2009 Annual Report

The Case Study > Seylan Bank PLC Annual Report 2009 b
Annual Report 2009

Dedicated to all our Stakeholders
Copyright 2009 Seylan Bank PLC
Stock Code SEYB. N0000
ISBN 978-955-1619-01-5
Designed and produced by Smart Media
This Annual Report is printed on paper containing post-consumer fibre.
The paper used in this report is also certified under the Programme for the Endorsement of Forest Certification Schemes (PEFC)/Chain of Custody.
ConTenTS
Preface
A SToRY WoRTH SHARInG ............................................................... 07
Seylan Banks return to financial stability warrants a unique case study - with
lessons for the entire financial services industry.
Chapter 1
GRoWTH AnD ITS CHALLenGeS ..................................................... 09
From its founding in 1987, The Bank with a Heart grew rapidly, and managing
that success became increasingly difficult.
Chapter 2
A CRISIS oF ConFIDenCe ............................................................... 17
In a general climate of uncertainty, misunderstandings around the collapse of
Golden Key Company triggered a run on Seylan Bank.
Chapter 3
SWIFT AnD DeCISIVe ACTIon .......................................................... 25
The Central Bank stepped in quickly, installing a new board of directors to
stabilise the business and apply corrective measures.
Chapter 4
ReASSURInG THe PUBLIC ............................................................... 35
The top priority of the Banks new board was to restore confidence through
forthright and transparent communications.
Chapter 5
ReBUILDInG THe BUSIneSS ........................................................... 41
A series of practical steps, including a systematic rethinking of policy in every area,
soon yielded measurable positive results.
Chapter 6
A SoUnD FUTURe STRATeGY .......................................................... 49
Guided by a comprehensive strategic plan, Seylan Bank is building a healthy,
sustainable future for all stakeholders.
BenCHMARKS oF SUCCeSS . ........................................................... 55
The ultimate measures of Seylan Banks return to stability and growth are the
financial and operational results for 2009.
Financial Highlights
Management Report
Risk Management Report
Corporate Governance Report
Sustainability Report
Financial Reports
Appendix
Profiles of the Board of Directors, Senior Management Team, Ten Year Summary,
Summary of Performance Indicators, US$ Accounts, Investor Information, Branch Network,
Geographical Analysis, Glossary, Corporate Information, GRI Compliance Index, Subject Index,
Notice of Meeting, Sinhala Translations, Tamil Translations, Form of Proxy
{ PReFACe }
A SToRY WoRTH
SHARInG
Seylan Banks return to fnancial stability warrants a unique case
study - with lessons for the entire fnancial services industry.
In December 2008, Seylan Bank was confronted by a sudden, unexpected crisis
of public confidence. The situation facing Sri Lankas fifth largest bank, while,
no doubt linked to widespread uncertainty in the wake of the global economic
downturn, was triggered by a highly publicised financial collapse much
closer to home. As a result, many concerned customers rushed to withdraw
their deposits, creating a run on the Bank. The ensuing period of instability
threatened the very future of a 20-year old, systemically important institution.
The reasons behind the crisis are complex, and we will examine them in
detail over the following pages. But the central point of the Seylan Bank story
is very simple: A run that could have been catastrophic was halted, and the
support of both customers and investors quickly restored without the need for
a bail out from the Sri Lankan Government or the nations Central Bank. This
is unprecedented in banking history.
Our goal in The Case Study is to tell this unique story - clearly and candidly,
heartened by the knowledge that the crisis is behind us and we can already
point to measurable signs of progress. At the same time, some of the problems
that sparked this dramatic event, both inside our Bank and in the wider market-
place, have yet to be fully resolved. We will examine those challenges as well,
and the strategic plan weve put in place to address them.
Above all, our purpose here is to share the lessons learned and remedies
applied as weve worked to make Seylan Bank more responsive and accountable
to the needs of all stakeholders. Our sincere hope is that, others will benefit from
seeing what has been accomplished in a remarkably short time, through the
collective efforts of many dedicated individuals and institutions. We welcome this
opportunity to set our corporate vision within a solid factual framework - to make
the case for Seylan Bank as we build a healthy, sustainable business for the future.
Eastman Narangoda
Executive Chairman
17th February 2010
9
From its founding in 1987, The Bank with a Heart grew
rapidly, and managing that success became increasingly diffcult.
GRoWTH AnD ITS
CHALLenGeS
{ CHAPTeR 1 }
Seylan Bank PLC was founded in 1987 and opened its doors for business
on 24th March 1988, in Colombo Fort, the traditional banking district of
Sri Lankas largest city. Originally named Seylan Trust Bank Limited, it was
designated a Licensed Commercial Bank and incorporated as a public company
with a broad base of shareholders. From its founding, the new institution was
part of the Ceylinco Group of Companies, a major Sri Lankan conglomerate
operating in a wide range of industries.
The goal of the Banks Founder Chairman, Dr. Lalith Kotelawala, was
to offer retail customers a more welcoming, service-oriented alternative in a
banking culture that was generally perceived to be formal and regimented,
even a bit austere. From the outset, Seylan Bank presented itself as a flexible,
customer-friendly choice, summing-up its promise in a service motto that soon
caught the attention of prospective customers: The Bank with a Heart.
A Customer serviCe LeAder
Seylan Bank quickly differentiated itself in the Sri Lankan market-place with a
range of innovative services, including:
Extended weekday banking hours, as well as Saturday service
1% bonus interest on minimum average balances for savings accounts
Special high-interest savings accounts with contracted monthly deposits
5% thank-you bonuses on interest reinvested in fixed deposits
Personal Assistance Loans for customers with limited credit opportunities
Cash-card access to non-resident foreign currency accounts (often used by

Sri Lankan expatriates to transfer funds to their dependents)
The Case Study > Seylan Bank PLC Annual Report 2009 10
In 1992, the Bank introduced Sri Lankas first homegrown credit card -
Seylan Card - in association with Golden Key Credit Card Co. Ltd. Three
years later, Seylan Bank joined the Visa International network and over the
next decade became the largest issuer of Visa cards in Sri Lanka. A network of
Automated Teller Machines was implemented beginning in 1995.
The same period saw the Bank extend its retail network across the country,
opening new branches and acquiring those of other institutions, including the
Sri Lankan branches of the failed Bank of Credit and Commerce International
(BCCI). In addition, through the mid-1990s Seylan Bank extended its retail
services internationally, becoming a regional agency of the Western Union
global money transfer system and establishing presence in Dubai and Oman to
serve expatriate Sri Lankans working in the Middle East.
Entering the new millennium, Seylan Bank continued its course of steady
growth, adding branches in previously under-served areas of Sri Lanka. The
Bank also maintained its reputation as an industry innovator, leading the market
with a mobile palmtop banking solution in 2007 and, in the following year,
launching the countrys first corporate website in all three official languages -
Sinhala, Tamil and English.
At the same time, the Bank sought ways to further strengthen customer
relationships. For example, the Rewards Plus programme, featuring a prize draw
that benefited a few fortunate depositors, was replaced by a more sophisticated
loyalty programme called Merit Rewards, which recognised customers
academic and professional excellence, sporting achievements and medical or
bereavement needs. Seylan Bank also affirmed its leadership in the realm of
social responsibility - notably by taking an active role in national rebuilding
initiatives following the devastating tsunami of December 2004 (the victims of
which included many Bank customers as well as employees).
11
rApid, profitAbLe Growth
Seylan Bank enjoyed immediate success, reporting after tax profit of Rs. 11.3 Mn.
for its first partial year (i.e., from 24th March) ending 31st December 1988. Over
the next 17 years, the Bank grew at an unprecedented pace, with assets totalling
Rs. 113.6 Bn. by the end of 2005. Profits in the same period fluctuated to some
degree but followed the same overall rapid trajectory, reaching Rs. 687 Mn. (after
taxes) in the 2005 financial year.
Other key measures showed a similar pattern of dramatic growth.
The Banks workforce increased steadily from an original staff of 72 to a
companywide total of 3,733 employees. A single head office location grew into
a network of 117 outlets - based, from 1997 onward, in a new headquarters,
Ceylinco Seylan Towers. By 2005, Seylan Bank was Sri Lankas fifth-largest
Bank and ranked third among privately owned financial institutions.
Unfortunately, that same year brought a dramatic heightening of public
concern - following several years of increased scrutiny from regulators, banking
analysts and other industry watchers - that Seylan Banks remarkable record
of growth masked some significant underlying management problems. In
retrospect we can see that these unresolved issues, while not the direct cause of
the Bank run three years later, undoubtedly set the stage for the crisis to come.
overexpAnsion CArries A priCe
In the view of some stakeholders, the staggering growth achieved by Seylan
Bank had led to a classic case of overtrading. Banking is by definition a capital-
intensive business. However, in the case of Seylan Bank, aggressive expansion,
both in terms of business volumes as well as physical infrastructure - opening
branches, expanding the ATM network, building new premises, etc. - had exerted
tremendous pressure on the limited amount of capital available. Within five
years of the Banks founding, its gearing ratio (the degree of leverage required
to finance operations, calculated as total assets divided by total shareholders
funds) shot up past 29 times. This pointed to serious problems ahead.
GRoWTH AnD ITS CHALLenGeS
The ratio in fact remained extraordinarily high through the rest of the
1990s and beyond. Where other industry players typically hold the gearing ratio
below a threshold of 15 times, Seylan Bank rarely managed to keep this key
performance indicator below 20 times, and in many years it rose significantly
higher. In retrospect, one need only glance at the Banks financial performance
highlights from the early 1990s onward to confirm a long-standing gap between
business needs and available resources.
Another, complementary measure of the Banks financial health was
its capital adequacy ratio, which had been consistently forced downward as
growth in capital failed to keep pace with growth in the volume of business.
Beginning in 1993, the year it was first reported, this vital ratio was frequently
below - and never more than marginally above - the statutory minimum of 8%
to 10% at the Tier I and II levels.
In retrospect, one need only glance at the Banks
financial performance highlights to confirm a
long-standing gap between business needs and
available resources.
With concern growing over these and other key indicators, in 2005, the
Central Bank of Sri Lanka moved to impose limitations on Seylan Banks
expansion plans. These included restrictions on the number of new branches
the Bank was permitted to open, as well as its planned expansion of student-
service centres and even its ATM network. Summing-up several years of such
restrictions in the 2005 Annual Report, the Chairman expressed frustration
over measures that, in his view, prevented the Bank from fulfilling its mandate
as a leader in the bottom-up development of an emerging economy:
13
Despite (our) contribution towards the economy and the employment
we have generated, I feel sad that we are not given a voice when it comes to
development plans or even in our own growth... I feel this is wrong because it
is entrepreneurs like us who help grow the economy
other wArninG siGns
In addition to the obvious indicators of overly ambitious expansion, industry
observers noted a growing number of signs that management at Seylan Bank
was not aligned with current professional standards for the industry. Among
members of the public as well, there was a growing perception that the Bank
was not being run properly.
The indicators that aroused concern covered various aspects of
management:
Seylan Banks cost-to-income ratio was the highest in the industry.
Its ratio of non-performing loans, ranging from just over 11% to more than 18%
since reporting began in 1998, was similarly among the highest in the industry.
In addition to the shortfall in capital adequacy, there were other areas where
the Bank failed to comply with minimum statutory requirements.
Seylan Bank was half the size of the countrys largest private bank in terms
of assets, yet it employed virtually the same number of staff.
Operating expenses were as high, in absolute terms, as those of the nations

largest private bank.
Productivity, gauged by assets per staff member and earnings per staff
member, was below industry norms.
Profitability, measured both by return on assets and return on shareholders

