICI Bank, to provide a web based
solution for remittances to Sri Lanka.
Further, we intend to launch a service
in early 2011 that allows money to
be remitted to Sri Lanka, via internet
banking thus providing a value added
service to remittance customers to
send money even on designated bank
holidays.
The Bank has also deputized its
Executives at Exchange Houses in the
Gulf region and in Europe, in order to
offer personalized assistance to help
Sri Lankan migrant workers complete
their banking needs with ease. In the
year ahead, we plan to second 10
more Executives to destinations where
substantial migrant workers reside, thus
reflecting our intent as a truly national
Bank, committed to serve every Sri
Lankan.
With migrant workers continuing to
be one of our most valuable national
resources – and the highest contributors
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
Internet Banking Priority Banking Telephone Banking
Loans & Overdrafts Pawning Facilities Leasing Facilities
Sampath Bank PLC 52
to the nation’s coffers, the Bank plans
to increase the numbers of marketing
executives stationed overseas and
expand its global presence by entering
into new correspondence arrangements
with exchange houses that comply with
the Bank’s evaluation criteria. We will
also continue to upgrade our award
winning e-remittance technology to
position the Sampath Bank as the
most preferred money transferring
establishment in Sri Lanka.
Sustaining the quality of the
advances portfolio
We adopted a two pronged approach
to sustain the quality of our lending
and of our customer services. Recording
an average of over 3 branches set
up per month, we ensured that
our aggressive expansion did not
compromise our service quality. During
the year, we recruited the services of
two senior, retired AGMs of the Bank
to train all our staff, to ensure that
our unparalleled customer care levels
remained uncompromised despite the
aggressive expansion. In addition, we
ensured a strategic balance in pursuing
an aggressive growth in our lending
by maintaining the quality of our
advances by lending to predetermined
sectors of the economy and segments
of society. Our focus on customer
care and prudent lending contributed
significantly to sustaining the quality
of the advances portfolio. Further,
we also provided focused training for
Branch Managers, Assistant Managers
and officers attached to Regional
Offices, to disseminate knowledge on
improving credit quality and to maintain
operational efficiencies.

Housing and other loans
The downward shift in interest rates
created significant opportunities for the
Bank to exploit the demand for housing
and other loans. During the year, the
Bank promoted its ground breaking
‘Next Generation Housing Loans’, where
during the 25 year tenure of the loan,
parents take on repayments within
the first 5 years subsequent to which,
the child, once employed, takes over
a small portion of the repayment and
ultimately the entire repayment is made
by the child. Being the only bank in
the industry to offer a loan with such
flexible features, the Bank envisages a
tremendous growth in demand for this
product in future.
Leasing
Despite the sharp decline in interest,
the Bank did not pursue an aggressive
growth in leasing in 2010, and is poised
to fully exploit opportunities presented
by the combined effects of low leasing
rates together with duty concessions
granted by the government to import
vehicles, by aggressively promoting
leasing in 2011.
BIZ Cash - Credit against gold
With the rapidly increasing market price
of Gold, we reoriented our lending
focus to suit the market trend, by
introducing BIZ Cash - advances of very
high value against gold. Offering a more
personalized service than pawning, BIZ-
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
Distribution of branches in 9 provinces
Western 45%
Uva 5%
Southern 9%
Sabaragamuwa 5%
North West 8%
North Central 5%
North 6%
East 8%
Central 9%
0
20
40
60
100
80
06 07 08 09 10
Deposit Mix
%
Demand
Call Deposits
Certificate of Deposits
Savings
Fixed Deposits
Margin Deposits
0
50
100
150
250
200
06 07 08 09 10
9
6
1
0
5
1
1
2
1
3
1
1
7
1
Branch & ATM Spread
Nos
Branches
ATMs
Personal Banking contd...
Management Discussion and Analysis contd...
Sampath Bank PLC 53
Cash customers are personally attended
to by the Branch Manager in a secluded
area, with privacy. The product aims
at catering to the short term financial
needs of the business community,
where the facility is processed and the
disbursement is made within minutes of
a customers’ request. With its increasing
popularity within our branches in the
Western Province, we hope to take the
product island wide in the year ahead.
Pawning
In spite of fluctuating gold prices,
the growth in Pawning contributed
significantly to the Banks advances
portfolio. Accordingly, the growth which
continued from last year, accounted
for 22% of the Bank’s loan book in
2010. While our advance per sovereign
continued to be the highest among
leading banks, we also initiated a rate
reduction which took effect across the
pawning sector, and was yet another
pioneering initiative by the Bank.
Platinum plus Customers
This year, we took privilege banking to
an ever higher plateau by introducing
the ‘Platinum Plus Circle’- an exclusive
banking service that rewards our
premium customers with a completely
new experience in banking.
Platinum Plus Customer centers located
at our founder Chairman’s residence
at Cambridge Place, Colombo 7 and
at the Kandy City Centre, reflects the
ultimate banking experience to our high
net-worth customers, with the privacy
to discuss their most discerning personal
financial needs with professional staff.
Or, their entire banking needs will be
met, with a mere phone call to the
center. A holiday bungalow maintained
by the Bank can also be availed. Based
on the success of our Platinum Plus
centre in Colombo, we also opened a
second centre in Kandy and hope to
expand to other parts of the country.
Payment Guaranteed Cheque
In addition to the Platinum Plus Centre,
our high net worth customers with
an unblemished account history, were
offered ‘Payment Guaranteed Cheques’
– a service offered for the first time by a
Bank in Sri Lanka.
This value added service is offered only
to a limited number of customers,
who will be issued a specially designed
cheque book, where payments are
guaranteed up to a value, pre-decided
and printed on the cheque leaves by the
Bank.
Subsequent to this initial introductory
phase aimed at Platinum-Plus
Customers, the service will also be
offered to other high net-worth
individuals, business leaders, and
professionals in both the public and
private sector.
The future of Personal
banking
A brief outlook for 2011
º Continue with the aggressive branch
expansion – targeting to set up at
least 40 more branches to penetrate
areas where financial services are
needed the most
º Continue the expansion of Regional
Offices and consolidate the success
of the centralized credit model to
Annual Report 2010 / Management Discussion and Analysis / Personal Banking
provide an unmatchable quality of
service
º Encourage Regional Managers to
provide a more personalized service
to suit the needs of high net worth
customers in their localities
º Use database marketing as a
strategic tool to capture business
from the high net worth customers
in our database of over 1 Mn,
to provide Advances that are of
acceptable credit quality
º Explore potential to provide
Advances to the emerging sectors
of tourism, construction, agriculture,
transport and housing
º Pursue with plans to conduct
joint promotions with reputed
organizations, to promote our
wide spectrum of personal banking
products
º Further consolidate on the
competitive advantage gained by
expediting credit processing, using
the automated credit processing
system
º Continue to develop competencies
on credit evaluation, disbursement
and monitoring, among our staff
to ensure a speedy and an efficient
customer service
Sampath Bank PLC 54
The Ultimate Card
“We are well on course to regain market leadership in
credit cards by 2013”
Annual Report 2010 / Management Discussion and Analysis / The Ultimate Card
Management Discussion and Analysis contd...
Sampath Bank PLC 55
1989 Crossing boundaries
- The first credit card, in Sri
Lanka
In 1989, we introduced the MasterCard
to the nation, redefining credit and the
lifestyle of Sri Lankans. Across the years,
we added to the range of cards on
offer, launching the first Visa Platinum
Credit Card in Sri Lanka in 2002 –
then, considered as one of the most
prestigious Credit Cards in the world.
Since then, we have come a long way,
with 2010 marking one of the most
phenomenally successful years for our
Credit Card operations.
2010 - Exclusivity redefined
This year, we launched the 2 most
exclusive cards issued by Visa
International, for the first time in
Sri Lanka.
The ‘Visa Signature Card’, a high end
credit card experience with exclusive
benefits and the ‘Visa Infinite Card’,
which has been launched even in India
very recently. Visa Infinite is the privilege
of an elite few, where membership is by
invitation only.
The Year of Cards
Subsequent to an initial market analysis
in mid 2009, we realized the need to
re-position the Sampath Cards to drive
its progress and thus adopted a two
pronged approach; firstly, we positioned
our cards both to fulfill consumer
expectations and also to exploit the
prevalent market conditions to our
advantage. Secondly, as a deliberate
strategy we introduced new products
wherever we felt that we had a product
gap in the market. As a direct result
of this, we launched the Sampath Visa
Debit Card to the market and followed it
up with the Co-branded Visa Debit card
with the Cargills Super Market Chain
to maintain a differentiated advantage
from our competitors.
We declared 2010 as ‘The Year of
Cards’ within the Bank, setting out
on a strategic course to give real
value addition to customers, as well
as position the cards as ‘the most
responsible choice’.
The path to positioning our Cards
in a challenging environment
One of the key downsides of consumer
spending is perceived to be the inability
to control or rationalize spending
between essentials and non-essentials.
A challenge exacerbated even further,
when consumer spending is via credit
cards which are universally deemed as
an irresponsible, unnecessary and a
wasteful choice.
Consequently, the challenge that lay
before us was to find a conclusive
platform that would offer the consumer
justifiable reasons to consider Sampath
Credit Cards, while at the same time
countering the surge of negativity both
locally and globally about the use of
credit cards.
We strategised a course that would
address the gap that existed within
the credit card market, between a
consumer’s genuine concerns about
irrational spending through cards and
the responsible use of a credit card.
Thus emerged the idea of responsible
spending and positioning Sampath
Cards as ‘the responsible choice’.
We embarked on a two-pronged
approach to attach credibility to
Sampath Cards as a responsible choice.
On the one hand, we appealed to the
emotions of cardholders, while at the
same time, rationalizing the use of our
cards through two separate campaigns
that worked in conjunction to synergise
our overall objective to position our
cards as a responsible choice and to
regain market leadership in the credit
card industry.
The thematic campaign, featuring the
tag-line of ‘The Responsible Choice’
focused on three distinct occasions
where, significant expenditure on a
credit card would not be questioned –
i.e.; the birth of a child, to provide for a
child’s education and development, and
finally to provide for a child’s wedding;
- emotionally charged occasions where
the use of a credit card would help
spread the financial burden on parents.
We supported our claim of being the
responsible choice by introducing the
following key product propositions /
features which set a new- norm for
the entire credit card industry in 2010.
These value additions and propositions
were introduced immediately after the
positioning campaign through a tactical
campaign which took the market by
storm.
Annual Report 2010 / Management Discussion and Analysis / The Ultimate Card
Sampath Bank PLC 56
º No hidden charges
We levy a mere 4 charges, out
of a possible 28 charged by the
industry – i.e., an annual fee to
issue the card, a cash advance fee
and interest, while the late payment
fee is not levied on the exclusive
‘Platinum’, ‘Signature’ and ‘Infinite’
Cards, as a special privilege
º The Card entitles a cardholder
to travel insurance of up to US$
250,000, even if the air ticket is not
purchased with the card
º Instant, SMS alerts for each
transaction
Introduction of the value added
benefits to the customers
We kicked off our promotions
by offering our cardholders an
extraordinary 60% discount on the total
bill value at a range of selected hotels in
Sri Lanka.
It set the momentum for the successful
launch of a series of offers that were to
follow in the next 12 months, promoting
a range of benefits to Card holders.
º ‘Feast Fest’ & ‘Feast Free’ – A
Cardholder dines free and discount
offers at over 30 restaurants across
the country
º ‘Holiday on sale’ – A 24 month
repayment for air tickets purchased
from the card, with one installment
paid, courtesy of the Bank
º ‘U Shop V Drop’ - Discounts up
to 25% of the total bill at over 12
leading retail outlets island wide
º ‘Cargills Food City Supiri
Deemanawa ‘- A 10% discount on
the final bill at any Cargills outlet
º ‘Town on Sale’ – Discounts upto
25% at selected leading retail outlets
located within a specific Town
º Limited two day discount periods
at selected leading retailers, with
discounts of 25% to 30%
º ‘Bill wipe-off’ – A complete wipe-
off of the total bill at selected retail
outlets and launched to coincide
with specific festive seasons
A dedicated sales force recruited
specifically to sustain the ‘year of cards’
and the support of our branch network
who worked tirelessly to outperform
their targeted card issuances, added to
the impact of one of the most effective
promotional campaigns in the industry
- ‘Sampath Cards – The Responsible
Choice’.
2013 - Moving towards
industry leadership in Credit
Cards
A brief outlook
The transparency of our charges and the
success of our aggressive promotions
helped us record 20,000 new card
issuances, steering us towards our
ultimate goal of regaining industry
leadership.
Annual Report 2010 / Management Discussion and Analysis / The Ultimate Card
The Ultimate Card contd...
Management Discussion and Analysis contd...
Sampath Bank PLC 57
‘Holiday on sale’
‘Town on Sale’ ‘Feast Fest’ & ‘Feast Free’ ‘U Shop V Drop’
‘Cargills Food City Supiri Deemanawa ‘ ‘Triple Benefit‘
We will continue to conform to required
stipulations – such as the interest rate
reduction requested by the CBSL. And
we will continue to surprise the market
and our Cardholders with an array of
value added benefits and exclusive offers
that are lined up to be launched in the
coming year.
Sampath Debit cards
The first Debit Card in Sri Lanka
We were the first Bank in South Asia,
to launch a Debit Card in the region in
1997, and 10 years later became the
first in the region again, to issue the Visa
Mini Debit Card. We then introduced
the standard Visa Debit Card to the
market, thereby increasing our market
share in the Visa space.
'Cne Card - Many benefts´
Our thematic campaign, ‘One Card –
Many benefits’ launched in 2010, was
geared at reinvigorating the use of Cards
in the wake of the global debt crisis and
to encourage our Debit Cardholders to
explore its real potential, instead of as a
mere ATM Card.
º A World’s First, ‘Sampath Triple
Benefits’ was launched in September
2010, Under this scheme, the
Cardholder is entitled to purchase
any goods to suit their lifestyle
at 0% interest, maintain the full
value of the goods in their own
account until the end of the
repayment period which can be up
to a maximum of 24 months, and
continue to enjoy interest on their
funds, during the entire period
º Debit Cardholders were also entitled
to most promotions, offered to
Credit Cardholders, which was not
offered by most competitors
The success of our conversion process
which commenced in March 2010, is
reflected in the tremendous response,
with 385,000 Visa Debit cards issued,
while the transaction volumes increased
by nearly 114% when compared to the
transactions volumes in December 2009.
Co-branded Debit Card
The first co-branded Debit Card in South
Asia with the added benefit of collecting
redeemable loyalty points for every
transaction completed at any Cargills
Food City outlet, was launched by the
Bank in March 2010.
The card can also be used at any ATM
within the Sampath network - including
at the interbank linked ATM network of
920 machines island wide, at any VISA/
PLUS ATM, worldwide, and to make
purchases at over 20 Mn VISA merchant
locations across the world.
Annual Report 2010 / Management Discussion and Analysis / The Ultimate Card
Sampath Bank PLC 58
Corporate Banking
“Strengthened corporate relationships helped us offer
tailor-made financial solutions geared to the emerging
needs of our economy”
Annual Report 2010 / Management Discussion and Analysis / Corporate Banking
Management Discussion and Analysis contd...
Sampath Bank PLC 59
Corporate Banking products & services
Corporate Credit & Corporate
Finance Unit
Trade Services & Foreign Currency
Banking Unit
Term Loans Documentary Credit
Overdrafts Acceptances
Leasing Facilities Import & Export Financing
Loan Syndications Trust Receipt Loans
Securitisation Pledge Facilities
Money Market loans Shipping Guarantees
Dealer Financing Handling of Collection Bills
Guarantee Facilities Packing Credit
Commercial paper Advising/Confirmation of LC’s
Margin Trading Purchasing/Negotiation of LC’s and Bills
Arranging Debt & Equity Financing Maintenance of FCBU accounts
Management of IPO’s Credit facilities in foreign currencies
Investments in Corporate Debt
Instruments
and other infrastructure are being
prioritised and will lay the foundation to
increase the ease of doing business in Sri
Lanka. Advanced telecommunications
facilities are increasing the connectivity
of all Sri Lankans to the development
mainstream, while the leisure industry is
being geared to become a key revenue
driver with targets to attract over a
million tourists in 2011 and 2.5 Mn by
2016.
The strengthened corporate
relationships enabled us to explore
the specific needs of our corporate
clients and gear financial solutions at
competitive prices that would help
them exploit opportunities within these
emerging sectors.
Strengthening corporate
relationships
Rapport building with our corporate
customers was our main focus
throughout the year. Among several
initiatives to strengthen corporate
relationships, key corporate customers
were also invited to be part of the elite
Platinum Plus Circle initiated under
Personal Banking with its range of
exclusive benefits.
Our exceptionally personalized service
stood us in good stead as the credit
demanded by the private sector
accelerated towards the latter part of
the year, buoyed by an optimistic post-
conflict development agenda which
has earmarked certain growth sectors
for our nation. Development of roads
One-stop-shop - redefining
the boundaries of corporate
banking
Prudent management of our assets
and liabilities, the diversified fund
base, effective pricing strategies and
the success of an integrated risk
management unit have helped us read
the market perceptively and added
to the strength of our expertise in
corporate as well as trade finance, which
we built up over the years. This year,
we consolidated our strengths under
one roof and geared our operations to
become a one-stop-shop that can design
corporate solutions which proactively
met the needs of market trends. It
helped us redefine corporate banking
as a total solutions provider – able to
finance capital expenditure, and meet
the working capital and trade financing
needs of our customers all under one
roof, thus increasing the ease of banking
with us.
An enhanced Single Borrower Limit
also strengthened the bank’s capacity
to deliver solutions that matched the
expectations of multi-national and other
large blue-chip companies who began
investing in the economy in their quest
to be a part of the new development
paradigm of the nation.
Corporate Credit
Excellent customer relationships
maintained with our wide network
of corporate clients proved to be the
key catalyst to rolling out our main
corporate credit strategy for the year,
viz; to canvass new business accounts
while ensuring maximum utilization
Annual Report 2010 / Management Discussion and Analysis / Corporate Banking
Sampath Bank PLC 60
of limits of existing customers. This
enabled Corporate Credit to record an
exceptional 41% growth in its advance
book during 2010.
Corporate Credit is equipped to offer
customers total financial solutions under
one roof. The Bank’s ability to maintain
a strong liquidity position by attracting
deposits through the wide spread and
expanding network of branches, and
the ability to effectively manage the cost
of funds by closely monitoring market
rates, paved the way for Corporate
Credit to offer competitive interest rates.
The sound liquidity of the Bank also
enabled us to offer competitively priced
short term/money market loans.
During the year we attracted many new
customers into our corporate credit
portfolio. We also maintained a very
close rapport with our existing clients,
monitoring their utilisation limits on a
regular basis in order to ensure that we
remained as their primary banker.
With the expected boom in the
tourism industry we explored funding
opportunities to construct new hotels
and refurbish existing hotels. We also
focused our efforts at promoting leasing
and hire purchasing to finance the
increasing portfolios of leading finance/
leasing companies.
The relaxation of import taxes spurred
us to focus on our existing customers,
promoting them to utilize their import
facilities to the maximum. This enabled
us to record a 56% increase in our
import volumes. Further, efforts to
expand our portfolio of clients during
the year, enabled us to attract new
accounts with import related businesses.
Our export volumes too, increased
by 14% during the year, while we
succeeded in attracting several new
exporters, mainly engaged in the tea
industry.
In addition to the aggressive growth
in advances, we also concentrated on
maintaining the quality of our loan book
by focusing on the recovery of non-
performing advances, which contributed
to the decline in the NPL ratio from
5.2% in 2009 to 3.0% in 2010.
Corporate Credit contributed
significantly to the overall performance
of the Bank, and was largely due to the
aggressive lending strategies adopted
which enabled us to maintain the
momentum of the growth in advances
throughout the year. Enhanced import
volumes and guarantee commissions
also contributed to the bottom line.
We will pursue with our aggressive
lending policies in the year ahead,
concentrating on increasing our
advances to the emerging sectors
that are being prioritised as part of
the nation’s economic revival. We will
concentrate on large infrastructure
projects such as development of roads
and ensure that proposed term loans to
construct or refurbish hotels are utilised.
Corporate Finance
The Corporate Finance Unit recorded
an extraordinary three-fold growth in
2010, due to our success in exploiting
opportunities created by the post-
conflict era.
A key achievement during the year, was
the structured debt financing offered to
non-banking financial institutions being
set up across the North and the East.
Corporate Finance also expanded its
operations into the fast developing
health sector and to the buoyant
equities market, where we offered
financing and became a service provider
for IPO’s.
During the year, we also lent our in-
house expertise to restructure businesses
and facilities that were adversely
impacted by the effects of the global
economic downturn, as well as years of
internal conflict, locally.
The success of our timely follow up
measures, and the effectiveness of
our pre evaluation of investments and
lending proposals, has contributed to
a zero NPA portfolio since inception of
corporate finance unit.
Going forward, Corporate Finance is
geared to grasp opportunities presented
by the post-conflict resurgence of
economic activity, reaching out to both
local as well as overseas entrepreneurs
mainly in the hospitality industry, as well
as those related industries involved in
infrastructure development.
Corporate Banking contd...
Annual Report 2010 / Management Discussion and Analysis / Corporate Banking
Management Discussion and Analysis contd...
Sampath Bank PLC 61
The fast growing equities market will
also be a key area of focus in 2011,
where we would look to provide services
to facilitate the needs of both issuers of
public offerings as well as investors.
International Operations
Trade Finance
Trade Services with a personal touch has
been our hallmark over the years.
This year, process improvements and
product innovation enabled us to
deliver unmatched service levels to
our customers. The investments made
over the last two years to improve
the technical knowledge of our trade
finance staff, enabled teams of trade
finance experts to deliver solutions at
our customer’s door step.
New trade finance products innovated,
such as the ‘Sampath Vishwa
Corporate Trade’ not only enabled us
to rapidly expand our trade-related
business volumes but also improved
customer convenience and accelerated
the speed of our service delivery.
Customers are now able to request
and amend Documentary Credit and
initiate enquiries regarding their trade
transactions entirely online, from the
convenience of their home or office.
Strengthened links with well established
and trusted Correspondent banks
helped us negotiate some of the most
competitive rates in the industry on
behalf of our customers – contributing
to a significant volume growth.
Subsequent to measures taken during
the year to build up new ties and
move out of non-effective working
arrangements, we now have a network
of 35 Correspondent banks, with whom
we maintain nostro accounts.
We tapped into new trade finance
markets presented through the
aggressive expansion embarked upon
by the Bank across the country, and
appointed a dedicated marketing
team to canvass for new business
opportunities to increase our market
share. We also improved our import
business volumes by capitalising on
opportunities presented by the reduction
of import-taxes - especially on goods
such as motor vehicles, electronic items,
computers and fertiliser.
Our efforts culminated in an overall
growth of 44% in our Import operations
– maintaining the success of the
previous year and also enabled us to
clinch the runner up award for the ‘Best
Sri Lanka Trade Bank 2010’ awarded
by the Trade Finance magazine of the
prestigious Euromoney Institutional
Investor Publications.
Foreign Currency Banking Unit
Operating the off-shore banking unit
as a specialised one-stop-shop during
the year resulted in a significant
improvement to the service levels.
It also helped to closely monitor the
facilities and pursue an aggressive
recovery process thus contributing to
an improved non-performing ratio.
Despite stiff competition mainly from
foreign banks in terms of pricing, the
FCBU expanded its loan book through
facilities granted to emerging sectors in
the post –global recession/ post conflict
era, including the tyre industry and food
processing, to name a few. The Bank
also continued to selectively expand into
the garment sector.
The off-shore banking unit is now fully
geared to not only exploit opportunities
for lending but also to facilitate FDIs
which are being encouraged to finance
infrastructure projects and to revive the
hospitality industry.
The future of Corporate
banking
A brief outlook for 2011
º Subsequent to the completion of
infrastructure development initiatives
of the Government, we will keenly
explore opportunities presented
by the upsurge in the demand for
corporate finance for investment
into post-conflict development in the
North and East
º Continue to be the main currency
note importer
º Further expand our trade business
in line with the expansion of the
branch network by engaging our
dedicated Trade marketing team
º Continue with our commitment to
innovation and product development
which will help improve our service
levels and enhance our market share.
( An enhancement on ‘Sampath
Vishwa Corporate Trade’ is also
envisaged in the year ahead)
Annual Report 2010 / Management Discussion and Analysis / Corporate Banking
Sampath Bank PLC 62
In the context of a macro environment
which witnessed exceedingly thin
margins and low credit demand,
while we steered a course to pursue
aggressive expansion and record a credit
growth that exceeded the industry
growth; ‘Recoveries’, required strategies
which forced us to think beyond the
conventional boundaries of the past.
As a result of innovative approaches
and effective strategies, we were able
to reduce our NPLs in absolute terms
by 32.5%, where as the total industry
reduction was 23.0%.
º Centralising our credit processing
contributed in large measure to
curtail new additions to the NPL
Portfolio
º We transformed our Centralised
Recoveries Division by introducing a
more approachable ambience and
culture to appeal to customers faced
with difficulties in their repayments.
It helped put our customers at
ease, and overcome their traditional
view of it being ‘the most feared
department to visit’
º We inculcated a more customer
friendly mindset among the staff
of the Recoveries Division - driving
the message on the importance of
attending to customers who are in
arrears in a friendly manner
º We attempted to reach amicable
settlements with those customers in
genuine difficulty, providing them
with a gamut of concessions
º Stringent legal procedures were also
initiated to recover from hard core
defaulters, as a last resort
Recoveries
“The key to our success in 2010 was our ability to balance
stringent recovery measures with a genuine concern for
our customers”
Annual Report 2010 / Management Discussion and Analysis / Recoveries
0
1,000
2,000
3,000
7,000
8,000
6,000
9,000
5,000
4,000
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
e
-
1
0
S
e
p
t
-
1
0
D
e
c
-
1
0
8
,
2
4
3
7
,
7
6
7
7
,
8
5
7
7
,
1
0
6
5
,
7
1
5
NPL Position
Rs. Mn.
0
1
2
5
4
9
7
6
8
3
%
Gross NPL (Rs.Mn.)
Net NPL Ratio (%)
0
200
1,000
1,200
800
400
600
J
a
n
-
1
0
F
e
b
-
1
0
M
a
r
-
1
0
A
p
r
-
1
0
M
a
y
-
1
0
J
u
n
-
1
0
J
u
l
-
1
0
A
u
g
-
1
0
S
e
p
-
1
0
O
c
t
-
1
0
N
o
v
-
1
0
D
e
c
-
1
0
New Entrants to Non-performing Category
Rs. Mn.
0
20
40
60
100
80
D
e
c
-
0
9
M
a
r
-
1
0
J
u
n
e
-
1
0
S
e
p
t
-
1
0
D
e
c
-
1
0
NPL Cover
%
0
6
12
24
30
18
%
Provision Cover
Open Credit Exposure
P
r
o
v
i
s
i
o
n

C
o
v
e
r
O
p
e
n

C
r
e
d
i
t

E
x
p
o
s
u
r
e
Management Discussion and Analysis contd...
Sampath Bank PLC 63
Annual Report 2010 / Management Discussion and Analysis / Recoveries
Change in quarterly NPL position
Dec 09 Mar 10 June 10 Sept 10 Dec 10
Net NPL (Rs.Mn.) 7,432 7,025 7,102 6,401 5,047
Net NPL (%) 7.63 6.92 6.82 5.48 3.95
Credit Loss Provision - Specific (Rs.Mn.) 4,061 4,330 4,618 4,127 4,486
Open Credit exposure (%) 26.59 20.84 17.55 16.43 3.59
º Attempts were made to reach
settlements through cordial
discussions, even during litigation
º The Credit Control Unit closely
liaised with Regional and Branch
Managers in monitoring borderline
customers - going that extra mile
to offer reschedulements and grace
periods, in order to avoid them
being classified as an NPL
As a result of our innovative strategies to
strengthen Recoveries and on the back
of improvements to our pre-sanctioning
credit quality and the post-sanctioning
monitoring; we succeeded in reducing
the net NPL ratio to well below industry
standard (3.9% against 5.3% for the
industry) this year, and most importantly,
reduced our NPLs in absolute numbers.
The success of our recovery efforts also
enabled us to significantly reduce our
Non Performing Loans (NPL) during the
year. In January 2010, the Bank’s gross
NPL stood at Rs. 9.1 Bn in absolute
terms, with an NPL percentage reaching
9.31%. Yet, our successful initiatives
enabled us to record a 37.4% decline in
the gross NPL in absolute terms to
Rs. 5.7 Bn and record a Gross NPL of
4.5% as at year end.
Curtailing new entrants to
the NPL category
We succeeded in controlling new
entrants to the non performing category
with stringent monitoring through,
a dedicated officer appointed and
entrusted with this key responsibility.
Timely information on new entrants
presented by the Credit Control Unit
was immediately disseminated to
relevant Regional and Branch Managers,
who in turn, initiated quick corrective
measures thus, effectively controlling
the inflow of new entrants, into the non
performing category.
Sampath Bank PLC 64
Development Banking
“Ease-of-banking for micro and SME customers, proved
to be our competitive edge as a Participating Credit
Institution for credit lines”
Annual Report 2010 / Management Discussion and Analysis / Development Banking
Management Discussion and Analysis contd...
Sampath Bank PLC 65
Development Banking
Products and Services
º Project Financing
º Micro Financing
º Re-financing facilities under Credit
Lines
Redefining the boundaries of
development
The growth trajectory of our nation’s
economy, underpinned by the increased
post-conflict investor confidence
has steered the country towards
development that could be sustained.
This has etched new boundaries for our
Development Banking division.
This year we explored opportunities
that arose in line with the Government’s
stated agenda to stimulate local
economies across the country through
development financing aimed at micro,
small and medium enterprises. We also
assisted those Micro entrepreneurs and
SMEs who were affected by natural and
man-made disasters to resume economic
activities, while self employment
projects that improved the standards of
living among low-income communities
received special attention.
Our role as a Participating
Credit Institution (PCI)
This year, we actively promoted the
Credit Lines made available to Local
Commercial Banks (LCBs), in our
capacity as a Participating Credit
Institutions, together with the leading
private LCBs in the country.
environment to lending beginning
to emerge during the last quarter
of 2010, we proactively increased
measures to conduct awareness
programmes to educate branches and
training programmes for communities
of the North and East, and to identify
potential opportunities to promote the
credit lines. Preliminary groundwork
was carried to identify the lending
environment for the ‘Pibidena Uthura’
and ‘Probodhini’ credit lines.
Our efforts culminated in 144 loans
being registered under all credit lines
dedicated to stimulate the economies
of the North and East, while Rs. 9 Mn
was disbursed during the last quarter of
2010.
Centralised credit processing in Regional
Offices and the extensive outreach of
our newly expanded branch network
increased the impact of our promotional
efforts to scale up disbursements
under the SMERDP credit line. The key
objective of SMERDP credit line was to
accelerate the development of Small
and Medium Enterprises located outside
the Western Province and the Bank has
succeeded in fulfilling this objective by
recording a significant 250% increase in
approvals under the SMERDP refinance
scheme compared to the previous year,
thereby giving due recognition to the
contribution made by the SME sector
to the country’s economy. During the
year, we also approved and commenced
disbursement of loans amounting to
Rs 1.17 Bn under the RERED additional
However, what set us apart from others
who delivered development banking
under these refinancing facilities was
our ability to increase the ‘ease of
banking’ for our customers. The reach
of our branch network which allowed
customers from all corners of the island
to easily access the credit lines, easy
appraisal system done by experienced
Relationship Managers who knew their
customers well, quick processing and
disbursement of the facility and our
efficient online delivery systems which
expedited the refinance of an approved
facility.
A significant portion of the Bank’s new
advances were disbursed to mid to
small sized corporate firms and, to a
lesser extent, to individual customers.
Lending to the SME sector grew by 25%
during the year, to record Rs. 8.4 Bn
with disbursement of loans amounting
to Rs. 2.0 Bn to a total of 3,842 SME
customers.
Year No. of loans Amount
(Rs.Bn.)
2008 4,571 7.78
2009 4,126 6.73
2010 3,842 8.47
Promoting the refinancing
credit lines
Most credits lines made available
from mid 2010 onwards, focused on
stimulating economic development
within the newly liberated areas of the
North & East. With a more conducive
Annual Report 2010 / Management Discussion and Analysis / Development Banking
Sampath Bank PLC 66
Annual Report 2010 / Management Discussion and Analysis / Development Banking
Development Banking contd...
Financial assistance given through operative re-financing schemes
Name of the Scheme Terms and the Donor Sectors Eligible No. of
Loans
Granted
Loans
Outstanding
December
31, 2010
Rs. Mn.
Interest Subsidy Schemes
Agro Livestock Development Loan
Scheme
2% - 8% interest Subsidy from the
Government of Sri Lanka
Dairy farming and crop cultivation 32 3.3
Refinance Schemes
Kapruka Ayojana Coconut
Development Credit Scheme
100% Refinanced by the Coconut
Cultivation Board
Coconut cultivation and development 29 9.5
Small and Medium Enterprise
Regional Development Project
75% Refinanced by the Asian
Development Bank
Sole proprietorships, partnerships and limited liability companies of
selected sectors including agriculture, food processing, education,
IT, construction, metal, textile, plastic, etc.
345 825.0
SMILE I - Revolving Fund 70% refinanced by the Japan Bank
for international Co-operation
Construction of factories, purchase of Property, Plant & Equipment,
pre-operative expenses and working capital
70 23.8
Post - Tsunami Recovery Loan
Schemes A & B
100% refinanced by the European
Investment Bank
Private Sector Enterprises directly and indirectly affected by tsunami 54 443.9
Environmentally Friendly Solutions
Fund (E - Friends II)
70% refinanced by the Japan Bank
for International Co-operation
Sole proprietorships, partnerships and limited liability companies,
co-oprative societies or other private enterprises for
1. Purchase of equipment that leads to emission control, improved
safety of work place and reduction in use of resources by
utilising existing equipment
2. Relocation of highly polluting industries to special estates that
are equipped with waste treatment plants
76 351.0
SMILE II - Revolving Fund 75% refinanced by the Japan Bank
for International Co-operation
Working capital and construction of commercial buildings except
for Municipal and Urban Councils in Colombo and Gampaha
Districts
122 258.6
SMILE III 70% refinanced by the Japan Bank
for International Co-operation
Construction of Buildings, Purchase of Fixed Assets, Permanent
Working Capital Requirements etc.
469 708.5
Construction Sector Development
Project Credit Scheme
100% refinanced by the Central
Bank of Sri Lanka
Reconstruction relating to post-tsunami 8 40.6
Southern Province Rural Economic
Advancement Project-SREAP
95% refinanced by the Asian
Development Bank
All manufacturing industries and selected sub sectors 10 6.5
Resumption of Economic Activities
in the Northern Province
90% Refinanced by the Central
Bank of Sri Lanka
Permanent resident living in the Northern Province Agriculture,
Livestock Development Activities, Micro & Small Enterprises, Trade
& Other Self Employment projects
57 8.7
Renewable Energy for Rural
Economic Development (RERED)
Project Additional Financing
80% Refinanced by the Government
of Sri Lanka & DFCC Bank functions
as Administrative Unit
Private Investment proposals For
Grid - connected / Off - Grid village based renewable energy power
16 791.0
Plantation Development Project 83% Refinanced by the
ADB,Government of Sri Lanka
& DFCC Bank functions as
Administrative Unit
Plantation Sector Field Development & Mechanisation activities /
Crop & Non Crop diversification, Factory consolidation & process
automation
59 563.8
Environmentally Friendly
(E - Friends - Revolving)
Credit Line
100% refinanced by the
Government of Sri Lanka & National
Development Bank, Functioned as
the Apex Body
Sole proprietorships, partnerships and limited liability companies,
co-operative societies or other private enterprises for –
1. Purchase of equipment that leads to emission control, improved
safety of work place and reduction in use of resources by
utilising existing equipment
2. Relocation of highly polluting industries to special estates that
are equipped with waste treatment plants
9 59.0
Poverty Alleviation Micro Finance
Project (PAMP 11)
100% refinanced by Central Bank
of Sri Lanka
Fixed & Working Capital requirements for Micro Enterprises
(Agriculture, Livestock Development, Trade & Services, Small
Industries
223 2.6
Management Discussion and Analysis contd...
Sampath Bank PLC 67
finance scheme, to finance 7 Mini Hydro
projects which together comprise a
total capacity to generate 14.83 Mw of
power using renewable energy sources.
Further, we contributed to the efforts of
the Central Bank of Sri Lanka to open
50 Dairy Resource Centres island wide
under the ALDL credit line, by financing
the 4th centre at Kekirawa and propose
to finance 20% of potential projects
considered under the this programme in
future.
Lending to stimulate
agriculture
We continued with our focus on lending
to the agriculture sector through our
branch network which has expanded
into largely agri-based communities
such as Anamaduwa, Bibile, Buttala etc.
Our outreach and the ability to offer
competitive rates through agriculture
based refinance schemes, helped us
to maximize our lending opportunities
to stimulate agriculture, granting over
1,285 loans amounting to Rs. 2.17 Bn as
at end December 2010.
Microfinance
‘SampathSaviya’, our microfinance
tool is geared at making a difference
in the lives of people who have,
over the years, been excluded from
mainstream development. Implemented
through 18 Branches across the island,
our microfinance efforts gathered
momentum as the year progressed,
recording a 14.2% increase over the
previous year.
Details of our efforts at helping rural
communities to cross the boundaries of
the poverty line through micro finance
are set out more explicitly in a separate
review titled ‘Inclusive Banking’, within
the Management Discussion and
Analysis.
The future of Development
banking
A brief outlook
º Exposure to the renewable energy
sector will increase from 1.3%
to 5% of the Bank’s portfolio
of Advances, in our efforts to
contribute towards development of
the energy sector and contribute
towards environmental conservation
º Opportunities arising out of the
prevailing conducive environment
for development banking will be
explored, in order to increase the
Development Banking portfolio by
75%
º Explore the potential to enhance our
exposure to the following emerging
sectors
a. Energy sector / Renewable
energy
b. Agriculture-related exports and
food processing projects
c. Commercial Cultivation
d. Tourism Industry
e. Dairy farming and manufacture
of dairy products
f. Education / IT / Business Process
Outsourcing sectors
g. Construction, Transportation and
Health sectors
º Continue promoting attractive
lending options under the refinance
loan schemes (eg; Abivurdhi,
Kapruka Ayojana) and increase the
participation in new credit lines
proposed to be introduced in 2011
º Actively support micro/small
entrepreneurs and accelerate credit
to rural communities – especially
through re-finance schemes available
for North and East
Annual Report 2010 / Management Discussion and Analysis / Development Banking
Sampath Bank PLC 68
Inclusive Banking
"Cur role as a truly national bank has become even more
relevant today, within our emerging economy”
Annual Report 2010 / Management Discussion and Analysis / Inclusive Banking
Management Discussion and Analysis contd...
Sampath Bank PLC 69
The Bank for every Sri Lankan
As a bank with home-grown roots, we
have been creating opportunities for
low income families across Sri Lanka,
since our inception. Today, as our
nation strives to transform our economy
through vast reconstruction efforts, our
intent to be a truly national bank that
can deliver financial intermediation to
every single Sri Lankan, has become
even more relevant and is reflected in
our extensive penetration into the six
provinces with the lowest per capita
incomes, that are even below the
national average per capita income of
Rs. 5,863.
Microfinance
Microfinance is a challenge to us - being
one of the leading private banks in the
nation where our stakeholders expect
exceptional growth in their returns.
Yet, we consider it is part of our efforts
to truly become a bank for the entire
nation. A bank that can empathise with
multinational blue chip conglomerates,
and with men and women from low
income communities in the heartlands
of Sri Lanka, who, due to the prolonged
conflict and other disasters, unequal
resource distribution across the nation
or simply due to their inability to access
finance as a result of inadequate
knowledge and assets; have become
excluded from mainstream development.
Our ‘Sampath Saviya’ microfinance
intervention is aimed at developing
livelihood options that revolves around
Self Help Groups (SHG). Groups of
grass-root level communities formed
to initiate sustainable livelihoods by
borrowing, repaying and saving as a
responsible group and as individuals.
Our efforts to improve their financial
literacy will not only make their
individual enterprises sustainable, but
in turn, help to increase the national
savings rate across the country to levels
required to spur national development.
To date, we have formed 250 SHGs
and funded start up or expand micro
enterprises related to agriculture,
livestock farming, trading and the
provision of services. During the year,
Province Median, Monthly
Per-Capita Income (Rs.)
No. of Branches
National monthly per capita income 5,863
By Province
Eastern 3,983 13
Uva 5,006 9
Sabaragamuwa 5,271 9
Central 5,446 16
Southern 5,647 15
Northern ** 11
** Note: Data collected for the Northern Province was incomplete due to resettlement issues, but could be
expected to be well below the national per capita income. The Bank has a total of 11 branches in the Northern
Province.
Source of information on provincial level per capita income: Household income and expenditure survey 2009 –
Preliminary report issued by the Department of Census and Statistics - Ministry of Finance and Planning Sri Lanka
- http://www.statistics.gov.lk
we have made a difference in the lives
of over 1,250 families across Sri Lanka
through a network of 18 Branches
dedicated to promoting ‘Sampath
Saviya’ including in; Tissamaharama,
Eheliyagoda, Monaragala, Kaduruwela,
Matale, Welimada, Hingurakgoda,
Embilipitiya, Dambulla, Alawwa,
Kalawanchikudy, Jaffna, Kilinochchi,
Manipay, Nelliady, Chunnakam,
Chankanai and Mannar.
In 2010 alone, the growth in our micro
finance portfolio was 14.2%.
This year, as part of our efforts to
make our ‘Sampath Saviya’ model
relevant to the microfinance needs of
the nation, we obtained the assistance
of the Central Bank of Sri Lanka to
implement 2 training programmes to
build the capacity of our branch staff,
to handle micro finance. Subsequent to
preliminary ground work undertaken
during the year, we have identified
around 150 micro entrepreneurs who
have the potential to obtain refinancing
under the ‘Awakening North’ credit line.
We approved a facility of Rs. 5 Mn
to support young entrepreneurs
who lacked the collateral to obtain
finance, and who have been selected
to be part of the Youth Business Sri
Lanka (YBSL) Project managed by the
Ceylon Chamber of Commerce and
implemented through the regional
chambers of YBSL.
In the years ahead, ‘Sampath Saviya’
will aim to create both backward and
forward linkages for micro entrepreneurs
– from knowledge, to material, to
markets; to sustain their enterprises,
to improve lives and livelihoods, and
spur the nation towards sustainable
development.
Annual Report 2010 / Management Discussion and Analysis / Inclusive Banking
Sampath Bank PLC 70
Information Technology
“Technology-led banking spurred the phenomenal
growth we achieved in 2010 and one of the lowest staff
to branch ratios in the banking sector”
Annual Report 2010 / Management Discussion and Analysis / Information Technology
Management Discussion and Analysis contd...
Sampath Bank PLC 71
Key Customer Service and Process Improvements during 2010
Continuous improvements to our banking technology enabled us to deliver greater value to our customers through enhanced ease-
of-banking, and added value to our bottom line by improving productivity.
Direct
Impact
Process/ System
Developed
Degree of Impact to
the Service Quality
(High / Medium / Low)
Impact to the Customers by
Enhancing Productivity
Description of the System Development
or Impact
Customer ATM Network sharing
with BOC, NSB, NDB,
Union Bank, DFCC,
PABC and HDFC
High Broad based customer service by
enabling our customers to use
the SET card on 7 other bank’s
ATMs
With these new additions, the total number of
ATMs in our network is now 920
Customer Self service Internet
Terminal at Easy Banking
Centres
High Provides customers with free
access to banking delivery
channels
Provides round-the-clock service at 18
locations island-wide
Customer Increasing the up time
of all the e-channels
by implementing a
clustered application
server environment
High Customers will receive an
uninterrupted service
Up time of e-channels are on average higher
than 99%
Customer Load balancing of Bank’s
corporate website
(www.sampath.lk) and
DNS load balancing
High Since most of the customers
will access e-banking channels
through the corporate site,
this will enhance the e-channel
availability
www.sampath.lk up time expected to be
100%
Customer Installation of secondary
communication link to
branches
High Uninterrupted service to the
customers via branches. This
will enhance the up time of
e-channels provided through
branches as well
The secondary link will balance the branch
traffic to head office and take over in case the
primary fails. Since it is from a different service
provider, we expect the branches to enjoy
100% up time
Customer Sampath Vishwa Retail High Customer service enhancements
and process improvements
New Internet Banking product with improved
user interface and process logic provides
higher reliability, advanced features and lower
cost per customer
Customer DC Direct High Customers can send their LC
applications and monitor the
state of their Import & Export
documents through the net
On-line Documentary Credit management
features enhanced functionality and customer
convenience
Staff Content Management
System
Medium Quick and accurate access to any
circular issued in the Bank there
by maintaining uniformity in
customer service levels
Improved ease of archiving and retrieving all
circulars
Staff Denomination
Management System
High Automated cash balancing of
tellers
Improved customer service levels by increasing
the efficiency of tellers. Improved cash
management for the bank
Network
Security
Securing Internal
web transactions by
implementing an
internal certificate server
High Internal web transactions will
travel through a secure link. No
party other than the intended
person or department will have
access to transactions originating
within the Bank’s network
Reduced risk of unauthorised use of the Bank’s
information resources
Annual Report 2010 / Management Discussion and Analysis / Information Technology
Sampath Bank PLC 72
We achieved a 20% capital cost
reduction per new branch opened in
2010 and managed to initiate a range of
direct process improvements and service
level improvements that led to enhanced
customer service. Our technology
focused process innovation enabled us
to reduce our environmental foot print
significantly.
Despite the unprecedented branch
expansion of 2010, we reduced our
IT costs by 20% per branch opened,
through astute strategies, while
power consumption of IT equipment
at branches declined by up to 80% in
certain cases.
º Use of thin-client computers to
replace PCs has reduced power
consumption, and they take up
less space on the table and is also
cheaper as it has no moving parts
such as a hard disk
º Consolidating the functions of
multiple machines during system
upgrades, has decreased the number
of central servers used, and reduced
the power consumption at the data
centre
The lowest staff to branch ratio
Our expansion, despite being one of the
largest ever to be undertaken by any
bank in this country, was one of the most
effective expansions to be rolled out in
terms of resource utilisation. Centralised
process improvements have enabled us
to record one of the best staff to branch
ratios in the industry - largely due to our
superior banking technology.
Business units automated
As part of our annual roll-out of
automated business units, all functions
of the Treasury were completely
automated in 2010, enabling our
dealers to instantly view foreign currency
positions, and use automated SWIFT
messages among a host of other
efficiencies implemented.
A dedicated team within our IT Division
– which assesses the Bank’s need for
continuous improvement measures, is
currently in the process of automating
our Human Resource Management
System, which should be completed by
early 2011 and will drastically minimize
the use of paperwork in HR functions
within the Bank.
Value addition to our ATMs &
inter-bank link
We now have a total of 222 ATMs
(compared to 186 last year), while our
inter-bank ATM sharing links, which
commenced in 2004 with the Bank of
Ceylon, has now grown to over 7 banks,
including Union Bank, DFCC Vardhana
Bank, National Savings Bank, NDB Bank,
HDFC and PABC. At the end of 2010,
ATMs available on the inter-bank linked
network stood at 920 (compared to 750
in 2009).
We were the first bank in South Asia,
and are currently the industry leader
locally, to install Bulk Note Deposit
(BNA) devices, having 9 advanced ATMs
with cash recognition capabilities in our
sophisticated network. In the coming
year we will continue to introduce
more ATMs with advanced imaging
options capable of recognizing more
denominations and able to image bulk
cheque deposits. Several areas with high
cash-based economies suitable for this
facility have already been identified.
Accessible 24x7, these ATMs are a value
added service in commercialised towns
where customers can withdraw as well
as deposit cash and obtain on line real
time credit to their accounts, at any time
of the day.
The combined Sampath ATM network is
easily the largest existing network in Sri
Lanka and offers security in compliance
with international ‘MasterCard’ and
‘Visa’ standards, and is monitored round
the clock to ensure an incredible up-time
of 99.6%.
Becoming the payment
gateway for the first
government e-service
‘LankaGate’ – the ground breaking
public-private partnership was initiated
by us with the Government of Sri
Lanka in late 2009, but became fully
operational in 2010, subsequent to
winning a competitive bidding process
from among 22 Sri Lankan commercial
Banks, while reflects our prowess in
technology led banking.
This year, a significant number of
transactions have been completed by
the citizens of our nation using this
facility - where, for the first time in
history, public services such as renewing
revenue licenses can be completed using
online financial transactions.
Information Technology contd...
Annual Report 2010 / Management Discussion and Analysis / Information Technology
Management Discussion and Analysis contd...
Sampath Bank PLC 73
Sampath Vishwa - crossing
the boundaries of internet
banking
An updated version of our Vishwa
Internet Banking product was
developed, which will free us from the
current limitations to the number of on-
line customers, and enable us to plan for
a two-fold increase in business volumes
over the coming year. It has also opened
limitless possibilities to the features
we could offer. A special promotion
is currently underway to increase the
number of merchants linked, in order to
maximize the utility value of the facility.
DC-Direct, the self-service trade finance
facility run on the in-house developed
software introduced last year as part
of the Vishwa Corporate package, was
recognised for its business impact by
winning the ‘eSwabhimani’ award for
e-Business and Commerce, presented
by the National ICT Agency and also a
National Best Quality Software Award.
Document management
system
All banking documents and legal
contracts used on a regular basis can now
be converted into templates under the
guidance of legal and banking experts
from across the Bank and installed in
our ‘Document Management System’.
These standardised templates will
increase the ease, speed and accuracy of
documentation at all service outlets.
Denomination management
system
With over 400 new recruits within the
year, this comprehensive new system has
improved the efficiency of the Bank’s
controls and cash management efforts,
as the system reflects the cash position
(by denomination) for each Teller, at
each branch across the Island and at the
Head Office.
Online in house cheque
management system
This system accelerates the time taken
by customers to obtain funds, as
Sampath Bank cheques deposited at
our branches are realised online. This is
the fastest cheque clearing process in
the industry. It is a value enhancement
driven by customer satisfaction, the
facility is offered to all our customers
irrespective of whether a request is
made or not.
Enhancement to the Sampath
Portal
The portal now allows Sri Lankans in
the Middle East and Europe to enquire
and print their transaction statements
through the online access provided to
our representatives in UAE, Qatar, Italy
and Cyprus.
Enhancing the Cargills Food
City link
This year we connected the central
systems of the Cargills network to our
banking system, and in addition to
several special offers to date, many more
benefits are in store for both Sampath
Bank customers as well as customers of
the retail outlet, once Cargills completes
its systems upgrade.
The future of IT
A brief outlook
º We will look at alternate options
to expand our reach through the
village-based e-government outlets
º Expand the potential offered by
‘mobile-phone’ based banking
(m-commerce) to deliver efficient
and cost-effective banking services
to hitherto un-banked sectors of the
population
º Venture in to untapped areas of B2B
commerce via the mobile platform
º Continue to upgrade ‘Sampath
Vishwa’ to give value addition
to customers and to merchants
connected to it
º Continue with systems
improvements and automation of
business units, to enhance the Bank’s
capacity to grow
º Continue to evaluate all current
processes in the bank to
re-engineer and improve efficiency
levels enabling faster and superior
customer service
º Continue to participate and
actively contribute to national level
e-initiatives related to banking,
finance and commerce
Annual Report 2010 / Management Discussion and Analysis / Information Technology
Sampath Bank PLC 74
Treasury
“Being a price-maker in the market, enabled us to be
one of the largest contributors to the Bank’s bottom line
growth”
Annual Report 2010 / Management Discussion and Analysis / Treasury
Management Discussion and Analysis contd...
Sampath Bank PLC 75
Treasury products and services
º Forward & Spot Dealings in Foreign
Currencies
º Currency and Interest Rate SWAPS
º Call Money Market Lending &
Borrowing
º Forward Rate Agreements
º Investments in Government Securities
º Investment in Sri Lanka Development
Bonds
º REPO & Reverse REPO Investments
Reading the market accurately
The Treasury Department is entrusted with
managing the Banks liquidity, Foreign
Currency exposure, Local and Foreign
funding sources and the banks interest
rate; and hence, is acutely susceptible and
sensitive to volatility in both the local and
global macro environment. In this highly
volatile environment, Bank managed to
continue its successful streak as in the
past, mainly due to our unerring ability to
read the market fluctuations accurately. At
the same time being a ‘price-maker’, has
given us the advantage of moving with
the market, enabling us to increase the
profitability of our Treasury operations,
which once again was the single largest
contributor to the Bank’s overall bottom
line growth.
The significant profitability in Treasury
operations was achieved in a year which
witnessed the appreciation of the Sri
Lankan Rupee by more than 3% owing
to a rising global consensus that the
country’s economy was on a sharp rebound,
subsequent to the end of a 30 year old
internal conflict. The economy was also
strengthened by the three tranches of the
IMF-SBA received during the year and by
the successful Sovereign Bond issues as well
as astute policy making which saw Money
Market rates keeping pace with the low
policy rates persevered by the Central Bank.
The primary market Treasury Bill rates
too, kept pace with the decline in policy
rates, reducing by around 175 Basis
points during the year. However, prudent
decision-making and close monitoring of
market rates by the Assets and Liability
Committee (ALCO), enabled us to
significantly contribute to the net interest
margin by parking our excess funds in
Treasury Bills and becoming one of the
main buyers in the Primary market.
Dealing limits with Global
Banks
During the year, many International
banks set up counterparty limits with
Sampath Bank, thus widening our
avenues of funding and enabling us to
source competitive pricing for our foreign
currency deals. Increased dealings with
these banks also allowed us greater access
to sensitive market information, which
in turn, enabled us to offer our own
customers better advice on market trends.
Foreign Currency Notes
Operations
We were the first Commercial Bank
permitted to import US Dollar notes to the
country by the Central Bank and being one
of the market leaders in currency notes
repatriation, we succeeded in meeting the
high demand for US Dollar notes within
the Sri Lankan market through our foreign
currency notes operations.
Structured changes enacted during the
year – where, dedicated dealers with the
ability to feel the pulse of the market
were appointed to handle the Bank Notes
operations, enabled us to handle large
volumes while maintaining better margins
in both the currency repatriation and the
import of US Dollars to the country.
Primary Dealer Unit (PDU)
The PDU is now in full operation and
empowered to handle REPOs as well as
Reverse REPOs which has strengthened
the overall effectiveness of our Treasury
operations.
Becoming a trend-setter in the
industry
Sampath Bank aims to become a major
force in the Local Foreign Exchange market
by quoting aggressive rates to other
banks and customers. The bank intends
to maintain exposures to all major time
buckets with the approval of the Board of
Directors.
The future of Treasury
A brief outlook
º Maximise the potential to increase the
volume on the back of operational
efficiencies of the automated Treasury
services
º Increase our volumes in dollar/rupee
trading through the adoption of new
strategies in the face of a strengthened
rupee
º Continue to look for avenues to
maximise our revaluation gains
º Roll out our strategy to focus more on
corporate as well as retail clients and
devise mechanisms to approach non-
customers as well
º Strive for more volume while
maintaining the profits in the Bank
Notes operations
º Bid more aggressively in the Primary
Market for Treasury Bills
º Target Corporate and retail clientele
sales for the Treasury Bill Secondary
Market operations
Annual Report 2010 / Management Discussion and Analysis / Treasury
Sampath Bank PLC 76
Marketing – Corporate & Product Branding
“Branding that has captured the hearts of all Sri Lankans”
Annual Report 2010 / Management Discussion and Analysis / Marketing
Management Discussion and Analysis contd...
Sampath Bank PLC 77
A Corporate Brand
In late 2009 and early 2010 the Bank
launched a new Corporate Campaign,
themed ‘There’s someone to take care’
in English and “Ya Yuthu Nivaradi Maga
Penwanneki” (‘guiding you on the right
path’), in sinhala.
Our competitive advantage across the
industry - that fiercely competes on a
similar range of products, continues
to be our service levels and the novel
products and services which we
continuously unveil to our customers,
and are both reflected in our corporate
campaign. While the English theme
articulates the Bank’s focus on Customer
Service, the Sinhala theme positions us
as the trend setter and trail blazer in the
banking industry.
Our overall corporate branding message
portrays our concern for all Sri Lankans,
from kids to young-adults, entrepreneurs
to those in the corporate world, to the
senior citizens who have driven our
economy over the decades. And the
success of our message is reflected in
the phenomenal bottom line growth
during the year.
A Corporate Brand-Image
Almost all new branches set up in
2010, carried our brand message on
the exterior glass-panes at the entrance,
immediately etching our Corporate
Brand image, in the minds of customers
or those who simply pass by. In addition
to this exterior visual impact, we also
converted the interior of over 50% of our
existing branches to carry this message
of customer care on the walls of service
areas frequented by customers thus, not
only creating a more customer-friendly
ambience at each branch but also
reflecting a uniform message that was in-
sync with the our single-minded focus on
achieving unparalleled service levels.
A Corporate Customer - Care
ethos
As part of our efforts to bring in a more
customer focused ethos across the
entire network, the bank’s customer
complaint handling procedure was
more formalised this year. Complaints
received via our customer complaint
hotline are immediately referred to the
respective officials and followed up by
the Customer care Manager until action
is taken.
Annual Report 2010 / Management Discussion and Analysis / Marketing
A key-pad on a Sampath ATM machine in a busy, commercial suburb close to Colombo, did
not function to the satisfaction of one of our customers, who was on his way to work.
Under an hour, a technical team from the Bank was on the job and the keypad was
replaced before the commercial hub started business for the day. During the course of the
day, he was informed on his mobile, to try again.
Cn his way home. not only was he able to operate the machine with ease. but as he walked
out, he was given a token of appreciation, for bringing the issue to the notice of the Bank.
A simple token. But a strong message.
We actually care!
Before dawn, one morning, we received a call on our Customer Service Hotline...
Sampath Bank PLC 78
The hotline allows any customer to
make any complaint regarding the
service of the bank and also to provide
information on areas of improvement.
The Customer Service Manager submits
a monthly report summarising the basis
of all complaints / feedback received
from customers to the Board Risk
Management Committee, specifying the
number of complaints received, number
of complaints actioned on, the critical
issues, and the process taken to resolve
same.
A Corporate Brand-Attitude
Successful image-building requires
clarity. One message, delivered by
everyone. And this has never been more
vital than in 2010 – our most aggressive
year of expansion.
In addition to introducing a Customer
Complaint Handling Procedure, we also
initiated a process to ingrain the ‘There’s
someone to take care’ attitude among
our staff.
To take all employees onboard - from
our most junior staff to the front-line
staff, to senior managers to our security
personnel, we structured our training
this year into three-tiers and is detailed
under ‘Training’ on page 84 of the
Management Discussion and Analysis.
Motivational, branch-wide training
by our newest Member on the Board,
Mr. Deepal Sooriyaarachchi is aimed
at bringing customer-focussed process
improvements at all level – creating a
mindset to deliver our Corporate Brand
message and set us apart from our
competitors.
Front-liner training includes an initial
6 day ‘Induction I’ programme,
subsequent to which hands on training
is provided for 6 months, at branches.
Considered as one of the most effective
capacity building efforts for front-liners,
a ‘learning from mistakes’ session is
driven by our DGM Marketing and
Business Development, who takes on
the role of a customer and through one-
to-one role playing with the frontline
trainees, observes and gives feedback
on the vibes exuded at the first point
of contact and on improvements
needed to effectively put the Bank’s
corporate brand message into
practice.
Marketing – Corporate & Product branding contd...
Annual Report 2010 / Management Discussion and Analysis / Marketing
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Management Discussion and Analysis contd...
Our award wining campaign on credit cards
Sampath Bank PLC 79
Annual Report 2010 / Management Discussion and Analysis / Marketing
Marketing Communications
We adhere to all standards and
requirements stipulated by the
regulator, in all our external marketing
communications at all times, e.g., the
mandatory requirement to display
the Bank’s Fitch rating on all deposit
advertising undertaken. We also
endeavor to make our corporate and
product branding messages inclusive,
with all promotional campaigns for
new branches carried out in all 3 local
languages, while many of our product
web-pages offer FAQ sections in Sinhala.
We have also trail-blazed the use of
modern communication methodologies
becoming one of the first banks in Sri
Lanka to use ‘experiential marketing’
– which is predominantly a tool used
by the FMCG industry. Many of our
experiential marketing strategies such
as; dedicated stalls and kiosks at public
exhibitions that offer an interactive
experience of Sampath Bank’s products
and technologies to visitors, innovative,
first-of-its-kind use of advertising slots
in both print and electronic media,
creating a link between culturally
important practices and banking,
unconventional promotions targeting
specific commercial hubs are among a
host of communication strategies used
by the Bank to successfully deliver our
corporate and product branding in
2010. As a matter of principal we do
not project our corporate message or
branding when we sponsor any religious
event.
Award winning campaigns
We were aptly rewarded for the result
oriented communication campaigns
executed in 2010 - with one campaign
winning the only recognition for the
industry at the international Effie
Advertising Awards 2010, bagging a
bronze, while two of our marketing
campaigns were also shortlisted as
nominees for the final awards. No gold
or silver awards were given for the entire
banking industry and only 4 Silvers and
11 Bronze awards were given in total
for the year, thus reflecting the stringent
criteria adhered to by the judges.
Cost-effective product
branding
The success of our product branding
strategies is not only reflected in the net
portfolio growth of our deposit brands,
but also by their cost effectiveness in
terms of the advertising spend.
The Rs.17.4 Bn growth in savings
achieved during the year - 94% of
which comprised growth in our key
savings brands promoted, was recorded
with an advertising spend of a mere
0.38% of the growth recorded. Similarly,
the advertising spend to achieve the
growth in Term Deposits was only
0.30% of the Rs. 2.9 Bn growth
recorded.
Product
Category
Net
Portfolio
Growth
in 2010
(Rs. Bn)
Advertising
Expenditure
as a % of the
Growth in
Deposits
Savings 17.4 0.38%
Term Deposits 2.9 0.30%
Sampath Bank PLC 80
Mainstreaming the North & East
“We aim to provide equal access to the most innovative
technology led banking, to all Sri Lankans.”
Annual Report 2010 / Management Discussion and Analysis / Mainstreaming the North & East
Management Discussion and Analysis contd...
Sampath Bank PLC 81
The nation and its business leaders now
have new opportunities to contribute
to the development of communities in
the North and the East, whose business
needs, at times vastly differ from the
rest of the nation. We aim to reconnect
these communities into the development
mainstream by prioritising financial
solutions geared at the needs of the two
provinces.
Penetrative banking
A total of 11 branches in the North and
13 branches in the East have helped us
understand the needs of communities
across the two provinces. With the
highest number of branches already
opened by any bank in the East, we
hope to soon have the largest presence
in both provinces.
º During this year, we have recruited
30 new staff members to our
branches in the North and East,
mainly from the locality of our
branches
º We have maintained a high deposits
to advances ratio, with 18 out of
the 24 Branches in the North and
the East recording a deposits to
advances ratio of over 100% - i.e.,
Bank’s lending to the area is more
than the deposits collected - which
signifies the significant contribution
made by the Bank to stimulate
these two economies. The average
deposits to advances ratio of all
other branches stands at 83%
Province District Branch Deposits to
Advances
Ratio (%)
North
Jaffna Chankanai 101
Chavakachcheri 51
Chunnakam 326
Jaffna 234
Manipay 141
Nelliady 200
Kayts 13
Kilinochchi Kilinochchi 225
Mannar Mannar 461
Vavuniya Vavuniya 359
Vavuniya Super 36
East
Batticaloa Batticaloa 186
Batticaloa II 221
Chenkalady 274
Kaluwanchikudy 379
Kattankudy 125
Oddamavady 367
Ampara Akkaraipattu 100
Ampara 60
Dehiattakandiya 21
Kalmunai 161
Pottuwil 260
Sainthamaruthu 82
Trincomalee Trincomalee 103
Crossing the boundaries of
language
As a means of bridging the
communication gap that may impede
the effectiveness of our service delivery,
we embarked on a Trilingual Proficiency
Programme for our staff, reflecting our
dedication to provide equal access to the
most innovative technology led banking
to all Sri Lankans of multi ethnicities.
Credit Lines for the North
and East
Most credit lines made available in
2010 focused on stimulating economic
development within the newly liberated
areas of the North & East.
º Credit Line for Resumption of
Economic Activities in the Eastern
Province
Aimed at stimulating economic
activities in perennial crop
cultivation, livestock, trade, tourism
and other self employment projects,
in the East
s Awakening North
Aimed at stimulating economic
activities in agriculture, livestock and
among Micro & Small enterprises in
the North
s DFCC - V for Northern & Eastern
Regions
Credit for SMEs in the North & East
for farming, primary agricultural
production and fisheries
We geared our development banking
focus to help communities maximise the
benefits by;
º Conducting awareness programmes
to educate staff at our branches
in the North and East on the
features of each credit line and the
refinancing mechanisms
º Initiating training programmes
for the communities of the North
and East to help them identify the
potential to obtain these refinance
facilities
º Undertook preliminary ground work
to identify potential customers for
Awakening North
Annual Report 2010 / Management Discussion and Analysis / Mainstreaming the North & East
Sampath Bank PLC 82
March 2010 – The first share
sub-division
The Board of Directors of the Bank
recommended a consolidation and
sub-division of the existing 68,887,628
ordinary shares of the bank, without any
change to the Stated Capital of the Bank
amounted to Rs.1,582 Mn. Accordingly
the number of shares in issue was
increased by 10% to 75,776,390 shares.
The capital restructure - 2010
During the year, Bank paid a scrip
dividend of Rs. 3/- per share, sub divided
the shares in the proportion of one for
The Capital Restructure
“For the first time in the history of the bourse, the value
of the bank’s share crossed the Rs.500/- mark”
one and will implement an ESOP - 2010,
as detailed below;
September 2010 – Scrip
dividend
º This interim dividend for 2010, was
declared in the form of fully paid
shares of the Bank
º The scrip dividend of Rs. 3/- per
existing share, valued at Rs 326/- net
of withholding tax at 10% created
627,596 fully paid new shares
allotted to shareholders as part of
their dividend for the year
º It was the highest ever scrip dividend
announced by any Bank, and
ensured a dividend value of more
than 3% to those shareholders who
retained their shares subsequent to
the subdivision
º The entire scrip dividend was funded by
the bank’s profits for the year, and no
capitalization of reserves was required
º The stated capital increased by the
value of the new shares created,
to Rs. 204,596,253/- while the
number of shares in issues rose from
75,776,390 to 76,403,986 shares
Annual Report 2010 / Management Discussion and Analysis / The Capital Restructure
0
5,000
25,000
30,000
20,000
10,000
15,000
J
a
n
-
1
0
F
e
b
-
1
0
M
a
r
-
1
0
A
p
r
-
1
0
M
a
y
-
1
0
J
u
n
-
1
0
J
u
l
-
1
0
A
u
g
-
1
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S
e
p
-
1
0
O
c
t
-
1
0
N
o
v
-
1
0
D
e
c
-
1
0
Price / Volume Chart 2010 - Sampath Share
No ‘000
Volume Traded (No ‘000)
Share Price - High (Rs.)
0
100
200
400
600
500
300
Rs.
0 0
30
3.0
60
120
9.0
180
150
90
15.0
12.0
6.0
06 07 08 09 10
Net Assets Per Share (Rs.)
Price Earnings Ratio (P/E Ratio)(%)
1
2
4
.
3
9
1
4
1
.
9
2
1
7
1
.
9
6
9
8
.
2
9
Assessment of Share Value
Rs. %
9
6
.
1
7
Management Discussion and Analysis contd...
Sampath Bank PLC 83
October 2010 – The second
share sub-division
º A one for one share split further
increased the market liquidity of the
Sampath share
º The number of shares increased
by 100%, from 76,403,986 to
152,807,972, but the stated capital
remained unchanged
º The two subdivisions within the year
more than doubled the number of
shares in our shareholders’ portfolio,
and spurred the Sampath share to
its highest ever price of Rs. 550/- in
September 2010
º It marked the very first time a share
of the bank has crossed the 500
rupee mark in the history of the
Colombo Stock Exchange
Employee Share Option
Scheme
º The Bank created 3,056,159 share
options to be offered to eligible staff
at 2% of 152,807,972 shares, being
the number of shares subsequent to
the 2nd share sub-division
º The shares were priced at Rs. 80/-
per share
º In the event of the options being
fully exercised by the eligible staff,
the Bank’s stated capital would rise
by Rs. 244,492,720/- as a result of
the consideration to be paid by the
staff under the ESOP
Annual Report 2010 / Management Discussion and Analysis / The Capital Restructure
º This motivational share option
offered to our staff - subject to
the Bank meeting certain overall
performance targets in 2010 enable
eligible staff to exercise their option
over 3 years instead of at the end of
their tenure of service
º We are one of the few banks in
the nation to offer a benefit of this
magnitude
Sampath Bank PLC 84
The 3-tiered approach to
training
This year, we approached the training
needs of our employees through
the prism of our aggressive branch
expansion. 405 new employees within
the year, would challenge the best
resourced organisation. Yet, it as a
challenge we met head-on-identifying it
as part of our strategic outlook from last
year and setting the wheels in motion to
adopt a 3 tiered structured approach.
Tier I: In addition to the regular
induction and training, we obtained
the assistance of two, retired, senior
AGMs of the Bank, to drive the
message of customer focus among
Training
new intakes by visiting every branch
and regional office in our network.
Their years of experience within the
Bank and understanding of Sampath
Bank’s work ethos, has enabled
this ongoing, structured training to
become an outstanding success. By
the end of 2010, most of the key
branches of our network was visited
by the two trainers.
Tier II: The appointment of the
widely experienced Mr. Deepal
Sooriyaarachchi to our Board in
August 2010 - who, in addition to
his other extensive expertise is also
a renowned Trainer, has enabled us
to implement a programme to bring
about a more customer focused
mindset among our Regional and
Branch Managers that will help them
deliver financial services suited to the
needs of their localities.
Tier III: Our final level of training
is geared at building the capacities
of a ‘super corporate management
team’. This earmarked team
is currently been exposed to
structured training - both locally and
internationally, to take on corporate
management of the Bank by 2015 as
part of our continuous business plan.
Details of Training
Training Area Internal External Foreign
No. of
Participants
Total Training
Hours
No. of
Participants
Total Training
Hours
No. of
Participants
Total Training
Hours
Branch Banking & Operations 1,259 300,517 12 166 2 64
Credit Operations 381 7,230 3 101 2 224
Treasury & Trade Services - - 6 64 6 136
Information Technology - - 9 112 2 32
Service Marketing - - 2 32 1 24
Legal aspects of Banking - - 57 2,285 - -
Management Development 140 11,200 29 352 8 960
Customer Service & Care 211 9,169 - - - -
Leadership Development - - 3 14 - -
Personal Development 20 80 26 293 11 2,440
Development of communication skills 130 21,988 - - - -
Process/Productivity Improvements - - 34 99 1 40
Promotions oriented programme 745 5,960 - - - -
Other 47 376 22 168 2 160
Total 2,933 356,520 203 3,686 35 4,080
Annual Report 2010 / Management Discussion and Analysis / Training
“Best-in-class capacity building, will enable the bank to
sustain its growth trajectory”
Management Discussion and Analysis contd...
Sampath Bank PLC 85
Our Delivery Channels
Annual Report 2010 / Management Discussion and Analysis / Our Delivery Channels
º Sampalh 8ank ATMs - 222
º ATMs nelworked wilh 7 olher Local Commercial
Banks - 920
º ATMs wilh online-real lime deposil lacililies - 9
º lslandwide, inlerconnecled branch nelwork - !7!
including 11 in North & 13 in East
º Pegional Ollces - !6
º Lasy8anking Cenlres - !8
º Plalinum Plus Cenlres - 2
Branches
º Visa lnlnile Credil Card - lrsl bank lo issue lhe
most exclusive visa card
º Visa Plalinum Credil Card - ollering exclusive
features and privileges around the world
º Cold & Silver Credil Cards
º Allnily Credil Cards - allnily cards wilh alumni ol
schools and professional bodies
º Visa Debil Cards
º Cargills Co-branded Debil Card
º Chip Card - lhe lrsl lo oller VlSA cards and lhe
only bank to issue Master Cards, with micro
integrated circuit security
º Web Card - a pre-paid VlSA card, which can
be topped-up as desired aimed at secure cyber
shopping
Credit & Debit Cards
º Sampalh Vishwa - Virlual branch banking
experience 24x7
º SampalhNel lnlernel 8anking
º Payeasy - Secure paymenls lo lhe widesl base ol
service providers, through the internet or easy
Banking Centres
º Sampalh lnlernel Paymenl Caleway (lPC) - lully
secure cyber shopping at its best with 153
merchants
º Telebanking - Telephone banking wilh mulli
language options, from anywhere in the world
º 36 e-remillance companies lo send & receive
money within seconds from anywhere in the
world
e-Banking
A 99.6% reliable network of ATMs
Sampath Bank PLC 86
Colombo District
Athurugiriya 1 √
Attidiya 1 √
Avissawella 2 √
Bambalapitiya 1 √
Battaramulla 2 √
Boraleagamuwa 1 √
Borella 3 √
City 2 √
Dehiwala 1
Embuldeniya 1 √
Fort 2
Gangodawila 1
Grandpass 1
Gregory’s Road 1 √
Hanwella 1
Harbour View 1
Head Quarters 3 √
Homagama 2
Kaduwela 1 √
Kirulapone 1 √
Kohuwela 1
Kollupitiya 1 √
Kotahena 1
Kottawa 2
Kottawa - Sunup 1
Maharagama 3
Maharagama - Singer Mega
Main Street 1 √
Malabe 1 √
Maradana 1
Moratumulla 1 √
Moratuwa 2
Narahenpita 1 √
Nawala 1 √
Nawam Mawatha 1
Nugegoda 2 √
Old Moor Street 1 √
Pelawatta 1 √
Pettah 1
Piliyandala 3
Pitakotte 1
Platinum Plus 1 √
Rajagiriya 1
Ratmalana 2 √
Thimbirigasyaya 1
Wellampitiya 1 √
Wellawatta 1
Off-site ATM’s 13
No of ATM’s
Availability of wheelchair access
Our Delivery Channels contd...
Annual Report 2010 / Management Discussion and Analysis / Our Delivery Channels
Management Discussion and Analysis contd...
Total Access Points (Branches & ATMs)
Jaffna
Kilinochchi
Mullativu
Mannar
Vavuniya
Anuradhapura
Puttalam
Kurunegala
Gampaha
Colombo
Kalutara
Ratnapura
Matara
Hambantota
Moneragala
Badulla
Nuwara Eliya
Kegalle
Kandy
Matale
Ampara
Batticaloa
Polonnaruwa
Galle
Trincomalee
10
13
22
44
21
10
125
14
7
10
8
12
12
11 6
26
4
6
2
10
4
2
2
14
Sampath Bank PLC 87
Kalutara District
Aluthgama 1
Bandaragama 1
Horana 2
Ingiriya 1 √
Kalutara 1
Keselwatta 1
Matugama 1 √
Panadura 2
Unichella - Panadura 1
Wadduwa 1 √
Gampaha District
Gampaha 2
Ganemulla 1
Ja-ela 1 √
Kadawatha 2 √
Kandana 1
Kiribathgoda 3
Kirindiwela 1
Kochchikade 1 √
Minuwangoda 1 √
Mirigama 1
Negombo 1
Negombo II 1
Nittambuwa 1
Peliyagoda 1
Ragama 1
Veyangoda 1 √
Wattala 2 √
Wattala - Singer Mega
Yakkala 1 √
Badulla District
Badulla 1
Bandarawela 1 √
Mahiyangana 2 √
Passara 1 √
Welimada 1 √
Monaragala District
Bibile 1
Buttala 1 √
Monaragala 1
Wellawaya 1
Galle District
Ambalangoda 1
Baddegama 1 √
Galle 2
Galle Bazaar 1
Karapitiya 1
Neluwa 1 √
Matara District
Deniyaya 1 √
Matara 3 √
Matara - Bazaar 1 √
Morawaka 1 √
Hambantota District
Ambalanthota 1
Middeniya 1 √
Sooriyawewa 1 √
Tangalle 1
Tissamaharama 1
Kegalle District
Deraniyagala 1
Kegalle 2
Mawanella 1
Ratnapura District
Embilipitiya 2 √
Kalawana 1
Balangoda 1 √
Pelmadulla 1
Ratnapura 2
Eheliyagoda 1 √
Kurunegala District
Alawwa 2 √
Giriulla 1 √
Kuliyapitiya 1
Kurunegala 3
Mawathagama 1 √
Narammala 1 √
Nikaweratiya 1
Pannala 1 √
Wariyapola 1
Puttalam District
Anamaduwa 1 √
Chilaw 1
Nattandiya 1 √
Puttalam 1 √
Wennappuwa 1
Anuradhapura District
Anuradhapura 1
Anuradhapura New Town 1
Kekirawa 1
Nochchiyagama 1
Thambuththegama 1 √
Polonnaruwa District
Aralaganwila 1
Hingurakgoda 1
Kaduruwela 1 √
Jaffna District
Chankanai 1 √
Chavakachcheri 1 √
Chunnakam 1 √
Jaffna 1 √
Kayts 1
Manipay 1 √
Nelliady 1
Kilinochchi District
Kilinochchi 1
Mannar District
Mannar 1 √
Vavuniya District
Vavuniya 1 √
Vavuniya Super 1
Batticaloa District
Batticaloa 1 √
Batticaloa II 1 √
Chenkalady 1 √
Kaluwanchikudy 1
Kattankudy 1
Oddamavady 1
Ampara District
Akkaraipattu 1
Ampara 1
Dehiattakandiya 1 √
Kalmunai 1
Pottuwil 1 √
Sainthamaruthu 1 √
Trincomalee District
Trincomalee 1 √
Kandy District
Digana 1 √
Gampola 1
Kandy 4 √
Kandy - City Centre 1 √
Kandy - Corporate 2 √
Katugastota 1
Kundasale 1 √
Peradeniya 1
Pilimatalawa 1 √
Rikillagaskada 1
Wattegama 1 √
Matale District
Dambulla 1 √
Matale 1 √
Nuwara Eliya District
Hatton 1 √
Nuwara Eliya 1
Pussellawa 1
Extention Offices
Katunayake Airport 1 √
Passport Office 1 √
Annual Report 2010 / Management Discussion and Analysis / Our Delivery Channels
Sampath Bank PLC 88
Sampath Centre Ltd
Sampath Centre Ltd; the first subsidiary
of Sampath Bank, was established in
1996 with a Capital of Rs. 350 Mn.
The principal objective of the Company
is property development entailing the
maintenance of the buildings occupied
by Sampath Bank; the principal source
of income thus being, the lease rental
from its tenants.
Sampath Centre Ltd, which was initiated
as a BOI approved project obtained
a six-year Tax holiday from 1999 to
2005 and thereafter a 15 year Tax
concession from 2006 to 2020. At
present, the Company is subject to a Tax
concession of 2% of the total turnover
of the Company until 2020. Dividends
including Foreign Investments paid have
not been Tax free since 2006.
Profits from operating activities stood at
Rs. 503.09 Mn, compared to Rs. 235.81
Mn in the previous year.
Net profit after tax stood at Rs. 483.27
Mn compared to Rs. 198.02 Mn in
2009, as the net fare value gain was
lower in 2009 compared to 2010.
The Company paid Rs. 40.25 Mn by
way of dividends during the year while
carrying forward a profit of Rs. 1,654.42
Mn as at 31 December 2010.
S C Securities (Pvt) Ltd
The stock brokering subsidiary of the
Sampath Group, SC Securities recorded
an improvement in terms of both top
Subsidiary Companies
Annual Report 2010 / Management Discussion and Analysis / Subsidiary Companies
Management Discussion and Analysis contd...
line and bottom line performance in
financial year 2010. The performance of
Colombo Stock Exchange rose by 130%
and 110% in two consecutive years
following the post war capital market
boom and SC Securities has managed
to fully capitalise on the upbeat investor
sentiment. The top line increased
by almost four fold (352%) to Rs.
166.2 Mn in 2010, while the resultant
operating profit amounted to Rs. 103
Mn as opposed to Rs. 4.3 Mn in 2009.
The lower interest rates, resulted in a
decline in the net finance income of the
subsidiary, but company’s core income
recorded a striking turnaround due to
the high performing Colombo Stock
Exchange, to record a 619% increase
in bottom line performance amounting
to Rs. 66.4 Mn in net profit after tax
compared to Rs. 9.2 Mn in 2009.
SC Securities was incorporated on the
16th October 1992 with the Sampath
Bank Holding a majority 51% of the
shares. Being a debt and equity member
firm of the Colombo Stock Exchange,
the Company is governed by the
regulatory framework of the Securities
and Exchange Commission (Sri Lanka)
and the Colombo Stock Exchange
(CSE). SC Securities operates branches
in Kandy and Matara and has a staff
strength of 25.
Sampath Leasing and Factoring
Limited (SLFL)
The year 2010 witnessed a growth
in profitability for specialised leasing
companies and other players directly
involved in the leasing business. Net
operational profits of specialised leasing
companies increased significantly
together with improvements in
credit quality. A positive operating
environment is envisaged for the
industry which shows signs of
improvement and growth due to
favorable external and internal factors
triggered by the significant increase in
vehicle sales, decline in interest rates,
opening of new geographical markets,
improvement of individual disposable
income and flexible credit terms
extended by institutes coupled with
economic and political stability.
SLFL is a wholly owned subsidiary of the
Sampath Bank which was incorporated
in May, 2005. Following the turbulent
period of negative profitability and
growth recorded by the Company, the
management took a conscious decision
to infuse capital, re-negotiate credit
lines, increase lendings, accelerate
recovery on Non Performing advances
and restructure the management with
a view to making it a dominant player
in the market. As a result of these
efforts the Company moved towards a
profitability of Rs. 165.2 Mn for 2010;
thereby transforming itself from a loss
making entity to a profitable entity.
The Company currently offers finance
leases, hire purchase and factoring
facilities in a very competitive
landscape consisting of specialised
leasing companies, registered finance
companies, licensed banks etc.
During the next three years the
Company hopes to embark on
improvements in market positioning,
expanding geographical reach together
with improved operational efficiency
and profitability. The Company would
be positioned as a hybrid of a specialised
leasing company and a licensed bank
Sampath Bank PLC 89
Annual Report 2010 / Management Discussion and Analysis / Subsidiary Companies
offering innovative leasing and factoring
services to profitable niche markets.
Sampath Information Technology
Solutions Ltd ( SITS )
Sampath Information Technology
Solutions Ltd (SITS), which was
incorporated in 2006 is a company with
a unique concept to harmonise and
synergise the experience of the Sampath
Bank IT expertise in developing software
solutions.
The Company’s vision is to ‘Provide best
in class IT solutions for the local market;
with a Sri Lankan touch, by creating
sustainable long term value for all
stakeholders’.
Initially, the focus of SITS was on
software development mainly for the
financial sector and related functional
areas of other businesses, and on
hardware maintenance within the
Banking industry. At present, the primary
focus of this fully owned subsidiary of
Sampath Bank is to provide software
and hardware maintenance to Sampath
Bank as well as other industries on a
competitive basis .
SITS recorded a commendable growth
in 2010 specially through its IT services,
while, its software development focus
was aimed at the financial segment of
the economy.
The company’s financial ERP system
known as SITS Financial caters to the
software requirements of Finance
Industry, especially focusing on Finance
Companies. The achievements of IT
services segment was noteworthy
bringing in major profits; with Sampath
Bank being the main customer whilst
finance companies comprised the main
clientele for Software Development.
It is envisaged that in future IT
services would be diversified whilst
strengthening the core software
Performance of Subsidiary Companies
Name Nature of Business Holding
%
Financial
Results
Rs. Mn.
2010 2009
Sampath Centre
Ltd
Renting office space
and providing ancillary
services to tenants
97.14% Turnover 188.5 187.9
Profit before tax 109.5 87.1
Profit after tax 104.8 82.1
Total assets 2,172.6 1,342.2
SC Securities (Pvt)
Ltd
Stock brokering 51% Turnover 166.2 48.7
Profit before tax 103.7 14.6
Profit after tax 66.4 9.2
Total assets 355.5 200.6
Sampath Leasing &
Factoring Ltd
Leasing & Factoring 100% Turnover 429.7 527.2
Profit before tax 165.2 (51.5)
Profit after tax 137.7 (48.5)
Total assets 1,905.8 1,981.2
Sampath
Information
Technology
Solutions Ltd
Providing IT related
services
100% Turnover 29.7 29.0
Profit before tax 2.8 1.0
Profit after tax 0.9 0.5
Total assets 13.9 14.8
packages already developed. Plans
underway to take over further IT
Services functions of Sampath Bank,
which will enable the Bank to focus on
the core business areas. SITS will also
be partnering with an Indian Software
Company in the near future, to market
their products whilst helping the
Financial Industry to automate ancillary
functions.
Sampath Bank PLC 90
Corporate Governance Report
Annual Report 2010 / Governance / Corporate Governance Report
“We are committed to high standards of corporate
governance which we consider are critical to business
integrity and maintain investors’ and customers’ trust in
us. We expect all our directors, employees and suppliers
to act with honesty. integrity and fairness. Cur business
principles set out the standards we set ourselves to ensure
we operate lawfully, with integrity and with respect for
the culture of every group in which we do business”
Cver the past years. the 8oard of Directors have managed to drive the 8ank
ahead of markets by adopting good Corporate Governance measures in advance
of regulations.
Initiative of the board Regulatory framework
Year Action Year Action
1997 The Board creates the audit and compliance
committee as a part thereof, with the name of audit
committee
2007 The mandatory Code of Corporate Governance for
Licensed Commercial Banks issued by the Central
Bank of Sri Lanka.
2002 The Board sets up Board Nominations Committee 2008 The Code of Best Practice on Corporate Governance
issued jointly by the Institute of Chartered
Accountants of Sri Lanka (ICASL) and the Securities
and Exchange Commission (SEC).
2002 Board Human Resource & Remuneration Committee 2008 The Rules on Corporate Governance for listed
companies issued by the Colombo Stock Exchange.
2008 Board Risk Management Committee was created to
monitor and manage risks
2008 The Board creates the Board Shareholder Relations
Committee
Governance
Sampath Bank PLC 91
Annual Report 2010 / Governance / Corporate Governance Report
Our system of corporate governance
lays the basis for responsible and
performance oriented management and
control of Sampath Bank which is geared
towards sustainable value creation.
We are compliant to the best of our
ability with the directions issued by the
Central Bank of Sri Lanka (CBSL), on
Corporate Governance for Licensed
Commercial Banks, Section 3(8)(ii)(g)
of the Banking Act direction No. 11 of
2007.
Bank also complies to the best of it’s
ability with the Code of Best Practice on
Corporate Governance issued jointly by
the Institute of Chartered Accountants
of Sri Lanka (ICASL) and the Securities
and Exchange Commission (SEC) as well
as the Rules on Corporate Governance
published by the Colombo Stock
Exchange (CSE).
The following developments which took
place in 2010 further improved Bank’s
corporate governance framework:
Ex:
º External auditor report on Internal
Control Over Financial Reporting
(ICOFR)
º External auditor report on the bank’s
compliance with the corporate
governance directions issued by the
CBSL
Our Corporate Governance Report 2010
covers following aspects,
º Governance Structure
º Statement of Compliances
º Performance Governance
º Other Aspects of Corporate
Governance
Governance Structure
Our organisation structure is
diagrammatically presented in the next
page.

‘BLUE BOOK’ tells what is expected
from team members so that uniform
standards are maintained throughout
the Bank to serve our customers
uniformly and in a manner that would
exceed their expectations. It also serves
as a guideline for us when we interact
with each other in the service of our
Bank.
Bank’s Whistle Blowing Policy is intended
to serve as a channel of corporate fraud
risk management. The policy will allow
any Team Member who has a legitimate
concern on an existing or potential
‘wrong doing’, done by any person
within the Sampath Bank, to come
forward voluntarily, and bring such
concern to the notice of an independent
designated authority.
Bank has Internal Loss Event Data
reporting process commenced in 2007,
and this process has been continuously
improved to ensure smooth and timely
reporting and very effective source for a
number of process improvements that
have eventually led to business benefits.
Reporting is centralised and escalated
to Corporate Management and BRMC
depending on their risk status. Each loss
even type depending on the severity on
the loss is mapped to the underlying
cause and control that failed. Key areas
in which internal processes and controls
have been improved as a result of this
analysis include cash transactions, ATM
transactions, foreign exchange losses,
mortgage loans, internet banking and
Letters of Guarantee.
In addition, we have implemented
following new or revised policies during
the year.
º Setting-up Risk Management Policy
º Policy on Re-scheduling/
Restructuring of Credit Facilities
º System Audit Policy
º Product Policy
º Policy on Outsourcing of Banking &
Ancillary Functions
º Compliance Policy
º Market Risk Management Policy
º Anti-Money Laundering Policy
º Disposal Policy for the Bank’s own
Motor Vehicles
º Credit Risk Management Policy
º IT Policies
º Credit Policy
º Integrated Risk Management Policy
How we manage the risk is set out in
the Risk Management report from pages
126 to 149.
Sampath Bank PLC 92
Corporate Governance Report contd...
Annual Report 2010 / Governance / Corporate Governance Report
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Governance contd...
Sampath Bank PLC 93
A. Bank’s compliance and
implementation of 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.
B. Bank’s extent of adoption of
the Code of Best Practices on
Corporate Governance issued
jointly by the Securities and
Exchange Commission of Sri
Lanka (SEC) and the Institute
of Chartered Accountants of
Sri Lanka (ICASL).
C. Bank’s level of conformity
with the Continuing Listing
Requirements section 7.10
on Corporate Governance
Rules for Listed Companies
issued by the Colombo Stock
Exchange.
Statement of Compliance
Our statement of compliance comprise three sections
Annual Report 2010 / Governance / Corporate Governance Report
As required by the Direction, Bank
has obtained reports from the Bank’s
External Auditors, M/s Ernst & Young
for the Internal Control over Financial
Reporting (ICOFR) and Annual corporate
governance report for the year ended
31st December 2010.
The following table summarises the
best attempt of the bank under the
Corporate Governance Directions.
The Bank will continuously attempt to
enhance its compliance aspects, thus
the best attempt the bank did in this
respect revealed, and the Bank needs
to enhance documentary aspects of the
requirements.
Section A
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.
The Board will institute continuous
actions of complying with such
documentation aspects of Corporate
Governance in the future.
The disclosures below reflects the
Banks compliance and implementation
measures of the above direction which
covers following eight sub sections,
º The responsibilities of the board
º The board’s Composition
º Criteria to assess the fitness and
propriety of directors
º Management functions delegated by
the board
º The Chairman and CEO
º Board appointed committees
º Related party transactions
º Disclosures
Sampath Bank PLC 94
Section Principle Compliance & Implementation
3. (1) The Responsibilities of the Board
3. (1) (i) Procedures to be carried out to ensure the board have strengthened the safety and soundness of the bank
a. Strategic objectives and
Corporate Values
Our Vision is to become ‘The Growing Force in Sri Lankan Financial Services’
Our guiding values & ethics are the principles established by us to achieve above Vision.
Banks Strategic Plan 2011-2013 and Budget 2011 were presented to the Board.
The Board has approved Strategic Objectives and Corporate Values which have been
communicated through the Bank.
It is the policy of Sampath Bank that its affairs are conducted to the highest standard
of ethics. The Bank competes for business only on the basis of quality, price and
service to customers.
b. Overall Business
Strategy
Board Reviews and monitors the implementation of a sound business strategy.
Strategic Plan 2011/2013 includes the overall business strategy of the Bank, overall
risk policy, risk management procedures and mechanisms.
The overall business strategy contains measurable goals, for next three years.
c. Risk Management Board approved the Integrated Risk Management policy which includes the
appropriate systems to manage the risks which is prudent and duly implemented.
Integrated Risk Management Framework of the Sampath Bank has re-aligned its
risk management structure with the objective of ensuring a single view of risk
across the Bank, and putting in place capabilities for an integrated risk management
framework.
The Bank’s core risk management function is segregated from the business operating
units and is centralised at Head Office. It reports to the Board Risk Management
Committee appointed by the Board of Directors.
Board Risk Management Committee implemented many policies during the year to
strengthen the risk management framework.
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 95
Section Principle Compliance & Implementation
c. Risk Management The Bank has a Board approved Business Continuity Plan. An off-site Disaster
recovery centre is maintained and tested regularly for proper functionality. The
Disaster recovery centre was tested for functionality of core systems and delivery
channels during the year 2010, and the results/recommendations have been
evaluated by Internal Audit, Systems Audit, Risk and submitted to the board. The
position of BCP director is held by a member of corporate management. Our BCP
readiness is continuously monitored by the Corporate Management and the Board
Risk Management Committee and improved where necessary.
d. Communication with all
stakeholders, including
depositors, creditors,
shareholders and borrowers
The Board has approved and implemented a policy of communication with all
stakeholders, including depositors, creditors, borrowers and shareholders.
The Annual General Meeting (AGM) is one of the main forums of contact between
shareholders and the Board. It is a common practice for the Managing Director
to have regular contact with the major shareholders. The Chairman often also
participates in these meetings. The Chairman as a part of his role, ensures effective
communication with shareholders and keeps the Board informed of major concerns
raised by the shareholders.
In addition, the Bank has become the 1st listed company in Sri Lanka to have a
Shareholder Relation Committee. The committee maintains a regular dialogue with
shareholders, address the concerns and looks positively at their suggestions.
All Board Members, including the Chairmen of the Board Sub-Committees attend
the AGM in order to answer questions raised.
A considerable numbers of team members are shareholders of the Bank and actively
participate at shareholders’ general meetings by exercising their voting rights in
person or by proxy in decision making at such meetings.
Staff who are members of the Sampath Bank Employees Association (SBEA) (98% of
all staff) and their representatives are given unrestricted access to the management
to voice their concerns. Communication between the Association and Board of
Directors is carried out through the Company Secretary of the Bank.
All stakeholders have access to relevant reliable information on a regular and timely
basis thus safeguarding the stakeholders’ interests.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 96
Section Principle Compliance & Implementation
e. Bank’s internal control systems
and management information
systems
The Board has delegated this responsibility to the Board Audit Committee.
Bank has separate Internal Audit Department which directly report to Audit
committee.
Board has reviewed the adequacy and the integrity of the bank’s internal control
systems and management information systems.
f Key Management Personnel Board has identified Key Management Personnel as defined in the Sri Lanka
Accounting Standards.
All appointments of designated Key Management Personnel are interviewed and
appointed by the Board.
g. Authority and Key
Responsibilities for the Board of
Directors and Key Management
Personnel
The Board members have been inducted to the Board, based on their special
expertise to brief the Board. E.g.- Mr. Denzil Gunaratne and Mr. W M P L De Alwis
on legal issues, Mr. L J K Hettiaratchi on IT, Dr. S Kelegama on economic matters. Key
Management Personnel are appointed by the Board based on their expertise.
Areas of authority and key responsibilities for the Board of Directors’ themselves
and for the Key Management Personnel have been documented and it is reviewed
annually by the Board.
h. Appropriate oversight of the
affairs of the bank by Key
Management Personnel
Key Management Personnel are called by the Board regularly or as and when need
arises to explain matters relating to their areas.
Their affairs are being monitored by the Board which is consistent with the Board
Policy.
i. Directors’ own Governance The Board annually appraises their own performance to ensure that they are
discharging their responsibilities satisfactorily. Among the areas they concentrate on
are reviewing and monitoring the implementation of sound business strategy and
board members personal contributions based on their field of expertise.
The Board appraises the performance of each Director filling a ‘Board Performance
Evaluation’ form in line with the Corporate Governance Code of SEC and ICASL.
Selection, Nomination and Election of directors are based on this criteria. Such
information is tabulated and discussed at the Board. (Evaluations are in the custody
of the Company Secretary)
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 97
Section Principle Compliance & Implementation
Succession plan for Key
Management Personnel
An effective succession plan is in place for the Managing Director and Senior
Management.
Succession plans for all members of the Executive Committees, their direct reports
and Senior Managers are also in place. A key aspect of the succession plan is
to develop senior managers to ensure that there are adequate options available
internally to replace key personnel.
k. Regular meetings with the key
management personnel
Board Sub-Committees on Risk Management, Credit, Human Resource &
Remuneration and Audit, meets regularly and the Key Management personnel in-
charge of IT, Marketing, HR, Operations, Finance and Risk attend these meetings
to review policies, establish communication lines and monitor progress towards
corporate objectives. The Sub-Committee minutes are tabled at main Board
Meetings.
The following management committees have regular meetings;
º Assets & Liability Committee (ALCO)
º Procurement Committee
º Deposits Mobilisation Committee
º Bad Debts Recovery Committee
º Outsourcing Committee
º Credit Committee
º HR Committee
º IT Steering Committee
º Credit Risk Steering Committee
º Operational Risk Steering Committee
º Investments Committee
º Internal Control Over Financial Reporting (ICOFR) Steering Committee
º International Financial Reporting Standards (IFRS) Steering Committee
l. Understand the regulatory
environment and relationship
with regulators
Compliance Reports submitted to CBSL which includes all returns to regulators are
presented to the board quarterly and monitored closely by the Board.
BRMC minutes submitted to the Board will help to understand the regulatory
environment of the Bank and the relationship with the regulator.
Acts in the manner that will not contravene any provisions of the Companies Act or
any other relevant statutes and the Articles of Association of the Bank and relevant
rules, regulations and directions of the CBSL & CSE.
Ensures compliance with legal/ethical standards.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 98
Section Principle Compliance & Implementation
Understand the regulatory
environment and relationship
with regulators
When changes take place in Statutes, Rules and Regulations and Regulatory
Directions relevant to the Banking Industry, arrangements are made to make
presentations to the Board by relevant professionals on quarterly basis or as and
when need arises which Board closely monitored.
m. External Auditors Hiring and oversight of External Auditors is assigned to Board Audit Committee after
final approval of the Board.
3. (1) (ii) Appointment and the
responsibilities of the Chairman
and the Managing Director
Appointment of Chairman and Managing Director and their functions and
responsibilities are approved by the Board.
3. (1) (iii) Regular Board
Meetings
Regular Board Meetings are held monthly during the latter part of each month while
special Board Meetings are held as and when the need arises.
During 2010 the Board met on 15 occasions.
3. (1) (iv) Matters and proposals in the
agenda
Monthly meetings are scheduled and informed to the Board at the beginning of each
calendar year to submit proposals in the agenda for regular meetings where such
matters and proposals relate to the promotion of business and the management of
risks of the bank.
3. (1) (v) Notice of Meeting Notice of Meeting, agenda and board papers for the board meetings are circulated
to the Directors 07 days prior to the meeting giving Directors time to attend and
submit any urgent proposals.
3. (1) (vi) Directors attendance As per Articles of the Company and Corporate Governance Code, Directors have
been apprised of their attendance.
Details of Director’s attendance in accordance with the Corporate Governance Code
is setout in the page 120.
Board closely monitors the participation of each director.
3. (1) (vii) Company Secretary The board has appointed a Company Secretary who satisfies the provisions of
Section 43 of the Banking Act No.30 of 1988, and whose primary responsibilities
shall be to handle the secretariat services to the board and shareholder meetings and
carry out other functions specified in the statutes and other regulations.
3. (1) (viii) Directors to have access to
advice and services of the
Company Secretary
All members of the Board have opportunities to obtain advice and services of the
Company Secretary who is a Chartered Corporate Secretary and who is responsible
to the Board in ensuring the follow up of Board procedures, Compliance with Rules
and Regulations, Directions and Statutes and keeping and maintaining Minutes and
relevant records of the Bank.
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 99
Section Principle Compliance & Implementation
3. (1) (ix) Maintenance of the Minutes of
Board Meetings
Company Secretary maintains the minutes of board meetings and circulates same to
all Board members.
There is a process for Directors to check any Board Meeting Minutes.
3. (1) (x) Minutes of the Board Meetings Minutes of the meetings include:
Summary of data and information used by the board in its deliberations
Matters considered by the board
The fact-finding discussions and the issues of contention or dissent which illustrates
the board is carrying out its duties with due care and prudence
The matters which indicate compliance with the board’s strategies and policies and
adherence to relevant laws and regulations;
Understanding the risks to which the bank is exposed and an overview of the risk
management measures adopted
The decisions and board resolutions
3. (1) (xi) Independent
Professional Advice
Board approved procedure is in place to seek independence professional advice.
The Board Sub-committees and various professionals in Corporate Management
& Senior Management advise the Board on various matters relevant to them. In
addition, the Board obtains independent professional advice as and when necessary.
These functions are coordinated through the Company Secretary.
3. (1) (xii) Conflict of Interest Procedure in place to evaluate and to take necessary steps to avoid any issues of
director’s conflict of interest.
Director’s abstained from voicing in such a situation and he/she is not counted in the
quorum.
The Directors are conscious of their obligation to ensure that no conflict of interest
arises in the decision making process.
Directors have direct or indirect interests in any transaction with the Company refrain
from participating in discussions, decisions making or voting on matters whenever
such conflict of interest arises.
3. (1) (xiii) Schedule of matters A schedule of matters reserved for Board’s decisions is included in the agenda for
easy direction and control of the Bank.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 100
Section Principle Compliance & Implementation
3. (1) (xiv) Solvency of the Bank The Board is aware of the requirement to inform the Director, Banking Supervision of
the situation of the bank prior to taking any decisions or action, if the Bank considers
that the procedures to identify when the bank is or is likely to be unable to meet its
obligations or is about to become insolvent or is about to suspend payments due to
depositors and other creditors.
Such situation has not arisen.
3. (1) (xv) Capital Adequacy The Bank’s capital adequacy requirement is in place. It is informed to the Board and
monitored monthly.
3. (1) (xvi) Annual Corporate Governance
Report (ACGR)
The Board publishes in the Bank’s Annual Report the Corporate Governance Report.
3. (1) (xvii) Self-assessment of Directors The Board adopts a scheme of self-assessment to be undertaken by each director
annually, and maintains records of such assessments with the Company Secretary.
3. (2) The Board’s Composition
3. (2) (i) Number of Directors As per CBSL governance direction, the number of Directors should be not less than
07 nor more than 13. The Board comprises 12 Directors.
3. (2) (ii) Period of Service of a Director/
Director serving more than 9
years
Transitional provisions have been applied to any director serving more than 9 years.
3. (2) (iii) Board Balance The number of executive directors, including the Managing Director (MD) does not
exceed one-third of the number of directors of the board.
At present the Bank has only 3 executive directors which is less than 1/3 of total
directors.
3. (2) (iv) Independent
Non Executive
Director
At the beginning of the year there were 4 Independent Non Executive Directors
but reduced to 2 due to retirement and other Directors joining Boards of subsidiary
companies.
Steps are being taken to comply with the Corporate Governance requirement in
2011.
3. (2) (v) Process for appointing
Independent
Directors.
Directors are requested to propose names of individuals of various disciplines in place
of Independent Directors. Eg: Accountants, Economists, HR Professionals.
The Nomination Committee peruses the profile, etc. of the individuals and
recommends to the Board suitable names.
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 101
Section Principle Compliance & Implementation
3. (2) (vi) Appointing Independent
Directors
Bank has a process in place for appointing Independent Directors.
3. (2) (vii) Stipulated quorum of the Bank According to the attendance records more than 6 Directors have attended all
meetings. Out of all directors present, minimum 4 directors are Non Executive
Directors.
Bank’s policy on the quorum will be changed to read as minimum 7.
3. (2) (viii) Discloses the composition of the
Board
Bank discloses the names of the Chairman, Executive Directors, Non Executive
Directors and Independent Non Executive Directors in the annual corporate
governance report.
3. (2) (ix) Appointment of new directors Procedure is in place where the Nominations Committee assess names submitted and
recommends suitable names to the Board.
3. (2) (x) Directors appointed to fill casual
vacancy
Complied as per Articles of Association of the Company. Elected at the first Annual
General meeting after their appointment.
3. (2) (xi) Director resigns or removed
from office
Director’s resignation and the reason for such resignation are informed to the
regulatory authorities as per CSE requirement and shareholders are informed.
3. (2) (xii) Process to identify whether
a director or an employee of
a bank is appointed, elected
or nominated as a director of
another bank
Employee code of ethics (Blue Book) prohibits an employee to be elected/nominated
as a director of another Bank.
Regulatory framework has restrictions in place for directors to be appointed as
directors of another Bank.
3. (3) Criteria to assess the fitness and propriety of directors
3. (3) (i) Directors’ age There are no directors whose age is over 70 years.
3. (3) (ii) Period of service Directors who serve beyond 9 years period as stipulated by CBSL are under the
transitional period.
3. (3) (iii) Director of more than 20
companies/ entities/ institutions
As per declaration given by the directors, 02 directors are holding office of more than
20 companies. However the transitional period applies to them and they are required
to reduce their holding during the year 2011.
CBSL Code of Corporate Governance states that a director cannot serve on 20
companies/entities/institutions inclusive of subsidiaries or associate companies of the
bank.
However transitional period is given for them to comply.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 102
Section Principle Compliance & Implementation
3. (4) Management functions delegated by the board
3. (4) (i) Delegation Arrangements Managing Director’s (MD) delegated authority is approved by the Board.
3. (4) (ii) Responsibility for the matters in
3(i)(i) even actions are delegated
As per Board minute’s ultimate responsibility is with the Board.
3. (4) (iii) Review the delegation processes Delegated process to be reviewed annually starting from year 2011.
3. (5) The Chairman and Managing Director (MD)
3. (5) (i) Roles of Chairman and MD Roles of Chairman and MD are separate and not performed by the same individual.
3. (5) (ii) Chairman is a Non Executive
Director
Chairman is a Non Executive Director but not an Independent Director, since he holds
directorships in subsidiaries.
The Board will take steps to designate an independent director as the Senior Director
and disclose in the Annual Report 2011.
3. (5) (iii) Any relationship between the
Chairman, MD and board
members
Disclosed in the Annual Report and information gathered every 6 months to update
the data.
3. (5) (iv) Self evaluation process This is evidence from the self evaluation forms submitted by the Board Members.
Contents of the Board meetings and the matters discussed clearly evidence that
Board as a group works effectively and discharge its responsibilities.
Key and appropriate issues are discussed at monthly board meetings and on need
basis convening special board meetings.
3. (5) (v) Formal agenda is circulated by
the company secretary
Formal agenda is circulated which is approved by the Chairman.
3. (5) (vi) Circulation of Board Papers Agenda and board papers are circulated to the directors 07 days prior to the
meeting.
3. (5) (vii) Process that encourages all
directors to make a full and
active contribution to the
board’s affairs
Agenda and board papers are circulated to the directors 07 days prior to the meeting
which gives time for Directors to raise mattes at the board meeting.
3. (5) (viii) Self evaluation process that
assesses the contribution of Non
Executive Directors
The board has a self evaluation process that assesses the contribution of Non
Executive Directors.
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Section Principle Compliance & Implementation
3. (5) (ix) Chairman’s activities The Chairman does not directly get involved in the supervision of key management
personnel or any other executive duties. The MD is empowered by the Chairman and
the Board who in turn reports to the Board.
3. (5) (x) Communication with
shareholders
Effective communication with shareholders is maintained at the Annual General
Meeting and the Shareholder Relations meeting which is held after the AGM where
the shareholder issues are discussed.
The Board Shareholder Relations Committee meets on need basis and minutes are
tabled at the preceding Board Meeting for the perusal of all Board Members.
The following benefits are now being offered to our shareholders;
1. All internal commission charges waived off
2. 50% reduction in initial deposit of opening of current accounts
3. Waiver of 50% on the annual free charges for VISA credit cards
4. SET cards issued free of charge
5. Shareholders can meet the Assistant Manager of a branch for their requirement
3. (5) (xi) The MD functions as the apex
executive-in charge of the day-
to-day management
As per board approval and organization chart.
3. (6) Board appointed committees
3. (6) (i) Establishing Board Committees Bank has established more than 4 Board Committees as required. This exceeds the
minimum requirement of CBSL for Corporate Governance.
All Board Committee reports are addressed to the Board and minutes discussed at
the Board Meetings.
A report on each committee on its duties, roles and performance is included in the
Annual Report of the Bank.
3. (6) (ii) Audit Committee
a. Chairman of the Audit
Committee is an
Independent Non-Executive
Director and possesses
qualifications and related
experience
Audit Committee Chairman is a Non Executive Director. He is a Chartered
Accountant but not an Independent Director since he is a director of a subsidiary
company of the Bank. Steps will be taken to make him an Independent Director
during 2011.
b. All members of the committee
are Non Executive Directors
All members of the committee are Non Executive Directors.
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Section Principle Compliance & Implementation
c. Audit Committee
Recommendations
As per the Terms of Reference the committee has made the following
recommendations;
º The appointment of the external auditor for audit services to be provided in
compliance with the relevant statues
º The implementation of the Central Bank guidelines issued to auditors from time
to time
º The application of the relevant accounting standards; and
º The service period, audit fee and any resignation or dismissal of the auditor;
provided that the engagement of the audit partner shall not exceed five years
and that the particular audit partner is not re-engaged for the audit before the
expiry of three years from the date of the completion of the previous term.
d. Independence of the External
Auditor
The committee has obtained representations from the external auditor’s on their
independence and that the audit is carried out in accordance with Sri Lanka
Accounting Standards (SLAS).
e. Providing non audit services by
the external auditor
At present, such a policy is not in place. But in instances where such services
are obtained from External Auditors prior approval is obtained from the Audit
Committee in accordance with regulations.
Committee is to implement such a policy approved by the Board.
f. Scope of the Audit The committee has discussed and finalised the nature and scope of the audit, with
the external auditors in accordance with SLAS before the audit commences.
g. Review the
financial information of the
Bank
Refer the Board Minutes in respect of Financial Statements presented to the Board
by Group Chief Financial Officer on a monthly basis and the related board papers on
Financial Statements presented to the Audit Committee of the Board.
h. External Auditor’s meeting with
Non Executive Directors
The committee has met the External Auditor’s relating to any issue in the absence of
the executive management with relation to the audit.
i. The External Auditor’s
management letter
The committee has reviewed the External Auditor’s management letter and the
management’s response there to.
j. Internal Audit function In place. (Board minutes dated 03.11.2010)
Assessment of the performance of the Head of Audit is being done by the Audit
Committee on an annual basis.
At present assessment of performance of senior staff members are done by Head of
Internal Audit.
Committee will ensure the assessment of senior staff members by the committee
itself during the year.
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Section Principle Compliance & Implementation
k. Minutes of the Audit Committee
Meetings
Major findings of internal investigations and management’s responses there to be
considered by the Committee and minutes are maintained.
l. Audit Committee meeting
without the executive directors
being present
The Committee has met external auditors during the year.
m. Terms of Reference of the
committee
Committee has documented and Board approved Terms of Reference which provides,
º Explicit authority to investigate into any matter within its terms of reference;
º The resources which it needs to do so;
º Full access to information; and
º Authority to obtain external professional advice and to invite outsiders with
relevant experience to attend, if necessary.
n. Number of Meetings - at least
four times and maintained
minutes
Committee has met on 09 occasions during 2010 and minutes are maintained.
o. Disclosure in the Annual Report Bank has following Audit Committee disclosures in the Annual Report,
Audit committee report
Number of audit committee meetings held in the year
Details of attendance of each individual director at such meetings
p. Secretary of the Committee Secretary of the Committee is the Company Secretary
q. Whistle Blowing Policy Bank has a Board approved whistle blowing policy to report the improprieties in
financial reporting, internal control or other matters.
The committee ensures that proper arrangements are in place for the fair and
independent investigation of such matters and appropriate follow-up action.
3. (6) (iii) Human Resources and Remuneration Committee
a. Remuneration Policy Terms of Reference are in place as required.
b. Goals and targets Goals and targets for the MD and the Key Management Personnel (KMP) are
documented.
To be implemented for Executive Directors during 2011.
Targets are not set for Non Executive Directors since they are not expected to get
involved in executive functions.
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Section Principle Compliance & Implementation
c. Evaluations of performance At present, the performance of the MD is evaluated by the Board and the KMPs are
evaluated by the Committees.
Bank will take steps to follow the guidance in corporate governance from 2011 to
evaluate by the Committee.
d. Matters relating to MD Terms of reference provides that the MD is not present at meetings of the
committee, when matters relating to the MD are being discussed by reviewing the
minutes.
3. (6) (iv) Nomination Committee
a. Procedure to select/appoint new
directors
The Committee has implemented a procedure to select/appoint new Directors and
MD/CEO provided as per Terms of Reference.
To be implemented for Key Management Personnel during the year 2011.
b. Procedure to re-elect current
Directors
The Committee has considered and recommended the re-election of current
Directors.
c. Qualifications, experience and
key attributes
Though there is no set criteria the Committee has broadly evaluated the same
when considering for appointment and promotion to the post of MD/CEO and Key
Management Personnel.
The said criteria to be documented for the purpose based on the job descriptions.
d. Annual signed declarations Committee has obtained declarations from directors, MD and Key Management
Personnel.
e. Succession Plan Formal succession plan is being developed. The Board requirement is to have
directors representing various disciplines.
f. Committee Chairman Committee is chaired by Non-Executive Director who is also a Non Independent
Director and majority of Directors are Non Independent since they hold directorships
in subsidiaries, though they are Non-Executive Directors.
Steps will be taken to rectify this position during 2011.
3. (6) (v) Integrated Risk Management Committee (IRMC)/Board Risk Management Committee (BRMC)
a. Committee members The Committee consists of four Non Executive Directors, MD and Key Management
Personnel supervising the areas of risk, credit, market, liquidity, operational and
strategic risk. They work within the framework of the authority, responsibility
assigned to the committee.
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Section Principle Compliance & Implementation
b. Risk Assessment Process is in place as per Terms of Reference of the Integrated Risk Management
Committee. The policies on credit risk management, market risk management and
operational risk management provide the framework for managing and assessing
risks.
Information is provided to the Committee on a monthly basis on pre-established risk
indicators/thresholds for review.
c. Review of specific quantitative
and qualitative risk limits
At present, such limits are being reviewed and approved by the Board.
Appropriate steps will be taken to review/recommend the same through the
Committee and to report any risks to the Board.
d. Review of all risks gone beyond
specified limits
At present, being reviewed by the Board.
Appropriate steps will be taken to review the same by the Committee and report to
the Board.
e. Frequency of meetings The Committee meets regularly on monthly basis. 12 meetings were held in
2010 and the procedures and decisions are documented by the Secretary of the
Committee.
f. Disciplinary action procedure
for non identification of specific
risks
A formal document on disciplinary action is in place. However, there is no separate
document for disciplinary action with regard to officers.
Action will be taken to adopt a formal document on disciplinary action procedure
with regard to officers responsible for failure to identify specific risks.
g. Risk assessment report Detailed report of the meeting is submitted to the Board after each committee
meeting by the Secretary of the Committee.
h. Compliance function Established compliance function is in place. A dedicated Compliance Officer has
been appointed to monitor compliance.
º A detailed quarterly report on statutory and mandatory reporting requirements
indicating the status of compliance is submitted by the Compliance Unit to the
Board of Directors.
º A monthly compliance certificate with a sign-off with all business unit heads are
submitted to the Committee through the Compliance Unit.
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Section Principle Compliance & Implementation
3. (7) Related party transactions
3. (7) (i) Documented process to avoid
conflict any conflicts of interest
Board approval procedure is in place at the moment. Process is in place to report the
transactions mentioned in section 3(7) (ii).
In the process of establishing a documented procedure and to educate the related
parties.
3. (7) (ii) Identification and reporting of
related party transactions
Company Secretary’s department compiles details with regard to related party
transactions received from relevant heads of business units for the year in question as
mentioned in corporate governance process of the CBSL.
Staffs concerned are well informed through operational circulars to identify and
report such transactions.
3. (7) (iii) Monitoring of related party
transactions defined as ‘more
favourable treatment’
A monitoring process is in place where the Bank is able to track down these types of
transactions at its originating place such as card centre, corporate credit, commercial
credit, branches and such information is gathered regularly and documented.
The staff concerned is well informed through operational circulars not to grant any
accommodation as defined in the Banking Act direction No. 7 of 2007 on maximum
amount of accommodation.
This type of accommodation granted to related parties are also strictly monitored by
the Compliance Unit of the Bank.
This process is to be documented and submitted to the Board for approval.
3. (7) (iv) Grant accommodation to
directors and key management
personnel
A procedure is in place for granting accommodation to directors and such
accommodation is approved at the Board level with not less than 2/3 of the number
of directors other than the director concerned, voting for the accommodations
granted.
All key management personnel are bank staff and they come under the normal staff
benefit schemes.
3. (7) (v) Grant accommodation to a
person or close relation of a
person which the person has
a substantial interest , and
such person is subsequently
appointed as a Director
The Bank has a process in place.
The staff is well aware of the requirement to obtain necessary security as defined by
the Monetary Board if such a need arise.
The Bank and the staff are totally aware of the requirement but such a situation has
not arisen. These processors are closely monitored by the compliance unit as well.
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Sampath Bank PLC 109
Section Principle Compliance & Implementation
3. (7) (vi) Favourable treatment/
accommodation to bank
employees or their close
relations
At present, the employees of the Bank or their close relations are not given any
favorable treatment/accommodation other than the existing staff benefits.
Staff concerned are well informed through operational circulars not to grant any
favorable treatment to employees or close relations of such employee or to any
concern in which the employee or close relation has a substantial interest.
3. (8) Disclosures
3. (8) (i) Annual audited financial
statements and quarterly
financial statements
Audited financial statements are disclosed in the Annual Report and quarterly
financial statements are published in the news papers in all three languages.
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Sampath Bank PLC 110
Section B
The Code of Best Practices on Corporate Governance Issued Jointly by the
Securities and Exchange Commission of Sri Lanka (SEC) and The Institute of
Chartered Accountants of Sri Lanka (ICASL)
The Bank’s commitment with respect
to the above Code which comprise
following aspects is summarised below:
º Directors
º Directors’ Remuneration
º Relations with Shareholders
º Accountability and audit
º Shareholders
Section Principles Compliance & Implementation
A. Directors
A.1 Board of Directors
1. Effective Board The Board takes steps to direct, lead and control the business and affairs of our Bank.
2. Regular Meetings Regular Board Meetings are held monthly during the latter part of each month while
special Board Meetings are held as and when the need arises.
The details of Board Meetings and Board Sub Committee Meetings and Attendance
are given on page 120 of this Annual Report.
3. Board’s
Responsibilities
The Board is overall responsible and accountable for the management of the affairs
and business of the Bank. For this purpose the Board;
1. Acts in good faith for the best interests of the Bank.
2. Acts in the manner that will not contravene any provisions of the Companies Act
or any other relevant statutes and the Articles of Association of the Bank and
relevant rules, regulations and directions.
3. Reviews and monitors the implementation of a sound business strategy.
4. Ensures that the CEO and Management team are competent, and of an effective
Succession Plan is adopted for the CEO and Senior Management.
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Section Principles Compliance & Implementation
3. Board’s
Responsibilities
5. Secures effective information flow, internal controls and audit systems.
6. Ensures compliance with legal/ethical standards.
7. Ensures prevention and management of risks.
8. Does not act in a manner which is reckless or grossly negligent.
9. Exercises the degree of skill and care that may reasonably be expected of persons
of their knowledge and experience.
4. Obtain Independent Professional
Advice
The Board obtains independent professional advice as and when necessary. These
functions are coordinated through the Company Secretary.
5. Company Secretary All members of the Board have opportunities to obtain advice and services of the
Company Secretary who is a Chartered Corporate Secretary and who is responsible
to the Board in ensuring the follow up of Board procedures, Compliance with Rules
and Regulations, Directions and Statutes, keeping and maintaining Minutes and
relevant records of the Bank.
The Secretary, possess all qualifications as specified in the Company’s Act, and
required of a licenced Commercial Bank.
6. Independent Judgment of
Directors
The Directors of the Bank have no vested interests and take decisions on matters
before them using independent judgment. If a matter concerning a company, in
which a Director has an interest is tabled for discussion and decision making, the
Director declares his interests and withdraws from the meeting.
7. Dedication of time for making
Board Decisions
The Board dedicates adequate time for Board Meetings and generally the dates of
regular Board Meetings are scheduled well in advance.
8. Training for Directors When changes take place in Statutes, Rules and Regulations and regulatory
directions relevant to the Banking Industry, arrangements are made to make
presentations to the Board by relevant professionals.
A. 2 Chairman & CEO
1. Division of responsibilities of
Chairman and CEO
The positions of the Chairman and the CEO have been separated keeping in line
with the best practices of Corporate Governance in order to maintain balance of
power and authority. The Chairman is a Non-Executive Director, while the CEO is an
Executive Director.
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Section Principles Compliance & Implementation
A. 3 Chairman’s Role
1. Role of the Chairman The Chairman of our Bank is a Non-Executive Director appointed by the Board and
entrusted with the following duties:
1. To ensure effective participation of both Executive and Non Executive Directors in
decision making on behalf of the Bank.
2. To encourage Directors to make an effective contribution for the benefit of the
Bank and for that purpose to ensure the Directors receive relevant information on
time.
3. To maintain a balance of power between Executive and Non-Executive Directors.
4. To approve the Agenda and Minutes of the Board Meetings prepared by the
Company Secretary and conduct Board Meetings, in an orderly manner.
5. To ensure effective communication with shareholders and their views are
communicated to the Board. In this regard, a Shareholder Relations Committee
has been established.
6. To provide leadership to the Board and ensure that the Board works effectively to
discharge its responsibilities.
A.4 Financial Acumen
1. Financial Acumen & knowledge
of the Board
One Director is a Fellow Member of the Institute of Chartered Accountants of
Sri Lanka and three Directors are Fellow Members of the Chartered Institute of
Management Accountants of UK.
Following Directors provide the Board with the necessary degree of financial acumen
and knowledge,
Mr. M A Abeynaike
Mr. S G Wijesinha
Mr. L J K Hettiaratchi
Mr. M Y A Perera
They have the ability to offer guidance to the Board on matters of Finance.
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Section Principles Compliance & Implementation
A.5 Board Balance
1. Composition of the Board The Board of Directors of the Bank comprises 9 Non Executive Directors and 03
Executive Directors. The Chairman of the Bank is a Non-Executive Director while the
CEO, COO and GCFO are Executive Directors who serve on the Board with other Non
Executive Directors.
2. Independent Directors Independent Directors are: Mr. Deepal Sooriyarachchi and Mr. W M P L De Alwis.
As per terms of CSE Rule 7, 10.3 the Board presents their opinion that the following
persons too are Independent Directors irrespective of the fact that they are not in
compliance with the relevant criteria required by the Rules of SEC & ICASL [ A 5].
Mr. M A Abeynaike - has served the Board continuously as a Director for over a
period of 09 years, and is a Director of a subsidiary.
Mr. D J Gunaratne - has served the Board continuously as a Director for over a period
of 09 years, and is a Director of a subsidiary
Dr. S Kelegama - has served the Board continuously as a Director for over a period of
09 years, and is a Director of a subsidiary.
A. 6 Supply of Information
1. Supply & use of Information &
Advice
The Board of Directors receive comprehensive information for the monthly Board
Meetings. The executive summery is circulated within the stipulated time prior to the
scheduled Board Meetings.
Agenda and Board Papers are generally sent to Directors 7 days prior to the Board
Meeting.
The Board is also provided with information regarding deliberations and decisions
made at the Board Sub Committee meetings.
A.7 Appointments to The Board
1. Appointments to the Board Appointment of Directors is carried out by the Board after having considered the
recommendations of the Nominations Committee.
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Section Principles Compliance & Implementation
A. 8 Re-election
1. Re-election of Directors The Articles also provide terms that 1/3 of the Directors should retire at each Annual
General Meeting and be subject to re-election. Such Directors who retire are those
who held office for the longest time period since the election/re-appointment.
A. 9 Appraisal of Board Performance
1. Appraisal of Board Performance The Board annually appraises their own performance to ensure that they are
discharging their responsibilities satisfactorily.
The Board appraises its performance by each Director filling a “Board Performance
Evaluation” form in line with the Corporate Governance Code of SEC and ICASL.
2. Appraisal of Board Sub -
Committees
The Committee appraises itself and the reports are retained by the Committee
Chairman.
A. 10 Appraisal of Chief Executive Officer (CEO)
1. Appraisal of the CEO Assessment of performance of the CEO is carried out by the Board at the end of
each year to ensure that targets set have been achieved.
At the beginning of the Financial Year, the Board discusses with the CEO and sets
long term, medium term and short term Financial & Non Financial goals of the Bank
that are to be achieved by the CEO within the course of the year.
B. Directors’ Remuneration
1. Levels & make up of
Remuneration
The Remuneration Committee maintains a market oriented remuneration policy for
the Bank’s Directors, Management and Executive staff. No Director is involved in
deciding his own remuneration.
2. Disclosure of Remuneration Details of the Directors’ fees, reimbursement of expenses and total remuneration are
disclosed on Page 244 of this Annual Report.
C. Relations with Shareholders
1. Constructive use of the Annual
General Meeting & other
General Meetings
The Annual General Meeting is one of the main forums of contact between small
shareholders and the Board. It is a common practice for the CEO to have regular
contact with the major shareholders. The Chairman often also participates in these
meetings. The Chairman as a part of his role, ensures effective communication
with shareholders and keeps the Board informed of major concerns raised by the
shareholders.
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Sampath Bank PLC 115
Section Principles Compliance & Implementation
2. Circulation of Notices of
Annual General Meetings to
Shareholders
All Board Members, including the Chairmen of the Board Sub-Committees attend
the AGM in order to answer questions raised (on request by the Chairman).
The Bank dispatches the Notice of the Annual General Meeting and relevant
documentation to shareholders in compliance with regulatory requirements.
3. Building up Relations with
Shareholders
The Bank, recognizing the importance of effective communication with shareholders,
provides a full detailed Annual Report. The Bank also maintains a close dialogue with
its shareholders through the Secretariat of the Bank. The Bank maintains a regular
dialogue with institutional shareholders and the financial community.
Bank has also a Shareholder Relations Committee for this purpose
4. Major Transactions Major transactions are disclosed in page 245 of this Annual Report.
D. Accountability and Audit
D. 1 Financial Reporting
1. Financial Reporting The Financial Statements have been prepared in accordance with the requirements of
the Sri Lanka Accounting Standards.
2. Annual Report of the Board
of Directors re. Affairs of the
Company
The Annual Report of the Board Directors has been prepared by the Company
Secretary in accordance with the Statutory and regulatory requirements and the
Report is from pages 164 to 183 of this Annual Report.
3. Directors’ Responsibility of
Financial Reporting
A statement of Directors’ Responsibilities for Financial Reporting is given on pages
184 to 185 of this Annual Report.
4. Management Discussion &
Analysis Report
The report given from Pages 40 to 89 presents a detailed management review with
regard to industry development, prevailing opportunities, threats, relevant business
risks, adequacy of internal control systems, financial performance and future
prospects of the Bank.
5. Declaration of the Directors that
the business is a going concern
The declaration included is part of the Annual Report of the Directors on the affairs
of the Company.
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Section Principles Compliance & Implementation
D. 2 Internal Controls
1. Maintaining a sound system
of Internal Control and Risk
Management
The Board is responsible for formulating & implementing appropriate and adequate
internal control systems.
Review of the adequacy and effectiveness of these internal control systems are
carried out by the Internal Audit Department and the Board Audit Committee.
These Internal control systems help manage the risks of the Bank’s business and
ensure that the financial information on which the business decisions are made and
which is published are reliable. The controls also ensure that the Bank’s assets are
safeguarded.
2. Timely review of the
effectiveness of internal controls
The Audit Committee keeps under review the Group’s Internal Control and Systems
to assess and mitigate Financial and Non-Financial risks.
D. 3 Audit Committee
1. Audit Committee and Auditors. The Audit Committee has been established in keeping with the requirements of
good governance, since 1997.
2. Composition & Terms of the
Audit Committee
The Audit Committee consists of Non Executive Directors. The Directors of the
Committee, CEO, COO, CFO, DGM - Finance, Manager - Systems Audit and
representatives of the External Auditors normally attend the meetings.
3. Review of External Audit
Function and relationship with
External Auditors
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.
It also approves the audit fee and on an annual basis, assesses the effectiveness and
the independence of the External Auditors.
4. Conflict of Interest & Related
Party Transactions
The Directors are conscious of their obligation to ensure that no conflict of interest
arises in the decision making process. Directors having direct or indirect interests in
any transaction with the Company refrain from participating in discussions, decisions
making or voting on matters whenever such conflict of interest arises.
The Related Party Transactions are disclosed on page 244 in this Annual Report.
5. Code of Business Conduct It is the policy of Sampath Bank that its affairs are conducted to the highest standard
of ethics.
6. Confidential
Information & Insider Trading
The Board of Directors ensures that the Bank has adequate and effective control
systems to protect depositors’ interest and prevent any possible mismanagement of
their Funds. The Board ensures that banking secrecy is always complied with.
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Section Principles Compliance & Implementation
E. Shareholders
1. Institutional & Individual
shareholders voting rights
The Institutional shareholders and individual major shareholders are encouraged
to make use of their voting rights and to participate in decision making at the
shareholders’ General Meetings, by exercising their voting rights.
Small shareholders are educated in this aspect through the Shareholder Relations
Committee.
Voting at General Meetings is generally by a show of hands. However, as stated
in the Articles of Association the Chairman of the meeting or 3 shareholders can
demand a poll. In this event Ballot Cards are issued. Scrutinisers specialised in
conducting Polls are appointed/invited to participate at such General Meetings of the
shareholders.
F. Investing/ Divesting Decision
1. Investing/Divesting Decisions Shareholders Analysts, Stockholders Associations, the Media and interested members
of the public are rapidly informed with regard to all announcements of the Bank, by
informing such decisions promptly to the Colombo Stock Exchange, publication in
the press and updating the Sampath web-site.
2. Corporate Governance
Disclosures
The Board takes responsibility for compliance with accepted rules and regulatory
directions of Corporate Governance.
Accordingly, the Board is of the opinion and is satisfied that the relevant and
adequate disclosures have been made under these rules and regulations which
governs the Corporate Governance best practices. In addition, the Board wishes
to state that voluntary disclosures made are appropriately included in this Annual
Report.
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Section C
Continuing Listing Requirements Section 7.10 on Corporate Governance Rules for
Listed Companies issued by the Colombo Stock Exchange
The disclosures below reflect Sampath
Bank’s level of conformance to the
above Rule which comprises of five
fundamental principles, namely Non
executive Directors, Independent
Directors, Disclosures relating to
Directors, Remuneration committee
Section Principle Compliance and Implementation
1. Non executive Directors The Bank has three Executive Directors. All others are Non Executive Directors.
2. Independent Directors All Non Executive Directors have submitted their confirmations on independence/
or not as per the criteria set by the Bank, which is in line with the regulatory
requirements.
3. Disclosures relating to Directors The Board assessed the independence declared by the Directors and determined the
Directors who are independent and disclosed same in item 14 of SEC & ICASL.
Four Non Executive Directors do not fulfill the entire criteria for independence. The
Board has nevertheless, decided that they are independent.
The Bank discloses the changes of Directors to the Colombo Stock Exchange when it
disclosed to the Central Bank of Sri Lanka and the public.
4. Human Resource &
Remuneration Committee
The Human Resource & Remuneration Committee comprises of two Non Executive
independent Directors, two Non executive Directors. This does not fully comply with
the requirement that the majority of the members should be independent. The Bank
has initiated steps towards rectify the said non compliance.
Please refer item 3 (6) (iii) of the SEC & ICASL: Code table on page 105 for details of
the function of the Remuneration Committee.
Names of the Remuneration Committee members are given in Board sub-committees
on page 120. The report of the Human Resource Remuneration Committee is given
on pages 160 to 161 and the remuneration paid to Directors is given in the Note
32.1.1.1 to the financial statements on page 244.
and Audit Committee. The structure
is in place and the conformance to
the requirement and expectations are
tabulated below under the said five
fundamental principles.
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 119
Section Principle Compliance and Implementation
5. Audit Committee The Audit Committee of Sampath Bank Plc is comprised of four Non-executive
Directors. Chairman of the Committee is a member of a professional accountancy
body. CEO, COO and GCFO attend Committee meetings by invitation. Please refer
pages 152 to 154 for further details.
Please refer item D 3.1 of the SEC & ICASL Code table on page 116 for the details of
the functions of the Audit Committee
The names of the Audit Committee members and the report of the Committee has
been given on page 152. The basis of determination of the independence of the
auditor is also given in the Audit Committee.
Composition and structure of the board of directors
As at 31st December 2010
Main Board Audit
Committee
Nominations
Committee
Credit
Committee
Risk
Management
Committee
HR &
Remuneration
Committee
Strategic
Planning
Committee
Shareholder
Relations
Committee
Mr. I W Senanayake
C M C I - - C -
Mr. S G Wijesinha
D M M - - M M -
Mr. M A Abeynaike
M C M M - - M -
Mr. D J Gunaratne
M - M C M - - C
Dr. S Kelegama
M - - - - - - -
Mr. L J K Hettiaratchi
M M - M M M M -
Mr. W M P L De Alwis
M - - - C C - M
Mr. K D D Perera
M - - - M - M -
Mr. D Sooriyaarachchi
M* - - - - M - -
Mr. G L H Premaratne
M I I M M M M -
Mr. M Y A Perera
M I - M M M I -
Mr. R Samaranayake
M I - M M I M -
Mr. J D Bandaranayake
M** - - - - M* M -
Mr. E A Gunasekera
M** - - M - - - M
C - Committee Chairman, D - Deputy Chairman, M - Member, I - Invitation
* D Sooriyaarachchi was appointed to the Board on 05.08.2010.
** J D Bandaranayake and E A Gunasekera vacated office with effect from 17.07.2010.
*** J D Bandaranayake and E A Gunasekera were appointed Board Advisors with effect from 17.07.2010.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 120
Directors Attendance at Meetings
Names Main Board Audit
Committee
Nominations
Committee
Credit
Committee
Risk
Management
Committee
HR &
Remuneration
Committee
Strategic
Planning
Committee
Shareholder
Relations
Committee
Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended
Mr. I W Senanayake 15 15 09 08 04 04 - - - - - - 03 03 - -
Mr. S G Wijesinha 15 15 09 08 04 04 - - - - 04 04 03 03 - -
Mr. M A Abeynaike 15 13 09 09 04 04 19 13 - - - - 03 02 - -
Mr. D J Gunaratne 15 14 - - 04 04 19 17 12 11 - - - - 02 02
Dr. S Kelegama 15 13 - - - - - - - - - - - - - -
Mr. L J K Hettiaratchi 15 13 09 08 - - 19 13 12 11 04 03 03 03 - -
Mr. W M P L De Alwis 15 15 - - - - - - 12 12 04 04a - - 02 02
Mr. K D D Perera 15 13 - - - - - - 12 1 - - 03 02 - -
Mr. D Sooriyaarachchi 07 05 - - - - - - - - 02 01 - - - -
Mr. G L H Premaratne 15 15 - - - - 19 18 12 10 04 04 03 03 - -
Mr. M Y A Perera 15 14 - - - - 19 16 12 09 04 03 - - - -
Mr. R Samaranayake 15 15 - - - - 19 18 12 12 - - 03 02 - -
Mr. J D Bandaranayake 07 02a - - - - - - - - 04 03b 03 01 - -
Mr. E A Gunasekera 07 07a - - - - 19 19a - - - - - - 02 02a
Main Board - a. vacated office with effect from 17.07.2010.
Credit Committee - a. 10 as Committee Member and 09 as Board Advisor
HR & Remuneration Committee - a. 02 as Committee member and appointed as Chairman on 04th August 2010
b. 01 as Board Advisor
Shareholder Relations Committee - a. 01 as Committee member and 01 as Board Advisor
Board Sub Committees
Committee/
Composition
Scope
1. Audit Committee
M A Abeynaike
I W Senanayake
S G Wijesinha
L J K Hettiaratchi
Chairman (Non-Executive) M. A. Abeynaike
Availability of terms of reference Available
Planned frequency Quarterly
Circulation of the agenda and papers 7 days before the meeting
Members Non-Executive Directors I W Senanayake
S G Wijesinha
L J K Hettiaratchi
Invitees G L H Premaratne - MD/ CEO
M Y A Perera - Dy MD/COO
R Samaranayake - GCFO
N.R. Thilakarathne - Snr. DGM Operations
L.R. Jayakody - DGM Finance and Planning
P. Polwatte - Head of Internal Audit
N. Gunawardena - Snr. Mgr. System Audit
External Auditors - M/S Ernst & Young
Professional advice Obtains advice on need basis
Secretary S. Sudarshan – Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 121
Committee/
Composition
Scope
2. Nominations
Committee
I W Senanayake
S G Wijesinha
M A Abeynaike
D J Gunaratne
Chairman I W Senanayake
Availability of terms of reference Available
Planned frequency Bi - annually
Circulation of the agenda and papers 7 days before the meeting
Members Non-Executive Directors S G Wijesinha
M A Abeynaike
D J Gunaratne
Invitees G L H Premaratne - MD/CEO
Professional advice Obtains advice on need basis
Secretary S Sudarshan – Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
3. Credit Committee
D J Gunaratne
E A Gunasekera
M A Abeynaike
G L H Premaratne
M Y A Perera
R S Samaranayake
L J K Hettiaratchi
Chairman (Non Executive) D J Gunaratne
Availability of terms of reference Available
Planned frequency Based on need
Circulation of the agenda and papers Only on very urgent situations
Members Non-Executive Directors
Board Advisor
M A Abeynaike
L J K Hettiaratchi
E A Gunasekera
Invitees I W Senanayake
Professional advice Obtains advice on need basis
Secretary S Sudarshan - Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
4. Board Risk
Management
Committee
W M P L De Alwis
D J Gunaratne
K D D Perera
L J K Hettiaratchi
G L H Premaratne *
M Y A Perera *
R Samaranayaka *
*Members KMPs
Chairman (Non-Executive) W M P L De Alwis
Availability of terms of reference Available
Planned frequency Monthly
Circulation of the agenda and papers 7 days before the meeting
Members Non-Executive Directors D J Gunaratne
K D D Perera
L J K Hettiaratchi
Invitees Corporate Management as required
Professional advice Obtains advice on need basis
Secretary S Sudarshan - Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 122
Committee/
Composition
Scope
5. Human Resources
and Remuneration
Committee
W M P L De Alwis
J D Bandaranayake
L J K Hettiaratchi
S G Wijesinha
G L H Premaratne
M Y A Perera
D Sooriyaarachchi
Chairman (Non-Executive) W M P L De Alwis
Availability of terms of reference Available
Planned frequency Need basis
Circulation of the agenda and papers Need basis
Members Non-Executive Directors J D Bandaranayake
L J K Hettiaratchi
S G Wijesinha
D Sooriyaarachchi
Invitees R Samaranayake - GCFO
Head of HR
Professional advice Obtains advice on need basis
Secretary S Sudarshan - Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
6. Strategic Planning
Committee
I W Senanayake
M A Abeynaike
S G Wijesinha
L J K Hettiaratchi
J D Bandaranayake
K D D Perera
G L H Premaratne
R Samaranayake
Chairman (Non-Executive) I W Senanayake
Availability of terms of reference Available
Planned frequency Need basis
Circulation of the agenda and papers 7 days before the meeting
Members Non-Executive Directors M A Abeynaike
S G Wijesinha
L J K Hettiaratchi
J D Bandaranayake
K D D Perera
Invitees M Y A Perera - Deputy Managing Director
Professional advice Obtains advice on need basis
Secretary S Sudarshan - Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee As per the Corporate Governance Code of Central Bank of Sri Lanka
7. Shareholder
Relations
Committee
D J Gunaratne
E A Gunasekera
W M P L De Alwis
Chairman (Non-Executive) D J Gunaratne
Availability of terms of reference Available
Planned frequency Based on need
Circulation of the agenda and papers 7 days prior to meeting
Members Non-Executive Directors E A Gunasekera
W M P L De Alwis
Invitees Other Directors
Professional advice Obtains advice on need basis
Secretary S Sudarshan - Company Secretary
Availability of Meeting Minutes Available in the custody of Secretary
Objectives of the committee Shareholders are given opportunity to present their views, problems,
grievances, etc directly to the committee.
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 123
Performance Governance
Beyond Boundaries
and Reaching the
Horizon……
Our Strategic Planning process has been
designed to position the Sampath Bank
as a key player in the Financial Industry
by increasing the market share of the
Vision & Mission of the Bank
Strategic Direction
Macro Economic
Analysis
Banks Strategic Position in the competitive environment SWOT Analysis
Banking Industry
Review
Business Strategies Supporting Strategies
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BUDGET 2011
Bank while prudently managing the
associated business risks.
We have adopted a three year
“Revolving Strategic Planning Model”
which was introduced & implemented
to the Bank since 2009. According to
this planning process, the Strategic Plan
is annually reviewed and revised in line
with the latest market developments &
trends, the Annual Budget is prepared
within the set parameters of the new
Strategic Plan. The Strategic Plan 2011-
Annual Report 2010 / Governance / Corporate Governance Report
2013 and Budget 2011 was prepared by
applying the same model.