funds, fell significantly below industry norms - and below the returns posted
by competing banks.
In pointing out these warning signs, industry experts drew some general
conclusions about management effectiveness at Seylan Bank. Clearly, there was
reason to question the quality of credit appraisals in the Banks lending and other
financing activities. Risk management practices likewise fell short of reasonable
standards. And the Bank was significantly overstaffed, demonstrating a lack of
adequate human resource policies and procedures.
Equally apparent to outside analysts were more specific problems in one
crucial aspect of the Banks business conduct - its relationship to the Ceylinco
Group, whose principal shareholder and Chairman was also Seylan Banks
chair, Dr. Lalith Kotelawala.
the CeyLinCo ConneCtion
Founded in 1939 as the Ceylon Insurance Co., the company now known as
Ceylinco had just three small subsidiaries and a total of 100 employees when
Mr. Kotelawala took on the Chief Executive role in the early 1960s. Under
his leadership, it grew into one of Sri Lankas major corporations, employing
over 30,000 people and encompassing more than 250 affiliated companies.
Some of those companies were publicly held and listed on the Colombo Stock
Exchange; most, however, were owned by other companies within the Group,
or by the Chairman and various Ceylinco directors.
The complex interrelationships between Seylan
Bank and many of the companies associated with
Ceylinco were a further source of unease for analysts
examining the Banks financial performance,
management practices and corporate governance.
Ceylinco was a major shareholder in Seylan Bank from its founding, with
an ownership stake averaging approximately 24% through the end of 2008. In
addition, the two entities entered into a diverse range of business relationships
over the years. For instance, in 1992, the Bank established a subsidiary, Ceylinco-
Seylan Development Company Limited, which involved a partnership between
the two businesses. And, as stated earlier, the Banks original credit cards were
issued under a franchise agreement with Golden Key Credit Card Co. Ltd.,
a company in the Ceylinco Group.
15
The complex interrelationships between Seylan Bank and many of the
companies associated with Ceylinco are beyond the scope of this case study.
What is salient is that those close connections were a further source of unease
for analysts examining the Banks financial performance, management practices
and corporate governance.
In short, it was widely agreed that Seylan Bank (a) had taken on excessive
and unjustified lending exposures with regard to many companies within the
Ceylinco Group, and (b) had signed contracts deemed unfavourable to the
Banks own interests in order to obtain services from, or deliver services to, a
large number of Ceylinco companies.
Again, these specific inferences about Seylan Banks connection to
Ceylinco, and even broader public conclusions about the competence of senior
management, did not directly cause the Bank run of December 2008. But there
is no question that they contributed to an overall climate of uncertainty around
Seylan Bank, such that the actual triggering event, when it did come, had
consequences that expanded far beyond the immediate crisis.
17
{ CHAPTeR 2 }
A CRISIS oF
ConFIDenCe
In a general climate of uncertainty, misunderstandings around the
collapse of Golden Key Company triggered a run on Seylan Bank.
The immediate chain of events that led to the historic run on Seylan Bank occurred
within - and was accelerated by - a broader context of public unease arising from
two recent institutional failures in Sri Lankas financial services sector.
Several years earlier, Pramuka Savings & Development Bank Limited had
failed, jeopardising the savings of more than 14,000 depositors. The Central
Bank of Sri Lanka had subsequently stepped in and liquidated the failed bank,
transferring its assets to a new entity. The complex process had taken sometime
to complete, however, and in 2008, the Pramuka Bank saga was still fresh in the
minds of Sri Lankan consumers as an example of the potential personal risk of
entrusting deposits to a mismanaged institution.
Then, in late September 2008, Sri Lankan media headlines were
dominated by revelations that an unlicensed finance company had defrauded
several thousand depositors of an estimated Rs. 900 million after luring them
with promises of exceptionally high rates of return. In what came to be called
the Sakvithi Scam (named after the individual reportedly responsible for the
collapsed investment scheme - who subsequently fled the country), attention
quickly shifted from the plight of individual investors to the overall hazards of
dealing with finance companies that operated outside regulatory controls.
In an effort to raise public awareness, the Central Bank of Sri Lanka
published - not for the first time - a list of all officially registered finance
companies. Among the significant omissions that immediately drew notice
were several companies within the Ceylinco Group, including Golden Key
Credit Card Co. Limited. In subsequent media reports, it emerged that Golden
Key, while not licensed to do so, had been accepting deposits from credit card
holders in the manner of a bank. Moreover, the Company had been offering
rates of return significantly higher even than those of the more aggressive
finance companies - reportedly in the range of 24% to 30% annually.
the probLem of GoLden Key
The question of how such extraordinary interest rates could be offered by any
institution, licensed or otherwise, took on a new urgency in light of the Sakvithi
scandal. And the doubts only intensified as a series of unprecedented crises in the
global banking industry through the final months of 2008 sent the worlds economy
spiralling into a severe recession. Rumours of financial difficulties at Golden Key
appeared to be confirmed by reports of depositors whose interest payment cheques
had bounced and others who had been unable to withdraw their funds.
At the beginning of December 2008, Dr. Lalith Kotelawala - in his role
as Chairman of Ceylinco, Golden Keys corporate parent - wrote to depositors
assuring them that all outstanding interest payments would be settled within
two months. This did little to calm growing apprehension over the financial
health of Golden Key, which at that point (according to later Court testimony)
held about Rs. 26 Bn. on behalf of some 10,000 depositors. As new deposits
dried up, and with no other means of covering the premature withdrawal
requests, the Company could do little more than offer further assurances. At
one point, a large group of angry depositors demonstrated outside the Golden
Key offices, demanding their funds back.
Alarm over what appeared to be the imminent collapse of Golden Key
spread to customers of other Ceylinco companies that mobilised deposits - which
soon faced similar problems in fulfilling the demand for withdrawals. Meanwhile,
unsubstantiated stories circulated about behind-the-scenes transactions among
other Ceylinco subsidiaries designed to help Golden Key meet its obligations.
In this climate of rising anxiety, it was not surprising that the cloud of rumours
soon enfolded one of the most prominent enterprises in which Ceylinco had a
major shareholding: Seylan Bank. Tainted by association, the Bank tried in vain
to dispel suggestions that its own depositors had cause for concern.
the finAL strAws
With public fears at their peak, the last few cards were played that brought Seylan
Bank to the brink. On 19th December 2008, having admitted to mismanaging
Golden Key (according to later statements by Ceylinco Chairman, Dr. Lalith
Kotelawala), the Companys Chief Executive Officer tendered his resignation
to Dr. Kotelawala. Police authorities were called and the CEO handed over his
passport. In a subsequent statement, Dr. Kotelawala confirmed that Golden
Key had been enmeshed in a major credit card fraud.
On the afternoon of 23rd December, Dr. Kotelawala addressed thousands
of concerned Golden Key depositors at a convention centre in Colombo.
After listening to a series of first-person accounts of the hardships caused
by Golden Keys liquidity crisis, the Chairman pleaded with the crowd to be
19 A CRISIS oF ConFIDenCe
patient and give the Company time to make good on its obligations. Then, on
27th December the Executive issued a further statement, which proved to be
the inadvertent triggering event for what happened next to Seylan Bank.
In retrospect its generally agreed that what Dr. Kotelawala meant to
communicate, as he tried once again to allay concerns over Golden Key, was that
equity in other companies within the Ceylinco Group would be redeployed to
help the failed credit card company pay off its depositors and creditors. However,
when the Chairman specifically referenced selling his conglomerates stake in
Seylan Bank, it was misinterpreted - through an unfortunate combination of
unclear reporting and public misunderstanding - as meaning that Ceylinco would
directly allocate bank assets in order to refund Golden Key deposits. Panicked
Seylan Bank customers, convinced that their savings were about to be diverted
toward a Ceylinco bail out, rushed to their home branches to make withdrawals.
In a matter of hours, a classic bank run was rapidly gaining momentum.
A run on the bAnK
Over the next few days, long queues formed outside Seylan Bank locations
across Sri Lanka. Branch staff faced some tense moments, between fielding
questions from upset customers and securing additional funds from head
office to meet the extraordinary demand for withdrawals. Contrary to some
media rumours, the Bank never attempted to stop withdrawals. Indeed, in
some branches, money was conspicuously displayed to reassure anxious
depositors waiting in line that there were sufficient funds to cover their requests.
Meanwhile, the corporate management team, faced with a shrinking number
of funding lines from other banks, worked closely with those institutions that
maintained support - Bank of Ceylon, Wachovia Bank, Standard Chartered
Bank, Pan Asia Bank, Nations Trust Bank, Peoples Bank, HSBC and State
Bank of India - to ensure a steady supply of cash.
Seylan Bank staff worked with remarkable diligence and professional
composure in handling a crisis situation none of them had ever confronted
before. They managed for the most part to keep customers calm and in some
cases even managed to convince depositors to leave their accounts intact. But, it
was clear that this impressive grassroots effort could only go so far. History held
plenty of examples of Bank runs that had quickly spiralled out of control, not
only bringing down the original institutions but also threatening entire national
economies. With the worldwide economic downturn already prompting
comparisons to the Great Depression of the 1930s, who could say how far the
tremors from one national bank failure might reach?
Clearly something had to be done - and at the highest level of Sri Lankas
banking system, a remarkable recovery effort was already in motion.
25
{ CHAPTeR 3 }
SWIFT AnD
DeCISIVe ACTIon
The Central Bank stepped in quickly, installing a new board of
directors to stabilise the business and apply corrective measures.
On 29th December 2008, Seylan Bank issued a statement clarifying the
Chairmans press release of two days earlier:
What has been stated in the press release is that our Founder/Chairman
and Ceylinco Group have decided to divest Seylan Bank shares owned by Ceylinco
Group so as to raise funds to honour the dues to Golden Key credit card holders.
We emphasise that the intended sale is of the shares owned by Ceylinco Group
to a potential reputed investor subject to the permission of the relevant regulatory
authorities It is further clarified that what is intended for sale are not the assets
of the Seylan Bank, investments made by the Bank or any shares owned by Seylan
Bank. Furthermore, we wish to inform that Seylan Bank will not use the depositors
funds to meet the obligations to Golden Key credit card holders.
The clarification may have helped ease concerns in some quarters but, as
weve seen, did not succeed in neutralising the run on the Bank. What had far
greater impact, immediately and over the longer term, was a succinct statement
issued the same day by the Central Bank of Sri Lanka: The board of directors of
Seylan Bank had been dissolved. State-owned Bank of Ceylon had been asked
to appoint a new board and, in the meantime, would be providing management
support to Seylan Bank.
It was a swift, decisive move following a few days of intensive behind-the-
scenes consultations and reflecting the crucial support of the President and the
Government of Sri Lanka. The general consensus was that a high-profile bank
failure would have disastrous consequences for the financial sector and, indeed,
for the overall Sri Lankan economy, which was already shaken by the ongoing
global crisis. Faced with such circumstances, the Central Bank was empowered
to take action. Under the provisions of Section 31 of the Monetary Law Act,
the regulator could suspend the activities of a distressed Bank, remove its board
and order the immediate resumption of business under new management.
As the Central Bank made clear in its statement, the intervention of its
Monetary Board was sparked not simply by the plight of depositors, but by the
broader threat to economic equilibrium:
The difficulties of Seylan Bank PLC presented a potential danger to the
stability of the financial system. Therefore, the Monetary Board is of the view
that immediate measures require to be taken to stabilise the financial system.
With management support from Bank of Ceylon, the largest commercial
bank owned by the Sri Lankan Government, Seylan Bank would carry on
operating under its incumbent General Manager with no interruption in
service, and all current employees would retain their jobs. The Monetary Board
assured Seylan Bank customers that their deposits were safe and they could
conduct all transactions as usual. At the same time, the Central Bank reinforced
the message to the general public that the banking system was not in jeopardy.
This well-orchestrated intervention on behalf of Seylan Bank required a
remarkable level of cooperation and support among all key players, including the
Governor of the Central Bank of Sri Lanka, Mr. Ajith Nivard Cabraal, as well as
the Monetary Board, its Bank Supervision Department and staff at many levels.
under new mAnAGement
On 30th December, the Central Bank Governor, Mr. Cabraal, met with the newly
appointed board of directors of Seylan Bank. The new Executive Chairman was
Mr. Eastman Narangoda, a veteran of the banking industry who had previously
held the position of General Manager/CEO of National Savings Bank, a
state-owned, AAA-rated institution. A former President of the Association of
Professional Bankers of Sri Lanka, he had also served as Vice-Chairman of Financial
Ombudsman Sri Lanka (Guarantee) Limited and participated as a Commissioner
in a Presidential Commission investigating failed financial institutions.
Mr. Narangoda was joined by fellow directors Mr. Lalith Withana, a
Chartered Accountant; Mr. Naomal Goonewardena, a Chartered Accountant
and Attorney-at-Law; and Mr. Nihal Jayamanne, Presidents Counsel and a
former President of the Bar Association of Sri Lanka. Also at the meeting
was Seylan Banks senior management team, led by the General Manager,
Mr. Ajitha Pasqual.
27
The significance of this landmark, first meeting was summed up by the
Central Bank Governor: We have brought in the Bank of Ceylon together with
leading professional personalities in the country to head the new Seylan board,
and they are expected to perform their duties until that Bank becomes stable.
That same day, trading in Seylan Bank shares, which had been halted by
securities authorities during the crisis, resumed on the Colombo Stock Exchange
and immediately showed a slight rise in value - an encouraging sign of restored
confidence. (Significantly, a day earlier the Bank had announced the extension
of a five-year debenture issue, after the full subscription of the first tranche of
Rs. 400 Mn. - further evidence of longer-term support from institutional investors.)
Mr. Pasqual, Seylan Banks General Manager, stressed to the media that
the Bank was functioning normally with the backing of the Bank of Ceylon
and the Central Bank. Now the challenge was to win back those customers
who had withdrawn their savings. He also asserted that the Bank would have no
involvement with Golden Key, other than to assist with Ceylincos anticipated
partial divestiture of its shareholding in Seylan Bank in order to reimburse
depositors in the credit card company.
Highlighting the Banks successful track record as a retail services
innovator, Mr. Pasqual emphasised that the recent crisis had originated from
one segment of its customer base. Local and overseas funding partners, while
initially concerned, had for the most part been reassured that Seylan retained a
solid foundation on which to move ahead and rebuild any lost business.
The spirit of a new beginning was symbolically reinforced when the
board of directors joined Seylan Bank employees at a head office gathering to
welcome in the New Year. After the traditional lighting of an oil lamp, the new
Executive Chairman expressed his confidence that the Bank would soon return
to strength. With the immediate crisis already showing signs of abating, it was
time to address some of the deeper management challenges and help Seylan
Bank reach even greater heights as a leader in the financial services industry.
SWIFT AnD DeCISIVe ACTIon
29
We HAVe HonoUReD eACH
AnD eVeRY CUSToMeR WHo
CAMe To WITHDRAW MoneY
AnD neVeR TURneD THeM
BACK AT AnY SInGLe PoInT...
I MUST ALSo TeLL YoU THAT
WHen THe CenTRAL BAnK
InTeRVeneD AnD APPoInTeD
A neW BoARD oF DIReCToRS,
PUBLIC PeRCePTIon CHAnGeD
AnD MAnY CUSToMeRS WHo
eARLIeR WITHDReW MoneY
In FACT ReTURneD To THIS
BAnK To Do THeIR FInAnCIAL
TRAnSACTIonS.
Eastman Narangoda
Executive Chairman
At a media briefing held on 8th January 2009
THe BoARD oF DIReCToRS
1. mr. eastman narangoda Executive Chairman
2. mr. r. nadarajah Executive Director
3. mr. nihal Jayamanne - Presidents Counsel, Director
4. mr. Lalith withana Director
1
2
5
3
The profiles of the directors are given on pages 228 and 229
31
5. rear Admiral (rtd.) b.A.J.G. peiris Director
6. mr. pradeep G.s. Kariyawasam Director
7. dr. nalaka h. Godahewa Director
8. mr. Ajith L. devasurendra Director
9. mr. ishara C. nanayakkara Director
10. mr. samantha p.s. ranatunga Director
7
9
10
8
4
6
the new boArds priorities
At the beginning of January 2009, two additional members joined the new
Seylan Bank board of directors: Rear Admiral (Retired) Ananda Peiris and
Mr. R. Nadarajah, former DGM of Bank of Ceylon and Managing Director/
CEO of Pan Asia Banking Corporation. The expanded board set to work, and
in short order the Executive Chairman outlined a set of immediate priorities:
Re-establish financial stability
Remedy any continuing stresses on operations as a result of the Bank run
Introduce more effective risk management policies and practices
Restore the full confidence of customers and win back those who had
made pre-emptive withdrawals
Improve the quality of credit appraisal, monitoring and recovery
Implement new measures for containing and managing operational costs

At the same time, the board identified a number of key objectives for the
longer term, including:
Continuous improvement of business processes across the enterprise
Transformation of the organisational structure and resources required to

implement those processes
Preparation of employees to embrace and support the planned changes
Identification of critical issues facing the business going forward
Establishing a new vision, mission, values statement and set of defined

corporate goals
Creation of a comprehensive strategic plan with clear guideposts for

management success
The new board of directors understood that the
reinvention of Seylan Bank must begin at the
highest level.
33
Mr. Narangoda outlined these objectives in a highly publicised media
briefing on 8th January 2009. The Executive Chairman also used this occasion
to share the new boards perspective on the recent crisis, revealing that a total
of Rs. 7 Bn. had been withdrawn in the preceding weeks:
We have honoured each and every customer who came to withdraw
money and never turned them back at any single point... I must also tell you
that when the Central Bank intervened and appointed a new board of directors,
public perception changed and many customers who earlier withdrew money
in fact returned to this Bank to do their financial transactions.
Seylan Bank subsequently announced that it would be reducing its lending
to companies in the Ceylinco Group. It was the first in a series of signals that
the Bank was distancing itself not only from Golden Key, but also from the
larger conglomerate of which it was a part.
The failed credit card company continued to generate headlines in
early January, both for the deepening legal difficulties of its principals and
for Ceylincos repeated assurances that it would soon begin paying back
depositors. In the weeks and months that followed, there were further protests
by angry Golden Key customers as well as employees - along with widening
criminal investigations, high-profile arrests and revelations that other Ceylinco
subsidiaries faced serious financial problems.
At Seylan Bank, meanwhile, that 8th January news conference was
followed by a series of proactive steps aimed at getting key messages fully
aired and understood by customers and the general public. It was clear that
communications, even ahead of specific management changes, would play a
vital role in getting the Bank back on a solid footing.
SWIFT AnD DeCISIVe ACTIon
35
{ CHAPTeR 4 }
ReASSURInG
THe PUBLIC
The top priority of the Banks new board was to restore
confdence through forthright and transparent communications.
Seylan Bank not only survived the trying days that closed 2008, but did so in
a way that was truly remarkable. Around the world, prominent banks dragged
down by the global financial crisis had been rescued with Government bail outs,
either in the form of massive infusions of capital or, in a few cases, outright
nationalisation. By contrast, the express support of the Central Bank and a
major state-owned commercial bank was sufficient for Seylan Bank to quickly
regain its equilibrium and begin moving forward again, with no need for a full-
fledged financial rescue.
the fuLL story
In mid-January Seylan Banks new board oversaw publication of a
communications vehicle entitled The Full Story, which was given wide national
circulation. Through a series of executive interviews and partner testimonials,
the document affirmed the Banks status as an independently run entity that
had prevailed in challenging circumstances by adhering to a core set of sound
business practices. It also reinforced the Banks continued commitment to
the following all regulations and compliance initiatives governing financial
institutions instituted by the Central Bank, the Monetary Board and other
regulatory bodies.
Highlighting Seylan Banks strong fundamentals and traditionally high
standards of service, Mr. Pasqual, the Banks General Manager, delivered a
strong message of pride, commitment and continuity: Our customers have
been our partners for 20 years, and we will be with you for the next 20 years and
more. In a companion interview, the new Executive Chairman, Mr. Narangoda,
underlined the professional credentials of the board and senior management
team, as well as the expressions of solidarity from across the financial sector:
I have utmost confidence that the Bank can emerge from this situation.
Also contributing to The Full Story was the Chairman of Bank of Ceylon,
Dr. Gamini Wickramasinghe, who spoke frankly about Seylan Banks problems
while affirming his Institutions unwavering support:
We are the largest bank in the country. We are probably also the most
stable due to our large asset base, reserves and risk management capabilities.
Moreover, we carry the weight of the Government behind us, and this gives
people immense confidence... Seylan Bank needed large infusions of local as
well as foreign currency. The Central Bank has asked Bank of Ceylon to step
in to fill the void of funding and to help Seylan Bank manage its affairs in this
period of restoring confidence and consolidating its finances. I must, however,
stress that we have no intention of being privy to privileged information, and
our intention is purely to help a good and long-standing bank come through
this difficult period.
As a testament to the fact that corporate clients had remained solidly
behind Seylan Bank, The Full Story included endorsements from senior
executives of several leading Sri Lankan corporations. They expressed their
confidence in the new boards leadership and their continuing loyalty to the
Bank, based on the successes of the past.
Lastly, the publication presented a selection of testimonials from Banks
employees, who recounted how theyd helped cope with the crisis at the retail
level and shared their first-hand contributions to the Banks success in getting
back on track. As the centrepiece of a hurriedly launched media campaign,
The Full Story was an effective vehicle for getting important messages across
and garnering public attention. However, as the outflow of deposits continued
- totalling Rs. 18 billion for January and February - there was no question that
more work was needed to win back the hearts and minds of retail customers.
37
A muLti-front CAmpAiGn
Seylan Banks public information campaign began in earnest within days of
the new board assuming control and targeted a range of fronts simultaneously.
Communications initiatives included:
Advertising and Public Relations
The Bank launched a coordinated campaign of press advertisements and PR
efforts with major media outlets, all communicating the central message that
the change in management marked not simply the end of the crisis but the
beginning of a new era. The goal was to maintain constant visibility by issuing
newsworthy releases and fostering journalistic contacts to suggest stories
worthy of coverage. Head office initiatives were supported at the local level by
branch managers, who were encouraged to act as PR representatives with the
media and community groups. In addition, branch staff were briefed on new
marketing plans at regular meetings.
Direct Mail Campaign
All customers who had remained with Seylan Bank throughout the crisis
received a thank you letter expressing gratitude for their support during a
difficult period. At the same time, letters were sent to those who had withdrawn
their deposits, expressing understanding for their decision and asking that they
now consider returning to the newly stabilised Bank.
ReASSURInG THe PUBLIC
Management Outreach
Management-level staff across the Bank launched a programme of regular
meetings with customers as well as employees, getting the message out that
the emergency had passed and smooth, reliable operations had resumed. The
Executive Chairman and the General Manager visited Seylan Bank branches
across the country, answering questions and offering personal assurances to
members of the public as well as branch staff. Indeed, these visits were especially
effective in raising morale, as many employees had never seen the Chairman of
their Bank in person before. Through a steady programme of regional meetings
and less formal gatherings, senior managers found new opportunities to connect
with employees - seeking their input, keeping them informed, helping to shift
attitudes and generally motivating everyone to work together in sustaining the
Banks return to health.
Enlisting Customer Support
In some locations, customers took the lead in showing support for the
beleaguered Bank. Branches in Galle, Matara, Mirigama, Badulla and
Bandarawela gratefully put up banners created by patrons who wanted others
to know how Seylan Bank helped them through their own difficult times, so
now they were pleased to reciprocate. A number of prominent customers took
part in publicity campaigns that showed them depositing cash.
Door-to-Door Campaign
On the initiative of the Executive Chairman, Seylan Bank took its marketing
efforts literally to the streets, introducing its first-ever house-to-house public
awareness and promotional campaign. Launched across the country on
31st January 2009, the effort saw Banks employees at every level - from branch
staff to the Executive Chairman, the Executive Director and the General Manager -
visiting homes and businesses and greeting people in public spaces, spreading
39
the word that The Bank with a Heart was alive and well. Featuring prize
draws, music and a festive street-party atmosphere, the campaign was hugely
successful in sparking interactions with new and lapsed customers, and in
generally rebuilding the Banks positive public image - along with employees
team spirit.
Seylan Bank took its marketing efforts literally to the
streets, introducing its first-ever house-to-house
public awareness and promotional campaign.
Taken together, these various communications efforts spearheaded by the
board of directors played a huge part in reaffirming Seylan Banks place in
the public consciousness as a solid, trusted, customer-focused market leader.
Ensuring that the Bank once again met those expectations required a parallel
effort behind the scenes, as the board and management worked to transform the
new strategic plan into real business change with measurable results.
ReASSURInG THe PUBLIC
41
{ CHAPTeR 5 }
ReBUILDInG
THe BUSIneSS
A series of practical steps, including a systematic rethinking of
policy in every area, soon yielded measurable positive results.
The new board of directors understood that the reinvention of Seylan Bank
must begin at the highest level, with new policies and practices around
corporate governance. Board meetings, traditionally held once a month, now
became weekly events, starting at 4:30 p.m. and often running as late as 2:00
the following morning. In addition to the Management Committee, the board
established Credit, Audit, Nominations, Remuneration and Risk Management
committees. With a better-defined corporate structure, a rigorous set of
standards and a commitment to lead by example, the executive team could then
begin implementing the myriad practical measures required to get the Bank
moving forward on a secure and profitable path.
In a series of meetings in various forums, the Banks leadership sought
to restore employees confidence in their institution and obtain their support
for the collective effort to come. Employees gained a better understanding of
their individual responsibilities in relation to the Banks current position and
future expectations. The response at all levels was overwhelmingly positive, as
staff affirmed their commitment to returning Seylan Bank to full strength and
beyond. Now the task was to implement specific tactical measures designed to
re-engineer existing operations and processes.
The range of business challenges fell into three main areas:
Banking Practices
As long as a significant number of depositors continued to empty their