Overview of the Strategic Planning
Process as follows:
Sampath Bank PLC 124
Measuring Performance
Sampath Bank’s performance will be
measured using the above selected
Financial & Non Financial KPIs on
frequent basis in order to ensure the
budgeted results are achieved and
corrective action taken to overcome any
negative variances.
Other Aspects of Corporate
Governance
Corporate governance of the
risks function
The Credit Risk Steering Committee and
Operational Risk Steering Committee are
responsible for proposing to the Board
Risk Committee, the Bank’s risk policy,
approval of which corresponds to the
Board under its powers of administration
and supervision. The committee also
ensures that the Group’s activities are
consistent with its risk tolerance level
and establishes the global limits for
the main risk exposures, reviewing
them systematically and resolving those
operations that exceed the powers
delegated in bodies lower down the
hierarchy. The committee gives guidance
and takes decisions in the sphere of the
powers delegated to it by the Board. It is
chaired by the W M P L De Alwis and six
other Board members are also members
of the committee.
The committee met 12 times during
2010, underscoring the importance
that Bank attaches to appropriate
management of its risks.
Financial KPIs
Business Growth
Deposit Growth > 20.00%
Advances Growth > 20.00%
Net Interest
Margin
> 4.75 %
Other Income
to Net Income
> 25.00 %
Cost to
Net Income
< 60.00 %
Effective
Tax &
VAT Rate
< 40.00 %
Profit Growth (After Tax)
> 25.00 %
Return on Assets (After Tax)
> 1.50 %
Return on Equity (After Tax)
> 20.00 %
Dividend Payout Ratio
> 15.00 %
Minimum Dividend per Share
> Rs. 7.00
Credit Quality
NPA Ratio (Net of IIS) Open Credit Exposure
< 5.00 % < 10.00 %
Non Financial KPIs
Risk Management
Human Resource
Development
Network Expansion
Total Capital
Adequacy Ratio >
12.50%
Employement
Generation, minimum of 200
new recruits
Branch Network >
200 Branches
Bank owned ATM
Network > 250
ATMs
Annual Report 2010 / Governance / Corporate Governance Report
Corporate Governance Report contd...
Governance contd...
Sampath Bank PLC 125
The main responsibilities of the Board’s
Risks Committee are:
º Propose to the Board the risk policy
for the Group, which must, in
particular, identify:
º The dillerenl lypes ol risk
(operational, technological,
financial, legal and reputational,
among others) facing it;
º The inlormalion and inlernal
control systems used to control
and manage these risks;
º Sel lhe level ol risk considered
acceptable:
º The measures envisaged lo
mitigate the impact of identified
risks, in the event that they
materialise;
º Systematically review exposures
with the main customers, economic
sectors, geographic areas and types
of risk.
º Ensure that the Group’s actions
are consistent with the previously
decided risk tolerance level.
º Authorise the management tools
and risk models as well be familiar
with the results of the internal
validation.
º Know, assess and monitor the
observations and recommendations
periodically formulated by the
supervisory authorities in the exercise
of their function.
IT Governance
IT Governance at Sampath Bank is
firmly entrenched by both policy and
procedure. Over the years, the hallmark
of our IT Governance has been the
strict change control process, where
IT Development and IT Operations are
independent units at the departmental
level. The close attention given by the
Audit Committee to potential IT related
loss events; the establishment of an
Information Systems Audit Unit within
the Bank’s Internal Audit Department
and the involvement of the Board of
Directors in formulating the IT Policy and
Product development process; clearly
demonstrate the Bank’s commitment to
effective and relevant IT Governance.
Guidance on all IT related strategic and
operational matters is provided by the
IT Steering Committee, while the Bank’s
membership in the national Banking
and Finance CSIRT (Computer Security
Incident Response Team) has enabled
the Bank to absorb valuable inputs
and best practices to improve our IT
governance function.
IT Controls over Financial
Reporting
Access to the data sources for Financial
Reporting at Sampath Bank is controlled
by the various IT Policies and Procedures,
and backed by the associated control
mechanisms. Use of the core banking
system and other reporting facilities
is controlled by the various IT usage
Policies, Procedures and access controls
implemented throughout the Bank.
Annual Report 2010 / Governance / Corporate Governance Report
Sampath Bank PLC 126
Risk Management & Compliance
Annual Report 2010 / Governance / Risk Management & Compliance
Our Vision for Risk Management
In today’s challenging financial and economic environment, effective risk management is
fundamental to maintain consistency in profitability and sustainability.
The Risk Management Vision of Sampath Bank focuses on developing a strong, strategic and
integrated approach aimed at optimum performance. We have recognised the fact that Risk
Management adds greater sustainable value to our business strategy, operations, and finally to
profitability.
Thus, risk management is an integral part of banking and we aim to deliver superior value to all
our stakeholders while achieving an appropriate trade-off between risk and returns.
Key Risks
The Bank’s risk profiling and
management, focuses on the key
risk categories of credit risk, market
risk, liquidity risk, operational risk and
reputational risk.
Our risk Management strategy is
based on a clear understanding of
these multiple risks, and systemised
through disciplined risk assessment
and measurement procedures and
continuous monitoring. The Bank
follows an integrated approach towards
risk management and has taken
various initiatives to strengthen its risk
management practices over the years.
The policies and procedures designed
for this purpose are continuously
reviewed according to evolving business
requirements, and regulatory guidelines,
and are also benchmarked against
international best practices.
Governance and Key
Principles of our Integrated
Risk Management Framework
The integrated risk management
function of the bank is undertaken by
a well structured Risk Management
Unit which reports to Chief Risk &
Compliance Officer (CRCO).
The Risk Management Unit is
independent of profit and volume
targets to ensure greater transparency
and effectiveness.
The organisation structure and key
responsibilities are discussed below.
º The Board of Directors (BOD) - has
oversight on all risks assumed by the
Bank. The BOD maintains overall
responsibility to ensure adequate
structures; policies and procedures
are in place for risk management,
as well as their effective
implementation. The Board approves
all risk management policies and
also sets limits by assessing the
risk appetite, the skills available for
managing risks and the Bank’s risk
bearing capacity
º The Board Risk Management
Committee (BRMC) - The Board has
delegated the overall integrated
risk management responsibilities to
an independent Risk Management
Committee of the Board of
Directors which functions as the
Apex body/Committee responsible
for supervising the integrated risk
management activities of the Bank
º Further, the bank has the following
separate steering committees to
facilitate focused oversight on
various risks;
Governance contd...
Sampath Bank PLC 127
Annual Report 2010 / Governance / Risk Management & Compliance
i) Credit Policy, Risk & Portfolio
Review Committee - which
is responsible for regularly
reviewing the credit policy and
portfolio, credit procedures and
for managing the credit risk on a
bank-wide basis
ii) Operational Risk Management
Steering Committee - which
is responsible for overseeing
the Bank’s operational risk
management policy and process
iii) Asset-Liability Management
Committee (ALCO) - which
is the decision making unit
responsible for the management
of the balance sheet from a risk
return perspective including
management of market risk
iv) IT Steering Committee - which
takes responsibility for assessing
the feasibility, presentation of
business-case scenarios and
the achievement of the most
ideal operational outcomes,
infrastructure, automation,
research, development,
procurement and system/
network security aspects related
to the entire Information
Communication Technology
infrastructure of the Bank, in line
with the strategic vision and long
term goals as stipulated by the
Board of Directors
v) The Audit Committee provides
direction to the Board of
Directors and also monitors the
quality of the Internal Audit
function of the Bank.
º Policies approved from time to
time by the Board of Directors and
as recommended by the various
Board Committees and Corporate
Management form the governing
framework for each type of risk and
business activities are undertaken
within this policy framework
º The Risk Management Unit reviews
and monitors the bank’s policy
framework that addresses multiple
risks and regulatory compliance
issues. The Unit reviews and assesses
the key risk indicators covering areas
such as credit risk, interest rate risk,
liquidity risk and foreign exchange
risk within the ‘limits - framework’,
including stress test limits, for
various risks. It also carries out an
assessment of the capital adequacy
based on the risk profile of our
balance sheet and reviews the status
with respect to implementation of
requirements under Basel II norms.
º Anti Money Laundering (AML) and
Regulatory Compliance activities
are administered by the AML &
Compliance unit.
Risk and Compliance Organisational Structure
Board of Directors
(BOD)
Board Risk Management
Committee (BRMC)
Board Audit Sub Committee
Internal Audit
Chief Risk & Compliance
Officer (CRCO)
AML & Compliance Unit Risk Management Unit (RMU)
Operational & Market Risk
Management Unit
Credit Risk Management Unit
(CRMU)
Managing Director
Sampath Bank PLC 128
The Bank’s overall risk/governance model is premised on the concept of the Three (3) Lines of Defense.
Credit Risk Management
Credit Risk is the risk of loss arising
from the inability of a borrower or
counter party to meet their obligations
in accordance with the agreed terms.
While financial institutions have faced
numerous difficulties over the years for
several reasons, the main contributory
factors to the collapse of such
institutions continue to be directly linked
to lax credit standards for borrowers
and counter parties, poor portfolio
management, or lack of attention to
changes in the economic environment.
For most banks, loans constitute the
largest and most obvious source of
credit risk, and credit risk management
therefore, is a critical component of
a comprehensive approach to the
integrated risk management function.
The Bank manages the credit risk
inherent in the entire portfolio as
well as the risks in individual credits
or transactions, in order to minimise
or reduce potential non performing
advances, whilst determining the most
profitable borrower, exposure limits and
to manage returns on its portfolio.
Sampath Bank’s Policy on Credit Risk
reflects the tolerance for risk and
focuses on achieving the following
primary objectives;
Mechanisms of Credit Risk
Management
We have a soundly structured and
standardised credit approval process,
which includes a well established
procedure that comprehensively
addresses credit appraisal and credit
rating. An initial assessment of the
credit risk associated with any lending
proposal, is undertaken by analysing a
Three Lines of Defense Framework
1st Line of
Defence
Risk Taking
Business/Support
Units
2nd Line of
Defense
Risk Management
3rd Line of
Defense
Internal Audit
Credit Risk Policy
Establishing/ maintaining
an appropriate credit risk
environment
Maintain an appropriate
credit administration,
measuring and monitoring
process
Identification and
administration of credit issues
Ensuring adequate controls
over credit risk
Proper evaluation of new
business opportunities
Operating a sound credit
granting process
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 129
variety of risks relating to the borrower
and the relevant industry, while a
gamut of management techniques
that conform to good governance are
in place as mechanisms of credit risk
management.
Delegated approving authority
The Board of Directors of the Bank
has delegated appropriate levels of
authority to Credit Committees (Board
Credit Committee, Executive Advances
Committee, Advances Committee )
and to the Managing Director. Such
delegated authority limits are reviewed
on an annual basis or earlier if the need
arises. Further, the Board of Directors/
Managing Director shall decide on
subordinated thresholds for onward
delegation to the next level of officers.
The Managing Director also reviews
such delegated levels periodically, and
effects appropriate changes, if necessary.
Specific thresholds of delegated
authority are based on the type of
collateral, a delegate’s experience/
exposure in granting credit and
knowledge of facility types, in order to
ensure accountability and to mitigate the
risks arising out of judgmental errors.
Segregation of duties
Segregation of duties is primarily
aimed at ensuring Credit Approval/
Management, Risk Management, Credit
Administration, Credit Control and
Credit Audit functions are performed
independent from each other. The
Relationship Manager, who is the direct
point of contact for the customer
relationship is responsible for ensuring
the accuracy of the credit application
submitted for approval, adherence
to credit policies, procedures and the
conduct of due diligence.
Internal risk rating of obligors
Internal credit rating methodologies for
rating obligors have been developed.
The rating, factors in quantitative as
well as qualitative issues, and serves as a
key input in the approval as well as post
approval credit processes. The rating
of every borrower is reviewed at least
annually or more frequently, if required.
Lending operations / Centralised
credit evaluations
Lending operations in the Branch
network, has been centralised since early
2009, with all credit appraisals upto a
pre-approved limit being sanctioned
by the Regional Managers, with the
exception of cash-backed & gold-backed
advances. Branch Managers are solely
responsible for business development
and branch operations.
This has resulted in an overall
improvement in credit quality, thus
reducing the non performing loans in
absolute terms.
Independent review / appraisal
by Credit Risk Management Unit
(CRMU)
In addition to the credit assessment
conducted by the Branch/Relationship
Manager, all credit appraisals with large
exposure, as well as credit applications
by borrowers with weak internal risk
ratings, are reviewed by the CRMU, prior
to forwarding to the relevant approval
authority.
Annual Report 2010 / Governance / Risk Management & Compliance
Credit risk management encompasses a host of management techniques, which helps the bank to mitigate the adverse impacts of credit risk
Delegated credit
approval levels
Segregation of
duties
Internal risk ratings
of obligors
Lending operations
Centralised credit
evaluation
Independent
review of credit
applications by the
CRMU
Monitoring post
credit risk
Management of
the credit portfolio
Sampath Bank PLC 130
Monitoring post-credit risk
The Branch/Relationship Managers are
responsible to continuously monitor/
review the performance of their
portfolio of credit and the financial
stability of the borrower, with special
emphasis on ‘Internal’ & ‘External’
Early Warning Signals (EWS). Accounts
indicating deterioration of credit quality
through EWS are ‘Watch-listed’ - with
approval from the respective Credit
Committees, for stringent monitoring
and to prevent any possible credit losses.
Further, the CRMU carries out
independent risk based post credit
reviews for borrowers/sectors with
high exposure levels and/or lower
credit ratings or are susceptible to any
other factors that might negatively
impact credit quality. The outcome
of the evaluation is conveyed to the
relevant Branch/Relationship Manager
for necessary action, while reports
highlighting the outcomes of such post-
credit reviews are forwarded through
the CRCO to the ‘Credit Policy, Risk &
Portfolio Review Committee’ for further
review.
Management of the credit
portfolio
A key credit risk management
strategy adhered to by the Bank is to
continuously maintain a well diversified,
balanced and healthy credit portfolio,
in order to avoid the dangers of
over-exposure to any single customer,
customer segment, sector or industry
within the economy, end-use purpose or
type of security . Stringent adherence to
Analysis of Advances Portfolio
Agriculture & Fishing 10%
Manufacturing 15%
Tourism 3%
Transport 1%
Construction 11%
Traders 17%
New Economy 2%
Financial & Business
Services 5%
Infrastructure 2%
Other Services 4%
Credit Cards 2%
Pawning 22%
Other Customers 6%
manage the credit portfolio within this
strategy enables the Bank to spread its
credit portfolio risk among a large and
varied clientele, a diversified sectoral-
base, and achieve a sound mix of
security.
Portfolio Analysis
The Credit Portfolio Analysis undertaken
by the CRMU, enables the Bank to
monitor the credit risk attached to its
entire credit portfolio. A comprehensive
report is submitted monthly to the
Board Risk Management Committee
(BRMC) and the management, setting
out a detailed risk evaluation, as well as
suggested mitigating action.
Concentration Risk
Concentration risk is the probability
of a loss arising from significantly
imbalanced exposure to a particular
group of counterparties. Concentration
risks could occur due to, ‘Name
Concentration’(i.e. uneven distribution
of exposure to its borrowers) or ‘Sectoral
Concentration’(i.e. uneven distribution
of exposure to particular sectors,
regions, industries or products etc.).
Concentration risk is mitigated in the
bank to a great extent by stipulating
prudent credit risk limits on various
risk parameters. The Central Bank of
Sri Lanka (CBSL) has also stipulated
guidelines on maximum exposure in
respect of single/related party borrower
limits, as well as for large exposures.
In addition, the Bank also has adopted
a prudent classification of borrowers
into sectors and sub-sectors, including
Pawning, Manufacturing, Trading,
Housing, Tourism, Construction,
Agriculture etc., as part of our efforts
to improve portfolio management by
proactively monitoring such exposure
against credit concentration limits.
Sector Exposures are reviewed at least
once a year, or earlier if the need arises,
by the BOD.
We have adopted the following method
to measure the risk in relation to such
concentration.
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 131
Herfindhal-Hirshman Index (HHI)
As at 31.12.2010
Sector (Rs.Mn.) HHIScore Sector (Rs.Mn.) HHI Score
Pawning 0.0462 Other Services 0.0014
Manufacturing 0.0235 Tourism 0.0012
Traders 0.0293 Construction 0.0009
Agriculture & Fishing 0.0096 New Economy 0.0006
Housing 0.0056 Infrastructure 0.0004
Other Customers 0.0042 Credit Card 0.0002
Financial & Business Services 0.0026 Transport 0.0001
Total 0.1258
HHI Score of 0.1258 was received from the index. This would be monitored on a
monthly basis to curtail any significant adverse fluctuations in the index.
Post Mortem Review
Post mortem reviews are conducted by
the CRMU for performing and non-
performing advances to review the
original credit assessment, the timeliness
of action taken to identify any problems,
adequacy of collateral, reasons for
default, and conditions of granting the
facility. This enables the Bank to ‘learn
from the mistakes’ in order to improve
the quality of the credit portfolio and
evaluation process.
Operational Risk
Management
Operational Risk is the possibility of
loss resulting from inadequate or failed
internal processes, people and systems
or from external events. This includes
legal risk but excludes strategic and
reputational risks.
Operational Risks at Sampath Bank are
managed with a comprehensive internal
control framework emanating from the
strategic corporate goals and regulatory
requirements. Internal controls form an
integral part of the regular activities that
enable swift responsiveness to changing
conditions.
Policies, procedures & internal
control framework
The Bank has an approved policy
framework which includes all key
policies. As a best practice, new
or amended policies or procedural
instructions are risk reviewed by the
RMU, to ensure appropriate risk
mitigation strategies are considered
and embedded in the internal control
framework.
Managing risks in New Product
Development
Risk Management is a key and priority
aspect of product development, as the
Bank continues to innovate new products
geared to suit the evolving needs of
markets and of our emerging economy.
Risk Management is represented in all
New Product Committees of the Bank
and a risk and compliance sign-off is
obtained prior to implementing product
changes or introducing new products.
Review area No. of
reviews
Policies 12
Procedures 67
Directives 24
Service Level
Agreements (SLA)
37
Product Development
Sign offs
12
Policies, Procedures, Directives, SLA’s & New
Products Reviewed in 2010
Risk Identification
Assessment of Risks &
Controls
Risk Monitoring
Establishing Key Risk
Indicators
(KRI)
Risk Mitigation Risk Reporting
Core elements of Operational Risk Management
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 132
Internal Loss Event Data
Collection & Management
Internal Loss Event Data captured at the
point of occurrence, and segregated
into respective business lines to form
the base for quantification of regulatory
capital computation under Basel II
standardised and higher approaches.
Internal Loss Event Data collection which
was initiated at the Bank in 2007 has
been continuously improved to ensure
smooth and timely reporting.
Reporting is centralised and is
disseminated to Corporate Management
and the BRMC, depending on the
magnitude of risk. Each loss event is
mapped to the underlying cause and
control that failed. As a result of this
analysis, the Bank has improved its
internal processes and controls in many
areas including; cash transactions, ATM
transactions, foreign exchange losses,
mortgage loans, internet banking and
Letters of Guarantee. Therefore, internal
loss events reporting has become an
effective source for a number of process
improvements that have eventually led
to business benefits over the years.
Review of Systems
IT systems developments, new
acquisitions and upgrades are reviewed
for risk and compliance issues prior to
implementation and are augmented by
the monitoring and review conducted by
the Systems Audit function.
Risk & Control Self Assessments
Business lines and operational units
have commenced Risk & Control Self
Assessment (RCSA) processes during
the year, to identify, evaluate and
control key risks faced by them with
the assistance of the Operational Risk
Management Unit. On completion of
the self assessments, key risks would be
assessed, and corrective action plans will
be formulated to address areas where
controls are weak, ineffective or absent.
Establishment of Key Risk
Indicators (KRI)
KRIs are used to monitor either exposure
to key risks or controls implemented
to mitigate them. The Bank is currently
developing its KRI framework in order
to enhance the measures taken through
Internal Loss Event Data Reporting - 2010 (No. of Events)
Retail Banking 1,508
Agency Sevices 6
Asset Management -
Commercial Banking 16
Corporate Finance 1
Payment and Settlement 39
Trading & Sales 11
Retail Brokerage -
Internal Loss Data Collations and RCSA.
Initially we have designed the KRIs to be
updated at monthly intervals with pre-
defined threshold levels indicating the
level of risk. Upon the KRIs reaching a
critical level, appropriate risk mitigation
action would be triggered.
Business Line Segregation of
Gross Income
The Basel II standardised approach
requires Gross Income of the Bank to
be segregated into eight different Basel
Business Lines. Accordingly, during the
year, the Bank devised a mechanism
of income segregation. Computation
in line with the Basel II requirements is
expected to be completed in the first
quarter of 2011.
This initiative will expedite the Bank’s
migration towards the standardised
approach on Operational Risk Capital
Calculation, and will also be a key
input for implementing Stress Testing
framework for Operational Risk.
Legal Risk Management
All contractual documents and Service
Level Agreements with external parties
are approved by the Chief Legal Officer,
and reviewed by the Operational
Risk and Compliance functions.
Where specific expertise is required,
professional services of external legal
experts are sought.
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 133
Market Risk Management
Market Risk is the possibility of losses
that may be incurred by the Bank by
changes in market variables. The Basel
Committee defines Market Risk as the
risk that ‘on’ or ‘off’ balance sheet
positions will be adversely affected by
movements in equity and interest rate
markets, currency exchange rates and
commodity prices.
The Bank has a well established
framework for Market Risk Management
under the Market Risk Management
Policy, Asset and Liability Management
Policy and the Treasury Policy forming
the basis for procedures, processes and
structure, while key aspects of market
risks reviewed and monitored by the
Bank include Liquidity Management,
Interest Rate Risk Management and the
pricing of Assets and Liabilities.
Asset and Liability Management
Committee (ALCC)
ALCO, headed by the Managing
Director monitors and manages the
Bank’s overall liquidity position in order
to maximise shareholder value, enhance
profitability and protect the Bank from
adverse situations involving liquidity or
market risks.
The Committee decides on product
pricing, the optimum mix of assets and
liabilities, and stipulates the liquidity
gap position and interest rate risk limits,
formulates views on interest rates, sets
benchmark lending rates and determines
the asset and liability management
strategy in light of the current and
expected business environment.
Key business heads are represented
in ALCO, and the committee meets
fortnightly to duly discharge its
functions.
Risk Management and
Monitoring Functions by the
Middle Cffce
The Middle Office function which is
independent of the Treasury is a part
of RMU. Middle office monitors the
comprehensive framework of Treasury
operating limits approved by the Board,
including; open position limits, dealer
limits, counter party limits, gap limits,
FCBU and Domestic operations limits
etc., which are regularly reviewed
and updated as per the prevailing
business requirements, business
0
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Monitoring Functions of Middle Office
Nos
Number of monitoring functions carried out by the Middle Office
opportunities, regulator guidelines, Basel
II recommendations and industry best
practices.
Upon completion of the automation of
the Treasury System, which is currently
in the final stages of implementation,
it is expected that monitoring activities
undertaken by the Middle Office will
almost double, in 2011.
All executive level staff attached
to the Middle office obtained the
internationally recognised ACI
Operations Certification offered by The
Financial Markets Association during
the year, as required by CBSL directives.
The Bank will continue to develop and
strengthen the Middle Office function in
terms of capability of its staff, as well as
the effectiveness of its monitoring and
reporting systems.
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 134
Automation of the Treasury
The Finacle Treasury system set up
during the year, is expected to be
completed in early 2011. The system
will enable the Bank to further develop
and strengthen its treasury functions in
line with the industry best practices and
CBSL requirements.
Managing Foreign Exchange Risk
Foreign Exchange Risk arises out of
the impact of volatility of foreign
exchange rates on open foreign
exchange positions. Foreign exchange
risk is managed through a framework of
approved limits issued by the Board of
Directors. The significant limits include
currency wise overnight / intraday limits
for open positions, Dealer Limits, Stop
Loss Limits, counter party limits, Country
Limits, and Gap Limits in line with CBSL
regulations and business requirements
of the Bank. These limits are monitored
by the Middle Office, and deviations are
escalated to the respective approving
authorities.

Liquidity Risk
Liquidity risk arises due to unmatched
maturities of assets and liabilities, and
hinders the Bank’s capacity to honour
its commitments as and when they fall
due. The Liquidity Risk of the Bank is
managed by ALCO, through constant
monitoring, and implementing corrective
action through various banking
products and mechanisms such as the
management of advances, deposits and
investment portfolios.
Stress Testing
The Bank has established a Stress Testing
Policy and framework, and the following
Stress Testing calculations have been
performed to assess the impact on risk
variables such as credit, equity, liquidity,
exchange rate on the bank’s capital
adequacy as at 31 December 2010.
Base Data as at 31 December 2010
(Rs. Mn.)
Capital Base 15,647
Risk Weighted Assets
(RWA)
121,168
Net Open Position (NOP) 88.022
Liquid Assets 42,243
Liquid Liabilities 160,694
Total Exposure in Equity
(Stock Market)
899.105
Total NPA(Net) 5,047
Capital Adequacy ratio 12.91%
Exchange Rate Risk
The Stress Test for Exchange Rate
assesses the impact of change in
exchange rate on the value of equity.
Overall Net Open Position (NOP) of the
Bank including the on and off balance
sheet exposures has been given adverse
shocks of 5%, 10% and 15%.
Total Capital Adequacy Ratio (CAR)
remains over 10% minimum value under
all 3 Stress Testing Scenarios.
Liquidity Risk
The test evaluates the resilience of
the bank towards the fall in liabilities.
The liabilities has been given shocks of
10%,20% and 30% fall. The equivalent
amount is deducted from the liquid
assets assuming the fall in liabilities is
met by the corresponding fall in the
liquid asset.
At 30% shock (fall in liabilities) the
Ratio, Liquid Assets to Liabilities results
in a negative value, denoting a strained
liquidity position.
Equity Price Risk
The test assesses the impact of the fall
in the stock market index. The current
market value of all the on and off
balance sheet securities listed on the
stock exchange including shares, mutual
funds, etc. has been given shocks of
10%, 20%, 40 % fall in their value, and
the impact on capital due to resultant
change is re-calculated under each
scenario.
The total Capital Adequacy Ratio (CAR)
remains over 10% minimum value under
3 Stress Testing Scenarios.
Non Performing Advances
The impact of 5%, 10% & 20%
increase in NPLs directly downgraded
to loss category having 100% provision
requirement.
Negative Shift in NPA Categories
Composition of NPA categories Special
Mention, Substandard, Doubtful and
Loss categories were 5.92%, 8.18%,
6.36%, 79.54%, respectively. Following
scenarios explain the impact of 50%,
80% & 100% downward shift in
NPA categories and the impact on
Capital Adequacy, due to increase in
provisioning.
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 135
Fluctuation of world market gold
prices on the pawning portfolio
Pawning consist of approximately 22%
of the Bank’s portfolio. An increasing
trend was observed in the world market
gold prices during the last few months.
Hence, the following calculations
consider the stress on the capital
adequacy due to the adverse fluctuation
of exchange rate & gold prices.
Pawning advances as
at 31.12.2010 (approx.
77% against present Mkt
Value)
Rs. Mn.
27,844
Current gold price in
world market( avg.
January 2011) 24k
1Oz =1,356
USD
Assumptions:
1) All customers would re-pawn their
articles to obtain the benefit of
the current high rate of pawning
advances / low interest rate.

2) Appreciation of the rupee
(LKR/USD:110/-) and the immediate
drop in market value of gold to the
levels indicated in the scenarios.
3) Fall in value of the security is
immediately adjusted in the P&L.
Exchange Rate Risk Scenario 1 Scenario 2 Scenario 3
Magnitude of Shock 5% 10% 15%
Net Exposure of the Foreign Exchange (NOP) 88.022 88.022 88.022
Loss on Exchange Rate 4.4011 8.8022 13.2033
Revised Capital 15,643 15,639 15,634
Revised RWA 121,163 121,159 121,154
Revised CAR (%) 12.91 12.91 12.90
Liquidity Risk Scenario 1 Scenario 2 Scenario 3
Magnitude of Shock 10% 20% 30%
Liquid Assets 42,243 42,243 42,243
Liabilities 160,694 160,694 160,694
Fall in Liabilities 16,069 32,139 48,208
Revised Liabilities 144,625 128,555 112,486
Revised Liquid Assets 26,174 10,104 (5,965)
Ratio after Shock (%) 18.10 7.86 (5.30)
Equity Price Risk Scenario 1 Scenario 2 Scenario 3
Magnitude of Shock 10% 20% 40%
Total Exposure in Stock Market 899.105 899.105 899.105
Fall in the Value of Stocks 89.9 179.8 359.6
Revised Capital 15,557 15,468 15,288
Revised RWA 121,078 120,988 120,808
Revised CAR (%) 12.85 12.78 12.65
Non Performing Advances Scenario I Scenario 2 Scenario 3
Magnitude of the shock 5% 10% 20%
NPA 5,047 5,047 5,047
Increase in NPA 252 505 1,009
Revised Capital 15,395 15,143 14,638
Revised RWA 120,915 120,663 120,158
Revised CAR (%) 12.73 12.55 12.18
Negative Shift in NPA Categories Scenario I Scenario 2 Scenario 3
Magnitude of the shock 50% 80% 100%
Total NPA 5,047 5,047 5,047
Weighted NPA’s 4,821 4,821 4,821
Weighted NPA’s after shift in categories 5,016 5,133 5,211
Increase in provisions 195 312 390
Revised Capital 15,452 15,336 15,258
Revised RWA 120,969 120,852 120,774
Revised CAR (%) 12.77 12.69 12.63
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 136
Outsourcing
The Bank’s Policy on Outsourcing
of banking and ancillary functions
was reviewed and updated during
2010 in line with the recent Central
Bank guidelines. The policy addresses
the criteria for selection of areas
for outsourcing, selection of service
providers, periodic reviews on
outsourced activities, and execution,
monitoring of Service Level Agreements.
An Outsourcing Committee, represented
by key functional areas of the Bank was
appointed by the Board of Directors in
October 2009 to approve all outsourcing
activities of the bank in conformity with
the criteria specified in the Outsourcing
Policy.

Scenario I Scenario 2
LKR value of Pawning advance after re-pawning
(assumption 1) 32,635.41 Mn. 32,635.41 Mn.
If value of Gold Oz decline to (assumption 2) USD 1,253 USD 1,102
Value of the security i.e. gold in rupees
(LKR/ USD @110) 32,635.41 Mn. 28,709.08 Mn.
Mark to market loss (assumption 3) 0.00 (3,926.34)
Revised Capital 15,647.34 11,721.00
Revised RWA 121,167.67 117,237.51
Revised CAR (%) 12.91 10.00
Reputational Risk
Management
Reputational Risk arises from the
negative effects of public opinion,
customer opinion and market
reputation, and the damage caused
to brands by failing to manage public
relations.
During the year, the Bank implemented
a comprehensive Customer Grievance
Handling Policy, as part of its
Reputational Risk Management efforts.
Customers have a range of options
through which they can forward their
grievances to the Bank, including a
public help line that is manned 24x7.
Further, a dedicated senior officer was
appointed to record and co-ordinate all
issues pertaining to customer relations
promptly, while significant customer or
public grievances are formally submitted
for appropriate action by Corporate
Management and review by BRMC.
Reputational risk management and
mitigation aspects are also embedded
within the Bank’s Policies and Procedures
such as the Product Policy, as well
as during training programmes, the
Business Continuity Plan and through
the Audit and Board Risk Management
Committees.
Whistle Blowing Policy
In order to support and supplement the
Bank’s risk and compliance governance
efforts, the Whistle Blowing Policy of the
Bank operates ensuring that information
on undesirable events or actions are
communicated without delay in an
independent manner to the Board Audit
Committee, by any stakeholder of the
Bank, in order to mitigate possible risks
through appropriate action.
Strategic Risk Management
Strategic risk is the possibility of current
and prospective impact on earnings or
capital arising from adverse business
Outsourcing Committee headed by the Managing Director
Deputy
Managing
Director
Group
CFO
Chief Risk &
Compliance
Officer
Senior
Deputy
General
Manager -
Operations
Deputy
General
Manager -
IT
Deputy
General
Manager -
Marketing &
Business
Development
Consultant /
Head of
Human
Resource
Management
Head of
Internal
Audit
Senior
Manager -
Operational
Market
Risk
Senior
Manager -
Systems
Audit
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 137
decisions, improper implementation of
decisions, or lack of responsiveness to
industry changes.
Strategic planning is conducted by the
Heads of business divisions together
with the Board of Directors. The three
year Strategic Plan, which is updated
annually, is used as the foundation for
defining business goals, budgets, and
resource planning. The Bank’s Strategic
Plan also links the goals of individual
employees with the Bank’s overall
objectives and periodic performance
reviews and the annual strategic
planning process ensure that corporate
objectives are met, as planned.
All strategic decisions taken by
the Board and at the Corporate
Management give due consideration
to applicable laws and regulations,
Corporate Governance requirements,
ethics, industry best practises, as well
as our core values; in our endeavour to
manage strategic risks.
Compliance Risk Management
The Compliance Unit within the Bank is
headed by the Chief Risk & Compliance
Officer (CRCO) who reports on relevant
concerns pertaining to compliance
directly to the Board Risk Management
Committee (BRMC). Sampath Bank
has adopted a structured framework
for compliance by formulating a
Compliance Policy, which is approved by
the Board of Directors and is reviewed
periodically.
The Compliance Policy communicates
the Bank’s compliance philosophy,
the basic principles governing the
compliance function, as well as the
broad structure and processes to ensure
that Compliance Risks are addressed
adequately and in a timely manner, by
the relevant sections within the Bank.
The Compliance Unit functions as an
independent Unit and addresses the
Bank’s compliance with regulations
such as Know Your Customer (KYC)
and Anti Money Laundering (AML)
functions. Appropriate mechanisms have
been devised by the Unit, to identify
regulatory guidelines applicable to the
Bank and to assess key compliance
requirements, which are then
disseminated to the business/operations
units on a regular basis.
The Compliance Unit is also engaged in
pro-actively identifying, documenting
and assessing Compliance Risks that
may arise due to non compliance with
regulatory / internal requirements,
when conducting the day to day
business activities of the Bank. As
part of their efforts, the unit takes
into account all compliance control
procedures for mitigating such risks
and conducts representative testing of
such compliance controls etc., which
enables the Bank to assess the residual
compliance risk and conduct compliance
monitoring in a systematic manner.
Monitoring of Compliance
The Bank has adopted an overview-
based approach to monitoring
compliance, while at times a detailed-
oriented approach is also undertaken,
depending on the severity of the
potential impact of the risk event. As
part of the Bank’s overview-based
approach, the CRCO relies on the
compliance reports generated, based
on the sign-off’s given by the heads of
business units, and focuses on exception
reports to follow-up on non-compliance
issues.
Compliance
Certificate
Significant new regulations/
statutes and the implications
to the Bank
Training/awareness
undertaken and /or
identification of training
needs
Compliance monitoring on;
Regulatory Compliance Anti
Money Laundering (AML)
Compliance related customer
complaints/commendations
Compliance on statutory/
mandatory reporting
requirements
Significant non compliance
events; Regulatory/
Potential Branches
Monthly compliance certificate composition
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 138
A monthly compliance certificate
is submitted to the BRMC by the
Compliance Unit which contains mainly
the items given in the chart on page 137.

º All instances of non-compliance,
along with remedial action taken/
recommended are reported to the
BRMC on a monthly basis, to enable
them identify breaches and other
risk exposures.
Anti Money Laundering (AML)
Compliance
Sampath Bank has established a
sound framework for AML compliance
based on relevant laws enacted by the
Government of Sri Lanka to combat
money laundering/terrorist financing
and in line with the rules governing
the conduct of all account relationships
issued by Financial Intelligence Unit (FIU)
of the Central Bank of Sri Lanka.
A separate policy for AML has been
approved by the Board of Directors
and is reviewed periodically, while the
Compliance Unit carries out sample
testing bank-wide to ensure adherence.
The Bank’s AML Policy establishes
standards of AML compliance which
applies to all branches/departments,
as well as the Bank’s fully owned
subsidiaries, and ensures strict
compliance with all existing laws and
regulatory requirements.
The Bank takes all reasonable steps to
verify the identity of our customers in
accordance with the directions issued
by the FIU. Systems are also in place to
ensure that Know Your Customer (KYC)
and Customer Due Diligence (CDD)
information is collected and kept up-to-
date and that identification details are
updated when changes occur.
Money laundering issues - including
suspicious transactions, are monitored
through appropriate internal channels
Key regulatory instructions issued in 2010 and status of compliance within the Bank
Regulatory Requirement Status
Banking Act direction No. 5 of 2010
dated 27.09.2010
All Licensed Commercial Banks (LCBs) should
insure their deposit liabilities within the Sri Lanka
Deposit Insurance Scheme (SLDIS), operated by the
Monetary Board, with effect from 1 October 2010.
Compliant
Banking Act direction No. 7 of 2010
dated 02.11.2010
Outsourcing of business operations of Licensed
Commercial Banks.
Compliant
The Bank’s existing Outsourcing
Policy conforms to the
regulation
Banking Act determination No. 3 of
2010 dated 24.11.2010
Assessment of fitness and propriety of officers
performing executive functions in LCBs.
Compliant
Revised declaration to be submitted in
terms of section 42 of the Banking Act
for the Appointment of Directors dated
27.08.2010
Revised declaration, which incorporates additional
information, to enable the licensed banks to
ascertain compliance with the provision of the
directions on Corporate Governance by the
Directors of the bank.
Compliant
Credit Card Operation Guidelines
No. 01/2010 with effect from
01.03.2010.
The guidelines on operations of Credit Cards are
issued by the CBSL in order to ensure safe, secure
and efficient operation when Credit Cards are used
as a payment instrument.
Compliant
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 139
and reported to the Bank’s Senior
Management/BRMC and other relevant
authorities where applicable, on a
regular basis.
New Product Development
Framework
Prior to launching or formally approving
new products or new procedures
which form the operating instructions
for various activities; the Bank ensures
that they are reviewed and signed off
by the Compliance Unit, as well as by
other independent units, including the
Risk Management Unit (RMU), Legal
Unit, Finance Unit, Systems Audit and
by Internal Audit. In addition, the
Compliance Unit also facilitates the
incorporation of regulatory requirements
into operational procedures and
appropriate manuals.
Capacity Building On Risk
Management & Compliance
Capacity building through various
internal and external training
opportunities form a critical building
block of Sampath Bank’s success in Risk
Management & Compliance. Internal
training and orientation for new recruits
include training modules on Risk and
Compliance. Existing and new staff are
provided training throughout the year
to ensure that sufficient numbers of
trained staff members are present in all
branches and departments.
Ongoing training on Risk & Compliance
is conducted regularly for Branch
Managers and Heads of Departments,
to ensure continuous professional
development and knowledge sharing.
As part of this programme, 126 Branch
Managers, Assistant Managers, Heads of
Departments and their Assistants have
been trained during the year.
In addition to the above, specific
training has been provided to the Risk
and Compliance Staff including the
following;
º A comprehensive 6 day training
programme on Quantitative
Techniques in Risk Management,
conducted by a reputed international
consultancy/ training service provider
Representation from Number
trained
Corporate Management 2
Finance 2
Operational Risk 2
Credit Risk 5
Market Risk/Middle Office 2
IT Systems 2
Credit 4
Operations 2
Corporate Finance 3
Total 24
Participation at the comprehensive 6 day
Training on Quantitative Techniques in
Risk Management
º Risk in financial services / Portfolio at
Risk & Bank failures / Stress Testing
techniques for Risk Management
conducted by the CBSL
º Intellectual property rights and
trade-marks conducted by Director
General of Intellectual property
º External training programmes
conducted by CBSL and the
Institute of Banking, on Anti
Money Laundering and compliance
challenges for banks, for the staff of
the AML and Compliance Unit
Internationally accepted risk
certifications
The Bank actively supports and
encourages all employees in the RMU
to acquire internationally recognised
professional certifications in risk
management.
All officers in the Executive level and
above, attached to the Middle Office
now possess internationally accepted
ACI Operations Certificate.
IT Systems for Risk
Management & Compliance
IT Support Systems for Risk
Management and Compliance have
been identified as one of the key
priorities, and as an initial step, the
Bank commenced implementation of
a Treasury system, which also covers
baseline Market Risk Management
aspects.
The Bank has issued a Request for
Proposal to procure IT Systems for
Operational Risk Management and
Credit Risk Management during the last
quarter of 2010. This project is planned
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 140
for 2011, and we expect Credit and
Operational Risk Management functions
to be fully supported by adequate IT
Systems by the end of 2011.
Similarly, the Bank has expedited
acquisition of a software solution
for AML and Regulatory Compliance
function, and is hopeful that the system
would be set-up during the first half of
2011.
Corporate Risk Register
The Corporate Risk Register lists risks
faced by the bank, and action taken to
mitigate and minimize the possibility
of losses that could arise. The final
Risk Rating considers the impact of the
respective risk (in the event it occurs),
and how well the mitigating measures
have contributed to bring down the
Core Banking
System
Operational Risk
System
Other Systems
Data Warehouse
AML & Compliance
System
Treasury System
Credit Risk
System
IT Systems Framework for Risk & Compliance
level of risk to an acceptable level.
The Risk Register also provides a tracking
mechanism that highlights the risks that
may adversely affect the Bank’s business
objectives, creating an opportunity
for the Bank to take necessary action
proactively. The Risk Register is reviewed
periodically, and approved by the BRMC.
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 141
The salient Risks in the Risk Register are discussed below.
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
Credit Risk
Risk of loss arising from a borrower’s or counterparty’s inability to meet it’s obligations
1. Counterparty Risk
Counterparty risk,
otherwise known as default
risk, is the risk that a
borrower (individual or an
organisation) does not pay
out on a credit derivative,
credit default swap, credit
insurance contract or other
trade or transaction when it
is supposed to.
High º Structured & standardised credit
evaluation process
º Pre-credit risk evaluation
º Internal Risk Rating
º Delegated authority
1. Credit risk management
policies, procedures, prudential
limits
2. Credit administration
3. Centralised credit evaluation
4. Follow-up and recovery
5. Post credit / postmortem
analysis
Medium
2. Credit Concentration Risk
Risk of losses due to the
Bank’s credit exposure
being concentrated on one
or few lending sectors, and
insufficiently diversified
with respect to industry,
geography etc.
High Concentration risk was assessed
Based on the Herfindhal-Hirshman
Index(HHI)which indicated a score of
0.1258 as at the year end.
1. Maximum exposure limits
2. Portfolio monitoring and
management
3. Sector & product limits
Medium
3. Sovereign Risk
Risk of a government
becoming unwilling or
unable to meet its loan
obligations, or reneging on
loans it guarantees.
Low Exposure is very minimal, and only in
the form of Treasury bills & Treasury
bonds.
1. Maximum exposure limits
2. Portfolio monitoring and
management
Low
Operational Risk
Possibility of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
1. Processing and Behaviour Risk
Problems with products
or services due to
failed internal controls,
information systems,
employee integrity, errors
and mistakes, negligence,
accident, fraud or through
weaknesses of operating
procedures.
High This area accounts for 50% of the
total number of Internal Loss Events
reported during 2010. Most of our
controls and risk mitigations are
focussed on managing this area of
risk.
1. Operational risk policy
2. Risk & compliance review of
processes, new products and
procedures
3. Fraud prevention measures
4. Customer grievance handling
5. Business Continuity Plan
6. Training
Medium
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 142
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
2. Human Resources Risk
Failure to recruit, develop
or retain employees with
the appropriate skills and
knowledge or to manage
employee relations.
High 1. Manpower planning
2. A good framework of HR policies
& procedures
3. Managing a healthy relationship
with employees
4. Capacity building
1. HR policies & procedures
2. Review of annual rewards and
employee benefits
3. Annual remuneration reviews
and employee benefits
4. Grievance handling
mechanisms
5. Identification of training needs
6. Succession & development
plans
Medium
3. Technology Risk
Failure to plan, manage
and monitor performance
of technology related
projects, products, services,
processes, staff and
delivery channels, including
failure to recognise latest
technology.
High 1. Technology planning is conducted
during the annual strategic
planning
2. The bank’s IT steering committee
is continuously monitoring,
planning for emulating
appropriate technology, and
supplemented the core banking
system with other peripheral
systems.
1. IT policies & procedures
2. Information Security
Management & Systems Audit
3. Risk review of IT projects
Medium
4. Facilities and Operating Environment Risk
Loss or damage to
operational capabilities
caused by problems with
premises, facilities, services
or equipment.
Medium Joint efforts of our IT and
Administration Departments,
together with business units ensure
that risks in this area are well
managed. Events reported under this
category counts for less than 1% of
all events reported.
1. Periodic maintenance and
routine checks
2. Monitoring processes
3. Business Continuity Plan
Low
5. Control Frameworks Risk
Inadequate design or
performance of the
existing risk management
framework
Medium Risk & Compliance assists and guides
business units in ensuring that a
sufficiently comprehensive control
framework is maintained. Review
of all products, systems, procedures
play a key role. Internal Audits,
and RCSA exercise commenced in
2010 have also contributed towards
ensuring that risk in this area are well
managed.
1. Risk Management Policies,
procedures and planning
2. Reviews by Board Risk
Management Committee,
and steering committees for
respective business lines
3. Internal Audits
4. Risk Control Self Assessments
Medium
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 143
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
6. Information Security Risk
Unauthorised disclosure
or modification of
information, loss of
availability of information,
or inappropriate use of
information.
High Systems Audit, Internal Audit,
Business Continuity Planning and IT
departments play a combined role in
making sure that sufficient controls
and planning are in place. During the
year under review, no events falling
into this risk category have been
reported.
1. Systems Audit
2. Backup and Disaster Recovery
Procedures
3. Business Continuity Planning
Low
7. Legal Risk
Possibility of losses or
facing litigation as a result
of failure to understand/
interpret and consider
provisions in law.
High We have an independent legal
department to manage legal matters,
including recovery, and when
necessary, we seek external legal
expertise.
All legal documents, including Service
Level Agreements are specifically
approved by the legal department.
1. Risk Management &
Compliance
2. Policies & Procedures
3. Chief Legal Officer function
4. Company Secretary function
5. Finance function
Low
8. Regulatory Compliance Risk
Failure to comply with
the laws of the countries
(regulatory/statutory) where
business operations are
carried out. This includes
the risk of non adherence
to Anti Money Laundering
regulations.
High Well structured compliance
framework to carry out this
function, which includes Anti Money
Laundering Unit to ensure adherence
to the FIU (Financial Intelligence Unit)
requirements.
The Bank is currently evaluating the
Software System for AML monitoring,
and plans to setup the same within
the first half of 2011.
1. Compliance Policy
2. Anti Money Laundering Policy
3. Assessment of compliance risks
4. Quarterly sign-offs to the
BOD on regulatory /statutory
requirements/returns
5. Monthly compliance certificate
to BRMC
6. Sample testing
7. Dissemination of regulatory
directives through internal
circulars
8. Transaction monitoring and
submission of reports to FIU
9. Regular Training
Low
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 144
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
9. Management Information Risk
Inadequate, inaccurate,
incomplete or untimely
information to support
the management decision
making processes.
High Maintaining accuracy and the
quality of information on which we
reply upon is a key requirement in
successful decisions. Finance and
Planning departments together with
IT, Systems Audit, Data Warehousing
team and business units make joint
efforts to achieve this goal all the
time.
1. Updated MIS systems
2. Reconciliation and day to day
balancing procedures
3. Periodic Management
Reporting
4. Data warehouse
5. Risk and other reporting
Medium
10. System Risk
Risk of financial losses
due to system and
telecommunication failures,
including temporary system
shut-downs, malfunction,
hacking and disruptions
caused by external parties.
High Since the bank is almost entirely
relying on IT Systems for running
its operations, the second highest
number of events (37% of the
events) reported are from this area.
The event reports reflect a high
frequency and low to moderate
impact. System Risk is well managed,
and mitigated throughout all
operational areas of the bank.
1. Periodic maintenance and
upgrades
2. Backup and Disaster recovery
procedures
3. Business Continuity Planning
Low
11. Corporate Governance Risk
Failure of directors to fulfil
their personal statutory
obligations in managing
and controlling the Bank.
High This is a critical area, which is being
addressed by the BOD, ensuring
that there is sufficient control and
quality in discharging their corporate
governance requirements.
1. Governance Policies and
Procedures
2. Compliance and Risk
Management functions
3. Whistle Blowing
4. Company Secretariat function
5. Training & awareness building
Low
12. Geopolitical Risk
Loss or damage caused by
political instability, poor
quality of infrastructure,
cultural differences and
misunderstanding etc.
Medium No events have been reported under
the category, and we anticipate this
trend to continue.
1. Planning & periodic monitoring
2. Training and communication
3. Mass media communication
4. CSR projects
Low
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 145
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
13. Project Management Risk
Failure to plan and manage
resources required to
achieve tactical project
goals, leading to budget
over runs, time over runs,
failure to complete the
projects, or failure to
manage integration aspects
with existing sections of
the business and impact
the changes can have on
business operations.
Medium This is an area that could impact
both operational efficiency and
financial performance of the Bank.
No events have been reported
under this category during the year
under review. All key projects of the
bank are appropriately managed,
controlled and monitored by the
Corporate Management.
1. Project Risk Management
2. Financial Planning
3. Project HR aspects planning
4. Expertise building & training
Low
14. Supplier Risk
Failure to evaluate
adequately the capabilities
of suppliers leading to
breakdowns in the supply
process or substandard
delivery of supplied goods
and services; failure to
understand and manage
the supply chain issues.
Medium 1% of the loss events reported
during the year, including the events
connected to outsourced services
fall into this category. Although the
reported events are not having a
significant impact, we have identified
this as an area to keep under
observation, specially under the
increasing outsourcing volumes, and
CBSL directives.
1. Procurement Policies &
Procedures
2. Review by outsourcing
committee
3. Service Level Agreements
4. Periodic review of performance
5. Business Continuity Planning
6. Internal Audits
Low
15. Criminal and Illicit acts Risk
Loss or damage caused
by fraud, theft, wilful
neglect, gross negligence,
vandalism, sabotage,
extortion etc.
Medium As a financial institution, this is
an area where there is substantial
vulnerability for high frequency of
events. Events such as Credit Card
frauds, ATM Card frauds and other
external frauds fall into this category.
These events are of low impact, but
frequency of events are 7% of total
number of reported events.
1. Physical controls and security
2. Security technology such as
CCTV
3. Training
4. Prompt action against
fraudsters
5. Fraud Monitoring
6. Insurance
Medium
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 146
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
16. Climate and Weather Risk
Loss or damage caused by
unusual climate conditions,
including drought, heat,
flood, cold, storm, winds,
tsunami etc.
Medium Increased number of events (1% of
the total events) have been reported
under Climate & Weather Risk this
year, mainly due to natural disasters
like floods, earth-slips etc. We have
identified this as an area to monitor
closely.
1. Insurance
2. Business Continuity Planning
Low
17. Health and Safety Risk
Threats to personal and
health safety of staff,
customers and general
public.
Medium Although a very small number (only
0.03% of the events) of events
reported fall into this category, we
consider those events as the ones
that need to be avoided without
exception. No significant health and
safety impact have been recorded.
1. Training
2. Workplace safety practices /
Ergonomics
3. Business Continuity Planning
4. Employee Insurance
Low
Market Risk
Possibility of losses to the bank by volatility in market variables such as interest and exchange rates. It is also defined as the risk
that value of ‘on’ or ‘off’ balance sheet positions are adversely affected by movements in equity and interest rate markets, currency
exchange rates and commodity prices.
1. Liquidity Risk
The possibility that the bank
suffers a loss due to not
having sufficient financial
resources at its disposal to
meet its obligations as and
when they fall due.
High A pivotal area for a commercial bank,
and all measures have been taken by
ALCO to mitigate Liquidity Risks. No
events have been reported.
1. Monitoring by ALCO
2. Market Risk Management
3. Prudential Limits
Medium
2. Interest Rate Risk
Interest Rate risk is the
possibility of adverse
effects due to interest rate
movements on net interest
income.
Medium Interest Rate Risk could possibly
impact the financial standing and
profitability. Regular controls,
monitoring and limits are in place
to manage this risk. No events have
been reported.
1. Portfolio Monitoring
2. Monitoring by ALCO
3. Prudential Limits
4. Value at Risk Calculations
Low
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 147
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
3. Foreign Exchange Risk
Forex risk is the risk that
a bank may suffer losses
as a result of adverse
exchange rate movements
during a period in which
it has an open position,
either spot or forward, or
a combination of the two,
in an individual foreign
currency.
High As an increasing active bank in
Treasury operations, this risk could
have impact on our financial standing
and profitability. Regular controls,
monitoring and limits are in place
to manage this risk. No events have
been reported.
1. Monitoring by ALCO
2. Prudential Limits
3. Value at risk calculations
4. SWAPS
5. Hedging
Medium
Reputational Risk
1. Reputational Risk
Negative effects of public
opinion, customer opinion
and market reputation, and
the damage caused due to
brands by failure to manage
public relations.
High As a Banking institution, managing
reputation is of primary importance.
Being a service sector organisation,
we rely heavily on customer
confidence, and any lapses could lead
to irreparable damage.
We have further improved risk
mitigation in this area by appointing
senior officers to directly monitor
the status, by publishing customer
grievance handling policy of the bank,
and establishing communication
and reporting lines for customer
grievances. Corporate Management
and BRMC are constantly monitoring
the status.
1. Customer response & grievance
handling programmes
2. Policies & Procedures
3. Risk reviews
4. Public Relations Management
& Corporate Campaigns
5. Business Continuity Planning
6. Training
Low
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 148
Risk Impact Description /Risk Assessment Mitigating Measures Risk
Rating
Strategic Risk
1. Strategic Risk
Failure to manage long
term strategic goals of
the business, including
dependence on any
estimated or planned
outcomes that may be in
the control of the third
parties.
Medium The Bank’s strategic planning and
monitoring processes ensures that
the risks in this area will be accessed
and mitigated. Annual strategic plan
approved by the BOD is regularly
monitored by the business line heads
and participation of all business unit
heads are obtained at respective
stages of monitoring and review
action stages.
1. Strategic Planning
2. Corporate Governance
3. Risk & Compliance
Management
4. Training
Low
Moving Towards Basel II
Compliance
The Bank is currently compliant with
Basel II Standardised approach in
Credit and Market Risk, and Basic
Indicator approach in Operational Risk.
We are presently in the process of
moving towards the Basel II advanced
approaches which includes Internal Risk
Based (IRB) Approach in Credit Risk and
Market Risk, and Standardised Approach
in Operational Risk.
In this aspect, the Bank is fully
committed to migrating to the advanced
approaches of Basel II well ahead of the
time-lines stipulated by the Central Bank
of Sri Lanka, and therefore, continues
to assess the progress and progressively
take necessary steps to achieve this
milestone.
Future Value Addition of Risk
& Compliance
In a much broader perspective, risk
management and compliance functions
are striving to support achievement of
the bank’s corporate objectives and
to add value to shareholders while
conforming to the standards and
regulations.
Risk and Compliance Management
activities would enable the Bank to
develop a Robust and Integrated Risk
Management framework that supports
achievement of respective business
unit goals, which will ultimately lead to
achieving the Bank’s overall Corporate
Objectives.
Annual Report 2010 / Governance / Risk Management & Compliance
Risk Management & Compliance contd...
Governance contd...
Sampath Bank PLC 149
Moving Towards Basel II
Compliance
Priorities for 2011 & onwards
º Validalion ol inlernally developed
risk rating models by independent
consultants/experts
º Seleclion & implemenlalion ol lT
system for Credit & Operational Risk
Management
º Conlinualion ol dala colleclion in
order to migrate to IRB approaches
º Slanderdised Approach Calculalion lor
Operational Risk Capital
º Pisk 8ased Pricing
º AML Sollware Syslem
º Capacily 8uilding

In 2010
º Peview & Updale, modilcalion ol
Corporate Borrower Risk rating model
º Developmenl ol new raling models
for Middle Corporates, Financial
Institutions, SME’s and Start-up
projects
º Slrenglhening ol independenl pre
approval review by the CRMU
º Delailed procedures lor posl granl
credit risk monitoring, identification of
early warning signals & watch listing
º Lnhanced scope ol credil porllolio
management
º Measuremenl ol concenlralion risk
º Slress Tesling - Markel & Credil Pisk
º Delailed analysis ol lnlernal Loss
Events, leading to improved controls
and process enhancements
º Pisk & Conlrol Sell Assessmenls (PCSA)
º 8usiness Line Segregalion ol lncome
º Key Pisk lndicalor lramework (KPl)
º Value al Pisk & Mark lo Markel
calculations
º Pegular Policy Peviews
º Specilc lraining on quanlilalive
techniques in Risk Management, and
general training for capacity building
º Treasury lT Syslem
º lssue ol Pequesl lor Proposal (PlP) lor
Credit &Operational Risk IT System
Up to 2009
º Selup Pisk and Compliance lunclions
º Selup 8PMC
º Cap analysis and recommendalions lor
Integrated Risk Management by IFC /
KPMG
º Credil, Markel & Operalional Pisk
policies
º lnlernal Loss Lvenl Peporling
º Oulsourcing Policy & Commillee
º Pisk Pegisler
º Monlhly reporling lo 8PMC
Annual Report 2010 / Governance / Risk Management & Compliance
Sampath Bank PLC 150
Financial Calendar
Final Dividends for 2009 was paid on 6th April, 2010
Annual Report and Accounts for 2010 signed on 10th February, 2011
Twenty Fifth Annual General Meeting to be held on 31st March, 2011
Final Dividends for 2010 proposed to be paid on 7th April, 2011
In a year where we crossed
the conventional boundaries of
growth in the banking industry,
we remained within the confines
of our corporate ethics.
Our values - relevant; timeless;
truly Sri Lankan values that
steered our performance far
beyond industry norms.
In a year where we crossed
the conventional boundaries of
growth in the banking industry,
we remained within the confines
of our corporate ethics.
Our values - relevant; timeless;
truly Sri Lankan values that
steered our performance far
beyond industry norms.
Sampath Bank PLC 151
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Financial Reports
Audit Committee Report 152 / Nomination Committee Report 155 / Credit Committee
Report 156 / Risk Management Committee Report 158 / Human Resources and
Remuneration Committee Report 160 / Strategic Planning Committee Report
162 / Shareholder Relations Committee Report 163 / Annual Report of the Board of
Directors on the Affairs of the Company 164 / Directors Statement on Internal Control Report
184 / Managing Director’s and Group Chief Financial Officer’s Responsibility Statement
186 / Directors’ Responsibility for Financial Reporting 187 / Auditors’ Report 189 / Income
Statement 190 / Balance Sheet 191 / Cash Flow & Reconciliation Statement 192 / Statement
of Changes in Equity 194 / Significant Account Policies 195 / Notes to the Financial
Statements 210
Sampath Bank PLC 152
Audit Committee Report
Annual Report 2010 / Financial Reports / Audit Committee Report
The Audit Committee
The Audit Committee assists the Board in carrying out its responsibilities in relation to financial reporting requirements, risk
management and the assessment of internal controls. The Audit Committee also reviews the effectiveness of the Bank’s internal
audit function and manages the Company’s relationship with the external auditors.
The Board Audit Committee comprises of the following Directors, who conduct Committee proceedings in accordance with the
terms of reference approved by the Board of Directors.
º M A Abeynaike (Chairman) - Non Executive Director
º I W Senanayake - Non Executive Director
º S G Wijesinha - Non Executive Director
º L J K Hettiaratchi - Non Executive Director
By invitation of the Audit Committee, the Managing Director, Deputy Managing Director, Executive Director/Group Chief Financial
Officer, Deputy General Manager – Finance & Planning, Head of Internal Audit, Senior Manager-Systems Audit and the external
auditors also attend the Audit Committee meetings. Also invited to attend certain meetings are relevant people from the business
to present sessions on issues designed to enhance the Audit Committee’s awareness of key issues and developments in the business
which are relevant to the Audit Committee in the performance of its role. The Company Secretary functions as the Secretary of the
Committee.
Regulatory Compliance
The Roles and functions of the Audit Committee are regulated by the Banking Act Direction No. 11 of 2007, the mandatory
Code of Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka, the Rules on Corporate
Governance as per section 7.10 for Listed Companies issued by the Colombo Stock Exchange and the Code of Best Practice on
Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and Exchange
Commission (SEC). All Directors are Non-Executive Directors, including the Chairman.
Qualifications
M A Abeynaike is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka (ICASL) and counts many years of
experience in the financial services industry.
Duties and Role
The Audit Committee is responsible for:
º Review the financial information of the bank, in order to monitor the integrity of the financial statements of the bank, its
annual report, accounts and quarterly reports prepared for disclosure.
º Reporting to the Board on the quality and acceptability of our accounting policies and practices.
º Reviewing accounting and financial reporting, risk management processes and regulatory compliance;
º Review of the financial statements (including quarterly interim statements) prior to publication to ensure compliance with
statutory provisions, accounting standards and accounting policies which are consistently applied.
º Assessing the independence and monitoring the performance and functions of Internal Audit, including overseeing the
appointment of the Head of Internal Audit.
º Overseeing the appointment, compensation, resignation, dismissal of the external auditor, including review of the external
audit, its cost and effectiveness and monitoring of the external auditor’s independence;
º Reviewing the Bank’s systems of internal control; and confirm in its report that the financial reporting system has been
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes has been done in accordance with applicable accounting standards and regulatory
requirements.
º Engaging independent advisors as it determines is necessary and to perform investigations.
º Oversee the Bank’s Code of Ethics and Business Conduct.
Sampath Bank PLC 153
Annual Report 2010 / Financial Reports / Audit Committee Report
During the year ended 31 December 2010 the principal activities of the Audit Committee were as follows:
Performance
Meetings of the Audit Committee
The Committee had 09 meetings during the year under review. The Managing Director, Deputy Managing Director, Executive
Director/Group Chief Financial Officer, Deputy General Manager – Finance & Planning, Head of Internal Audit, Senior Manager-
Systems Audit and the external auditors also attended these meetings by invitation. Three meetings were to approve the Bank’s
quarterly financial statements. Two special meetings were held with External Auditors to discuss the implementation of SLAS 44 &
45 and Banking Act Direction No. 11 of 2007, on corporate governance and Internal Controls of Licensed Commercial Banks.
Financial Reporting
The Audit Committee reviewed and discussed with management and the external auditors the quarterly and annual financial
statements focusing on, without limitation, the quality and acceptability of accounting policies and practices, the clarity of the
disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements. To
aid their review, the Audit Committee considered reports from the Group Chief Financial Officer and also reports from the external
auditors, M/S Ernst and Young, on the scope and outcome of their half-year review and annual audit.
Internal Control Over Financial Reporting (ICOFR)
The Group is required to comply with the Section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance
issued by Central Bank of Sri Lanka and assess the effectiveness of internal control over financial reporting as of 31 December 2010.
The Group assessed the effectiveness of its internal control over financial reporting as of 31 December 2010 based on the criteria set
out in the Guidance for Directors of Banks on “The Directors’ Statement “of Internal Control, issued by the Institute of Chartered
Accountants of Sri Lanka (ICASL) in 2010.
Based on its assessment, Board has concluded that, as of 31 December 2010, the Group’s Internal Control Over Financial Reporting
is effective. Director’s report on the Group’s Internal Control Over Financial Reporting is provided on pages 184 to 185. The Group’s
auditors have audited the effectiveness of the Group’s internal control over financial reporting and have reported to the Board that
nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the
process adopted by the Board in the review of the design and effectiveness of the internal control system of the Bank.
Annual Corporate Governance Report
As required by the directions issued by the Central Bank of Sri Lanka (CBSL), on Corporate Governance for Licensed Commercial
Banks, Section 3(8)(ii)(g) of the Banking Act direction No. 11 of 2007, the external auditor of the bank should report on the bank’s
compliance with the corporate governance directions in the corporate governance reports published by the bank.
Annual Corporate Governance Report for 2010 is provided on pages 90 to 125.
Internal Audit
The Audit Committee monitored and reviewed the scope, extent and effectiveness of the activity of the Bank’s internal audit
department that included updates on audit activities and achievement against the Bank audit plan, the results of any unsatisfactory
audits and the action plans to address these areas, and resource requirements of the internal audit department. The Audit
Committee had necessary interactions with The Chief Internal auditor throughout the year.
During the year, the Committee reviewed the internal audit plan, and monitored progress on a regular basis. The sections covered
and the regularity of audits depends on the risk level of each section, with higher risk sections being audited more frequently.
The Committee reviewed internal audit reports covering the operations of many branches and several departments i.e. Credit,
Treasury, International, Clearing and Settlement, etc. Audit findings presented in the reports are prioritized based on the level of risk.
The Committee followed up on internal audit recommendations. Internal audit reports are made available to external auditors as well.
Sampath Bank PLC 154
Annual Report 2010 / Financial Reports / Audit Committee Report
External Auditors
The Audit Committee reviewed and monitored the independence of the external auditors and the objectivity and effectiveness of the
audit process and provided the Board with its recommendation to the shareholders on the reappointment of M/S Ernst and Young
as external auditors for the financial year ended 31st December 2011 at the next Annual General Meeting. The Audit Committee
approved the scope and fees for audit and permitted non-audit services provided by M/S Ernst and Young.
The Committee has received a declaration from M/S Ernst and Young as required by the Companies Act No. 7 of 2007, confirming
that they do not have any relationship or interest in the company, which may have a bearing on their independence within the
meaning of the Code of Conduct and Ethics of the Institute of Chartered Accountants of Sri Lanka.
The Committee reviewed the external audit plan as well as management letters and followed up on issues raised. Private meetings
were held with M/S Ernst and Young to ensure that there were no restrictions on the scope of their audit and to discuss matters
without management being present.
Whistle Blowing
Sampath Bank’s Whistle Blowing Policy is intended to serve as a channel of corporate fraud risk management. The policy will allow
any Team Member who has a legitimate concern on an existing or potential “wrong doing”, done by any person within Sampath
Bank, to come forward voluntarily, and bring such concern to the notice of an independent designated authority. Concerns raised
are investigated and the identity of the person raising the concern is kept confidential, as even anonymous complains are looked at.
In fact this procedure will be operated by the Audit Committee of the Board.
Audit Committee effectiveness
The Audit Committee conducts a formal review of its effectiveness annually, and concluded its performance was effective.
Mohan A Abeynaike
Chairman
Audit Committee
10th February 2011
Colombo, Sri Lanka
Audit Committee Report contd...
Sampath Bank PLC 155
Annual Report 2010 / Financial Reports / Nomination Committee Report
Nomination Committee Report
Composition of the Nomination Committee
The Nomination Committee comprises four non-executive directors. The following Directors serve on the Nomination Committee:
Mr. I W Senanayake (Chairman) - Non Executive Director
Mr. M A Abeynaike - Non Executive Director
Mr. S G Wijesinha - Non Executive Director
Mr. D J Gunaratne - Non Executive Director
The quorum necessary for the transaction of business is three, each of whom must be non-executive director. The Chairman of the Bank acts
as the Chairman of the Nomination Committee, although the Chairman may not chair the Nomination Committee when it is dealing with
the matter of succession to the chairmanship of the Bank. Any non-executive director may not chair the Nomination Committee when it is
dealing with a matter relating to that non-executive director.
Only members of the Nomination Committee have the right to attend Nomination Committee meetings. However, the Managing Director,
external advisers and any others may be invited to attend any meeting as appropriate.
The Company Secretary is secretary to the Nomination Committee.
Frequency of Meetings
Meetings are held as required, but at least annually to enable the Committee to fulfil its obligations to the Company.
Authority
The Nomination Committee has the authority to seek any information that it requires from any officer or employee of the Bank. In
connection with its duties, the Nomination Committee is authorized by the board to take such independent advice (including legal or other
professional advice, at the Bank‘s expense) as it considers necessary, including requests for information from or commissioning investigations
by external advisers.
Role of the Nomination Committee
1. Regularly review the structure, size and composition (including the skills, knowledge and expertise and experience) required on the board,
compared to its current position and make recommendations to the board with regard to any changes, considered necessary.
2. Consider and propose, for approval of the Board, a description of the role and competencies required for a particular appointment on
the Board.
3. Be responsible for identifying and nominating for the approval of the board, candidates to fill board vacancies as and when they arise.
Before any appointment is made by the board, evaluate the balance of skills, knowledge and experience on the board, and, in the
light of this evaluation, prepare a description of the role and capabilities required for a particular appointment.
4. To review management development and succession planning for top management and executive Board members.
5. To review and make recommendations to the Board on the reappointment of non-executive directors at the expiry of their term of office.
6. To appoint and take advice from independent search consultants and other professional advisers where appropriate.
7. To report to the Board on the proceedings of the Committee after each meeting and to make available to Board members the minutes
of Committee meetings.
Reporting to the Board
Minutes of the Committee meetings shall be circulated to all members of the Committee and made available on request to all other
members of the Board.
Performance
The Committee is expected at least once a year, review its own performance, constitution and terms of reference to ensure that it is
operating effectively and, if relevant, to recommend any changes necessary to the Board.
On behalf of the Nomination Committee
I W Senanayake
Chairman
Nomination Committee
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 156
Credit Committee Report
Composition of the Credit Committee
The Credit Committee comprises three (3) non-executive directors and three (3) executive directors. The following Directors serve on
the credit Committee;
Mr. D J Gunaratne (Chairman) - Non Executive Director
Mr. M A Abeynaike - Non Executive Director
Mr. L K J Hettiaratchi - Non Executive Director
Mr. G L H Premaratne - Executive Director
Mr. M Y A Perera - Executive Director
Mr. R Samaranayake - Executive Director
Chairman of the Credit Committee, Mr. E.A. Gunasekera, stepped down on 17th July 2010 as he vacated the office of Directorship
of Sampath Bank PLC, consequent upon the 09 year rule of the Corporate Governance code of the Central Bank of Sri Lanka for
Licensed Commercial Banks. At the request of the Board and Credit Committee, due to his expertise in the Banking sector, Mr. E.A.
Gunasekera serves as an advisor to the committee.
Quorum
A minimum of 2 Non Executive Directors and 2 Executive Directors is the quorum for a credit committee meeting.
Performance
During the year, the committee met in 19 occasions. The Company Secretary is the secretary to the Credit Committee and the
minutes of the meetings are reported to the Board of Directors. The attendance of the committee members is stated in Corporate
Governance Report on pages 90 to 125 Members of the Senior management of the Bank are invited to participate at the meetings
as and when required.
Duties & Role
While financial institutions have faced various difficulties over the years for various reasons, the major causes of serious banking
problems have been directly linked to lax credit standards for borrowers and counterparties, poor portfolio management or lack of
attention to changes in the economic environment.
The Committee derives its scope and authority from the Board of Directors decision to set it up and increase its authority in keeping
with the expansion of the Bank.
It is the responsibility of this Committee to;
1. Operate a sound credit granting process
º Review proposals in respect of credit policies and standards and approve them and also submit credit requests beyond
their scope to the Board
º Review credit policy changes initiated by the Management of the Bank and recommend them with or without
modifications to the Board of Directors for approval
º Ensure compliance with the Bank’s credit policies and statutory requirements prescribed by the regulatory/supervisory
authorities
º Request rapid portfolio reviews or sector/industry reviews, where deemed appropriate
2. Maintain an appropriate credit administration, measuring and monitoring process
º Define credit approval framework and assign credit delegated limits in line with the Bank’s policy
º Review and recommend to the Board, facilities that they believe should have the full Board approval
3. Ensuring adequate controls over credit risk
º Ensure credit risk exposure keeps within acceptable limits to maximize Bank’s risk adjusted rate of return
º Monitor capital allocation and define limits in line with the risk appetite
º Ensure stress tests are conducted, where deemed appropriate
Annual Report 2010 / Financial Reports / Credit Committee Report
Sampath Bank PLC 157
Annual Report 2010 / Financial Reports / Credit Committee Report
4. Identification and administration of problem credits
º Monitor on an ongoing basis the Bank’s credit quality, review periodic credit portfolio reports and assess portfolio
performance
º Ensure post credit monitoring and post mortem reviews are performed, where deemed appropriate
5. Proper evaluation of new business opportunities
º Ensure all new credit risk related products are reviewed from a credit risk management perspective
6. Cyclical aspects of the economy (both internal and external)
º Monitor the resulting shifts in the composition and quality of the loan portfolio
Review of the Committee
The Board undertakes a regular review of the Committee’s performance, objectives and responsibilities.
On behalf of the Credit Committee
D J Gunaratne
Chairman
Credit Committee
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 158
Risk Management Committee Report
During the year under review Sampath Bank has taken several initiatives for strengthening its risk management practices. Since 2008
the bank has increased its focus on consolidating the overall risk management function and implemented the recommendations
originating from a consultancy project carried out by KPMG, CBSL guidelines as well Basel II recommendations.
The Bank has an integrated approach to Risk Management and specific committees have been constituted to facilitate focused
oversight of various risks. A review of the integrated risk management process has been detailed in pages 126 to 149 of this report.
The Board of Directors has oversight on all risks assumed by the bank, and has overall responsibility to ensure that adequate
structures, policies and procedures are in place for Risk Management and they are properly implemented. The Board approves the
Bank’s risk management policies and also sets limits by assessing the risk appetite, skills available for managing risks and our risk
bearing capacity.
The Board has delegated overall risk management responsibilities to an independent Risk Management Committee of the Board of
Directors, i.e; the Board Risk Management Committee (BRMC) to manage the bank’s integrated risk functions in accordance with
the mandatory code of Corporate Governance issued by Central Bank of Sri Lanka. This is the Apex body /Committee responsible for
supervising the risk management function of the Bank and all regulatory compliance issues.
Composition
The committee consists of 4 Non Executive Directors, including the undersigned as the Chairman. Managing Director, Deputy
Managing Director, Group Chief Financial Officer, Chief Risk & Compliance Officer and Key Management Personnel supervising of
broad risk categories.
The Directors serve on the Board Risk Management Committee:
Mr. W M P L De Alwis (Chairman) - Non Executive Director
Mr. D J Gunaratne - Non Executive Director
Mr. K D D Perera - Non Executive Director
Mr. L J K Hettiaratchi - Non Executive Director
Mr. G L H Premaratne - Executive Director
Mr. M Y A Perera - Executive Director
Mr. R Samaranayake - Executive Director
The Committee works closely with key management personnel and make decisions on behalf of the board ,within the frame work of
authority and responsibilities assigned to the committee.
To carry out the Integrated Risk Management function a dedicated Risk Management Unit (RMU), independent of profit and volume
targets was set up in 2009.The RMU is headed by the Chief Risk and Compliance officer, who reports directly to the BRMC. The
RMU ensures that the overall risk management frame work and risk management initiatives are in line with the risk management
philosophy and strategy of the Bank.
Duties & Roles
The BRMC is responsible for reviewing the risk management policies of the Bank in relation to various risks and regulatory
compliance requirements. It reviews periodically key risk indicators covering areas such as credit risk, interest rate risk, liquidity risk,
foreign exchange risk, operational risk and reputational risk based on pre approved risk indicators. It also reviews stress test limits, for
various risks and carries out an assessment of the capital adequacy, based on the risk profile of our balance sheet. It also reviews the
progress and the status on the implantation of Basel II norms.
The BRMC also considers the bank’s business continuity, risk and mitigating measures as part of its overall integrated risk
management framework. Thus the risk committee ensures that board approved policies for Business Continuity Planning (BCP) is
in place, which provides clear guidance and directions in respect of disaster recovery implementation programme. A formal BCP
management team headed by a BCP director, is responsible to coordinate planning and implementation.
The committee overseas the Compliance function to ensure that the Bank is compliant with the statutory laws, regulations,
guidelines by the regulator, internal controls and approved policies.
Annual Report 2010 / Financial Reports / Risk Management Committee Report
Sampath Bank PLC 159
Annual Report 2010 / Financial Reports / Risk Management Committee Report
Meetings
Meetings are held by the BRMC on a monthly basis to assess all types of risk management including the business continuity plan. 12
Meetings were held during the year 2010 and minutes of the meetings are recorded by the Secretary to the Board of Directors and
circulated to the committee members and Board of Directors.
Performance
The BRMC continues to maintain awareness of any changes in the Bank’s overall risk profile in an integrated manner and focused on
the following key areas of risk management /compliance in 2010:
º Review of all key risk management policies including credit risk operational risk, ,integrated risk management, market risk,
compliance and Anti money laundering to be in line with CBSL guidelines, Basel II recommendations, International best
practices and corporative objectives. These policies were approved by the BOD in 2010.
º Evaluation of the adequacy of contingency planning for core banking / critical businesses and systems to ensure that the
agreed service levels are met in an event that one or more business operations or components of a system fail.
º Establishing Terms of reference to all key positions in Risk and compliance.
º Review of stress testing limits for various risks ,particularly on credit and market risks.
º Review of credit rating models, Recommendation for Model validation
º Credit Portfolio Management with special emphasis on portfolio analysis, concentration risk, post mortem reviews for
performing and non performing advances, to evaluate the composition, trend in portfolio behavior .
º Internal Loss Event Data Reporting and review and analysis of internal loss data depending on the severity of the loss. Review
of the internal controls/processes and processes and procedures resulting through the analysis and recommendation for
improvements.
º Implementation of Board approved treasury operating limits which are monitored by the Middle Office and are regularly
reviewed and updated as per the bank’s requirements.
º Implementation of IT systems for operational and credit risk management.
º Acquisition of AML software System which is considered critical for alert and case management for monitoring of suspicious
transactions / activities, regulatory reporting of large cash transactions, electronic fund transfers, screening of customers etc.
º Monitoring of Compliance through monthly compliance certificate
º Selected Training for Risk and compliance staff.
º Preparation for Basel II advanced approaches.
º Risk & Compliance strategic plan for 2011 – 2013.
º Monitoring of outsourcing activities of the bank through the outsourcing committee to ensure that such activities are within
the CBSL directives and guidelines and due diligence tests are in place to monitor the activities of 3rd party service providers.
º Review of customer complaints.
Our approach will further assess and identify existing gaps in Risk and Compliance, or needed shifts in delivery and deepen its
existing support to the business units to achieve their own business goals.
W M P L De Alwis
Chairman
Risk Management Committee
13th January 2011
Colombo, Sri Lanka
Sampath Bank PLC 160
Human Resources and Remuneration Committee Report
Annual Report 2010 / Financial Reports / Human Resources and Remuneration Committee Report
The Composition
The Human Resources and Remuneration Committee comprises four Non Executive Directors and two Executive Directors. The
Directors who serve on the Committee are:
Mr. W M P L De Alwis (Chairman) - Non Executive Director
Mr. S G Wijesinha - Non Executive Director
Mr. L K J Hettiaratchi - Non Executive Director
Mr. D Sooriyaarachchi - Non Executive Director
Mr. G L H Premaratne - Executive Director
Mr. M Y A Perera - Executive Director
Chairman of the Committee, Mr. J D Bandaranayake stepped down on 17th July 2010 as he vacated the office of Directorship of
Sampath Bank PLC in term of the Corporate Governance Code of the Central Bank of Sri Lanka. Mr. J D Bandaranayake continues
to serve as an Adviser to the Committee. Mr. J D Bandaranayake during his stewardship as a Chairman, brought his extensive
experience in Human Resources to Sampath Bank and enhanced the scope of Human Resources and Remuneration Committee. The
Committee under his leadership stood up to the challenges and faced the issues with an objective approach.
Meetings
During the financial year ended 31st December 2010, 04 meetings were held. The attendance of the members of these meetings
is given on page 120 of the Annual Report. The Group Chief Financial Officer & Deputy General Manager Human Resources as
well as other executive staff attend meetings by invitation and assist in their deliberations by providing relevant information and
participating in the analysis of information, except when their own compensation packages or other matters relating to them are
reviewed.
Duties and Roles
The overall scope of the committee is to provide strategic direction to build and effective and efficient HR organisation for the Bank.
The main function of the committee is the determination and establishment of fair, equitable and consistent salary policy relating
to all staff including Directors and the key management personnel of the Bank with the emphasis on building a conducive work
environment that facilitates the Bank to achieve its strategic objectives.
This is one of the more important functions as set out in the governance code applicable to commercial banks determined by the
Central Bank of Sri Lanka.
The other specific task of the committee is to set long-term performance objectives for key personnel of the Bank and relates their
achievement with remuneration and benefits. Therefore to achieve this objective greater emphasis on building a performance culture
is essential.
The committee in its deliberation will underpin the overall philosophy of ensuring that compensation decisions are consistent and
aligned with the performance of the bank. The compensation philosophy is intended to attract and retain qualified and competent
personnel that blend into the culture of the bank.
Another significant focus of the committee has been to create a vibrant corporate culture based on agreed values which ensures
sustainable competitive advantages. In this context, the contributory factors were reviewed periodically and provided with necessary
guidance to achieve the required objective.
The Bank’s rich history of functioning as one “Sampath Team” endowed with the requisite skills and spirit to support the strategic
goals of the Bank is considered a vital ingredient to succeed in this endeavor.
Similarly in the adoption of appropriate HR practices, the committee will draw on rich experiences and good practices from external
sources.
Sampath Bank PLC 161
Annual Report 2010 / Financial Reports / Human Resources and Remuneration Committee Report
Performance during the year
(1) One of the key achievements in 2010, was that the Bank has been able to reach an agreement with the employee
representatives for a revision of salaries covering a period of two years. This step facilitated, to plan and carry out business
operations smoothly and to generate strategic advantages for all stakeholders.
(2) On recommendation of the Central Bank of Sri Lanka the Shares under the existing ESOP was re-allocated taking in to
consideration of the benefits of share split, Scrip Dividend & Sub-division and converted it to pass the Utmost Ownership in lieu
of beneficial ownership to the team members at their retirement.
(3) The committee has taken a number of steps to improve quality of the life of employees of the Bank by way of improving
various other benefits.
(4) Took steps to implement a new ESOP plan, in order to increase the motivation of the team members next year, as per the
terms and conditions approved by the Shareholders at the EGM held on 21st August 2010. Through this ESOP Plan the team
members will get an opportunity to contribute towards the Capital of the bank and to increase their share of, ownership of
which the limitation of 2% of the total issued no. of shares.
In accordance with the above process the team members will get opportunities to exercise their entitlement pertaining to
shares, which are similar to the rights of the other shareholders. The team members will be able to actively participate in
decision making at the shareholders meeting by exercising their rights to speak and to vote at such meetings.
(5) Restructuring of the HR Division into core HR, Non core HR and inter-related functions was affected with four strategic HR pillars.
a) Capability Development
b) Technical training/Junior recruitment
c) Employee relation and benefits
d) HR services outsourcing as a methodology was encouraged to maximize on effectiveness and efficiency.
(6) Changes in the recruitment policy enhanced the scope of recruitment, by inclusion of age category below 25 years with
professional qualifications and altered the administration of assessment such as psychometric assessment.
(7) Succession Plan was looked into detail with greater emphasis in order to facilitate the vast growth of the Bank.
(8) Transparent, effective recruitment drive in the war sawaged Northern and Eastern provinces, created an essential feeling of
national integration. New recruits were offered and provided with language skills, and necessary knowledge
to carry out their duties.
(9) We were the first Bank to embrace the “Tri Lingual Nation” policy of the government of Sri Lanka by ceremonially
inaugurating and successfully completing a course of Tamil and Business English Communication, to the Sampath Team.
(10) Committee ably support by the HR division, successfully managed the recruitment, training and deploying of the staff on the
massive un-precedent expansion of 40 branches during 2010.
W M P L De Alwis
Chairman
Human Resource and Remuneration Committee
12th January 2011
Colombo, Sri Lanka
Sampath Bank PLC 162
Annual Report 2010 / Financial Reports / Strategic Planning Committee Report
Strategic Planning Committee Report
The Strategic Planning Committee is a Board Sub Committee established to assist the Board in fulfilling its responsibility to set
strategic direction and define key objectives for the Bank. The Strategic Planning Committee is also responsible to determine the
Bank’s long-term goals and then identifying the best approach for achieving those goals.
Composition of the Strategic Planning Committee
This Committee is made up of 7 members: 5 Non Executive Directors and 2 Executive Directors. It is chaired by a Non Executive
Director.
Mr. I W Senanayake (Chairman) - Non Executive Director
Mr. M A Abeynaike - Non Executive Director
Mr. S G Wijesinha - Non Executive Director
Mr. L K J Hettiaratchi - Non Executive Director
Mr. K D D Perera - Non Executive Director
Mr. G L H Premaratne - Executive Director
Mr. R Samaranayake - Executive Director
The Company Secretary acts as Secretary to this Committee.
Frequency of Meetings
Meetings are held as and when required, but at least annually to enable the Committee to fulfil its obligations to the Bank.
Scope of work
1. Strategic Vision & Mission of the Bank.
Examine the Bank’s current mission, strategic positioning and the Strategic Vision and provide guidelines to the Bank’s Strategic
planning process.
2. Review of the impact of external trends and issues: Examine the external challenges and opportunities relevant to the strategic
vision and key goals of the Bank.
3. Review the internal strengths and weaknesses of the Bank give guidelines to the Management.
4. Oversee and monitor the planning process that leads to the formulation of the Strategic Plan.
5. Examine the effectiveness of key strategies for achieving the goals and objectives.
6. Review the Bank’s resources and capabilities in the context of achieving its strategic objectives.
7. Review the adequacy and composition of the Bank’s capital structure in the context of the growth targets.
8. Make recommendations to the Board on key strategic decisions and investments.
Reporting to the Board
Minutes of the Committee meetings shall be circulated to all members of the Committee and made available to all other members
of the Board.
Performance
The Committee is expected at least once a year, review its own performance, constitution and scope of work to ensure that it is
operating effectively and, if relevant, to recommend any changes necessary to the Board.
On behalf of the Strategic Planning Committee
I W Senanayake
Chairman
Strategic Planning Committee
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 163
Shareholder Relations Committee Report
The Shareholder Relations Committee is a Board Sub Committee, established to assist the Board in maintaining an ongoing dialogue with
the shareholders and address their concerns, if any. Through this committee the Bank seeks to maintain and enhance good relations with
its shareholders. The Bank’s up-to-date information and financial results are promptly communicated to the shareholders through interim
and annual reports, notification to the Colombo Stock Exchange and press releases. In addition all investors have access to such information
on the Bank via its website, www.sampath.lk, which also provides contact details for investor related enquiries. All shareholders are invited
to make use of the Bank’s Annual General Meeting and Shareholder Relations General Meetings to raise any questions regarding the
performance of the Bank. They are also encouraged to make suggestions, bring out any concerns including requests.
There has been regular two-way communication between the Shareholder and the Directors on a wide range of issues, with the Directors
being kept informed of the Shareholders’ views through regular reports to the Board.
Sampath Bank is the first listed Company in Sri Lanka which has set up a Shareholder Relation Committee to have a constant dialogue with
shareholders/investors.
Composition of the Shareholder Relations Committee
The Committee comprises three members;
Mr. D J Gunaratne (Chairman) - Non Executive Director
Mr. E A Gunasekera - Non Executive Director
Mr. W M P L De Alwis - Non Executive Director
The Company Secretary is the Secretary to this Committee.
Frequency of Meetings
Meetings are held as and when required. The Committee met twice during the year, which was attended to by all the members. By invitation
of the Shareholder Relations Committee, the Managing Director, Deputy Managing Director and Executive Director/Group Chief Financial
Officer, also attend the Shareholder relation Committee meetings. At the two general meetings held during the year, the Committee met
with the interested shareholders and provided the opportunity to express their views on a wide range of matters.
Role of the Shareholder Relations Committee
(1) Provide suggestions to the Board to improve shareholder/Investor relations of the Bank.
(2) Conduct meetings with Shareholders to provide a forum for open dialogue between the Shareholders and the Board of Directors.
(3) Provide guidance regarding all material investor relations.
(4) Perform such other functions as expressly delegated to it from time to time by the Board relating to investor/shareholder relations.
Activities of the Committee during the year
Following benefits have been effected for Shareholders during the year
º All commissions charged to shareholder on banking transactions are on actual cost basis.
º 50% reduction in initial deposit on opening of current accounts
º No joining fee in the 1st year for VISA Credit Cards issued by the Bank.
º SET (ATM)cards to be issued free of charge.
Performance
The Committee is expected to meet as and when necessary, and provide to the Board a report on the Committee’s performance, its
constitution and terms of reference to ensure that it is operating effectively and to recommend to the Board any changes that are necessary.
On behalf of the Shareholder Relations Committee.
D J Gunaratne
Chairman
Shareholder Relations Committee
10th February 2011
Colombo, Sri Lanka
Annual Report 2010 / Financial Reports / Shareholder Relations Committee Report
Sampath Bank PLC 164
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company
Your Directors have pleasure in presenting their Annual Report on the State of Affairs, together with the Audited Financial
Statements for the year ended 31.12.2010 of Sampath Bank PLC a licensed Commercial Bank, listed on the Colombo Stock
Exchange and Consolidated Financial Statement of the Group, the Auditors’ Report on those Financial Statements. Sampath Bank
Limited which was incorporated in Sri Lanka on 10th March 1986 under the Companies Act No. 17 of 1982 and approved as a
licensed Commercial Bank under the Banking Act No. 30 of 1988 has now become a holding company having many subsidiaries and
significant investments in certain financial institutions. In compliance of the requirements of the New Companies Act No. 07 of 2007
the bank was re-registered under the name Sampath Bank PLC with The Re-registrar General of Companies. The Re-registration
number of the Company is PQ 144.
Completion and the Contents of this report are in accordance with the statutory requirements, the requirements of relevant
regulatory authorities in compliance for this regulation for the listed companies in the financial industry and best accounting
practices which have been brought to the attention of the Shareholders and other Stakeholders.
This Audited Financial Statements were approved by the Directors at the Board Meeting held on 10th February 2011.
Vision, Values and Corporate Conduct
The Bank’s Vision and Values are given in page 01 of the report. The Bank conducts its business at a high level of ethical standard in
achieving its Vision.
Activities, Business Review & Future Developments
Principal Business Activities
The Principal business activities of the Company are banking and related financial services. The principal activities and nature of
operations of the group are described in the Corporate Information on inner back cover as well, as under each company in the report.
Bank
The principle activities of the Bank includes accepting deposits, personal banking, trade financing, off-shore banking, resident and
non-resident foreign currency operations, travel related services, corporate and retail credit, import and export financing, project
financing, lease financing, pawning, issuing of local and international debit and credit cards, chip cards, telebanking facilities,
internet banking and dealing in Government securities.
Subsidiaries
Sampath Bank PLC had four subsidiaries as at 31.12.2010, namely, Sampath Centre Limited, S C Securities (Private) Limited,
Sampath Leasing and Factoring Limited and Sampath Information Technology Solutions Limited.
Review of the year’s performance
A review of the financial and Operational performance and future business developments of the Bank is contained in the message
from Chairman (pages 12 to 17), the message from Managing Director (pages 18 to 25) and the Management Discussion & Analysis
(pages 40 to 89) of the Annual Report.
(As per the Section 168 (1)(a) of the Companies Act No. 07 of 2007)
Future Developments
The Bank has its target of opening 40 new branches during the year 2011 country wide and make available more channels of
delivering banking and related financial services.
The Bank opened 40 new branches during the year under review, bringing the total number of branches to 171 at the end of 2010.
The new branches were opened in North & East provinces to expand the area of service providing by targeting the developments of
potential markets available in such provincial areas.
The further information is given in the message from Chairman (pages 12 to 17), the message from Managing Director (pages 18 to
25) and the Management Discussion & Analysis (pages 40 to 89) of the Annual Report.
Sampath Bank PLC 165
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Financial Statements
The financial statements of the company and group for the year ended 31st December 2010 duly signed by the Group Chief
Financial Officer, three of the Directors of the Bank and the Board Secretary are given on pages 190 to 253.( As per the Section 168
(1)(b) of the Companies Act No. 07 of 2007)
Financial Results
Income
Interest income constitutes the Bank’s main income. The total income for 2010 and 2009 were as follows:-
2010
(Rs. Bn.)
2009
(Rs. Bn.)
Group Bank Group Bank
Gross Income 24.8 24.3 25.6 25.2
Operating Income 14.8 14.4 12.1 12.1

Details are given in the Income Statement of the Financial Statements.
Profit & Appropriations
Profit
The profit before tax for the Bank and the Group were up by 13.2% and 19.7% respectively. (55.1% and 43.7% in 2009) and the
profit after tax up by 57.4% and 68.9% respectively (48.4% and 36.6% in 2009). Details regarding the profit of the Bank are given
below.
2010
Rs. Mn.
2009
Rs. Mn.
Profit for the year after payment of all expenses -
Providing for depreciation, Possible loan losses, Financial
VAT and Contingencies
4,501.7 3,976.2
Provision for taxation 1,199.0 1,877.9
Net profit after taxation 3,302.7 2,098.3
Unappropriated profit brought forward from previous year 473.7 275.7
Profit available for appropriation 3,776.4 2,374.0
Appropriations
Transfer to the Statutory Reserve Fund 165.1 42.0
Transfer to the Risk Reserve Fund of the
Primary Dealer
10.4 7.1
Transfer to General Reserve 1,891.3 1,575.6
Dividends Paid
Final Dividend of Rs. 4.00 per share - 2008 - 275.6
Final Dividend of Rs. 6.25 per share - 2009 473.6 -
Interim Scrip Dividend of Rs. 3.00 per share - 2010 227.3 -
Unappropriated profit to be Carried forward 1,008.6 473.7
Dividends Proposed
Final Dividend proposed at Rs. 6.25 per share - 2009 - 473.6
Final Scrip Dividend proposed at Rs. 6.60 per share - 2010 1,008.5 -
Sampath Bank PLC 166
Taxation
Income Tax rate applicable on Bank’s domestic and on-shore profits of the FCBU Banking is 35% and the off-shore profits of the
FCBU Banking is 20%.
The Financial VAT and Income Taxes of the Bank are given in Notes 05 and 09.
The Bank’s policy is to provide for deferred taxation on temporary differences based on the liability method. Provision for taxation
has been compiled at the rates given in Note 9.2 to the Financial Statements.
Dividends
On recommendation of the Directors the Bank has distributed a Scrip( Interim) Dividend of Rs.3/ per existing share, valued at Rs.326/-
per share, after providing for the 10% Withholding Tax.
This move created 627,596 fully paid new shares, which were allotted to the shareholders as part of their dividend for 2010. The
entire cost of the scrip dividend was funded by the profits of the bank for 2010 and hence there was no capitalisation of reserves.
However, the stated capital of the bank rose by Rs.204,596,253/- being the value of the new shares created. Consequently, the
number of shares in issue too rose from the existing 75,776,390 to 76,403,986 shares.
As required by section 56(2) of the Companies Act No. 07 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. 07 of 2007 and obtained a certificate from the external
auditors for the same.
The Directors recommend that a final scrip dividend of Rs. 6.60 per existing share, valued at Rs. 300/- per share , after providing for
the 10% Withholding Tax.
This final dividend will be on the increased number of shares i.e. 152,807,972 (after 1:1 sub division of shares on 12th October 2010.
This will add 3,051,788 fully paid new shares, which will be allotted to the shareholders as part of their final dividend for 2010.
There will be no capitalisation of reserves, since the cost will be funded by the profits of the bank for 2010. The stated capital of the
bank will increase by Rs. 915.5 Mn being the value of the new shares to be created. The number of shares in issue will increase from
the existing 152,807,972 to 155,859,706 shares.
Your Directors have made an assessment of the Solvency of the Bank, immediately after the proposed dividend and confirm that the
Bank satisfies the Solvency Test required by the Section 57 of Companies Act No. 07 of 2007.
With this dividend payment, the Bank is fulfilling the deemed dividend requirement according to the provisions of Inland Revenue Act.
The details are given in Note 11 to the Financial Statements.
Reserves
Total Reserves of the Bank stood at Rs. 13,232.7 Mn as at 31.12.2010 and details of which are given in Statement of Changes in
Equity on page 194 of the Annual Report.
Directors’ Responsibility for Financial Reporting
The Directors are responsible for the preparation of Financial Statements of the Bank to reflect a true and fair view of the state of
its affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of
the Sri Lanka Accounting Standards, Companies Act No. 07 of 2007 thereafter, Sri Lanka Accounting and Auditing Standards Act
No. 15 of 1995, the Banking Act No. 30 of 1988 and amendments thereto the Listing Rules of the Colombo Stock Exchange and
the Mandatory Corporate Governance Code for Licensed Commercial Banks issued by Central Bank of Sri Lanka. The Statement of
Directors’ Responsibility for Financial Reporting is given on page 187 of this Annual Report forms an integral part of this report and
also confirm that the Bank has complied with prudential requirements, regulations, laws and internal controls and measures.
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 167
Auditors Report
The Auditors of the Company are M/s Ernst & Young, Chartered Accountants. Their report on the Consolidated financial statements
is given on page 189. They come up for re-election at the Annual General Meeting, with the recommendation of the Audit
Committee and Board of Directors. (As per the Section 168 (1)(c) of the Companies Act No. 07 of 2007)
Significant Accounting Policies
The significant accounting policies adopted in preparation of the financial statements of the Bank and the Group are given in page
195 to 209. There have been no changes in the accounting policies adopted by the Bank during the year and consistent with those
adopted in the previous financial year as required by the Sri Lanka Accounting Standard No 3 (Revised 2005) on ‘presentation of
Financial Statements’. (As per the Section 168 (1)(d) of the Companies Act No. 07 of 2007)
Directors’ Interest Register
Under the provisions of Section 168(1)(e) of the Companies Act No. 07 of 2007, the Interest Register is maintained by the Bank and
the Group. Directors have made the necessary declarations, in terms of the Section 192(2) of the Companies Act No. 07 of 2007,
which are recorded in the Interest Register and this is available for inspection in terms of the Act. The entries in the Register made
during the accounting period are given as a footnote to this report on page 176.
Directors’ Remuneration
Directors’ remuneration and other benefits of directors in respect of the company and the group are given in Note 05 to the
Financial Statements on page 211. (As per the Section 168 (1)(f) of the Companies Act No. 07 of 2007)
Donations
Given below is the total donations made by the Company during the year. The Company does not make donation for political
purposes.
Donations 2010 Donations 2009
Rs. 10.250 Mn Rs. 1.947 Mn
Donations in excess of Rs. 50,000/- are disclosed in Note 05 on page 211 to the Financial Statements. (As per the Section 168 (1)(g)
of the Companies Act No. 07 of 2007).
Directorate
(As per the Section 168 (1)(h) of the Companies Act No. 07 of 2007)
The names of the directors of the Bank during the period 01.01.2010 to 31.12.2010 are given below. The classification of directors
into Executive, Non-Executive and Non-Executive Independent Directors is given against the names as per Colombo Stock Exchange
listing requirements and Corporate Governance rules and Central Bank’s mandatory rules on Corporate Governance.
Name Date of Appointment Remarks
Mr. I W Senanayake Non Executive Director since 16.03.1987 Appointed as Chairman on 01.10.2008
Mr. S G Wijesinha Non Executive Director since 14.10.1996 Appointed as Deputy Chairman on 01.10.2008
Mr. M A Abeynaike Non Executive Director since 27.07.1995
Mr. D J Gunaratne Non Executive Director since 29.01.1998
Dr. S Kelegama Non Executive Director since 01.04.1998
Mr. L J K Hettiaratchi Non Executive Director since 10.12.1998
Mr. J D Bandaranayake Non Executive Director since 17.07.2001 Independent, vacated office w.e.f.17.07.2010
Mr. E A Gunasekera Non Executive Director since 17.07.2001 Independent, vacated office w.e.f. 17.07.2010
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 168
Name Date of Appointment Remarks
Mr. W M P L De Alwis Non Executive Director since 15.01.2002 Independent, vacated office w.e.f 15.01.2011
Mr. K D D Perera Non Executive Director since 01.08.2007
Mr. G L H Premaratne Executive Director since 25.11.2008 Appointed as Managing Director on 01.01.2011
Mr. M Y A Perera Executive Director since 25.11.2008 Appointed as Deputy Managing Director on
01.01.2011
Mr. R Samaranayake Executive Director since 01.01.2009
Mr. D Sooriyaarachchi Non Executive Director since 05.08.2010 Appointed on 05.08.2010 (Independent)
Alternate Directors
Mr. I W Senanayake Alternate Director to Mr. K D D Perera Appointed on 23.09.2010
Mr. S Sudarshan Alternate Director to Dr. S Kelegama Appointed on 23.09.2010
Mr. D Sooriyaarachchi Alternate Director to Mr. L J K Hettiaratchi Appointed on 11.10.2010
In order to comply with the Corporate Governance Code for Licensed Commercial Bank of Central Bank of Sri Lanka, Messrs E A
Gunasekera and J D Bandaranayake vacated their Directorships of Sampath Bank PLC.
In order for the Bank to gain from their expertise, they have been appointed as the Member of the Board Advisors.
All Non-Executive Directors of the Bank have given a signed declaration in terms of Colombo Stock Exchange’s Continuing listing
rules clarifying their position either as an independent Director or Non-Independent Director. These have been tabled at the Board
Meeting held in on 10th February 2011.
Recommendation for re-election
In terms of Article No. 86 and 87 of the Articles of Association of the Company, Mr. K D D Perera, Mr. I W Senanayake,
Mr. M A Abeynaike and Mr. L J K Hettiaratchi retire by rotation and being eligible offer themselves for re-election, on a unanimous
recommendation of the Nomination Committee & Board of Directors.
Mr. D. Sooriyaarachchi was appointed as a Non Executive Director with effect from 05/08/2010 offers himself for re-election by the
shareholders in terms of section No. 93 of the Articles of Association of the Company on an unanimous recommendation of the
Nomination Committee and the Board of Directors.
Re-election under Section 210 and 211 of the Companies Act.
No existing director has reached the age of 70 and therefore these sections of the Companies Act are not applicable.
Retirement of Director
Mr. W M P L De Alwis, Director, vacated office on 15th January 2011, in term of the Corporate Governance code for licensed
commercial banks of the Central Bank of Sri Lanka.
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 169
Directorate - Subsidiaries
Names of the Directors of Subsidiaries are given below;
Sampath Centre Ltd Sampath Leasing & Factoring Ltd S C Securities (Pvt) Ltd Sampath Information
Technology Solutions Ltd
Mr. I W Senanayake (Chairman)
Mr. M A Abeynaike
Mr. S G Wijesinha
Mr. S P Kannangara
Mr. M Y A Perera
Mr. I W Senanayake (Chairman)
Mr. S G Wijesinha
Mr. L J K Hettiaratchi
Mr. G L H Premaratne
Mrs. M A Karunaratne (appt. 19.04.2010)
Mr. P M A Sirimane (appt. 03.08.2010)
Mr. D J Gunaratne (Chairman)
(appt. 19.11.2010)
Mr. E A Gunasekera
Mr. Harsha Fernando
Mr. M Y A Perera
Dr. S Kelegama (appt. 10.03.2010)
Mr. I W Senanayake
Mr. L J K Hettiaratchi (Chairman)
Mr. E A Gunasekera
Mr. G L H Premaratne
Mr. M Y A Perera
Mr. D J Gunaratne
Mr. N J Alwis (appt.16.04.2010)
Mr. N R Tillekeratne
(appt.16.04.2010)
Mr. M V Indrasoma
(appt.16.04.2010)
Register of Directors & Secretaries
The Bank maintains a Register of Directors and Secretaries which contain the name, surname, former name (if any), residential
address, business, occupation and dates of appointment and resignation of each member.
Board Sub Committees
In keeping with the principles of Corporate Governance, Transparency and Accountability, the Board has initiated the formation of
the following Board Sub-Committees. These Sub-Committees have been re-constituted in keeping to the new mandatory code of
Corporate Governance of the Central Bank of Sri Lanka, the Institute of Chartered Accountants, and the Colombo Stock Exchange.
Audit Committee Messrs M A Abeynaike (Chairman) , I W Senayayake, S G Wijesinha and L J K Hettiaratchi
Nominations Committee Messrs I W Senanayake (Chairman), M A Abeynaike, S G Wijesinha and D J Gunaratne
Credit Committee Messrs D J Gunaratne (Chairman), M A Abeynaike, L J K Hettiaratchi, G L H Premaratne,
M Y A Perera and R Samaranayake, E A Gunasekera (Adviser)
Chairman, Mr. E A Gunasekera steped down on 17th July 2010 as he vacated the office of
Directorship of Sampath Bank PLC and Mr. D J Gunaratne was appointed as the Chairman of
the Credit Committee. Mr. E A Gunasekera serves as an Adviser to the Committee.
Board Risk Management
Committee
Messrs W M P L De Alwis (Chairman), D J Gunaratne, K D D Perera, L J K Hettiaratchi,
G L H Premaratne, M Y A Perera and R Samaranayake
Human Resources & Remuneration
Committee
Messrs W M P L De Alwis (Chairman), L J K Hettiaratchi, S G Wijesinha, D Sooriyaarachchi,
G L H Premaratne, M Y A Perera, Mr. J D Bandaranayake (Adviser)
Chairman Mr. J D Bandaranayake steped down on 17th July 2010 as he vacated the office of
Directorship of Sampath Bank PLC and Mr. W M P L De Alwis was appointed as the Chairman
of the Human Resources & Remuneration Committee.
Mr. J D Bandaranayake serves as an Adviser to the Committee.
Strategic Planning Committee Messrs I W Senanayake (Chairman), M A Abeynaike, S G Wijesinha, L J K Hettiaratchi,K D D
Perera, G L H Premaratne and R Samaranayake, J D Bandaranayke (Adviser)
Mr. J D Bandaranayake steped down on 17th July 2010 as he Vacated the office of
Directorship of Sampath Bank PLC and he serves as an Adviser to the Committee.
Shareholder Relations Committee Messrs D J Gunaratne (Chairman), E A Gunasekera and W M P L De Alwis
The duties, responsibilities and performance of the above sub-committees are discussed in the respective sub-committee reports in
the Annual Report.
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 170
Directors’ Interest in Contracts
The Directors of the Bank have made declarations as provided for in section 192(2) of the Companies Act No. 07 of 2007.
Directors Interest in contracts of the company are disclosed on pages 182 and 183. The Directors have no direct or indirect interest
or proposed contract other than those disclosed.
The Directors have at the meetings declared all material interests in contracts if any involving the company and have refrained in
participating when decisions are taken.
Directors’ Interest in Shares and Debentures
Shareholding No. of Shares
As at 31.12.2010
No. of Shares
As at 31.12.2009
I W Senanayke (Chairman) 653,142 276,266
S G Wijesinha (Deputy Chairman) 1,376 621
M A Abeynaike 110,910 50,000
D J Gunaratne Nil Nil
S Kelegama Nil Nil
L J K Hettiaratchi 4,658 2,100
W M P L De Alwis 305,026 137,510
K D DPerera Nil
(7,640,314 Shares transferred to
Vallibel One Ltd on 13/12/2010)
3,412,769
*Vallibel Leisure (Pvt) Ltd Nil
(7,636,890 shares transferred To
Vallibel One Ltd on13/12/2010)
3,442,800
(Registered as per Permission of Monetary
Board)
*Vallibel Investments (Pvt) Ltd Nil
(7,639,996 shares transferred to
Vallibel One Ltd on 13/12/2010)
3,444,200
*Vallibel One Ltd 22,917,200 Nil
G L H Premaratne (Managing Director) Nil Nil
M Y A Perera (Deputy Managing Director) 1,496 775
R Samaranayake 1,142 516
D Sooriyaarachchi Nil Nil

Debentures No. of Debentures
As at 31.12.2010
No. of Debentures
As at 31.12.2009
K D D Perera 100,000 (2007/2012) 100,000 (2007/2012)
Note: Mr. S G Wijesinha, Mr. M A Abeynaike and Mr. L J K Hettiaratchi held 47,025 number of shares as Trustees for shareholders
who hold excess shares at the Bonus Issue in 2004. This holding has been increased to 111, 630 shares as a result of; Share Split -
March 2010, Scrip Dividend - September 2010 and Share - Split in October 2010 of the bank.
Directors’ shareholdings also increased considerably in accordance with the scrip dividend and two share sub-division of shares of
Sampath Bank.
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 171
Directors’ Interest in Shares & Debentures of Subsidiaries:
None of the Directors directly hold any debentures in any Subsidiary.
Messrs L J K Hettiaratchi, E A Gunasekera, G L H Premaratne , M Y A Perera and R Samaranayake hold 01 share each in Sampath
Information Technology Solutions Ltd, as subscribers. These shares are held in trust for Sampath Bank.
Messrs I W Senanayake and M Y A Perera hold 01 share each in S C Securities (Pvt) Ltd for and on behalf of Sampath Bank PLC.
Directors’ Meetings
Details of Directors meetings and Board sub-committee meetings are given in Corporate Governance Report on pages 90 to 125 of
this Annual report.
Auditors’ Interest and dealings
M/s Ernst & Young were paid by the Bank and the Group amounted to Rs. 6.597 Mn (2009 - Rs. 4.391 Mn) and Rs. 7.841 Mn
(2009 - Rs. 5.769 Mn) respectively as Auditors Fee for the financial year ending 31.12.2010.
For acting as advisors on taxation matters M/s Ernst & Young were paid by the Bank and the Group amounted to Rs. 0.820 Mn
(2009 - Rs. 0.505 Mn) and Rs. 0.820 Mn (2009 - Rs. 0.505 Mn) respectively for the final year ended 31.12.2010
M/s Ernst & Young who are the Bank’s auditors are also the auditors for the Bank’s subsidiary companies namely, Sampath Centre
Limited, S C Securities (Private) Limited, Sampath Leasing and Factoring Limited and Sampath Information Technology Solutions
Limited.
Registered Office and Head Office
The registered office and head office of the Bank is situated at No.110, Sir James Peiris Mawatha, Colombo 2.
Shareholding
The number of registered shareholders of the company as at 31st December 2010 was 17,186 compared to 14,662 as at 31st
December 2009. The Schedule indicating the shareholders’ analysis is on pages 267 to 271.
Investors’ Information
Information relevant to investors such as Earnings & Earning Yield, Dividends & Dividend Yield, Net Assets and Volume of Share
trading and Market Capitalizations etc. are given on page 267.
Significant Shareholding
Sampath Bank PLC has a 7.9% shareholding (significant) in Union Bank of Colombo Ltd., and 11.3% shareholding in LankaBangla
Finance Limited in Bangladesh. Details are given in Note No. 16 to the Financial Statements.
Stated Capital
The Stated Capital of the Bank is Rs. 1,786.250 Mn comprising of 152,807,972 Ordinary Shares.
The number of shares in issue of the Bank increased from 68,887,628 ordinary shares to 152,807,972 ordinary shares as a result of
the 1st Share sub-division, Scrip Dividend and the 2nd Share sub-division, taken place during the year 2010.
No. of Shares issue 2009 No. of shares issue in 2010
68,887,628 152,807,972
The details of the proportionate increments of the issued shares are given in Note 10.1 to the Financial Statements
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 172
Debt Capital
Sampath Bank PLC has issued 3,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are unlisted. The par
value of these debentures is Rs. 100/- and will be redeemed in December 2011.
Sampath Bank PLC has also issued 2,500,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are unlisted. The par
value of these debentures is Rs. 100/- and will be redeemed in June 2012.
Sampath Bank PLC has also issued 15,000,000 Unsecured, Subordinated, Redeemable 5 year Debentures, which are listed on the
Colombo Stock Exchange. The par value of these debentures is Rs. 100/- and will be redeemed in August 2012.
The details are given in Note 27.1 to the Financial Statements.
Bond
Sampath Bank PLC has issued a deep discounted zero coupon bond with a maturity value of Rs. 3,458.1 Mn for 20 years. The
present paid up value of this bond is Rs. 1,148.8 Mn and this forms part of the Tier II Capital.
The details are given in Note 27.2 to the Financial Statements.
Corporate Governance
The Board of Directors is committed towards maintaining an effective Corporate Governance Framework and processes required
to ensure that the Bank is compliant with the Code of Best Practice on Corporate Governance, issued by the Institute of Chartered
Accountants of Sri Lanka, the Central Bank of Sri Lanka, the Securities and Exchange Commission of Sri Lanka and the Colombo
Stock Exchange. Details are given on Corporate Governance Report on pages 90 to 125 of this Annual Report.
As required by Section 3(8)(ii)(g) on Corporate Governance of the Direction No. 11 of 2007 of the Banking Act for Licensed
Commercial Banks, issued by the Central Bank of Sri Lanka (CBSL), the Bank has obtained a report from the external auditors of the
bank.
Internal Controls
The Board of Directors has put in place an effective and comprehensive system of Internal Controls by:
(1) Ensuring that an adequate and effective system of internal control is established and maintained, by approving and periodically
reviewing overall business strategies and significant policies of the bank.
(2) Ensuring that delegated responsibilities are effectively carried out and setting appropriate internal control policies by the
Corporate Management of the Bank.
(3) Ensuring that all personnel understand their role in the internal Control process and are fully engaged in the process.
(4) Recognizing and assessing of material risks that could adversely affect the achievement of the bank’s goals, covering all risks
and revising Internal controls which should appropriately address any new or previously uncontrolled risks.
(5) An appropriate control structure is set up, with control activities defined at every business unit level.
(6) Identifying, minimizing and monitoring of areas of potential conflicts of interest.
(7) Relevant financial, operational and compliance data, as well as external market information are maintained to provide reliable,
timely, and accessible information.
(8) Monitoring the information systems to ensure that “hold and use data” in an electronic form are secured and supported by
adequate contingency arrangements.
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Annual Report of the Board of Directors
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Sampath Bank PLC 173
(9) Ensuring that effective channels of communication are available to all staff to understand and adhere to policies and
procedures affecting their duties and responsibilities.
(10) Ensuring that business lines and internal audit are monitoring key risks which are part of the daily activities of the Bank.
(11) Ensuring that Internal Audit function is carried out by operationally independent, appropriately trained competent staff who
report directly to Audit committee of the Board.
(12) Ensuring that internal control deficiencies, identified by business lines, internal audit or other control personnel are reported to
senior management and the Board of Directors in a timely manner.
Internal Control Over Financial Reporting (ICOFR) - Compliance with section 3(8)(ii)(b) of the Banking Act
Direction No. 11 of 2007 on Corporate Governance.
The Group is required to comply with the Section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance
issued by Central Bank of Sri Lanka and assess the effectiveness of internal controls over financial reporting for the year ended
31st December 2010.
Accordingly, the Bank assessed the effectiveness of its internal controls over financial reporting as at 31 December 2010, based on
the criteria set out in the Guidance for Directors of Banks on “The Directors’ Statement” of Internal Control, issued by the Institute
of Chartered Accountants of Sri Lanka (ICASL) in 2010.
The Directors’ statement on Internal Control is detailed on page 184 to 185 in the Annual Report.
Statutory Payments
The directors are satisfied to the best of their knowledge and belief, that statutory payments due to the Government, other
regulatory bodies and in relation to the employees have been paid up to date, on a timely basis.
Our Team Members
The Bank believes that its real potential rests on the strength and capabilities of its team members in a rapidly changing scenario. All
efforts are directed at having a motivated and competent team in order to grow and achieve results as projected in the Strategic Plan
and the Budget.
As at 31st December 2010, the number of employees on the payroll of the Bank was 2,688 as compared to 2,388 as at 31st
December in 2009.
On recommendation of the Central Bank of Sri Lanka the Shares under the existing ESOP was re-allocated taking in to consideration
of the benefits of Scrip Dividend and two sub-division of shares and converted it to pass the Utmost Ownership in lieu of beneficial
ownership to the team members at their retirement.
Further, in order to increase the motivation of the team members a new ESOP plan was introduced, as per the terms and conditions
approved by the Shareholders at the EGM held on 21 August 2010. Through this ESOP Plan the team members will get an
opportunity to contribute towards the Capital of the bank and to increase their portion of ownership of which the limit boundary is
2% of the total issued number of shares.
ESOP 2011
In accordance with the above process the team members will get opportunities to exercise their entitlement pertaining to shares
which are similar to the rights of the other shareholders. The team members will be able to actively participate for decision making
at the shareholders meeting by exercising their rights to speak and vote at such meetings.
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 174
Capital Expenditure
The Bank incurred capital expenditure on the acquisition of premises and equipment during the financial year. The summarised
details of capital expenditure in 2010 and 2009 are as follows:
Capital Expenditure for 2010 Capital Expenditure for 2009
Rs. 907.1 Mn Rs. 496.7 Mn
The details are given in Note 20.2 and 21 on pages 229 to 230 to the Financial Statements.
Capital Commitments
Capital Commitments approved and contracted are shown in Note 31.2.2 on page 244.
Market Value of Freehold Properties
All freehold land and buildings of the Bank were last re-valued by professional valuers as at 31.12.2010 and a revaluation surplus of
Rs. 415.331 Mn, was brought in to Financial Statements as at 31.12.2010.
Directors are of the opinion the value stated are not in excess of the current market value of such properties.
The details are given in Statement of Changes in Equity on page 194 to the Financial Statements.
Value Added
Value Added details are shown on page 266.
Risk Management
The Board and Corporate Management of the Bank have re-aligned its risk management structure with the objective of identifying,
measuring and mitigating the risks.
The ongoing process at the Bank is detailed in the Risk Management Report on pages 126 to 149.
Outstanding Litigation
In the opinion of the Directors and in consultation with the Bank lawyers, litigations currently pending against the Bank will not have
material impact on the reported financial results of future operations of the Bank. Details of litigations pending against the Bank are
given in Note 31.2 on page 243 of the Annual Report.
Events after the Balance Sheet Date
There have not been any material events that occurred subsequent to the date of the Balance Sheet that require adjustments to the
Financial Statements, other than those disclosed, if any, in Note 38 to the Financial Statements.
Going Concern
The Directors after making necessary inquiries and reviews including reviews of the Groups budget for the ensuing year, capital
expenditure requirements, future prospects and risks and cash flows, and such other matters required to be addressed in the Code of
Best Practice on Corporate Governance, issued by the Institute of Chartered Accountants of Sri Lanka, the Central Bank of Sri Lanka
and the Securities and Exchange Commission of Sri Lanka are satisfied that the company and the Group have adequate resources
to continue operations into the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the
Financial Statements.
Environmental Protection
The Bank/Group has not knowingly engaged in any activity which is harmful to the environment.
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
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Sampath Bank PLC 175
Auditors
The Auditors of the Company are M/s Ernst & Young, Chartered Accountants. They come up for re-election at the Annual General
Meeting, with the recommendation of the Audit Committee and the Board of Directors.
In accordance with Companies Act No. 7 of 2007, a resolution proposing the re-appointment of M/s Ernst & Young, Chartered
Accountants as Auditors is being proposed at the Annual General Meeting.
Annual General Meeting
In complying with the good governance practices, the Annual Report of the Company is dispatched as soon as possible after the end
of the financial year and completion of the audit.
A data base has been developed through the information gathered at the scrip dividend distribution and on requirement of
shareholders and accordingly in compliance with the Colombo Stock Exchange Rules, the Annual Reports have been distributed in
the form of a Diskette (a Soft copy) as well as the Printed form.
Notice of Meeting
The 25th Annual General Meeting will be held at the Grand Ballroom, Galadari Hotel,Colombo on 31st March 2010. The notice of
meeting is given on page 284 of the Annual Report.
Change of Directorate After Balance Sheet Date
Director Mr. W M P L De Alwis, Chairman of both the Board Risk Management Committee and HR & Remuneration Committee
vacated office on the 15th January 2011 in term of the Corporate Governance Code of Central Bank of Sri Lanka for Licensed
Commercial Banks.
As required by Section 168(1)(k) of the Companies Act No. 07 of 2007 the Board of Directors hereby acknowledge the contents of
this report.
For and on behalf of the Board of Directors.
I W Senanayake S G Wijesinha G L H Premaratne S Sudarshan
Chairman Deputy Chairman Managing Director Company Secretary
10 February 2011
Colombo, Sri Lanka
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 176
Note: Directors’ Interest Register (Changes during the year ending 31.12.2010)
Mr. I W Senanayake (Chairman)
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
SC Securities (Pvt) Ltd Chairman 23.01.2001 21.10.2010
Sampath Leasing and Factoring Ltd Chairman 22.10.2008 -
Sampath Centre Ltd Chairman 12.11.2008 -
Sampath Trade Services (Hongkong) Ltd
(Company de-registered and ceased to exist w.e.f
23.07.2010)
Director 17.11.2008 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
American President Lines Lanka Ltd Chairman -
Germania Colombo (Pvt) Ltd Chairman 17.06.1982 -
Interfreight (Pvt) Ltd Chairman 17.07.1987 -
Comexco International (Pvt) Ltd Chairman 27.05.1996 -
Dynacom Engineering (Pvt) Ltd Chairman 01.09.1990 -
Regency Automobiles (Pvt) Ltd Chairman 23.05.1995 -
Eurocars (Pvt) Ltd Chairman 10.10.1996 -
Dynanet Ltd Chairman 21.04.1998 -
Interfreight Haulage (Pvt) Ltd Chairman 11.04.2001
I W S Logistics Ltd Chairman 30.03.1999 -
I W S Technologies (Pvt) Ltd Chairman 11.12.2002 -
ART Television Broadcasting Co (Pvt) Ltd Chairman 27.11.2007 -
I W S Aviation (Pvt) Ltd Chairman 05.12.2007 -
I W S Geographical Information Systems (Pvt) Ltd Chairman 19.08.2004 -
The Model Network (Pvt) Ltd Chairman 07.06.2006 -
I W S Engineering Services (Pvt) Ltd Chairman 29.06.2004 -
Dynatel Communications (Pvt) Ltd Chairman 18.04.1994 -
I W S Leisure (Pvt) Ltd Chairman 25.06.2004 -
Dish Lanka (Pvt) Ltd Chairman 07.07.2006 -
Universal Auto Assembling (Pvt) Ltd Chairman 04.10.2007 -
Your Foods Limited Chairman 12.07.2007 -
Interpack (Pvt) Ltd Chairman 27.09.1988 -
I W S Holdings (Pvt) Ltd Chairman 28.06.1994 -
Precision Motors (Pvt) Ltd Chairman 02.05.1995 -
Dynacom Electronics (Pvt) Ltd Chairman 27.05.1996 -

Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 177
Mr. S G Wijesinha (Deputy Chairman)
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
Sampath Leasing & Factoring Ltd Director 22.10.2008 -
Sampath Centre Ltd Director 31.07.1996 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Dankotuwa Porcelain Ltd Chairman/ Managing
Director
01.07.2005 -
Centec (Pvt) Ltd Director 18.04.2007 -
Asiri Surgical Hospital PLC Director 26.05.2010 -
National Chamber of Commerce of Sri
Lanka
Deputy President 31.01.2009 -
Employers’ Federation of Ceylon Vice Chairman & Trustee 29.10.2010 -
Ceylon Chamber of Commerce Committee Member February 2004 -
Sri Lanka Italy Business Council Council Member Since 2007 -
Sri Lanka Association for the Advancement
of Quality & Productivity
President 08.11.2010 -
National Chamber of Exporters of Sri Lanka Council Member 26.11.2010 -
Mr. M A Abeynaike
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
Sampath Centre Ltd Director 31.07.1996 -

Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Regency Teas (Pvt) Ltd Chairman 1997 26.02.2010
Asia Pacific Investments (Pvt) Ltd Chairman 30.11.1994 -
Mr. D J Gunaratne
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
S C Securities (Pvt) Ltd Chairman 09.12.2010 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Bibile Trading & Forwarding Company Chairman 03.01.2005 -
United Eastern (Pvt) Ltd Chairman 05.01.1990 -
Ascot Holdings PLC Director 17.12.2009 -
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 178
Dr. S Kelegama
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
S C Securities (Pvt) Ltd Director 10.03.2010 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Institute of Policy Studies Executive Director 03.02.1995
Singer (Sri Lanka) PLC Director 01.06.2006
National Enterprise Development Authority Director 08.09.2006
Singer Finance Ltd Director 13.11.2008
Regnis Lanka PLC Director 21.08.2008
Colombo Stock Exchange Director 01.04.2010
Mr. L J K Hettiaratchi
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
Sampath Leasing and Factoring Ltd Director 03.03.2005 -
Sampath Information Technology
Solutions Ltd
Chairman 03.11.2006 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Bank/Company Name Position held Date resigned
Institute of Technology - University of Moratuwa Member - Board of Management -
University of Moratuwa Member of the Council -
Ceylon Buddhist Congress Member -
World Fellowship of Buddhists Member -
German Dharmaduta Society Trustee -
Bodu Sahana Aramudala (Charity for Buddhist Activities) Hony.Secretary -
Organization of Professional Association Trustee
National Education Commission Member
Mackply (Pvt) Ltd Director
L K Domain Ltd Director
South Asia Partnership Chairman
Ingrin Institute of Printing and Graphics Chairman
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 179
Mr. J D Bandaranayake
Resigned from the office of Director of Sampath Bank PLC w.e.f. 17.07.2010.
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Ceylon Tobacco PLC Chairman
(Director since 01.03.1990)
25.03.2008 -
Hayleys PLC Director 01.07.2004 -
Coca Cola Beverages Sri Lanka Ltd Director 19.01.2000 -
Finlays Colombo PLC Director 01.07.2002 -
West Coast Power (Pvt) Ltd Director 14.05.2007 -
Union Assurance PLC Director 01.04.2007 -
Board of Investments of Sri Lanka Chairman In 2010 -
Mr. E A Gunasekera
Resigned from the office of Director of Sampath Bank PLC w.e.f. 17.07.2010.
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
S C Securities (Pvt) Ltd Director 04.09.2001 -
Sampath Information Technology Solutions Ltd Director 03.11.2006 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Buddhist Activities Fund Trustee 21.04.2006 -
Mr. W M P L De Alwis
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Consumer Affairs Authority Member
Ministry Export Development and International
Trade
Advisor to the Hon.
Minister
From May 2007 -
Colombo Institute for advanced Study of
Society & Culture
Director
Commission of Official Languages Member From August 2010
Sri Lanka Foreign Employment Agency Director
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Sampath Bank PLC 180
Mr. K D D Perera
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
Board of Investment of Sri Lanka (BOI) Chairman/ Director General 17.04.2007 10.05.2010
Sri Lanka Export Development Board (SLEDB) Member of the Board 01.06.2007 10.05.2010
Strategic Enterprises Management Agency (SEMA) Member of the Board 24.04.2006 -
Ministry of Transport, Sri Lanka Secretary
Substantial Interest in other entities other than Banks
Company Name Position held Company Name Position held
Vallibel Holdings (Pvt) Ltd Chairman Asian Alliance Insurance PLC Director
Vallibel Lanka (Pvt) Ltd Chairman Hayleys PLC Director
Vallibel Leisure (Pvt) Ltd Chairman Hayleys - MGT Knitting Mills PLC Director
Vallibel Investments (Pvt) Ltd Chairman Haycrab PLC Director
Vallibel Marine Management Ltd Chairman Royal Procelain (Pvt) Ltd Director
Anuradha Traders (Pvt) Ltd Chairman Royal Ceramics Distributors (Pvt) Ltd Director
Valibel Power Ltd Chairman Rocell Barthware Ltd Director
Vallibel Power Erathana PLC Chairman Rocell Roofing Ltd Director
Vallibel Finance Ltd Chairman Rocell Ceramics Ltd Director
Vallibel Exports (Pvt) Ltd Chairman Hotel Services (Ceylon) PLC Director
Vallibel One Ltd Chairman Ceylon Continental Hotel - Colombo Director
Vallibel Two (Pvt) Ltd Chairman Hunas Falls Hotels PLC Director
Vallibel Three (Pvt) Ltd Chairman Dipped Products PLC Director
Vallibel Technologies (Pvt) Ltd Chairman Nirmalapura Wind Power (Pvt) Ltd Director
Vallibel Plantatnions (Pvt) Ltd Chairman Alutec Anodising & Machine Tools (Pvt) Ltd Director
Alternate Power Systems (Pvt) Ltd Chairman Culture Club Resorts (Pvt) Ltd Director
The Fortress Resorts PLC Chairman Kandyan Resorts (Pvt) Ltd Director
Star Tower Developers (Pvt) Ltd Chairman Connaissance Air Travels (Pvt) Ltd Director
Country Energy (Pvt) Ltd Chairman CDC Convention (Pvt) Ltd Director
LB Finance PLC Chairman Connaissance Hotel Management (Pvt) Ltd Director
Greener Water Ltd Chairman The Beach Resorts Ltd Director
Royal Ceramics Lanka PLC Deputy Chairman La Fortresse (Pvt) Ltd Director
Amaya Leisure PLC Deputy Chairman Sri Lanka Insurance Corporation Ltd Director
Mr. G L H Premaratne
Directorship in Subsidiary Companies:
Company Name Position held Date Appointed Date Resigned
Sampath Leasing and Factoring Ltd Director 22.10.2008 -
Sampath Trade Services (Hong Kong) Ltd
(Company Deregistered on 23.07.2010)
Director 17.11.2008 -
Sampath Information Technology Solutions Ltd Director 07.11.2008 -
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 181
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held
Asiri Hospital PLC Director
Asiri Surgical Hospitals PLC Director
Asiri Cental Hospital PLC Director
Mr. M Y A Perera
Directorship in Subsidiary Companies:
Company Name Position held Date appointed Date resigned
Sampath Centre Ltd Director 31.08..2007 -
S C Securities (Pvt) Ltd Director 01.12.2008 -
Sampath Information Technology Solutions Ltd Director 05.03.2009 -
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held
Credit Information Bureau of Sri Lanka Director
Lanka Clear (Pvt) Ltd Director
Lanka Financial Services Bureau Ltd Director
Mr. R Samaranayake
Directorship in Subsidiary Companies: None
Directorship/ Cffcer/ Jrustee in other entities other than 8anks: None
Mr. D Sooriyaarachchi
Directorship in Subsidiary Companies: None
Directorship/ Cffcer/ Jrustee in other entities other than 8anks:
Company Name Position held Date appointed Date resigned
AVIVA NDB Insurance PLC Managing Director 01.07.2005 28.02.2010
Executive Director 31.03.2010
Non Executive Independent Director 01.04.2010
Rainbow Trust Management Co. Ltd Non Executive Independent Director
NDB AVIVA Wealth Management Non Executive Independent Director
Hemas Manufacturing PLC Non Executive Independent Director 03.05.2010
Pan Asian Power PLC Non Executive Independent Director 27.07.2010
Ceylon Chamber of Commerce Member
National Administrative Council Member
Prof. V.K. Samaranayake Endowment Fund Member
Council of the University of Kelaniya Member
Sampath Bank PLC 182
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Directors’ interest in Contracts with the Company
Related party disclosures as required by the Sri Lanka Accounting Standard No. 30 on Related Party Disclosures (Revised 2005) is
detailed in Note 32 on pages 244 to 246 to the Financial Statements. In addition, the Bank carries out transactions in the ordinary
course of the business at an arm’s length basis with entities where the Chairman or a Director of the Bank is the Chairman or a
Director of such entities as detailed below.
Also this complies with the requirements of Section 168 of the Companies Act No 7 of 2007 and Directions issued under Section 47
(3),(4),(5) & (6) of the Banking Act No. 30 of 1988.
Company Relationship Nature of Facility Current
Limit
(Rs. Mn.)
Balance
Outstanding
As at
31.12.2010
(Rs. Mn.)
Balance
Outstanding
As at
31.12.2009
(Rs. Mn.)
Mr. I W Senanayake
Sampath Leasing & Factoring Ltd Chairman Loans & Advances 884.810 490.060 507.890
Off Balance Sheet Accommodations 1,000.000 300.000 376.790
Sampath Centre Ltd Chairman Loans & Advances 170.000 74.400 138.600
Mr. S G Wijesinha
Dankotuwa Porcelain PLC Chairman Loans & Advances 109.870 26.412 95.573
Off Balance Sheet Accommodations 25.000 20.390 24.500
Sampath Leasing & Factoring Ltd Director Loans & Advances 884.810 490.060 507.890
Off Balance Sheet Accommodations 1,000.000 300.000 376.790
Sampath Centre Ltd Director Loans & Advances 170.000 74.400 138.600
Mr. M A Abeynaike
Sampath Centre Ltd Director Loans & Advances 170.000 74.400 138.600
Mr. D J Gunaratne
SC Securities (Pvt) Ltd Chairman Loans & Advances 50.000 - 31.300
Dr. Saman Kelegama
Singer Sri Lanka PLC Director Loans & Advances 300.000 210.570 267.060
Off Balance Sheet Accommodations 150.000 222.790 48.100
Singer Finance Ltd Director Loans & Advances 25.000 - -
Regnis Lanka PLC Director Loans & Advances 35.000 0.190 2.970
Off Balance Sheet Accommodations 50.000 41.750 41.740
SC Securities (Pvt) Ltd Director Loans & Advances 50.000 - 31.300
Off Balance Sheet Accommodations 1.750 1.750 1.750
Mr. L J K Hettiaratchi
Sampath Leasing & Factoring Ltd Director Loans & Advances 884.810 490.060 507.890
Off Balance Sheet Accommodations 1,000.000 300.000 376.790
Sampath Information Technology Solutions Ltd Director Loans & Advances 9.270 6.479 9.270
Mr. K D D Perera
Asian Alliance Insurance PLC Director Loans & Advances 15.000 - 8.070
Off Balance Sheet Accommodations 0.300 0.300 0.300
Hayleys MGt Knitting Mills PLC Director Loans & Advances 75.000 48.400
Off Balance Sheet Accommodations 219.126 74.337
Alco Industries (Pvt) Ltd Director Loans & Advances 30.000 30.000
Off Balance Sheet Accommodations 120.000 105.320
Alutec Anodizing & Machine Tools (Pvt) Ltd Director Loans & Advances 20.000 20.000
Off Balance Sheet Accommodations 60.000 6.850
Annual Report of the Board of Directors
on the Affairs of the Company contd...
Sampath Bank PLC 183
Annual Report 2010 / Financial Reports / Annual Report of the Board of Directors on the Affairs of the Company
Company Relationship Nature of Facility Current
Limit
(Rs. Mn.)
Balance
Outstanding
As at
31.12.2010
(Rs. Mn.)
Balance
Outstanding
As at
31.12.2009
(Rs. Mn.)
Mr. G L H Premaratna
Sampath Leasing & Factoring Ltd Director Loans & Advances 884.810 490.060 507.890
Off Balance Sheet Accommodations 1,000.000 300.000 376.790
Sampath Information Technology Solutions Ltd Director Loans & Advances 9.270 6.479 9.270
Central Hospitals (Pvt) Ltd Director Loans & Advances 962.000 962.000 -
Off Balance Sheet Accommodations - 17.000 -
Asiri Central Hospitals PLC Director Loans & Advances 195.000 195.000 -
Asiri Hospitals Holdings PLC
(Previously known as Asiri Hospitals PLC)
Director Loans & Advances 1,250.000 550.000 -
Off Balance Sheet Accommodations 10.000 - -
Mr. M Y A Perera
SC Securities (Pvt) Ltd Director Loans & Advances 50.000 - 31.300
Off Balance Sheet Accommodations 1.750 1.750 1.750
Sampath Centre Ltd Director Loans & Advances 170.000 74.400 138.600
Sampath Information Technology Solutions Ltd Director Loans & Advances 9.270 6.479 9.270
Mr. Deepal Sooriyaarachchi
Pan Asia Power Ltd Director Loans & Advances 15.300 13.300 -
Fully secured facilities in the form of International Master (credit) and VISA (Web) Cards were made available to the following
directors during the year.
Name of the Director Credit
Limit
2010
(Rs. Mn.)
Balances as
at 31.12.2010
(Rs. Mn.)
Security Type Security Value
(Rs./USD. Mn.)
Credit Limit
2009
(Rs. Mn.)
Balances
as at
31.12.2009
(Rs. Mn.)
Mr. S G Wijesinha 0.50 0.032 0.200 0.127
Mr. E A Gunasekera - - 0.050 -
Mr. J D Bandaranayake - - Surety from CTC Rs 1.000 1.000 -
Mr. W M P L De Alwis 0.50 - 0.500 -
Mr. G L H Premaratne 3.00 0.242 Repo Rs. 2.000 0.525 0.094
Mr. M Y A Perera 0.50 0.267 0.500 0.245
Mr. R Samaranayake 0.50 0.063 0.500 0.002
Mr. D J Gunaratne 0.50 0.013 - -
Mr. M A Abeynaike 0.50 0.010 - -
Dr. S Kelegama 0.50 0.002 - -
Mr. L J K Hettiaratchi 0.50 0.014 - -
Mr. Deepal Sooriyaarachchi 1.23 0.020 NRFC FD USD 12,600.000
The borrowings of Directors as at 31st December 2010 are as follows:
Name of Director Limit
2010
(Rs. Mn.)
Balances
as at
31.12.2010
(Rs. Mn.)
Security Limit
2009
(Rs. Mn.)
Balances as
at
31.12.2009
(Rs. Mn.)
Security
Mr L J K Hettiaratchi 3.158 0.263 Fixed Deposit 0.623 0.130 Cr R F C balance & F D
Mr.S.G.Wijesinha 0.800 - NRFC Balance 0.800 0.130 Cr R F C balance
Mr. D.Sooriyaarachchi 0.300 0.002 NRFC Balance - - -
Sampath Bank PLC 184
Directors’ Statement on Internal Control Report
Responsibility
In line with the Banking Act Direction No. 11 of 2007, section 3 (8) (ii) (b), the Board of Directors present this report on Internal
Control.
The Board of Directors (“Board”) is responsible for the adequacy and effectiveness of the Sampath Bank’s (“the Bank”) system of
internal controls. However, such a system is designed to manage the Bank’s key areas of risk within an acceptable risk profile, rather
than eliminate the risk of failure to achieve the policies and business objectives of the Bank. Accordingly, the system of internal
controls can only provide reasonable but not absolute assurance against material misstatement of management and financial
information and records or against financial losses or fraud.
The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Bank and
this process includes enhancing the system of internal controls as and when there are changes to business environment or regulatory
guidelines. The process is regularly reviewed by the Board and accords with the Guidance for Directors of Banks on the Directors’
Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. The Board has assessed the internal
control system taking into account principles for the assessment of internal control system as given in that guidance.
The Board is of the view that the system of internal controls in place is sound and adequate to provide reasonable assurance
regarding the reliability of financial reporting, and that the preparation of financial statements for external purposes and is in
accordance with relevant accounting principles and regulatory requirements.
The management assists the Board in the implementation of the Board’s policies and procedures on risk and control by identifying and
assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks.
Key features of the process adopted in applying and reviewing the design and
effectiveness of the internal control system
The key processes that have been established in reviewing the adequacy and integrity of the system of internal controls with respect
to financial reporting include the following:
º Various appointed Committees are established by the Board to assist the Board in ensuring the effectiveness of Bank’s daily
operations and that the Bank’s operations are in accordance with the corporate objectives, strategies and the annual budget as
well as the policies and business directions that have been approved.
º The Internal Audit Division of the Bank check for compliance with policies and procedures and the effectiveness of the internal
control systems on an ongoing basis using samples and rotational procedures and highlight significant findings in respect of
any non-compliance. Audits are carried out on all units and branches, the frequency of which is determined by the level of
risk assessed, to provide an independent and objective report. The annual audit plan is reviewed and approved by the Audit
Committee. Findings of the Internal audit are submitted to the Audit Committee for review at their periodic meetings.
º The Audit Committee of the Bank review internal control issues identified by the respective Internal Audit Division, regulatory
authorities and management, and evaluate the adequacy and effectiveness of the risk management and internal control systems.
They also review the internal audit functions with particular emphasis on the scope of audits and quality of internal audits. The
minutes of the Audit Committee meetings are tabled to the Board of the Bank on a periodic basis. Further details of the activities
undertaken by the Audit Committee of the Bank are set out in the Audit Committee Report on pages 152 to 154.
º In assessing the internal control system, identified officers of the Bank collated all procedures and controls that are connected
with significant accounts and disclosures of the financial statements of the Bank. These in turn were observed and checked
by the internal audit department for suitability of design and effectiveness on an ongoing basis. Due to time constraints,
areas with respect to the processes that provided disclosures to the financial statements such as related party transactions,
contingencies and commitments were not fully completed. The assessment did not include subsidiaries of the Bank.
º Comments made by the external auditors in connection with internal control system will be dealt with in the future.
Annual Report 2010 / Financial Reports / Directors’ Statement on Internal Control Report
Sampath Bank PLC 185
Annual Report 2010 / Financial Reports / Directors’ Statement on Internal Control Report
Confirmation
Based on the above processes, the Board confirms that the financial reporting system of the Bank has been designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
has been done in accordance with Sri Lanka Accounting Standards and regulatory requirements of the Central Bank of Sri Lanka.
Review of the Statement by External Auditors
The external auditors have reviewed the above Directors’ Statement on Internal Control included in the annual report of the Bank for
the year ended 31 December 2010 and reported to the Board that nothing has come to their attention that causes them to believe
that the statement is inconsistent with their understanding of the process adopted by the Board in the review of the design and
effectiveness of the internal control system of the Bank.
By order of the Board
Mohan A Abeynaike
Chairman
Audit Committee
I W Senanayake S G Wijesinha G L H Premaratne S Sudarshan
Chairman Deputy Chairman Managing Director Company Secretary
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 186
Managing Director’s and Group Chief Financial Officer’s
Responsibility Statement
Annual Report 2010 / Financial Reports / Managing Director’s and Chief Financial Officer’s Responsibility Statement
The Financial Statement of the Sampath Bank Group are prepared in compliance with the requirements of the Sri Lanka Accounting
Standards issued by The Institute of Chartered Accountants of Sri Lanka, the requirements of the Companies Act No. 7 of 2007,
Sri Lanka Accounting and Auditing Standards Act No 15 of 1995, Banking Act No. 30 of 1988 and amendments thereto, the Listing
Rules of the Colombo Stock Exchange and the Code of Best Practice on Corporate Governance issued jointly by The Institute of
Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka and section 3(8)(ii)(g) of the Banking
Act Direction No. 11 of 2007 on Corporate Governance issued by the Central Bank of Sri Lanka and also comply with the formats
prescribed by the Central Bank of Sri Lanka.
The Accounting Policies are consistently applied by the Group. The Significant accounting policies and estimates that involve a
high degree of judgment and complexity were discussed with the Bank’s External Auditors and Audit Committee. Comparative
information has been reclassified wherever necessary to comply with the current presentation and material departures, if any, have
been disclosed and explained in the notes to the Financial Statements. The Financial statements give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Bank, its cash flows and liquidity position. We have reasonable grounds
to believe that the Bank has adequate resources to continue in operational existence for the foreseeable future. Accordingly, we
continue to adopt the going concern basis in preparing the Financial Statements.
The Board of Directors and the management of the Bank accept responsibility for the integrity and objectivity of these Financial
Statements. The estimates and judgments relating to the Financial Statements were made on a prudent and reasonable basis, in
order that the Financial Statements reflect in true and fair manner, the form and substance of transactions and reasonably present
the Company’s state of affairs. To ensure this, the Bank has taken proper and sufficient care in installing a system of internal controls
and accounting records, for safeguarding assets and for preventing and detecting frauds as well as other irregularities, which are
reviewed, evaluated and updated on an ongoing basis. Our Internal Auditors have conducted periodic audits to provide reasonable
assurance that the established policies and procedures of the Bank were consistently followed. However, there are inherent
limitations that should be recognized in weighing the assurances provided by any system of internal controls and accounting.
We confirm, Compliance with section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance (Internal
Control Over Financial Reporting (ICOFR)) issued by the Central Bank of Sri Lanka as of 31 December 2010 on the Bank’s Internal
Controls over Financial Reporting is adequate and effective. The Annual Report of the Directors on page 164 to 183, has briefly
covered the Group’s Internal Control over Financial Reporting. In addition, Directors’ Statement on Internal Control Over Financial
Reporting (ICOFR) is provided on page 184 to 185. The Bank’s auditors, M/s Ernst & Young, have audited the effectiveness of the
Bank’s internal controls over financial reporting and have given an unqualified opinion.
The Financial Statements of the Group were audited by M/s. Ernst & Young, Chartered Accountants, and their report is given on
page 189 of this Annual Report. The Audit Committee of the Bank meets periodically with the Internal Auditors and the External
Auditors to review the manner in which the auditors are performing their responsibilities and to discuss issues relating to auditing,
internal controls and financial reporting issues. To ensure complete independence, the External Auditors and the Internal Auditors
have full and free access to the members of the Audit Committee to discuss any matter of substance. The Audit Committee report is
given on pages 152 to 154.
The Audit Committee pre-approves the audit and non-audit services provided by M/s. Ernst & Young, in order to ensure that the
provision of such services does not impair M/s. Ernst & Young’s independence.
It is further confirmed that all the other guidelines have been complied with.
We confirm that the Bank and all its subsidiaries have complied with all applicable laws and regulations and guidelines and that
there are no material litigations against the Group other than those disclosed in Note 31.2 on page 243 of the Financial Statements
in this Annual Report.
G L H Premaratne R Samaranayake
Managing Director Executive Director/ Group Chief Financial Officer
10th February 2011
Colombo, Sri Lanka
Sampath Bank PLC 187
Directors’ Responsibility for Financial Reporting
Annual Report 2010 / Financial Reports / Directors’ Responsibility for Financial Reporting
The responsibility of the Directors in relation to the Financial Statements of the Bank and its subsidiaries, prepared in accordance with
the provision of the Companies Act No.07 of 2007 is set out in the following statements.
Your Directors are aware that in addition to being a guardian for the shareholders, they also have a duty towards the depositors
and other customers of the bank, especially as the depositors’ funds are far in excess of the shareholders’ funds. The Directors are
personally liable if they have not performed their expected role. As per the provisions of the Companies Act No.07 of 2007, the
Directors are required to prepare Financial Statements for each financial year and place them before a general meeting.
The Financial Statements comprise of;
º The Balance Sheet
º The Income Statement
The Financial Statements are prepared under the supervision of the Group Chief Financial Officer who is an Executive Director of
the Bank. These documents present true and fair view of the Company and its subsidiaries, which have been certified by the Group
Chief Financial Officer and signed by the Chairman, the Deputy Chairman, Managing Director, and the Company Secretary in
conformity with the requirements of the Companies Act. The Accounts are circulated and reviewed by the Audit Committee and
Board of Directors.
The Directors are required to ensure that, in preparing these Financial Statements;
(i) The appropriate accounting policies have been selected and applied in a consistent manner and material departures, if any
have been disclosed and explained
(ii) Judgments and estimates have been made which are reasonable and prudent
(iii) All applicable Accounting standards, as relevant, have been followed
(iv) The Internal Control over Financial Reporting is effective and
(iv) The financial statements are prepared on the going concern basis, unless it is inappropriate to presume that the Bank and the
Group will continue in business
Financial Statements prepared and presented in the report are consistent with the underlying books of Account and are in
conformity with the requirements of Sri Lanka Accounting Standards, Companies Act No.07 of 2007, Sri Lanka Accounting and
Auditing Standers Act No.15 of 1995, Banking Act No.03 of 1988 and amendments thereto and the continuing Listing Rules of the
Colombo Stock Exchange.
The Audit Committee of the Bank reviews the quarterly accounts and recommends them to the Board prior to release of these
Financial Statements.
The Annual Report of the Board of Directors on the State of Affairs of the Company gives a synopsis of the Company and the
Group.
Your Directors have taken reasonable steps open to them to safeguard the assets of the Bank while taking steps to prevent and
detect frauds if any and any other irregularities. For this purpose your Directors have instituted an effective and comprehensive
system of internal control comprising internal audit, internal checks, financial and other controls in order to carry on the operations
in an orderly manner, safeguard the assets and secure as far as practicable, the accuracy and reliability of the records.
Based on its assessment of Internal Control Over Financial Reporting (ICOFR) - Compliance with section 3(8)(ii)(b) of the Banking
Act Direction No. 11 of 2007 on Corporate Governance, your Directors have concluded that, as of 31 December 2010, the Group’s
Internal Controls over Financial Reporting is effective. Directors’ Statement on Internal Control Over Financial Reporting (ICOFR) and
Annual Report of the Board of Directors are provided on pages 184 to 185 and pages 164 to 183 respectively of the Annual Report.
The setting up of the Board Sub-Committee on Integrated Risk Management (Board Risk Management Committee) which is
looking at all areas to mitigate the Risks of the Bank, keeping in line with the regulatory directives of the Central Bank of Sri Lanka,
Corporate Governance Codes issued by the Central Bank of Sri Lanka and the Colombo Stock Exchange.
Sampath Bank PLC 188
As required by section 56(2) of the Companies Act No. 7 of 2007, your Directors have made an assessment of the Solvency of the
Bank, immediately after the paid and proposed dividends and confirm that the Bank satisfies the Solvency Test required by the
Section 57 of Companies Act No. 07 of 2007.
M/s Ernst & Young, Chartered Accountants, the Auditors of the Company have examined the Financial Statements made available
to them together with all financial records, related data, minutes of shareholders’ meetings, Directors’ Meetings, Audit Committee
Meetings and other Board Sub-Committee meetings and expressed their opinion as reported by them in the Report on page 189.
Compliance Report
The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries,
all contributions, levies and taxes on behalf of and in respect of its Staff Members and the Staff Members of its subsidiaries, and all
other known statutory dues as were due and payable by the Company and its subsidiaries at Balance Sheet date have been paid
or where relevant, provided for. The Directors also confirm that based on its assessment the accounting controls are adequate and
nothing has come to the attention of the directors to indicate that any breakdown in the functioning of these controls, resulting
in material loss to the Bank, and also the Bank will have adequate resources to continue in operational existence and as a going
concern for the foreseeable future.
The Directors are of the view that they have discharged their responsibilities as set out in the above statement.
By order of the Board,
S Sudarshan
Company Secretary
10th February 2011
Colombo, Sri Lanka
Annual Report 2010 / Financial Reports / Directors’ Responsibility for Financial Reporting
Directors’ Responsibility for Financial Reporting contd...
Sampath Bank PLC 189
Annual Report 2010 / Financial Reports / Auditors’ Report
Auditors’ Report
Independent Auditors’ Report to the
Shareholders of Sampath Bank PLC
Report on the Financial Statements
We have audited the accompanying financial statements
of Sampath Bank PLC (‘Bank’), the consolidated financial
statements of the Bank and its subsidiaries which comprise
the balance sheets as at 31 December 2010, and the income
statements, statement of changes in equity and cash flow
statements for the year then ended, and a summary of
significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes;
designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are
reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit
in accordance with Sri Lanka Auditing Standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are free
from material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation.
We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for
the purposes of our audit. We therefore believe that our audit
provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the
Bank maintained proper accounting records for the year ended
31 December 2010 and the financial statements give a true
and fair view of the Bank’s state of affairs as at 31 December
2010 and its profit and cash flows for the year then ended in
accordance with Sri Lanka Accounting Standards.
In our opinion, the consolidated financial statements give a
true and fair view of the state of affairs as at 31 December
2010 and the profit and cash flows for the year then ended,
in accordance with Sri Lanka Accounting Standards, of the
Company and its subsidiaries dealt with thereby, so far as
concerns the shareholders of the Bank.
Report on Other Legal and Regulatory Requirements
In our opinion, these financial statements also comply with the
requirements of Sections 151 (2) and 153 (2) to 153 (7) of the
Companies Act No.07 of 2007.
Ernst & Young
Chartered Accountants
18th February, 2011
Colombo, Sri Lanka
Sampath Bank PLC 190
Bank Group
For the year ended 31st December Page 2010 2009 Change 2010 2009 Change
No Note (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Income 210 01 24,332,560 25,212,896 (3.5) 24,816,064 25,560,156 (2.9)
Interest Income 210 02 18,477,355 20,969,778 (11.9) 18,721,942 21,345,030 (12.3)
Less : Interest Expenses 210 03 9,952,576 13,164,599 (24.4) 10,036,400 13,472,178 (25.5)
Net Interest Income 8,524,778 7,805,179 9.2 8,685,542 7,872,852 10.3
Foreign Exchange Profit 210 02.1 497,901 774,489 (35.7) 497,901 774,489 (35.7)
Fees & Commission Income 210 02.2 1,360,450 1,205,529 12.9 1,360,450 1,205,529 12.9
Other Income 211 04 3,996,854 2,263,099 76.6 4,235,771 2,235,107 89.5
Operating Income 14,379,983 12,048,297 19.4 14,779,664 12,087,978 22.3
Operating Expenses 211 05
Personnel Costs 2,576,572 2,194,166 17.4 2,648,842 2,254,817 17.5
Premises, Equipment & Establishment Expenses 2,091,858 1,802,934 16.0 2,061,903 1,773,373 16.3
Provision for Retirement Benefits 211 06 355,433 467,892 (24.0) 358,091 469,195 (23.7)
Provision for Credit Losses - Specific 212 07 1,764,753 324,011 444.7 1,756,096 428,405 309.9
- General 212 07 135,370 (39,397) 443.6 135,370 (39,397) 443.6
Provision for Diminution/(Appreciation)
in Value of Investments 212 08 (44,463) 917,508 (104.8) (44,463) 917,508 (104.8)
Other Overhead Expenses 2,998,747 2,404,966 24.7 3,069,617 2,439,540 25.8
Operating Expenses 9,878,270 8,072,080 22.4 9,985,456 8,243,442 21.1
Operating Profit before Provision for Taxation
and Associate Company’s Profit 4,501,713 3,976,217 13.2 4,794,208 3,844,536 24.7
Add/(Less): Share of Profit before Tax of
Associate Company - - - - 160,391 (100.0)
Profit before Tax 4,501,713 3,976,217 13.2 4,794,208 4,004,927 19.7
Less : Provision for Taxation 212 09 1,198,964 1,877,910 (36.2) 1,274,226 1,921,170 (33.7)
Profit after Tax 3,302,748 2,098,307 57.4 3,519,982 2,083,756 68.9
Attributable to:
Equity Holders of the Parent 3,302,748 2,098,307 57.4 3,484,466 2,072,483 68.1
Minority Interest - - - 35,516 11,273 215.1
Profit for the Year 3,302,748 2,098,307 57.4 3,519,982 2,083,756 68.9
Earnings per Share - Basic / Diluted (Rs.) 214 10 - - - 22.80 13.56 68.1
Dividend per Share - Gross 215 11 8.09 6.25 8.09 6.25
Dividend per Share - Net 215 11 7.33 5.78 7.33 5.78
The Accounting Policies and the Notes from pages 195 to 253 form an integral part of these Financial Statements.
Income Statement
Annual Report 2010 / Financial Reports / Income Statement
Sampath Bank PLC 191
Balance Sheet
Bank Group
As at 31st December Page Note 2010 2009 Change 2010 2009 Change
No (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Assets
Cash and Cash Equivalents 215 12 6,046,830 5,868,195 3.0 6,052,551 5,875,708 3.0
Balance with Central Bank of Sri Lanka 216 13 8,221,068 7,397,703 11.1 8,221,068 7,397,703 11.1
Government of Sri Lanka Treasury Bills & Bonds 216 14 31,394,278 31,767,817 (1.2) 31,402,915 31,797,446 (1.2)
Commercial Papers - 459,389 (100.0) - 459,389 (100.0)
Dealing Securities 217 15 899,106 276,207 225.5 899,106 276,207 225.5
Investment Securities 218 16 7,647,737 7,264,149 5.3 7,803,788 7,451,439 4.7
Securities Purchased under Re-sale Agreements - 2,676,615 (100.0) - 2,676,615 (100.0)
Loans and Advances 221 17
Bills of Exchange 221 17.1 2,295,427 2,874,909 (20.2) 2,295,427 2,874,909 (20.2)
Loans and Advances 222 17.2 117,004,821 86,817,992 34.8 116,394,605 86,102,302 35.2
Lease Receivable within One Year 222 17.3.1 1,350,620 1,745,466 (22.6) 1,917,414 2,401,937 (20.2)
Lease Receivable from One to Five Years 222 17.3.2 1,975,637 1,711,060 15.5 2,579,997 2,597,405 (0.7)
Lease Receivable after Five Years 222 17.3.3 - 27,305 (100.0) 6,663 27,305 (75.6)
Investment in Subsidiary Companies 228 18.2 991,626 991,626 - - - -
Interest and Fees Receivable 1,959,236 1,854,370 5.7 1,959,236 1,854,370 5.7
Other Assets 229 19 937,952 937,440 0.1 1,821,852 1,394,925 30.6
Goodwill and Other Intangible Assets 229 20 78,723 71,171 10.6 95,065 82,630 15.0
Property and Equipment 230 21 4,277,501 3,420,483 25.1 6,436,694 4,731,762 36.0
Total Assets 185,080,560 156,161,897 18.5 187,886,380 158,002,050 18.9
Liabilities
Deposits 235 22 150,508,801 126,090,964 19.4 150,375,194 125,974,257 19.4
Unclaimed Dividends 37,922 29,880 26.9 37,922 29,880 26.9
Refinance Borrowings 4,442,929 4,819,327 (7.8) 4,442,929 4,819,327 (7.8)
Other Borrowings 236 23 1,013,070 871,860 16.2 1,443,927 1,542,880 (6.4)
Securities Sold under Re-purchase Agreements 4,361,363 2,887,480 51.0 4,361,363 2,887,480 51.0
Other Liabilities 237 24 5,390,706 5,453,781 (1.2) 5,974,014 5,876,430 1.7
Taxation 239 25 911,509 578,757 57.5 950,630 583,664 62.9
Deferred Taxation 239 26 196,440 481,199 (59.2) 183,859 478,636 (61.6)
Other Liabilities Evidenced by Paper 240 27 3,198,800 3,102,468 3.1 3,198,800 3,102,468 3.1
Total Liabilities 170,061,540 144,315,716 17.8 170,968,638 145,295,021 17.7
Shareholders’ Funds
Stated Capital 241 28 1,786,250 1,581,654 12.9 1,786,250 1,581,654 12.9
Reserves 241 29
Capital Reserves
Statutory / Risk Reserve Funds 241 29.1 646,564 471,013 37.3 653,735 471,301 38.7
Other Capital Reserves 242 29.2 1,519,041 1,152,615 31.8 2,938,517 1,768,546 66.2
Revenue Reserves 242 29.3 11,067,164 8,640,899 28.1 11,387,343 8,790,299 29.5
15,019,020 11,846,181 26.8 16,765,846 12,611,800 32.9
Minority Interest 242 30 - - - 151,896 95,228 59.5
Total Equity 15,019,020 11,846,181 26.8 16,917,742 12,707,028 33.1
Total Liabilities and Shareholders’ Funds 185,080,560 156,161,897 18.5 187,886,380 158,002,050 18.9
Net Asset Value per Share (Rs.) 98.29 77.52 26.8 109.72 82.53 32.9
Commitments and Contingencies 243 31 68,628,122 62,021,644 10.7 68,628,122 62,021,644 10.7
The Accounting Policies and the Notes from pages 195 to 253 form an integral part of these Financial Statements.
These financial statements are in compliance with the requirements of the Companies Act No 07 of 2007.
R Samaranayake
Executive Director / Group Chief Financial Officer
The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
Approved and signed for and on behalf of the Board;
I W Senanayake S G Wijesinha G L H Premarathne S Sudarshan
Chairman Deputy Chairman Managing Director Company Secretary
10th February 2011
Colombo
Annual Report 2010 / Financial Reports / Balance Sheet
Sampath Bank PLC 192
Bank Group
For the year ended 31st December Page Note 2010 2009 2010 2009
No (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Cash flows from operating activities
Interest & commission receipts 210 1 19,837,805 22,175,308 20,082,392 22,550,560
Interest payments 210 3 (9,952,576) (13,164,599) (10,036,400) (13,472,178)
Receipts from other operating activities 3,748,286 1,353,631 4,028,147 1,503,072
Cash payments to employees and suppliers (4,569,008) (4,072,053) (4,572,634) (4,061,909)
Payments for other operating activities (2,998,747) (2,404,966) (3,068,362) (2,439,540)
Operating profit before changes in operating
assets & liabilities [note (a)] 6,065,759 3,887,321 6,433,143 4,080,004
(Increase)/Decrease in operating assets
Balance with Central Bank of Sri Lanka 216 13 (823,365) (518,806) (823,365) (518,324)
Funds advanced to customers 221 17 (31,349,897) (3,748,808) (31,081,714) (2,577,794)
Other assets (105,378) 961,907 (531,793) 909,544
(32,278,639) (3,305,707) (32,436,872) (2,186,574)
Increase/(Decrease) in operating liabilities
Deposits from customers 235 22 24,320,128 18,662,087 24,303,228 18,585,183
Negotiable certificates of deposit 235 22 97,709 96,322 97,709 96,322
Other liabilities 237 24 (63,076) 338,910 93,528 495,870
24,354,761 19,097,319 24,494,465 19,177,375
Net cash flow from operating activities
before income tax (1,858,119) 19,678,933 (1,509,264) 21,070,805
Income tax paid 239 25 (1,199,875) (1,742,999) (1,250,942) (1,796,333)
Net cash flow from operating activities (3,057,994) 17,935,934 (2,760,206) 19,274,472
Cash flow from investing activities
Dividends received from subsidiaries 211 4 36,438 20,790 - -
Income from investments 211 4 49,148 95,631 49,148 87,829
Investment in subsidiary companies 228 18.2 - (318,000) - -
Acquisition of minority share (net) - - - 13,926
Government of Sri Lanka Treasury bills & bonds 216 14 410,902 (11,485,897) 431,893 (11,056,423)
Securities purchased under re-sale agreements 2,676,615 (2,676,615) 2,676,615 (2,673,744)
Securities sold under re-purchase agreements 1,473,883 464,235 1,473,883 447,928
Sale/(Purchase) of Commercial papers 459,389 (459,389) 459,389 (459,389
Sale/(Purchase) of investments 218 16 (17,309) (1,777,363) (17,300) (1,777,363)
Sale/(Purchase) of dealing securities 217 15 (327,241) 26,997 (327,241) 26,997
Proceeds from sale of associate shares - 1,618,698 - 1,618,698
Amalgamation of subsidiary - 402,057 - -
Proceeds from disposal of property & equipment 9,037 13,429 40,007 21,418
Purchase of property & equipment 230 21 (907,083) (496,763) (979,551) (498,289)
Net cash flow from investing activities 3,863,779 (14,572,190) 3,806,844 (14,248,414)
Cash flow from financing activities
Increase in bonds 240 27 96,332 88,254 96,332 88,254
Minority interest 242 30 - - (2,483) (3,710)
Redemption of debentures 240 27.1 - (1,500,000) - (1,500,000)
Increase/(Decrease) in other borrowings (235,188) (2,729,095) (475,351) (4,380,739)
Dividends paid (488,294) (277,674) (488,294) (277,674)
Net cash flow from financing activities (627,150) (4,418,515) (869,795) (6,073,869)
Net increase/(decrease) in cash and cash equivalents 178,635 (1,054,771) 176,843 (1,047,811)
Cash and cash equivalents at the beginning of the year 215 12 5,868,195 6,922,966 5,875,708 6,923,516
Cash and cash equivalents at the end of the year [note (b)] 215 12 6,046,830 5,868,195 6,052,551 5,875,708
Cash Flow & Reconciliation Statement
Annual Report 2010 / Financial Reports / Cash Flow & Reconciliation Statement
Sampath Bank PLC 193
Reconciliation Statement
Bank Group
As at 31st December Page Note 2010 2009 2010 2009
No (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Note (a)
Reconciliation of operating profit
Profit before provision for income tax 4,501,713 3,976,217 4,794,208 4,004,927
Loss/(Profit) on disposal of property & equipment 211 4 (6,046) (8,381) (32,771) (9,661)
Income from investments 211 4 (49,148) (95,631) (49,148) (78,225)
Provision for diminution/(appreciation)
in value of investments 212 8 (44,463) 917,508 (44,463) 917,508
Inter company dividends 211 4 (36,438) (20,790) - -
Capital gains from sale of LBFL shares 211 4 (654,836) (1,559,156) (623,606) (1,418,637)
Goodwill written off - - 1,254 -
Share of profit before tax of associate company - - - (160,391)
Depreciation 211 5 454,854 392,939 496,202 435,476
Provision for credit losses 212 7 1,900,124 284,614 1,891,466 389,008
Operating profit before changes in operating assets/liabilities 6,065,759 3,887,321 6,433,143 4,080,004
Note (b)
Reconciliation of cash and cash equivalents
Local currency in hand 215 12 3,185,353 2,393,681 3,185,482 2,393,790
Foreign currency in hand 215 12 543,588 363,526 543,588 363,526
Balances with local banks 215 12 77,374 37,704 82,966 45,107
Balances with foreign banks 215 12 403,142 600,176 403,142 600,176
Money at call and short notice 215 12 50,000 30,000 50,000 30,000
Placements with banks 215 12 1,787,373 2,443,108 1,787,373 2,443,108
Cash and Cash Equivalents at the end of the year 6,046,830 5,868,195 6,052,551 5,875,708
Annual Report 2010 / Financial Reports / Cash Flow & Reconciliation Statement
Sampath Bank PLC 194
Bank (Rs.’000)
Stated Revaluation Statutory Risk General Retained Total
Note Capital Reserve Reserve Reserve Reserve Profit Shareholders’
Fund Fund Funds
Balance as at 1st January 2009 1,581,654 1,157,576 407,731 - 6,353,709 275,659 9,776,328
Final dividend paid - 2008 11 - - - - - (275,550) (275,550)
Net profit for the year - - - - - 2,098,307 2,098,307
Surplus/(Reversals) on revaluation of property - (4,961) - - - - (4,961)
Transferred from Sampath Surakum Ltd
upon amalgamation - - - 14,262 237,795 - 252,057
Transfers during the year 29.3 - - 41,966 7,054 1,575,683 (1,624,704) -
Balance as at 31st December 2009 1,581,654 1,152,615 449,697 21,316 8,167,187 473,712 11,846,181
Final dividend paid - 2009 11 - - - - - (473,602) (473,602)
Interim scrip dividend paid - 2010 11 204,596 - - - - (227,329) (22,733)
Net profit for the year - - - - - 3,302,748 3,302,748
Surplus/(Reversals) on revaluation of property 29.2 - 415,331 - - - - 415,331
Deferred tax liability attributable to
revaluation surplus 29.2 - (48,904) - - - - (48,904)
Transfers during the year 29.3 - - 165,137 10,414 1,891,335 (2,066,886) -
Balance as at 31st December 2010 1,786,250 1,519,041 614,834 31,730 10,058,522 1,008,643 15,019,020
% 11.9 10.1 4.1 0.2 67.0 6.7 100.0
Group (Rs.’000)
Stated Revaluation Statutory Risk General Retained Total Minority Total
Capital Reserve Reserve Reserve Reserve Profit Shareholders’ Interest Equity
Fund Fund Funds
Balance as at 1st January 2009 1,581,654 1,755,392 408,019 14,262 6,336,141 724,360 10,819,828 119,590 10,939,418
Final dividend paid - 2008 11 - - - - - (275,550) (275,550) - (275,550)
Net profit for the year - - - - - 2,072,483 2,072,483 11,273 2,083,756
Interim cash dividend paid - 2009 - - - - - - - (3,710) (3,710)
Surplus/(Reversal) on revaluation of property - (4,961) - - - - (4,961) - (4,961)
Transferred from Sampath Surakum Ltd
upon amalgamation - - - (14,262) (237,795) - (252,057) - (252,057)
Transferred to Bank upon amalgamation - - - 14,262 237,795 - 252,057 - 252,057
Transfers during the year 29.3 - - 41,966 7,054 1,575,683 (1,624,703) - - -
Change in holding of subsidiary share - 18,115 - - - (18,115) - (31,926) (31,926)
Balance as at 31st December 2009 1,581,654 1,768,546 449,985 21,316 7,911,824 878,475 12,611,800 95,228 12,707,028
Final dividend paid - 2009 11 - - - - - (473,602) (473,602) - (473,602)
Net profit for the year - - - - - 3,480,409 3,480,409 35,516 3,515,926
Interim scrip dividend paid - 2010 204,596 - - - - (227,329) (22,733) - (22,733)
Interim cash dividend paid - 2009 - - - - - - - (2,483) (2,483)
Surplus/(Reversal) on revaluation of property 29.2 - 1,218,876 - - - - 1,218,876 23,635 1,242,511
Deferred tax liability attributable to
revaluation surplus 29.2 - (48,904) - - - - (48,904) - (48,904)
Transfers during the year 29.3 - - 172,019 10,414 1,891,335 (2,073,769) - - -
Change in holding of subsidiary share - - - - - - - - -
Balance as at 31st December 2010 1,786,250 2,938,518 622,004 31,730 9,803,159 1,584,184 16,765,846 151,896 16,917,742
% 10.6 17.4 3.7 0.2 57.9 9.4 99.1 0.9 100.0
Statement of Changes in Equity
Annual Report 2010 / Financial Reports / Statement of Changes in Equity
Sampath Bank PLC 195
Significant Account Policies
Annual Report 2010 / Financial Reports / Significant Account Policies
1. Corporate Information
1.1 General
Sampath Bank PLC (‘The Bank’), is a Licensed Commercial Bank established under the Banking Act No 30 of 1988. It is a Public
Limited Liability Company, listed on the Colombo Stock Exchange, incorporated and domiciled in Sri Lanka. The registered office of
the Bank is located at No 110, Sir James Peiris Mawatha, Colombo 02.
The staff strength of the Bank as at 31st December 2010 is 2,688 (2,388 as at 31st December 2009).
1.2 Consolidated Financial Statements
The Consolidated Financial Statements of the Bank for the year ended 31st December 2010 comprise the results, assets & liabilities
of the Bank and its Subsidiaries i.e. Sampath Centre Ltd., S C Securities (Pvt) Ltd., Sampath Leasing and Factoring Ltd., and Sampath
Information Technology Solutions Ltd.
1.3 Principal Activities and Nature of Operations
1.3.1 Bank
The Bank provides a comprehensive range of financial services encompassing accepting deposits, corporate & retail banking, project
financing, trade finance, treasury and investment services, issuing of credit cards and debit cards, off shore banking, resident & non-
resident foreign currency operations, telephone banking, internet banking, money remittance facilities, pawning & leasing, etc.
1.3.2 Subsidiaries
The following Subsidiaries have been consolidated.
º Sampath Centre Ltd. - Renting of Commercial Property
º S C Securities (Pvt) Ltd. - Share Brokering
º Sampath Leasing & Factoring Ltd. - Leasing & Factoring
º Sampath Information Technology Solutions Ltd. - Developing Software Solutions & Maintenance of Hardware
1.4 Date of Authorisation for Issue
The Financial Statements of the Group for the year ended 31st December 2010 were authorised for issue in accordance with a
resolution of the Board of Directors on 10th February 2011.
2. Basis of Preparation
These Financial Statements are prepared under the historical cost basis, except for certain Land & Buildings, Government of Sri Lanka
Treasury Bills & Bonds and Dealing Securities which are stated at market values as explained in Note 21, 14 and 15 to the Financial
Statements.
All values presented in the Financial Statements are in Sri Lanka Rupees thousands (Rs’000), unless otherwise stated.
2.1 Statement of Compliance
The Balance Sheet, Statement of Income, Statement of Changes in Equity and Cash Flow Statement, together with Accounting
Policies and Notes, (‘Financial Statements’), i.e: Consolidated Financial Statements and Separate Financial Statements of the Bank, as
at 31st December 2010 and for the year then ended, have been prepared in accordance with Sri Lanka Accounting Standards laid
down by the Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07
of 2007 & the Banking Act No. 30 of 1988 and amendments thereto.
2.2 Materiality & Aggregation
In compliance with Sri Lanka Accounting Standard No. 3 (Revised 2005) on Presentation of Financial Statements, each material class
of similar items is presented separately in the Financial Statements. Items of dissimilar nature or functions are presented separately,
unless they are immaterial.
Sampath Bank PLC 196
2.3 Comparative Information
The accounting policies have been consistently applied by the Group with those of the previous financial year, in accordance with Sri
Lanka Accounting Standard No. 3 (Revised 2005) on Presentation of Financial Statements.
Comparative information is reclassified wherever necessary to comply with the current presentation.
2.4 Basis of Consolidation
The Group Financial Statements comprise consolidation of the Financial Statements of the Bank and it’s subsidiaries in terms of the
Sri Lanka Accounting Standard No. 26 (Revised 2005) on Consolidated & Separate Financial Statements.
2.4.1 Subsidiaries
The Group has an interest of over 50% of these companies voting rights and has the power directly or indirectly, to govern the
financial and operating policies of the companies to obtain benefits from its activities.
The Financial Statements of Sampath Bank PLC. and its subsidiary companies included in the consolidation are prepared to a
common financial year, ending 31st December.
Sampath Bank PLC. holds 97.14% and 51.00% of the stated capital of Sampath Centre Ltd and S C Securities (Pvt) Ltd., respectively
as at 31st December 2010 and Sampath Leasing & Factoring Ltd. and Sampath Information Technology Solutions Ltd., are fully
owned subsidiaries of Sampath Bank PLC as at 31st December 2010.
The total profit for the year of the subsidiaries is included in the Consolidated Income Statement. The total classified as minority
interest in the Consolidated Income Statement represents the portion of the consolidated profit after taxation, of the subsidiary,
applicable to the non-group shareholders.
The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date that control effectively
commences until the date that control effectively ceases.
The total Assets and Liabilities at the balance sheet date of the subsidiaries are included in the Group Balance Sheet. The
proportionate interest of the non-group shareholders in the consolidated net assets of the subsidiaries is separately disclosed as
minority interest in the Consolidated Balance Sheet.
2.4.2 Business Combinations and Goodwill
Business combinations are accounted for using the Purchase Method of Accounting as per the requirements of Sri Lanka Accounting
Standard No. 25 (Revised 2004) on Business Combinations. This involves recognising identifiable assets (including previously
unrecognised intangibles) and liabilities (including contingent liabilities) of the acquired business at fair value. Any excess of the cost
of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If the cost of acquisition is less
than the fair values of the identifiable net assets acquired, the discount on acquisition is recognised directly in the Income Statement
in the year of acquisition.
Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination
over the Bank’s interests in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Sri Lanka
Accounting Standard No. 25 (revised 2004) on Business Combinations requires that following initial recognition goodwill to be
measured at cost less any accumulated impairment losses and goodwill to be reviewed for impairment annually or more frequently if
events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, as at the acquisition date, any goodwill acquired after 1st July 2005 is allocated to each of
the cash-generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group of units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on
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disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences and
unamortised goodwill is recognised in the Income Statement.
Goodwill acquired in a business combination prior to 1st July 2005 as disclosed in Note No. 20 on page 229 to the Financial
Statements, was amortised to revenue till 30 June 2005, over a period of five years commencing from the first year of acquisition.
2.4.3 Transactions eliminated on Consolidation
Intra-group balances, transactions and any unrealised gains arising from Intra-group transactions are eliminated in preparing the
Consolidated Financial Statements. Unrealised losses are eliminated in the same way as unrealised gains, except that they are only
eliminated to the extent that there is no evidence of impairment in value.
2.5 Going Concern
The Directors have made an assessment of the Bank’s ability to continue as a going concern and they do not intend either to
liquidate or to cease operations.
2.6 Significant accounting judgments, estimates and assumptions
2.6.1 1udgments
In the process of applying accounting policies, management has made the following judgments, apart from those involving
estimations, which has the most significant effect on the amounts recognized in the Financial Statements.
2.6.1.1 lmpairment Losses on Loans and Advances:
In addition to the allowances made for doubtful recoveries based on Central Bank guidelines and directives for specific and general
loans and advances, the Bank reviews its problem loans and advances at each reporting date to assess whether an allowance for
impairment should be recorded in the Income Statement. Judgement by management is required in the estimation of these amounts
and such estimations are based on assumptions about number of factors and actual results may differ, resulting in future changes to
the allowance.
2.6.1.2 lmpairment Losses on Foreign Currency 8onds:
Foreign currency bonds are generally marked to market. If there is any indication of impairment, an impairment review is performed
to determine any possible impairment loss, instead of marking to market and provide for impairment losses so identified.
2.6.1.J Review of lmpairment of Non Financial Assets:
The assessment of impairment in non financial assets includes the estimation of the value in use of the asset computed at the
present value of the best estimates of future cash flows generated by the asset adjusted for associated risks. These estimation has
inherent uncertainties. Impairment losses, if any are charged to Income Statement immediately.
2.6.2 Lstimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustments to the carrying amounts of assets and liabilities within the next financial year are
discussed below. The respective carrying amounts of assets and liabilities are given in related notes to the Financial Statements.
2.6.2.1 Fair value of Property and Lquipment
The Land and Buildings of the Group are reflected at fair value. When current market prices of similar assets are available, such
evidences are considered in estimating fair values of theses assets. In the absence of such information the company determines
within a reasonable fair value estimates, amounts that can be attributed as fair values, taking in to consideration discounted cash
flow projections based on estimates, derived evidence such as current market rents for similar properties and using discount rates
that reflect uncertainty in the amount and timing of cash flows.
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2.6.2.2 Defned 8eneft Plans:
The cost of defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about
discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the
long term nature of these plans, such estimates are subject to significant uncertainty.
2.7 Financial Instruments
The Bank uses derivative financial instruments such as foreign currency contracts and interest rate swaps to hedge its risks,
associated with interest rate and foreign currency fluctuations. Such derivative financial instruments are stated at fair value.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
3. Valuation of Assets and their Measurement Bases
3.1 Foreign Currency Translation
The Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Bank’s functional and presentation currency.
Each entity in the Group detemines its own functional curency and items included in the Fianancial Statements of each entity are
measured using that functional currency.
3.1.1 Transactions and Balances
All foreign currency transactions are converted to Sri Lanka rupees which is Group’s functional & reporting currency, at the rates of
exchange prevailing at the time the transactions were effected.
Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to Sri Lanka Rupees using
the year end spot foreign exchange rate and all differences are taken to Income Statement.
Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
Foreign exchange differences arising on the settlement or reporting of monetary items at rates different from those which were
initially recorded are dealt with in the Income Statement.
Forward exchange contracts are valued at the forward market rates ruling on the date of the Balance Sheet. Resulting net unrealised
gains or losses are dealt with through the Income Statement.
3.2 Government of Sri Lanka Treasury Bills & Bonds
3.2.1 Investments in Treasury Bills and Treasury Bonds held for Trading
Investment in Treasury Bills and Treasury Bonds held for trading are carried at the market value in the Balance Sheet with any Gains
and losses are dealt with through the Income Statement.
3.2.2 Investment in Treasury Bills and Bonds held to Maturity
Investments in Treasury Bills and Bonds held to maturity are carried at the value of the Bills/Bonds purchased and the discount /
premium accrued thereon. Discount received/premium paid is amortized and recognized in the Income Statement based on a
pattern reflecting a constant periodic rate of return, in accordance with the Sri Lanka Accounting Standard No. 22 on Accounting for
Investments.
3.2.3 Securities Purchased under Re-sale Agreements
Securities purchased under agreements to re-sell are classified as part of the assets. Obligation to repurchase resulting from securities
sold under repurchase agreements is accounted for as a liability and is classified under liabilities.
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3.3 Investments
3.3.1 Securities Held for Dealing Purposes
These are marketable securities acquired and held with the intention of resale over a short period of time. Such securities are
recorded at market value, with any resultant gain or loss recognised in the Income Statement as per the provisions under Sri Lanka
Accounting Standard No. 22, Accounting for Investments.
3.3.2 Investment Securities
These investments are acquired and held for yield or capital growth in the long to medium term. Such securities are recorded at cost
of acquisition. Provision is made for diminution in value of these investments only if they are expected to be permanent.
Investments in units of Unit Trust are carried at cost.
3.3.3 Investments in Associates
Investments in Associates are accounted for under the Cost Method in the Bank’s Separate Financial Statements and under the
Equity Method in Consolidated Financial Statements in accordance with the Sri Lanka Accounting Standard No. 27 on Investments in
Associates.
3.3.4 Investments in Subsidiaries
Investments in Subsidiaries are stated at cost in the Bank’s Separate Financial Statements in accordance with the Sri Lanka
Accounting Standard No. 26 - Consolidated and Separate Financial Statements.
3.4 Loans and Advances to Customers
Loans and Advances to customers are stated in the Balance Sheet net of provisions for possible loan losses and net of interest, which
is not accrued to revenue.
3.4.1 Non- Performing Loans & Advances
Loans and advances which are in arrears of due capital and/or interest are classified as non-performing as per the Direction No. 3 of
2008 as amended by the Direction No. 9 of 2008 on ‘Classification of Loans and Advances, Income Recognition and Provisioning’
issued by the Central Bank of Sri Lanka. For this purpose, all credit facilities are classified as non-performing on the following basis.
Type of Facility Point of Classification
Overdrafts Outstanding balance in excess of the sanction limits
continuously for a period of 90 days or more
Credit facilities repayable in monthly installments Three consecutive installments, principal and/or interest have
not been paid
Credit facilities repayable in quarterly /half yearly installments Installment is not paid within 90 days of the due dates
Credit facilities repayable in one installment at the end of a
specified period or on a due date (bullet payments)
Payment is not made within 90 days from the end of the agreed
period or the due date
Credit Cards Minimum payment is in arrears for 90 days from the due date
The Bank reclassifies non-performing loans as performing loans in accordance with the guidelines given in Direction No. 9 of 2008.
J.4.2 Write - off Policy
The Bank writes off a loan (net of any related loan loss provisions), when it determines that the loan is uncollectible. This
determination is reached after considering information such as the occurrence of significant changes in the borrower’s financial
position such that the borrower can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back
the entire exposure.
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3.4.3 Foreclosed Properties
Foreclosed properties represent properties acquired in full or partial settlement of loans and advances are accounted for at the lower
of cost or market value on an individual property basis. The shortfall between the prevailing market value of the foreclosed assets
and the related loan outstanding is recognized as a provision for loan losses in the Income Statement in the year of taking over the
foreclosed properties in satisfaction of the debt. The Bank reviews these properties at each reporting date or more frequently, if
events or changes in circumstances indicate that the properties impaired.
Foreclosed properties are shown under non-performing loans and advances (Note No. 17.6.1 to the financial statements) until they
are disposed. Subsequent gains and losses on the disposal of the said properties are treated as provisions written back or charged to
Income Statement, respectively. Those properties are recorded under loans and advances until those are disposed off.
3.4.4 Provision for Loan Losses
3.4.4.1 Specific Provisions
Specific provisions for possible loan losses are made on the basis of a continuous review of all advances to customers. This provision
relates to identified bad and doubtful advances as stipulated by the Central Bank of Sri Lanka based on a classification of advances
as given below;
Classification Facility Type Overdue Period Minimum Provision
Requirement (Net of Security)
Substandard Credit Cards
Loans
Overdrafts
4 - 6 months
6 - 12 months
180 - 360 days
25%
20%
20%
Doubtful Credit Cards
Loans
Overdrafts
6 - 8 months
12 - 18 months
360 - 540 days
50%
50%
50%
Loss Credit Cards
Loans
Overdrafts
Over 8 months
Over 18 months
Over 540 days
100%
100%
100%
Subsequent recoveries of loans are credited to the Income Statement against which such sums had been previously written-off.
3.4.4.2 General Provisions
Beginning from the year ended 31st December 1995, a general provision was maintained in addition to the specific provision, to
cover bad debts which are inherent in the loan portfolio of the Bank but not yet identified.
As per the direction issued by the Monetary Board of the Central Bank, beginning from the quarter ended 31st December 2006, a
general provision was maintained on total performing and overdue loans and advances, net of interest in suspense and advances
secured by cash deposits, gold or government securities with the Bank. The Bank was compliant with the requirement of 1.0% from
31st December 2008 as per the Central Bank directions. As per the subsequently amended direction in 2010, Banks shall reduce
the general provision requirement of 1.0% to 0.5% at a rate of 0.1% per quarter during the five quarters commencing 1st October
2010. In terms of the amended direction, the general provision of 1.0% was reduced to 0.9% as at 31st December 2010.