accounts, management met on a daily basis to ensure branches had sufficient
funds to pay out all withdrawals.
The board provided senior management with new targets for reducing the
Banks ratio of non-performing loans (NPLs), which had risen above 30%
during the crisis.
Credit authority limits were reduced at every level, with all lending appraisals to
be monitored by a Credit Committee that includes two members of the board.
More aggressive measures were adopted for handling defaulters.
Risk management moved to the top of the corporate agenda, beginning with
workshops with an overseas professional on assessment and management
practices for senior bank staff. The ultimate goal is to systematise risk
management throughout the Banks transactional operations.
In the absence of proper procurement procedures, the Bank established a

new, transparent process (based on the Bank of Ceylon model).
Cost Containment
The overall objective of the Banks new cost-management approach was to
curtail all expenditures that did not contribute to improved profitability.
Employees were informed that the Bank was unable to pay incremental
salary increases in the near term.
The anticipated April 2009 bonus was cancelled, and the gratuity formula
was reduced to half a months salary from previously enhanced levels.
Personal loans to staff were temporarily suspended.
Overtime was severely limited.
Foreign travel was eliminated unless absolutely necessary.
Fuel benefits were curtailed, including for the senior management team
(which also accepted fewer perks for entertainment and other expenses).
All capital expenses were suspended unless they had the express approval of
the Executive Chairman and/or the board.
Human Resources
A study was initiated to examine the problem of Seylan Banks high staffing
ratio in relation to competing banks.
Arrangements were discontinued for some individuals who worked for the
Bank on a consulting basis.
The age of retirement was lowered from 58 to 55.
Some staff members who were considering resignation were offered

encouragement.
43 ReBUILDInG THe BUSIneSS
To support the Banks new ethical standards, a revised Disciplinary Code

was put in place.
The Banks organisational structure and depth of talent were improved with
the addition of several new people in key positions, including:
- a Chief Financial Officer (CFO)
- an Executive responsible for corporate and retail banking
- an Internal Auditor
- an Assistant General Manager (AGM) in charge of premises and supplies
- a head of private banking for high-net-worth customers
- a Deputy General Manager (DGM) in a new role overseeing Recoveries
- an external consultant in Information Technology.
The Banks two unions committed to cooperating with the new board. That
positive relationship is strengthened through monthly meetings in which
issues are discussed clearly and candidly, building an ongoing dialogue.
The Human Resources department has been brought under the management
of a DGM.
As these various pragmatic steps were being implemented, the board of
directors made another key decision: For the first time in its history, Seylan Bank
would begin developing a comprehensive three-year strategic plan (which will
be detailed in the next chapter of The Case Study). At the same time, discussions
were underway with the Central Bank regarding potential new sources of
capital, as it was agreed that new shareholders bringing a fresh infusion of cash
would help further stabilise the Bank, shore up investor confidence and pave
the way for the Central Banks ultimate ceding of full management control back
to the Seylan Bank board.
In March the Central Bank formally called for expressions of interest
from potential strategic partners in the recapitalisation of Seylan Bank. The
intended outcome was a new share issue that would result in an overall dilution
of holdings (as opposed to a divestiture by any of the current shareholders).
A new wAy of doinG business
Another of the high-level commitments made by the new Seylan Bank board
was to demonstrate strict compliance with all industry-specific regulations and
other statutory provisions governing the financial services sector, including
adherence to Sri Lanka Accounting Standards. In March the Bank published
its draft accounts for the 2008 financial year. The board took this opportunity
to formally state its intent with regard to financial reporting:
Consequent to recent adverse market perception since December 2008,
the Bank under its new directorate has decided to clean up and strengthen its
Balance Sheet position by constantly evaluating its total investment portfolio,
including loans and advances and other investments giving weightage to its
realisability, market risk, interest rate risk and any other associated risks.
The Banks statement went on to explain that during the current financial
year, it had made provisions for falling value in its marketable investments and
loan portfolio, in keeping with International Accounting Standards and in fact
exceeding the guidelines stipulated by the Central Bank of Sri Lanka. Seylan
Bank had established a significant new benchmark, dispelling past criticisms with
a pledge to ensure clear, forthright and readily comparable reporting of results.
At the same time, there was renewed pressure to further differentiate
Seylan Bank from the troubled Ceylinco conglomerate with which it was too
closely - and now inappropriately - associated in the public mind. For the board
and senior executives, the answer was to stay focused on building a compelling
business case, showing how their Institutions fundamental strengths, reshaped
by a new Code of Conduct, would translate into positive results.
weLCome siGns of proGress
Interim results for the six months ended 30th June 2009 showed an after-tax
profit of Rs. 188 million for Seylan Bank and its subsidiaries (i.e., the Seylan
Group) and earnings per share of Rs. 4.5 - a dramatic improvement over the
first quarter. Moreover, a 20% reduction in expenditures compared to the same
period in 2008 demonstrated that the new cost-cutting measures were having
an impact. And while a provision of Rs. 296 Mn. for non-performing advances
45
definitely affected the bottom line, both liquidity and capital adequacy ratios
had already been restored to accepted levels. In short, the immediate crisis was
demonstrably past, and the steps toward longer-term recovery were already
yielding measurable success - at a time when much of the financial sector was
still mired in the global economic downturn.
Throughout the third quarter of 2009, there were many other signs of
progress:
By August the Bank had recovered about Rs. 300 Mn. from previously non-
performing loans. The boards pledge to reduce NPLs and step up recovery
efforts - including more aggressive pursuit of defaulters - was bearing fruit.
Cost-cutting by the end of August had yielded Rs. 860 Mn. in savings,
bringing the target of Rs. 1 Bn. for the year well within reach. (Indeed, cost
savings reached Rs. 1.2 Bn. by the end of October.)
In July and August the Bank launched a high-profile marketing campaign

to win new customer deposits, showcasing its extensive history as a retail
banking innovator with a range of attractive offers, including three-month and
one-year fixed products with the highest interest rates of any Sri Lankan bank.
The campaign exceeded all expectations, bringing in welcome revenue along
with the reassurance that customer confidence was significantly restored.
In a further strengthening of its national retail presence, Seylan Bank

announced that it would soon be opening new branches in the East and North
of the country, including areas newly amenable to development following the
end of civil-war hostilities in May. The Bank has since opened a branch in
Nelliaddy and two Convenient Banking Centres in Manipay and Chankanai.
An additional new branch in Mannar is scheduled to open in March 2010.
Foreign remittances also increased significantly for the first half of the year,
totalling Rs. 12.7 Bn. Seylan Banks extensive network of international
money transfer agencies - recently augmented by new partnerships with
MoneyGram International, XPRESS MONEY and EzRemit - made it
easier than ever for expatriate workers and the Sri Lankan diaspora to send
funds home from abroad. The growth in this area indicated that the Banks
reputation was secure overseas as well.
ReBUILDInG THe BUSIneSS
the reCApitALisAtion effort
As weve seen, the recovery of Seylan Bank stands out in the annals of banking
because it was achieved without any external infusions of emergency cash.
Through prudent management and implementation of the various measures
discussed above, the Banks declining liquid assets ratio was brought under
control and ultimately raised, by the end of August, to 23% - comfortably above
the minimum threshold of 20%. This was the single most significant sign of
restored stability that stakeholders had been waiting to see.
By year-end, the Banks liquid assets ratio had strengthened further to
29%. Meanwhile, its capital adequacy ratio, which had dropped as low as 8.0%,
had reversed direction, reaching 11.74% against the required 10% minimum.
To ensure the availability of capital for future growth, the Central Bank of
Sri Lanka made its aforementioned call for expressions of interest from
potential investors. On offer was a 33% stake in Seylan Bank for a specified
minimum investment of Rs. 5.7 Bn. Six parties expressed serious interest;
however, the bids they ultimately submitted were found to be not compliant
with the terms and conditions established for the deal.
The Central Bank therefore decided to pursue an alternative method
of recapitalising Seylan Bank - a new share issue that would combine a
private placement with a public offering to raise slightly more than Rs. 3 Bn.
In the private placement, two state-owned entities, Bank of Ceylon and
Sri Lanka Insurance Corporation, agreed to make a combined investment of
approximately Rs. 1.1 Bn. in new capital. The remaining Rs. 1.9 Bn. would
be raised through a public offering of 54,290,000 ordinary (voting) shares at
Rs. 35 per share. The issue, with a minimum subscription of 100 shares per
application, was set for 22nd September 2009.
47
The public offering was an extraordinary success, so much so that 10 days
later Seylan Bank announced it had been oversubscribed and all shares were
sold. The Executive Chairman, Mr. Narangoda, summed up the gratitude of
all bank employees:
Given the crisis the Bank underwent towards the end of last year, this
oversubscription is an unequivocal endorsement by the people of Sri Lanka
demonstrating the confidence they have in the Bank. This has been a great team
effort. On behalf of Seylan Bank, I thank everybody who contributed to this
success story and reassure them that Seylan Bank will grow from strength to
strength and live up to their expectations.
With the public and private share issues complete, the total stake in Seylan
Bank held by Government-owned institutions was now just over 28%, including
1.16% held by National Savings Bank. The highly successful initiative also
marked another milestone in the Ceylinco saga, as the resulting share dilution
further reduced the proportionate size of the conglomerates holding.
The Banks third-quarter results added further confirmation that Seylan
Bank was back on track. An after-tax profit of Rs. 503 Mn. for the nine months
ended 30th September compared favourably with a total of Rs. 155 Mn. for all
of 2008. At the same time, the board reported that advances had dropped by
Rs. 17 Bn for the year to date, and that recoveries had accelerated dramatically.
With these gratifying results and a large infusion of capital ensuring
continued stability and growth, Seylan Bank could now turn its attention
wholeheartedly to the future.
ReBUILDInG THe BUSIneSS
49
A SoUnD FUTURe
STRATeGY
Guided by a comprehensive strategic plan, Seylan Bank is
building a healthy, sustainable future for all stakeholders.
Faced with a uniquely challenging threat to its future as an institution, Seylan
Bank has prevailed by building on - and believing in - its core strengths. The
Bank welcomed the support of its partners, but at the same time took pride in
never needing the financial rescue sought by so many other banks around the
globe. In retrospect, its clear that what helped Seylan Bank most in quickly
recovering its stride was a collective grasp of the fundamentals:
Commitment to ethical governance and accountability
Respect for basic values such as integrity, commitment and trust
Belief in the power of teamwork
Leadership grounded in experience and sound judgment
Dedication, among thousands of loyal employees, to doing whatever is

needed to ensure success
As the current period of stabilisation and consolidation draws to a close,
Seylan Bank expects to maintain its ranking as Sri Lankas fifth largest bank,
using its solid customer base as a springboard for future growth. It also remains
The Bank with a Heart, but at the same time is ready to make its strong brand
even stronger, exploring new ways to provide the kind of responsive, flexible
service that has always set Seylan Bank apart.
The Banks strategic consultations have yielded a new vision:
To be the leading financial solutions provider that delivers exceptional
value to stakeholders.
{ CHAPTeR 6 }
And its collective aspirations have been captured in a new mission
statement:
To exceed customer expectations by providing competitively priced
superior services through speedy and multiple delivery channels, whilst
rewarding staff through recognition and empowerment; being a responsible
corporate citizen; adopting environmental friendly practices and adding
superior value to shareholders.
Before Seylan Bank could fully articulate a new strategic plan, however,
management first had to make a rigorous and objective evaluation of where the
business stands today.
Current stAte Assessment
Combining the specialised knowledge and skills of internal teams with
the expertise of outside consultants, Seylan Bank has analysed systems and
processes, policies and procedures in every area of its operations.
Financial Performance
The Bank has identified a broad range of indicators - including return on
assets, operating profit, net income growth, cost-to-income ratio and growth in
deposits - that can be used to gauge its comparative performance in the market-
place. Seylan Banks NPL ratio, for instance, was significantly higher than that
of its competitors in 2008. And the fact that operating expenditure was as high
as that of Sri Lankas largest private bank - an institution twice the size of
Seylan Bank, measured by assets and branches - underlines a pressing need, as
discussed earlier, to look for greater efficiencies.
Products and Customer Segments
The enormously varied segmentation of the Banks target market means that
marketing strategies must be more focused than ever. By grounding campaigns
in independent research and solid analysis of feasibility, and by refining the
information tools used to measure success, Seylan Bank will further its reputation
for highly innovative product development and delivery. A comprehensive
strategic marketing plan is now being implemented.
51 A SoUnD FUTURe STRATeGY
Structure
Like most financial institutions, Seylan Bank has a complex organisational structure
that undoubtedly could benefit from some economies of scale and efficiency. In
future, the Bank aims to become more market-focused in its organisation, creating
nimble business units that can move quickly to pursue opportunities without
fragmentation or duplication of effort. The branches, in particular, will continue to
evolve from self-contained mini-banks to delivery channels for a unified mix of
products, services and relationship-building strategies.
Systems and Processes
Seylan Bank is conducting exhaustive reviews of systems at all levels, from cost
allocation in the branches to enterprise-wide management information systems.
The overriding goals are to maximise efficiency, increase integration and
provide managers with the best possible reporting and analytical tools. Similarly,
processes are being deconstructed and evaluated across the business, bringing
together those, such as risk management, that benefit from central control and,
in other cases, establishing more clean divisions between responsibilities - for
example, relationship management and credit evaluation, or business and
consumer lending. All of these measures will be facilitated by a new strategic
plan for information technology, which is currently in development.
Human Resources
Internally, the Bank sees an opportunity to build on the momentum of the past
year, developing new human resources practices that better reflect employees
demonstrated commitment to collaborative teamwork and tackling tough
challenges. Some will benefit from being redeployed in areas where they can
make more of a contribution. All will come to see the advantages of an HR
environment in which performance reviews, promotions and rewards are more
systematically and effectively managed, with clearly understood expectations
from both management and staff. The sense of confidence and motivation that
has accompanied the Banks return to financial stability will help retain existing
talent while strengthening recruitment efforts.
Image and Branding
As customer confidence continues to grow, Seylan Bank will balance its
established identity as a caring, personally responsive institution with a more
businesslike image in effect using the residual positive impact of the crisis-
recovery story to give its brand more depth and credibility. At the same time,
efforts will continue to distance the Seylan Bank brand from the negative
associations of the Ceylinco legacy.
the strAteGiC pLAn: 20092011
Out of the foregoing assessment process, Seylan Bank has identified the critical
success factors for each area and mapped out a comprehensive three-year plan
that will guide decision-making through the end of 2011. The specifics of the
plan are proprietary in nature and therefore beyond the scope of this case study.
However, its main elements can be summarised broadly as follows:
Goals - defined and quantified in relation to seven specific performance indicators:

return on equity, profit after tax, cost-to-income ratio, customer deposits, total
assets, NPL ratio and market position in terms of total assets. These goals will
be incorporated into the budgets developed for each financial year.
Strategic Initiatives - including domestic and international expansion

opportunities; capital requirements; governance structure and practices;
liquidity management, including loans-to-deposits ratio and long-term asset
maturity planning; risk management, especially with regard to NPL recoveries
and credit evaluation; mergers and acquisitions; and image and branding.
Business-Level Strategies - focusing on the core business areas of retail banking,