3.5 Finance Leases
3.5.1 Rental Receivables
Assets leased to customers under agreements that transfer substantially all the risks and rewards associated with ownership other
than legal title, are classified as finance leases. Lease rentals receivable in the balance sheet, represents total lease payments due net
of unearned interest income not accrued to revenue, provision for bad and doubtful recoveries and the initial rentals received.
3.5.2 Provision for Lease Receivable
Specific provisions have been made in relation to bad and doubtful leases as stated in 3.4.4.1 above. In addition, a general provision
for possible losses on lease receivables is made as specified in 3.4.4.2 above.
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3.6 Interest and Fees Receivables
Interest receivables are stated at the amounts they are estimated to realize net of provisions for bad and doubtful receivables. Fees
and other dues from related parties are recognized at cost less provisions for bad and doubtful receivables.
3.7 Intangible Assets
3.7.1 Basis of Recognition
An Intangible Asset is recognized if it is probable that future economic benefits that are attributable to the asset will flow to the
entity and the cost of the asset can be measured reliably in accordance with SLAS 37 on Intangible Assets. Accordingly, these assets
are stated in the Balance Sheet at cost less any accumulated amortisation and accumulated impairment losses.
3.7.2 Amortisation
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at
each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in
accounting estimates. The amortisation expenses on intangible assets with finite lives are recognised in the Income Statement.
The useful lives and the amortization methods of intangible assets with finite lives are as follows:
The class of The class of intangible assets Useful life Amortization Method
Computer software 4 Years Straight line method
3.7.3 Gains/Losses on Derecognition
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in the Income Statement, when the asset is derecognised.
3.8 Property & Equipment
J.8.1 8asis of Recognition
Property & Equipment are recognized if it is probable that future economic benefits associated with the asset will flow to the entity
and the cost of the asset can be measured reliably in accordance with SLAS 18 on Property, Plant & Equipment.
Cost Model
Equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment
in value. Such cost includes the cost of replacing part of the equipment when that cost is incurred, if the recognition criteria are met.
Revaluation Model
Land and buildings are measured at fair value, less depreciation on buildings and impairment charged subsequent to the date of the
revaluation.
Valuations are performed every 3-5 years to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.
Any revaluation surplus is credited to the revaluation reserve included in the equity of the Balance Sheet, except to the extent
that is reverses a revaluation decrease of the same asset previously recognized in Income Statement, in which case the increases is
recognized in Income Statement. A revaluation deficit is recognized in Income Statement, except that a deficit directly offsetting a
previous surplus on the same asset is directly offset against the surplus in the asset revaluation reserve.
Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.
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J.8.2 Subsequent Cost
These are costs that are recognized in the carrying amount of an item, if it is probable that the future economic benefits embodied
within that part will flow to the Group and it can be reliably measured.
J.8.J Derecognition
An item of Property & Equipment is recognized upon disposal or when no economic benefits are expected from its use. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is recognized in the Income Statement in the year the asset is derecognized.
J.8.4 Depreciation
The provision for depreciation is calculated by using the straight line method on cost or valuation of the Property & Equipment other
than freehold land.
The rates of depreciations are given below;
Asset Category Rate of Depreciation
Freehold Buildings 2.0% - 2.5 % per annum
Motor Vehicles 25.0% per annum
Computer Equipment 16.67% per annum
Furniture, Office &
Household Equipment
5.0% - 20.0 % per annum
Building Integrals 10% - 25 % per annum
The asset’s residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year
end.
J.8.S Property & Lquipment on Finance Leases
Property and Equipment on finance leases, which effectively transfer substantially all of the risk and benefits incidental to ownership
of the leased item are capitalised at the inception of the lease at the fair value of the leased property, or if lower, at the present value
of the minimum lease payments.
Capitalised leased assets are disclosed as property and equipment and depreciated consistently with that of owned assets as
described under property and equipment.
The corresponding principal amount payable to the lessor together with the interest payable over the period of the lease is shown
as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements and depreciated over the
unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter.
3.9 Impairment of Non Financial Assets
The Group assesses at each reporting date or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired, whether there is an indication that a non-financial asset may be impaired. If any such indication exists, or when
an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. When
the carrying amount of an asset (or cash generating unit) exceeds its recoverable amount, the asset (or cash generating unit) is
considered impaired and is written down to its recoverable amount.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exists or may have decreased. If such condition exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine
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the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is
increased to its recoverable amount.
4. Liabilities and Provisions
4.1 Deposits from Customers
Deposits include non interest bearing deposits, saving deposits, term deposits, deposits payable at call and certificate of deposits.
They are stated in the Balance Sheet at amount payable. Interest paid/payable on these deposits is charged to the Income Statement.
4.2 Borrowings
Borrowings include refinance borrowings, call and term borrowings, foreign currency borrowings, credit balances of nostro accounts
and finance lease payables. They too are stated in the Balance Sheet at amount payable. Interest paid/payable on these deposits is
charged to the Income Statement.
4.3 Securities Sold under Repurchase Agreements
These are borrowings collateralized by sale of Treasury Bills and Treasury Bonds held by the Bank to the counterparty from whom
the Bank borrowed, subject to an agreement to repurchase them at a predetermined price. Such Treasury Bills and Treasury Bonds
remain on the Balance Sheet of the Bank and the liability is recorded in respect of the consideration is received.
4.4 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
where appropriate, the risks specific to the liability. Where discounting is used the increase in the provision due to the passage of
time is recognised as an interest expense.
4.5 Retirement Benefit Obligations
4.5.1 Defined Benefit Plan
4.5.1.1 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 complete 5 or more
years of continuous service, as the Bank has it’s 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.
The Bank measures the present value of the promised retirement benefits for gratuity, which is a defined benefit plan with the advice
of an independent professional actuary using the Projected Unit Credit method (PUC) as required by Sri Lanka Accounting Standards
No. 16, Employee Benefits (Revised 2006).
An actuarial valuation is carried out at every year to ascertain the full liability under the Fund. The valuation was carried out as at
31st December 2010 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.
For Group companies other than the Bank, the liabilities ascertained using the formula specified in Appendix E of SLAS 16.
Recognition of Actuarial Losses / Gains
Actuarial losses / gains to be recognized in this year’s retirement expense was calculated according to the 10% corridor method
specified by the SLAS 16 – para 92. None was recognized this year as the unrecognized actuarial losses / gains as at 01.01.2010 as
this was within the specified corridor limit.
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Expected Return on Assets
Expected return on assets is zero as the plan is not pre funded.
Interest Cost
Interest cost is the expected increase due to interest during the period in the present value of the plan liabilities because the benefits
are one year closer to settlement.
Funding Arrangements
The Gratuity liability is not externally funded.
The principal assumptions, which have the most significant effect on the valuation, are the rate of Discount at 9%, rate of increase
in salaries at 9%, rate of turnover at selected ages, rate of disability, death benefits and expenses. However, due to the long term
nature of employment benefits, such estimates are subject to significant uncertainty. Further details of assumptions together with
an analysis of their sensitivity as carried out by the management in relation to the above key assumptions and the results of the
sensitivity analysis are given in Note No. 24.1 on page 237 in Notes to the Accounts.
4.5.1.2 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 method (PUC) as required by Sri Lanka Accounting Standards No. 16, Employee
Benefits (Revised 2006).
An actuarial valuation is carried out at every year to ascertain the full liability under the Fund. The last such valuation was carried out
as at 31st December 2010 by M/s. Piyal S. Goonetilleke & Associates, a qualified actuary.
Recognition of Actuarial Losses / (Gains)
Actuarial losses / (gains) occur when the actual plan experience differ from the assumed experience. This actuarial losses / (gains) will
be considered for recognition in the next year’s retirement benefit expense.
Expected Return on Assets
Expected return on assets is the expected return on pension fund at the assumed rate of return.
Interest Cost
Interest cost is the expected increase due to interest during the period in the present value of the plan liabilities because the benefits
are one year closer to settlement.
Funding Arrangements
The assets of the fund are held separately from those of the Bank assets, which is administered independently.
The principal assumptions, which have the most significant effect on the valuation, are the rate of discount at 9%, rate of increase
in salaries at 9%, annual return on assets at 9%, rate of turnover at selected ages, rate of disability, death benefits and expenses.
However, due to the long term nature of employment benefits, such estimates are subject to significant uncertainty. Further
details of assumptions together with an analysis of their sensitivity as carried out by the management in relation to the above key
assumptions and the results of the sensitivity analysis are given in Note No. 24.2 on page 238 in Notes to the Accounts.
4.5.2 Defined Contribution Plans
Contributions to defined contribution plans covering all employees are recognised as an expense in the income statement, as
incurred.
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4.5.2.1 Employees’ Provident Fund
The Bank and Employees contribute to the approved private Provident Fund at 12% and 8% respectively.
4.5.2.2 Employees’ Trust Fund
The Bank contributes to the Employees’ Trust Fund at 3%.
4.6 Taxation
Income Tax expense comprises of current and deferred tax. Income tax expense is recognized in the Income Statement.
4.6.1 Current Jaxation
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 and any adjustment to tax payable in respect of prior years. The tax rates and tax laws used to
compute the amount are those that are enacted or substantially enacted by the balance sheet date.
Provision for current taxation is made for Sampath Bank, S C Securities (Pvt) Ltd, Sampath Leasing and Factoring Ltd., and Sampath
Information Technology Solutions Ltd., on the basis of the profit for the year as adjusted for taxation purposes in accordance with
the provisions of the Inland Revenue Act No. 10 of 2006, and amendments thereto.
Sampath Centre Ltd., is a company approved under BOI law, as such the company was exempted from taxation for a period of
7 years commencing from the first year of assessment. Accordingly, the company is liable for taxation at the rate of 2.0% of the
revenue from the year of assessment commencing 2006/2007.
4.6.2 Deferred Jaxation
Deferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except:
º 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 profits nor taxable profits or
loss; and
º In respect of taxable temporary differences associated with investments in subsidiaries and associates, 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 differences, carry forward of unused tax credits and unused tax losses, to the
extent that it is probable that taxable profits will be available against which the deductible temporary differences and the carry
forward of unused tax credits and unused tax losses can be utilized except:
º Where the deferred tax assets relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor the taxable profit or loss; and
º In respect of deductible temporary differences associated with investments in subsidiaries and associates, 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 profits will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the deferred tax assets to be utilised.Unrecognised
deferred tax assets are re-assessed at each balance sheet date and are recognised to the extent that it has become probable that
future taxable profits will allow the deferred tax assets to be recovered.
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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the assets are realised, or
the liabilities are settled, based on tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date.
Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity and not in the Income
Statement.
Deferred tax assets and liabilities are set off if a legally enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
4.6.J VAJ on Financial Services
VAT on Financial Services is calculated in accordance with Ammended VAT Act No. 7 of 2003.
4.6.4 Social Responsibility Levy (SRL)
SRL was introduced with effect from 1st January 2005 by Finance Act No. 5 of 2005 and amendments thereto. The current rate of
this levy with effect from 1st April 2008 is 1.5% on all taxes and levies chargeable as specified in the first schedule of the Act.
4.7 Commitments and Contingencies
All discernible risks are accounted for in determining the amount of all known liabilities.
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 can not be readily measured. Contingent Liabilities are not
recognized in the Balance Sheet but are disclosed unless its occurrence is remote.
4.8 Post Balance Sheet Events
All material events occurring after the Balance Sheet date are considered and where necessary adjustments or disclosures are made
to the Financial Statements.
5. Income Statement
5.1 Revenue Recognition
5.1.1 Interest Income on Loans & Advances
Interest receivable is recognised on accrual basis. Interest from loans and advances ceases to be taken into revenue when the
recovery of interest or principal is in arrears for over one month for loans, and over three months for overdrafts. Thereafter, interest
income on advances is accounted for on a cash basis, until in the opinion of the management, the financial position of the borrower
has improved to the extent that the receivables are deemed collectible.
Interest on all non-performing advances is credited to the ‘Interest in suspense’ account, which is netted in the Balance Sheet against
the relevant advances.
5.1.2 Lease Income
The excess of aggregate lease rental receivable over the cost of the leased asset constitutes the total unearned lease income at the
commencement of a lease. The unearned lease income is taken into income over the term of the lease, commencing with the month
in which the lease is executed in proportion to the declining receivable balance.
Gross earnings under finance leases in respect of lease rentals due, cease to be taken to revenue when they are in arrears for over
one month. Thereafter, such income is recognised on a cash basis.
Annual Report 2010 / Financial Reports / Significant Account Policies
Significant Account Policies contd...
Sampath Bank PLC 207
5.1.3 Income from Government Securities and Securities Purchased under Resale Agreement
Discounts/Premiums on Treasury Bills and Treasury Bonds are amortised over the period to reflect a constant yield. The coupon
interest on Treasury Bonds is recognized on an accrual basis. The interest income on Securities Purchased under Resale Agreements is
recognized in the Income Statement on an accrual basis over the period of agreement.
Interest income from Treasury Bills and Treasury Bonds is grossed by the addition of the tax credit inputted to 10% withholding tax
on discount allowed at the time of issue. This notional tax credit is 1/9th of the net interest income.
5.1.4 Interest Income on Investments
Interest income from investments is recognised on an accrual basis.
5.1.5 Dividend Income
The Dividend Income received from the subsidiary and the quoted public company shares are recognised on an accrual basis in the
period in which they are declared.
S.1.6 lncome on Discounting of 8ills of Lxchange
Income on discounting of Bills of Exchange is recognized proportionately over the period of the instrument.
5.1.7 Gains or losses arising from the sale of securities
Gains or losses arising from the sale of dealing securities, investment securities, shares, foreign bonds & units are accounted for on
an accrual basis.
S.1.8 Cains or Losses on Disposal of Property and Lquipment
Gains or losses of a revenue nature arising from the disposal of Property and equipment are accounted for on an accrual basis.
5.1.9 Fees and Commission Income
Fees and commission income are recognised in the income statement on an accrual basis.
5.1.10 Rental Income
Rental income is recognised on an accrual basis.
5.1.11 Interest & Fees Receivable on Credit Cards
Fees & Commission income on credit cards is recognised on an accrual basis. Interest and fees ceases to be taken in to revenue when
the recovery of minimum payment is in arrears for over three months. Thereafter, interest is recognised on cash basis.
S.1.12 Cther lncome
Other income is recognised on an accrual basis.
5.2 Expenses
S.2.1 lnterest Lxpenses and Cther Lxpenses
Interest payable is recognised on an accrual basis. All other expenses have been recognised in the accounts as they are incurred in
the period to which they relate. All expenditure incurred in the operation of the business and in maintaining the capital assets in a
state of efficiency has been charged to revenue in arriving at the Bank’s profit for the year.
5.2.2 Borrowing Costs
Borrowing costs are recognised as an expense in the period in which they are incurred.
S.2.J Cff-8alance Sheet Jransactions
The Bank enters into off balance sheet transactions such as forward exchange contracts and currency swaps. At the year-end, gains/
losses on such transactions are dealt with through the Income Statement.
Annual Report 2010 / Financial Reports / Significant Account Policies
Sampath Bank PLC 208
6. Cash Flow Statement
The cash flow statement has been prepared by using ‘The Direct Method’, whereby gross cash receipts and gross cash payments of
operating activities, finance activities and investing activities have been recognised.
Cash and cash equivalents comprise cash balances, call deposits and short-term funds.
7. Fiduciary Assets
Assets held in a fiduciary capacity are not reported in these financial statements as they are not the assets of the Bank.
8. Earnings per Share
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 shareholders of the Bank by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit or loss attributable to the ordinary shareholders and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise
share options granted to employees.
9. Dividends on Ordinary Shares
Dividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Bank’s
shareholders. Interim dividends are deducted from equity when they are declared and are no longer at the discretion of the Bank.
Dividends on ordinary shares for the year that are recommended by the Directors after the Balance Sheet date for approval of the
shareholders at the Annual General Meeting are disclosed as an event after the Balance Sheet date.
10. Segment Reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business
segment), or in providing products and services within a particular economic environment (geographical segment), which is subject
to risks and returns different from those of other business segments. For the purposes of segment reporting disclosures, the
information is presented in respect of the Group’s business segments, which is based on the Group’s management and internal
reporting structure. The Group comprises the following major Business segments; banking, leasing, dealing / investments and others.
Inter-segment pricing is determined on an arms length basis.
Measurement of segment assets, liabilities, segment revenue and results is based on the accounting policies set out above. Segment
revenue results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a
reasonable basis.
11. Directors’ Responsibility Statement
The Board of Directors takes the responsibility for preparation and presentation of these Financial Statements. Please refer page 187
for the statement of the directors’ responsibility for financial reporting.
Annual Report 2010 / Financial Reports / Significant Account Policies
Significant Account Policies contd...
Sampath Bank PLC 209
12. Effect of Sri Lanka Accounting Standards Issued but not yet Effective
(a) The following standards have been issued by the Institute of Chartered Accountants of Sri Lanka.
- Sri Lanka Accounting Standard 44 Financial Instruments; Presentation (SLAS 44)
- Sri Lanka Accounting Standard 45 Financial Instruments; Recognition and Measurement (SLAS 45)
- Sri Lanka Accounting Standard 39 Share Based Payments (SLAS 39)
The effective date of SLAS 44, 45 and 39 was changed during the year to be effective for financial periods beginning on or after
01 January 2012. These three standards have been amended and forms a part of the new set of financial reporting standards
mentioned under note (b) below.
b) Following the convergence of Sri Lanka Accounting Standards with the International Financial Reporting Standards, the
Council of the Institute of Chartered Accountants of Sri Lanka has adopted a new set of financial reporting standards that
would apply for financial periods beginning on or after 01 January 2012. The application of these financial reporting standards
is substantially different to the prevailing standards.
Annual Report 2010 / Financial Reports / Significant Account Policies
Sampath Bank PLC 210
Bank Group
For the year ended 31st December 2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
01. Income
Interest Income (Note No. 2) 18,477,355 20,969,778 (11.9) 18,721,942 21,345,030 (12.3)
Foreign Exchange Profit (Note No. 2.1) 497,901 774,489 (35.7) 497,901 774,489 (35.7)
Fee & Commission Income (Note No. 2.2) 1,360,450 1,205,529 12.9 1,360,450 1,205,529 12.9
Other Income (Note No. 4) 3,996,854 2,263,099 76.6 4,235,771 2,235,107 89.5
24,332,560 25,212,896 (3.5) 24,816,064 25,560,156 (2.9)
02. Interest Income
Customer Advances 14,399,580 15,648,771 (8.0) 14,642,751 16,019,777 (8.6)
Placements with Other Banks 40,571 75,336 (46.1) 40,571 75,336 (46.1)
Treasury Bills,Treasury Bonds & Money Market Instruments 3,978,283 5,226,300 (23.9) 3,979,439 5,230,305 (23.9)
Other Interest Income 58,920 19,371 204.2 59,181 19,612 201.8
18,477,355 20,969,778 (11.9) 18,721,942 21,345,030 (12.3)
A Notional Tax Credit on Secondary Market Transactions
According to Section 137 of the Inland Revenue Act No. 10 of 2006, Net interest income of the Bank derived from the secondary market transactions in Treasury Bills
& Treasury Bonds (Interest income accrued or received on outright or reverse purchase transaction on such security, Bond or Bill less interest expenses on repurchase
transaction with Securities, Treasury Bonds or Treasury Bills from which such interest income was earned) for the period 01st January 2010 to 31 st December 2010 has
been grossed up by Rs. 122.940 Mn ( 2009 - Rs. 434.338 Mn) for the notional tax credit, consequent to the interest income on above instruments being subjected to
withholding tax (Note No. 9.2(g)).
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
2.1 Foreign Exchange Profit
Exchange Income Currency Notes 202,254 180,837 11.8 202,254 180,837 11.8
Exchange Income Revaluation 295,647 593,652 (50.2) 295,647 593,652 (50.2)
497,901 774,489 (35.7) 497,901 774,489 (35.7)
2.2 Fees & Commission Income
Professional Services 491,154 438,339 12.0 491,154 438,339 12.0
Trade Related Services 399,275 322,231 23.9 399,275 322,231 23.9
Foreign Remittances 90,666 100,762 (10.0) 90,666 100,762 (10.0)
Credit & Debit Card Services 230,555 190,530 21.0 230,555 190,530 21.0
Other Banking Services 148,800 153,667 (3.2) 148,800 153,667 (3.2)
1,360,450 1,205,529 12.9 1,360,450 1,205,529 12.9
03. Interest Expenses
Customer Deposits 8,940,316 11,632,728 (23.1) 8,937,245 11,624,540 (23.1)
Short Term Borrowings 47,605 293,286 (83.8) 47,605 293,286 (83.8)
Refinance Borrowings 309,429 372,835 (17.0) 309,429 372,650 (17.0)
Repurchase Agreements 302,547 305,963 (1.1) 302,099 303,071 (0.3)
Due to Banks 96,332 88,254 9.2 183,675 407,098 (54.9)
Debentures 256,347 471,534 (45.6) 256,347 471,534 (45.6)
9,952,576 13,164,599 (24.4) 10,036,400 13,472,178 (25.5)
Notes to the Financial Statements
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 211
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
04. Other Income
Income from Investment Securities 41,565 60,230 (31.0) 41,565 60,230 (31.0)
Income from Dealing Securities 7,583 7,449 1.8 7,583 7,449 1.8
Income from Investments in Subsidiaries 36,438 20,790 75.3 - - -
Income from Investments in Associates - 17,405 (100.0) - - -
Capital Gain on Sale of LBFL shares 654,836 1,559,156 (58.0) 623,606 1,418,637 (56.0)
Capital Gain/(Loss) from Dealing Securities & Unit Trusts - 10,546 (100.0) - 10,546 (100.0)
Bad Debt Recoveries* 1,230,206 - 100.0 1,230,206 - 100.0
Recovery of Impairment of Investment 1,331,400 - 100.0 1,331,400 - 100.0
Profit/(Loss) on Sale of Property & Equipment 6,046 8,381 (27.9) 32,771 9,661 239.2
Rental and Other Income 4,471 3,864 15.7 40,665 38,075 6.8
Charges Recovered 509,773 377,339 35.1 509,383 377,339 35.0
Others 174,535 197,938 (11.8) 418,593 313,169 33.7
3,996,854 2,263,099 76.6 4,235,771 2,235,107 89.5
* The presentation of bad debts recovery was reflected under other income in the current year. This was netted against credit loss provision in the previous year.
05. Operating Expenses
Operating expenses include the following;
Depreciation of Property & Equipment 409,676 326,869 25.3 447,015 367,895 21.5
Amortisation of Intangible Assets 45,178 66,071 (31.6) 49,188 67,581 (27.2)
Professional & Legal Expenses 45,193 32,530 38.9 48,796 38,168 27.8
Auditors’ Remuneration
Audit Fees and Expenses 6,597 4,391 50.2 7,841 5,769 35.9
Non - Audit Services 820 505 62.4 820 505 62.4
Directors’ Emoluments 16,345 16,345 - 27,930 23,524 18.7
Advertising & Business Promotion Expenses 581,139 376,649 54.3 584,147 378,502 54.3
Deposit Insurance Premium 44,000 - 100.0 44,000 - 100.0
Employer’s Contribution to EPF 186,701 160,304 16.5 193,769 165,999 16.7
Employer’s Contribution to ETF 46,677 40,076 16.5 48,446 41,400 17.0
Financial Value Added Tax 1,613,897 1,385,300 16.5 1,642,790 1,387,153 18.4
Donations 10,250 1,947 426.3 10,250 1,948 426.1
(Donations in excess of Rs. 50,000/= include the following;)
Api Wenuwen Api Fund 10,000
Prahita Organisation 250
06. Provision for Retirement Benefits
Contribution made to Pension Fund ( Note No. 6.1 ) 313,841 413,224 (24.1) 313,841 413,224 (24.1)
Contribution made to Gratuity Fund ( Note No. 6.2 ) 41,592 54,668 (23.9) 44,251 55,971 (20.9)
355,433 467,892 (24.0) 358,091 469,195 (23.7)
6.1 Contribution made to Pension Fund
Current Service & Interest Cost 353,658 339,228 4.3 353,658 339,228 4.3
Expected Return on Assets & Recognition of Actuarial Loss/(Gain) (177,472) (201,314) (11.8) (177,472) (201,314) (11.8)
Recognition of Transitional Liability/(Asset ) 137,655 275,310 (50.0) 137,655 275,310 (50.0)
313,841 413,224 (24.1) 313,841 413,224 (24.1)
6.2 Contribution made to Gratuity Fund
Current Service & Interest Cost 27,621 26,725 3.4 30,279 28,028 8.0
Expected Return on Assets & Recognition of Actuarial Loss/(Gain ) - - - - - -
Recognition of Transitional Liability/(Asset ) 13,971 27,943 (50.0) 13,971 27,943 (50.0)
41,592 54,668 (23.9) 44,251 55,971 (20.9)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 212
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
07. Provision for Credit Losses
Specific Provision for
- Loans and Advances 1,755,704 456,188 284.9 1,755,704 456,188 284.9
- Pawning 661 (164,859) 100.4 661 (164,859) 100.4
- Credit Cards 8,388 32,682 (74.3) 8,388 32,682 (74.3)
- Leases - - - (8,658) 104,394 (108.3)
1,764,753 324,011 444.7 1,756,096 428,405 309.9
General Provision for
- Loans and Advances & Leases 135,370 (39,718) 440.8 135,370 (39,718) 440.8
- Credit Cards - 321 (100.0) - 321 (100.0)
135,370 (39,397) 443.6 135,370 (39,397) 443.6

1,900,124 284,614 567.6 1,891,466 389,008 386.2
Movement in the provision for bad & doubtful debts is given in Note No. 17.4.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
08. Provision for Diminution/(Appreciation)
in Value of Investments
Securities held for dealing purposes
- Shares (quoted) (Note No. 15.1) (295,658) (149,030) 98.4 (295,658) (149,030) 98.4
- Treasury Bills & Bonds (Note No. 14.1) (37,362) 13 (281,318.3) (37,362) 13 (281,318.3)
Provision made o/a of Foreign Currency Bonds (Note No. 15.2) - 1,069,421 (100.0) - 1,069,421 (100.0)
Provision made o/a of Investment Securities
- Ordinary shares - Union Bank of Colombo (Note No. 16.2.2) 275,953 - 100.0 275,953 - 100.0
- Preference shares - Texpro Industries Ltd. (Note No. 16.2.1) 12,604 - 100.0 12,604 - 100.0
Reversal of provision made for Investment Securities
- Ordinary shares - Produce of Paradise Ltd. (Note No. 16.2.2) - (2,896) (100.0) - (2,896) 100.0
(44,463) 917,508 (104.8) (44,463) 917,508 (104.8)
09. Provision for Taxation
Bank
Taxation based on profits for the year ( Note No. 9.1 ) 1,532,628 1,647,356 (7.0) 1,622,092 1,668,507 (2.8)
Transfers to/(from) deferred taxation ( Note No. 26 ) (333,663) 226,258 (247.5) (343,682) 209,934 (263.7)
(Over)/under provision in the previous year ( Note No 9.1 ) - 4,297 (100.0) (4,184) 9,687 (143.2)
Share of income tax of associate company (Note No. 9.1) - - - - 33,042 (100.0)
1,198,964 1,877,910 (36.2) 1,274,226 1,921,170 (33.7)
The Group tax expense includes the tax expense of following subsidiaries.
- Sampath Centre Ltd. 4,484 4,956 (9.5)
- S C Securities (Pvt) Ltd. 36,850 5,419 580.0
- Sampath Leasing & Factoring Ltd. 32,355 (660) 5,005.2
- Sampath Information Technology Solutions Ltd. 1,573 502 213.4
Notes to the Financial Statements contd...
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 213
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
9.1 Reconciliation of the Accounting Profit to
Income Tax Expense
Profit before tax 4,501,713 3,976,217 13.2 4,794,208 4,004,927 19.7
Add: Disallowable expenses 5,788,261 5,729,053 1.0 6,208,694 6,204,207 0.1
Less: Tax deductible expenses (2,652,027) (2,828,532) (6.2) (3,018,932) (3,273,360) (7.8)
Exempt income (3,135,604) (2,097,933) 49.5 (3,172,041) (2,097,933) 51.2
Adjusted profit/(loss) for tax purposes 4,502,343 4,778,806 (5.8) 4,811,929 4,837,841 (0.5)
Income from other sources - - - 2,668 11,915 (77.6)
Assessable income 4,502,343 4,778,806 (5.8) 4,814,597 4,849,757 (0.7)
Less: Qualifying payments (10,500) (500) 2,000.0 (19,598) (500) 3,819.6
Tax losses - - - (61,820) (21,923) 182.0
Taxable income 4,491,843 4,778,306 (6.0) 4,733,179 4,827,333 (2.0)
Turnover liable for income tax - - - 188,520 184,004 2.5
Income tax @ 35% 1,426,188 1,556,582 (8.4) 1,510,568 1,573,741 (4.0)
Income tax @ 20% 83,454 66,186 26.1 83,454 66,186 26.1
Income tax @ 2% on liable turnover (Note No. 9.2(f)) - - - 3,770 3,680 2.5
Social responsibility levy at 1.5% (Note No. 9.2(e)) 22,986 24,588 (6.5) 24,300 24,900 (2.4)
Income tax on current year’s profit 1,532,628 1,647,356 (7.0) 1,622,092 1,668,507 (2.8)
(Over)/under provision in respect of previous years - 4,297 (100.0) (4,184) 9,687 (143.2)
Increase/(decrease) in current year provision (Note No. 25) 1,532,628 1,651,652 (7.2) 1,617,908 1,678,194 (3.6)
Deferred tax charge/(credit) (Note No. 9.3) (333,663) 226,258 (247.5) (343,682) 209,934 (263.7)
Share of income tax of associate company - - - - 33,042 (100.0)
Income tax expense 1,198,964 1,877,910 (36.2) 1,274,226 1,921,170 (33.7)
Effective tax rate 26.6% 47.2% (43.6) 26.6% 48.0% (44.6)
Effective tax rate (excluding deferred tax) 34.0% 41.5% (18.0) 33.7% 42.7% (21.0)
2010 2009 2011 (Proposed)
9.2 Applicable Rates of Tax
9.2 (a) Income tax on Sampath Bank
(a) Domestic operation of the bank 35% 35% 28%
(b) Foreign currency banking unit of the bank
(1) On-shore operation 35% 35% 28%
(2) Off-shore operation 20% 20% 28%
9.2 (b) Income tax on S C Securities (Pvt) Ltd. 35% 35% 28%
9.2 (c) Income tax on Sampath Leasing & Factoring Ltd. 35% 35% 28%
9.2 (d) Income tax on Sampath Information Technology Solutions Ltd. 35% 35% 28%
9.2 (e) Social responsibility levy (SRL) 1.5% 1.5% -
9.2 (f) Income Tax on Sampath Centre Ltd.
Sampath Centre Ltd. is a company approved under BOI Law and the company was exempted from taxation for a period of seven years commencing from the first
year of assessment. The first year of assessment is the year in which the company commenced making profits in relation to its transactions in that year, or any year of
assessment not later than five years from the date of its first commercial operations, whichever is earlier. Accordingly, they are liable for taxation at the rate of 2.0% of
the revenue from the year of assessment commencing 2006/2007.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 214
9.2 (g) A Notional Tax Credit on Secondary Market Transactions (for Withholding Tax)
Any company which derived income from the secondary market transactions involving any security or treasury bonds or treasury bills on which the income tax has
been deducted at the rate of 10% at the time of issue of such security, such company is entitled to a notional tax credit at 10% of the grossed up amount of net
interest income from such secondary market transaction to an amount of one ninth of the same. Accordingly, the net interest income earned by the bank from
above transactions has been grossed up in the financial statements for the period 01st January 2010 to 31st December 2010 and the notional tax credit amounts to
Rs.122.940 Mn.
9.3 Deferred Tax Expense/(Income )
According to Government Budget proposals 2011, the Bank’s Income tax rate would be reduced to 28% from year 2011 and in line with the Budget proposals the
Deferred tax rate has been changed from 35% to 28%.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Impact on opening balance due to deferred tax rate change (96,240) - (100.0) (95,727) - (100.0)
Deferred tax expense/(income) arising
due to origination and reversal of temparory
differences (Note No. 26) (237,423) 226,258 (204.9) (247,955) 209,933 (218.1)
(333,663) 226,258 (247.5) (343,682) 209,933 (263.7)
10. Earnings Per Ordinary Share
Basic earning per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year, as per the Sri Lanka Accounting Standard 34 - Earnings per Share.
Group
2010 2009 Change
(Rs.’000) (Rs.’000) %
Amount used as the numerator
Profit attributable to ordinary shareholders 3,484,466 2,072,483 68.1
Amount used as the denominator
Weighted average number of ordinary shares (Note No. 10.1) 152,807,972 152,807,972 -
Basic Earnings per Ordinary Share (Rs.) 22.80 13.56 68.1
Weighted average number of ordinary shares
Number of shares held as at 31st December 2009 was 68,887,628. However, it was restated as 152,807,972 in the comparative column as a result of the events
described below, as required by SLAS 34- Earnings per Share.
As approved by the shareholders of the Bank at the Extraordinary General Meetings (EGMs) held during year 2010, two share consolidations and sub-divisions took
place in March and October 2010 and Bank paid an interim scrip dividend in September 2010, as detailed below.
Consolidation & Sub division of shares
The first share consolidation and sub-division took place on 15th March 2010. Accordingly, 68,887,628 ordinary shares held as at 31st December 2009 was increased
to 75,776,390 with the shareholders receiving one share for every ten shares held by them. Due to this, there was no increase in the stated capital of the Bank which
amounted to Rs.1,581.6 Mn.
Scrip Dividend
This was an interim dividend for 2010 declared in the form of fully paid shares of the Bank. The basis was Rs.3/- per existing share, valued at Rs.326/- per share, after
providing for the 10% withholding tax.
This move created 627,596 fully paid new shares, which were allotted to the shareholders as part of their dividend for 2010. The entire cost of the scrip dividend was
funded by the profits of the Bank for 2010 and hence there was no capitalization of reserves. However, the stated capital of the Bank rose from Rs.1,581.6 Mn to
Rs.1,786.2 by Rs.204.6 Mn being the value of the new shares created. Consequently, the number of shares in issue too rose from 75,776,390 to 76,403,986 shares.
Sub division of shares
This was a share split of one for one and the second sub-division undertaken by the Bank for the year, aimed at further increasing the market liquidity of the Sampath
Bank share. Consequently, every Sampath Bank share held by the shareholders was sub-divided on 12th October 2010 in to two and the number of shares was
increased by 100% from 76,403,986 to 152,807,972. Due to this, there was no increase in the stated capital amounting to Rs.1,786.2 Mn., which increased due to
scrip dividend as stated above.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 215
10.1 Movement of Number of Shares during the year 2010
Number of shares held as at 1st January 2010 68,887,628
Consolidation & Sub division of shares - March 2010 6,888,762
75,776,390
Interim Scrip Dividend - September 2010 627,596
76,403,986
Sub division of shares - October 2010 76,403,986
Number of shares held as at 31st December 2010 152,807,972
Bank Bank
2010 2009
(Rs.’000) (Rs.’000)
Gross Dividend Net Gross Dividend Net
Dividend Tax Dividend Dividend Tax Dividend
11. Dividends Paid & Proposed
Final dividend paid for the years 2009 & 2008 respectively.
Out of dividend received - free of tax 115,719 - 115,719 111,450 - 111,450
Out of normal profits 357,883 35,788 322,095 164,100 16,410 147,690
Cash dividend paid 473,602 35,788 437,814 275,550 16,410 259,140
Interim scrip dividend paid - 2010
Out of current year’s profits 227,329 22,733 204,596 - - -
227,329 22,733 204,596 - - -
Final dividend proposed - 2010 & 2009 respectively
Out of dividend received - free of tax 78,572 - 78,572 115,719 - 115,719
Out of current year’s profits 929,961 92,996 836,965 357,883 35,788 322,095
Scrip/Cash dividend payable/paid 1,008,533 92,996 915,537 473,602 35,788 437,814
Dividend per Ordinary Share (Rs.) 8.09 7.33 6.25 5.78
Final dividend will be paid on 152,807,972 ordinary shares in the form of scrip dividend. The basis is Rs.6.60 per existing share, valued at Rs.300/- per share, after
providing for the 10% withholding tax. This move will create 3,051,788 fully paid new shares, which will be allotted to the shareholders as their final dividend for
2010. The entire cost of the scrip dividend will be funded by the profits of the Bank for 2010 and hence there will be no capitalization of reserves. However, the stated
capital of the Bank will rise by Rs.915.5 Mn being the value of the new shares to be created. Consequently, the number of shares in issue too will rise from the existing
152,807,972 to 155,859,760 shares.
In accordance with Sri Lanka Accounting Standard No. 12 (Revised) on Events After Balance Sheet Date, above proposed final dividend has not been recognised as a
liability as at the year end.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
12. Cash and Cash Equivalents
Local currency in hand 3,185,353 2,393,681 33.1 3,185,482 2,393,790 33.1
Foreign currency in hand 543,588 363,526 49.5 543,588 363,526 49.5
Balances with local banks 77,374 37,704 105.2 82,966 45,107 83.9
Balances with foreign banks 403,142 600,176 (32.8) 403,142 600,176 (32.8)
Money at call and short notice 50,000 30,000 66.7 50,000 30,000 66.7
Placements with banks 1,787,373 2,443,108 (26.8) 1,787,373 2,443,108 (26.8)
6,046,830 5,868,195 3.0 6,052,551 5,875,708 3.0
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 216
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
13. Balance with Central Bank of Sri Lanka
8,221,068 7,397,703 11.1 8,221,068 7,397,703 11.1
This represents the statutory reserve required to be maintained with the Central Bank of Sri Lanka under section 93 of the Monetary Law Act Chapter 422 and clearing
balances in the name of the Bank. At present, the minimum cash reserve requirement is 7.0% of the Rupee Deposit Liabilities. There is no reserve requirement on
deposit liabilities of the foreign currency banking unit (FCBU) and foreign currency deposit liabilities of the domestic banking unit (DBU).
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
14. Government of Sri Lanka Treasury Bills & Bonds
Treasury Bills - Trading (Note No. 14.1) 30,288,580 - 100.0 30,288,580 - 100.0
Treasury Bills - Investment (Note No. 14.2 ) 547,805 30,780,335 (98.2) 556,443 30,809,964 (98.2)
Treasury Bonds - Invstments (Note No. 14.3) 557,892 987,482 (43.5) 557,892 987,482 (43.5)
31,394,278 31,767,817 (1.2) 31,402,915 31,797,446 (1.2)
2010 2010 2009 2009
Cost Market Cost Market
Value Value
Bank & Group (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
14.1 Treasury Bills - Trading
30,251,218 30,288,580 - -
Add/(Less):
Provision for appreciation/(diminution) in market value b/f - - - -
Provision for diminution in market value write back/(made) during the year 37,362 - - -
30,288,580 30,288,580 - -
2010 2010 2009 2009
Cost Market Cost Market
Value Value
Bank & Group (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
14.2 Treasury Bills - Investment
Bank 547,805 548,305 30,780,335 29,581,731
Sampath Centre Ltd. - - 21,572 21,008
S C Securities (Pvt) Ltd. 8,637 8,616 8,056 8,115
Group 556,443 556,921 30,809,964 29,610,855
2010 2010 2009 2009
Face Year Market Face Year Market
Value of Cost Value Value of Cost Value
Bank & Group (Rs.’000) Maturity (Rs.’000) (Rs.’000) (Rs.’000) Maturity (Rs.’000) (Rs.’000)
14.3 Treasury Bonds - Investment
550,000 2011 547,923 549,849 400,000 2010 398,545 399,276
9,948 2012 9,969 10,632 550,000 2011 527,602 532,573
- - - - 9,948 2012 9,974 10,338
- - - - 50,000 2013 51,360 43,425
559,948 557,892 560,481 1,009,948 987,482 985,613
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 217
15. Securities Held for Dealing Purposes (Quoted) - Bank & Group
15.1 Shares
2010 2009
Name of the Quoted Company No of Cost of % of Market No of Cost of Market
Ordinary Investment Total Value Ordinary Investment Value
Shares (Rs.’000) Cost (Rs.’000) Shares (Rs.’000) (Rs.’000)
Banks, Finance & Insurance
Nations Trust Bank PLC 170,000 6,453 1.0% 14,178 170,000 6,453 6,248
Commercial Bank of Ceylon PLC 293,350 55,463 8.5% 76,242 - - -
Pan Asia Banking Corporation PLC 690,266 10,932 1.7% 35,894 517,700 8,861 10,483
Merchant Bank of Sri Lanka PLC 207,600 3,354 0.5% 9,508 138,400 2,523 2,699
Hatton National Bank PLC 115,000 35,822 5.5% 45,989 - - -
NDB Bank PLC 300,000 107,943 16.6% 104,850 - - -
DFCC Bank PLC 4,000 354 0.1% 801 - - -
220,320 34.0% 287,461 17,837 19,430
Diversified Holdings
Hayley’s PLC 354,740 58,731 9.1% 122,385 304,740 41,054 52,339
Hemas Holdings PLC 647,000 16,252 2.5% 28,792 109,400 10,999 13,429
Aitken Spence PLC 270,000 54,512 8.4% 45,873 - - -
JKH PLC 440,501 101,344 15.6% 131,445 150,501 19,659 25,811
230,839 35.6% 328,495 71,712 91,579
Hotel & Travel
Asian Hotels & Properties PLC 618,900 33,110 5.1% 120,067 644,600 34,671 60,915
Fortress Resort PLC 233,400 4,587 0.7% 4,808 671,000 13,187 8,220
37,697 5.8% 124,875 47,858 69,134
Manufacturing
Royal Ceramics PLC 266,600 11,200 1.7% 81,286 266,600 11,200 17,729
11,200 1.7% 81,286 11,200 17,729
Land & Property
C T Land Development PLC 325,000 4,853 0.7% 9,100 325,000 4,853 7,069
4,853 0.7% 9,100 4,853 7,069
Plantations
Kegalle Plantations PLC - - - - 11,000 700 369
- - - 700 369
Power & Energy
Lanka IOC PLC 3,307,100 133,652 20.6% 62,504 3,911,000 156,965 67,465
133,652 20.6% 62,504 156,965 67,465
Trading
Richard Peiris Exports PLC - - - - 5,000 195 125
- - - 195 125
Telecommunication
Dialog Axiata PLC 456,290 10,354 1.6% 5,384 456,290 10,354 3,308
10,354 1.6% 5,384 10,354 3,308

Total 648,915 100% 899,106 321,675 276,207
Less:
Provision for appreciation/(diminution)
in market value b/f (45,468) -7.0% (194,496)
Provision for diminution in market value
write back/(made) during the year (Note No. 8) 295,658 45.6% 149,030
899,106 138.6% 276,207
Securities held for dealing purposes (quoted shares) are marked to market and carried at market value determined at the Colombo Stock Exchange and any gains or
losses on marked to market are included in the Income Statement.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 218
2010 2009
Cost Directors’ Cost Directors’
(Rs.’000) Valuation (Rs.’000) Valuation
(Rs.’000) (Rs.’000)
15.2 Foreign Currency Bonds
at cost b/f - 1,327,524
Exchange rate effect - 17,270
at cost c/f - - 1,344,794 -
Add/(Less):
Provision for appreciation/(diminution) in market value b/f - (269,580)
Exchange rate effect - (5,793)
Provision for impairment (Note No. 8) - (1,069,421)
- - - -
Total for the Bank and the Group 899,106 899,106 276,207 276,207
Full provision was made in years 2008 & 2009 on a/c of Foreign currency bond receivable due to default in payment of interest on due dates and face value of the bond
upon the maturity on 26th February 2009.
Subsequently, the Bank was able to recover the face value of the bond, i.e. USD 12 Mn in year 2010, as discussed in Note No. 4 under ‘Recovery of Impairment of
Investment.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
16. Investment Securities
Quoted (Note No. 16.1)
Shares (Note No. 16.1.1) 102,956 86,710 18.7 258,950 273,944 (5.5)
Debentures (Note No. 16.1.2) 435,740 - 100.0 435,740 - 100.0
538,696 86,710 521.3 694,690 273,944 153.6
Un-quoted (Note No. 16.2)
Preference Shares (Note No. 16.2.1) 235,000 365,104 (35.6) 235,000 365,104 (35.6)
Ordinary Shares (Note No. 16.2.2) 23,110 278,110 (91.7) 23,166 278,166 (91.7)
Debentures (Note No. 16.2.3) 10,000 10,000 - 10,000 10,000 -
Bonds (Note No. 16.2.4) 6,734,665 6,261,509 7.6 6,734,665 6,261,509 7.6
Leased backed Trust Certificates (Note No. 16.2.5) 106,267 262,717 (59.6) 106,267 262,717 (59.6)
7,109,041 7,177,439 (1.0) 7,109,097 7,177,495 (1.0)
Total Investment 7,647,737 7,264,149 5.3 7,803,788 7,451,439 4.7
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 219
Bank Group
2010 2009 2010 2009
Cost Market Value Cost Market Value Cost Market Value Cost Market Value
/ Directors’ / Directors’ / Directors’ / Directors’
Valuation Valuation Valuation Valuation
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
16.1 Quoted - Shares/Debentures
16.1.1 Ouoted - Shares
LankaBangla Finance Ltd (LBFL) 72,259 4,900,320 86,710 3,098,700 228,253 4,900,320 273,944 3,098,700
(6,000,000 Ordinary Shares - 2010)
(6,000,000 Ordinary Shares - 2009)
(Holding Percentage - 11.29%)
(Investment in LankaBangla Finance Ltd. in 2009
is given in Note No. 18.1.1)
LankaBangla Securities Ltd 30,697 30,697 - - 30,697 30,697 - -
(60,000 Ordinary Shares -2010)
102,956 4,931,017 86,710 3,098,700 258,950 4,931,017 273,944 3,098,700
16.1.2 Ouoted - Debentures
Vanik Incorporation Ltd 750 - 750 - 750 - 750 -
(7,500 Debentures of Rs 100/- each -2010)
(7,500 Debentures of Rs 100/- each -2009)
(17% redeemable un-secured debentures)
(Redeemable on or before 31st August 2003)
(Redeemable on or before 12 th May 2008)
Urban Development Authority 217,870 217,870 - - 217,870 217,870 - -
(2,178,700 Debentures of Rs 100/- each -2010)
(10% fully secured redeemable debentures)
(Redeemable on 5th October 2015)
Urban Development Authority 217,870 217,870 - - 217,870 217,870 - -
(2,178,700 Debentures of Rs 100/- each -2010)
(11% fully secured redeemable debentures)
(Redeemable on 5th October 2015)
436,490 435,740 750 - 436,490 435,740 750 -
Add/(Less):
Provision for appreciation/(diminution) in market
value b/f (750) (750) (750) (750)
Provision for diminution in market
value write back/(made) during the year - - - -
435,740 - 435,740 -
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 220
Bank Group
2010 2009 2010 2009
Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’
Valuation Valuation Valuation Valuation
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
16.2 Un-quoted - Shares/Debenture/Bonds
16.2.1 Un-quoted - Preference Shares
Texpro Industries Ltd 12,604 - 12,604 12,604 12,604 - 12,604 12,604
(1,260,365 Preference Shares of Rs 10/- each -2010)
(1,260,365 Preference Shares of Rs 10/- each -2009)
(Non cumulative redeemable preference shares
@ 15% interest. Redeemable over the period
of 6 years Commencing from 30/06/2003.)
Dialog Axiata PLC 235,000 235,000 352,500 352,500 235,000 235,000 352,500 352,500
(235,000,000 Preference Shares of Rs 1/- each -2010)
(352,500,000 Preference Shares of Rs 1/- each -2009)
(Rated cumulative redeemable preference shares
@ AWPLR minus 0.9% interest.
(Redemption Dates 31st May 2008, 31st May 2009,
31st May 2010, 31st May 2011 & 31st May 2012 and
Redemption per preference share 10%, 15%
25%, 25% & 25% respectively)
Add/(Less):
Provision for appreciation/(diminution) in market - - - -
value b/f
Provision for diminution in market (12,604) - (12,604) -
value write back/(made) during the year
235,000 235,000 365,104 365,104 235,000 235,000 365,104 365,104
During the year, the Bank made full provision of Rs.12.6 Mn on account of Texpro Industries Ltd. as bank has not received the redemption proceeds as agreed.

16.2.2 Un-quoted - Shares
Union Bank of Colombo 275,953 - 255,000 255,000 275,953 - 255,000 255,000
(26,338,127 Ordinary Shares -2010)
(25,500,000 Ordinary Shares -2009)
(Holding Percentage - 7.9%)
Credit Information Bureau 170 170 170 170 226 226 226 226
(1,700 Ordinary Shares -2010)
(1,700 Ordinary Shares -2009)
S.W.I.F.T 65 65 65 65 65 65 65 65
Fitch Rating Lanka Ltd 625 625 625 625 625 625 625 625
(62,500 Ordinary Shares -2010)
(62,500 Ordinary Shares -2009)
Lanka Clear (Pvt) Ltd 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
(2,000,000 Ordinary Shares -2010)
(2,000,000 Ordinary Shares -2009)
Lanka Financial Services Bureau Ltd 2,250 2,250 2,250 2,250 2,250 2,250 2,250 2,250
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 221
Bank Group
2010 2009 2010 2009
Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’
Valuation Valuation Valuation Valuation
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
16.2.2 Un-quoted - Shares contd...
Add/(Less):
Provision for appreciation/(diminution) in market
value b/f - (2,896) - (2,896)
Provision for diminution in market
value write back/(made) during the year (275,953) 2,896 (275,953) 2,896
23,110 23,110 278,110 278,110 23,166 23,166 278,166 278,166
During the year, the Bank made full provision of Rs.275.9 Mn. on account of investment in Union Bank shares as recommended by the Central Bank of Sri Lanka.
16.2.J Un-Ouoted - Debentures
Seylan Bank PLC 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
(100,000 Debentures of Rs 100/- each -2010)
(100,000 Debentures of Rs 100/- each -2009)
(Unsecured subordinated redeemable
debentures 2007/2012)
(Redeemable on 9 th December 2012)
(Floating Interest rate equal to the 3 months
weighted average TBill rate + 2.5%)
10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
16.2.4 Sri Lanka Development 8onds (SLD8s) 6,734,665 6,799,821 6,261,509 6,391,574 6,734,665 6,799,821 6,261,509 6,391,574
(Redeemable Development Bonds)
(Redeemable on or before 30th June 2013)
6,734,665 6,799,821 6,261,509 6,391,574 6,734,665 6,799,821 6,261,509 6,391,574
16.2.S Leased backed Jrust Certifcates
Issued by Deutsche Bank o/a of :
People’s Leasing PLC 104,167 104,167 235,417 235,417 104,167 104,167 235,417 235,417
Orient Financial Services Corporation Ltd. 2,100 2,100 27,300 27,300 2,100 2,100 27,300 27,300
106,267 106,267 262,717 262,717 106,267 106,267 262,717 262,717
17. Loans and Advances (Net of Provision for Possible Credit Losses and Interest in Suspense)
Bank Group
2010 2009 Change 2010 2009 Change
(Rs. ‘000) (Rs. ‘000) % (Rs. ‘000) (Rs. ‘000) %
17.1 Bills of Exchange
Cheques Purchased - Local 45,372 58,400 (22.3) 45,372 58,400 (22.3)
- Foreign 131,706 84,786 55.3 131,706 84,786 55.3
Bills Purchased - Export 1,901,141 2,290,165 (17.0) 1,901,141 2,290,165 (17.0)
- Import 369,379 552,079 (33.1) 369,379 552,079 (33.1)
2,447,599 2,985,432 (18.0) 2,447,599 2,985,432 (18.0)
Less:
(a) Provision for Credit Losses (Note No. 17.4) (152,172) (110,522) 37.7 (152,172) (110,522) 37.7
2,295,427 2,874,909 (20.2) 2,295,427 2,874,909 (20.2)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 222
Bank Group
2010 2009 Change 2010 2009 Change
(Rs. ‘000) (Rs. ‘000) % (Rs. ‘000) (Rs. ‘000) %
17.2 Loans and Advances
Sri Lanka Rupee Loans & Advances
Overdraft 21,591,111 14,297,359 51.0 21,520,595 14,218,922 51.4
Term Loans 52,620,293 41,071,973 28.1 52,080,594 40,434,720 28.8
Trust Receipts 489,216 290,259 68.5 489,216 290,259 68.5
Staff Loans 2,743,938 2,082,573 31.8 2,743,938 2,082,573 31.8
Pawning Advances 27,844,218 18,140,861 53.5 27,844,218 18,140,861 53.5
Margin Trading 6,831 48,765 (86.0) 6,831 48,765 (86.0)
Other Advances 46,850 35,907 30.5 46,850 35,907 30.5
105,342,458 75,967,696 38.7 104,732,242 75,252,006 39.2
Foreign Currency Loans & Advances
Overdraft 2,656,022 2,389,943 11.1 2,656,022 2,389,943 11.1
Trust Receipts 86,855 96,054 (9.6) 86,855 96,054 (9.6)
Packing Credit 238,861 115,280 107.2 238,861 115,280 107.2
Term Loans 11,962,100 11,798,615 1.4 11,962,100 11,798,615 1.4
Other Advances 2,507,435 1,821,281 37.7 2,507,435 1,821,281 37.7
17,451,274 16,221,173 7.6 17,451,274 16,221,173 7.6
Total Rupee & Foreign Currency Loans & Advances 122,793,732 92,188,868 33.2 122,183,516 91,473,178 33.6
Less:
Specific Provision for Credit Losses (Note No.17.4) (4,306,824) (3,923,513) 9.8 (4,306,824) (3,923,513) 9.8
General Provision for Credit Losses (Note No.17.4) (813,436) (678,741) 19.8 (813,437) (678,741) 19.8
(5,120,260) (4,602,253) 11.3 (5,120,260) (4,602,253) 11.3
Loans & Advances after Credit Loss Provision 117,673,471 87,586,615 34.4 117,063,255 86,870,925 34.8
Less: Interest Suspended (Note No.17.5) (668,651) (768,623) (13.0) (668,651) (768,623) (13.0)
117,004,821 86,817,992 34.8 116,394,605 86,102,302 35.2
17.3 Receivable on Leases
17.3.1 Lease rentals receivable
within one year from balance sheet date 1,787,194 2,324,971 (23.1) 2,696,148 3,415,522 (21.1)
Unearned income (409,366) (552,297) (25.9) (593,096) (816,445) (27.4)
Provision for credit losses (Note No.17.4) (27,208) (27,208) - (185,638) (197,140) (5.8)
1,350,620 1,745,466 (22.6) 1,917,414 2,401,937 (20.2)
17.3.2 Lease rentals receivable
after one year but before five years from balance sheet date 2,401,405 2,004,590 19.8 3,156,703 3,025,936 4.3
Unearned income (425,768) (293,530) 45.1 (576,707) (428,530) 34.6
1,975,637 1,711,060 15.5 2,579,997 2,597,405 (0.7)
17.3.3 Lease rentals receivable
after five years from balance sheet date - 29,185 (100.0) 7,248 29,185 (75.2)
Unearned income - (1,880) (100.0) (585) (1,880) (68.9)
- 27,305 (100.0) 6,663 27,305 (75.6)
3,326,256 3,483,831 (4.5) 4,504,074 5,026,648 (10.4)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 223
Bank Group
2010 2009 2010 2009
% % % %
17.3.4 Analysis of Advances Portfolio - Productwise
Bills of Exchange
Cheques Purchased - Local - 0.1% - 0.1%
- Foreign 0.1% 0.1% 0.1% 0.1%
Bills Purchased - Export 1.5% 2.3% 1.5% 2.3%
- Import 0.3% 0.6% 0.3% 0.5%
Total Bills of Exchange 1.9% 3.0% 1.9% 3.0%
Sri Lanka Rupee Loans & Advances
Overdraft 16.7% 14.4% 16.5% 14.1%
Term Loans 40.7% 41.3% 39.9% 40.1%
Trust Receipts 0.4% 0.3% 0.4% 0.3%
Staff Loans 2.1% 2.1% 2.1% 2.1%
Pawning Advances 21.5% 18.2% 21.3% 18.0%
Margin Trading - - - -
Other Advances - - - -
Total Rupee Loans & Advances 81.4% 76.3% 80.3% 74.5%
Foreign Currency Loans & Advances
Overdraft 2.1% 2.4% 2.0% 2.4%
Trust Receipts 0.1% 0.1% 0.1% 0.1%
Packing Credit 0.2% 0.1% 0.2% 0.1%
Term Loans 9.2% 11.9% 9.2% 11.7%
Other Advances 1.9% 1.8% 1.9% 1.8%
Total Foreign Currency Loans & Advances 13.5% 16.3% 13.4% 16.1%
Total Rupee & Foreign Currency Loans & Advances 94.9% 92.6% 93.6% 90.6%
Leases
Lease rentals receivable within one year from balance sheet date 1.4% 2.3% 2.1% 3.4%
Lease rentals receivable after one year but before five years from Balance sheet date 1.9% 2.0% 2.4% 3.0%
Lease rentals receivable after five years from Balance sheet date - - - -
Total Leases 3.2% 4.4% 4.5% 6.4%
Total Advances 100.0% 100.0% 100.0% 100.0%
The maturity analysis of loans & advances is given in Note No. 33.
17.4 Movement in the Provision for Bad and Doubtful Debts
17.4.1.1 Movements in the Provision for Loan Losses - Bank
As at Provisions Amounts Amount Exchange As at As at Change
01.01.2010 during the Written-off Recovered rate variance 31.12.2010 31.12.2009 %
Year for FCY provision
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Provision against advances
Specific - Bills of Exchange (Note No. 17.1) 110,522 41,649 - - - 152,172 110,522 37.7
Specific - Loans & Advances (Note No. 17.2) 3,923,512 1,762,876 (108,925) (1,230,206) (40,433) 4,306,824 3,923,512 9.8
Specific - Pawning (Note No. 17.2) - 661 (661) - - - - -
Specific - Leases (Note No. 17.3) 27,208 - - - - 27,208 27,208 -
Specific - Total 4,061,243 1,805,186 (109,586) (1,230,206) (40,433) 4,486,204 4,061,243 10.5
General - Loans & Advances (Note No. 17.2) 678,741 139,141 (675) - (3,770) 813,436 678,741 19.8
Specific & General - Total 4,739,984 1,944,327 (110,261) (1,230,206) (44,203) 5,299,640 4,739,984 11.8
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 224
17.4.1.2 Movements in the Provision for Loan Losses - Group
As at Provisions Amounts Amount Exchange As at As at Change
01.01.2010 during the Written-off Recovered rate variance 31.12.2010 31.12.2009 %
Year for FCY provision
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Provision against advances
Specific - Bills of Exchange (Note No. 17.1) 110,522 41,649 - - - 152,172 110,522 37.7
Specific - Loans & Advances (Note No. 17.2) 3,923,512 1,762,876 (108,925) (1,230,206) (40,433) 4,306,824 3,923,512 9.8
Specific - Pawning (Note No. 17.2) - 661 (661) - - - - -
Specific - Leases (Note No. 17.3) 197,140 (8,658) (2,844) - - 185,638 197,140 (5.8)
Specific - Total 4,231,175 1,796,528 (112,430) (1,230,206) (40,433) 4,644,634 4,231,175 9.8
General - Loans & Advances (Note No. 17.2) 678,741 139,141 (675) - (3,770) 813,436 678,741 19.8
Specific & General - Total 4,909,915 1,935,669 (113,105) (1,230,206) (44,203) 5,458,070 4,909,915 11.2
* Specific Provision
The Bank has significantly strengthened efforts in minimizing its non performing advances. During the year 2010, the Bank made additional specific credit loss
provisions of Rs. 1,344.9 Mn, over and above the amounts recommended by the Central Bank of Sri Lanka ignoring collateral values, after an objective review in which
the management exercise their judgment.
** General Provision
As per the direction issued by the Monetary Board of the Central Bank, beginning from the quarter ended 31st December 2006, a general provision was maintained on
total performing and overdue loans and advances, net of interest in suspense and advances secured by cash deposits, gold or government securities with the Bank. The
Bank was compliant with the requirement of 1.0% from 31st December 2008 as per the Central Bank directions. As per the subsequently amended direction in 2010,
Banks shall reduce the general provision requirement of 1.0% to 0.5% at a rate of 0.1% per quarter during the five quarters commencing 1st October 2010. In terms
of the amended direction, the general provision of 1.0% was reduced to 0.9% as at 31st December 2010.
(As at 31st December 2010 General provision maintained for the above requirement was Rs. 813.4 Mn. (0.9%)
(As at 31st December 2009 General provision maintained for the above requirement was Rs. 678.7 Mn. (1.02%)
*** Valuation of Securities for Provisioning Purposes
As per the amendment to the directions issued by the Central Bank of Sri Lanka under section 46 (A) of the Banking Act No. 30 of 1988, as amended by Banking
(Amendment) Act No. 33 of 1995 the extent up to which securities can be discounted for provisioning purposes has been revised as follows.
Category % of Forced Sale Value of Immovable
Property that can be considered as the
Value of Security
At the time of 1st provisioning 75%
1 to 2 years in the loss category 60%
2 to 3 years in the loss category 50%
3 to 4 years in the loss category 40%
Over 4 years in the loss category At the discretion of the management
As per the above amendment, an additional provision made by the Bank during the year was Rs. 90.8 Mn. (2009 - Rs. 236.9 Mn.)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 225
17.4.2.1 Loan Losses and Provision for Loan Losses - Bank
Bills of Loans & Pawning Leases Bank Bank Change
Exchange Advances 2010 2009 %
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Balance as at 1st January 110,522 4,602,253 - 27,208 4,739,984 4,815,078 (1.6)
Specific provision on loans and advances 41,649 1,762,876 661 - 1,805,186 312,449 477.8
General provision on loans and advances - 139,141 - - 139,141 (49,861) 379.1
Exchange rate variance for foreign currency provision - (44,203) - - (44,203) 22,026 (300.7)
Amount Recovered - (1,230,206) - - (1,230,206) - (100.0)
Written off during the year - (109,600) (661) - (110,261) (359,709) 69.3
Balance as at 31st December 152,172 5,120,260 - 27,208 5,299,640 4,739,984 11.8
2.9% 96.6% 0.0% 0.5% 100.0%
17.4.2.2 Loan Losses and Provision for Loan Losses - Group
Bills of Loans & Pawning Leases Group Group Change
Exchange Advances 2010 2009 %
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Balance as at 1st January 110,522 4,602,253 - 197,140 4,909,915 4,880,617 0.6
Specific provision on loans and advances 41,649 1,762,876 661 (8,658) 1,796,528 416,843 331.0
General provision on loans and advances - 139,141 - - 139,141 (49,861) 379.1
Exchange rate variance for foreign currency provision - (44,203) - (2,844) (47,047) 22,026 (313.6)
Amount Recovered - (1,230,206) - - (1,230,206) - (100.0)
Written off during the year - (109,600) (661) - (110,261) (359,709) 69.3
Balance as at 31st December 152,172 5,120,260 - 185,638 5,458,070 4,909,915 11.2
2.8% 93.8% 0.0% 3.4% 100.0%
17.5 Movement in Interest in Suspense & Shortfall
2010 2009
Interest in (Rs.’000) Interest in (Rs.’000)
Shortfall Suspense Total Shortfall Suspense Total
17.5.1 Movement in Interest in Suspense & Shortfall - Bank
Balance as at 1st January 3,246,799 768,622 4,015,421 2,899,889 1,127,855 4,027,743
Interest suspended during the year 3,547,934 79,746 3,627,680 9,222,896 299,810 9,522,707
Suspended interest recovered (3,812,293) (179,718) (3,992,011) (8,875,986) (659,042) (9,535,028)
Balance as at 31st December 2,982,440 668,651 3,651,090 3,246,799 768,622 4,015,422
81.7% 18.3% 100.0% 80.9% 19.1% 100%
17.5.2 Movement in Interest in Suspense & Shortfall - Group
Balance as at 1st January 3,246,799 768,622 4,015,421 2,899,889 1,127,855 4,027,743
Interest suspended during the year 3,547,934 79,746 3,627,680 9,222,896 299,810 9,522,707
Suspended interest recovered (3,812,293) (179,718) (3,992,011) (8,875,986) (659,042) (9,535,028)
Balance as at 31st December 2,982,440 668,651 3,651,090 3,246,799 768,622 4,015,422
81.7% 18.3% 100.0% 80.9% 19.1% 100%
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 226
17.6 Non Performing Advances
Net exposure on non performing loans and advances as at 31st December before setting off the value of securities obtained is given below.
Bank As a % of Bank As a % of Group As a % of Group As a % of
total total total total
2010 Advances 2009 Advances 2010 Advances 2009 Advances
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Bills of Exchange 163,007 0.1 159,165 0.2 163,007 0.1 159,165 0.2
Loans & Advances* 5,357,298 4.2 7,714,431 7.9 5,357,298 4.2 7,714,431 7.8
Lease Rental Receivable 195,420 0.2 368,934 0.4 319,223 0.2 612,183 0.6
Gross Non-Performing
Advances (Note No.17.7) 5,715,725 4.5 8,242,530 8.4 5,839,528 4.5 8,485,779 8.6
Less: Interest in suspense included
in overdrafts (Note No. 17.5) (668,651) (768,623) (668,651) (768,623)
Net Non-Performing Advances 5,047,074 3.9 7,473,907 7.6 5,170,878 4.0 7,717,156 7.8
Less: Specific Provision for
Credit Losses (Note No. 17.4) (4,486,204) (4,061,243) (4,644,634) (4,231,175)
Net Exposure 560,871 0.4 3,412,664 3.5 526,244 0.4 3,485,981 3.5
NPA Cover (Gross) 4,486,204 x 100 4,061,243 x 100 4,644,634 x 100 4,231,175 x 100
(Specific Provisions to Gross 5,715,725 8,242,530 5,839,528 8,485,779
Non-Performing Loans) 78.5% 49.3% 79.5% 49.9%
NPA Cover (Net) 4,486,204 x 100 4,061,243 x 100 4,644,634 x 100 4,231,175 x 100
(Specific Provisions to Net 5,047,074 7,473,907 5,170,878 7,717,156
Non-Performing Loans) 88.9% 54.3% 89.8% 54.8%
* This includes Foreclosed properties, the details of which are given in Note No.17.6.1.
17.6.1 Foreclosed Properties
The foreclosed properties included under loans and advances as at December 31, include the following:
Bank Bank
2010 2009
Extent Cost / WDV Forced Cost / WDV Forced
Sale Value Sale Value
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Land & Building at No.19, Gangadara Mawatha, Attidiya, Ratmalana 2A 0R 23 P 247,949 280,000 246,350 280,000
A = Acres, R = Roods, P = Perches
Bank acquired this property during the year in settlement of debt due to Bank to dispose in the near future.
However, the Bank made full credit loss provisions on a/c of foreclosed properties as at 31st December 2010.
17.7 Concentration of Credit Risk
Analysis of Bank’s gross advances portfolio reflecting the exposure to credit risk in various sectors of the economy is detailed below.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 227
17.7.1 Sector / Productwise Analysis of Gross Loans & Advances - Bank
2010 2009
Purpose Performing Non-Performing Total Performing Non-Performing Total
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Agriculture & Fishing 12,038,329 930,557 12,968,886 9,373,943 777,179 10,151,122
Manufacturing 18,445,967 1,521,313 19,967,280 15,935,705 1,983,918 17,919,623
Tourism 4,287,507 121,356 4,408,863 4,053,490 137,576 4,191,066
Transport 1,173,000 57,537 1,230,537 1,473,637 90,691 1,564,328
Construction 13,155,751 658,606 13,814,357 11,221,619 1,100,460 12,322,079
Traders 20,882,626 1,054,601 21,937,227 14,202,253 1,725,891 15,928,144
New Economy 3,023,926 26,167 3,050,093 1,922,164 38,251 1,960,415
Financial and Business Services 6,528,731 14,292 6,543,023 2,057,879 668,932 2,726,811
Infrastructure 2,458,069 171,884 2,629,953 1,643,439 269,340 1,912,779
Other Services 4,619,039 178,790 4,797,829 4,443,721 481,597 4,925,318
Credit Cards 1,826,964 248,052 2,075,016 1,490,028 268,339 1,758,367
Pawning 27,844,218 - 27,844,218 18,140,861 - 18,140,861
Other Customers 6,594,943 732,571 7,327,514 4,484,070 700,356 5,184,425
122,879,070 5,715,725 128,594,795 90,442,809 8,242,530 98,685,338
17.7.2 Sector / Productwise Analysis of Gross Loans & Advances - Group
2010 2009
Purpose Performing Non-Performing Total Performing Non-Performing Total
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Agriculture & Fishing 12,038,329 930,557 12,968,886 9,373,943 777,179 10,151,122
Manufacturing 18,445,967 1,521,313 19,967,280 15,935,705 1,983,918 17,919,623
Tourism 4,287,507 121,356 4,408,863 4,053,490 137,576 4,191,066
Transport 1,173,000 57,537 1,230,537 1,473,637 90,691 1,564,328
Construction 13,155,751 658,606 13,814,357 11,221,619 1,100,460 12,322,079
Traders 20,882,626 1,054,601 21,937,227 14,202,253 1,725,891 15,928,144
New Economy 3,017,376 26,167 3,043,543 1,912,550 38,251 1,950,801
Financial and Business Services 5,997,714 14,292 6,012,006 1,488,016 668,932 2,156,948
Infrastructure 2,458,069 171,884 2,629,953 1,643,439 269,340 1,912,779
Other Services 4,619,039 178,790 4,797,829 4,443,721 481,597 4,925,318
Credit Cards 1,826,964 248,052 2,075,016 1,490,028 268,339 1,758,367
Pawning 27,844,218 - 27,844,218 18,140,861 - 18,140,861
Other Customers 7,734,737 856,374 8,591,111 5,817,356 943,605 6,760,961
123,481,298 5,839,528 129,320,827 91,196,619 8,485,779 99,682,398
17.7.3 Collateralwise Analysis of Gross Loans & Advances - Bank
Bank Bank
2010 2009
(Rs.’000) % (Rs.’000) %
Cash / Gold 31,146,776 24.2% 21,196,043 21.5%
Government Securities 36,556 0.0% 33,952 0.0%
Immovable Properties 36,576,322 28.4% 31,153,516 31.6%
Stock in Trade 14,870,436 11.6% 12,514,964 12.7%
Personal Guarantees and Pro Notes 2,736,975 2.1% 2,192,624 2.2%
Movable Properties 4,520,696 3.5% 1,375,803 1.4%
Other Securities 29,709,597 23.1% 23,827,794 24.1%
Unsecured 8,997,438 7.0% 6,390,642 6.5%
128,594,795 100% 98,685,338 100%
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 228
18. Investments in Associate & Subsidiary Companies
18.1 Investments in Associate Companies
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Balance as at 1st January - 146,252 (100.0) - 364,060 (100.0)
Additions - - - - - -
Current year’s share of profit/(loss) after tax - - - - 109,944 (100.0)
Less: Disposals/Transfers (Note No.18.1.1) - (146,252) 100.0 - (474,003) 100.0
Balance as at 31st December - - - - - -
Bank Bank Group Group
2010 2009 2010 2009
Cost Directors’ Cost Directors’ Cost Directors’ Cost Directors’
Valuation Valuation Valuation Valuation
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
18.1.1 Lanka8angla Finance Ltd.
(Incorporated Outside Sri Lanka)
(6,000,000 Ordinary shares of tk 10/- each -2009) - - 146,252 - - - 114,533 -
Additions - - - -
- - 146,252 - - - 114,533 -
Add: Share of profit/(loss) applicable to the Bank
Balance as at 1st January - 249,527
Current year’s share of profit/(loss) before tax - 160,391
Less: Provision for taxation - (33,042)
Less: Dividend received during the year - (17,405)
Current year’s retained profit/(loss) - 109,943
- 474,003
Less: Cost of disposal - (59,541) - (200,060)
- 86,710 - 273,944
Transferred to Investment Securities (Note 16.1.1) - (86,710) - (273,944)
Balance as at 31st December - - - - - - - -
During the year 2009, 9.31% of the shares of Bank’s associate company, i.e. LankaBangla Finance Ltd. was sold by the Bank. As a result, Bank’s holding of 22.86%
as at 31.12.2008 was reduced to 13.55% as at 31.12.2009. However, since the Bank had over 20% holing in the company up to 03.08.2009, the equity method of
accounting was adopted up to 03.08.2009 and there after the carrying value of the investment was considered as an ‘Investment Security’ and accounted as per SLAS
22 – Accounting for Investments. (Investment in LankaBangla Finance Ltd . is given in Note No.16.1.1)
18.2 Investments in Subsidiary Companies-Bank
2010 2009 Change
(Rs.’000) (Rs.’000) %
Balance as at 1st January 991,626 823,626 20.4
Additions - 318,000 (100.0)
Investment set off against stated capital of Sampath Surakum Ltd upon amalgamation - (150,000) 100.0
Balance as at 31st December 991,626 991,626 -
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 229
Principal % of 2010 2009
Activity Ownership Cost Directors’ Cost Directors’
Valuation % Valuation %
Name (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Unquoted
Sampath Centre Ltd Renting of
34,000,000 ordinary shares Commercial
(Country of Incorporation - Sri Lanka) Property 97.14 447,000 2,110,540 45.1% 447,000 447,000 45.1%
S C Securities (Pvt) Ltd Share 51.00 15,626 15,626 1.6% 15,626 15,626 1.6%
1,387,200 ordinary shares Brokering
(Country of Incorporation - Sri Lanka)
Sampath Leasing & Factoring Ltd Leasing & 100.00 525,000 525,000 52.9% 525,000 525,000 52.9%
52,500,000 ordinary shares Factoring
(Country of Incorporation - Sri Lanka)
Sampath Trade Services (Hong Kong) Ltd * Re-issuing of - - - - - - -
(Incorporated Outside Sri Lanka) Trade Documents
Sampath Information Technology Solutions Ltd. Developing 100.00 4,000 4,000 0.4% 4,000 4,000 0.4%
400,000 ordinary shares Software
(Country of Incorporation - Sri Lanka) Solutions &
Maintenance
of Hardware
991,626 991,626 100.0% 991,626 991,626 100.0%
* Sampath Trade Services (Hong Kong) Ltd. was liquidated w.e.f. 23.07.2010. Due to this, there were on implications on the Financial Statements of the Bank.
Bank Group
As at 31st December 2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
19. Other Assets
Deposits and Pre-payments 307,415 274,721 11.9 461,847 334,446 38.1
Other Debtors 630,537 662,719 (4.9) 1,360,005 1,060,479 28.2
937,952 937,440 0.1 1,821,852 1,394,925 30.6
20. Goodwill and Other Intangible Assets
Unamortised Balance of Goodwill as at 31st December (Note No. 20.1) - - - 6,266 7,520 (16.7)
Computer Software (Note No. 20.2) 78,723 71,171 10.6 88,799 75,110 18.2
Balance as at 31st December 78,723 71,171 10.6 95,065 82,630 15.0
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 230
Group
As at 31st December 2010 2009 Change
(Rs.’000) (Rs.’000) %
20.1 Goodwill on Consolidation
Goodwill as at 1st January 7,520 12,687 (40.7)
Additions - - -
Less: Disposals (1,254) (5,167) (75.7)
Unamortised balance of Goodwill 6,266 7,520 (16.7)
20.2 Computer Software
Cost
Balance as at 1st January 623,474 595,326 4.7 631,361 603,094 4.7
Additions 52,730 27,374 92.6 62,809 27,374 129.4
Disposals - - - - - -
Transfers during the year - 774 (100.0) 110 893 (87.7)
Balance as at 31st December 676,204 623,474 8.5 694,280 631,361 10.0
Amortisation & Impairment
Balance as at 1st January 552,303 486,233 13.6 556,251 488,823 13.8
Disposals - - - - - -
Amortisation charge for the year 45,178 66,071 (31.6) 49,188 67,581 (27.2)
Transfers during the year - - - 41 (152) 127.1
Balance as at 31st December 597,481 552,303 8.2 605,481 556,251 8.9
Net Book Value
Balance as at 1st January 71,171 109,093 (34.8) 75,110 114,271 (34.3)
Balance as at 31st December 78,723 71,171 10.6 88,799 75,110 18.2
21. Property and Equipment
21.1 Bank
Additions /
As at Revaluation Disposals Transfers / As at As at Change
01.01.2010 during the year during the year Adjustments 31.12.2010 31.12.2009 %
(Rs.’000)
At Cost/Valuation
Land & Building 2,177,146 437,152 - - 2,614,298 2,177,146 20.1
Leasehold Properties & Improvements 510,348 220,127 (1,047) - 729,428 510,348 42.9
Computer Equipment 1,840,431 215,187 (31,365) - 2,024,253 1,840,431 10.0
Motor Vehicles 130,099 35,727 (6,932) 25,095 183,988 130,099 41.4
Office Equipment 892,772 306,177 (16,018) - 1,182,931 892,772 32.5
Work in Progress 41,239 55,316 - - 96,555 41,239 134.1
5,592,035 1,269,684 (55,362) 25,095 6,831,453 5,592,035 22.2
Finance Leases
Motor Vehicles 38,712 - - (25,095) 13,617 38,712 (64.8)
38,712 - - (25,095) 13,617 38,712 (64.8)
Total 5,630,747 1,269,684 (55,362) - 6,845,069 5,630,747 21.6
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 231
Accumulated Depreciation
As at Charge Disposals Transfers / As at As at Change
01.01.2010 for the year during the year Adjustments 31.12.2010 31.12.2009 %
On Cost/Valuation
Building 54,800 10,904 - - 65,704 54,800 19.9
Leasehold Properties & Improvements 337,846 71,919 (559) - 409,207 337,846 21.1
Computer Equipment 1,223,500 197,700 (29,986) - 1,391,214 1,223,500 13.7
Motor Vehicles 57,106 26,905 (6,932) 25,095 102,174 57,106 78.9
Office Equipment 506,743 97,128 (14,895) - 588,976 506,743 16.2
2,179,995 404,556 (52,372) 25,095 2,557,274 2,179,995 17.3
Finance Leases
Motor Vehicles 30,270 5,121 - (25,095) 10,295 30,270 (66.0)
30,270 5,121 - (25,095) 10,295 30,270 (66.0)
Total 2,210,265 409,676 (52,372) - 2,567,569 2,210,265 16.2
Net Book Value of Assets
At Cost/Valuation 3,412,040 4,274,179 3,412,040 25.3
On Finance Leases 8,442 3,322 8,442 (60.7)
Total 3,420,483 4,277,501 3,420,483 25.1
Freehold land & buildings of the Bank were revalued by professionally qualified independent valuers during the year ended 31 st December 2010. The revaluation
surplus, amounting to Rs. 415.331 million was credited to the ‘Revaluation Reserve’ account.
The carrying amount of Bank’s revalued land and buildings, if they were carried at cost less depreciation, would be as follows:
2010 2009
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Land 732,938 - 732,938 732,938 - 732,938
Freehold Buildings 390,746 62,475 328,271 384,863 52,706 332,157
Total 1,123,684 62,475 1,061,209 1,117,801 52,706 1,065,095
21.2 Property and Equipment
Additions /
As at Revaluation Disposals Transfers / As at As at Change
Group 01.01.2010 during the during the Adjustments 31.12.2010 31.12.2009 %
year year
(Rs.’000)
At Cost/Valuation
Land & Building 3,558,602 1,264,334 - - 4,822,936 3,558,602 35.5
Leasehold Properties & Improvements 510,348 220,127 (1,047) - 729,428 510,348 42.9
Computer Equipment 1,864,233 216,609 (31,967) - 2,048,875 1,864,233 9.9
Motor Vehicles 199,727 92,793 (27,826) 18,270 282,963 199,727 41.7
Office Equipment 918,515 310,077 (18,494) (155) 1,209,943 918,515 31.7
Work in Progress 41,239 55,316 - - 96,555 41,239 100.0
7,092,665 2,159,254 (79,334) 18,115 9,190,700 7,092,665 29.6
Finance Leases
Motor Vehicles 44,178 - (5,465) (18,270) 20,443 44,178 (53.7)
Total 44,178 - (5,465) (18,270) 20,443 44,178 (53.7)
7,136,843 2,159,254 (84,799) (155) 9,211,142 7,136,843 29.1
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 232
Accumulated Depreciation
As at Charge Disposals Transfers / As at As at Charge
On Cost/Valuation 01.01.2010 for the during the Adjustments 31.12.2010 31.12.2009 %
year year
Building 173,175 30,168 - - 203,343 173,175 17.4
Leasehold Properties & Improvements 337,848 71,919 (559) - 409,209 337,848 21.1
Computer Equipment 1,239,844 200,214 (30,269) - 1,409,789 1,239,844 13.7
Motor Vehicles 99,923 38,008 (24,712) 22,938 136,157 99,923 36.3
Office Equipment 518,784 100,003 (16,850) (19) 601,918 518,784 16.0
2,369,573 440,313 (72,390) 22,919 2,760,416 2,369,573 16.5
Finance Leases
Motor Vehicles 35,509 6,702 (5,240) (22,938) 14,033 35,509 (60.5)
35,509 6,702 (5,240) (22,938) 14,033 35,509 (60.5)
Total 2,405,082 447,015 (77,630) (19) 2,774,448 2,405,082 15.4
Net Book Value of Assets
At Cost/Valuation 4,723,092 6,430,284 4,723,092 36.1
On Finance Leases 8,670 6,410 8,670 (26.1)
Total 4,731,762 6,436,694 4,731,762 36.0
Freehold land & buildings of the Group were revalued by professionally qualified independent valuers during the year ended 31 st December 2010. The revaluation
surplus, amounting to Rs. 1,242.511 million was credited to the ‘Revaluation Reserve’ account.
The carrying amount of Group’s revalued land and buildings, if they were carried at cost less depreciation, would be as follows:
2010 2009
Cost Accumulated Carrying Cost Accumulated Carrying
Depreciation Value Depreciation Value
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Land 867,938 - 867,938 867,938 - 867,938
Freehold Buildings 1,036,824 187,586 849,238 1,030,941 161,666 869,275
Total 1,904,762 187,586 1,717,176 1,898,879 161,666 1,737,213
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 233
Details of Group Land and Buildings stated at valuation are given below.
Bank 2007
Date of Method of Cost Revaluation Revaluation
Location Valuation Valuation (Rs. Mn.) (Rs. Mn.) (Rs. Mn.)
Valuer - Mr. P B Kalugalagedara
No.180 (part), People’s Park, Bodhiraja Mawatha, Pettah 12.11.2010 Open Market Value 21.40 55.00 48.0
No.179 & 179A, High Level Road, Nugegoda 01.11.2010 Open Market / Fair Value Basis 29.19 88.90 76.0
No.261, Galle Road, Ratmalana 01.11.2010 Open Market / Fair Value Basis 25.50 41.00 36.0
No.61 & 61A, Moratuwa Road, Piliyandala 01.11.2010 Open Market / Fair Value Basis 38.10 76.00 65.0
No.591, Galle Road, Wellawatte 10.11.2010 Open Market / Fair Value Basis 112.30 107.50 -
No.475, Elvitigala Mawatha, Narahenpita 12.11.2010 Open Market / Fair Value Basis 81.87 77.70 -
No.103, Dharmapala Mawatha, Hunupitiya, Colombo 07 08.11.2010 Open Market / Fair Value Basis 26.20 597.00 597.0
Valuer - Mr. E M Wimalasena
No.268, Main Street, Anuradhapura 12.12.2010 Open Market / Fair Value Basis 10.90 92.80 45.0
Valuer - Mr. C Wellappili
No.81 & 81A, High Level Road, Maharagama 09.11.2010 Income Basis / Contractor’s Principle 34.42 59.38 55.7
No.371 &371 1/1, Old Moor Street, Colombo 12 10.11.2010 Contractor’s Principle 38.28 126.00 112.2
No.1022, Maradana Road, Borella 29.11.2010 Income Basis / Contractor’s Principle 70.21 192.57 190.7
No.5, Wakwella Road, Galle 28.12.2010 Income Basis / Contractor’s Principle 26.80 71.39 52.0
No.280 & 280/1, Negambo Road, Wattala 30.12.2010 Comparison Method 44.20 53.90 -
No.150, Colombo Road, Gampaha 04.12.2010 Comparison Method 20.00 29.88 -
No.312 (part), Galle Road, Kalutara 15.11.2010 Comparison Method 62.40 60.00 -
No.373, Galle Road, Panadura 30.12.2010 Income Basis / Contractor’s Principle 42.00 55.28 -
No.167, Anguruwatota Road, Horana 28.12.2010 Comparison Method 18.50 20.75 -
No.7/5, Giriulla Road, Alawwa 16.11.2010 Income Basis / Contractor’s Principle 6.50 25.40 -
Valuer - Mr. S G Fernando
No.29, Cross Street, Kandy 25.10.2010 Income Method / Comparative Method 102.18 300.00 180.0
No.187, Madawela Road, Katugastota 05.11.2010 Income Method / Comparative Method 14.35 43.38 -
No.31 & 33, Negambo Road, Kurunegala 04.11.2010 Income Method / Comparative Method 77.05 145.00 128.9
Valuer - Mr. H J A Nisad
No.25-27, Main Street, Tissamaharama 29.10.2010 Contractor’s Method/Income Method 34.28 37.00 -
No.3, Hakmana Road, Matara 29.10.2010 Contractor’s Method 39.15 161.00 80.0
No.117, Ihalagama Road, Deniyaya 29.10.2010 Contractor’s Method 3.95 4.20 4.0
No.69, Main Street, Deniyaya 27.10.2010 Contractor’s Method 15.00 11.80 -
Sampath Centre Ltd.
Valuer - Mr. P B Kalugalagedara
No.110, Sir James Peiris Mawatha, Colombo 02 31.12.2010 Income Method 597.61 2,071.00 1,300.0
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 234
21.3 Freehold Land & Buildings- Bank
Location Cost or Cost or
Revaluation Revaluation Total Accumulated Net Book
Buildings of Buildings Extent of Land Value Depreciation Value
Sq.ft (Rs.’000) Perches (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) %
Pettah 5,124 62,995 - - 62,995 7,995 55,000 2.1%
No.180 (part), People’s Park, Bodhiraja Mawatha, Pettah
Nugegoda Under 673 25.4 88,900 89,573 - 89,573 3.4%
No.179 & 179A, High Level Road, Nugegoda Construction
Borella 16,345 75,535 25.5 127,500 203,035 10,466 192,569 7.3%
No.1022, Maradana Road, Borella
Kurunegala 11,206 78,344 37.4 74,760 153,104 8,104 145,000 5.5%
No.31 & 33, Negambo Road, Kurunegala
Wattala Bare Land - 43.1 53,900 53,900 - 53,900 2.0%
No.280 & 280/1, Negambo Road, Wattala
Matara 11,895 37,706 80.9 131,610 169,316 8,316 161,000 6.1%
No.3, Hakmana Road, Matara
Maharagama 6,310 30,371 15.5 33,990 64,361 4,986 59,375 2.2%
No.81 & 81A, High Level Road, Maharagama
Deniyaya Under 608 40.0 4,200 4,808 - 4,808 0.2%
No.117, Ihalagama Road, Deniyaya Construction
Deniyaya Bare Land - 16.9 11,800 11,800 - 11,800 0.4%
No.69, Main Street, Deniyaya
Gampaha Bare Land - 25.0 29,880 29,880 - 29,880 1.1%
No.150, Colombo Road, Gampaha
Ratmalana 5,520 26,309 10.9 19,075 45,384 4,384 41,000 1.6%
No.261, Galle Road, Ratmalana
Piliyandala 8,037 35,650 37.5 46,875 82,525 6,525 76,000 2.9%
No.61 & 61A, Moratuwa Road, Piliyandala
Anuradhapura Under 6,214 41.3 92,800 99,014 - 99,014 3.7%
No.268, Main Street, Anuradhapura Construction
Panadura 3,000 14,621 27.3 43,800 58,421 1,381 57,040 2.2%
No.373, Galle Road, Panadura
Old Moor Street 8,455 4,988 24.0 122,000 126,988 988 126,000 4.8%
No.371 &371 1/1, Old Moor Street, Colombo 12
Tissamaharama 10,815 28,599 22.2 9,990 38,589 1,589 37,000 1.4%
No.25-27, Main Street, Tissamaharama
Katugastota Under 49,046 24.1 43,380 92,426 - 92,426 3.5%
No.187, Madawela Road, Katugastota Construction
Galle 5,400 22,591 17.5 52,440 75,031 3,637 71,394 2.7%
No.5, Wakwella Road, Galle
Wellawatte Under 6,821 21.5 107,500 114,321 - 114,321 4.3%
No.591, Galle Road, Wellawatte Construction
Narahenpita Bare Land - 18.5 77,700 77,700 - 77,700 2.9%
No.475, Elvitigala Mawatha, Narahenpita
Kalutara Bare Land - 30.0 60,000 60,000 - 60,000 2.3%
No.312 (part), Galle Road, Kalutara
Alawwa 8,245 18,673 20.7 8,260 26,933 1,533 25,400 1.0%
No.7/5, Giriulla Road, Alawwa
Horana Bare Land - 20.8 20,750 20,750 - 20,750 0.8%
No.167, Anguruwathota, Horana
Kandy Corporate 15,026 89,478 25.4 216,155 305,633 5,633 300,000 11.3%
No.29, Cross Street, Kandy
Kandy Banglow 2,035 15,938 - - 15,938 167 15,771 0.6%
No.1/87, Victoria Range, Digana, Kegalle
Dharmapala Mawatha Under 31,427 119.4 597,000 628,427 - 628,427 23.8%
No.103, Dharmapala Mawatha, Construction
Hunupitiya, Colombo 07
Total 636,588 770.6 2,074,265 2,710,853 65,704 2,645,149 100.0%
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 235
21.4 The cost of fully depreciated assets of the Bank amounts to Rs. 1,902.3 Mn. ( 2009 - Rs. 1,711.9 Mn )
Details of cost of fully depreciated assets classwise are given below.
2010 2009
Asset Class (Rs.’000) (Rs.’000)
Leasehold Properties & Improvements 259,113 232,115
Computer Equipment 1,290,311 1,161,022
Motor Vehicles 52,711 33,858
Office Equipment 300,125 273,871
Lease Vehicles - 11,000
Total 1,902,260 1,711,866
22. Deposits
22.1 Type of Deposits
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Local Currency Deposits
Demand 11,265,244 7,966,101 41.4 11,198,763 7,955,847 40.8
Savings 54,599,241 37,490,575 45.6 54,599,241 37,490,575 45.6
Call Deposits 1,001,170 1,590,677 (37.1) 934,044 1,560,907 (40.2)
Fixed Deposits 61,216,871 57,873,423 5.8 61,216,871 57,796,740 5.9
Certificates of Deposits 5,344,890 5,247,181 1.9 5,344,890 5,247,181 1.9
Margin Deposits 555,871 376,099 47.8 555,871 376,099 47.8
Local Currency Total 133,983,287 110,544,055 21.2 133,849,679 110,427,348 21.2
Foreign Currency Deposits
Demand 2,421,525 1,661,034 45.8 2,421,525 1,661,034 45.8
Savings 4,695,973 4,336,203 8.3 4,695,973 4,336,203 8.3
Call Deposits 6,432 58,685 (89.0) 6,432 58,685 (89.0)
Fixed Deposits 9,352,518 9,466,012 (1.2) 9,352,518 9,466,012 (1.2)
Margin Deposits 49,066 24,975 96.5 49,066 24,975 96.5
Foreign Currency Total 16,525,514 15,546,909 6.3 16,525,514 15,546,909 6.3
Total Deposits 150,508,801 126,090,964 19.4 150,375,194 125,974,257 19.4
22.2.1 Analysis of Deposits - Customerwise
Deposits from Banks 1,393,492 1,015,915 37.2 1,393,492 1,015,915 37.2
Deposits from Finance Companies 215,161 386,171 (44.3) 195,687 386,171 (49.3)
Deposits from Other Customers 148,900,149 124,287,804 19.8 148,786,015 124,171,097 19.8
150,508,801 126,090,964 19.4 150,375,194 125,974,257 19.4
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 236
Bank Group
2010 2009 2010 2009
% % % %
22.2.2 Analysis of Deposits Portfolio - Productwise
Local Currency Deposits
Demand 7.5% 6.3% 7.4% 6.3%
Savings 36.3% 29.7% 36.3% 29.8%
Call Deposits 0.7% 1.3% 0.6% 1.2%
Fixed Deposits 40.7% 45.9% 40.7% 45.9%
Certificates of Deposits 3.6% 4.2% 3.6% 4.2%
Margin Deposits 0.4% 0.3% 0.4% 0.3%
Local Currency Total 89.0% 87.7% 89.0% 87.7%
Foreign Currency Deposits
Demand 1.6% 1.3% 1.6% 1.3%
Savings 3.1% 3.4% 3.1% 3.4%
Call Deposits - - - -
Fixed Deposits 6.2% 7.5% 6.2% 7.5%
Margin Deposits - - - -
Foreign Currency Total 11.0% 12.3% 11.0% 12.3%
Total Deposits 100.0% 100.0% 100.0% 100.0%
The maturity analysis of deposits is given in Note No. 33.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
23. Borrowings
Call Borrowings 875,000 350,000 150.0 875,000 350,000 150.0
Term Borrowings - - - 370,000 429,152 (13.8)
Foreign Currency Borrowings - 28,618 (100.0) - 28,618 (100.0)
Finance Leases (Note No. 23.1) 3,671 10,591 (65.3) 3,671 9,989 (63.2)
Other Borrowings 134,399 482,652 (72.2) 195,256 725,121 (73.1)
1,013,070 871,860 16.2 1,443,927 1,542,880 (6.4)
The maturity analysis of borrowings is given in Note No 33 in the Financial Statements.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
23.1 Details of Finance Leases - Bank
Gross liability to the lessor 3,754 11,721 (68.0) 3,754 11,104 (66.2)
Less: Finance charges allocated to future periods (83) (1,130) (92.7) (83) (1,115) (92.6)
Net liability 3,671 10,591 (65.3) 3,671 9,989 (63.2)
Repayable within one year
Gross liability 3,190 7,630 (58.2) 3,190 7,013 (54.5)
Less: Finance charges allocated to future periods (72) (985) (92.7) (72) (970) (92.6)
Net liability 3,118 6,645 (53.1) 3,118 6,042 (48.4)
Repayable after one year before five years
Gross liability 564 4,091 (86.2) 564 4,091 (86.2)
Less: Finance charges allocated to future periods (11) (145) (92.6) (11) (145) (92.6)
Net liability 553 3,946 (86.0) 553 3,946 (86.0)
There were no lease rentals repayable beyond five years.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 237
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
24. Other Liabilities
Cheques Sent on Clearing 2,533 31,863 (92.0) 2,533 31,863 (92.0)
Interest Payable 3,090,465 3,288,649 (6.0) 3,090,465 3,288,649 (6.0)
Provision for Retiring Gratuity (Note No. 24.1) 89,223 57,941 54.0 100,173 66,021 51.7
Pension Fund (Note No. 24.2) - 160,619 (100.0) - 160,619 (100.0)
Provision for Deposit Insurance Scheme (Note No. 24.3) 44,000 - 100.0 44,000 - 100.0
Other Payable 2,164,485 1,914,709 13.0 2,736,843 2,329,277 17.5
5,390,706 5,453,781 (1.2) 5,974,014 5,876,430 1.7
24.1 Provision for Retiring Gratuity
Balance as at 1st January 57,941 19,087 203.6 66,021 24,087 174.1
Provision made during the year (Note No. 6.2) 41,592 54,668 (23.9) 44,251 55,971 (20.9)
99,533 73,755 35.0 110,271 80,058 37.7
Benefits paid by the plan (10,310) (15,814) (34.8) (10,098) (14,037) (28.1)
Balance as at 31st December 89,223 57,941 54.0 100,173 66,021 51.7
An actuarial valuation of the gratuity fund was carried out as at 31st December 2010 by M/s. Piyal S Goonetilleke and Associates, a professional actuary. The valuation
method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by SLAS No.16 Employee Benefits.
Actuarial assumptions 2010 & 2009
Discount Rate 9%
Salary Increment 9%
Mortality GA 1983 Mortality Table
Retirement Age 55 years
Sensitivity of Assumptions Employed in Actuarial Valuation
The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the
employment benefit liability measurement.
The sensitivity of the Income Statement and Balance Sheet is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and
employment benefit obligation for the year.
2010 2009
Increase / (Decrease) in
Discount Rate
Increase / (Decrease)
in Salary Increment
Sensitivity Effect on
Income Statement
Increase/ (Reduction) in
results for the year
(Rs’ Mn)
Sensitivity Effect on
Employment Benefit
Obligation Increase/
(Decrease) in the
Liability (Rs’ Mn)
Sensitivity Effect on
Income Statement
Increase/ (Reduction) in
results for the year
(Rs’ Mn)
Sensitivity Effect on
Employment Benefit
Obligation Increase/
(Decrease) in the
Liability (Rs’ Mn)
1% 5.7 (5.7) 8.7 (8.7)
(1%) (13.9) 13.9 (10.3) 10.3
1% (13.6) 13.6 (10.1) 10.1
(1%) 11.6 (11.6) 8.7 (8.7)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 238
24.2 Pension Fund
The amounts recognised in the balance sheet are as follows:
Bank Group
2010 2009 2010 2009
Present value of funded obligations as at 31 st December 2,885,617 2,398,198 2,885,617 2,398,198
Fair value of plan assets as at 31st December (2,903,616) (1,908,452) (2,903,616) (1,908,452)
(17,999) 489,746 (17,999) 489,746
Present value of unfunded obligations (275,310) (412,965) (275,310) (412,965)
Unrecognised actuarial gains/losses 241,181 83,838 241,181 83,838
(52,129) 160,619 (52,129) 160,619
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Balance as at 1st January 160,619 (49,468) (424.7) 160,619 (49,468) (424.7)
Provision made during the year (Note No. 6.1) 313,841 413,224 (24.1) 313,841 413,224 (24.1)
Less: Payments/Investments made during the year (474,460) (203,137) 133.6 (474,460) (203,137) 133.6
Balance as at 31st December - 160,619 (100.0) - 160,619 (100.0)
An actuarial valuation of the pension fund was carried out as at 31st December 2010 by M/s. Piyal S Goonetilleke and Associates, a professional actuary. The valuation
method used by the actuary to value the Fund is the “Projected Unit Credit Method”, recommended by SLAS No.16 Employee Benefits.
Actuarial assumptions 2010 & 2009
Discount Rate 9%
Salary Increment 9%
Annual Return on Assets 9%
Mortality GA 1983 Mortality Table
Retirement Age Normal retirement age or age on valuation date, if greater
Sensitivity of Assumptions Employed in Actuarial Valuation
The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed with all other variables held constant in the
employment benefit liability measurement.
The sensitivity of the Income Statement and Balance Sheet is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and
employment benefit obligation for the year.
2010 2009
Increase / (Decrease) in
Discount Rate
Increase / (Decrease)
in Salary Increment
Sensitivity Effect on
Income Statement
Increase/ (Reduction) in
results for the year
(Rs’ Mn)
Sensitivity Effect on
Employment Benefit
Obligation Increase/
(Decrease) in the
Liability (Rs’ Mn)
Sensitivity Effect on
Income Statement
Increase/ (Reduction) in
results for the year
(Rs’ Mn)
Sensitivity Effect on
Employment Benefit
Obligation Increase/
(Decrease) in the
Liability (Rs’ Mn)
1% 415.0 (415.0) 355.6 (355.6)
(1%) (518.9) 518.9 (446.6) 446.6
1% (209.4) 209.4 (240.7) 240.7
(1%) 242.0 (242.0) 212.5 (212.5)
24.3 In terms of Banking Act Direction No.5 of 2010 on Insurance of Deposit Liabilities, Bank shall insure their eligible deposit liabilities under the Deposit Insurance
Scheme operated by the Monetary Board with effect from 1st October 2010. To comply with the requirements, Bank made a provision of 0.125%p.a. on the
eligible deposit liabilities for the quarter ended 31st December 2010.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 239
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
25. Current Taxation
Balance brought forward 578,757 670,104 (13.6) 583,664 668,760 (12.7)
Current year provision (Note No. 9.1) 1,532,628 1,651,652 (7.2) 1,617,908 1,711,237 (5.5)
Less: Payment of tax (1,199,875) (1,742,999) (31.2) (1,250,942) (1,796,333) (30.4)
Balance c/f 911,509 578,757 57.5 950,630 583,664 62.9
26. Deferred Taxation
Balance brought forward 481,199 254,941 88.7 478,636 268,703 78.1
Increase/(decrease) in provision (Note 9.3) (333,663) 226,258 (247.5) (343,682) 209,933 (263.7)
Deferred tax liability attributable to revaluation
surplus charged to equity 48,904 - 100.0 48,904 - 100.0
Balance c/f 196,440 481,199 (59.2) 183,859 478,636 (61.6)
26.1 Analysis of Deferred Tax Assets and Liabilities
26.1.1 8ank
2010 2009
Temporary difference Tax effect Temporary difference Tax effect
Deferred Tax Liability
Property and Equipment 526,623 147,454 531,800 186,130
Lease Rentals 844,212 236,379 900,995 315,348
Revaluation on Buildings 174,657 48,904 - -
1,545,493 432,738 1,432,795 501,478
Deferred Tax Asset
Unclaimed Bad debt provision - Specific 478,806 134,066 - -
Unclaimed Impairment provision - Investment 275,953 77,267 - -
Defined Benefit Obligation 89,163 24,966 57,941 20,279
843,922 236,298 57,941 20,279
Net deferred tax (Asset) / Liability 701,571 196,440 1,374,854 481,199
26.1.2 Croup
2010 2009
Temporary difference Tax effect Temporary difference Tax effect
Deferred Tax Liability
Property and Equipment 539,718 151,121 750,749 262,762
Lease Rentals 950,550 266,154 900,995 315,348
Revaluation on Buildings 174,657 48,904 - -
1,664,925 466,179 1,651,744 578,110
Deferred Tax Asset
Unclaimed Bad debt provision - Specific 478,806 134,065 - -
Unclaimed Impairment provision - Investment 275,953 77,267 - -
Defined Benefit Obligation 99,519 27,865 66,147 23,150
Brought forward tax losses 154,010 43,123 218,068 76,324
1,008,287 282,320 284,215 99,474
Net deferred tax (Asset) / Liability 656,637 183,859 1,367,529 478,636
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 240
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
27. Other liabilities evidenced by paper
Redeemable Debentures (Note No.27.1) 2,050,000 2,050,000 - 2,050,000 2,050,000 -
Long Term Bond (Note No 27.2) 1,148,800 1,052,468 9.2 1,148,800 1,052,468 9.2
3,198,800 3,102,468 3.1 3,198,800 3,102,468 3.1
27.1 Redeemable Debentures
Balance as at 1st January 2,050,000 3,550,000 (42.3) 2,050,000 3,550,000 (42.3)
Debentures issued - - - - - -
Debentures redeemed - (1,500,000) (100.0) - (1,500,000) (100.0)
Balance as at 31st December (Note No.27.1.1, 27.1.2, & 27.1.3) 2,050,000 2,050,000 - 2,050,000 2,050,000 -
27.1.1 The debentures consists of 3,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2006.
No of 2009 2010 Allotment Maturity Rate of Interest
Debentures Value Value Date Date
(Rs.’000) (Rs.’000)

3,000,000 300,000 300,000 29 Dec 2006 28 Dec 2011 Floating rate is equivalent to the one year
weighted avg. Treasury Bill rate (gross)
3,000,000 300,000 300,000 plus 1.5% p.a., payable annually.
27.1.2 The debentures consists of 15,000,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.
The debentures are quoted in the Colombo Stock Exchange.
No of 2009 2010 Allotment Maturity Rate of Interest
Debentures Value Value Date Date
(Rs.’000) (Rs.’000)

5,206,725 520,673 520,673 30 Aug 2007 29 Aug 2012 Fixed - 17.5 % per annum payable annually
222,650 22,265 22,265 30 Aug 2007 29 Aug 2012 Fixed - 15.5 % per annum payable monthly
9,570,625 957,063 957,063 30 Aug 2007 29 Aug 2012 Floating rate is equivalent to the three months
15,000,000 1,500,000 1,500,000 Treasury Bill rate (gross) plus 1.5%
p.a., payable quarterly.
27.1.3 The debentures consists of 2,500,000 unsecured subordinated redeemable 5-year debentures of Rs.100/- each issued in 2007.
No of 2009 2010 Allotment Maturity Rate of Interest
Debentures Value Value Date Date
(Rs.’000) (Rs.’000)

2,500,000 250,000 250,000 30 June 2007 28 June 2012 Floating rate is equivalent to the six months
2,500,000 250,000 250,000 weighted avg. Treasury Bill rate (gross)
plus 1.75% p.a., payable semi annually.
Debenture information are given on page 272.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 241
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
27.2 Long Term Bond
Balance as at 1st January 1,052,468 964,214 9.2 1,052,468 964,214 9.2
Interest Accrued 96,332 88,254 9.2 96,332 88,254 9.2
Balance as at 31st December 1,148,800 1,052,468 9.2 1,148,800 1,052,468 9.2
28. Stated capital
Ordinary Shares 1,786,250 1,581,654 12.9 1,786,250 1,581,654 12.9
1,786,250 1,581,654 12.9 1,786,250 1,581,654 12.9
Number of shares as at 31st December 2010 increased to 152,807,972 from 68,887,628 as at 31st December 2009, due to effecting the scrip dividend and two sub-
division of shares given in Note No. 10.1.
Share information are given on pages 267 and 271.
28.1 Rights Preferences & Restrictions of Classes of Capital
The holders of ordinary shares confer their right to receive dividends as declared from time to time and are entitled to one vote per share at the Annual General meeting
of the Bank.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
29. Reserves
29.1 Statutory/Risk Reserve Funds
Statutory Reserve Fund (Note 29.1.1) 614,834 449,697 36.7 622,004 449,985 38.2
Risk Reserve Fund (Note 29.1.2) 31,730 21,316 48.9 31,730 21,316 48.9
646,564 471,013 37.3 653,735 471,301 38.7
29.1.1 Statutory Reserve Fund
Balance as at 1st January 449,697 407,731 10.3 449,985 408,019 10.3
Transfer to Reserve Fund ( Note No. 29.3 ) 165,137 41,966 293.5 172,019 41,966 309.9
Balance as at 31st December 614,834 449,697 36.7 622,004 449,985 38.2
The statutory reserve fund is maintained as required by the section 20 (1) of the Banking Act No. 30 of 1988. A sum equivalent to 5% of the profit after tax , but
before any dividend is declared or any profits are transferred to elsewhere should be transfer to above reserve until the reserve is equal to 50% of the paid-up capital of
the Bank and thereafter a further sum equivalent to 2% of such profits until the amount of the said reserve fund is equal to the paid-up capital of the Bank.The balance
in the statutory reserve fund will be used only for the purposes specified in the Section 20(2) of the Banking Act No. 30 of 1988.
However, the paid-up capital concept was abolished by the Companies Act No. 7 of 2007. Therefore, Bank considered the ‘stated capital’ as equivalent of ‘paid-up’
capital and transferred 5% of profit after tax to the Statutory Reserve Fund. The Bank’s stated capital increased to Rs. 1,786.2 Mn during the year due to scrip dividends
being declared to shareholders.
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
29.1.2 Risk Reserve Fund
Balance as at 1st January 21,316 - 100.0 21,316 14,262 49.5
Transferred from Sampath Surakum Ltd upon amalgamation - 14,262 (100.0) - 14,262 (100.0)
Transferred to Bank upon amalgamation - - - - (14,262) 100.0
Transfer to Reserve Fund (Note No. 29.3) 10,414 7,054 47.6 10,414 7,054 47.6
Balance as at 31st December 31,730 21,316 48.9 31,730 21,316 48.9
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 242
In terms of section 12 of the Regulations issued by the Minister of Finance under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance, a
sum equivalent to 25% of the profit after tax of the Sampath Surakum Ltd. was transferred to a special risk reserve as per direction issued by the Central Bank upto 2nd
November 2009.
After the amalgamation of Sampath Surakum Ltd. with the Bank on 2nd November 2009, 25% of profit after tax of Primary Dealer Unit was transferred to the same reserve.
Bank Subsidiary Group
Revaluation Revaluation Total
Reserve Reserve Reserve
(Rs.’000) (Rs.’000) (Rs.’000)
29.2 Other Capital Reserves - Revaluation Reserve
Balance as at 1st January 2010 1,152,615 615,931 1,768,546
Additions 415,331 803,545 1,218,876
Disposals - - -
Deferred tax liability attributable to revaluation surplus (48,904) - (48,904)
Balance as at 31st December 2010 1,519,041 1,419,477 2,938,518
Revaluation reserve relates to the revaluation of property & equipment as described in Note No. 21.
2010 2010 2010 2009
Bank Subsidiary/ Group Group
Total Associate Total Total Change
General Retained Revenue Retained Revenue Revenue
Reserve Profits Reserves Profits Reserves Reserves %
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
29.3 Revenue Reserves
Balance as at 1st January 8,167,187 473,712 8,640,899 149,400 8,790,299 7,060,501 24.5
Adjustments
Net profit for the year - 3,302,748 3,302,748 249,616 3,552,364 2,121,951 67.4
Appropriations
Final dividend paid - 2009 (Note No. 11) - (473,602) (473,602) - (473,602) (275,550) 71.9
Interim scrip dividend paid - 2010 (Note No. 11) - (227,329) (227,329) - (227,329) - (100.0)
Dividends from subsidiary &
associate companies (Note No. 4) - - - (36,438) (36,438) (38,195) (4.6)
Minority interest (Note No. 30) - - - (35,516) (35,516) (11,273) 215.1
Transfer to statutory reserve fund (Note No. 29.1.1) - (165,137) (165,137) (6,883) (172,019) (41,966) 309.9
Transfer to risk reserve fund (Note No. 29.1.2) - (10,414) (10,414) - (10,414) (7,054) 47.6
Transfer to general reserve 1,891,335 (1,891,335) - - - - -
Change in holding
subsidiary company share - - - - - (18,115) 100.0
Balance as at 31st December 10,058,522 1,008,643 11,067,164 320,179 11,387,343 8,790,299 29.5
88.3 8.9 97.2 2.8 100.0
Group
2010 2009 Change
(Rs.’000) (Rs.’000) %
30. Minority Interest
Balance as at 1st January 95,228 119,590 (20.4)
Profit/(loss) applicable for the year 35,516 11,273 215.1
Add : Revaluation Surplus 23,635 - 100.0
Less : Dividends paid (2,483) (3,710) (33.1)
Change in holding of share - (31,926) 100.0
Balance as at 31st December 151,896 95,228 59.5
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 243
31. Commitments and Contingencies
31.1 In the normal course of business the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to its customers. No material
losses are anticipated as a result of these transactions.
Bank Group
2010 2009 Change 2010 2009 Change
As at 31st December (Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Commitments
Commitment for unutilized facilities (direct advances) 22,968,058 15,802,061 45.3 22,968,058 15,802,061 45.3
22,968,058 15,802,061 45.3 22,968,058 15,802,061 45.3
Contingent Liabilities
Acceptances 3,133,328 3,399,904 (7.8) 3,133,328 3,399,904 (7.8)
Documentary credit 8,115,432 5,617,865 44.5 8,115,432 5,617,865 44.5
Guarantees 13,069,829 12,397,993 5.4 13,069,829 12,397,993 5.4
Bills sent for collection 154,878 331,648 (53.3) 154,878 331,648 (53.3)
Stock on travellers’ cheques 334,661 463,210 (27.8) 334,661 463,210 (27.8)
24,808,129 22,210,621 11.7 24,808,129 22,210,621 11.7
Forward exchange contracts 20,851,936 24,008,962 (13.1) 20,851,936 24,008,962 (13.1)
45,660,065 46,219,583 (1.2) 45,660,065 46,219,583 (1.2)
Commitments and Contingencies 68,628,122 62,021,644 10.7 68,628,122 62,021,644 10.7
31.2 Contingent Liabilities
31.2.1 Litigation against the Bank
I. Before the Labour Tribunal :
(a) Two LT applications are before the Labour Tribunal in Case Nos. 1/14/2006 & 08/410/2010 on termination of employment.
(b) One LT application is before the Labour Tribunal in Case No. 39/09/2006 - Matale pursuant to which SC Case No. 22/2009 in High Court Kandy and
Case No. SC/SPL/LA 73/2010 are pending.
II. To prevent the Bank from enforcing the mortgages to recover it’s dues:
(a) Two actions have been filed in Supreme Court in Case Nos. SC/CHC/12/2002 & SC/CHC/21/2010.
(b) Five actions have been filed in Court of Appeal in Case Nos. CA/REV/690/2005, 457/2006, 46/2004, CALA/320/2001 & CALA/48/2006.
(c) Twelve cases have been filed against the Bank in the Commercial High Court Case Nos. HC/CIVIL/124/2009, CHC 421/10, CHC 326/10, CHC 83/10,
CHC 91/10, CHC 276/10, CHC 260/10, CHC 247/10, CHC 70/10, CHC 423/10, CHC 421/10/MR & CHC 500/10 MR.
(d) Twenty five actions have been filed in District Court , Colombo by constituents in Case Nos. 0003/DHP, DMR/01138, 7358/090/DMR, 58032/M,
53009/MHP, 21508/L, DSP/178/2010, DSP/180/2010, DSP/167/10, DSP/162/10, DSP/130/10, DSP/119/10, DSP/89/10, DSP/88/10, DSP/85/10,
DSP/52/10, DSP/210/09, DSP/191/09, DSP/214/09, DSP/216/09, DLM/214/09, 7058/10/DR, DSP/313/10, DSP/220/10 & DSP/276/10.
Three in DC Kaduwela in Case Nos. 104/L, 75/L, 74/L, one in DC Horana in Case No. 2504/MB, one in DC Kuliyapitiya in Case No. 15315/L, one in
DC Kurunegala in Case No. 7587/L, two in DC Marawila in Case No. 1617/L & 2984/M, one in DC Nugegoda in Case No. 267/L, one in DC Mount
Lavinia in Case No. 363/CLAIM, one in DC Attanagalla in Case No. 640/L, one in DC Hatton in Case No. 1585/M & one in DC Kandy in Case No.
263/10/DSP have been filed to prevent the Bank from enforcing the mortgages to recover it’s dues.
III. Bank has been made a party only for the purpose of giving notice
(a) Twelve actions have been filed in DC Colombo in Case Nos. DSP/205/2008, DSP/00174/2009, DSP/00251/09, DSP/231/09, DSP/221/10,
DSP/5787/10/DMR, DSP/172/09, CHC/482/10, CHC/494/10, 39/Ejectment, 24208/P & 5207/SPL
IV. Commercial High Court Case No. 11/2004/HC(civil)
The above Case had been filed against the Bank in the Commercial High Court by Claremont Capital Limited (a company incorporated in the British Virgin
Islands) for the recovery of a sum of Rs 272,232,295.16 on the allegation that the Bank had wrongfully debited the said amount from the bank account
of Claremont Capital Limited. The said party had also claimed a sum of Rs. 53,411,299.34 on account of the alleged loss suffered by them up to date of
institution of the action and a sum of Rs.4,906,796.63 per month as alleged continuing losses.
Judgment of the said case was delivered in favour of Sampath Bank on 20th January 2011. The plaint of the plaintiff has been dismissed with costs.
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 244
31.2.2 Capital expenditure approved by the Board of Directors, for which provisions have not been made in these accounts, amounted to approximately;
Bank Group
As at 31st December 2010 2009 2010 2009
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Approved and contracted for 166,338 138,088 166,338 138,088
Approved but not contracted for 271,509 417,531 271,509 417,531
437,847 555,619 437,847 555,619
32. Related Party Transactions
The Bank carries out transactions in the ordinary course of business with the related parties.
32.1 Transactions with Key Managerial Personnel (KMPs)
Key managerial personnel include members of the Board of Directors of the Bank, their close family members and key employees of the Bank holding directorships in
Subsidiary and Associate companies of the Bank.
32.1.1 Short term employment benefits to key managerial personnel amounted to Rs. 33,810 thousand for the year 2010. (Rs. 29,174 thousand in 2009)
32.1.1.1 Directors fees & expenses amounted to Rs. 16,345 thousand for the year 2010. (Rs. 16,075 thousand in 2009)
32.1.1.2 No post employment benefits was paid to key managerial personnel during the year 2010. (Nil - 2009)
32.1.2 Loans & advances to key managerial personnel and their close family members are detailed below.
Limit Balances as at Limit Balances as at
2010 31st December 2010 2009 31st December 2009
(Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
4,258 265 - -
32.1.3 Credit card facilities to key managerial personnel and their close family members are detailed below.
Limit Balances as at Limit Balances as at
2010 31st December 2010 2009 31st December 2009
(Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
9,475 1,077 3,875 513
J2.1.4 Deposits and investments from key managerial personnel amounted to Rs. 191.81S thosand for the year 2010. (Rs. 68.098 thousand in 2009)
32.1.5 Entities controlled by close family members of key managerial personnel.
Facility 2010 2009
(Rs. ‘000) (Rs. ‘000)
Loans & Advances - 433
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 245
32.2 Transactions with Subsidiary Companies
The Bank had the following financial dealings during the year with related parties.
2010 2009
Nature of Facility / Balance Outstanding Balance Outstanding
Subsidiary Company Transaction (Rs. ‘000) (Rs. ‘000)
Sampath Centre Ltd. Deposits 67,206 29,771
Loans & advances 74,400 139,801
Income & fees received 153,976 148,577
Expenses & fees paid 15,129 9,844
Other assets 4,324 2,494
Other liabilities 62,754 62,754
Sampath Surakum Ltd. Income & fees received - 95,321
Expenses & fees paid - 5,094
Sampath Surakum Ltd. was amalgamated with the Bank w.e.f. 03rd November 2009.
S C Securities (Pvt) Ltd. Loans & advances 14,545 49,832
Off - balance sheet accommodations 1,750 1,750
Deposits 46,929 76,701
Income & fees received 1,413 10,359
Expenses & fees paid 6,725 6,208
Other liabilities - 25
Sampath Leasing & Factoring Ltd. Loans & advances 516,472 520,031
Deposits 19,473 10,235
Income & fees received - 185
Expenses & fees paid 46,531 73,476
Lease receivable - 602
Sampath Information Technology Solutions Ltd. Loans & advances 6,549 9,617
Expenses & fees paid 1,171 1,506
32.3 Transactions with Associate Company
LankaBangla Finance Ltd. Dividend income received - 17,405
LankaBangla Finance Ltd. is no longer an associate of the Bank since 03.08.2009.
32.4 Transactions with Entities where Key Managerial Personnel have either Significant Influence or Control
During the year, the Bank purchased goods and services to the value of Rs.51.1 Mn from entities where key managerial personnel have either significant influence or
control. (2009 - Rs.23.5 Mn)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 246
32.5 Transactions with Post Employment Benefits of the Bank
Name of the Related Nature of 2010 2009
Party Company/Individual Transaction (Rs.’000) (Rs.’000)
32.5.1 Sampath Bank Employees Provident Fund
Treasury Bills 1,537,988 1,187,284
Deposits 943,919 827,616
Investment in Sampath Bank Shares 7,640,240 3,444,310
(No. of Shares)
Market Value as at 31st December 2,077,381 703,500
32.5.2 Sampath Bank Employees Pension Fund
Fixed Deposits 1,024,934 926,254
Demand Deposits - 1,417
Treasury Bills 1,553,990 968,598
Investment in Sampath Bank Shares 2,536,292 859,755
(No. of Shares)
Market Value as at 31st December 689,618 175,605
33. Maturity Analysis
An analysis of the interest bearing assets and liabilities based on the remaining period at the Balance Sheet date to the respective contractual maturity dates are as
follows.
33.1 Bank
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at
(Rs.’000) years 31.12.2010 31.12.2009
Interest Earning Assets
Money at Call & Short Notice 1,837,373 - - - - 1,837,373 2,473,108
Government of Sri Lanka Treasury Bills & Bonds 7,804,979 23,579,329 9,969 - - 31,394,278 31,767,817
Commercial Papers - - - - - - 459,389
Investment Securities 1,142,850 705,332 5,002,750 435,740 30,697 7,317,369 6,534,225
Securities Purchased under Re-sale Agreements - - - - - - 2,676,615
Bills of Exchange 2,295,427 - - - - 2,295,427 2,874,909
Loans & Advances 51,390,008 24,044,450 7,336,344 19,461,314 14,772,704 117,004,821 86,817,992
Lease Rentals Receivable 82,276 347,322 1,196,885 1,699,773 - 3,326,256 3,483,831
Total Interest Earning Asset - 31.12.2010 64,552,912 48,676,434 13,545,948 21,596,827 14,803,402 163,175,523
Total Interest Earning Asset - 31.12.2009 48,305,920 40,398,431 11,243,294 13,868,347 23,271,894 137,087,886
Non - Interest Earning Assets
Cash and Cash Equivalents 3,806,316 403,142 - - - 4,209,457 3,395,087
Balances with Central Bank of Sri Lanka 6,261,084 1,574,553 194,736 64,702 125,992 8,221,068 7,397,703
Dealing Securities - 899,106 - - - 899,106 276,207
Interest and Fees Receivable 1,959,236 - - - - 1,959,236 1,854,370
Investment in Subsidiaries & Associate Companies - - - - 991,626 991,626 991,626
Other Investments - 117,500 117,500 - 95,369 330,369 729,924
Property and Equipment - - - - 4,277,501 4,277,501 3,420,483
Other Assets 717,784 74,360 37,494 10,745 176,291 1,016,675 1,008,613
Total Non - Interest Earning Asset - 31.12.2010 12,744,419 3,068,661 349,731 75,447 5,666,778 21,905,037
Total Non - Interest Earning Asset - 31.12.2009 10,853,801 2,655,676 501,199 51,530 5,011,805 19,074,011
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 247
33.1 Bank continued...
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at
(Rs.’000) years 31.12.2010 31.12.2009
Total Asset - 31.12.2010 77,297,332 51,745,094 13,895,679 21,672,274 20,470,180 185,080,560
Percentage - 31.12.2010 41.8% 28.0% 7.5% 11.7% 11.1% 100%
Total Asset - 31.12.2009 59,159,721 43,054,107 11,744,493 13,919,877 28,283,699 156,161,897
Percentage - 31.12.2009 37.9% 27.6% 7.5% 8.9% 18.1% 100%
Interest Bearing Liabilities
Deposits 100,725,668 29,801,632 3,176,627 1,055,702 2,062,403 136,822,032 116,062,755
Refinance Borrowings 184,488 925,452 1,807,567 1,076,221 449,201 4,442,929 4,819,327
Securities Sold Under Re-Purchase Agreement 3,506,186 855,177 - - - 4,361,363 2,887,480
Other Liabilities Evidenced by Paper - 300,000 1,750,000 - 1,148,800 3,198,800 3,102,468
Other Borrowings 886,925 125,592 553 - - 1,013,070 871,861
Total Interest Bearing Liabilities - 31.12.2010 105,303,266 32,007,854 6,734,747 2,131,923 3,660,403 149,838,194
Total Interest Bearing Liabilities - 31.12.2009 84,154,197 30,808,861 7,464,305 1,654,763 3,661,766 127,743,891
Non - Interest Bearing Liabilities
Deposits 13,686,769 - - - - 13,686,769 9,627,135
Deferred Taxation - - - - 196,440 196,440 481,199
Unclaimed Dividends - - - - 37,922 37,922 29,880
Other Liabilities 3,580,173 468,334 - - 2,253,708 6,302,215 6,433,612
Shareholders’ Funds - - - - 15,019,020 15,019,020 11,846,180
Total Non - Interest Bearing Liabilities - 31.12.2010 17,266,942 468,334 - - 17,507,089 35,242,366
Total Non - Interest Bearing Liabilities - 31.12.2009 15,293,309 578,757 - - 12,545,940 28,418,006
Total Liabilities - 31.12.2010 122,570,209 32,476,188 6,734,747 2,131,923 21,167,492 185,080,560
Percentage - 31.12.2010 66.2% 17.5% 3.6% 1.2% 11.4% 100%
Total Liabilities - 31.12.2009 99,447,506 31,387,618 7,464,305 1,654,763 16,207,706 156,161,897
Percentage - 31.12.2009 63.7% 20.1% 4.8% 1.1% 10.4% 100%
GAP 2010 (45,272,877) 19,268,906 7,160,933 19,540,351 (697,313)
GAP 2009 (40,287,785) 11,666,489 4,280,188 12,265,114 12,075,993
33.2 Group
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at
(Rs.’000) years 31.12.2010 31.12.2009
Interest Earning Assets
Money at Call & Short Notice 1,837,373 - - - - 1,837,373 2,473,108
Government of Sri Lanka Treasury Bills & Bonds 7,807,348 23,585,598 9,969 - - 31,402,915 31,797,446
Commercial Papers - - - - - - 459,389
Investment Securities 1,142,850 705,332 5,002,750 435,740 186,747 7,473,419 6,721,515
Securities Purchased under Re-sale Agreements - - - - - - 2,676,615
Bills of Exchange 2,295,427 - - - - 2,295,427 2,874,909
Loans & Advances 50,780,528 24,044,450 7,336,344 19,461,314 14,771,969 116,394,605 86,102,302
Lease Rentals Receivable 82,276 914,117 1,801,245 1,699,773 6,663 4,504,074 5,026,648
Total Interest Earning Asset - 31.12.2010 63,945,802 49,249,497 14,150,308 21,596,827 14,965,380 163,907,813
Total Interest Earning Asset - 31.12.2009 48,548,337 40,755,655 11,683,172 13,842,475 23,302,282 138,131,932
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 248
33.2 Group continued...
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Total as at Total as at
(Rs.’000) years 31.12.2010 31.12.2009
Non - Interest Earning Assets
Cash and Cash Equivalents 3,812,036 403,142 - - - 4,215,178 3,402,599
Balances with Central Bank of Sri Lanka 6,261,084 1,574,553 194,736 64,702 125,992 8,221,068 7,397,703
Dealing Securities - 899,106 - - - 899,106 276,207
Interest and Fees Receivable 1,959,236 - - - - 1,959,236 1,854,370
Other Investments - 117,500 117,500 - 95,369 330,369 729,924
Propert and Equipment - - - - 6,436,694 6,436,694 4,731,762
Other Assets 1,476,695 192,573 42,279 10,745 194,625 1,916,917 1,477,553
Total Non - Interest Earning Asset - 31.12.2010 13,509,051 3,186,873 354,516 75,447 6,852,680 23,978,567
Total Non - Interest Earning Asset - 31.12.2009 11,167,392 2,790,811 501,199 51,530 5,359,186 19,870,118
Total Asset - 31.12.2010 77,454,853 52,436,370 14,504,824 21,672,274 21,818,059 187,886,380
Percentage - 31.12.2010 41.2% 27.9% 7.7% 11.5% 11.6% 100%
Total Asset - 31.12.2009 59,715,729 43,546,466 12,184,371 13,894,005 28,661,468 158,002,050
Percentage - 31.12.2009 37.8% 27.6% 7.7% 8.8% 18.1% 100%
Interest Bearing Liabilities
Deposits 100,592,060 29,801,632 3,176,627 1,055,702 2,062,403 136,688,425 116,357,376
Refinance Borrowings 184,488 925,452 1,807,567 1,076,221 449,201 4,442,929 4,819,327
Securities Sold Under Re-Purchase Agreement 3,506,186 855,177 - - - 4,361,363 2,887,480
Other Liabilities Evidenced by Paper - 300,000 1,750,000 - 1,148,800 3,198,800 3,102,468
Other Borrowings 966,111 209,996 267,820 - - 1,443,927 1,542,880
Total Interest Bearing Liabilities - 31.12.2010 105,248,845 32,092,258 7,002,014 2,131,923 3,660,403 150,135,444
Total Interest Bearing Liabilities - 31.12.2009 84,182,845 30,992,076 7,762,881 1,708,891 3,661,766 128,709,531
Non - Interest Bearing Liabilities
Deposits 13,686,769 - - - - 13,686,769 9,616,881
Deferred Taxation - - - - 183,859 183,859 478,636
Unclaimed Dividends - - - - 37,922 37,922 29,880
Other Liabilities 4,052,499 509,957 11,062 86,469 2,264,658 6,924,644 6,460,094
Shareholders’ Funds - - - - 16,765,846 16,765,846 12,611,800
Minority Interest - - - - 151,896 151,896 95,228
Total Non - Interest Bearing Liabilities - 31.12.2010 17,739,268 509,957 11,062 86,469 19,404,180 37,750,936
Total Non - Interest Bearing Liabilities - 31.12.2009 15,596,024 583,664 - 100,917 13,412,988 29,292,519
Total Liabilities and Shareholders’ funds- 31.12.2010 122,988,113 32,602,214 7,013,076 2,218,392 23,064,583 187,886,380
Percentage - 31.12.2010 65.5% 17.4% 3.7% 1.2% 12.3% 100%
Total Liabilities - 31.12.2009 99,778,869 31,575,740 7,762,881 1,809,808 17,074,754 158,002,050
Percentage - 31.12.2009 63.2% 20.0% 4.9% 1.1% 10.8% 100%
GAP 2010 (45,533,260) 19,834,156 7,491,748 19,453,882 (1,246,524)
GAP 2009 (40,063,140) 11,970,726 4,421,490 12,084,197 11,586,714
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 249
33.3 Interest Rate Sensitivity - Interest Rate Risk Analysis of Assets and Liabilities
The Bank is exposed to various risk associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flow.
The following table indicate the periods in which the financial instruments reprice or mature , whichever is earlier.
Bank
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Non Interest Total as at Total as at
Sensitive 31.12.2010 31.12.2009
Assets
Cash and Cash Equivalents 1,837,373 - - - - 4,209,457 6,046,830 5,868,195
Balances with Central Bank of Sri Lanka - - - - - 8,221,068 8,221,068 7,397,703
Government of Sri Lanka Treasury Bills & Bonds 7,804,979 23,579,329 9,969 - - - 31,394,278 31,767,817
Commercial Papers - - - - - - - 459,389
Dealing Securities - - - - - 899,106 899,106 276,207
Investment Securities 1,142,850 705,332 5,002,750 435,740 30,697 330,369 7,647,737 7,264,149
Securities Purchased under Re-sale Agreements - - - - - - 2,676,615
Bills of Exchange 2,295,427 - - - - - 2,295,427 2,874,909
Loans & advances 51,390,008 24,044,450 7,336,344 19,461,314 14,772,704 - 117,004,821 86,817,992
Lease rentals receivable 82,276 347,322 1,196,885 1,699,773 - - 3,326,256 3,483,831
Investment in subsidiaries & Associate Companies - - - - - 991,626 991,626 991,626
Interest and fees receivable - - - - - 1,959,236 1,959,236 1,854,370
Other Assets - - - - - 1,016,674 1,016,674 1,008,611
Property and equipment - - - - - 4,277,501 4,277,501 3,420,483
Total Assets as at 31.12.2010 64,552,912 48,676,434 13,545,948 21,596,827 14,803,402 21,905,037 185,080,560
Percentage - 31.12.2010 34.9% 26.3% 7.3% 11.7% 8.0% 11.8% 100%
Total Assets as at 31.12.2009 58,768,090 32,416,801 6,220,329 13,604,359 23,437,896 21,714,421 156,161,897
Percentage - 31.12.2009 37.6% 20.8% 4.0% 8.7% 15.0% 13.9% 100%
Liabilities
Deposits 100,725,668 29,801,632 3,176,627 1,055,702 2,062,403 13,686,769 150,508,801 126,090,964
Refinance borrowings 184,488 925,452 1,807,567 1,076,221 449,201 - 4,442,929 4,819,327
Securities Sold Under re-purchase agreement 3,506,186 855,177 - - - - 4,361,363 2,887,480
Debentures/Securities evidenced by paper - 300,000 1,750,000 - 1,148,800 - 3,198,800 3,102,468
Other Borrowings 886,925 125,592 553 - - - 1,013,070 871,861
Deferred Taxation - - - - - 196,440 196,440 481,199
Unclaimed Dividends - - - - - 37,922 37,922 29,880
Other Liabilities - - - - - 6,302,215 6,302,215 6,032,538
Shareholders’ Funds - - - - - 15,019,020 15,019,020 11,846,181
Total Liabilities as at 31.12.2010 105,303,266 32,007,854 6,734,747 2,131,923 3,660,403 35,242,366 185,080,560
Percentage - 31.12.2010 56.9% 17.3% 3.6% 1.2% 2.0% 19.0% 100%
Total Liabilities as at 31.12.2009 86,803,089 30,876,210 5,687,414 1,474,685 2,419,840 28,900,657 156,161,897
Percentage - 31.12.2009 55.6% 19.8% 3.6% 0.9% 1.5% 18.5% 100%
Net Interest Sensitivity GAP 2010 (40,750,354) 16,668,580 6,811,202 19,464,904 11,142,998 (13,337,329)
Net Interest Sensitivity GAP 2009 (28,034,999) 1,540,591 532,915 12,129,674 21,018,056 (7,186,236)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 250
33.4 Interest Rate sensitivity - Interest rate risk analysis of assets and liabilities
The following table indicate the periods in which the financial instruments reprice or mature, whichever is earlier.
Group
Maturity Period Up to 3 months 3-12 months 1-3 years 3 to 5 years More than 5 Non Interest Total as at Total as at
Sensitive 31.12.2010 31.12.2009
Assets
Cash and Cash Equivalents 1,837,373 - - - - 4,215,178 6,052,551 5,875,708
Balances with Central Bank of Sri Lanka - - - - - 8,221,068 8,221,068 7,397,703
Government of Sri Lanka Treasury Bills & Bonds 7,807,348 23,585,598 9,969 - - - 31,402,915 31,797,446
Commercial Papers - - - - - - - 459,389
Dealing Securities - - - - - 899,106 899,106 276,207
Investment Securities 1,142,850 705,332 5,002,750 435,740 186,747 330,369 7,803,788 7,451,439
Securities Purchased under Re-sale Agreements - - - - - - - 2,676,615
Bills of Exchange 2,295,427 - - - - - 2,295,427 2,874,909
Loans & advances 50,780,528 24,044,450 7,336,344 19,461,314 14,771,969 - 116,394,606 86,102,302
Lease rentals receivable 82,276 914,117 1,801,245 1,699,773 6,663 - 4,504,074 5,026,647
Interest and fees receivable - - - - - 1,959,236 1,959,236 1,854,370
Other Assets - - - - - 1,916,917 1,916,917 1,477,555
Property and equipment - - - - - 6,436,694 6,436,694 4,731,762
Total Assets as at 31.12.2010 63,945,802 49,249,497 14,150,308 21,596,827 14,965,380 23,978,567 187,886,380
Percentage - 31.12.2010 34% 26% 8% 11% 8% 13% 100%
Total Assets as at 31.12.2009 58,991,991 32,290,585 7,041,185 13,575,583 23,467,633 22,635,072 158,002,050
Percentage - 31.12.2009 37.3% 20.4% 4.5% 8.6% 14.9% 14.3% 100%
Liabilities
Deposits 100,592,060 29,801,632 3,176,627 1,055,702 2,062,403 13,686,769 150,375,194 125,974,257
Refinance borrowings 184,488 925,452 1,807,567 1,076,221 449,201 - 4,442,929 4,819,327
Securities Sold Under re-purchase agreement 3,506,186 855,177 - - - - 4,361,363 2,887,480
Debentures/Securities evidenced by paper - 300,000 1,750,000 - 1,148,800 - 3,198,800 3,102,468
Other Borrowings 966,111 209,996 267,820 - - - 1,443,927 1,542,880
Deferred Taxation - - - - - 183,859 183,859 478,636
Unclaimed Dividends - - - - - 37,922 37,922 29,880
Other Liabilities - - - - - 6,924,644 6,924,644 6,460,093
Shareholders’ Funds - - - - - 16,765,846 16,765,846 12,611,800
Minority Interest - - - - - 151,896 151,896 95,228
Total Liabilities as at 31.12.2010 105,248,845 32,092,258 7,002,014 2,131,923 3,660,403 37,750,936 187,886,380
Percentage - 31.12.2010 56.0% 17.1% 3.7% 1.1% 1.9% 20.1% 100%
Total Liabilities as at 31.12.2009 85,139,907 31,059,424 6,255,819 1,708,891 3,661,765 30,176,243 158,002,050
Percentage - 31.12.2009 53.9% 19.7% 4.0% 1.1% 2.3% 19.1% 100%
Net Interest Sensitivity GAP 20010 (41,303,043) 17,157,239 7,148,294 19,464,904 11,304,977 (13,772,368)
Net Interest Sensitivity GAP 2009 (26,147,916) 1,231,161 785,366 11,866,692 19,805,868 (7,541,171)
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 251
34. Segment Reporting
Financial statistics by segments as per the provisions under Sri Lanka Accounting Standards No.28, Reporting of Financial Statement by segments.
Dealing/ Elimination/ Total
Banking Leasing Investment Others Unallocated
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
Interest 17,889,439 20,182,420 - - 2,545 11,889 2,392 3,436 (68,217) (97,675) 17,826,158 20,100,069
Leasing - - 895,784 1,244,961 - - - - - - 895,784 1,244,961
Dividends 49,148 78,225 - - 36,438 38,195 - - (36,438) (38,195) 49,148 78,225
Commissions 1,360,450 1,205,529 - - - - - - - - 1,360,450 1,205,529
Exchange 497,901 774,489 - - - - - - - - 497,901 774,489
Others 3,911,267 2,146,678 102,102 68,504 165,341 35,467 195,871 185,312 (187,959) (279,079) 4,186,623 2,156,881
Total revenue from
external customers 23,708,205 24,387,342 997,886 1,313,465 204,324 85,551 198,262 188,748 (292,614) (414,950) 24,816,064 25,560,156
Inter segment revenue (49,148) (78,225) - - 49,148 78,225 - - - - - -
Total revenue 23,659,057 24,309,117 997,886 1,313,465 253,472 163,777 198,262 188,748 (292,614) (414,950) 24,816,064 25,560,156
Segment result 4,325,338 3,740,010 321,859 178,620 103,823 14,359 112,112 81,509 (68,923) (169,962) 4,794,208 3,844,536
Share of profit of Associate company - 160,391
Profit from operations 4,794,208 4,004,927
Income tax expense 1,274,226 1,921,170
Minority Interest 35,516 11,273
Net profit for the year 3,484,466 2,072,483
Segment assets 170,274,116 143,668,945 16,712,219 14,474,164 355,531 200,592 2,186,535 1,341,712 (797,197) (1,683,364) 187,886,380 158,002,050
Unallocated assets
Total assets 170,274,116 143,668,945 16,712,219 14,474,164 355,531 200,592 2,186,535 1,341,712 (797,197) (1,683,364) 187,886,380 158,002,050
Segment liabilities 157,476,062 133,696,707 13,967,963 12,191,869 162,673 71,402 174,592 273,084 (812,652) (938,040) 170,968,638 145,295,021
Unallocated liabilities
Total liabilities 157,476,062 133,696,707 13,967,963 12,191,869 162,673 71,402 174,592 273,084 (812,652) (938,040) 170,968,638 145,295,021
Cash flows from
operating activities (3,057,994) 17,935,934 309,093 812,661 7,336 (60,744) 9,553 130,904 (28,194) 455,718 (2,760,206) 19,274,472
Cash flows from
investing activities 3,863,779 (14,572,190) (56,496) 844 (987) (223) (684) (573) 1,233 323,728 3,806,844 (14,248,414)
Cash flows from
financing activities (627,150) (4,418,515) (273,592) (667,884) - - (3,358) (84,753) 34,305 (902,717) (869,795) (6,073,869)
Capital expenditure 907,083 496,763 70,380 731 987 223 684 573 416 - 979,551 498,289
35. Trust Activities
Employees’ Share Trust Loan
The Sampath Bank Employees’ Share Trusts namely, Sampath Trust, Sampath Team Trust & Sampath Middle Management Trust were set up by the directors of the Bank.
This is in line with the Articles of the bank which empowers the directors to create an ESOP and 6,536,800 shares were purchased for this purpose, to be allocated to
employees. Payment for the shares being made by the trustees from the proceeds of loans ( Interest rate at 5 % ) granted by the Bank.
Sampath Trust Sampath Team Trust Sampath Middle
Management Trust
Trustees SSP Corporate Services (Pvt) Ltd Varners International (Pvt) Ltd Corporate Services Ltd
2010 2009 2010 2009 2010 2009
(Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000) (Rs.’000)
Loan Amount ( Rs ‘000 ) 173,620 173,620 169,689 169,689 175,119 175,119
Balance at beginning of the year 93,059 116,402 100,304 129,237 106,796 132,429
Additions 2,220 3,138 840 2,799 671 3,449
Repayments during the year (95,279) (26,480) (101,144) (31,732) (107,467) (29,082)
Balance at end of the year - 93,059 - 100,304 - 106,796
Number of Shares ( ‘000 ) 5,721 2,581 5,469 2,465 5,097 2,579
Market price 271.90 204.25 271.90 204.25 271.90 204.25
Market value of the shares held ( Rs.’000 ) 1,555,540 527,169 1,487,021 503,476 1,385,874 526,761
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Sampath Bank PLC 252
Under the restructuring proposals approved by the board, part of the shares held by the ESOP was sold and the loans were settled with the proceeds. The remaining
shares were reallocated to the eligible staff. Further, rules were amended to transfer the absolute ownership of shares to the staff at the point of leaving.