corporate banking, customer segmentation and product market strategy,
as well as a range of support areas, including organisational structure,
centralisation of management systems and human resources management.
Guiding implementation of the strategic plan is a board whose success
in stabilising Seylan Bank has won emphatic support from all stakeholders.
Originally appointed for a period of six months, the directors, led by
Mr. Narangoda as Executive Chairman, subsequently had their terms extended
by a further three years. (The appointments were confirmed by a unanimous
vote at the Annual General Meeting held in the month of June 2009.)
53
A new Kind of bAnK
Seylan Bank is a dramatically different institution from what it was just a year
ago. There is continuity in the range of products and services on offer, and in the
Banks trademark attention to customer care. But for employees, retail customers,
corporate and Government partners, industry analysts and regulators -
for all stakeholders - Seylan Bank is an institution transformed.
By year-end, the Banks capital adequacy ratio exceeded the statutory
minimum requirement. The liquidity ratio, which at one point in the crisis fell to
13% - well below the statutory minimum of 20% - had increased to 29%. Indeed, the
Bank is focused on compliance in all aspects of financial performance - as evidenced
by the summary of performance highlights for 2009, and by the comprehensive and
detailed report of financial and operational results for 2009 that follows.
Guiding implementation of the strategic plan is a
board whose success in stabilising Seylan Bank has
won emphatic support from all stakeholders.
There is still work to be done on many financial fronts. For example, at
one stage in the past year Seylan Banks NPL ratio, at 33%, was the highest in
the Sri Lankan industry and significantly above the widely accepted benchmark
of about 10%. The strategy for 2010 is to bring that ratio down to at least 15% -
with a further reduction to 5% in 2011 - by practising more prudent lending. As
for the recovery of outstanding loans, the Bank has set a tactical branch-level
target of recovering at least 1% of bad and doubtful debts every month. At the
regional level, the monthly goal is to reduce the NPL ratio by 2.5%.
Going forward, a new business team devoted exclusively to risk management
will extend the boards vision deeper into the organisation, with the goal of
creating a pervasive culture of risk-reward assessment and mitigation. Another
team is working with an outside IT consultant to maximise the potential of the
Banks information systems and help employees take better advantage of the
powerful tools on their desktops. Meanwhile, with recruitment strictly curtailed,
the Banks human resources specialists are looking at opportunities for retraining
and redeploying current employees - including at new branches planned for cities
in the North and the East. Area managers will also be moving to the regions for
which they are responsible, giving them more visibility.
A SoUnD FUTURe STRATeGY
Changes, large and small, are evident everywhere at Seylan Bank. From
the launch of a Titanium MasterCard, to the relocation of a branch to more
attractive premises, to an ambitious new programme that will make all branches
more customer-centric - in every respect the Bank is moving forward, propelled
by a commitment to innovation and quality service that one twist in the road,
however alarming, was not going to stop.
A CAse for the future
What is the ultimate lesson to be drawn from the crisis at Seylan Bank? There
are probably as many as there are pages in this case study. But if we had to boil
it down to one, it would be this: The ultimate decision-maker in any business is,
without question, the customer.
It was a sudden, plummeting loss of customer confidence that brought
Seylan Bank to the edge of catastrophe. And it was a longer-term failure
to uphold the core values of the customer relationship - trust, integrity,
transparency, accountability, respect - that created the climate of uncertainty in
which such a precipitous fall could happen so easily.
No other bank in the world has weathered such a run without a bail
out. An investigative team from the International Monetary Fund, following
a recent visit to Sri Lanka, commented that it was a miracle Seylan Bank had
survived. The fact that the Bank did survive and, a year later, is poised to grow
stronger than ever, comes down to the same powerful single factor that almost
brought about its demise: customer confidence. That is the one investment,
more fundamental than the deepest cash reserves, that no financial institution
can take for granted.
Through the swift action and judicious planning of its new board, Seylan
Bank was able to secure the savings of its depositors and protect the interests of
its shareholders while also safeguarding thousands of jobs. These successes in
turn helped ensure the economic stability of the entire country.
In the final analysis, though, every practical remedy and process
step reviewed in these pages is ultimately directed at one basic goal - giving
customers all that they need to believe in the value of a relationship. This is the
fundamental business case that The Case Study has tried to illuminate. It is the
grassroots truth at the heart of The Bank with a Heart. And it is the lesson
learned that Seylan Bank carries forward as it builds a healthy and sustainable
business for the future.
55
Financial Highlights .............................................................................. 56
Management Report ............................................................................. 57
Risk Management Report ....................................................................... 63
Corporate Governance Report ................................................................ 75
Sustainability Report ............................................................................ 105
Financial Reports ................................................................................. 117
Appendix
Profiles of the Board of Directors (228), Senior Management Team (230), Ten Year Summary (232),
Summary of Performance Indicators (233), US$ Accounts (234), Investor Information (236),
Branch Network (241), Geographical Analysis (243), Glossary (244), Corporate Information (245),
GRI Compliance Index (246), Subject Index (248), Notice of Meeting (249), Sinhala Translations (250),
Tamil Translations (252), Form of Proxy (Enclosed)
BENCHMARKS OF
SUCCESS
The ultimate measures of Seylan Banks return to stability and
growth are the fnancial and operational results for 2009.
Seylan Bank PLC Annual Report 2009 56
FiNANCiAL HigHLigHtS
BANK gROUP
During the Year 2009 2008
(Reclassified)
Change 2009 2008
(Restated)
Change
Rs. 000 RS. 000 % Rs. 000 Rs. 000 %
income 23,154,529 25,246,209 (8.29) 24,538,978 27,053,951 (9.30)
Net Profit before income tax 892,572 155,241 474.96 933,630 (735,579) (226.92)
income tax on Profits 349,271 100.00 484,869 64,224 654.97
Net Profit After taxation and
Minority interest 543,301 155,241 249.97 569,208 (142,993) (498.07)
Revenue to government 910,711 243,056 274.69 1,123,194 309,846 262.50
gross Dividend - Note 133,018 100.00 133,018 100.00
At the Year End
Shareholders Funds 10,582,474 7,020,011 50.75 11,109,138 7,786,525 42.67
Retained Profit 3,930,689 3,420,791 14.91 3,800,891 3,553,052 6.98
Deposits from Customers 104,815,899 107,938,801 (2.89) 104,815,899 109,505,539 (4.28)
Loans & Advances (Excluding
Bills & Leases) 76,038,971 97,746,084 (22.21) 76,045,385 99,078,324 (23.25)
total Assets 132,775,872 154,046,245 (13.81) 137,267,851 163,308,489 (15.95)
Information per Ordinary Share
Earnings (Rs.) 2.83 0.90 214.44 2.97 (0.89) (433.71)
Dividends (Rs.) - Note 0.50 100.00 0.50 100.00
Net Asset Value (Rs.) 41.60 41.80 (0.48) 43.68 46.39 (5.84)
Market Value (Rs.)
- As at End of the Year
- Voting Shares 37.00 28.50 29.82
- Non-Voting Shares 16.00 6.00 166.67
Statutory/Other Ratios (%)
Core Capital Adequacy
(Minimum Requirement - 5%) 9.69 5.74 68.82 11.35 6.86 65.45
total Capital Adequacy
(Minimum Requirement - 10%) 11.74 8.06 45.66 13.60 9.44 44.07
Liquidity
- Domestic Banking Unit
Operations % 28.80 20.11 43.21
(Minimum Requirement - 20%)
- Foreign Currency Banking Unit
Operations %
(Minimum Requirement - 20%)
24.94

22.11

12.80

Price Earnings Ratio
- Voting (times) 13.07 31.67 (58.73)
Dividend Cover (times) - Note 4.08 100.00
Capital Funds to Liabilities and
Commitment & Contingent
Liabilities % 7.33 4.04 81.44
Note: Dividends for year 2009 are accounted for as per the Accounting Standard SLAS 12 (Revised).
MANAgEMENt REPORt
CEOS MESSAgE
An effective business case study not only illuminates
best practices and valuable lessons learned; it also
presents measurable outcomes. in the case of Seylan
Bank, i am pleased to report that this institutions return to
financial stability under the guidance of our new board of
directors has yielded gratifyingly positive financial results.
this Annual Report documents the first full financial
year since the Central Bank of Sri Lanka took steps to
establish a new management mandate at Seylan Bank.
in the preceding section, we took the unusual route of
chronicling those efforts in the form of an analytical case
study. in the pages that follow, we complete the analysis
by setting out the benchmarks for Seylan Banks success,
reviewing both the impressive results our team has
achieved to date and the clear milestones weve set along
the road ahead.
Seylan Banks after-tax profit for 2009 was
Rs. 543.301 Mn., which represents an increase of
250% over the previous financial year. During the
same period, the Banks cost-to-income ratio showed
a marked improvement, decreasing from 75.79% to
67.82%, while our total capital adequacy ratio - under
severe pressure during the crisis at the end of 2008 -
rose from 8.06% to 11.74%.
the recent global economic downturn,
precipitated by a sharp decline in financial markets
in late 2008, had a particularly strong impact on the
domestic economy of Sri Lanka. Compounding the
negative impact on Seylan Bank was the collapse of
the golden Key Credit Card Co. Limited, which resulted
in many of the Ceylinco group Companies facing a
liquidity crisis resulting in those companies defaulting
on loans from our institution. An increase in the non-
performing loans coupled with a 23% contraction of
the loan book increased the ratio of non-performing
assets to 33.61% from 16.93% 12 months earlier.
the positive indicators, and the many others
detailed in the following Management Report and
financial summaries, have brought a corresponding rise
in confidence among both depositors and shareholders.
Seylan Bank now meets or exceeds the liquidity targets
stipulated by the Central Bank. And our share price,
which returned to pre-crisis levels immediately following
the appointment of the new board, has continued to gain
strength as management at all levels implements the
wide-ranging initiatives set out in our new strategic plan.
in short, Seylan Bank has made a series of decisive
strides forward from the brief, galvanising crisis covered
in the opening chapters of this Report. in the sections
that follow, we examine in more detail the Banks
progress on a range of fronts, from the adoption of
new procedures for managing risk to the refinement
of our corporate governance practices. We also review
ongoing sustainability efforts, looking at all aspects of
corporate responsibility - social, environmental and
economic. We examine some of the key operational
areas, from marketing to information technology,
where the introduction of new standards and processes
is prompting positive change. And we review Seylan
Banks financial performance, applying the objective
rigour expected of a leading financial institution.
For more than 20 years, Seylan Bank has proudly
called itself the Bank with a Heart, and we have
worked to live up to that credo in everything we do. As
we tackled the unprecedented challenges of the past
year, the dedicated men and women who make up this
institution never lost heart. Buoyed by the continued
support of our customers, we redefined our vision and
improved management practices from the top down.
At the same time, we reaffirmed the commitment that
has guided Seylan Bank from the day our first branch
opened its doors: to provide the best possible service
while practicing innovative, responsible management
to the benefit of all stakeholders.
it is enormously satisfying to table an Annual
Report that we feel lives up to the high expectations of
all who believe in Seylan Bank. i am confident that the
positive momentum weve fostered and sustained will
only continue in the years ahead.
Ajita Pasqual
General Manager/CEO
17th February 2010
FInAnCIAl REvIEw
it is no exaggeration to say that the year under review
was a memorable one for Seylan Bank. the collapse
of the golden Key Credit Company which was a
member of the Ceylinco group, of which the Bank
too was then a member, sent shock waves through
Sri Lankan society as well as through the countrys
economy and financial services industry. Naturally,
Seylan Bank was affected in several ways. the
confidence of our depositors was temporarily shaken,
though in fact the Bank was in a good position to
meet its obligations. Happily, confidence was restored
when the Central Bank of Sri Lanka (CBSL) stepped
into the picture, appointing the Bank of Ceylon as
Seylan Banks managing agent and averting a run on
deposits. Subsequently, CBSL appointed a new board
of directors, empowered by its Monetary Board to
manage Seylan Bank independently.
Despite this severe setback, and against a
background of global financial turmoil and economic
recession, Seylan Bank was able to regain investor
and depositor confidence; our share price rebounded
immediately following the CBSL announcement, and
the Bank now meets or exceeds all the statutory
requirements laid down by the regulator. these
outcomes represent a complete recovery from its
troubles for the Bank and a strong vote of confidence
in its solidity and stability from those who matter
most: our shareholders and customers.
Developments in the wider world were hardly
conducive to such a quick recovery. the first half
of 2009 was characterised by limited economic
activity as investors took a wait-and-see attitude in
the face of economic uncertainty and the escalation
of the war. the clothing and export industries,
fearing the consequences of losing the preferential
status granted to them by the EU under the gSP+
exemption to WtO rules, were particularly affected.
the banking sector also had its own special
difficulties, among them a fall of nearly 10% in
interest rates, which had a cooling effect on both
lending and borrowing, as well as continued high
taxation. However, declining interest rates enabled
Seylan Bank to earn substantial profits from its
investments in government securities. Another
bright spot in a generally gloomy picture was the
recovery of tourism, which led a modest revival of
the economy in the second half of 2009 and general
anticipation of better things to come in 2010.
By far, the years most significant achievement was
restoring the stability and liquidity of the Bank. this
was achieved through a number of means.
taking advantage of the buoyant stock market,
Seylan Bank made a public issue of 54,290,000
ordinary shares at Rs. 35/- per share on 22nd
September. the desirability of the issue was bolstered
by the aggregate 28% stake taken in Seylan Bank by
two State institutions, the Bank of Ceylon and the
Sri Lanka insurance Corporation. the success of the
issue clearly demonstrated the recovery of investor
confidence in the Bank, being fully subscribed before
the closing date. Market capitalisation of Seylan
Bank grew 288% in the course of the year, from
Rs. 1.2 Bn. at the end of 2008 to Rs. 4.8 Bn. by the
end of 2009. the Bank now has adequate capital to
support the current business volumes as well as the
growth plans and we do not foresee the need for any
further re-capitalisation effort in the near future.
Profitability
in retrospect, 2009 marked a commendable return
to form for Seylan Bank. Special mention deserves
to be made of the Banks treasury division, which
performed extremely well in a year when the focus
of many other departments was on Non-Performing
Loans recovery and consolidation.
Profit before tax of the group increased from
a restated loss for 2008 of Rs. 735.579 Mn. to a
profit of Rs. 933.630 Mn., an increase of 227%. Loss
before tax of Rs. 71.820 Mn. for 2008 as published
in the last years Annual Report had to be restated
due to the delayed audit of Seylan Merchant Bank
concluding during the year with a higher loss for
2008. group profit after tax too improved from a
restated loss of Rs. 799.803 Mn. in 2008 to a profit
of Rs. 448.761 Mn. for 2009.
Resulting from the improved profitability,
Return on Assets and Return on Equity too
improved from 0.10% and 2.22% to 0.38% and
6.20% respectively.
the underlying gearing levels have improved
to 16.3 times from 22.2 times in 2008. Earnings per
share of the Bank grew from Rs. 0.90 for 2008 to
Rs. 2.83 during the year under review.
Profit before tax of the Bank increased from
Rs. 155.241 Mn. in 2008 to Rs. 892.572 Mn., an
increase of 475%. this is as a result of operating
expenses and provisions for loan losses decreasing
by 21.05% (Rs. 1.729 Bn.) and 11.51% (Rs. 284 Mn.)
respectively as against a drop in net income of
11.77% (Rs. 1.275 Bn.). Despite a contraction in
business volumes, fund-based operations resulted
in a marginal increase in net interest income in the
backdrop of an improvement in interest spread.
However, income from fee-based operations and
investments recorded a substantial drop. Profit
after tax increased from Rs. 155.241 Mn. in 2008 (in
the absence of any tax liability) to Rs. 543.301 Mn.
after making a provision of Rs. 349.271 Mn. towards
income tax.
Operational Efficiency
Several structural changes effected helped
the Bank realise certain economies of scale
and improve the Cost-to-income ratio by an
unprecedented 8% from 75.79% to 67.82%. Some of
the specific initiatives taken in this regard included
formalising procurement procedure, elimination of
unnecessary costs and a better control over costs.
cash flow of Rs. 20.869 Bn. for the Bank as against
a negative of Rs. 6.595 Bn. in 2008 which was used in
investing and financing activities.
Productivity
Contraction of business volumes partly set-off
by the drop in staff numbers from 3,923 to 3,733
caused the assets per staff member to decrease
marginally from Rs. 39.2 Mn. in 2008 to Rs. 35.6 Mn.
improved profitability during 2009 resulted in the
profit after tax per staff member to increase from
Rs. 0.040 Mn. to Rs. 0.146 Mn.
Asset Quality
Loss of customer confidence was not the only
difficulty the Bank suffered as a consequence of the
collapse of the former group company. increased
reputation risk was paralleled by real financial
losses, since the Bank had extended loan facilities
to a number of Ceylinco group companies, the
economic impact of the collapse sent these loans
into default. this coupled with economic recession
and a contraction in the loan book caused the rise
in the Banks NPL ratio in the year under review.
Non-Performing
Assets
Non-Performing
Assets Ratio
2009 2008 2009 2008
Rs. Mn. Rs. Mn. % %
gross NPL 31,149.96 19,428.23 33.61 16.93
Net NPL 25,491.07 15,905.54 29.29 14.30
Stability
total capital adequacy ratio which was below the
statutory minimum of 10% at 2008 year-end improved
to a comfortable level of 11.74% during the year under
review. Fitch Ratings Lanka Ltds rating of Seylan
Bank is BBB+ and the outlook is Stable.
Consequent to the issue of shares and
improved profitability, regulatory capital of the
Bank increased from Rs. 9,054.08 Mn. as at
31st December 2008 to Rs. 11,612.48 Mn. as at
31st December 2009. Market capitalisation too
witnessed a four-fold increase from Rs. 1.2 Bn. to
Rs. 4.8 Bn. as at 31st December 2009. the increase
in the number of shareholders from 7,812 to 11,039
reflects the increased investor interest in the Bank.
Business volumes
Consequent to the crisis the Bank went through as
detailed in chapters one to six of this Annual Report,
the Bank experienced a drop in the business volumes.
though recovered to some extent with the restoring of
the customer confidence, they fell short of the levels
reported as at 31st December 2008, as detailed below:
item 2009 2008 Variance
Rs. Mn. Rs. Mn. %
Net Loans &
Advances 80,287.81 104,154.13 (23%)
Deposits 104,815.90 107,938.80 (3%)
total Assets 132,775.87 154,046.25 (14%)
liquidity
A combination of factors such as the issue of shares,
recovery of non-performing advances, curtailed
lending and improved profitability of the Bank
substantially boosted liquidity ratio of the Bank from
20% in December 2008 to 29% in December 2009, a
pattern that the entire banking industry witnessed
due to a negative growth in credit outstanding in the
country. Operating activities generated a positive
Corporate governance
With a view to enhance corporate governance
practices, several structural improvements were
effected in the course of the year. these are detailed
in the Corporate governance Report on page 75.
Operations
Despite the years troubles, we took a firm decision
to continue increasing the reach and relevance of
Seylan Bank to customers through the expansion
of our network of outlets, especially in the North of
the country. A new fully-fledged branch was opened
at Nelliady and new convenient banking centres at
Manipay and Chankanai. Our established branches
at Ja-Ela and Malabe were relocated in the interests
of greater efficiency and customer access. Pawning
centres were set up at the Banks branches, and
four more AtMs were added to the network.
Marketing
Marketing activity was emphasised in retail
banking, where competitive pressures increased
last year. We continued to offer a number of loyalty
and rewards programmes to our customers,
such as the Merit Rewards scheme on savings
and current accounts, the Thilina Sayura scheme
for foreign-currency account holders and a gift
scheme for our Tikiri savings accounts for minors.
A special deposit-mobilisation campaign was
held from June to August 2009. the objective of
the campaign was to raise Rs. 2 Bn. in 50 days.
the campaign exceeded its target by as much and
more, raising a total of Rs. 4.2 Bn. and was judged
a great success.
During the period when the troubles of the
Ceylinco group impacted strongly on the Bank, we
commenced a special effort to retain customers
through a house-to-house campaign known as
Jaya Maga. the campaign, still under way, has
yielded very good results.
the Marketing Department undertook a
customer satisfaction survey in the course of the
year. the survey revealed that perceptions of service
quality were good, with the Bank receiving an average
score of 74% on the parameters tested.
Information technology
Modern banking is uncompromisingly technological.
Seylan Banks 100-plus branches and convenient-
banking centres are linked through a single
automated network, which makes possible customer
service quality and product access anywhere on the
network and to customers overseas as well as in
Sri Lanka. this network supports and enables all
the features customers expect of a modern bank:
AtMs, telephone, mobile and internet banking, and
credit cards, as well as traditional high street banking
services and Seylans pioneering mobile branches. All
these are connected via state-of-the-art it.
improvements to our it capability during the
course of the year included enhancements to the
SMS banking module and greater functionality with
respect to funds transfers, utility-bill payments,
etc. We also supported the introduction of the
Seylan Bank MasterCard.
Subsidiaries and Associates
the board decided during the course of the year
on a gradual divestiture of the Banks investment
in Seylan Merchant Bank PLC (SMB). Accordingly,
SMB ceased to be a Seylan Bank subsidiary on
1st October 2009.
investments in our other subsidiaries, Seylan
Bank Asset Management Limited (a primary dealer)
and Seylan Developments PLC, remain unchanged.
looking Forward
With our difficulties now behind us, we are free
to consider our strengths and capitalise on the
opportunities opened up by the end of the war and
the consequent opening-up of business opportunities
in the North and the East, as well as the revival of
tourism and the expected peace dividend.
today, Seylan Bank finds itself in an enviable
position. Financially, it is stronger and more stable than
ever. in terms of expertise and personnel resources,
it can draw on a team of effective and experienced
staff, many of whom enjoy long-established and close
employee-employer relationships with the Bank. On
the technology side, we are a fully-functional modern
bank with a platform capable of rolling out innovative,
in-demand services. Best of all, recent troubles have
not affected the Banks large and loyal customer base.
Our current priorities are to release funds
tied up in non-performing accounts, capitalise on
business opportunities in the North and the East,
and establish synergies with our new strategic
investors, Sri Lanka insurance Corporation,
Browns and LOLC. going forward, we see a lucrative
market in services to the small- and medium-scale
enterprise (SME) sector and have begun plans to
expand our coverage in this market. Also in the
pipeline are moves to drive growth in fee-based
income and a number of new products targeting
well-defined market segments. Further alignment
of products and services, marketing strategy,
organisational structure and corporate governance
practices, systems and procedures and productivity
enhancements, customer segmentation and
enhancing operational efficiencies too will continue
to be priorities over the next several years.
Financial projections in the 3-year Strategic
Plan 2009-11, that is currently guiding the Bank on
a focussed path of stabilisation and consolidation
are based on the successful implementation of
these initiatives which are expected to position the
Bank as follows by 2011:
indicator Projected 2011
Loans and advances (Rs. Bn.) 158
Customer Deposits (Rs. Bn.) 170
total Assets (Rs. Bn.) 195
Profit after taxation (Rs. Mn.) 2,301
Return on Equity (%) 17
Net NPL Ratio (%) 10
Cost to income ratio (%) 60
RiSK MANAgEMENt REPORt
OuR nEw PAth
Seylan Bank views Risk Management as an
important element of the management control and
business of the Bank. A renewed and re-emphasised
approach is being taken under the new board for
managing risks better.
We have recognised that risk is the existence
of a range of possible outcomes where such
outcomes and the potential range can be reasonably
estimated. Where such estimation becomes difficult
the situation is one of uncertainty. A Bank is faced
with both uncertainty and risk. While attempting to
avoid uncertainty as a business outcome, the Bank
does accept risk within acceptable norms and limits,
within our strategy set towards our new path.
We have categorised the key risks faced by us
into three main risks viz. Credit Risk, Market Risk
and Operational Risk. Apart from these three risks,
several other risks such as liquidity risk, reputation
risk, solvency risk and event risk, are some of the
key risks faced by the Bank.