As approved by the shareholders of the Bank at the Extraordinary General Meeting held on 21.08.2010, Sampath Bank will implement the ESOP-2010 in the year 2011,
upon achieving the targets set for 2010. Accordingly, the Bank will create 3,056,159 share options to be offered to the eligible staff, at 2% of the existing 152,807,972
shares. The shares will be priced at Rs. 80/- per share. The option exercisable period would be 3 years, from the entitlement date of 30.06.2011 fixed in the scheme. In
the event of options being fully exercised by the eligible staff, the stated capital of the Bank would rise by Rs. 244.5 Mn, as a result of the consideration to be paid by
the staff under the ESOP.

In accordance with the above process the staff will get the opportunity to exercise their options pertaining to shares which are similar to the rights of the other
shareholders. The team members will be able to actively participate for decision making at the shareholders meeting by exercising their rights to speak and vote at such
meetings.
36. Assets Pledged as Security
The following aseets have been pledged as securities for liabilities.
36.1 Nature of Liabilities
Securities Sold under re-purchase Agreements
Bank Group
2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Balance as at 1st January 2,887,480 2,423,245 19.2 2,887,480 2,439,553 18.4
Additions 1,473,883 464,235 217.5 1,473,883 447,928 229.0
Balance as at 31st December 4,361,363 2,887,480 51.0 4,361,363 2,887,480 51.0
Nature of Assets Carring amounts pledged Carring amounts pledged
Assets pledged as Security 2010 2009 Change 2010 2009 Change
(Rs.’000) (Rs.’000) % (Rs.’000) (Rs.’000) %
Treasury Bills & Bonds included under Note No. 14 4,361,363 2,887,480 51.0 4,361,363 2,887,480 51.0
4,361,363 2,887,480 51.0 4,361,363 2,887,480 51.0
37. Comparative Information
The presentation and classification of following items in these Financial Statements are amended to ensure comparability with the current year.
2009
(Rs.’000)
As reported previously:
(a) Other Liabilities
- Margins 401,074
401,074
(b) Placements & Loans with Other Banks
- Money at call and short notice 30,000
- Placements with banks 2,443,108
2,473,108
(c) Net Asset Value per Share (Rs.) 171.96
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
Notes to the Financial Statements contd...
Sampath Bank PLC 253
Annual Report 2010 / Financial Reports / Notes to the Financial Statements
2010 2009
(Rs.’000) (Rs.’000)
Current Presentation:
(a) Deposits
- Margin Deposits - LKR 555,871 376,099
- Margin Deposits - FCY 49,066 24,975
604,937 401,074
(b) Cash & Cash Equivalents
- Money at call and short notice 50,000 30,000
- Placements with banks 1,787,373 2,443,108
1,837,373 2,473,108
(c) Net Asset Value per Share (Rs.) 77.52
Reasons for change in the presentation and classification:
(a) During the year, Margin deposits were re-classified under ‘Deposit’ liabilities towards a better presentation.
(b) During the year, ‘Placements with other banks’ were re-classified under ‘Cash & Cash Equivalents’ towards a better presentation.
(c) As at 31.12.2009 Net Asset Value per Share was amounted to Rs. 171.96. Hence, number of shares as at 31.12.2010 was increased to 152,807,972 from
68,887,628 due to effecting the scrip dividends and two sub-division of shares as given in Note No. 10.1, Net Asset Value per Share was restated to Rs. 77.52
(Net Assets as at 31.12.2009 was devided by number of shares as at 31.12.2010) in the comparative column in the Balance Sheet.
38. Post Balance Sheet Events
No circumstances have arisen since the balance sheet date which would require adjustments to, or disclosure in the financial statements, other than the following.

Final scrip dividend of Rs.6.60 per share , less 10.0% withholding tax will be paid on 152,807,972 ordinary shares, if the proposal is approved by the shareholders at
the annual general meeting to be held on 31.03.2011.

However, in accordance with Sri Lanka Accounting Standard 12 (Revised) on events after balance sheet date, proposed final dividends have not been recognised as a
liability as at 31st December 2010. As required by section 56(2) of the Companies Act No. 7 of 2007, the Board of Directors has confirmed that the Bank has satisfied
the ‘Solvency Test’ in accordance with section 57 of the Companies Act No. 7 of 2007, having obtained a certificate from the auditors, prior to recommending a final
scrip dividend of Rs. 6.60 per share for this year. The dividend will require the approval of the shareholders at the Annual General Meeting to be held on 31 st March
2011.

The Board of Directors of the Bank at a meeting held on 27 th January 2011 decided to introduce another ESOP for 2011, on the condition that the Bank achieves
certain enhanced performance criteria for 2011. Under this, again new shares will be created up to 2% of the current number of shares which would amount to
3,056,159 to be offered to the eligible staff. These shares too could be purchased within the next three years commencing 01.05.2012, in tranches not exceeding
three. The offer price at which the shares could be purchased during the entire period would be the volume weighted average of the Bank shares during last week of
January 2011, less a discount of 10%. However, this ESOP is subject to the approval of the Colombo Stock Exchange and the shareholders by a special resolution.
Sampath Bank PLC 254
Income Statement in US$
Bank Group
For the year ended 31st December 2010 2009 Growth 2010 2009 Growth
(US$.’000) (US$.’000) % (US$.’000) (US$.’000) %
Income 219,311 220,258 (0.4) 223,669 223,291 0.2
Interest Income 166,538 183,190 (9.1) 168,742 186,468 (9.5)
Less : Interest Expenses 89,703 115,005 (22.0) 90,459 117,692 (23.1)
Net Interest Income 76,834 68,185 12.7 78,283 68,777 13.8
Foreign Exchange Profit 4,488 6,766 (33.7) 4,488 6,766 (33.7)
Fees & Commission Income 12,262 10,531 16.4 12,262 10,531 16.4
Other Income 36,024 19,770 82.2 38,177 19,526 95.5
Operating Income 129,608 105,253 23.1 133,210 105,600 26.1
Operating Expenses
Personnel Costs 23,223 19,168 21.2 23,874 19,698 21.2
Premises, Equipment & Establishment Expenses 18,854 15,750 19.7 18,584 15,492 20.0
Provision for Retirement Benefits 3,204 4,087 (21.6) 3,228 4,099 (21.3)
Provision for Credit Losses - Specific 15,906 2,831 461.9 15,828 3,743 322.9
- General 1,220 (344) 454.5 1,220 (344) 454.5
Provision for Diminution/(Appreciation) in Value of Investments (401) 8,015 (105.0) (401) 8,015 (105.0)
Other Overhead Expenses 27,028 21,010 28.6 27,667 21,312 29.8
Operating Expenses 89,034 70,517 26.3 90,000 72,014 25.0
Operating Profit before Provision for Taxation
and Associate Company’s Profit 40,574 34,736 16.8 43,211 33,586 28.7
Add/(Less): Share of Profit before Tax of Associate Company - - - - 1,401 (100.0)
Profit before Tax 40,574 34,736 16.8 43,211 34,987 23.5
Less : Provision for Taxation 10,806 16,405 (34.1) 11,485 16,783 (31.6)
Profit after Tax 29,768 18,331 62.4 31,726 18,204 74.3
Attributable to:
Equity Holders of the Parent 29,768 18,331 62.4 31,406 18,105 73.5
Minority Interest - - - 320 98 225.1
Profit for the Year 29,768 18,331 62.4 31,726 18,204 74.3
Earnings per Share - Basic / Diluted (Rs.) 0.21 0.12
Dividend per Share - Gross 0.07 0.05 0.07 0.05
Dividend per Share - Net 0.07 0.05 0.07 0.05
Annual Report 2010 / Supplementary Information / Income Statement in US$
Sampath Bank PLC 255
Balance Sheet in US$
Bank Group
As at 31st December 2010 2009 Growth 2010 2009 Growth
(US$.’000) (US$.’000) % (US$.’000) (US$.’000) %
Assets
Cash and Cash Equivalents 54,501 51,264 6.3 54,552 51,330 6.3
Balance with Central Bank of Sri Lanka 74,097 64,626 14.7 74,097 64,626 14.7
Government of Sri Lanka Treasury Bills & Bonds 282,959 277,521 2.0 283,037 277,780 1.9
Commercial Papers - 4,013 (100.0) - 4,013 (100.0)
Dealing Securities 8,104 2,413 235.8 8,104 2,413 235.8
Investment Securities 68,930 63,459 8.6 70,336 65,095 8.1
Securities Purchased under Re-sale Agreements - 23,383 (100.0) - 23,383 (100.0)
Loans and Advances
Bills of Exchange 20,689 25,115 (17.6) 20,689 25,115 (17.6)
Loans and Advances 1,054,573 758,434 39.0 1,049,073 752,182 39.5
Lease Receivable within One Year 12,173 15,248 (20.2) 17,282 20,983 (17.6)
Lease Receivable from One to Five Years 17,807 14,948 19.1 23,254 22,691 2.5
Lease Receivable after Five Years - 239 (100.0) 60 239 (74.8)
Investment in Subsidiary Companies 8,938 8,663 3.2 - - -
Interest and Fees Receivable 17,659 16,200 9.0 17,659 16,200 9.0
Other Assets 8,454 8,189 3.2 16,420 12,186 34.7
Goodwill and Other Intangible Assets 710 622 14.1 857 722 18.7
Property and Equipment 38,553 29,881 29.0 58,014 41,336 40.3
Total Assets 1,668,144 1,364,217 22.28 1,693,433 1,380,292 22.7
Liabilities
Deposits 1,356,546 1,101,520 23.2 1,355,342 1,100,500 23.2
Unclaimed Dividends 342 261 30.9 342 261 30.9
Refinance Borrowings 40,044 42,101 (4.9) 40,044 42,101 (4.9)
Other Borrowings 9,131 7,616 19.9 13,014 13,478 (3.4)
Securities Sold Under Re-purchase Agreements 39,309 25,225 55.8 39,309 25,225 55.8
Other Liabilities 48,587 47,644 2.0 53,844 51,336 4.9
Taxation 8,215 5,056 62.5 8,568 5,099 68.0
Deferred Taxation 1,771 4,204 (57.9) 1,657 4,181 (60.4)
Other Liabilities Evidenced by Paper 28,831 27,103 6.4 28,831 27,103 6.4
Total Liabilities 1,532,776 1,260,730 21.6 1,540,952 1,269,285 21.4
Shareholders’ Funds
Stated Capital 16,100 13,817 16.5 16,100 13,817 16.5
Reserves
Capital Reserves
Statutory / Risk Reserve Funds 5,828 4,115 41.6 5,892 4,117 43.1
Other Capital Reserves 13,691 10,069 36.0 26,485 15,450 71.4
Revenue Reserves 99,749 75,486 32.1 102,635 76,791 33.7
135,367 103,487 30.8 151,112 110,176 37.2
Minority Interest - - 1,369 832 64.6
Total Equity 135,367 103,487 30.8 152,481 111,007 37.4
Total Liabilities and Shareholders’ Funds 1,668,144 1,364,217 22.3 1,693,433 1,380,292 22.7
Net Asset Value per Share (Rs.) 0.89 0.68 31.3 0.99 0.72 37.4
Commitments and Contingencies 618,550 541,816 14.2 618,550 541,816 14.2
Annual Report 2010 / Supplementary Information / Balance Sheet in US$
Sampath Bank PLC 256
Ten Years at a Glance
Rs. Mn.
Year Ended 31st December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Profit Performance
Income 5,269 5,432 6,044 6,953 8,704 12,340 17,400 22,243 25,213 24,333
Interest income 4,484 4,612 4,948 5,412 7,227 9,997 14,950 19,451 20,970 18,477
Interest expenses 3,191 2,834 2,602 2,859 3,913 5,890 9,947 12,801 13,165 9,953
Net interest income 1,293 1,778 2,346 2,553 3,314 4,107 5,003 6,650 7,805 8,525
Exchange income 400 296 288 617 192 646 505 647 774 498
Other income 472 569 808 924 1,284 1,697 1,944 2,144 3,469 5,357
Operating expenses 1,466 1,682 2,094 2,308 3,493 4,183 5,234 6,877 8,072 9,878
Profit before tax 429 525 740 965 1,297 2,268 2,218 2,564 3,976 4,502
Income tax expense 107 84 179 344 476 1,240 1,167 1,150 1,878 1,199
Profit after tax 322 441 561 621 821 1,028 1,052 1,414 2,098 3,303
Assets
Cash and cash equivalents 2,937 2,840 3,449 4,813 5,848 8,814 9,108 6,923 5,868 6,047
Bills of exchange 2,139 1,945 2,262 2,424 2,748 2,572 2,947 2,827 2,985 2,448
Loans and advances 27,127 29,556 34,723 43,548 54,043 67,061 83,695 87,380 92,189 122,794
Lease rentals receivable 246 238 677 1,972 3,304 6,337 6,788 5,448 3,511 3,353
Investment in associates
& subsidiaries 381 386 452 452 862 1,096 970 970 992 992
Fixed assets 1,031 1,060 1,131 1,183 1,435 1,823 3,080 3,289 3,420 4,278
Total assets 38,781 43,017 54,054 67,483 84,811 109,550 133,196 138,539 156,162 185,081
Liabilities
Deposits 30,035 34,152 42,386 53,305 65,900 81,432 99,419 107,380 126,091 150,509
Refinance borrowings 732 844 1,123 1,564 1,900 2,774 4,157 4,592 4,819 4,443
Other liabilities evidenced
by paper 500 500 1,128 2,196 2,491 2,734 4,433 4,514 3,102 3,199
Other liabilities 4,982 4,634 6,035 6,501 8,889 15,984 16,618 12,276 10,304 11,911
Total liabilities 36,248 40,130 50,672 63,566 79,180 102,924 124,627 128,762 144,316 170,062
Shareholders’ Funds
Stated capital 443 443 443 517 689 1,582 1,582 1,582 1,582 1,786
Reserves 2,091 2,444 2,940 3,401 4,943 5,044 6,987 8,195 10,265 13,233
Investor Information
Dividends paid 77.5 88.6 66.4 88.6 137.8 34.4 172.2 206.7 275.6 700.9
Dividend cover (times) 4.2 5.0 8.4 7.0 6.0 29.8 5.1 6.8 7.6 4.7
Net assets per share (Rs.) 57.20 65.20 65.48 75.82 81.75 96.17 124.39 141.92 77.52 98.29
Market price
per share - Max (Rs.) 72.00 79.80 133.00 105.00 114.00 117.25 135.00 120.00 205.00 550.00
Market price
per share - Min (Rs.) 32.50 50.00 65.00 60.25 61.00 75.25 100.00 65.00 65.00 201.00
Market price
as at 31 December (Rs.) 63.00 72.00 83.50 62.75 90.00 109.75 120.00 68.00 204.25 271.90
Other Information
Export turnover 18,370 15,669 15,823 17,240 19,524 18,789 24,071 23,800 20,648 19,625
Import turnover 23,630 29,099 28,523 30,459 35,220 54,020 54,490 57,036 54,361 78,058
Number of staff
as at 31 December 1,430 1,492 1,579 1,702 1,875 2,039 2,213 2,364 2,388 2,688
Number of branches
as at 31 December 45 53 63 71 83 96 105 112 131 171
Annual Report 2010 / Supplementary Information / Ten Years at a Glance
Sampath Bank PLC 257
Rs. Mn.
Year Ended 31st December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Ratios
Growth of income (%) 24.9 3.1 11.3 15.0 25.2 41.8 41.0 27.8 13.4 (3.5)
Cost to income ratio (%) 70.6 64.7 60.8 60.1 60.0 58.0 56.8 59.6 57.0 55.8
Growth of deposits (%) 20.1 13.9 24.4 25.9 23.6 23.5 22.4 8.1 17.5 19.4
Growth of advances (%) 11.0 7.5 18.7 27.3 25.3 26.4 23.0 2.4 3.2 30.3
Dividends per share 1.75 2.00 2.00 2.00 2.00 2.50 3.00 4.00 6.25 8.09
Return on assets
(after tax) (%) 0.88 1.10 1.19 1.02 1.08 1.06 0.87 1.04 1.42 1.94
Return on equity
(after tax) (%) 13.31 16.30 17.89 17.02 17.20 16.78 13.84 15.41 19.41 24.59
Advances to deposits
& refinance (%) 97.1 91.7 87.3 88.0 89.3 90.9 90.7 85.8 75.6 83.0
Fixed assets to
shareholders’ funds (%) 40.7 36.7 33.4 30.2 25.5 28.9 35.9 33.6 28.9 28.5
Total assets to
shareholders’ funds (times) 15.3 14.9 16.0 17.2 15.1 17.4 15.5 14.2 13.2 12.3
(As specified in Banking Act No. 30 of 1988)
Liquid assets to liabilities (%) 27.9 25.2 27.4 23.6 25.3 31.3 29.0 29.5 30.5 26.3
Capital funds to
Liabilities including
Contingent liabilities (%)
Capital standards (%) - TIER I 10.49 11.50 9.59 9.14 10.14 8.38 7.58 8.10 10.40 10.71
- TIER I+II 12.59 13.11 11.02 13.30 13.53 10.82 11.58 11.95 13.45 12.91
Annual Report 2010 / Supplementary Information / Ten Years at a Glance
Sampath Bank PLC 258
Capital Adequacy Requirement
Capital adequacy is the key financial indicator which illustrates the soundness and the stability of the Bank by measuring the
adequacy of capital of banks to meet unexpected losses arising from various risks, associated with business of banking, such as credit
risk, market risk, operational risk etc. Hence the capital of banks act as a “cushion” of “buffer” to the extent of its size, in absorbing
potential losses arising from these risks, thereby safeguarding the depositors funds, at least to that extent. Hence, capital adequacy is
an essential requirement for banks over and above the requirement to have an integrated risk management system.
New Capital Adequacy Framework
Capital adequacy of our Sampath Bank too is computed as per the parameters of “Basel II”, a universally accepted framework put
forward by the “Basel Committee on Bank Supervision” of the Bank for International Settlements (BIS). This is an International Bank
for Central Bankers, set up by the Central Banks of the Group of Ten (G10), the 10 wealthiest nations of the world.

The Basel Committee on Banking Supervision (BCBS) published the International Convergence of Capital Measurement and Capital
Standards: a Revised Framework (Basel II) in June 2004 and as amended in June 2006. This is the basis currently used by Sri Lankan
Banks for the computation of the Capital Adequacy Ratio effective from 1st January 2008.
Being compatible for rapidly changing global environment, a broad-based and flexible capital adequacy framework which Basel
Committee proposed, is best accomplished through the three pillar Basel 11 Capital Accord as mentioned below.
Basel 11 Capital Framework
Pillar 1
Minimum Capital Requirement
Pillar 2
Supervisory Review Process
Pillar 3
Market Discipline
Credit Risk
Market Risk
Operational Risk
Regulatory Compliance
Concern other Risks not captured and
accounted in Pillar 1
Regular disclosure to the market
Covering both quantitative and qualitative
aspects of Capital requirement
Pillar I contains generic rules for calculating credit, market and operational risks to determine a bank’s Risk-Weighted Assets (RWA). It
also stipulates the minimum capital requirement for banks: Tier I 5.0% and Total Capital 10% of the RWA of the Bank.
Pillar II sets forth the framework for the Supervisory Review Process (SREP) and the framework for bank’s Internal Capital Adequacy
Assessment Process (ICAAP). Pillar II concerns bank’s risks in a wider sense, including risks not captured and accounted by Pillar
1. (e.g.: Credit concentration risk, Liquidity risk, business and strategic risk etc…). It also covers the Stress Tests which are used to
measure the impact on possible adverse movements in different market scenarios.
Pillar III presents a number of disclosure requirements. The objective is to raise the level of market discipline by giving external
stakeholders a better understanding of bank’s capital adequacy calculations and the procedures involved. This Pillar is seen as
particularly important because under the advanced approaches of Basel 11, banks are allowed to rely more heavily on internal
methods for determining risk, giving them greater discretion in determining their capital needs.
The Capital Adequacy Ratio is calculated by dividing the Capital (Tier 1 + Tier 11) by the Risk Weighted Assets of the Bank.
Capital Adequacy Ratio (CAR) =
Bank's Capital
x 100
Bank's Risk Weighted Assets
Capital Adequacy
Annual Report 2010 / Supplementary Information / Capital Adequacy
Sampath Bank PLC 259
Bank’s Capital
According to the Basel 11, there are three components in the bank’s capital namely Tier 1 Capital, Tier 11 Capital and Tier 111
Capital.
Tier 1 Capital consists of Stated Capital, Non redeemable and non cumulative preference shares, Other Capital and revenue reserves
after deducting totals of intangible assets, 50% of the investments made in shares and debentures of banks and financial companies
and unconsolidated banking and financial subsidiary companies.
The main elements of Tier 11 Capital are Revaluation Reserves approved by CBSL, General Loan Loss Provisions, and Subordinated
term Debts approved by CBSL after deducting totals of intangible assets, 50% of the investments made in shares and debentures of
banks and financial companies and unconsolidated banking and financial subsidiary companies.
Tier 111 capital consists of short-term subordinated debt, limited to 250 per cent of a bank’s eligible core capital. Tier 111 capital is
available to support market risk, after meeting credit risk and operational risk.
All licensed Commercial Banks shall at all times maintain the Core capital (Tier1) Ratio not less than 5% and the Total Capital Ratio (
Tier 1 + Tier 11 ) not less than 10% of the total Risk Weighted Assets of the Bank.
Bank’s Risk Weighted Assets
The risk of assets held by the bank is segregated to three categories named as Credit risk, market risk and operational risk as
summarized below.
Primary Risk Classification
Credit Risk Market Risk Operational Risk
The risk to earnings and capital arising
from an obligor’s failure to meet the
terms of any contract with the institution
or its failure to perform as agreed.
Market risk can be defined as the risk to
earnings and capital arising from adverse
movements in prices in the trading book.
The risk of loss resulting from inadequate
or failed internal processes, people and
systems or from external events.
The bank has currently adopted the following approaches of Basel II in calculating risk weighted assets as per the directions issued by
CBSL.
º The Standardized Approach for credit risk
º The Standardized Measurement Method for market risk
º The Basic Indicator Approach for operational risk.
The Standardized Approach for credit risk
Under the Standardized Approach credit risk is measured by applying risk weights (0% to 150%) directly to on-balance sheet
assets mainly based on external credit ratings of the counterparty obtained from external credit assessment institutions recognized
by CBSL. Accommodations granted to Retail customer base qualify for a lower risk weight of 75%. Exposures secured by cash,
gold, government securities and residential properties that qualify for lower risk weights (0% to 50%). Off-balance sheet items are
converted to credit equivalents using credit conversion factors (0% to 100%) and thereafter risk weighted according to the risk
weights applicable to the counterparts.
The Standardized Measurement Method for market risk
Market risk measures the risk pertaining to interest rate related instruments and equities in the trading book and foreign exchange
position (including gold positions) throughout the bank. Since Sri Lankan banks are still at a nascent stage of developing internal risk
management models, it has been decided by the Regulators to allow banks to initially adopt the Standardized Measurement Method
for market risk calculation.
Annual Report 2010 / Supplementary Information / Capital Adequacy
Sampath Bank PLC 260
The Basic Indicator Approach for operational risk.
Operational risk includes legal /compliance risk, but excludes strategic and reputational risk. Legal / compliance risk includes, but is not limited to,
exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements. Regulators have directed local
banks to use Basic Indicator Approach for calculating operational risk. Under this approach annual gross income is considered to measure the capital
charge for operational risk.
Internal Rating Based (IRB) foundation Approach in Basel 11 framework for calculating credit risk would be adopted from 2013 and the Bank is
actively making arrangements migrate in to this approach in 2013..
The Core capital as well as the Base Capital currently maintained by the Bank comfortably exceeds the regulatory requirements set by CBSL.
Computation of Capital Adequacy Ratios - Basel 11
(Rs. Mn)
Bank Group
2010 2009 2010 2009
Assets Risk Assets Risk Assets Risk Assets Risk
weighted weighted weighted weighted
Assets Assets Assets Assets
Risk-weighted Assets for Credit Risk
Claims on Central Government and
Central Bank of Sri Lanka 16,140.2 - 48,196.9 - 16,148.8 - 48,226.5 -
Claims on Public Sector Entities 512.2 76.4 160.9 160.9 512.2 76.4 153.0 153.0
Claims on Banks Exposures 2,314.1 566.5 3,219.9 859.1 2,319.7 567.6 3,227.3 866.5
Claims on Financial Institutions 6,235.6 4,126.4 2,033.5 1,702.6 5,745.9 3,636.7 1,779.2 1,448.3
Claims on Corporates 73,837.6 73,335.9 55,461.6 54,896.5 74,619.5 74,117.8 56,198.3 55,608.9
Retail claims 13,836.7 10,377.6 10,485.5 7,864.2 13,836.7 10,377.6 10,485.5 7,864.2
Claims Secured by Residential Property 6,743.4 4,891.7 7,825.1 4,897.9 6,743.4 4,891.7 7,825.1 4,897.9
Past Due Loans 221.3 244.9 2,706.0 3,995.2 186.0 209.7 2,779.3 4,068.5
Past Due Residential Mortgage Loans 339.6 320.4 706.7 681.5 339.6 320.4 706.7 681.5
Cash Items 39,259.2 17.5 29,736.4 23.3 39,259.4 17.5 29,736.5 23.3
Other Assets 7,008.3 7,008.3 6,018.0 6,018.0 10,051.4 10,051.4 7,786.7 7,786.7
166,448.1 100,965.6 166,550.6 81,099.2 169,762.6 104,266.9 168,904.3 83,398.8
Bank Group
2010 2009 2010 2009
Off-balance sheet Items Credit
Conversion
Factor (%)
Principal
amount of
Off-balance
sheet items
Credit
equivalent of
Off-balance
sheet items
Principal
amount of
Off-balance
sheet items
Credit
equivalent of
Off-balance
sheet items
Principal
amount of
Off-balance
sheet items
Credit
equivalent of
Off-balance
sheet items
Principal
amount of
Off-balance
sheet items
Credit
equivalent of
Off-balance
sheet items
Direct Credit Substitutes 5,874.0 5,874.0 5,560.5 5,560.5 5,874.0 5,874.0 5,560.5 5,560.5
General Guarantees of Indebtedness 100.0 5,874.0 5,874.0 5,560.5 5,560.5 5,874.0 5,874.0 5,560.5 5,560.5
Transaction-related Contingencies 4,773.2 2,750.1 4,945.3 2,772.2 4,773.2 2,750.1 4,945.3 2,772.2
Performance Bonds, Bid Bonds & Warranties 50.0 2,696.4 1,348.2 2,948.3 1,474.2 2,696.4 1,348.2 2,948.3 1,474.2
Others 67.5/65.0 2,076.9 1,401.9 1,997.0 1,298.0 2,076.9 1,401.9 1,997.0 1,298.0
Short-Term Self-Liquidating Trade-Related
Contingencies 12,056.3 2,411.3 9,648.5 1,929.7 12,056.3 2,411.3 9,648.5 1,929.7
Shipping Guarantees 20.0 807.5 161.5 630.8 126.2 807.5 161.5 630.8 126.2
Documentary Letters of Credit 20.0 8,115.4 1,623.1 5,617.9 1,123.6 8,115.4 1,623.1 5,617.9 1,123.6
Trade related acceptances 20.0 3,133.3 626.7 3,399.9 680.0 3,133.3 626.7 3,399.9 680.0
Other Commitments with an Original
maturity of up to one year or which can be
unconditionally cancelled at any time 21,000.4 - 15,031.2 - 21,000.4 - 15,031.2 -
Undrawn Overdraft Facilities/Unused Credit
Card Lines - 21,000.4 - 15,031.2 - 21,000.4 - 15,031.2 -
Other Commitments with an Original
Maturity of over one year 1,967.7 983.8 770.9 385.4 1,967.7 983.8 770.9 385.4
Undrawn Term Loans 50.0 1,967.7 983.8 770.9 385.4 1,967.7 983.8 770.9 385.4
Foreign Exchange Contracts 20,851.9 417.0 24,009.0 480.2 20,851.9 417.0 24,009.0 480.2
Original Maturity-less than one year 2.0 20,851.9 417.0 24,009.0 480.2 20,851.9 417.0 24,009.0 480.2
66,523.5 12,436.2 59,965.3 11,128.0 66,523.5 12,436.2 59,965.3 11,128.0
Annual Report 2010 / Supplementary Information / Capital Adequacy
Capital Adequacy contd...
Sampath Bank PLC 261
Bank Group
2010 2009 2010 2009
Risk-weighted amounts for Market Risk
Interest Rate Risk 306.09 - 306.09 -
General risk 306.09 - 306.09 -
Specific risk - - - -
Equity Risk 106.36 44.66 106.36 44.66
General risk 61.16 25.68 61.16 25.68
Specific risk 45.19 18.98 45.19 18.98
Foreign Exchange & Gold Risk 8.73 37.97 8.73 37.97
Total Capital Charge for Market Risk 421.18 82.63 421.18 82.63
Total Risk-weighted amount for Market Risk 4,211.84 826.25 4,211.84 826.25
(Total Capital Charge X 10 )
Bank Group
2010 2009 2010 2009
Risk-weighted Assets for Operational Risk
Average Net Income for last three financial years 11,956.4 9,647.2 12,144.9 9,736.2
Deductions : - - - -
Realised profits from the sale of securities (average of last three financial years) 1,290.9 628.7 1,197.8 534.8
Extraordinary / irregular item of income ( average of last three financial years ) 5.3 5.3 14.7 5.7
Gross Income 10,660.2 9,013.2 10,932.5 9,195.7
Total Capital Charge for Operational Risk 1,599.0 1,352.0 1,639.9 1,379.4
(Gross Income X 15%)
Total Risk-weighted amount for Operational risk 15,990.2 13,519.8 16,398.8 13,793.5
(Total Capital Charge for Operational Risk X 10)
Risk-weighted assets for credit risk 100,965.6 81,099.2 104,266.9 83,398.8
Risk-weighted amounts for market risk 4,211.8 826.3 4,211.8 826.3
Risk-weighted amounts for operational risk 15,990.2 13,519.8 16,398.8 13,793.5
Total Risk-weighted Assets 121,167.7 95,445.3 124,877.5 98,018.6
Annual Report 2010 / Supplementary Information / Capital Adequacy
Sampath Bank PLC 262
Bank Group
2010 2009 2010 2009
Calculation of Total Capital Base
Core Capital (Tier 1)
Stated Capital 1,786.2 1,581.7 1,786.2 1,581.7
Statutory Reserve Fund 646.6 471.0 653.7 471.3
Published Retained Profits/(Accumulated Losses) 1,008.6 473.7 1,584.2 878.5
General and Other Reserves 10,058.5 8,167.2 9,803.2 7,911.8
Minority Interests (consistent with the above capital constituents) - - 151.9 95.2
Deductions/Adjustments-Tier 1
Goodwill - - 6.3 7.5
Other intangible assets 78.7 71.2 88.8 75.1
Advances granted to employees of the bank for the purchase of shares of the bank under a
share ownership plan - 296.7 - 296.7
50% of investments in unconsolidated banking and financial subsidiary companies. 262.5 262.5 - -
50% investments in the capital of other banks and financial institutions 184.9 133.4 184.9 133.4
Total Core Capital 12,973.9 9,929.8 13,699.3 10,425.7
Supplementary Capital (Tier II)
Revaluation Reserves (as approved by CBSL) 398.6 398.6 398.6 398.6
General Provisions 813.4 678.7 813.4 678.7
Approved Subordinated Term Debt 1,908.8 2,222.5 1,908.8 2,222.5
Actual amount of Approved Subordinated Term Debt 3,198.8 3,102.5 3,198.8 3,102.5
Deductions-Tier II
50% of investments in unconsolidated banking and financial subsidiary companies. 262.5 262.5 - -
50% investments in the capital of other banks and financial institutions 184.9 133.4 184.9 133.4
Eligible Tier II Capital 2,673.4 2,903.9 2,935.9 3,166.4
Base Capital (Tier I + Tier II) 15,647.3 12,833.7 16,635.2 13,592.1
LIMITS:
(i) Approved subordinated Term Debt is limited to 50% of Total Tier 1 Capital.
(ii) The total of Tier 11 Supplementary Elements should not exceed a maximum of 100% of Tier 1 Elements.
(iii General Provision should not exceed 1.25% of Risk Weighted Assets.
Bank Group
2010 2009 2010 2009
Core Capital Ratio (Minimum Ratio - 5%)
Core Capital (Tier 1) x 100 12,973.9 x 100 9,929.8 x 100 13,699.3 x 100 10,425.7 x 100
Total Risk-weighted Assets 121,167.7 95,445.3 124,877.5 98,018.6
Total Capital Ratio (Minimum Ratio - 10%)
Capital Base x 100 15,647.3 x 100 12,833.7 x 100 16,635.2 x 100 13,592.1 x 100
Total Risk-weighted Assets 121,167.7 95,445.3 124,877.5 98,018.6
Core Capital (Tier 1) Ratio (%) 10.71 10.40 10.97 10.64
Total Capital Ratio (%) 12.91 13.45 13.32 13.87
Annual Report 2010 / Supplementary Information / Capital Adequacy
Capital Adequacy contd...
Sampath Bank PLC 263
2010 2009 2008 2007 2006
For the year ended 31st December (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.)
Sources of Income
Interest Income 18,477 20,970 19,451 14,950 9,997
Foreign Exchange Profit 498 774 647 505 646
Fee & Commission Income 1,360 1,206 1,355 1,211 1,107
Investment Income 86 116 136 85 29
Others 3,911 2,147 654 648 561
24,333 25,213 22,243 17,400 12,340
Distribution of Income
To Depositors/ Borrowers/Debenture Holders
Interest Paid 9,953 13,165 12,801 9,947 5,890
To Employees
Salaries & Other Payments 2,932 2,662 2,138 1,575 1,383
To Suppliers / Depreciation set aside /
Provision for Credit Losses 5,332 4,025 3,776 3,041 2,193
Depreciation 455 393 387 287 235
Credit Losses 1,900 285 809 937 488
Other Expenses 2,977 3,347 2,580 1,817 1,470
To Government 2,813 3,263 2,114 1,784 1,847
VAT 1,614 1,385 964 617 607
Income Tax 1,199 1,878 1,150 1,167 1,240
To Shareholders 3,303 2,098 1,414 1,052 1,028
Dividends 701 276 207 172 34
Retained Profit 2,602 1,823 1,207 880 994
24,333 25,213 22,243 17,400 12,340
Sources & Distribution of Income
Annual Report 2010 / Supplementary Information / Sources & Distribution of Income
Sources of Income
RS. Mn.
Interest Income
Others
Foreign Exchange Profit
Fee & Commission Income
Investment Income
10 10
09 09
08 08
07 07
06 06
0
4
,
5
0
0
4
,
5
0
0
9
,
0
0
0
9
,
0
0
0
1
3
,
5
0
0
1
3
,
5
0
0
2
7
,
0
0
0
2
7
,
0
0
0
1
8
,
0
0
0
1
8
,
0
0
0
2
2
,
5
0
0
2
2
,
5
0
0
Distribution of Income
To Shareholders
To Depositors/ Borrowers/Debenture Holders
To Government
To Suppliers/Depreciation/ Provision for credit losses
To Employees
Sampath Bank PLC 264
2010 2009 2008 2007 2006
(Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.)
Deposits
Local Currency Deposits
Demand 11,265 7,966 6,525 6,367 5,714
Savings 54,599 37,491 28,414 28,108 28,980
Call Deposits 1,001 1,591 354 904 536
Fixed Deposits 61,217 57,873 51,675 42,536 29,991
Certificate of Deposits 5,345 5,247 5,151 3,811 2,486
Margin Deposits 556 376 398 488 600
Total 133,983 110,544 92,517 82,214 68,307
Foreign Currency Deposits
Demand 2,422 1,661 1,866 1,382 1,115
Savings 4,696 4,336 4,304 4,709 4,469
Call Deposits 6 59 129 131 77
Fixed Deposits 9,353 9,466 8,513 10,936 7,424
Margin Deposits 49 25 52 47 41
Total 16,526 15,547 14,864 17,205 13,126
Total Deposits 150,509 126,091 107,380 99,419 81,432
Borrowings/Debt Financing
Securities sold under repurchase agreements 4,361 2,887 2,423 1,730 5,343
Refinance Borrowings 4,443 4,819 4,592 4,157 2,774
Other liabilities evidenced by paper 3,199 3,102 4,514 4,433 2,734
Foreign Currency Borrowings - 29 1,526 7,251 3,001
Other Borrowings 1,013 843 2,302 1,936 2,667
Total Borrowings 13,016 11,680 15,357 19,507 16,519
Equity Financing
Stated Capital 1,786 1,582 1,582 1,582 1,582
Reserves 13,233 10,264 8,194 6,987 5,043
Total Equity 15,019 11,846 9,776 8,569 6,625
Total Deposits/Borrowings/Equity 178,544 149,617 132,513 127,495 104,576
Sources of Financing
Annual Report 2010 / Supplementary Information / Sources of Financing
0
30,000
60,000
90,000
180,000
120,000
150,000
06 07 08 09 10
Financing Mix
Rs. Mn.
Total Deposits
Total Borrowings
Equity
Certificate of Deposits
Margin Deposits
Fixed Deposits
0
22,500
45,000
67,500
135,000
90,000
112,500
06 07 08 09 10
Local Currency
Deposits
Rs. Mn.
Demand
Savings
Call Deposits
Margin Deposits
Fixed Deposits
0
22,500
45,000
67,500
135,000
90,000
112,500
06 07 08 09 10
Foreign Currency
Deposits
Rs. Mn.
Demand
Savings
Call Deposits
0
5,000
10,000
15,000
30,000
20,000
25,000
06 07 08 09 10
Borrowings &
Equity Financing
Rs. Mn.
Borrowings
Equity
Sampath Bank PLC 265
2010 2009 2008 2007 2006
(Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.) (Rs. Mn.)
Advances
Local Currency Advances
Overdrafts 21,598 14,346 17,249 19,292 15,608
Trust Receipts 489 290 386 447 509
Term Loans 52,620 41,072 41,162 38,891 31,109
Other Loans 30,635 20,260 14,804 11,200 9,687
Total 105,342 75,968 73,601 69,830 56,913
Foreign Currency Advances
Overdrafts 2,656 2,390 2,008 2,108 1,240
Trust Receipts 87 96 131 141 73
Packing Credit 239 115 165 115 100
Term Loans 14,470 13,620 11,475 11,501 8,735
Total 17,451 16,221 13,779 13,865 10,148
Lease Rental Receivble 3,353 3,511 5,448 6,788 6,307
Biils of Exchange
Cheques Purchased - Local 45 58 83 66 96
- Foreign 132 85 71 118 93
Billss Purchased - Export 1,901 2,290 1,995 2,262 1,807
- Import 369 552 678 501 576
Total Bills of Exchange 2,448 2,985 2,827 2,947 2,572

Total Advances 128,595 98,685 95,655 93,430 75,940
Investments
Treasury Bills & Bonds 31,394 31,768 20,282 12,218 9,802
Dealing Securities 899 276 1,224 4,275 4,165
Placements & Loans with Banks 1,837 2,473 4,093 6,643 6,490
Investment in Subsidiaries 992 992 824 824 695
Investment in Associates - - 146 146 401
Investment Securities 7,648 7,264 5,397 4,392 2,888
Commercial Papers - 459 - 100 -
Reverse Repo - 2,677 - - -
Total Investments 42,770 45,909 31,966 28,598 24,441

Total Advances & Investments 171,365 144,594 127,621 122,028 100,381
Utilisation of Funds
Annual Report 2010 / Supplementary Information / Utilisation of Funds
Other Loans
Term Loans
0
18,000
36,000
54,000
108,000
72,000
90,000
06 07 08 09 10
Local Currency
Advances
Rs. Mn.
Overdrafts
Trust Receipts
Term loans
Packing credit
0
3,000
9,000
9,000
18,000
12,000
15,000
06 07 08 09 10
Foreign Currency
Advances
Rs. Mn.
Overdrafts
Trust Receipts
Bills of Exchange
Lease Rentals Receivable
0
20
40
100
60
80
06 07 08 09 10
Composition of
Advances
%
Local Currency Advances
Foreign Currency Advances
0
20
40
100
60
80
06 07 08 09 10
Composition of
Utilisation of Funds
%
Investments
Total Advances
Sampath Bank PLC 266
Economic Value Addition
Year 2010 2009 2008 2007 2006
(Rs Mn) (Rs Mn) (Rs Mn) (Rs Mn) (Rs Mn)
Shareholders’ funds 13,432.6 10,811.2 9,172.7 7,597.2 6,128.4
Accumulated provision for credit losses 5,299.6 4,740.0 4,815.0 4,007.9 3,089.9
18,732.2 15,551.2 13,987.7 11,605.1 9,218.3
Profit attributable to share holders 3,302.7 2,098.3 1,413.9 1,051.7 1,028.1
Provision for credit losses 1,900.1 284.6 809.0 936.9 487.6
Actual credit losses written off (110.3) (359.7) (33.2) (40.1) (287.6)
5,092.6 2,023.2 2,189.7 1,948.5 1,228.1
Economic cost % (12 months average
Treasury Bill rate plus 2% risk premium) 10.6 15.3 20.4 18.8 12.6
Economic cost 1,978.1 2,382.5 2,859.1 2,180.6 1,164.3
Economic value addition 3,114.5 (359.2) (669.4) (232.1) 63.8
The economic value created by the Bank to its shareholders’ credit during the period is reflected in the above analysis.
Financial Value Addition
2010 % 2009 %
(Rs.’000) (Rs.’000)
Value Added
Income earned by providing banking services 22,254,691 23,528,939
Cost of services 12,147,061 14,879,928
Value added by banking services 10,107,630 8,649,011
Non-banking income 2,077,868 1,683,958
Provision for bad debts and diminution value of dealing securities (1,855,661) (1,202,122)
10,329,838 9,130,847
Value allocated
To employees 2,932,005 28.4 2,662,058 29.2
Salaries, wages and other benefits 2,932,005 28.4 2,662,058 29.2
To providers of capital 957,279 9.3 747,084 8.2
Dividends to shareholders 700,932 6.8 275,550 3.0
Interest to debenture holders 256,347 2.5 471,534 5.2
To government 3,146,524 30.5 3,032,656 33.2
Income tax 1,532,628 14.8 1,647,356 18.0
Value Added Tax & Debit Tax 1,613,897 15.6 1,385,300 15.2
To expansion and growth 3,294,030 31.9 2,689,050 29.5
Retained income 3,172,839 30.7 2,069,853 22.7
Depreciation 454,854 4.4 392,939 4.3
Deferred taxation (333,663) 3.2 226,258 2.5
10,329,838 100.0 9,130,847 100.0
Value Addition
Annual Report 2010 / Supplementary Information / Value Addition
Sampath Bank PLC 267
Share Information
Value Creation for Shareholders
2010 2009 Change %
Net Asset Value Per Share (Rs.) 98.29 77.52 26.8
Earnings Per Share - Group (Rs.) 22.80 13.56 64.14
Dividends Per Share (Rs.) 8.09 6.25 29.44
Market Price Per Share (Year End) 271.90 204.25 33.12
Return On Equity - After Tax (%) 24.59 19.41 26.69
0
3,000
6,000
12,000
18,000
15,000
9,000
06 07 08 09 10
Shareholders’ Funds (Rs. Mn.)
6
,
6
2
6
8
,
5
6
9
9
,
7
7
7
1
1
,
8
4
7
1
5
,
0
1
9
Shareholders’ Funds
Rs. Mn.
0
3
6
9
06 07 08 09 10
Dividends Per Share
Rs.
0
6,000
12,000
24,000
42,000
36,000
30,000
18,000
06 07 08 09 10
7
,
4
5
7
8
,
2
6
7
4
,
6
8
4
1
4
,
0
7
0
4
1
,
5
6
4
Sampath Market Capitalisation
Rs. Mn.
-50
0
150
100
200
50
06 07 08 09 10
Fluctuation of Sampath Market
Capitalisation (Y on Y)
%
Annual Report 2010 / Supplementary Information / Share Information
Bank’s Market Capitalisation in Comparison to CSE
2010 2009 2008 2007 2006
Sampath Bank Market Capitalisation (Rs. Mn.) 41,564 14,070 4,684 8,267 7,457
Increase % in Market Capitalisation (Y on Y) 195% 200% (43%) 11% 20%
CSE Market Capitalisation (Rs. Mn.) 2,210,452 1,092,137 488,812 820,700 834,800
As a % of CSE Market Capitalisation 1.88 1.29 0.96 1.01 0.89
Market Capitalisation Rank 15 19 25 17 21
0 0
6 100
12 200
24 400
36
30
18
600
500
300
06 07 08 09 10
Earnings Per Share (EPS) - Group
Highest Market Price Per Share (HMPPS)
1
5
.
5
6
1
6
.
6
2
2
1
.
7
0
2
2
.
8
0
Earnings and Highest Market Price
- Per Share
Rs.
E
P
S
H
M
P
P
S
Rs.
1
3
.
5
6
Sampath Bank PLC 268
0
20
60
100
80
40
06 07 08 09 10
Individuals/Public
Institutions
Shareholding of Institutions
& Individuals as at
31st December
%
Annual Report 2010 / Supplementary Information / Share Information
Analysis of Shareholders
Resident / Non - Resident
31.12.2010 31.12.2009
No of No of % No of No of %
Shareholders Shares Shareholders Shares
Resident Shareholders 16,847 146,933,576 96.16 14,389 61,072,592 88.66
Non-Resident Shareholders 339 5,874,396 3.84 273 7,815,036 11.34
Total 17,186 152,807,972 100.00 14,662 68,887,628 100.00
Individuals / Institutions
31.12.2010 31.12.2009
No of No of % No of No of %
Shareholders Shares Shareholders Shares
Individuals / Public 10,910 17,912,390 11.72 14,301 27,557,972 40.00
Institutions 6,276 134,895,582 88.28 361 41,329,656 60.00
Total 17,186 152,807,972 100.00 14,662 68,887,628 100.00
Composition of Share Ownership
(No. of Shareholders)
31.12.2010 31.12.2010
No of % No of % No of % No of %
Shareholders Shares Shareholders Shares
Shares 500 & Less 8,287 48.22 1,838,735 1.20 9,978 68.05 1,729,569 2.51
Shares 501 - 5,000 7,513 43.72 11,274,196 7.38 4,138 28.22 5,790,217 8.41
Shares 5,001 - 10,000 686 3.99 4,702,473 3.08 266 1.81 1,913,341 2.78
More than 10,000 Shares 700 4.07 134,992,568 88.34 280 1.91 59,454,501 86.31
17,186 100.00 152,807,972 100.00 14,662 100.00 68,887,628 100.00
Composition of Share Ownership (No of Shares)
Shares 500 & Less 1.20%
Shares 501 - 5,000 7.38%
Shares 5,001 - 10,000 3.08%
More than 10,000 Shares 88.34%
Composition of Share Ownership (No of Shareholders)
Shares 500 & Less 48.22%
Shares 501 - 5,000 43.72%
Shares 5,001 - 10,000 3.99%
More than 10,000 Shares 4.07%
Share Information contd...
0
5
10
25
20
30
15
06 07 08 09 10
Average 12 Mts. Treasury Bill Rate
AWFDR
Sampath ROE
Sampath Return on Equity &
Market Interest Rates
%
1
2
.
9
6
1
1
.
5
0
1
9
.
9
6
9
.
3
2
1
0
.
9
1
7
.
5
5
8
.
2
0
1
9
.
0
8
1
5
.
5
1
1
6
.
5
7
Sampath Bank PLC 269
0
24
12
36
48
60
72
06 07 08 09 10
Share Trading -
Sampath Bank PLC
No of Shares Mn.
0
100
200
400
600
500
300
06 07 08 09 10
Minimum Market Price
Maximum Market Price
Price as at 31st December
Sampath Share Price Fluctuation
Rs.
Annual Report 2010 / Supplementary Information / Share Information
0
5,000
25,000
30,000
20,000
10,000
15,000
J
a
n
-
0
6
J
a
n
-
0
7
J
a
n
-
0
8
J
a
n
-
0
9
J
a
n
-
1
0
D
e
c
-
1
0
Share Trading
(No.’000)
Volume Traded (No ‘000)
Turnover (Rs.Mn.)
0
1,500
3,000
6,000
9,000
7,500
4,500
Rs. Mn.
Share Trading
Share Trading - Market
2010 2009 2008 2007 2006
No of Transactions 3,355,126 1,266,299 776,244 876,928 952,382
Number of Shares Traded 18,489,195,424 4,928,999,666 3,189,135,408 2,887,300,000 3,912,345,750
Value of Shares Traded (Rs.Mn) 570,326 142,463 110,454 104,985 105,154
Share Trading - Sampath Bank PLC
2010 2009 2008 2007 2006
No of Transactions 20,154 8,578 1,280 3,071 2,858
Number of Shares Traded 67,672,164 19,077,355 5,356,600 9,530,000 3,879,000
As a % of total shares in issue 44.20 27.69 7.77 13.83 5.63
Average Daily Turnover (Rs.Mn.) 90.78 10.41 2.41 4.79 1.70
Value of Shares Traded (Rs.Mn.) 20,427 2,457 574 1,154 381
Sampath Share Monthly Trading Volumes and Market Capitalisation
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
Highest Price (Rs.) 226.25 260.00 243.00 294.00 291.00 395.00 390.00 379.00 550.00 535.00 288.00 274.40
Lowest Price (Rs.) 201.00 210.00 212.50 222.00 270.00 287.50 330.00 342.00 367.90 215.00 247.00 253.70
No of Shares Traded 1,290,540 2,239,800 961,029 3,652,146 1,425,375 5,492,411 9,027,917 1,267,241 3,360,849 7,981,333 4,525,815 27,316,990
No of Trades 716 909 605 1,104 607 1,938 1,626 1,408 3,035 5,895 2,552 2,042
Market Capitalisation (Rs. Mn.) 15,155 16,292 16,822 21,994 21,786 27,223 28,246 28,022 39,272 43,535 39,852 41,548
Market Capitalisation Rank 21 20 21 16 16 16 17 19 15 13 15 15
Sampath Bank PLC 270
Sampath Bank PLC - Ordinary Shares
Top 20 Shareholders as at 31st December 2010
Name of Shareholder Shareholding %
Vallibel One Limited 22,917,200 14.99
Employees’ Provident Fund 12,601,610 8.25
Mr. Y S H I K Silva 10,833,530 7.09
Rosewood (Pvt) Limited 10,542,916 6.90
Sampath Bank PLC - Account No.2 7,640,240 5.00
Sri Lanka Insurance Corporation Limited - Life Fund 7,615,396 4.98
Corporate Services Limited A/c No.2 5,721,380 3.74
Varners International (Pvt) Limited 5,469,056 3.58
SSP Corporate Services (Pvt) Limited A/c No.1 5,097,130 3.34
Sampath Bank PLC - Account No.4 2,536,292 1.66
Northern Trust Co.S/A - Northern Trust Fiduciary Services 2,376,176 1.56
Indra Traders (Pvt) Limited 1,920,222 1.26
Mr. B A Mahipala 1,892,250 1.24
Mr. S V Somasunderam 1,544,900 1.01
Keystone Limited 1,294,918 0.85
Mr. B W Kundanmal 1,103,414 0.72
J B Cocoshell (Pvt) Limited 723,824 0.47
Mrs. J A De Mel 706,044 0.46
The Bank of New York Mellon SA/NV - The Asia Pacific 695,714 0.46
Mr. I W Senanayake 653,142 0.43
103,885,354 67.99

Total No. of Shares Registered 152,807,972 100.00
Total No. of Shares Unregistered 0 0.00
Total No. of Shares Issued 152,807,972 100.00

Shares held by Directors 1,077,750 0.71
Shares held by Institutions 134,895,582 88.27
Balance held by Public 16,834,640 11.02
Total No. of Shares Issued 152,807,972 100.00