thE RESPOnSIBIlItIES FOR MAnAgIng RISk
the board of directors assumes overall
responsibility for managing risks in the Bank.
For this purpose, the board has determined the
organisational structure that should prevail to
ensure a sound and adequate risk management
framework. Further, the board has designated
Key Management Personnel to manage risk and
identify their areas of responsibilities. the board
also reviews on a regular basis the risk exposures
of the Bank and specifies and approves policies
with regard to risk measurement and control.
the board delegates some of its duties to
various risk management committees and officials
of the Bank.
thE RISk MAnAgEMEnt PROCESS And
thE IntEgRAtEd RISk MAnAgEMEnt
COMMIttEE
the following is a schematic presentation of the
multifaceted framework of Risk Management that
encompasses three areas of controls viz. Financial
Control, Risk Management Control and internal Audit.
the key mechanism in discharging the board
responsibilities of risk management is through
the integrated Risk Management Committee that
comprises the undermentioned three directors
with the participation of senior management
personnel. the Committee meets at least on a
quarterly basis.
the members of the Board integrated Risk
Management Committee are:
Mr. Ajith Devasurendra - Director, Chairman of
the Committee
Mr.NaomalGoonawardene-Director (Resigned
w.e.f. 03/12/2009), Chairman of the Committee,
till 3/12/2009
Mr.LalithWithana-Director
Mr.PradeepaKariyawasam-Director
Four meetings of the Risk Management
Committee were held during the year 2009.
the responsibilities of the integrated Risk
Management Committee are designed to capture a
wide range of potential risk-related issues that are
dealt in a proactive and preventive manner. Some of
the key functions include the following:
Taking prompt corrective actions to mitigate
effects of specific risks.
ReviewingandrecommendingRiskManagement
policy, strategy and policy controls and systems
for the Bank.
Establishing risk tolerance for the Bank at
enterprise and strategic business unit levels.
Maintaining continued awareness of changes
in the Banks risk profile and with periodical
review of the risk exposures of the Bank.
Submission of risk assessment reports
to the board pursuant to the discussions
and observations at the Risk Management
Committee meetings.
the new board places a very high emphasis on
the risk management function and strengthened
the committees as well as the organisational
framework. Further, the effectiveness of the
committees is being elaborated on, rather than
mere functioning for the sake of formality. the
structures of information dissemination and
reporting formats have been improved.
A board approved Risk Management Policy
covering multifaceted aspects has been put in place.
A new Risk Management Department enhancing
the former Risk Management Department with
wider scope and functions is set up to concentrate
on the risk management function as a second line of
defence for the Banks integrated Risk Management
system. this Department will coordinate the activities
of risk management and submit quarterly reports to
the integrated Risk Management Committee. these
reports include risk identification, risk measurement,
reporting on risk-based occurrences, trends in the
risks undertaken, risk mitigation and control. the
Risk Management Department will also maintain
data relating to operational loss events for further
evaluation and study.
OuR APPROACh tO MOnItORIng
RISk And CAPItAl
Availability of adequate capital in the business
acts as a cushion against risk. Hence, minimum
capital requirements have been stipulated by the
authorities as a prudential means of regulation.
the Bank had a deteriorating capital adequacy ratio
in the early part of 2008.
the capital adequacy ratio that had fallen below
the required level towards the end of the year 2008
got restored at 11.74% towards December 2009
which is above the statutory requirement of 10%.
this was a result of several strategic moves and
strategies adopted by the Bank including the issue of
new shares to boost the capital base. the restoration
of the capital adequacy requirement was a major
achievement of the Bank during the year 2009.

the Risk Management Department is designed
to comprise three units namely, Credit Risk Monitoring
Unit, treasury Middle Office and Operational Risk
Monitoring Unit. in addition, a separate unit carries
out Quality Assurance, Business Continuity Planning
and information Systems Security.
Risks arising from Financial Instruments
international Financial Reporting Standards require
certain disclosures on the risks arising from
various financial instruments. the Bank deals in
financial assets and liabilities and also in financial
instruments such as the fixed income securities
mainly comprising of government Securities viz.
treasury Bills and treasury Bonds. the Bank held
a trading portfolio of treasury Bills and Bonds
amounting to Rs. 14.37 Bn. as at 31st December 2009
and an investment portfolio of Rs. 14.73 Bn. the main
risk arising from the trading portfolio is the interest
rate risk as detailed elsewhere in this Annual Report.
Bank quantifies and monitors this risk on a regular
basis. Further, the instruments result in liquidity risk
in a very insignificant manner as the instruments
themselves are fairly liquid and can be converted
into cash quite easily or can be used as collateral to
borrow in the REPO market.
the Bank also deals in forward exchange
contracts mainly to cover the requirements of the
clients and usually the positions are covered by
opposite contracts and the level of exposure is not
significant. the Bank also enters into currency
swaps in a minimal way.
Bank does not as a policy usually enter into
various derivative transactions on a speculative basis.
kEY RISkS And RISk MAnAgEMEnt
CREdIt RISk
Credit Risk is the risk of default of capital and interest
by the borrowers of the Bank as a result of which the
Bank will encounter loss of revenue and a reduction
in the value of its assets leading to reduced profits.
thE BOARd CREdIt SuBCOMMIttEE
the Board Credit Subcommittee is chaired by the
Chairman of the Bank and has a minimum of two
directors.
the Board Credit Subcommittee formulates
credit policies for the Bank inclusive of maximum
limits of exposure to each major sector of the economy.
the Committee formulates credit strategies towards
maintaining a healthy credit portfolio and maintains
credit discipline within the Bank.
the areas of focus include:
Approvaloffacilitieswithinarangeofspecified
limits and recommendation of credit facilities
beyond such limits.
Formulating credit policies and guidelines
for the Bank from time to time and review of
existing policies.
Formulationofpolicies/reviewofexistingpolicies
on credit risk management.
Monitoringrecoveriesandformulatingrecovery
strategies.
Ensuringthatthecreditportfoliodoesnotexceed
accepted levels of risk.
Reviewofsingleborrowerlimitsandsectorlimits
where more stringent limits are in place for any
sector and also review of other lending criteria.
the Board Credit Subcommittee meets on
a regular basis at a frequency of at least twice
a month. the Chief Executive Officer and Key
Management Personnel in charge of credit areas
are co-opted to the meetings.
thE IntERnAl CREdIt COMMIttEE
this Committee comprises of Executive Management
and deals with approval of facilities within a certain
range of amounts. Further, this Committee deals with
recommendation of credit policies and implementation
and monitoring of the same through respective credit
disbursement areas and branch outlets.
Credit Policies
this Committee formulates and recommends
Banks credit risk policies based on the boards
risk management strategy. it has also during the
year, improved the process for the management of
credit and quantification of risk by standardising
reporting formats, following a more stringent
policy towards collateral requirements for credit
facilities, restricting the exposures to any single
customer, scaling down the facilities where the
clean exposure is excessive, and application of
shorter repayment periods on term loans.
SECtORAl ExPOSuRE OF CREdIt PORtFOlIO

Credit Rating
the Bank also uses a comprehensive credit rating
system based on a package acquired from an
international vendor. the rating engine acquired by
the Bank is capable of developing different rating
modules. Bank has developed seven credit rating
modules covering the areas of Corporate, SME, SMi,
Leasing, Housing, Credit Cards and Personal Loans.
the rating system provides quantitative support
to the very subjective area of credit where both
qualitative and quantitative aspects are captured in
a scientific approach to maintain consistency.
the largest risk exposure of the Bank is in
the area of credit risk, as common to any banking
institution. the total risk weight of the three
different risks viz. Credit Risk, Market Risk and
Operational Risk as per the capital adequacy
computations based on BASEL ii approach under
the Central Bank guidelines, as at 31st December
2009 was Rs. 98.9 Bn. whereas the component of
credit risk within this was Rs. 79.3 Bn. representing
80% of the quantified risk.
MARkEt RISk
Market Risk is the risk arising from fluctuations in the
market price/value of tradable assets such as foreign
exchange, fixed income securities and shares that are
held for trading purposes where the Bank holds either
long positions or short positions of such assets.
the two risk components of the market risk
most applicable to the Bank are foreign exchange
risk and interest rate risk.
the Foreign Exchange Risk arises from the
foreign exchange positions maintained by the Bank
where either the foreign currency denominated
assets exceed such liabilities (long positions) or the
foreign currency denominated liabilities exceed the
assets (short positions). Such long or short positions
could also be created through the purchase or sale
transactions both in spot and forward markets
as well as through swap transactions. Bank is
conservative and prudent in its management of
foreign exchange exposures and has set out limits
on its transactions and exposures including dealer
limits, portfolio limits, daylight limits, overnight
limits, long position limits, short position limits,
counterparty limits etc. the treasury Middle Office
monitors the compliance with the set limits.
Seylan maintained a net oversold position of
USD 3.85 Mn. as at 31st December 2009 where the
risk arising from appreciation of foreign currency
was Rs 3.85 Mn. for each one Rupee appreciation
of USD against the Rupee or equivalent in other
currencies; a level of risk considered to be low
based on the capital and resources of the Bank.
Interest Rate Risk arises from the movement
of interest rates affecting the value of tradable
fixed income securities as well as the interest rate
re-pricing gaps of the interest rate sensitive assets
and liabilities. the Bank evaluates the risk level
of the tradable fixed income securities portfolio
by assessing the sensitivity of the market value
towards a change of interest rates by one hundred
basis points, which is one percentage point. the
size and duration of the trading portfolio is capped
based on the potential risk exposure as well as the
board approved limits placed on absolute values.
Banks also typically have mismatches in the
re-pricing periods of assets and liabilities and an
approach of minimising the gaps and limiting long-
term fixed rates is followed by the Bank.
Seylan as a policy does not carry a significant
exposure to the equity market whilst of course being
an active investor within applicable prudential limits.
the different types of market risks and the
Balance Sheet structure with a long-term focus are
monitored by the Asset and Liability Management
Committee (ALCO).
ASSEt And lIABIlItY MAnAgEMEnt
COMMIttEE (AlCO)
this Committee comprises of senior management
personnel representing treasury and main
business functions and also the Risk Management
area. the Committee meets once a month and
addresses matters relating to market risk and to
some extent the business risk which is mainly dealt
with at the board level. A comprehensive reporting
system is available to provide detailed information
to the ALCO. During the year the ALCO reporting
system was streamlined and a standardised ALCO
Pack has been introduced for better reporting
towards more effective risk management.
Of the total risk weight of the three different
risks amounting to Rs. 98.9 Bn. the component of
market risk was Rs. 4.5 Bn. representing 5% of the
quantified risk.
OPERAtIOnAl RISk
Operational Risk refers to the losses arising from
fraud, negligence, oversight, human error, process
errors, system failures, external events etc. the
Bank manages most elements of the Operational
Risk through sound internal control systems and
well-defined processes both technology driven and
with human intervention.
the areas of risk include process risks where
faulty processes or errors in the processes could
trigger losses. Continuous review of the systems
and the processes either on a regular review basis
or pursuant to observed loss events and incidents
addresses potential weaknesses of the processes.
in implementation of new products that
invariably relies on technology as well as human
involvement a risk review is an essential aspect
that needs both the marketing objectives as well
as the Risk Management requirements. Bank
strives to subject such new product introductions
to adequate review.
Bank also maintains its policies with regard to
access control and data protection and necessary
safeguards are constantly introduced and upgraded
to ensure the integrity of the information and the
data bases. Preventive measures such as firewalls
and virus guards among other steps are put in place.
Operational Risk unit - the operational risk
is monitored by the Operational Risk Unit and the
Operations Department.
the objective of operational risk assessment
is to identify the areas of high risk based on the
prevalence of occurrences as well as evaluation of
potential dangers. the Bank is at an early stage of
analysing loss events and loss data under different
product and business categories. Any significant
loss events are analysed in depth so as to strengthen
the processes and close out any weak controls.
Of the total risk weight of the three different
risks amounting to Rs. 98.9 Bn. the component of
operational risk was Rs. 15.1 Bn. representing 15%
of the quantified risk.
lIQuIdItY RISk
Liquidity Risk is the risk that an entity may not be
able to meet the payments as they fall due. it appears
to be an insignificant risk that does not cause
regular losses until such time a major event occurs
resulting in even a threat to the mere existence of
an organisation. Seylan views Liquidity Risk as an
important aspect in managing risks and pays serious
attention to the management of liquidity. the Bank
underwent a potential liquidity crisis towards the
end of year 2008 that was triggered by the external
events, a situation referred to as event risk that
triggered potential crystallising of liquidity risk.
Bank always maintained its liquid assets in excess
of the statutory requirement of 20% of liabilities;
however as a result of the crisis the ratio fell to a range
of 13%. Due to several measures taken by the Bank
and the regulatory authority in meeting the challenges,
the deposit base improved significantly and the ratio
restored much above the statutory minimum of 20% to
a level of 29% by the end of the year 2009.
ASSEt And lIABIlItY MAtuRItY gAPS
Another tool used by the Bank in the management of
long-term Balance Sheet Structure of the Bank is to
monitor the gap between the maturity of assets and
liabilities under different time bands. this analysis
shows the potential risks of mismatches between
maturity of assets and maturity of liabilities. Seylan
uses this analysis in its risk management process and
monitors the maturity ladder at the ALCO meetings
on a monthly basis. While it is typical for a bank to
have mismatches based on contractual maturities,
it is also appropriate to analyse the maturities based
on behavioural patterns. Bank has set targets in
reducing the mismatches over a time period.

tREASuRY MAnAgEMEnt COMMIttEE
this Committee chaired by the Chief Executive Officer,
meets on a daily basis to deal with matters relating
to liquidity management and market interest rates.
in addition, foreign currency exposures are reviewed
regularly. it is a strength of the Bank to have a focused
approach through the treasury Committee in its
liquidity management and management of the day
to day forex and money market exposures as well as
monitoring of the market rates for competitive and
current pricing of products.
COMPlIAnCE FunCtIOn
Bank has set up a separate Compliance Department
specialised in ensuring compliance with the
regulatory and legal framework. the Department
also has set in place necessary systems and
processes to comply with the Anti-Money Laundering
Regulations and Laws.
the Bank has taken a serious view that
compliance with all regulations is an essential
element of good governance and management of
the Bank and therefore, emphasis is made on this
aspect throughout the organisation.
Information technology Risk - the technology
teams and users meet regularly and review the
information systems currently utilised by the Bank
and analyse the future technology and systems
needs of the organization to compete effectively
and efficiently in the future. Additionally, key areas
of focus include information Security, Business
Continuity Planning (BCP) and Data Security.
BuSInESS COntInuItY PlAnnIng (BCP)
BCP is a strategic and tactical approach of an
organisation to plan for and respond to incidents and
business disruptions in order to continue business
operations at an acceptable pre-defined level.
BCP is a process designed to reduce the
organisations business risk arising from an
unexpected disruption of the critical functions/
operations (manual or automated) necessary for
the survival of the organisation. this includes
human/material resources supporting the critical
functions/operations and the assurance of
continuity of minimum level of service necessary
for critical operations.
Bank has set in place a comprehensive
Business Continuity Plan which has been developed
with the assistance of external consultants. the
plan addresses the criticality of different business
functions and maintains contingency arrangements
accordingly. Bank maintains an off-site Disaster
Recovery Centre as part of the Business Continuity
Plan. Further, data of all critical systems are
updated on a real time basis in the backup
machines at the Disaster Recovery Centre.
the initial task was to conduct a detailed
Business impact Analysis (BiA) and a Risk
Assessment (RA) on 29 business units and a team
was formed comprising of a business team leader,
coordinator and support staff with the assistance
of an external consultant who was given the task of
formulating a comprehensive business continuity
plan for each business unit. the Plan has been
built considering the following areas that could be
affected due to any disaster or crisis.
Personnel
Buildingstructure
Resources/Utilitiesand
AccessRoutes

BuSInESS COntInuItY MAnAgEMEnt
(BCM) StRuCtuRE And FRAMEwORk
BCM structure and framework consists of six
stages and components.

the Bank adopted a six phase approach to
develop the BCP as shown below.