% of Shares held by Public 84.30%
% of Shares held by Directors and Related Parties 15.70%
Annual Report 2010 / Supplementary Information / Share Information
Share Information contd...
Sampath Bank PLC 271
Annual Report 2010 / Supplementary Information / Share Information
Sampath Bank PLC - Ordinary Shares
Frequency Distribution of Shareholders as at 31 December 2010
Resident Non-Resident Total
Share
Range
No. of
Shareholders
% No of
Shares
% No of
Shareholders
% No of
Shares
% No of
Shareholders
% No of
Shares
%
1 - 250 3,225 18.77 312,136 0.20 41 0.24 4,200 0.00 3,266 19.00 316,336 0.21
251 - 500 4,959 28.85 1,502,555 0.98 62 0.34 19,844 0.01 5,021 29.22 1,522,399 1.00
501 - 1000 3,135 18.24 2,072,773 1.36 70 0.41 47,420 0.03 3,205 18.65 2,120,193 1.39
1001 - 2000 2,308 13.43 3,209,718 2.10 47 0.27 68,156 0.04 2,355 13.70 3,277,874 2.15
2001 - 5000 1,896 11.03 5,705,207 3.73 57 0.33 170,922 0.11 1,953 11.36 5,876,129 3.85
5001 - 10000 666 3.88 4,570,899 2.99 20 0.12 131,574 0.09 686 3.99 4,702,473 3.08
10001 - 20000 332 1.93 4,635,279 3.03 20 0.12 281,896 0.18 352 2.05 4,917,175 3.22
20001 - 30000 105 0.61 2,578,863 1.69 5 0.03 122,452 0.08 110 0.64 2,701,315 1.77
30001 - 40000 51 0.30 1,736,054 1.14 4 0.02 139,022 0.09 55 0.32 1,875,076 1.23
40001 - 50000 28 0.16 1,230,938 0.81 0 0.00 0 0.00 28 0.16 1,230,938 0.81
50001 - 100000 64 0.37 4,473,526 2.93 4 0.02 290,544 0.19 68 0.40 4,764,070 3.12
100001 - 1000000 63 0.37 16,804,342 11.00 8 0.05 2,222,190 1.45 71 0.41 19,026,532 12.45
1000001 - Over 15 0.09 98,101,286 64.20 1 0.01 2,376,176 1.56 16 0.09 100,477,462 65.75
Total 16,847 98.03 146,933,576 96.16 339.00 1.97 5,874,396 3.84 17,186 100.00 152,807,972 100.0
Dividend Payment Details
Year Dividend Ratio Total Dividend Paid
Rs. Mn.
Dividend Per Share
2000/2001 17.50% 58.7
2001/2002 17.50% 52.1
2002/2003 20.00% 88.6
2003 (Interim) 15.00% 59.9
2003 (Final) 5.00% 22.0
2004 (Interim) 15.00% 66.0
2004 (Final) 5.00% 34.3
2005 (Interim) 15.00% 87.1
2005 (Final) 5.00% 32.2
2006/2007 25.00% 172.2
2007/2008 206.7 Rs. 3.00
2008/2009 275.6 Rs. 4.00
2009/2010 473.6 Rs. 6.25
2010/2011 (Interim and
Final Proposed)
1,235.9 Rs. 8.09
Record of Scrip Issues (With reasons for the issue)
Year Issue Basis New No. of
Shares
Stated Capital
(Rs.)
Reason for the Issue
2010 Consolidation and Subdivision 11 for 10 6,888,762 1,581,653,635 Increase Liquidity
2010 Scrip Dividend 1 for 120.7 627,596 1,786,249,910 Increase Stated Capital
2010 Subdivision 1 for 1 76,403,986 1,786,249,910 Give more benefit to share holders
Sampath Bank PLC 272
Debenture Information
Market Values
Highest Lowest Year End
2010 2009 2010 2009 2010 2009
Debentures - 2007/2012
Fixed - 17.5% 100.00 Not Traded 100.00 Not Traded 100.00 Not Traded
Fixed - 15.5% 100.00 Not Traded 83.99 Not Traded 100.00 Not Traded
Floating rate Not Traded Not Traded Not Traded Not Traded Not Traded Not Traded
Interest Rates
2010 2009
Coupon Rate Effective Rate Coupon Rate Effective Rate
Debentures - 2007/2012
Fixed - 17.5% 17.50% 17.50% 17.50% 17.50%
Fixed - 15.5% 15.50% 16.65% 15.50% 16.65%
Floating rate - - - -
Debentures - 2006/2011 (Not Listed)
Floating rate is equivalent to the one year weighted avg. Treasury Bill rate (gross) plus 1.5% p.a., payable annually.
Debentures - 2007/2012
Floating rate is equivalent to the three months Treasury Bill rate (gross) plus 1.5% p.a., payable quarterly.
Debentures - 2007/2012 (Not listed)
Floating rate is equivalent to the six months weighted avg. Treasury Bill rate (gross) plus 1.75% p.a., payable semi annually.
Interest rate of comparable government securities
2010 2009
2 Year Treasury Bond 8.27% 9.75%
3 Year Treasury Bond 8.15% 11.02%
4 Year Treasury Bond 8.60% 11.01%
5 Year Treasury Bond 8.75% 12.11%
Current Yield & Yield to maturity
Fixed
‘17.50%
Fixed
‘15.50%
Floating
2010 2009 2010 2009 2010 2009
Debentures - 2007/2012
Current yield 17.50 Not Traded 16.65 Not Traded Not Traded Not Traded
Yield to maturity of last trade 17.47 Not Traded 16.61 Not Traded Not Traded Not Traded
Ratios
2010 2009
Debt to Equity Ratio (%) 21.3% 26.19%
Interest Cover ( Times) 18.56 9.43
Quick Asset Ratio (%) 83.2% 78.12%
Annual Report 2010 / Supplementary Information / Debenture Information
Sampath Bank PLC 273
Branch Name Address Telephone No. Fax No. E mail Address Branch
Code
Western Province
Colombo District
Athurugiriya No. 106, Borella Road, Athurugiriya (011) 2563612 athurugiriya.mgr@sampath.lk 067
Attidiya No. 202, Main Road, Attidiya (011) 2725668 attidiya.mgr@sampath.lk 089
Avissawella No. 64, Yatiyanthota Road, Avissawella (036) 2222011 - 2 (036) 2222010 awissawella.mgr@sampath.lk 022
Bambalapitiya No.1-01, Majestic City, Station Road, Colombo 04 (011) 2501829, 2502686 (011) 2501829 bambalapitiya.mgr@sampath.lk 011
Battaramulla No. 157, Main Street, Battaramulla (011) 2861805 - 6 (011) 2861807 battaramulla.mgr@sampath.lk 061
*Boraleagamuwa No.192, Kesbewa Road, Boralesgamuwa (011) 2545245 - 6 (011) 2545248 boralesgamuwa.mgr@sampath.lk 142
Borella No. 1022, Maradana Road, Colombo 08 (011) 2691121 - 3 (011) 2686066 borella.mgr@sampath.lk 004
City No. 55, D.R.Wijewardena Mawatha, Colombo 10 (011) 2448291, 2434431 (011) 2434217 city.mgr@sampath.lk 001
Dehiwala No. 155, Galle Road, Dehiwala (011) 2738481 & 422 (011) 2738461 dehiwala.mgr@sampath.lk 017
Embuldeniya No. 282, Old Kottawa Road, Embuldeniya,
Nugegoda
(011) 2836410 - 1 (011) 2836412 embuldeniya.mgr@sampath.lk 114
Fort No. 98, Chatam Street, Colombo 01 (011) 2447231 - 2 (011) 2421453 fort.mgr@sampath.lk 012
*Gangodawila No. 374, High Level Road, Gangodawila, Nugegoda (011) 2814147 - 8 (011) 2814149 gangodawila.mgr@sampath.lk 135
Grandpass No. 64, Jethawana Road, Colombo 14 (011) 2472390 - 1 (011) 2472392 grandpass.mgr@sampath.lk 127
Gregory’s Road No. 106, Wijerama Mawatha, Colombo 07 (011) 2681144 gregorysroad.mgr@sampath.lk 070
*Hanwella No. 148/A, Pahala Hanwella, Hanwella (036) 2254445 - 6 (036) 2254447 hanwella.mgr@sampath.lk 137
Harbour View Setmil Maritime Centre, No. 256, Srimath
Ramanathan Mawatha, Colombo 15
(011) 2393017 (011) 2393017 harbourview.mgr@sampath.lk 058
Head Quarters No. 110, Sir James Peiris Mw, Colombo 02 (011) 4730305 - 7 (011) 5331485 headq.mgr@sampath.lk 029
Homagama No. 46, 1st Lane, Station Road, Homagama (011) 2855975 - 6 (011) 2855985 homagama.mgr@sampath.lk 069
*Kaduwela No. 510/1 & 510/2, Avissawella Road, Kaduwela (011) 2537539 - 40 (011) 2537541 kaduwela.mgr@sampath.lk 162
Kirullapone No. 136,138 & 140, Highlevel Road, Kirullapone (011) 2513828 - 9 (011) 2513830 kirulapone.mgr@sampath.lk 117
Kohuwela No. 81, S De S Jayasinghe Mawatha, Kohuwela (011) 2814480 (011) 2814480 kohuwala.mgr@sampath.lk 094
*Kollupitiya Ground Floor, Platinum Residencies Building, No.1,
Bagatale Road, Colombo 03
(011) 2590682 - 3 (011) 2590684 kollupitiya.mgr@sampath.lk 134
Kotahena No. 165, George R De Silva Mw, Colombo 13 (011) 2384010 - 1 (011) 2384012 kotahena.mgr@sampath.lk 037
Kottawa No. 124/8, Highlevel Road, Kottawa (011) 2782684 & 690 (011)2782686 kottawa.mgr@sampath.lk 052
Kottawa - Sunup No. 364/10, Highlevel Road, Kottawa (011) 2783100 (011) 2783100 kottawa_sunup.mgr@sampath.lk 087
Maharagama No. 81, Highlevel Road, Maharagama (011) 2840950 - 2 (011) 2851352 maharagama.mgr@sampath.lk 013
Maharagama -
Singer Mega
No. 272, Highlevel Road, Maharagama (011) 2842442 (011) 2842442 maharagama_sm.mgr@sampath.lk 092
Main Street No. 110 - 114, Main Street, Colombo 11 (011) 2386732 - 3 (011) 2386734 mainst.mgr@sampath.lk 042
Malabe No. 895, Athurugiriya Road, Malabe (011) 2762222 - 3 (011) 2762224 malabe.mgr@sampath.lk 039
*Maradana No. 657, Kularathne Mawatha, Maradana Road,
Colombo 10
(011) 2678541 - 2 (011) 2678543 maradana.mgr@sampath.lk 144
*Moratumulla No.38, Sri Premarathana Mawatha,Moratumulla (011) 2654040, 2654075 (011) 2654048 moratumulla.mgr@sampath.lk 155
Moratuwa No. 653, Galle Road, Rawatawatta, Moratuwa (011) 2644737 - 8 (011) 2644739 moratuwa.mgr@sampath.lk 031
Narahenpita No. 193, Kirula Road, Narahenpita, Colombo 05 (011) 2552820 - 1 (011) 2552822 narahenpita.mgr@sampath.lk 040
Nawala No.143, Nawala Road, Nugegoda (011) 2812331 - 2 (011) 2812333 nawala.mgr@sampath.lk 082
Nawam Mawatha No. 46/38, Nawam Mawatha, Colombo 02 (011) 2305025 - 7 (011) 2305028 navam.mgr@sampath.lk 009
Nugegoda No. 79 A, Stanley Thillekeratne Mw, Nugegoda (011) 2856907 - 9,
2816288
(011) 2856908 nugegoda.mgr@sampath.lk 003
Old Moor Street No. 371, Old Moor Street, Colombo 12 (011) 2452490 - 2 (011) 2424074 oldmoor.mgr@sampath.lk 027
Pelawatta No. 424, Pannipitiya Road, Pelawatta , Battaramulla (011) 2787209, 2786119 (011) 2786118 pelawatte.mgr@sampath.lk 063
Pettah No. 999, People’s Park, Bodiraja Mw, Colombo 11 (011) 2432324, 2432262 (011) 2432303 pettah.mgr@sampath.lk 002
Piliyandala No. 61, Moratuwa Road, Piliyandala (011) 2614654, 2614665 (011) 2614664 piliyandala.mgr@sampath.lk 019
Pitakotte No. 463, Kotte Road, Pitakotte (011) 2874574 (011) 2874574 pitakotte.mgr@sampath.lk 091
Platinum Plus No.18, Cambridge Place, Colombo 07 (011) 2695073, 2695237 (011) 2695196 platinumc.mgr@sampath.lk 131
Rajagiriya No. 620, Kotte Road, Rajagiriya (011) 2864922, 2864944 (011) 2864988 rajagiriya.mgr@sampath.lk 122
Ratmalana No. 261, Galle Road, Ratmalana (011) 2730820 - 1 (011) 2730819 ratmalana.mgr@sampath.lk 018
Thimbirigasyaya No. 154, Havelock Road, Colombo 05 (011) 2505001 - 2 (011) 2505003 thimbirigasyaya.mgr@sampath.lk 034
Wellampitiya No. 268, Kolonnawa Road, Wellampitiya (011) 2533498 (011) 2533498 wellampitiya.mgr@sampath.lk 045
Wellawatta No. 595/A, Galle Road, Colombo 06 (011) 2507607 - 8 (011) 2507609 wellawatta.mgr@sampath.lk 036
Branch Network
Annual Report 2010 / Supplementary Information / Branch Network
Sampath Bank PLC 274
Branch Name Address Telephone No. Fax No. E mail Address Branch
Code
Kalutara District
Aluthgama No. 405, Galle Road, Aluthgama (034) 2290861 - 2 (034) 2290863 aluthgama.mgr@sampath.lk 079
Bandaragama No. 61/A, Kalutara Road, Bandaragama (038) 2289898 - 9 (038) 2293056 bandaragama.mgr@sampath.lk 059
Horana No 114, Somananda Mawatha, Horana (034) 2260345 - 6 (034) 2260377 horana.mgr@sampath.lk 057
*Ingiriya No. 68D, Panadura Road, Ingiriya (034) 2268288 - 488 (034) 2268588 ingiriya.mgr@sampath.lk 140
Kalutara No. 314, Main Street, Kalutara South, Kalutara (034) 2235600 - 1 (034) 2235602 kalutara.mgr@sampath.lk 050
*Keselwatta No. 41A, Galle Road, Keselwatta, Panadura (038) 2299633, 2299566 (038) 2299550 keselwatta.mgr@sampath.lk 151
Matugama No. 214 A, Aluthgama Road, Matugama (034) 2247233 - 4 (034) 2247235 matugama.mgr@sampath.lk 106
Panadura No. 373, Galle Road, Panadura (038) 2235100, 2231677 (038) 2235101 panadura.mgr@sampath.lk 026
Unichella -
Panadura
No. 124, Horana Road, Panadura (038) 4281245 (038) 4281245 unichella.mgr@sampath.lk 047
Wadduwa No. 555, Galle Road, Wadduwa (038) 2284505 (038) 2284505 wadduwa.mgr@sampath.lk 075
Gampaha District
Gampaha No. 8, Mangala Road, Gampaha (033) 2226640 - 1 (033) 2226642 gampaha.mgr@sampath.lk 016
Ganemulla No. 367/E, Kadawatha Road, Ganemulla (033) 2264630 (011) 5336558 ganemulla.mgr@sampath.lk 078
Ja-ela No.165, Realty Plaza, Negombo Road, Ja-ela (011) 2245896 - 7 (011) 2245895 jaela.mgr@sampath.lk 098
Kadawatha No. 174/3, Ragama Road, Kadawatha (011) 2921001 - 2 & 5 (011) 2921001 kadawatha.mgr@sampath.lk 060
Kandana No. 72, Colombo Road, Kandana (011) 2229218 - 9 (011) 2229249 kandana.mgr@sampath.lk 076
Kiribathgoda No. 259, Kandy Road, Dalugama, Kelaniya (011) 2910457, 2910514 (011) 2910515 kiribathgoda.mgr@sampath.lk 005
Kirindiwela No. 91, Gampaha Road, Kirindiwela (033) 2247150, 5622833 (033) 2247150 kirindiwela.mgr@sampath.lk 083
*Kochchikade No. 163, Chilaw Road, Kochchikade (031) 2279647 - 8 (031) 2279522 kochchikade.mgr@sampath.lk 165
Minuwangoda No. 31/1, Negombo Road, Minuwangoda (011) 2299131 - 2 (011) 2299133 minuwangoda.mgr@sampath.lk 065
Mirigama No. 54, Giriulla Road, Mirigama (033) 2276901 - 2 (033) 2276903 mirigama.mgr@sampath.lk 086
Negombo No. 293, Main Street, Negombo (031) 2224344 - 6 (031) 2224347 negombo.mgr@sampath.lk 024
Negombo II No. 203D, Telwatte Junction, Colombo Road,
Negombo
(031) 2221930 - 1 (031) 2227282 negombo2.mgr@sampath.lk 088
Nittambuwa Sri Ramya Building, Kandy Road, Nittambuwa (033) 2295905 - 6 (033) 2295907 nittambuwa.mgr@sampath.lk 071
*Peliyagoda No. 304, Negombo Road, Peliyagoda (011) 2940279, 2938797 (011) 2940156 peliyagoda.mgr@sampath.lk 136
Ragama Nos. 26/05, 26/06, UDA Premises, Kadawatha
Road, Ragama
(011) 2960659, 2960629 (011) 2960659 ragama.mgr@sampath.lk 073
Veyangoda No. 121, Negombo Road, Veyangoda (033) 2296330 (033) 2296330 veyangoda.mgr@sampath.lk 077
Wattala No. 165, Negombo Road, Wattala (011) 2931569 - 70 (011) 2931568 wattala.mgr@sampath.lk 008
Wattala - Singer
Mega
No. 811, Negombo Road, Wattala (011) 2981644 (011) 2981644 wattala_sm.mgr@sampath.lk 096
Yakkala No. 88, Kandy Road, Yakkala (033) 2232670, 2234230 (033) 4674602 yakkala.mgr@sampath.lk 068
Uva Province
Badulla District
Badulla No. 14, Dharmadutha Road, Badulla (055) 2225450 - 1 (055) 2225452 badulla.mgr@sampath.lk 093
Bandarawela No. 253, 255, Main Street, Bandarawela (057) 2223720 - 1 (057) 2223722 bandarawela.mgr@sampath.lk 046
Mahiyangana No. 28 - 29, New Town, Mahiyangana (055) 2258180 (055) 2258181 mahiyangana.mgr@sampath.lk 056
*Passara No.187/1, Badulla Road, Passara (055) 2288311 - 2 (055) 2288313 passara.mgr@sampath.lk 146
Welimada No. 54, Nuwara Eliya Road, Welimada (057) 2244466 - 7 (057) 2244468 welimada.mgr@sampath.lk 081
Monaragala District
*Bibile No. 31, Mahiyangana Road, Bibile (055) 2265398 - 9 (055) 2265400 bibile.mgr@sampath.lk 161
*Buttala “Madurapperuma Building’, Kataragama Road,
Buttala
(055) 2273530, 2273534 (055) 2273537 buttala.mgr@sampath.lk 145
Monaragala No. 75, Pothuwil Road, Monaragala (055) 2277290 - 1 (055) 2277222 monaragala.mgr@sampath.lk 074
Wellawaya No. 70/D, Kumaradasa Mawatha, Wellawaya (055) 2274445 - 2274419 (055) 2274470 wellawaya.mgr@sampath.lk 113
Southern Province
Galle District
Ambalangoda No. 118/A, New Road, Ambalangoda (091) 2255571 - 2 (091) 2255573 ambalangoda.mgr@sampath.lk 072
Baddegama No. 112, Diyawagura, Kumme, Baddegama (091) 2293230 - 1 (091) 2293232 baddegama.mgr@sampath.lk 118
Galle No. 5, Wakwella Road, Galle (091) 2245646 - 7 (091) 2245645 galle.mgr@sampath.lk 035
*Galle Bazaar Krishna Building ‘, No:69, Old Matara Road,
Pettigalawatte, Galle
(091) 2248582, 2248583 (091) 2248584 gallebazaar.mgr@sampath.lk 159
*Karapitiya No. 598 F, Hiribura Road, Karapitiya (091) 2248456 - 7 (091) 2248458 karapitiya.mgr@sampath.lk 141
Neluwa Dellawa Road, Main Street, Neluwa (091) 3783010 - 11 neluwa.mgr@sampath.lk 054
Annual Report 2010 / Supplementary Information / Branch Network
Branch Network contd...
Sampath Bank PLC 275
Branch Name Address Telephone No. Fax No. E mail Address Branch
Code
Matara District
Deniyaya No. 28-30, Main Street, Deniyaya (041) 2273225 & 255 (041) 2273255 deniyaya.mgr@sampath.lk 014
Matara No. 3, Hakmana Road, Matara (041) 2223260 - 1 (041) 2223268 matara.mgr@sampath.lk 010
*Matara - Bazaar No. 37, New Tangalle Road, Kotuwegoda, Matara (041) 2234055 - 6 (041) 2234057 matara_bazaar.mgr@sampath.lk 153
Morawaka Ranaweera Building, Akuressa - Deniyaya Main
Road, Morawaka
(041) 2282310 - 11 (041) 2282312 morawaka.mgr@sampath.lk 015
Hambantota District
Ambalanthota No. 138 D, Tissa Road, Ambalanthota (047) 2225506 - 7 (047) 2225508 ambalantota.mgr@sampath.lk 104
*Middeniya Abeysinghe Building’, Walasmulla Road, Middeniya (047) 2248231 - 2 (047) 2248233 middeniya.mgr@sampath.lk 158
*Sooriyawewa No. 6719, Ambalantota Road, Sooriyawewa (047) 2288155 - 6 (047) 2288157 sooriyawewa.mgr@sampath.lk 157
Tangalle No. 61, Muhudu Mawatha, Tangalle (047) 2241865 - 6 (047) 2241870 tangalle.mgr@sampath.lk 116
Tissamaharama No. 25 - 27, Main Street, Tissamaharama (047) 2237056, 2237008 (047) 2237058 tissa.mgr@sampath.lk 028
Sabaragamuwa Province
Kegalle District
Deraniyagala No. 63, Noori Road, Deraniyagala. (036) 2249500 (036) 2249500 deraniyagala.mgr@sampath.lk 049
Kegalle No. 142, 142A, Kandy Road, Kegalle (035) 2230597 - 8 (035) 2230519 kegalle.mgr@sampath.lk 064
*Mawanella No. 10, Rankoth Divila, Mawanella (035) 2246961 - 2 (035) 2246963 mawanella.mgr@sampath.lk 160
Ratnapura District
Embilipitiya No. 62, Main Street, Embilipitiya (047) 2261203 - 4 (047) 2261205 embilipitiya.mgr@sampath.lk 043
Kalawana No. 54/B, 54/C, Manana, Kalawana (045) 2255793 - 4 (045) 2255795 kalawana.mgr@sampath.lk 041
Balangoda No. 117, Barnes Ratwatta Mawatha, Balangoda (045) 2288793 - 4 (045) 2288795 balangoda.mgr@sampath.lk 097
Pelmadulla No. 77B, Main Street, Pelmadulla (045) 2275920 - 1 (045) 2275922 pelmadulla.mgr@sampath.lk 103
Ratnapura No. 180 - 182, Main Street, Ratnapura (045) 2232261 - 2 (045) 2224361 ratnapura.mgr@sampath.lk 033
Eheliyagoda No. 2, Ratnapura Road, Eheliyagoda (036) 2258032, 2259174 (036) 2258031 eheliyagoda.mgr@sampath.lk 020
North Western Province
Kurunegala District
Alawwa No. 9, 9/1 Giriulla Road, Alawwa (037) 2279209 - 2279463 (037) 2279209 alawwa.mgr@sampath.lk 053
Giriulla No. 103/A, Negombo Road, Giriulla (037) 2289482 (037) 2289482 giriulla.mgr@sampath.lk 095
Kuliyapitiya No. 259, Madampe Road, Kuliyapitiya (037) 2281860 & 866 (037) 2281861 kuliyapitiya.mgr@sampath.lk 023
Kurunegala No. 31, Negombo Road, Kurunegala (037) 2223500 - 2 (037) 2223509 kurunegala.mgr@sampath.lk 006
Mawathagama No. 95, Kurunegala Road, Mawathagama (037) 2296088 (037) 2296088 mawathagama.mgr@sampath.lk 109
Narammala No. 77 & 89 1/1, Kuliyapitiya Road, Narammala (037) 2248945 - 6 (037) 2248947 narammala.mgr@sampath.lk 099
Nikaweratiya No. 136, Kurunegala Road, Nikaweratiya (037) 2260918 - 9 (037) 2260920 nikaweratiya.mgr@sampath.lk 102
*Pannala No. 100, Negombo Road, Pannala (037) 2246250, 2245270 (037) 2245272 pannala.mgr@sampath.lk 166
Wariyapola Nawinna Office & Shopping Complex, Kalugamuwa
Road, Wariyapola
(037) 2268707 - 8 (037) 2268144 wariyapola.mgr@sampath.lk 044
Puttalam District
*Anamaduwa No. 69, Galgamuwa Road, Anamaduwa (032) 2263042 - 3 (032) 2263044 anamaduwa.mgr@sampath.lk 143
Chilaw No. 64, Colombo Road, Chilaw (032) 2222677 - 8 (032) 2222777 chilaw.mgr@sampath.lk 108
*Nattandiya No.149, Kuliyapitiya Road, Nattandiya (032) 2250263 - 4 (032) 2250265 nattandiya.mgr@sampath.lk 132
*Puttalam No.114 A, Kurunegala Road,Puttalam (032) 2266312 - 3 (032) 2266314 puttalam.mgr@Sampath.lk 156
Wennappuwa No. 191/A, Colombo Road, Wennappuwa (031) 2256925 - 7 (031) 2256926 wennappuwa.mgr@sampath.lk 030
North Central Province
Anuradhapura District
Anuradhapura No. 38, Rex Building, Main Street, Anuradhapura (025) 2235026 - 7 (025) 2235028 anuradhapura.mgr@sampath.lk 021
*Anuradhapura
New Town
No. 521/19, Maithripala Senanayake Mawatha,
New Town, Anuradhapura
(025) 2226190 - 1 (025) 2226192 anuradhapura_newt.mgr@sampath.lk 168
*Kekirawa No. 56, Main Street, Kekirawa (025) 2265266 - 7 (025) 2265268 kekirawa.mgr@sampath.lk 149
*Nochchiyagama No. 62, Puttalam Road, Nochchiyagama (025) 2257332 - 3 (025) 2257334 nochchiyagama.mgr@sampath.lk 138
Thambuththegama No. 255 C, Anuradhapura Road, Thambuttegama (025) 2276633, 2276836 (025) 2275072 thambuththegama.mgr@sampath.lk 048
Polonnaruwa District
*Aralaganwila No. 113, New Town, Aralaganwila (027) 2257204 - 5 (027) 2257206 aralaganwila.mgr@Sampath.lk 154
Hingurakgoda No. 88, D S Senanayake Veediya, Hingurakgoda (027) 2245300 - 1 (027) 2245302 hingurakgoda.mgr@sampath.lk 110
Kaduruwela No.626 B, Dharmasiri Building, Main Street,
Kaduruwela
(027) 2225567 - 8 (027) 2225569 kaduruwela.mgr@sampath.lk 038
Northern Province
Jaffna District
*Chankanai Main Street, Chankanai (021) 2250072 - 3 (021) 2250074 chankanai.mgr@sampath.lk 164
*Chavakachcheri Kandy Road, Chavakachcheri (021) 2270091 - 2 (021) 2270093 chavakachcheri.mgr@sampath.lk 169
Annual Report 2010 / Supplementary Information / Branch Network
Sampath Bank PLC 276
Branch Name Address Telephone No. Fax No. E mail Address Branch
Code
Chunnakam No.160, Sir Ponnambalam Ramanathan Veethy,
Chunnakam
(021) 2240721 - 2 (021) 2240723 chunnakam.mgr@sampath.lk 128
Jaffna No. 56/16, Link Road, Off Stanley Road, Jaffna (021) 2221025 - 6 (021) 2221027 jaffna.mgr@sampath.lk 120
*Kayts Suruvil Road, Kayts (021) 3215432, 3215434 (021) 3215428 kayts.mgr@sampath.lk 171
*Manipay No. 103, Jaffna Road, Manipay (021) 2255041 - 2 (021) 2255043 manipay.mgr@sampath.lk 147
Nelliady No. 169, Jaffna Road, Nelliady (021) 2262474, 2264950 (021) 2264951 nelliady.mgr@sampath.lk 129
Kilinochchi District
*Kilinochchi Unit 1-4, Antonipillai Building, Kilinochchi (021) 2285340 - 1 (021) 2285342 killinochchi.mgr@sampath.lk 148
Mannar District
Mannar No. 28, Field Street, Ward No.06, Mannar (023) 2251320 - 1 (023) 2251322 mannar.mgr@sampath.lk 119
Vavuniya District
Vavuniya No. 25, Station Road, Vavuniya (024) 2222959 (024) 4589500 vavuniya.mgr@sampath.lk 055
*Vavuniya Super No. 7A, Horowpatana Road, Vavuniya (024) 2226227 - 8 (024) 2226229 vavuniya_super.mgr@sampath.lk 170
Eastern Province
Batticaloa District
Batticaloa No. 32, Thamaraikeny Road, Batticaloa (065) 2227581 - 2 (065) 2227583 batticaloa.mgr@sampath.lk 107
*Batticaloa II No. 395, Trinco Road, Batticaloa (065) 2228240 - 1 (065) 2228242 batticaloa2.mgr@sampath.lk 139
Chenkalady Sellam Building, Boundary Road Junction, Main
Road, Chenkalady
(065) 2241348 - 9 (065) 2241350 chenkalady.mgr@sampath.lk 121
Kaluwanchikudy Hospital Road, Kaluwanchikudy (065) 2251177, 2250807 (065) 2250208 kaluwanchikudy.mgr@sampath.lk 125
Kattankudy No. 57,59, Main Street, Kattankudy (065) 2247930 - 1 (065) 2247932 kattankudy.mgr@sampath.lk 115
Oddamavady Colombo Road, Mavadichenai, Oddamavady (065) 2257372, 2258210 (065) 2258211 oddamavady.mgr@sampath.lk 124
Ampara District
Akkaraipattu No. 61, Sulaiman Shopping Complex, Main Street,
Akkaraipattu
(067) 2279197 - 8 (067) 2279199 akkaraipattu.mgr@sampath.lk 111
Ampara No. 9, D S Senanayake Road, Ampara (063) 2223840 - 1 (063) 2223444 ampara.mgr@sampath.lk 062
*Dehiattakandiya F 79, New Town, Dehiattakandiya (027) 2250418 - 9 (027) 2250420 dehiattakandiya.mgr@sampath.lk 167
Kalmunai No. 18, Police Station Road, Kalmunai (067) 2220448 - 9 (067) 2222020 kalmunai.mgr@sampath.lk 112
Pottuwil Cassim Moulavi Building, Main Street, Pottuvil (063) 2248190, 2248194 (063) 2248196 pottuvil.mgr@sampath.lk 130
Sainthamaruthu Main Street, Sainthamaruthu - 16 (067) 2225310, 2225320 (067) 2225330 sainthamaruthu.mgr@sampath.lk 126
Trincomalee District
Trincomalee No. 262, Central Road, Trincomalee (026) 2225387 - 9 (026) 2225389 trinco.mgr@sampath.lk 066
Central Province
Kandy District
Digana No. 42, Mahiyangana Road, Digana, Rajawella (081) 2376765 (081) 2376765 digana.mgr@sampath.lk 085
Gampola No. 06, Panabokke Mawatha, Gampola (081) 2350564 - 5 (081) 2350571 gampola.mgr@sampath.lk 101
Kandy No. 19, Dalada Veediya, Kandy (081) 2232778 - 80 (081) 2232779 kandy.mgr@sampath.lk 007
Kandy - City
Centre
Shop No.L 1-6 Level One, Kandy City Centre
Building, Dalada Veediya, Kandy
(081) 2205825 - 6 (081) 2205827 kandy_city.mgr@sampath.lk 123
Kandy - Corporate No. 29, Cross Street, Kandy (081) 2200096 - 7 (081) 2200098 kandy_corporate.mgr@sampath.lk 100
Katugastota No. 6-8, Gohagoda Road, Katugastota (081) 2498932 - 4 (081) 2499123 katugastota.mgr@sampath.lk 032
*Kundasale No. 232, Digana Road, Kundasale (081) 2421763 - 4 (081) 2421767 kundasale.mgr@sampath.lk 133
Peradeniya No. 676 A, Peradeniya Road, Kandy (081) 2387876 - 7 (081) 2384054 peradeniya.mgr@sampath.lk 051
*Pilimatalawa No:246, Colombo Road,Pilimatalawa (081) 2577341, 2577336 (081) 2577396 pilimatalawa.mgr@sampath.lk 150
*Rikillagaskada No:120, Kandy Road, Rikillagaskada (081) 2365021 - 2 (081) 2365023 rikillagaskada.mgr@sampath.lk 163
Wattegama No.134/A/1, Kandy Road, Wattegama (081) 2470600 (081) 2470600 wattegama.mgr@sampath.lk 105
Matale District
Dambulla No. 622, Anuradhapura Road, Dambulla (066) 2283085 & 87 (066) 2283067 dambulla.mgr@sampath.lk 090
Matale No. 142 - 144, Trincomalee Street, Matale (066) 2223861 - 2 (066) 2224094 matale.mgr@sampath.lk 025
Nuwara Eliya District
Hatton No. 173, Dimbula Road, Hatton (051) 2225403 - 4 (051) 2225405 hatton.mgr@sampath.lk 080
Nuwara Eliya No. 01, Lawson Street, Nuwara Eliya (052) 2222946 - 7 (052) 2222948 nuwaraeliya.mgr@sampath.lk 084
*Pussellawa No. 551, Nuwara Eliya Road, Pusselllawa (081) 2478034 - 5 (081) 2478036 pussellawa.mgr@sampath.lk 152
Extention Offices
Katunayake
Airport
Bandaranayake International Airport, Katunayake (011) 2253776 (011) 2253776 kpo&ir_exec@sampath.lk
Passport Office No.43, Ananda Rajakaruna Mawatha,
Colombo 10
(011) 2685098 (011) 2685098 col10-ppo.mgr@sampath.lk
* Branches opened in 2010
Annual Report 2010 / Supplementary Information / Branch Network
Branch Network contd...
Sampath Bank PLC 277
Nostro Accounts Maintained in Specific Currencies
Country / Name of the Bank & Address Swift Code CCY
AUSTRALIA
NATIONAL AUSTRALIA BANK - MELBOURNE
500, Bourke Street, Melbourne, Victoria 3000,
Australia
NATAAU33 AUD
BANGLADESH
STANDARD CHARTERED BANK – DHAKA
2, Dilkusha Commercial Area, Dhaka 1000,
Bangladesh
SCBLBDDX ACU-
DOLLAR
CANADA
BANK OF MONTREAL - TORONTO
Correspondent Bank Services
234, Simcoe Street , 2nd floor, Toronto,
Canada, M5T 1T4
BOFMCAT2 CAD
DENMARK
DANSKE BANK A/S - COPENHAGEN
Holmens Kanal 2-12,
DK-1092 Copenhagen K, Denmark
DABADKKK DKK
FRANCE
UNION DE BANQUES ARABES ET
FRANCAISES(UBAF)-PARIS
190, Avenue Charles-de-Gaulle,
92523 Neuilly Cedex (Paris), France
UBAFFRPP USD
GERMANY
DEUTSCHE BANK AG
Theodor-Heuss Allee 70
60486, Frankfurt am Main, Germany
DEUTDEFF EUR
COMMERZ BANK AG
Financial Institutions
Kaiserplatz, 60261 Frankfurt am Main,
Germany
COBADEFF EUR
UNICREDIT BANK AG - MUNICH
(HYPOVEREINSBANK)
Kardinal-Faulhaber-Straße 1, 80333 Munich,
Germany
HYVEDEMM EUR
HONGKONG
STANDARD CHARTERED BANK(HONG KONG) LTD
4-4a, Des Voeux Rd, Central Hong Kong, Hong
Kong
SCBLHKHH HKD
INDIA
BANK OF CEYLON – CHENNAI
1090, A.R.Complex, Poonamallee,
High Road, Chennai 600 084, India
BCEYIN5M ACU-
DOLLAR
BANK OF CEYLON – CHENNAI
1090, A.R.Complex, Poonamallee,
High Road, Chennai 600 084, India
BCEYIN5M ACU-EURO
STANDARD CHARTERED BANK - MUMBAI
90, Mahatma Gandhi Road,
Mumbai 400 001, India
SCBLINBB ACU-
DOLLAR
ITALY
UNICREDIT SPA – MILANO
Transactional Sales &Trade Services,
Global Transaction Banking
Viale Bodio 29B320158 Milano (MI), Italy
UNCRITMM EUR
BANCA.POPOLARE SOC COOP VERONA
Piazza Nogara 2, 37121 Verona, Italy
BAPPIT22 EUR
BANCA NAZIONALE DEL LAVORO SPA-ROME
APAC FLUSSI INTERNAZIONALI
Via degli Aldobrandeschi, 30000163 Roma, Italy
BNLIITRR EUR
JAPAN
BANK OF TOKYO MITSUBISHI UFJ LTD – TOKYO
1-3-2 Nihombashi Hongoku-cho,
Tokyo 103-0021,Chuo -Ku, Japan
BOTKJPJT JPY
STANDARD CHARTERED BK – TOKYO
21st Floor, Sanno Park Tower,
2-11-1 Nagatacho, Chiyoda-ku,
Tokyo 100-6155, Japan
SCBLJPJT JPY
Country / Name of the Bank & Address Swift Code CCY
SUMITOMO MITSUI BANKING CORPORATION
SMBC International operations,
5-2-10, Shinbashi, minato – ku, Tokyo 105-0004,
Japan
SMBCJPJT JPY
NEW ZEALAND
BANK OF NEW ZEALAND-WELLINGTON
Bank Sector – Institutional banking, Level 5 Pier 1,
Harbour Quays, 60 Waterloo Quay
Wellington, Newzealand
BKNZNZ22 NZD
NORWAY
DNB NOR BANK ASA- OSLO 0021, Oslo, Norway DNBANOKK NOK
PAKISTAN
STANDARD CHARTERED BANK - KARACHCHI
PO Box 5556, 11, Chundrigar Road,
Karachi 74000, Pakistan
SCBLPKKX ACU-
DOLLAR
SOUTH AFRICA
FIRSTRAND BANK LTD
P O BOX 786273,
Sandton 2146, South Africa
FIRNZAJJ ZAR
SINGAPORE
UNITED OVERSEAS BANK LTD
80 Raffles Place, UOB Plaza
Singapore 048624, Singapore
UOVBSGSG SGD
OVERSEA CHINESE BANKING CORP LTD
65 Chulia Street, OCBC Centre,
Singapore 049513, Singapore
OCBCSGSG SGD
SWEDEN
SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) -
STOCKHOLM
Kungsträdgårdsgatan 8,
10640 Stockholm, Sweden
ESSESESS SEK
SWITZERLAND
UBS AG- ZURICH
The Bank for Banks,
P.O.BOX, CH-8098, Zürich, Switzerland
UBSWCHZH80A CHF
UNITED ARAB EMIRATES
MASHREQ BANK PSC - DUBAI
3rd Floor Mashreqbank Head Office, Omer Bin Al
Khattab Road, PO Box 1250,Deira, Dubai, UAE
BOMLAEAD AED
UNITED KINGDOM
BANK OF CEYLON (UK)LTD
1 Devonshire Square, London, EC2M 4WD, UK
BCEYGB2L GBP
BARCLAYS BANK PLC
Correspondent Banking Branch
1 Churchill Place, London, E14 5HP, UK
BARCGB22 GBP
UNITED STATES OF AMERICA
DEUTSCHE BANK TRUST COMPANY AMERICAS
NY
60, Wall Street, New York, NY, USA
BKTRUS33 USD
CITI BANK NA
399, Park Avenue, New York, NY 10022, USA
CITIUS33 USD
HSBC BANK USA NA
452, Fifth Avenue, New York, NY 10018, USA
MRMDUS33 USD
JP MORGAN CHASE BANK NA
270, Park Avenue, New York,
NY 10017-2014, USA
CHASUS33 USD
MASHREQ BANK PSC
50, Broadway,15 th floor,
Suite 1500, Mashreq Bank, New York, USA
MSHQUS33 USD
WELLS FARGO BANK NA
375, Park Avenue, NY 4080
New York, NY 101152, USA
PNBPUS3NNYC USD
Annual Report 2009 / Supplementary Information / Nostro Accounts Maintained in Specific Currencies
Sampath Bank PLC 278
Annual Report 2009 / Supplementary Information / Correspondent Banks and Exchange Companies
Correspondent Banks and Exchange Companies

Country SWIFT Code
1. Australia
Australia and New Zealand Banking
Group Ltd ANZBAU2S
Citibank NA CITIAU2X
Hongkong & Shanghai Banking
Corporation Ltd HSBCAU2S
JP Morgan Chase Bank NA CHASAU2X
National Australia Bank Ltd NATAAU33
2. Austria
Raiffeisenlandesbank RWGAT2B
Unicredit Bank Austria AG BKAUATWW
3. Bahrain
HSBC Bank Middle East Ltd BBMEBHBX
4. Bangladesh
Dhaka Bank Ltd DHBLBDDH
Standard Chartered Bank SCBLBDDX
5. Belgium
Commerzbank AG COBABEBX
ING Belgium SA/NV BBRUBEBB
KBC Bank NV KREDBEBB
6. Brazil
Deutsche Bank SA DEUTBRSP
7. Bulgaria
Unicredit Bulbank AD UNCRBGSF
8. Canada
Bank of Montreal BOFMCAT2
HSBC Bank Canada HKBCCATT
Royal Bank of Canada ROYCCAT2
Bank of Nova Scotia NOSCCATT
9. Chile
Banco del Estado de Chile BECHCLRM
Citibank NA CITICLRM
10. China
Bank of China BKCHCNBJ
Citibank (China) Co. Ltd CITICNSX
Commerzbank AG COBACNSX
Deutsche Bank (China) Co. Ltd DEUTCNSH
HSBC Bank (China) Co. Ltd HSBCCNSH
JP Morgan Chase Bank (China) Co. Ltd CHASCNSH
Country SWIFT Code
Standard Chartered Bank (China) Ltd SCBLCNSX
Wells Fargo Bank NA PNBPCNSH
11. Cyprus
Societe Generale Cyprus Ltd SOGECY2N
12. Czech Republic
Commerzbank AG COBACZPX
Unicredit Bank Czech Republic AS BACXCZPP
13. Denmark
Danske Bank AS DABADKKK
DnB NOR Bank ASA DNBADKKX
Nordea Bank Denmark AS NDEADKKK
14. Egypt
Arab International Bank ARIBEGCX
Mashreq Bank MSHQEGCA
15. Finland
Nordea Bank Finland PLC NDEAFIHH
Danske Bank DABAFIHX
DnB NOR Bank ASA DNBAFIHX
16. France
BNP Paribas SA BNPAFRPP
Calyon BSUIFRPP
HSBC Bank PLC MIDLFRPX
Union de Banques Arabes et Francaises
(UBAF) UBAFFRPP
Deutsche Bank AG DEUTFRPP
Commerze Bank AG COBAFRPX
17. Germany
Unicredit Bank AG (Hypovereinsbank) HYVEDEMM
Commerzbank AG COBADEFF
Deutsche Bank AG DEUTDEMM
DnB Nor Bank ASA DNBADEHX
18. Greece
National Bank of Greece SA ETHNGRAA
19. Hong Kong
BNP Paribas BNPAHKHH
Citibank NA CITIHKHX
Commerzbank AG COBAHKHX
Deutsche Bank AG DEUTTHBK
Country SWIFT Code
Hongkong & Shanghai Banking
Corporation Ltd HSBCHKHH
JP Morgan Chase Bank NA CHASHKHH
Standard Chartered Bank (Hong Kong) Ltd SCBLHKHH
UBAF (Hong Kong) Ltd UBAFHKHX
Wells Fargo Bank NA PNBPHKHH
20. Hungary
CIB Bank Ltd CIBHHUHB
Commerzbank AG COBAHUHX
21. India
Bank of Ceylon BCEYIN5M
Citibank NA CITIINBX
Deutsche Bank AG DEUTINBB
The Hongkong & Shanghai Banking
Corporation Ltd HSBCINBB
ICICI Bank Ltd ICICINBBCTS
Mashreq Bank MSHQINBB
Standard Chartered Bank SCBLINBB
State Bank of India SBININBB
22. Indonesia
Citibank NA CITIIDJX
Deutsche Bank AG DEUTIDJA
The Hongkong and Shanghai Banking
Corporation Ltd HSBCIDJA
PT Bank Mandiri (Persero) BMRIIDJA
Standard Chartered Bank SCBLIDJX
23. Ireland
Bank of Ireland BOFIIE2D
Citibank Europe PLC CITIIE2X
24. Israel
Bank Leumi le – Israel BM LUMIILIT
25. Italy
Banca Intesa SpA BCITIT22
Banca Nazionale del Lavoro SpA BNLIITRR
Banca UBAE SPA UBAIITRR
Commerzbank AG COBAITMM
HSBC Bank PLC MIDLITMX
Unicredit SpA UNCRITMM
Banca Popolare Soc Coop BAPPIT22
41
49
29
22
1
33
30
21
36 52
35
42
3
31
4
50
49
45
10
26
19
37
40
28
8
54
9
6
44
27
14
24
11
39
46
16
5
23
53
47
34
13
32
15
48
25
18
51
38
2
12 17
20
7
Sampath Bank PLC 279
Annual Report 2010 / Supplementary Information / Correspondent Banks and Exchange Companies
Country SWIFT Code
26. Japan
Australia and New Zealand Banking
Group Ltd ANZBJPJX
Citibank Japan Ltd CITIJPJT
Commerzbank AG, Tokyo COBAJPJX
Deutsche Bank AG DEUTJPJT
The Hongkong and Shanghai Banking
Corporation Ltd HSBCJPJT
Mizuho Bank Ltd MHBKJPJT
Standard Chartered Bank SCBLJPJT
Sumitomo Mitsui Banking Corporation SMBCJPJT
The Bank of Tokyo – Mitsubishi UFJ Ltd BOTKJPJT
JP Morgan Chase Bank NA CHASJPJT
Wells Fargo Bank NA PNBPJPJX
27. Jordan
HSBC Bank Middle East Ltd BBMEJOAX
Standard Chartered Bank SCBLJOAX
28. Kuwait
Citibank NA CITIKWKW
National Bank of Kuwait NBOKKWKW
29. Malaysia
Citibank Berhad CITIMYKL
Deutsche Bank (Malaysia) Bhd DEUTMYKL
HSBC Bank Malaysia Berhad HBMBMYKL
Standard Chartered Bank Malaysia Bhd SCBLMYKX
30. Maldives
Bank of Ceylon BCEYMVMV
Bank of Maldives PLC MALBMVMV
The Hongkong & Shanghai Banking
Corporation Ltd HSBCMVMV
31. Nepal
Standard Chartered Bank Nepal Ltd SCBLNPKA
32. Netherlands
Commerzbank AG COBANL2X
Deutsche Bank AG DEUTNL2A
ING Bank NV INGBNL2A
33. New Zealand
ANZ National Bank Ltd ANZBNZ22
Bank of New Zealand BKNZNZ22
Citibank NA CITINZ2X
The Hongkong & Shanghai
Banking Corporation Ltd HSBCNZ2A
34. Norway
DnB Nor Bank ASA DNBANOKK
Nordea Bank Norge ASA NDEANOKK
Scandinevinska Enskilda Banken ESSENOKX
35. Oman
HSBC Bank Middle East Ltd BBMEOMRX
36. Pakistan
The Hongkong & Shanghai
Banking Corporation Ltd HSBCPKKX
Standard Chartered Bank (Pakistan) Ltd SCBLPKKX
37. Philippines
Citibank NA CITIPHMX
Deutsche Bank AG DEUTPHMM
The Hongkong & Shanghai
Banking Corporation Ltd HSBCPHMM
38. Poland
Bank Handlowy w Warszawie SA CITIPLPX
Nordea Bank Polska SA NDEAPLP2
39. Portugal
BNP Paribas Portugal BNPAPTPL
40. Qatar
HSBC Bank Middle East Ltd BBMEQAQX
Mashreq Bank MSHQQAQA
41. Romania
Romanian Commercial Bank RNCBROBU
42. Saudi Arabia
Saudi Hollandi Bank AAALSARI
The National Commercial Bank NCBKSAJE
The Saudi British Bank SABBSARI
Al Rajhi Bank RJHISARI
Country SWIFT Code
43. Singapore
The Bank of Tokyo-Mitsubishi UFJ Ltd BOTKSGSX
Citibank NA CITISGSG
Commerzbank AG COBASGSX
DBS Bank Ltd DBSSSGSG
Deutsche Bank AG DEUTSGSG
The Hongkong & Shanghai
Banking Corporation Ltd HSBCSGSG
JP Morgan Chase Bank NA CHASSGSG
Mizuho Corporate Bank Ltd MHCBSGSG
Oversea-Chinese Banking Corporation Ltd OCBCSGSG
Standard Chartered Bank SCBLSGSG
Union de Banques Arabes et Francaises
(UBAF) UBAFSGSX
United Overseas Bank Ltd UOVBSGSG
44. South Africa
ABSA Bank Ltd ABSAZAJJ
FirstRand Bank Ltd FIRNZAJJ
Ned Bank Ltd NEDSZAJJ
Standard Chartered Bank SCBLZAJJ
45. South Korea
Citibank Korea Inc CITIKRSX
Deutsche Bank AG DEUTKRSE
The Hongkong & Shanghai
Banking Corporation Ltd HSBCKRSE
JP Morgan Chase Bank NA CHASKRSX
Standard Chartered First Bank Korea Ltd. SCBLKRSE
Union de Banques Arabes et Francaises
(UBAF) UBAFKRSX
Wells Fargo Bank NA PNBPKRSX
46. Spain
Banco Bilbao Vizcaya Argentaria SA BBVAESMM
Banco Santander SA BSCHESMM
Commerzbank AG COBAESMX
47. Sweden
Danske Bank A/S DABASESX
Skandinaviska Enskilda Banken ESSESESG
Svenska Handelsbanken HANDSESG
48. Switzerland
Credit Suisse CRESCHZZ
UBS AG UBSWCHZH
49. Taiwan
Citibank NA CITITWTX
Deutsche Bank AG DEUTTWTP
The Hongkong & Shanghai
Banking Corporation Ltd HSBCTWTP
JP Morgan Chase Bank NA CHASTWTX
Mizuho Corporate Bank Ltd MHCBTWTP
Standard Chartered Bank (Taiwan) Ltd SCBLTWTP
Wells Fargo Bank NA PNBPTWTP
50. Thailand
Citi Bank NA CITITHBX
Deutsche Bank AG DEUTTHBK
The Hongkong & Shanghai
Banking Corporation Ltd HSBCTHBK
Kasikornbank Public company Ltd KASITHBK
Standard Chartered Bank (Thai) PCL SCBLTHBX
51. Turkey
HSBC Bank AS HSBCTRIX
Turk Ekonomi Bankasi AS TEBUTRIS
52. United Arab Emirates
Citibank NA CITIAEAD
HSBC Bank Middle East Ltd BBMEAEAD
Lloyds TSB Bank PLC LOYDAEAD
MashreqBank PSC BOMLAEAD
Standard Chartered Bank SCBLAEAD
Habib Bank AG Zurich HBZUAEAD
53. United Kingdom
Bank of Ceylon(UK) Ltd BCEYGB2L
Barclays Bank PLC BARCGB22
Citibank International PLC CITIGB2L
Country SWIFT Code
The Hongkong & Shanghai
Banking Corporation Ltd HSBCGB2L
JP Morgan Europe Ltd CHASGB2L
Standard Chartered Bank SCBLGB2L
Wells Fargo Bank NA PNBPGB2L
54. United States of America
Citibank NA CITIUS33
Deutsche Bank AG DEUTUS33
Deutsche Bank Trust Company Americas BKTRUS33
HSBC Bank USA NA MRMDUS33
JP Morgan Chase Bank NA CHASUS33
MashreqBank PSC MSHQUS33
Standard Chartered Bank SCBLUS33
Wells Fargo Bank NA PNBPUS3NNYC
Exchange Companies
Country Name of Exchange Company
Australia Kapruka Pvt Ltd
Remittance Plus Pty Ltd
Bahrain Bahrain Financing Company
National Finance & Exchange Co. W.L.L
Zenj Exchange Co. W.L.L
Italy National Exchange Company S.R.L.
Jordan Alawne Exchange
UAE Exchange
Kuwait Almulla International Exchange Co. K.S.C.C.
Bahrain Finance Company W.L.L
New
Zealand
Kapruka New Zealand Ltd
Oman Oman & UAE Exchange Centre & Co. L.L.C
Qatar Doha Bank
AlFardan Exchange Company Co. L.L.C
City Exchange Co., W.L.L
Islamic Exchange Co., W.L.L
Al Zaman Exchange W.L.L
Lari Exchange Co
Al Dar Exchange Works
Spain Money Exchange
Saudi
Arabia
Al Rajhi Banking Corporation
UAE UAE Exchange Centre L.L.C
Habib Exchange Company L.L.C
Wall Street Exchange Centre L.L.C
Alfalah Exchange Company L.L.C
Leela Megh Exchange Co. L.L.C
Al Ahalia Money Exchange Bureau
Al Ansari Exchange Est.
Emirates India International Exchange
Sampath Bank PLC also acts as an agent of following
Global Companies;
º Money Gram International
º Coinstar
º Xpress Money Services Ltd
º EzRemit
º ARY Speedremit
º Instant Cash Global Money Transfer
º Ria Financial Services
Sampath Bank PLC 280
Annual Report 2009 / Supplementary Information / Milestones
Milestones
1987
º The bank was incorporated as
‘Investment and Credit Bank Ltd’.
Mr. N U Jayawardena became the
Chairman of the Bank; while
Mr. Janaka De Silva was appointed as
the General Manager.
1988
º Automated Teller Machines were
introduced to Sri Lanka for the first
time.
1989
º Uni – Banking system was introduced
to the Country for the first time.
1991
º Mr. Stanley William became the
Chairman of the Bank.
º Mr. Edgar Gunatunge joined the Board
of Directors as the Deputy Chairman/
Managing Director.
1993
º Mr. Dunstan De Alwis became the
Chairman of the Bank.
1996
º Mr. Kumar Abayanayake assumed
duties as the General Manager/Chief
Executive Officer.
º ‘asiamoney’ the prestigious financial
magazine in Asia voted Sampath Bank
as the ‘Best Commercial Bank of the
year’ in Sri Lanka.
1997
º The Bank was awarded The Best
Small-Cap Bank in South Asia by the
prestigious ‘Asia Banking Digest’.
º The Bank was honoured with the
award, ‘Best Commercial Bank of the
Year’ by ‘asiamoney’ for the second
year in succession.
º Introduction of Debit Card in
association with ‘Cirrus’ and ‘Maestro’
for the first time in South Asia.
1998
º Mr.Edgar Gunatunge appointed as the
Chairman of the bank.
º The Bank was honoured with the
award, ‘Best Commercial Bank of the
Year’ by ‘asiamoney’ for the third year
in succession.
º In appreciation of the innovative
steps taken, the Bank was awarded
‘Outstanding New Business Venture
Project’ in 1988 by ‘Asian Banking
Digest’.
1999
º Mr. Anil Amarasuriya assumed duties
as General Manager/Chief Executive
Officer.
º The ‘Forbes Global’ Magazine listed
Sampath Bank under the 300 best
small companies in the world.
2000
º Sampath Bank was chosen ‘Bank of
the year 2000’, in Sri Lanka by the
prestigious magazine ‘The Banker’.
2002
º Top award for Human Resource
Management Services Sector – Large
Companies was awarded to Sampath
Bank at the National HRM Awards
2002.
2003
º As a first step towards expanding in
the South East Asian Region, the Bank
invested in LankaBangla Finance Ltd.,
a leasing and credit card company in
Bangladesh.
2004
º The Bank won two prestigious awards
i.e. First Runner-up in Overall Category
and the award for best HR practice in
the service sector large category at the
National HRM Awards 2004.
2005
º The Bank was adjudged the Best
Corporate Citizen for the year 2005
in the top ten category and was also
the joint winner in the Best Economic
Performance for the year 2005.
º The Bank won the Gold Award, in the
Financial Category and award for ‘Best
Financial Application’ presented by the
Institute of Chartered Accountants of
Sri Lanka at the ‘National Best Quality
Software Awards 2005’ organised by
the British Computer Society, Sri Lanka
Branch for developing an IVR Based
Bill Payment System in association
with Dialog Telekom.
º Sampath Bank was placed Second
Runner-up in Banking Sector for
business excellence at ‘National
Business Excellence Awards 2005’
organised by The National Chamber of
Commerce of Sri Lanka.
2006
º The Annual Report 2005 was
adjudged Runner-up for the
second consecutive year in Banking
Institutions category for Best Presented
Accounts awarded by South Asian
Federation of Accountants (SAFA) and
was also selected as the Runner-up for
the third consecutive year in’ Awards
for Excellence in Annual Reports’
competition organised by the Institute
of Chartered Accountants of Sri Lanka.
º Credit rating was enhanced to AA-
(lka) by Fitch Rating (Lanka) Ltd.
2007
º ATM network reached 150 machines
across the island and 100th Branch
was opened.
2008
º Mr. I W Senanayake assumed duties as
the 5th Chairman of the Bank, while
Mr. Harris Premaratne was designated
as the Chief Executive Officer.
Sampath Bank PLC 281
º Won a Gold and a Merit Award at the
National Best Quality Software Awards
2008 for the in-house category for
developing the ‘Credit Approval
System (CAS)’ and ‘Electronic Money
Transfer (EMTS)’ application.
º Honoured at the National Science
and Technology Awards 2008 for the
category of ‘Locally Developed New
Technologies which have resulted
in a successfully Marketed Product /
Services’ for our innovative product
‘Sampath eRemittance System’.
2009
º Became the third largest private sector
Bank in Sri Lanka in terms of total
assets.
º The Annual Report 2008 was
adjudged Joint Runner-up in Banking
Institutions category for Best Presented
Accounts awarded by South Asian
Federation of Accountants (SAFA) and
was also selected as the Joint Runner-
up in ‘Awards for Excellence in Annual
Reports’ competition organised by the
Institute of Chartered Accountants of
Sri Lanka.
º Honored with 4 accolades at the
National Business Excellence Awards
ceremony 2009, organized by the
National Chamber of Commerce of
Sri Lanka. Sampath Bank won the
following awards:
º Silver Award lor lhe Overall
Competition for National Business
Excellence
º lirsl Punner-Up Award in lhe Lxlra
Large Category
º Winner ol lhe 8anking Seclor ol Sri
Lanka Award
º Winner in Lxcellence in 8usiness &
Financial Performance Award
º Sampath Bank reached a greater
height by clinching the global
accolade ‘Bank of the Year – 2009’
by the highly acclaimed international
magazine ‘The Banker’ of Financial
Times - London.
º Placed among ‘The Ten Best Corporate
Citizens’ in Sri Lanka for the 5th
consecutive year at the Best Corporate
Citizens Awards organised by The
Ceylon Chamber of Commerce.
Sampath Bank was awarded;
º Corporale Social Pesponsibilily
Award for 2009 (Best Corporate
Citizen 2009)
º Winner in lhe Communily Pelalions
Category
º Top Ten Corporale Cilizens ol lhe
Country for 2009
2010
º Creating history in the banking
industry of Sri Lanka, Bank opened
40 Branches and 39 ATMs during
the year, bringing total number of
branches to 171 and total number of
ATMs to 222 by end of 2010
º ‘Bank of the Year – 2010’ was
awarded for the second consecutive
year by the highly acclaimed
international magazine ‘The Banker’ of
Financial Times - London
º National Chamber of Commerce
awarded 3 prestigious awards at the
National Business Excellence Awards
2010, conducted in recognition of the
business organizations excelled in the
Sri Lanka
º Winner - Lxcellence in 8usiness &
Financial Performance
º Punner-up - 8anking Seclor
º Second Punner-up - Lxlra Large
Category
º South Asian Federation of
Accountants (SAFA), awarded Joint
- 1st Runner-up award for Sampath
Bank Annual Report - 2009 for the
best presented accounts among
SAARC countries in the Banking
Sector Category
º At the Effie Advertising Awards 2010,
Bank won Bronze Award for the
thematic credit card campaign titled
‘Sampath Cards - The Responsible
Choice’. This award has been granted
considering both the effectiveness and
the creativity of the campaign as well
º Internally developed software,
Sampath Vishwa Corporate - Trade
Services Facility gathered momentum,
when awarded silver at the ‘National
Best Quality Software Awards
2010, under the in-house category
and as one of the country’s best
e-content applications in the category
of e-Business and Commerce in
‘e-Swabhimani Awards 2010’
º Forming a novel concept in the
banking history in Sri Lanka, a ‘scrip
dividend’ was proposed as final
dividend subsequent to the interim
dividend paid in 2010
Annual Report 2009 / Supplementary Information / Milestones
Sampath Bank PLC 282
Glossary of Financial and Banking Terms
Acceptances
The signature on a Bill of Exchange indicates that the person on
whom it is drawn accepts the conditions of the bill. In other words
a bill of exchange that has been accepted.
Accrual Basis
Recognition of the effects of transactions and other events when
they occur without waiting for receipt or payment of cash or its
equivalents.
Associate Company
An associate is an entity in which the investor has significant
influence and which is neither a subsidiary nor an interest in a
joint venture.
Bills of Collection
A bill of exchange drawn by an exporter usually at a term, on an
importer overseas and brought by the exporter to his bank with a
request to collect the proceeds.
BIS Surplus
The total Capital Adequacy in excess of the minimum stipulated
by Basel International Standards and as modified to suit local
requirements by the Central Bank of Sri Lanka.
Capital Adequacy
The percentage of risk-adjusted assets supported by capital as
defined under the framework of risk-based capital standards
developed by the Bank for International Settlement (BIS) and as
modified to suit local requirements by the Central Bank of Sri Lanka.
Capital Gain (Capital Profit)
The gain on the disposal of an asset calculated by deducting the
cost of the asset from the proceeds received on its disposal.
Capital Reserves
Capital Reserves consist of revaluation reserves arising from
revaluation of properties owned by the Bank and Reserve Fund set
aside for specific purposes defined under the Banking Act, No 30
of 1988 and shall not be reduced or impaired without the approval
of the Monetary Board.
Cash Equivalents
Short-term highly liquid investments that are readily convertible to
known amounts of cash and which subject to an insignificant risk
of changes in value.
Commitments
Credit facilities approved but not yet utilized by the clients as at
the Balance Sheet date.
Contingencies
A condition or situation, the ultimate outcome of which, gain or
loss, will be confirmed only on the occurrence or non-occurrence
of one or more uncertain future events.
Corporate Governance
The process by which corporate entities are governed. It is
concerned with the way in which power is exercised over the
management and direction of entity, the supervision of executive
actions and accountability to owners and others.
Correspondent Bank
A bank in a foreign country that offers banking facilities to the
customers of a bank in another country.
Cost Income Ratio
Operating expenses as a percentage of net income.
Cost Method
A method of accounting whereby the investment is recorded at
cost. The Income Statement reflects income from the investment
only to the extent that the investor receives distributions from
accumulated net profits of the investee arising subsequent to the
date of acquisition.
Cost-Push Inflation
A continuous increase in average price levels due to an increase in
production costs.
Credit Risk
Credit risk is the risk of financial loss to the Bank if a customer or
counter party to a financial instrument fails to meet its contractual
obligations, and arises principally from the loans and advances to
customers and other banks and investment debt securities.
Credit Ratings
An evaluation of a corporate ability to repay its obligations or
likelihood of not defaulting, carried out by an independent rating
agency.
Dealing Securities
These are marketable securities acquired and held with the
intention to resale over a short period of time.
Deferred Tax
Sum set aside in the Financial Statements that may become
payable/receivable in a financial year other than the current
financial year. It arises because of temporary differences between
tax rules and accounting conventions.
Derivatives
A derivative is a financial instrument or other contract, the value
of which changes in response to some underlying variable (e.g., an
interest rate), that has an initial net investment smaller than would
be required for other instruments that have a similar response to
the variable, and that will be settled at a future date.
Dividend Cover
Profit after tax divided by gross dividends. This ratio measures
the number of times dividend is covered by the current year’s
distributable profits.
Dividend Yield
Dividend earned per share as a percentage of its market value.
Documentary Letters Of Credit (L/C’s)
Written undertakings by a bank on behalf of its customers,
authorising a third party to draw on the bank up to a stipulated
amount under specific terms and conditions. Such undertakings
are established for the purpose of facilitating international trade.
Earning Per Share (EPS)
The profit attributable to each ordinary share in the bank, based
on the profit for the period after tax and after deducting minority
interest and preference share dividends.
Economic Value Added (EVA)
A measure of productivity which takes into consideration cost of
total invested equity.
Effective Tax Rate
Provision for taxation excluding deferred tax divided by the profit
before taxation.
Equity Method
The equity method is a method of accounting whereby the
investment is initially recognised at cost and adjusted thereafter
for the post-acquisition changes in the investor’s share of net
assets of the investee. The profit or loss of the investor includes the
investor’s share of the profit or loss of the investee.
ESOP (Employee Share Ownership Plan)
A method of giving employees shares in the business for which
they work.
Fair Value
Fair Value is the amount for which an asset could be exchanged
between a knowledgeable, willing buyer and a knowledgeable,
willing seller in an arm’s length transaction.
Finance Lease
A lease in which the lessee acquires all the financial benefits and
risks attaching to ownership of whatever in being leased.
Foreign Exchange Contract
Agreement between two parties to exchange one currency for
another at a future date at a rate agreed upon today.
Foreign Exchange Income
The realised gain recorded when assets or liabilities denominated
in foreign currencies are translated into Sri Lankan Rupees on the
balance sheet date at prevailing rates which differ from those rates
in force at inception or on the previous balance sheet date. Foreign
exchange income also arises from trading in foreign currencies.
General Provisions
General provisions are established for loans and advances for
anticipated losses on aggregate exposures where credit losses
cannot yet be determined on an individual facility basis.
Gross Dividend
The portion of profits distributed to the shareholders including the
tax withheld.
Group
A group is a parent and all its subsidiaries.
Guarantees
A promise made by a third party (Guarantor), who is not a party to
a contract between two others, that the guarantor will be liable if
the guarantee fails to fulfill the contractual obligations.
Hedging
A strategy under which transactions are effected with the aim of
providing cover against the risk of unfavorable price movements
(Interest Rate, Foreign exchange rate, commodity prices, etc)

HTM (Held to Maturity) Investments
Held-to-maturity investments are non-derivative financial assets
with fixed or determinable payments and a fixed maturity that an
entity has the positive intention and ability to hold to maturity.
Impairment
This occurs when recoverable amount of an asset is less than its
carrying amount.
Intangible Asset
An identifiable non-monetary asset without physical substance
held for use in the production / supply of goods / services or for
rental to others or for administrative purposes.
Interest Margin
Net interest income expressed as a percentage of interest earning
assets.
Interest Spread
This represents the difference between the average interest rate
earned and the average interest rate paid on funds.
Interest Cover
A ratio showing the number of times interest charges is covered by
earnings before interest and tax.
Interest Rate SWAP
Arrangement whereby one party exchanges one set of interest
payments for another.
Interest in suspense
Interest suspended on non-performing loans and advances.
Investment Properties
Investment property is property (land or a building - or part of a
building - or both) held (by the owner or by the lessee under a
finance lease) to earn rentals or for capital appreciation or both,
rather than for use or sale.
Annual Report 2009 / Supplementary Information / Glossary of Financial and Banking Terms
Sampath Bank PLC 283
Investment Securities
Securities acquired and held for yield or capital growth purposes
and are usually held to maturity.
Joint Control
Joint control is the contractually agreed sharing of the control
over an economic activity, and exists only when the strategic
financial and operating decisions relating to the activity require the
unanimous consent of the parties sharing control.
Joint Venture
A joint venture is a contractual arrangement whereby two or more
parties undertake an economic activity that is subject to joint
control.
Key Management Personnel
Key Management Personnel are those persons having authority
and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any Director
(whether Executive or otherwise) of that entity.
Letter of Credit (L/C’s)
Written undertakings by a bank on behalf of its customer (typically
an importer), authorizing a third party (e.g. an exporter) to draw
drafts on the bank up to a stipulated amount under specific terms
and conditions. Such undertakings are established for the purpose
of facilitating international trade.
Liquid Assets
Assets that are held in cash or in a form that can be converted to
cash readily, such as deposits with other banks, Bills of Exchange
and Treasury Bills and Bonds.
Loan Losses and Provisions
Amounts set aside against possible losses on loans, advances and
other credit facilities as a result of such facilities becoming partly or
wholly uncollectible.
Market Capitalisation
The value of a company obtained by multiplying the number of
issued shares by its market value as at a date.
Market Risks
Market risk is the risk that changes in market prices, such as
interest rates, equity prices, foreign exchange rates and credit
spreads (not relating to changes in the obligor’s/issuer’s credit
standing) will affect the Bank’s income or the value of its holdings
of financial instruments.
Materiality
The relative significance of a transaction or an event, the omission
or misstatement of which could influence the decisions of users of
Financial Statements.
Minority interest
The interest of individual shareholders, if more than 50% of which
is owned by a holding company.
Net Asset Value Per Share
Shareholders’ Funds divided by the number of ordinary shares in
issue.
Net-Interest Income (NII)
The difference between what a bank earns on assets such as
loans and securities and what it pays on liabilities such as deposits
refinance funds and inter-bank borrowings.
Non-Performing Advances (NPA)
All loans are classified as nonperforming when a payment is 90
days in arrears.
Non-Performing Advances Cover (NPA Cover)
Cumulative loan loss provision as a percentage of total Non-
Performing Advances (net of Interest in Suspense).
NPA Ratio
Total non-performing advances (net of Interest in Suspense) divided
by total advances portfolio (net of Interest in Suspense).
Off Balance Sheet Transactions
Transactions that are not recognised as assets or liabilities in
the Balance Sheet, but which give rise to contingencies and
commitments.
Open Credit Exposure Ratio
Total net non-performing loans and advances expressed as a
percentage of regulatory capital base.
Operational Risk
Operational risk refers to the losses arising from fraud, negligence,
oversight, human error, process errors, system failures, external
events, etc.
Parent
A parent is an entity that has one or more subsidiaries.
Price-earnings ration (P/E ratio)
The current market price of the share is divided by the earnings per
share of the bank.
Provision for Bad and Doubtful Debts
A charge to income statement which is added to the allowance for
loan losses. Specific provisions are established to reduce the book
value of specific assets (primarily loans) to estimated realisable
values.
Prudence
Inclusion of a degree of caution in the exercise of judgment
needed in making the estimates required under conditions of
uncertainty, such that assets or income are not overstated and
liabilities or expenses are not understated.

Related Parties
Parties where one party has ability to control the other party
or exercise significant influence over the other party in making
financial and operating decisions, directly or indirectly.
Return On Average Assets (ROA)
Net income expressed as a percentage of average total assets,
used along with ROE, as a measure of profitability and as a basis of
intra-industry performance comparison.
Return On Equity (ROE)
Net income, less preferred share dividends if any, expressed as a
percentage of average ordinary shareholders’ equity.
Revenue Reserves
Reserves set aside for future distribution and investment.
Rights Issue
Issue of shares to the existing shareholders at an agreed price,
generally lower than market price.
Risk Weighted Assets
Used in the calculation of risk-based capital ratios. The face
amount of lower risk assets is discounted using risk weighting
factors in order to reflect a comparable risk per rupee among all
types of assets. The risk inherent in off-balance sheet instruments
is also recognised, first by adjusting notional values to balance
sheet (or credit) equivalents and then by applying appropriate risk
weighting factors.

Securities Sold Under Repurchase Agreement (REPO)
This relates to Treasury Bills and Bonds sold subject to a
commitment to repurchase them at a predetermined price on a
specified future date.
Securities Purchased Under Resale Agreement (Reverse REPO)
These are loans collateralised by the purchase of Treasury Bills and/
or guaranteed commercial papers from the counterparty to which
the loans are granted. The sale by the counterparty is subject to a
commitment by the Bank to sell back the underlying debt securities
to the borrower at a predetermined price on a specific future date.
Segmental Analysis
Analysis of financial information by segments of an enterprise
specifically, the different industries and the different geographical
areas in which it operates.
Shareholders’ Funds
Total of issued and fully paid share capital and capital and revenue
reserves.
Single Borrower Limit
30% of Tier II Capital.
Statutory Reserve Fund
A capital reserve created as per the provisions of the Banking Act
No. 30 of 1988.
Substance Over Form
The consideration that the accounting treatment and the
presentation in Financial Statements of transactions and events
should be governed by their substance and financial reality and not
merely by legal form.
Subsidiary Company
A subsidiary is an enterprise that is controlled by another enterprise
(known as the parent).
SWAPS (Currency)
The simultaneous purchase of an amount of a currency for spot
settlement and the sale of the same amount of the same currency
for forward settlement. Alternatively a simultaneous spot sale and
forward purchase of a currency.
Tier I Capital (Core Capital)
Core Capital includes selected items of capital funds. Major core
capital items are share capital, share premium, statutory reserve
funds, retained profits, general reserves, surpluses/losses after tax
arising from the sale of fixed and long-term investments.
Tier II Capital (Supplementary Capital)
Supplementary Capital includes, approved revaluation reserves,
general provisions, hybrid (debt/equity) capital items and approved
subordinated term debts.
Total Capital
Capital base is summation of the core capital (Tier I) and the
supplementary capital (Tier II).
Unit Trust
An undertaking formed to invest in securities under the terms of
a trust deed.
Value Added
Wealth created by providing banking and other services less
the cost of providing such services. The value added is allocated
among the employees, the providers of capital, to government by
way of taxes and retained for expansion and growth.
Yield to Maturity
Discount rate at which the present value of future payments would
equal the security’s current price.
Annual Report 2010 / Supplementary Information / Glossary of Financial and Banking Terms
Sampath Bank PLC 284
Notice of Annual General Meeting
Notice is hereby given that the 25th Annual General Meeting of Sampath Bank will be held at the “Grand Ballroom” at Galadari
Hotel, 64, Lotus Road, Colombo 01 on 31st March 2011 at 10.00 a.m. for the following purposes.
1. To receive and consider the Annual Report of the Board of Directors on the Affairs of the Company and the Statement of
Audited Accounts for the year ended 31st December 2010 with the Report of the Auditors thereon.
2. To declare the recommended Dividend of Rs. 6.60 per share for the Financial Year 2010 and therefore to consider and if
thought fit, to pass the following Ordinary Resolution.
Ordinary Resolution - Scrip Dividend
It is hereby resolved that a final dividend of Rupees One Thousand Eight Million Five Hundred and Thirty Two Thousand Six
Hundred and Fifteen (Rs.1,008,532,615) (subject to a withholding of tax at the rate of ten percent [10%] be declared for the
year 2010 as a scrip dividend at the rate of Rupees Six and Cents Sixty (Rs.6/60) per share (subject to the withholding of tax
at the rate of ten percent [10%]) and the shares be issued at the valuation of Rs.300/- per share, which will result in one (01)
share being issued for each existing fifty point zero Seven (50.07) shares held by the shareholders of the company as at the
end of trading on the date of the Annual General Meeting. The number of shares to be so issued as a scrip dividend shall be
Three Million Fifty One Thousand Seven Hundred and Eighty Eight (3,051,788) ordinary shares. The total number of the issued
ordinary shares of the Company following the scrip dividend shall then be One Hundred and Fifty Five Million Eight Hundred
and Fifty Nine Thousand Seven Hundred and Sixty (155,859,760) ”
“It is further resolved that the shares issued for the scrip dividend be listed on the Colombo Stock Exchange.”
“It is further resolved that the shares arising from the aggregation of the residual fractions consequent to the scrip dividend
be disposed of in the market by a Trustee to be nominated by the Board of Directors and the proceeds to be distributed
amongst those shareholders entitled to the fractions of such shares”.
3. To re-elect Mr. K D D Perera who retires at the Annual General Meeting, as a Director in terms of Article No. 87 of the Articles
of Association of the Company.
4. To re-elect Mr. I W 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 Mr. M A Abeynaike who retires at the Annual General Meeting as a Director in terms of Articles 87 of the Articles of
Association of the Company.
6. To re-elect Mr. L J K Hettiaratchi who retires at the Annual General Meeting as a Director in terms of Articles 87 of the Articles
of Association of the Company.
7. To re-elect Mr. D Sooriaarachchi at the Annual General Meeting as a Director in terms of Article No. 93 of the Articles of
Association of the Company.
8. To approve the Donations and Contributions made by the Directors during the year under Review.
9. To re-appoint M/s Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and to authorize
the Directors to determine their remuneration.
10. To introduce Employee Share Option Plan (ESOP) for the year 2011 and therefore to consider and if thought fit, to pass the
following Special Resolution.
Annual Report 2009 / Supplementary Information / Notice of Annual General Meeting
Sampath Bank PLC 285
Special Resolution – ESOP 2011
It is hereby resolved that the Bank introduces an Employee Share Option Plan (ESOP) for the year 2011, consisting of
3,056,159 ordinary shares amounting to two percent (2%) of the existing total number of shares issued (ie.152,807,972
ordinary shares as at date) conditional upon the Bank achieving the performance criteria specified herein. The said ESOP
shall be administered by the Board, which is hereby authorized to offer the said shares as options in such amounts as may be
determined by it to the employees of the Bank, inclusive of executive directors on terms and conditions set out in the Circular
to the Shareholders attached to the Notice.
By Order of the Board
S Sudarshan
Company Secretary
Sampath Bank PLC
Company No. PQ 144
Colombo, on this 12th February 2011
Note:
A member is entitled to appoint a Proxy to attend and vote on his/her behalf and a Proxy need not be a member of the Company.
A Form of Proxy is attached for the purpose. The instrument appointing a Proxy must be deposited at the Registered Office of the
Bank at No. 110, Sir James Peiris Mawatha, Colombo 02, not less than forty eight (48) hours before the time fixed for holding of the
Meeting.
You are kindly requested to bring with you, your National Identity Card or any valid source of identification. (eg. Driving license,
Passport)
Annual Report 2010 / Supplementary Information / Notice of Annual General Meeting
Sampath Bank PLC 286
Notes
Annual Report 2009 / Supplementary Information / Notes
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Sampath Bank PLC 287
Form of Proxy
Twenty Fifth 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. Indulakshin Wickremasinghe Senanayake of No. 18/1, Alfred Place, Colombo 3, failing him Mr. Sunil Gamini Wijesinha of No.
146/8, Havelock Road, Colombo 5, Mr. Mohan Asoka Abeynaike of No. 2A, De Fonseka Road, Colombo 5, failing him, failing him Mr. Denzil Jayalath
Gunaratne of No. 410/8, Bauddhaloka Mawatha, Colombo 7, failing him Dr Saman Kelegama of No. 100/20, Independence Avenue, Colombo 07,
failing him Mr. Lakshman Jayaraj Kumar Hettiaratchi of No. 28/3, De Fonseka Place, Colombo 5, failing him Mr Kulappuarachchige Don Dhammika
Perera of 27th Floor, East Tower, World Trade Centre, Echelon Square, Colombo 01, failing him Mr. Deepal Sooriyaarachchi of 28/10, Birnamwood,
Wojesekera Mawatha, Mirihana, Nugegoda, failing him Mr Mahawaduge Yasalal Aravinda Perera of 370 F/2, Lake Road, Averihena, Hokandara
(South), failing him Mr. Ranjith Samaranayake of 51A, Weerapuranappu Mawatha, Laxapathiya, Moratuwa, failing him Mr. Gardia Lokuge Harris
Premaratne of 51/5, Weediya Bandara Mawatha, Ethul-Kotte
as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty Fifth Annual General Meeting of the Company to be held on 31st
March 2011 and at any adjournment thereof.
FOR AGAINST
1. To receive the Audited Financial Statements and the Annual Report of the
Board for the year ended 31st December 2010.
2. To declare the recommended Dividend , Rs.6/60 per share as the final Dividend for 2010
along with the Ordinary resolution set out in the Notice convening the Meeting.
3. To re-elect Mr. K D D Perera as a Director under Article 87 of the
Articles of Association of the Company.
4. To re-elect Mr. I W Senanayake as a Director under Article 87 of the
Articles of Association of the Company.
5. To re-elect Mr. M A Abeynaike as a Director under Article 87 of the
Articles of Association of the Company.
6. To re-elect Mr.L J K Hettiaratchi as a Director under Article 87 of the
Articles of Association of the Company.
7. To re-elect Mr. D. Sooriyaarachchi as a Director under the Article 93 of the
Articles of Association of the Company.
8. To approve donations/contributions made by the Directors during the year under review.
9. To re-appoint M/s Ernst & Young, Chartered Accountants as Auditors of the Company for
the ensuing year and authorize the Directors to determine their remuneration.
10. To approve the Employee Share Option Plan for the year 2011 and the Special Resolution
set out in the Notice convening the Meeting.
Mark your preference with “X”
Signed on this ………………………........................... Day of ………………………........................... 2011
Signature: ……………………………………………
NOTE: 1. Proxy need not be a member of the Company
2. Instructions re completion of Proxy are given in next page.
Annual Report 2010 / Supplementary Information / Form of Proxy
Sampath Bank PLC 288
Instructions as to Completion
1. Kindly perfect the form of proxy, after filling in legibly your full name and address, and by signing on the space provided.
2. The completed form of proxy should be deposited at the Registered Office of the Company at No. 110, Sir James Peiris
Mawatha, Colombo 02, not less than 48 hours before, the appointed time for the holding of the meeting.
3. If you wish to appoint a person other than Chairman, Deputy Chairman or a Director of the Company as your proxy, please
insert the relevant details in the space provided [below names of the Board of Directors] on the Proxy Form.
4. Article 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 authorized shall be entitled to exercise the same powers on behalf of such corporation as the
corporation could exercise if it were an individual member of the Company”.
5. Please indicate with an ‘x’ in the space provided how your Proxy is to vote on each resolution, if no indication is given, the
Proxy, at his discretion, will vote as he thinks fit.
6. In the case of a Company/ Corporation, the Proxy must be under its Common Seal which should be affixed and attested in the
manner prescribed by its Articles of Association.
7. In the case of a Proxy signed by an Attorney the Power of Attorney must be deposited at the Registered Office of the
Company for registration.
Name of Shareholder …………………………………………………
N.I.C. No. of Shareholder …………………………………………………
Share Certificate No./
Membership No. …………………………………………………
CDS A/C No. [if applicable] …………………………………………………

No. of shares …………………………………………………
Name of Proxyholder …………………………………………………
N.I.C No. of Proxyholder …………………………………………………
Annual Report 2010 / Supplementary Information / Form of Proxy
Name of Company
Sampath Bank PLC
Legal Form
A Public Limited Liability Company incorporated in Sri Lanka
on 10th March 1986 under the Companies Act No. 17 of
1982 and listed in the Colombo Stock Exchange. A licensed
Commercial Bank under the Banking Act No. 30 of 1988.
Re-registered on 28th April 2008 under the Companies Act No.
7 of 2007.
Registration Number
PQ 144
Head Office & Registered Office
110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka.
Telephone
(011) 2300260, (011) 2358358, (011) 4730630,
(011) 5331441, (011) 5600600
Fax
(011) 2303085
SWIFT Code
BSAMLKLX
E-mail
oper.mgr@sampath.lk
Web Page
www.sampath.lk
Auditors
Ernst & Young
Chartered Accountants
Lawyers
Nithya Partners
Attorneys-at-Law
Company Secretary
S Sudarshan
ACIS(UK), MBA (Lincoln-UK)
Stock Exchange Listings
152,807,972 Ordinary Shares
15,000,000 Unsecured Subordinated Debentures of
Rs 100/- each - 2007/2012
VAT Registration Number
134001194 – 7000
Corporate Information
Credit Rating
RAM Rating - AA (Stable)
Fitch Rating - AA -(lka)(Positive)
Board of Directors
Mr. Indulakshin W Senanayake - Chairman
Mr. Sunil G Wijesinha - Deputy Chairman
Mr. Mohan A Abeynaike - Non Executive Director
Mr. Denzil J Gunaratne - Non Executive Director
Dr. Saman Kelegama - Non Executive Director
Mr. Lakshman J K Hettiaratchi - Non Executive Director
Mr. W M Prasantha Lal De Alwis - Non Executive Director
Mr. K D Dhammika Perera - Non Executive Director
Mr. Deepal Sooriyaarachchi - Non Executive Director
Mr. G L Harris Premaratne - Managing Director
Mr. M Y Aravinda Perera - Deputy Managing Director
Mr. Ranjith Samaranayake - Executive Director/Group
Chief Financial Officer
Subsidiary Companies
Name of the Company Holding % Nature of Business
Sampath Centre Ltd 97.14 Renting of Commercial
Property
SC Securities (Pvt) Ltd 51.00 Stock Broking
Sampath Leasing and
Factoring Ltd
100.00 Leasing & Factoring
Sampath Information
Technology Solutions Ltd
100.00 Developing Software
Solutions and
Maintenance of
Hardware
For Investor Relations and Clarifications on The Report, Please
Contact
Company Secretary
Sampath Bank PLC
No.110, Sir James Peiris Mawatha
Colombo 02, Sri Lanka
E-mail : company_secretary@sampath.lk
Tel: (011) 4730418/420/421
110, Sir James Peiris Mawatha, Colombo 02, Sri Lanka.

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