RISk MAnAgEMEnt RElAtEd SYStEMS
the Bank has been developing its systems
capabilities and infrastructure for the purpose
of improved Risk Management. Accordingly, a
comprehensive Credit Rating System was acquired
in 2007. Bank also acquired a comprehensive
treasury Management software system way back
in the year 2001 and this system provides several
facilities of stress testing, scenario analysis, gap
analysis and duration measurement that facilitates
monitoring of Market and Liquidity Risk of treasury
products. Seylan also became one of the pioneering
banks to acquire BASEL ii related software that
covers capital charge calculations for Market Risk,
Credit Risk and Operational Risk. the software is
capable of expansion from the Basic indicator and
Standardised Approaches towards Foundation and
Advanced internal Rating Based Approaches. With
the support of these software systems, Seylan Bank
would possess a comprehensive and sophisticated
Risk Management framework.
BASEl II IMPlEMEntAtIOn PlAn
Seylan Bank was able to face its first stage of
meeting the challenge of implementing the BASEL ii
for credit risk - standardised approach, operation
risk - basic indicator approach, and market risk -
standardised approach very successfully through
the appointment of a dedicated committee which
comprised several subcommittees for evaluation and
implementation involving key officers representing
the core banking areas of finance, credit, operations,
branch banking, and treasury who worked tirelessly
towards achieving the set goals.
the first stage, comprised three phases; that of
assessing and planning where a gAP analysis was
conducted on our processes, methods, and systems
involving the core system of Kapiti, and other systems
used by treasury Operations, Pawning, Leasing,
Credit Cards, etc, comparing the availability of data
against the required data and thereafter developing
a master plan involving short-term and long-term
goals. the short-term goal was to initially achieve
the CBSL stipulations of meeting the preliminary
standards by 1st January 2008, a goal which was
achieved successfully and on time.
After a careful evaluation process a reputed
it software developer was hired to design the
system to integrate the main operational systems
of the Bank in forming a common data platform and
thereafter performing the following tasks ;
Risk Measurement
CreditPortfolioExposureCalculation
Uploadofdata
DataValidation
Calculation of gross exposure for on-Balance
Sheet and off-Balance sheet items
Calculationofcreditriskexposureforregulatory
purpose and
Capitalchargecalculations.
Risk Mitigation
Settingupnettingagreementsandmanagement
Calculationofimpactofnettingontheexposures
CollateralManagement
Collateralsetup
Calculation of impact of collateralisation on
exposures using simple approach
GuaranteesManagementand
Calculationofimpactofguaranteesonexposures.
Risk Reporting
Capitalchargecomputation
Statutoryreporting.
Parallel to the above, the second stage of
gearing and preparing for the advanced approach
in credit risk was launched by the introduction
of internal credit scoring and rating modules
for different types of facilities was rolled out
throughout the branch network, and credit SBUs
of the Bank. these rating modules are currently
being fine tuned through stress testing, and back-
testing with the view of ensuring that they reflect a
realistic risk assessment of the counterparty and
transaction, prior to linking them for credit decision
making, risk-based pricing and the calculation of
Probability of Default, Exposure at Default, and
Loss given Default.
kEY ElEMEntS OF SuCCESSFul BASEl II
RISk MAnAgEMEnt SYStEM
Sponsorshipfromtopmanagement.
Projectimplementationteamwhocancollaborate
between systems experts and risk experts.
Bank-widecross-functionalTaskforce,established
to identify and prioritise data quality issues,
evaluate solutions and initiate process changes.
implementing tools that detect data errors and
omissions.
Discipline needed to maintain clean data.
Reports generated regularly to ensure that
errors are not creeping back into database.
wAY FORwARd On RISk MAnAgEMEnt -
kEY FOCuS AREAS OF thE BAnk
the following is a summary of the key areas
focused by the Bank for implementation during the
year 2010 onwards:
Further development of internal risk rating
frameworks.
Integration of frameworks through credit
redesign initiatives.
Ongoing testing and validation of risk rating
systems.
Calibrationofprobabilityofdefault.
Development of portfolio management
information system.
Buildingdatabaseofdefaultdata,lossdataand
recovery data.
Measuringcreditexposuresaccurately.
AnalyticsEnginesthatsupportBASELIIcapital
requirements and economic capital attribution.
Each is a major project requiring cross-
functional expertise and deep skill sets. Projects
driven via Steering Committee and project leaders
are held accountable for project delivery.
COnCluSIOn
Risk Management is an important function of
any organisation and more so in the case of a
financial institution because the ability to expand
the exposures is much more significant compared
to most other business entities. Seylan Bank
recognises the need for a sound and comprehensive
risk management framework and therefore has
introduced a risk management framework that is
being continuously improved and developed.
CORPORAtE gOVERNANCE REPORt
IntROduCtIOn
Weak governance of banks reverberates
throughout the economy with negative ramifications
for economic development (Ross Levine - global
Corporate governance Forum, 2003).
given the important financial intermediation
role of banks in an economy, their high degree of
sensitivity to potential difficulties arising from
ineffective corporate governance and the need to
safeguard depositors funds, corporate governance
for banking organizations is of great importance
(BASEL Committee on Banking Supervision -
February 2006).
For Seylan, the above words serve as a bleak
reminder of the events which took place in December
2008 - the difficulties faced by the Bank precipitated
by a series of withdrawals which commenced with
the collapse of a company within the Ceylinco
group. timely intervention by the Central Bank of
Sri Lanka together with Management assistance
from Bank of Ceylon and appointment of a strong
and independent board of directors paved the way
for the Bank to make a recovery unprecedented and
unparalleled in the history of the banking sector in
the country particularly when its occurrence was in
the midst of the global financial crisis.
the implementation and enforcement of sound
corporate governance principles have therefore
become even more critical in this context.
the newly-appointed board comprising of all
eminent professionals in their respective fields are
firm in their resolve that both the board and the
senior management team and staff should act at
all times with integrity and honesty and function
in an environment where the highest element
of ethical business conduct is maintained. they
have therefore pledged their commitment towards
adoption and implementation of transparent and
effective corporate governance practices within the
Bank with the view of enhancing business prosperity
and corporate accountability and realising not
only long-term shareholder value and acquiring
and retaining the trust of its depositors but also
safeguarding the interests of all its stakeholders.
COMPlIAnCE REQuIREMEntS
Pursuant to Seylan Bank board being re-constituted
in December 2008, the new board commenced
detailed compliance with Corporate governance
principles and guidelines with particular reference
to the following during 2009:
the Banking Act Direction No. 11 of 2007

(Corporate governance for Licensed Commercial
Banks in Sri Lanka) issued by the Monetary
Board of the Central Bank of Sri Lanka including
subsequent amendments there to (CBSL Code);
the Colombo Stock Exchange rules on Corporate

governance (applicable on a voluntary basis for
listed entities until 1st April 2008 and for banks
until 31st December 2008) and mandatory
thereafter.
the Code of Best Practice of Corporate

governance jointly issued by the Securities
& Exchange Commission of Sri Lanka (SEC)
and the institute of Chartered Accountants of
Sri Lanka (iCASL).
the Bank is required to mandatorily comply with
the Corporate governance rules of the Code of Best
Practice of Corporate governance laid down as per
Central Bank Direction No. 11 of 2007 as amended
as aforesaid and also the Colombo Stock Exchange
rules of Corporate governance for listed entities
which became mandatory for banks with effect
from the financial year commencing January 2009.
Compliance with the iCASL/SEC Code of Best Practice
on Corporate governance is on a voluntary basis.
the Banks level of conformity to the Central Bank Code of Corporate governance issued under
Banking Act direction no. 11 of 2007 (as amended) is given below:
For purposes of compliance with Section 3 (1) (xvi) of the Banking Act direction no. 11 of 2007
(as amended) the disclosures made in the following two tables shall be deemed to be the Annual
Corporate governance Report of the Bank.
AnnuAl CORPORAtE gOvERnAnCE REPORt - CORPORAtE gOvERnAnCE
dISClOSuRE REQuIREMEntS AS PER SECtIOn 3 (8):
disclosure requirement level of compliance
3(8)(i) the board shall ensure that:
(a) annual audited Financial Statements
and quarterly Financial Statements are
prepared and published in accordance
with the formats prescribed by the
supervisory and regulatory authorities
and applicable accounting standards, and
(b) such Statements are published in
the newspapers in an abridged form, in
Sinhala, tamil and English.
3(8)(ii) the board shall ensure that the
following minimum disclosures are
made in the Annual Report:
(a) A statement to the effect that the annual
audited Financial Statements have been
prepared in line with applicable accounting
standards and regulatory requirements,
inclusive of specific disclosures.
Complied.
the Bank has made a balanced and fair assessment of its
financial position for the year ended 31st December 2009
through the Audited Financial Statements contained in the
Annual Report of 2009.
the Bank has continuously published its Quarterly Financial
Statements supplemented with the necessary explanatory
notes and observations for the information of its shareholders
and other stakeholders. Strict adherence is made to all
accounting formats and other procedures laid down by
regulatory authorities such as the Colombo Stock Exchange
and the Central Bank in the disclosure and submission of
such information. Financial Statements both audited and
interim unaudited are prepared and published in accordance
with the Sri Lanka Accounting Standards and other regulatory
requirements inclusive of specific disclosures.
Any other financial and non-financial information, which
are price-sensitive or warrant the shareholders and
stakeholders attention and consideration, are promptly
disclosed to the public.
Please also refer the Statement of Directors Responsibility for
Financial Statements appearing on pages 134 and 135 of the
Annual Report.
(b) A report by the board on the Banks
internal control mechanism that
confirms that the financial reporting
system has been designed to provide
reasonable assurance regarding the
reliability of financial reporting, and that
the preparation of Financial Statements
for external purposes has been done
in accordance with relevant accounting
principles and regulatory requirements.
Complied.
Please refer the Statement of Directors Responsibility for
Financial Reporting.
(c) the external auditors certification on
the effectiveness of the internal control
mechanism referred to in Direction 3(8)
(ii)(b) above, in respect of any
statements prepared or published
after 31st December 2008.
Pending auditing guidelines being issued by the iCASL in
respect to the nature, extent and reporting formats for such
certification, the Central Bank of Sri Lanka is considering
deferment of this directive.
However, the board has put in place processes and monitors
the effectiveness of internal controls through the following
board subcommittees:
AuditCommittee
IntegratedRiskManagementCommittee
(d) Details of directors, including
names, fitness and propriety,
transactions with the bank and the total
of fees/remuneration paid by the bank.
Complied.
Profiles of the board of directors and other details are
provided on pages 228 to 229 of the Annual Report and also
in the Annual Report of the Board appearing on pages 119 to
128 of the Annual Report.
Details of directors interest in contracts and related party
transactions are given in Notes 42 and 43 of the Financial
Statements and on pages 129 to 133 of the Annual Report.
Aggregate remuneration paid to directors and
accommodation granted are indicated in Note 7 and Note 42
to the Financial Statements.
(e) total net accommodation as defined in
3(7)(iii) granted to each category of related
parties. the net accommodation granted
to each category of related parties shall
also be disclosed as a percentage of the
banks regulatory capital.
Complied.
Details of accommodation granted to related parties
are disclosed on pages 129 to 133 and in Notes 42 and 43 of
the Financial Statements.
Net accommodation granted to related parties was 13.18% of
the Banks regulatory capital.
(f) the aggregate values of
remuneration paid by the bank to its
key management personnel and the
aggregate values of the transactions
of the bank with its key management
personnel, set out by broad categories
such as remuneration paid,
accommodation granted and deposits or
investments made in the bank.
Complied.
Please refer Notes 7 and 42 to the Financial Statements.
(g) the external auditors certification of
the compliance with these Directions in
the annual corporate governance reports
published after 1st January 2010.
the Central Bank of Sri Lanka is considering the deferment
of this directive.
(h) A report setting out details of the
compliance with prudential requirements,
regulations, laws and internal controls
and measures taken to rectify any
material non-compliances.
Please refer the Annual Report of the Board, Risk Management
Report and Audit Committee Report. there were no material
non-compliances.
Please also refer Statement of Directors Responsibility for
Financial Reporting.
(i) A statement of the regulatory and
supervisory concerns on lapses in
the banks risk management or non-
compliance with these Directions that
have been pointed out by the Director of
Bank Supervision, if so directed by the
Monetary Board to be disclosed to the
public, together with the measures taken
by the bank to address such concerns.
there were no lapses reported in the areas of risk
management and non-compliance with Directions issued by
the Central Bank which required disclosure to the public as
directed by the Monetary Board.
AnnuAl CORPORAtE gOvERnAnCE REPORt ISSuEd In COMPlIAnCE wIth
SECtIOn 3 (1) (xvI) OF thE BAnkIng ACt dIRECtIOn nO. 11 OF 2007 (AS AMEndEd)
CBSl Rule level/Extent of compliance
BOARd
Responsibilities of the Board
3(1) (i) - ensuring the safety and
soundness of the Bank
3 (1) (xiii) - Schedule of matters reserved
for boards decision:
formulationofstrategicobjectivesand
implementation of overall business
strategy
ensureidentificationandmanagement
of risks by implementation of risk
policies and measurable goals
ensureeffectivenessandadequacy
of information and internal control
systems
EnsurecompetencyofCEOandkey
management personnel and implement
succession strategy
the board has taken relevant measures as necessary to
ensure the safety and soundness of the Bank in terms of
Section 3(1) (i) of the said Direction. its responsibilities
included the following:
Providingstrategicdirectionbyformulatingand
implementing of new Strategic Plan for the Bank.
Formulationofbusinesspoliciesandensuringeffective
implementation of same.
Strengtheninginternalsystemsofcontrolincluding
formulation of overall risk policy for the Bank. Risk
management procedures with measurable goals are
currently being implemented.
MonitoringeffectivenessofCEOandthecorporate
management. the board also carried out a substantial
re-organisation exercise in the Bank;
Implementationofsoundcreditpoliciesandensuringhigh
credit quality as well as approval of credit facilities exceeding
the delegated limits of the internal Credit Committee.
BOARd
Ensuringcompliancewithlegaland
ethical standards
EnsureoversightofaffairsoftheBank
and fulfillment of other functions of
the board.
Ensuringinternalandexternalinformationflowsand
appropriate financial reporting
Approvingannualbudgetsandcorporateplanand
approving annual and interim Financial Statements.
Ensuringadherencetolegalandethicalstandards.
Rationalisationofadministrativeandpersonalexpensesand
revisiting human resources and procurement policies.
3 (2) Composition of the Board As at present, the board comprises of ten directors whose
profiles appear on pages 228 and 229 of the Annual Report.
All directors are eminent professionals with extensive
experience in the fields of banking, finance, law, insurance
and other related fields. the board also has several
members with financial acumen and experience.
the board comprises of two Executive Directors viz.
M/s. E. Narangoda (Chairman) and R. Nadarajah, the
remaining eight being Non-Executive Directors.
the Bank has identified three of the Non-Executive Directors
viz. Messrs P.L.P. Withana, N.M. Jayamanne PC and Rear
Admiral (Rtd.) B.A.J.g. Peiris as independent Directors
within the meaning of Direction No. 3(2) (iv) of the Mandatory
Code on Corporate governance issued by the Central Bank
of Sri Lanka (CBSL Code) and the Listing Rules of the
Colombo Stock Exchange (CSE), thus conforming to the
minimum number of independent Non-Executive Directors
required both as per the CBSL Code and the CSE Rules.
Pursuant to the re-capitalisation of the Bank, four new
directors were appointed during 2009 viz.
Mr. P.g.S. Kariyawasam, Dr. N.H. godahewa,
M/s. A.L. Devasurendra and i.C. Nanayakkara.
Mr. S.P.S. Ranatunge was appointed on 12th January 2010.
there were no alternate directors appointed.
the Banks Executive and independent Non-Executive
Directors are duly disclosed in the Annual Report and in all
corporate communications.
BOARd
3 (3) Fitness and Propriety of directors All directors have satisfied the fit and proper criteria
set out in Section 42 of the Banking Act No. 30 of 1988
(as amended) and have forwarded to the Bank Supervision
Department of the Central Bank signed affidavits and
declarations confirming their fit and proper status to hold
office as directors as required by Section 42 of the Banking
Act and as per Clause 2(3) (i) of the Banking Act Direction
No. 11 of 2007 (as amended).
No directors hold office as a director of more than 20
companies/entities or institutions.
3(1) (iii) & 3 (1) (xiii) Meetings
Board meetings to be held regularly with
active participation of members
the board dedicated sufficient time for board meetings. total
meetings held during 2009 were 27 and the attendance at
these meetings is given on page 84 of this Report. the directors
have a formal schedule of matters specifically reserved to it for
decision making. All directors actively contribute to the board
proceedings. Resolutions by circulation are kept at a minimum
and restricted to matters of a routine nature.
3(1) (iv) - (vi) Compliance with Board
procedures
Provision is made for all directors to place matters before
the board relating to both the promotion of the business and
management of risks. Due to board meetings being scheduled
twice a month, directors are noticed of the date of the next
meeting well in advance and board papers are circulated
approximately 4-5 days prior to the date of the meeting.
3(1) (vii) (x) Company Secretary All directors have access to the advice and services of
the Company Secretary who is a chartered secretary and
attorney-at-law to ensure that board procedures and all
applicable rules and regulations are followed. the Company
Secretary is responsible for compliance with the provisions
of the Companies Act, rules of the Colombo Stock Exchange
and Banking Act provisions relating to shareholders and
provisions of the Securities & Exchange Commission Act.
Minutes of board meetings are also recorded by her in
sufficient detail to enable a proper assessment to be made
of the depth of deliberations at the meetings.
3(1) (xi) Procedure for the Board to
obtain Independent Advice
the board seeks independent professional advice on any
matters whenever required.
BOARd
3(1) (xii) directors to avoid conflict of
interest
1/3rd of the Banks board comprise of independent Non-
Executive Directors and as such there is a strong independent
element in the board. Directors avoid conflicts of interest with
the Bank and any situation which involves or may reasonably
be expected to involve, a conflict of interest with the Bank is
disclosed promptly. Wherever a conflict of interest does arise,
the said director abstains from voting on any such resolution.
3 (4) Management Functions delegated
by the Board of directors
the board has delegated matters pertaining to the affairs of
the Company to the
Boardsubcommitteescomprisingboardmembers
wherever applicable and to the
ChiefExecutiveOfficer,
Keymanagementpersonneland
linemanagementwhilstretainingandnotderogatinginany
manner the final authority of the board.
the subcommittees function through the scope and
authority delegated by the board and as per board approved
terms of reference. Proper delegated authority limits have
been set out to the CEO and the line Management to conduct
their line functions within their lines of authority.
the delegation process to the board subcommittees and to
the CEO and line management is reviewed by the board from
time to time.
3(1) (ii) & 3 (5) Chairman & Chief Executive
Division of responsibilities
the positions of the Chairman and the CEO have been
separated. However, the Chairman functions in an executive
capacity (upon Seylan Bank board being reconstituted in
December 2008).
the Chairman provides leadership to the board and ensures that
the board members effectively discharge their responsibilities
and make an active contribution to the boards affairs. Under the
Chairmans supervision, the agenda and matters to be taken up
at the board meeting are itemised and scheduled.
CEO
the CEO of the Bank is not a member of the board. He
heads the senior management team of the Bank and reports
directly to the board of directors.
BOARd
His main functions and responsibilities are the overall
management and operations of the Bank. He also heads the
Banks treasury Committee and the Assets & Liabilities
Committee (ALCO).
the authority over the function of credit administration has
been delegated to the Board Credit subcommittee, internal
Credit Committee and levels of management, from the CEO
down to the level of Branch Managers with limits being
stipulated in accordance with the level of authority.
the CEO also chairs the internal Credit Committee, which
approves credit facilities above his delegated credit authority
limits upto a limit specified by the board.
the functions and responsibilities of the Chairman and the Chief
Executive are clearly set out in writing and approved by the board.
3(5)(ii) Appointment of Senior director -
designate
the board has appointed Mr. N.M. Jayamanne PC, an
independent Non-Executive Director of the Bank to function
as the Senior Director in order to bring in a greater
independent element to the functioning of the board.
Mr. N.M. Jayamanne PC functions in this capacity under
board approved terms of reference.
3(1) (xv) Capitalisation of the Bank A re-capitalisation process was carried out in 2009 with
a view to meeting regulatory requirements with regard to
capital adequacy. the Bank is compliant with regulatory and
prudential requirements relating to capital adequacy.
3(1) (xvii) Board to adopt a Scheme of
Self-Assessment
the board adopted a scheme of self-assessment based on their
duties and responsibilities as set out on pages 79 and 80 of
the Annual Report and also with regard to specific targets and
objectives set out for implementation in respect of the year 2009.
BOARd
3(6) Board appointed Committees the board subcommittees that were functional as at end
2009 include:
AuditCommittee
IntegratedRiskManagementCommittee
CreditCommittee
RemunerationCommitteeand
NominationsCommittee
All subcommittees function within board-approved terms of
reference and the details of same together with the attendance
of the directors at meetings of subcommittees are given on
pages 86 to 88 of the Annual Report. All subcommittees except
the Credit Committee are chaired by Non-Executive Directors.
in December 2009, two additional board subcommittees
for Strategic Planning and Sustainability were formed but
commenced its activities only from January 2010. A further
subcommittee for marketing and product development was
formed in January 2010.
3 (7) Related Party transactions the board has taken adequate measures to ensure that no
conflict of interest arises from any transactions of the Bank
with any related parties within the definition in Section
3 (7) (i) of the CBSL Code.
AttEndAnCE
the attendance of directors at the board meetings held during the year 2009 is given below:
Executive/non-Executive
Capacity
Board meetings
Eligible to attend Attended
Mr. E. Narangoda Executive 27 27
Mr. R. Nadarajah Executive 26 24
Mr. P.L.P. Withana independent Non-Executive 27 23
Mr. F.N. goonewardena
(resigned on 3/12/09) independent Non-Executive 24 24
Mr. N.M. Jayamanne PC independent Non-Executive 27 23
Rear Adm. (Rtd)
B.A.J.g. Peiris independent Non-Executive 26 20
Mr. P.g.S. Kariyawasam
(Appointed w.e.f. 10/11/09) Non-Executive 04 03
Dr. N.H. godahewa
Mr. A.L. Devasurendra
Mr. i.C. Nanayakkara
Upon the re-constitution of the board on
30th December 2008, new board subcommittees
were formed. However, upon the completion of
the re-capitalisation process of the Bank and the
subsequent appointment of new directors, the
board subcommittees were further reconstituted on
3rd December 2009 and new Committees formed
on 17th December 2009. the composition of the
Committees both before and after the reconstitution
is given below. Another subcommittee for
Marketing & Product Development was formed on
19th January 2010.
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Mr. R. Nadarajah Executive
Mr. P.L.P. Withana independent
Non-Executive

(resigned on 03/12/09)
independent
Non-Executive

Mr. N.M. Jayamanne PC independent
Non-Executive

Rear Admiral (Rtd.)
B.A.J.g. Peiris
independent
Non-Executive

(Appointed w.e.f. 10/11/09)
Non-Executive
Dr. N.H. godahewa
Non-Executive
Non-Executive
Non-Executive
Mr. S.P.S. Ranatunga

Represents committee members before reconstitution of committees.
Represents committee members after reconstitution of committees.
* Formerly titled as Remuneration Committee.
** Strategic Planning and Sustainability Committees were formed in December 2009 and commenced activities in January 2010.
*** Marketing & Product Development Committee was formed in January 2010 and commenced activities thereafter.
Committee /Composition no. of meetings Scope/terms of reference
Eligibility
to attend
Attended
Audit Committee:
Mr. P.L.P. Withana (Chairman)
Mr. N.M. Jayamanne PC
(appointed w.e.f. 24/2/09)
7
7
5
N/A*
7
7
3
N/A
the Audit Committee comprises three Non-Executive
Directors (of whom two are independent) and is
headed by Mr. Lalith Withana an independent Director
who possesses relevant financial experience and
qualifications.
the Executive Director, CEO, Chief Financial Officer and
DgM internal Audit attend the Committee meetings
by invitation. the External Auditors participate at
the meeting whenever required and therefore has
direct access to the Audit Committee to report on any
matters independently to the board. the Committee
has met seven times during 2009.
the Committee reviews internal Controls, information
technology governance activities and security and
controls and reviews and monitors all audit activities
and operations and the effectiveness of internal
controls including it/information Systems control
that are in place and the Banks compliance with key
statutory and regulatory requirements and industry
best practices.
the Report of the Audit Committee is set out on page
100 to 101 of the Annual Report.
* No Meetings were held after 3rd December 2009 until 31st December 2009
the composition and scope/terms of reference
of the board subcommittees which were functional
as at 31st December 2009 and their attendance at
committee meetings during 2009 are given below:
Eligibility
to attend
Attended
Integrated Risk
Management Committee
(Chairman)
Mr. P.L.P. Withana
(appointed to the Committee
and as Chairman of the
Committee w.e.f. 3/12/09)
3
3
N/A*
N/A*
3
3
N/A
N/A
the integrated Risk Management Committee comprises
of three Non-Executive Directors and is headed by
Mr. A.L. Devasurendra (consequent to the resignation of
Mr. Naomal goonewardena on 3rd December 2009)
the Executive Director, Mr. Nadarajah, the CEO,
CFO and key management personnel supervising
broad risk categories, i.e., credit, market, liquidity,
operational and strategic risks attend the Committee
meetings by invitation.
the Committee met thrice during the year. the
Committees responsibilities include assessment
of all risks, i.e., credit, market, liquidity, operational
and strategic risks to the Bank through appropriate
risk indicators and management information
and review the adequacy and effectiveness of
management-level committees set up to address
specific risks and the Asset-liability Committee to
address and manage such risks.
the Report of the integrated Risk Management
Committee is set out on page 102 of the Annual Report.
A detailed Report on Risk Management is given on
pages 63 to 74 of the Annual Report.
* No Meetings were held after 3rd December 2009 until 31st December 2009
Credit Committee
Mr. E. Narangoda (Chairman)
Mr. R. Nadarajah
20
20
3
3
20
19
2
1
the Credit Committee comprises of two Executive
Directors and two Non-Executive Directors and is
headed by the Chairman, Mr. E. Narangoda.
the CEO and senior management personnel
supervising credit and credit monitoring attend the
meeting by invitation.
the Committees responsibilities include
formulating credit policies and credit strategies
for the Bank towards maintaining a healthy credit
portfolio and credit discipline within the Bank.
the Committee approves the credit facilities above
the delegated authority limits of the internal Credit
Committee subject to a specified limit and recommends
facilities to the board in excess of the said limit. the
Committee also formulates policies /reviews existing
policies on credit risk management, monitors recoveries
and formulates recovery strategies and ensure that the
credit portfolio does not exceed accepted levels of risk.
Eligibility
to attend
Attended
Remuneration Committee
(Chairman)
Mr. P.L.P. Withana
Dr. N.H. godahewa
Rear Admiral (Rtd.)
B.A.J.g. Peiris
2
2
2
N/A*
N/A*
N/A
2
2
N/A
N/A
N/A
the Remuneration Committee during 2009 comprised
of six Non-Executive Directors and was headed by
Mr. Nihal Jayamanne PC, an independent
Non-Executive Director.
the general Manager/CEO attended the meeting by
invitation wherever permissible.
the mandate of the Committee is to determine the
remuneration policies relating to directors, the
Chief Executive Officer and the Key Management
Personnel (KMPs) of the Bank; set goals and
targets for the CEO and KMPs and evaluate their
performance against these targets periodically to
determine the basis of revising remuneration and
other benefits paid.
the Committee met twice during the year.
the Report of the Remuneration Committee including
the Remuneration Policy is set out on page 103 of the
Annual Report.
* No meeting were held after 3rd December 2009 until 31st December 2009
nomination Committee
Rear Admiral (Rtd.)
B.A.J.g. Peiris (Chairman)
1
1
1
N/A*
N/A*
1
1
N/A
N/A
the Nomination Committee during 2009 comprised
of four Non-Executive Directors and was headed by
Rear Admiral (Rtd.) B.A.J.g. Peiris.
the Chairman, Executive Director and the CEO attend
the meeting by invitation wherever permissible.
the Committee met once during the year.
the Committee makes recommendations to the
board on the selection, appointment of new directors
and key management personnel, determine the
qualifications, experience and competencies
required by such personnel to hold office of the
CEO or other key posts, determine their succession
planning and recommend election of directors and
review the composition and structure of the board of
directors having due regard to the balance of skills
required to be maintained on the board.
* No meeting were held after 3rd December 2009 until 31st December 2009
COlOMBO StOCk ExChAngE CORPORAtE
gOvERnAnCE REPORt
the Colombo Stock Exchange rules on Corporate
governance became mandatory for all listed entities
from the financial year commencing 1st April 2008
and for all licensed commercial banks which are
listed entities, from the financial year commencing
1st January 2009.
the Banks compliance with Rule 7.10 of the
CSE Revised Rules of Corporate governance from
the financial year commencing 1st January 2009 is
set out below:
Rule Status /Remarks
7.10.1 the Board of directors
(a) the board of directors should include at least
2 Non-Executive directors or 1/3rd of the total
number of directors whichever is higher.
(b) number of directors to be calculated based on
the number as at the conclusion of the immediately
preceding Annual general Meeting.
(c) Any change occurring to this ratio to be rectified
within 90 days from the date of the change.
Complied
As at 31st December 2009, the board comprised of
9 directors of whom 7 are Non-Executive Directors.
On 12th January 2010, an additional Non-Executive
Director was appointed to the board.
Profiles of these directors appear on pages 228 to
229 of the Annual Report.
7.10.2 Independent directors
(c) independent directors should be at least two Non-
Executive Directors or one-third of the Non-Executive
Directors appointed to the board, whichever is higher.
(d) Each Non-Executive Director to submit a signed
and dated declaration annually to the board of his/
her independence or non-independence against the
specified criteria.
Complied
three directors on the board viz. M/s. P.L.P. Withana,
N.M. Jayamanne PC and Rear Admiral (Rtd.) B.A.J.g.
Peiris are independent Non-Executive Directors of
the Company. Mr. F.N. goonewardena who resigned
from the board on 3rd December 2009 was also an
independent Non-Executive Director.
Complied
Signed and dated declarations have been provided
by the directors confirming their independent non-
executive status in compliance with the CSE Rules.
7.10.3 disclosure Relating to directors
(a) Determination made by board annually as to
the independence/non-independence of each Non-
Executive Director based on such declaration and
other information available to the board and set out
names of the independent directors in the Annual
Report.
(b) Where a Non-Executive Director does not qualify
as independent but where the board is of the opinion
he is nevertheless deemed to be independent, taking
into account all other circumstances.
(c) Publish a brief rsum of each director on
its board in the Annual Report which includes
information on the nature of his/her expertise in
relevant functional areas.
(d) Provision of a brief rsum to the CSE of a
new director appointed to the board and informing
matters itemised above.
Complied
Based on declarations received from the directors
by the year end, the independent status of M/s.
P.L.P. Withana, N.M. Jayamanne PC,
F.N. goonewardena and Rear Admiral (Rtd.)
B.A.J.g. Peiris is indicated on page 123 of the
Annual Report.
Not Applicable
Complied
Please refer pages 228 to 229 for profiles of directors.
Complied
7.10.5 Remuneration Committee
A listed company shall have a Remuneration
Committee in conformity with the following:
(a) Composition - comprise a minimum of two
independent Non-Executive Directors or
Non-Executive Directors, a majority of whom
shall be independent, whichever is higher.
One Non-Executive Director shall be appointed as
Chairman of the Committee by the board of directors.
(b) Functions - the Remuneration Committee
shall recommend the remuneration payable to the
Executive Directors and Chief Executive Officer
and/or equivalent position thereof to the board
which will make the final determination.
(c) Disclosure in the Annual Report set out the
names of directors comprising the Remuneration
Committee, contain a statement of the remuneration
policy and set out the aggregate remuneration paid to
Executive and Non-Executive Directors.
Complied
the Remuneration Committee comprises six Non-
Executive Directors of whom three are independent.
Complied
Mr. N.M. Jayamanne PC who is an independent Non-
Executive Director is the Chairman of the Committee.
Complied
Remuneration of the CEO and the emoluments
of the directors are recommended by the
Remuneration Committee.
Complied
Aggregate remuneration of directors and key
management personnel is given in Note 7 to
the Financial Statements. Please also refer the
Remuneration Committee Report on page 103 of
the Annual Report.
total remuneration paid to Executive and Non-
Executive Directors including by way of fees as at
31st December 2009 amounted to Rs. 10.779 Mn.
(2008 - Rs. 74.67 Mn.)
7.10.6 Audit Committee
A listed company shall have an Audit Committee in
conformity with the following:
(a) Composition - should comprise a minimum
of two independent Non-Executive Directors or
Non-Executive Directors, a majority of whom shall
be independent, whichever shall be higher.
One Non-Executive Director shall be appointed as
Chairman of the Committee by the board of directors.
Unless otherwise determined by the Audit
Committee the Chief Executive Officer and the
Chief Financial Officer of the listed company shall
attend Audit Committee meetings.
the Chairman or one member of the committee
should be a Member of a recognized professional
accounting body.
(b) Functions shall include -
Oversightofthepreparation,presentation
and adequacy of disclosures in the Financial
Statements of a listed company in accordance
with Sri Lanka Accounting Standards.
OversightoftheCompanyscompliancewith
financial reporting requirements, information
requirements of the Companies Act and other
relevant financial reporting related regulations
and requirements.
OversightoverprocessestoensureCompanys
internal controls and risk management are
adequate, to meet the requirements of the
Sri Lanka Auditing Standards.
Assessmentoftheindependenceand
performance of the companys External Auditors.
Tomakerecommendationstotheboard
pertaining to appointment, reappointment and
removal of External Auditors and to approve the
remuneration and terms of engagement of the
External Auditors.
Complied
the Audit Committee consists of three Non-Executive
Directors, of whom two are independent.
Complied
Mr. P.L.P. Withana, an independent Non-Executive
Director is the Chairman of the Committee.
Complied
the CEO and CFO attend the Committee meetings
by invitation.
Complied
in 2009, two members of the Committee were
members of recognised professional accounting
bodies and the Chairman of the Committee was a
member of the institute of Chartered Accountants
of Sri Lanka.
Complied
the Committee reviews all interim unaudited
and audited Financial Statements prepared in
conformity with Sri Lanka Accounting Standards.
Complied
Financial reporting requirements are strictly complied
in line with the Companies Act, Sri Lanka Accounting
Standards and regulatory requirements imposed by
the Colombo Stock Exchange and the Central Bank.
Complied
the Committee monitors and reviews the effectiveness
of the internal audit systems which includes the
internal audit and information system audit functions.
Complied
the Committee monitors and reviews the independence
of the External Auditors as part of its scope.
Complied
(c) Disclosure in the Annual Report
NamesofthedirectorscomprisingtheAudit
Committee to be disclosed in the Annual Report.
Thecommitteeshallmakeadetermination
of the independence of the Auditors and shall
disclose the basis for such determination in the
Annual Report.
TheAnnualReportshallcontainareportby
the Audit Committee, indicating the manner of
compliance in relation to the above.
Complied
Members of the Audit Committee are listed on page 86.
Complied
the Committee has determined the independence
of the Auditors and have disclosed the basis of their
determination in page 128 of the Annual Report.
Complied
Audit Committee Report is given on page 100 to 101
BAnkS COMPlIAnCE wIth thE COdE OF BESt PRACtICE On CORPORAtE gOvERnAnCE
ISSuEd JOIntlY BY thE SECuRItIES & ExChAngE COMMISSIOn OF SRI lAnkA (SEC) And
thE InStItutE OF ChARtEREd ACCOuntAntS OF SRI lAnkA (ICASl)
the Bank commenced voluntary compliance of the above Code of Best Practice commencing from January
2009 and the level and nature of compliance with the Code are set out below:
A. Annual Report
Subject & Ref. Corporate governance Principle level of Compliance
Chairman & CEO
A.2.1 & A.5.6
if Chairman and CEO is one and the
same person, disclose the name of the
Chairman/CEO and Senior independent
Director appointed and justification of
the decision to combine the positions.
As outlined earlier, the positions of
the Chairman and the CEO have been
separated.
the current Chairman, Mr. E. Narangoda
was appointed as a director to the board
on 30th December 2008 upon the re-
constitution of the Bank in terms of Section
30(9) of the Monetary Law Act). in view of
the exigencies of the situation the Bank was
faced with, he was appointed as Chairman
in an executive capacity by the new board of
directors on 5th January 2009.
the board has appointed
Mr. N.M. Jayamanne PC, an independent
Non-Executive Director of the Bank to
function as the Senior Director of the board.
Board Balance
A.5.5
Should identify the independent
Non-Executive Directors.
Complied
the board maintains the correct
balance of Executive and Non-Executive
Directors. Eight of the ten directors on
the board are Non-Executive Directors
whilst 1/3rd of the board comprise
independent Non-Executive Directors.
Appointment of
New Directors
A.7.3
When new directors are appointed, the
following details should be disclosed.
abriefrsum of each such director;
thenatureofhisexpertiseinrelevant
functional areas;
thenamesofcompaniesinwhich
the director holds directorships or
memberships in board committees;
and
whethersuchdirectorcanbe
considered independent.
Complied
timely disclosure of details as required
herein of new appointments made to the
board are disclosed to the Colombo Stock
Exchange and also in the Annual Report.
Profiles of directors are given on pages
228 and 229.
Nominations
Committee
A.7.1
the Chairman and members of the
Nominations Committee should be
identified.
Chairman of the Committee is
Mr. N.M. Jayamanne PC who is an
independent Non-Executive Director.
Other members are Rear Admiral (Rtd.)
B.A.J.g. Peiris, M/s. A.L. Devasurendra
and S.P.S. Ranatunga (appointed
w.e.f. 13th January 2010).
Appraisal of
Board Performance
A.9.3
Should disclose how performance
evaluations have been conducted.
Complied
the boards performance for 2009 was
evaluated in January 2010 anonymously by
the directors against the following criteria:
Developingandmonitoring
implementation of strategy;
Levelofbusinessandfinancialacumen
and experience and level of contribution
to the board in driving business goals
and formulating strategy and policies;
Ensuringrobustandeffectiverisk
management;
Managementofrelationswith
stakeholders including Employee
relations;
Ensuringeffectivenessofinternal
control mechanisms;
Creditmanagementandmonitoring;
Effectivenessofboardsubcommittees;
Dischargeofstatutoryandregulatory
duties and other responsibilities of the
board;
Corporategovernancecompliance:
Re-visitingHumanResourcesand
Procurement policies;
Overallviewofthemanagement
of the business.
Board Related
Disclosures
A.10.1
the following details pertaining to each
director should be disclosed.
name,qualificationandbriefprofile;
thenatureofhis/herexpertisein
relevant functional areas;
immediatefamilyand/ormaterial
business relationship with other
directors of the Company;
namesofotherlistedcompanies
in Sri Lanka in which the director
concerned serves as a director;
namesofcompaniesinwhichthe
director concerned serves as a
director and/or the fact that he/
she holds other directorships in the
group Companies;
number/percentageofboard
meetings of the Company attended
during the year;
namesoftheCommitteesinwhich
the director serves as the Chairman
or a member; and
number/percentageofcommittee
meetings attended during the year.
Complied
Directors profiles giving their
qualifications, areas of expertise etc. are
given on pages 228 to 229.
Details of directorships/other positions held,
directors interests in contracts and related
party transactions are given on pages 129
and 133 and also disclosed in Notes 42 and
43 of the Financial Statements.
Details of board meetings and board
subcommittees, their composition,
attendance by directors of meetings held
during the year are given on pages 84
and 86 to 88 of the Annual Report.
Disclosure
of Remuneration
B.3
AStatementofRemunerationPolicy
and details of remuneration of the
board as a whole.
Complied
Please refer Remuneration Committee
Report on page 103 and also Notes 7 and 42
of the Audited Financial Statements.
Major transactions
C.2
All major transactions entered into by
the Company should be disclosed.
there were no major transactions entered
into by the Company during the year under
review which fell within the definition of
Section 185 of the Companies Act No. 07
of 2007 which materially affected the asset
base of the Company.
Audit Committee
D.3.4
NamesofthemembersoftheAudit
Committee should be disclosed.
Basisfordeterminingthe
independence of auditors.
Complied
Please refer the Audit Committee Report
on page 100 to 101.
Please refer page 128 of the Annual Report.
Code of Business
Conduct and Ethics
D.4.1 & D.4.2
ShoulddisclosewhethertheCompany
has a Code of Business Conduct &
Ethics for directors and members of
the senior management team.
Shouldalsodiscloseanaffirmative
declaration that they have abided by
such Code.
TheChairmanmustcertifythathe/
she is not aware of any violation of
any of the provisions of this Code.
Complied
going Concern
D.1.5
Should report that the Company is a going
concern, with supporting assumptions
and qualifications as necessary.
Complied
Please refer Statement of Directors
Responsibility for Financial Statements
B. Remuneration Committee Report
Subject & Ref. disclosure Remarks
Members of
Remuneration
Committee
B.1.3
the names of the members of
Remuneration Committee should
be disclosed in the Remuneration
Committee Report.
Complied
Please refer the Remuneration Committee
Report on page 103 of the Annual Report
and also page 124 of the Annual Report of
the board of directors.
C. directors Report
Directors Report
D.1.2
Should contain the following
declarations made by the directors
TheCompanyhasnotengagedin
any activities, which contravenes
laws and regulations;
Thedirectorshavedeclaredall
material interests in contracts
involving the Company and refrained
from voting on matters in which they
were materially interested;
TheCompanyhasmadeall
endeavours to ensure the equitable
treatment of shareholders;
Complied
Please refer pages 119 to 133 of the
Annual Report of the board of directors.
Thebusinessisagoingconcern
with supporting assumptions or
qualifications as necessary; and
Theyhaveconductedareviewof
internal controls covering financial,
operational and compliance controls
and risk management and have
obtained reasonable assurance of
their effectiveness and successful
adherence herewith.
Please also refer the Audit Committee
Report and the Risk Management Report
set out on pages 100 to 101 and 63 to 74
respectively in the Annual Report.
d. Financial Statements
Financial Statements
D.1.3
Theboardofdirectorsshouldinclude
a Statement of Responsibility for
the preparation and presentation of
Financial Statements.
Auditorsshouldalsohaveastatement
about their reporting responsibility.
Complied
Please refer pages 134 and 135 of the
Annual Report.
Please refer pages 136 to 137 of the
Annual Report.
E. Management Report
Management Report
D.1.4
Should include a Management
Discussion and Analysis Report
discussing at least the following issues:
industrystructureanddevelopments;
opportunitiesandthreats;
risksandconcerns;
internalcontrolsystemsandtheir
adequacy;
socialandenvironmentalprotection
activities carried out by the Company;
financialperformance;
materialdevelopmentsinhuman
resources/industrial relations; and
prospectsforthefuture
Complied
Please refer pages 57 to 62
of the Annual Report.
F. Corporate governance Report
Corporate governance
Report
D.5.1
Should disclose the manner and extent
to which the Company has complied with
the principles and provisions of the Code.
Complied
g. Audit Committee Report
Audit Committee
Report
D.3.3.
Should set out the work carried out by
the Committee.
Complied
Please refer page 100 to 101 of the Annual
Report for the Audit Committee Report.
OthER MAttERS
Compliance
the Banks Compliance Department is responsible
for ensuring the Banks compliance with banking
regulations and the compliance requirements under
specific statutes namely, the Prevention of Money
Laundering Act, No. 5 of 2006, the Convention on
the Suppression of terrorist Financing Act, No. 25
of 2005 and the Financial transactions Reporting
Act, No. 6 of 2006. the Bank has fully implemented
the additional requirements in terms of Central
Banks regulations on Know Your Customer (KYC)
and Customer Due Diligence (CDD). internal
guidelines were formulated and circulated on KYC
and CDD. External training and periodic extensive
internal training programmes have been organised
to educate and update the staff.
Monthly, quarterly and half yearly compliance
reports are forwarded to the Central Bank
confirming the Banks compliance with the
regulations under Banking Act and its amendments.
the board is apprised of the status of compliance
by the Bank on a regular basis whilst a detailed
compliance report is submitted on a monthly basis.
IntERnAl COntROl SYStEMS
the establishment of an effective internal control
system is a pre-requisite to conduct banking
business in an orderly manner, safeguard its assets
and secure as far as practicable the accuracy and
reliability of records.
the two major internal control systems
prevalent in the Bank include the internal audit
and information system audit. the internal
Audit Department is an independent assurance
function established within the Bank to examine
and evaluate its activities. the internal Audit
Department of the Bank carries out regular reviews
on the internal control system to assist members of
the organisation, especially management and the
board of directors, in the effective discharge of their
responsibilities by furnishing them with analyses,
appraisals, recommendations, counsel, and
information concerning the activities reviewed and
by promoting effective control at reasonable cost.
through an effective internal audit mechanism,
the risks associated with business decisions
taken to improve productivity through enhanced
customer services are closely monitored, assessed
and wherever deemed necessary tools employed to
manage risks are introduced and existing systems
further strengthened. the process of identifying
and evaluating and effectively managing risks
associated with business processes and their
supporting functions is reviewed by the board on a
quarterly basis through the Audit Committee.
the information Systems Audit (iSA)
Department plays a key role in the Banks internal
control system and it governance structure. iSA
provides information system governance, assurance
and risk management services to the Bank ensuring
that the corporate information system assets are
safeguarded and banking services are delivered in
an efficient, reliable and effective manner whilst
protecting stakeholders interest. iSA Department
is engaged in implementing it governance and
information Security Management Programmes
that are in compliance with the industry standards
such as Control Objectives for information and
Related technologies (COBit), iSO 27001 and
generally Accepted good Practice (gAgP). Recently
the Business Continuity Management Plans have
been prepared for the Bank as guided by the Central
Bank and required structures and processes are
in place to recover and resume its critical banking
functions in a disaster situation.
CORRECtIvE ACtIOn /IMPROvEMEntS
EFFECtEd BY thE nEw BOARd
in view of the Bank not being fully compliant
prior to 2009 with some of the provisions outlined
above, the newly constituted board commenced
adherence with the Central Bank Code of Corporate
governance from 2009.
Also with the CSE Rules of Corporate
governance becoming mandatory from the financial
year commencing 1st January 2009, focus was
given to both these regulations. the board also took
cognisance of and became compliant with the Code
on Corporate governance issued jointly by the SEC
and iCASL in October 2008 as outlined above.
the board which was appointed on 30th
December 2008 (upon the Seylan Bank board
being reconstituted) initially functioned with six
directors two of whom were appointed as Executive
Directors and four being Non-Executive Directors.
the board is headed by an Executive Chairman. the
board comprised the correct mix of Executive and
Non-Executive Directors. the four Non-Executive
Directors fell within the criteria specified for
independent directors within the meaning of both
Section 3 (2) (iv) of the CBSL Code and Rule 7.10.4 of
the CSE Rules. the Bank has further ensured that
all directors fall within the fit and proper criteria
laid down by the Central Bank under Section 42 of
the Banking Act No. 30 of 1988 (as amended).
the new board also formulated a three-year
Strategic Plan for the Bank under which a major
restructuring and reorganisation of the Bank took
place. the Strategic Plan has already been rolled
out and the results of same will be seen towards
the latter part of 2010/early 2011.
the board focused much of their attention
on the following during 2009 in order to revive the
Banks operations and bring it to a point of stability
as well as to promote and promulgate a productive
work culture within the Bank:
(A) Re-evaluation of lending criteria in terms of
credit appraisals, approvals, collateral, single
borrower limits, monitoring and follow up.
(B) Non-performing loan classification and
income recognition: Strict compliance
with CBSL guidelines, reversal of interest
recognised, revaluation of collateral and loan
loss provisions etc.
(C) Reviewing and revising delegated authority of
line Management for lending based on past
loan failures and officers credit expertise.
(D) Setting out delegated authority for procurement,
supplies and administration.
(E) Human resources areas - comprehensive
revamping of HR policies including
implementation of Disciplinary Code, Staff
Promotion and transfer and Rotation Policy,
Retention Policy, Recruitment Policy and
other policies on performance, training and
secondment.
(F) Strategic Plan and reorganisation.
All the board subcommittees were reconstituted
viz. Audit Committee, Credit Committee, integrated
Risk Management Committee and Nominations
Committee. terms of reference for each of the
Committees were formulated/revised and approved by
the new board.
New committees were also formed viz. Strategic
Planning, Sustainability and Marketing and Product
Development Committees which commenced their
activities in 2010.
All subcommittees have met for a minimum
of two meetings for the year except for the
Nominations Committee. the Audit Committee has
met 7 times during the year.
Upon the completion of the Central Bank
assisted re-capitalisation process of the Bank, four
additional directors were appointed to the board in
November 2009 and one director in January 2010.
With the appointment of the additional directors,
the board restructured the board subcommittees.
A Strategic Planning Committee of the board was
also formed to give further impetus to the effective
implementation of the Strategic Plan. All directors
are members of this Committee which had its first
meeting in January 2010.
OthER ACtIOnS tAkEn /IMPROvEMEntS
tO BE EFFECtEd In FutuRE
All new appointments made to the board in 2009
were as a result of the re-capitalisation process
undergone by the Bank which concluded in November
2009 and as such the Nominations Committee has
not focused its attention during 2009 towards having
a formal board approved procedure for the selection
of/recommendation of new directors to the board.
this will be put in place in 2010.
Further, in carrying out the boards
responsibility of implementing succession strategy
for the CEO and Key Management Personnel
(KMPs), the Nominations Committee is currently in
the process of working out a succession plan for
the CEO and the KMPs of the Bank.
AUDit COMMittEE REPORt
COMPOSItIOn OF thE AudIt COMMIttEE
the Board Audit Committee comprises of
three Non-Executive Directors of the Bank, the
majority of whom are independent. Consequent
to the re-constitution of the board of directors, all
subcommittees of the board were also re-
constituted and the following directors were
appointed to the Audit Committee in 2009. viz -
Mr. Lalith Withana (Chairman)
Mr. Naomal goonewardena
(resigned on 3rd December 2009)
Mr. Nihal Jayamanne PC
(appointed w.e.f. 24th February 2009)
Mr. Pradeep Kariyawasam
(appointed w.e.f. 3rd December 2009)
the Chairman of the Committee is Mr. Lalith
Withana, who is an independent Non-Executive
Director and a Fellow of the institute of Chartered
Accountants of Sri Lanka. Mr. Nihal Jayamanne
PC is also an independent Non-Executive Director,
whilst Mr. Kariyawasam is a Non-Executive Director.
Mr. Naomal goonewardena, an independent
Non-Executive Director of the board and who is a
Chartered Financial Analyst, Associate Member of
the institute of Chartered Accountants of Sri Lanka
(ACA) and Associate Member of the Chartered
institute of Management Accountants (ACMA),
U.K., functioned as a member of the Committee
until his resignation on 3rd December 2009. the
Executive Director Mr. Nadarajah, Chief Executive
Officer, Chief Financial Officer and Deputy general
Manager, internal Audit attend committee meetings
by invitation. the External Auditors attend the
meetings whenever the Committee requires their
presence. the Company Secretary functions as the
Secretary to the Audit Committee.
MEEtIngS
As per the Audit Committee Charter, the Committee
is required to meet at least 4 times a year. However
during the year under review, the Committee
met seven times and reports of internal and
external audits were discussed at these meetings.
Attendance of the members at these Committee
meetings are given on page 86 of this Annual
Report. the Minutes of the Committee were made
available to the board of directors for information
and necessary action.
tERMS OF REFEREnCE
the new Charter of the Audit Committee that was
approved by the board at the beginning of the year
defines the role, responsibilities and powers of the
Audit Committee and it ensures that the composition
and the activities of the Audit Committee are in line
with international Best Practices and Corporate
governance Rules as laid down in Section 3 (6) (ii)
of the Banking Act Direction No. 11 of 2007, titled
Corporate governance for Licensed Commercial
Banks in Sri Lanka and subsequent amendments
thereto, Rule 7.10.6 of the Listing Rules of the
Colombo Stock Exchange and the Code of Best
Practice on Corporate governance jointly issued by
the Securities & Exchange Commission of Sri Lanka
(SEC) and the institute of Chartered Accountants of
Sri Lanka (iCASL).
MAIn RESPOnSIBIlItIES
the main objective of the Audit Committee is to
assist the board of directors to effectively carry
out its responsibilities relating to financials and
other connected affairs of the Bank. the main
responsibilities include -
1. Reviewing and monitoring the integrity of the
Financial Statements, financial reporting,
information databases and audit process.
2. Examining any matter relating to financial and
other connected affairs of the Bank.
3. Monitor all internal and external audits and
inspection programmes.
4. Review and take action on all internal and
external audit reports and follow-up on the
recommendations.
5. Review and monitor it governance activities.
6. Review and monitor the systems of internal
controls.
7. Review and monitor the system for approval
and monitoring of expenses including capital
expenditure.
8. Review and monitor statutory and regulatory
compliance process.
9. Approving the annual internal audit plans.
10. Review Banks annual and interim Financial
Statements.
11. Review the process of carrying out investigations
wherever necessary to assist the board.
ACtIvItIES duRIng thE YEAR
Committee carried out the following activities
during the year under review:
1. Audit Charter
A new audit charter was prepared and approved
during the year.
2. Financial Reporting
the Committee discussed and reviewed the
financial reporting process in the Bank on behalf
of the board. All interim Financial Statements
and annual Financial Statements were reviewed
prior to their release for compliance with statutory
and regulatory requirements including the
Sri Lanka Accounting Standards, the Companies
Act No. 07 of 2007, Sri Lanka Accounting and
Auditing Standards Act No. 15 of 1995, the Banking
Act No. 30 of 1988 (as amended). Conformity was
also ensured to other regulatory requirements
such as the Listing Rules of the Colombo Stock
Exchange and Banking Act Direction No. 11 of 2007
and subsequent amendments thereto.
3. Regulatory Compliance
Procedures were in place to ensure compliance
with banking and other statutory regulations.
During the year, these procedures were reviewed
through monthly/quarterly reports submitted by
the senior management to the board of directors.
4. Internal Audit and Inspection
Bank was able to prepare an annual audit plan
for the year under review. A total of 39 audits
and 90 investigations were carried out. the Audit
Division was also restructured and a new DgM
was recruited, who has an extensive industry and
auditing experience. Work is currently in progress
to restructure the internal Audit Division again
combining the information systems audit functions
with the Division. the Committee reviews and
monitors the effectiveness of the internal audit and
inspection functions and the performance of the
internal Audit and inspection Department.
5. External Audit
the Committee met with the External Auditors -
KPMg Ford, Rhodes, thornton & Co., during
the year to discuss the Management letters and
the Financial Statements and also to plan out
the scope, approach and the methodology to be
adopted in carrying out the annual audit.
6. Audit Manual
the Committee has approved outsourcing the
preparation of a risk-based internal Audit Manual
for the Bank to PricewaterhouseCoopers, Chartered
Accountants.
7. governance
the Committee also ensured that good corporate
governance was practiced in conformity with the
Banking Act Direction No. 11 of 2007 and subsequent
amendments thereto (Central Bank Code of Corporate
governance for licensed commercial banks), the
Listing Rules of the Colombo Stock Exchange and
the Code of Best Practice on Corporate governance
issued jointly by the SEC & iCASL and the appropriate
procedures were in place to conduct independent
investigations whenever it was needed.
8. Evaluation of the Committee
As authorised by the board, the Nominations
Subcommittee of the board through an annual
evaluation, assessed the effectiveness of the Audit
Committee as satisfactory.
the Audit Committee has recommended to the
board of directors that Messrs KPMg Ford, Rhodes,
thornton & Co., be re-appointed as Auditors for the
financial year ending 31st December, 2010 subject
to the approval of shareholders at the next Annual
general Meeting.
lalith withana
Chairman - Audit Committee
26th January 2010
BOARD iNtEgRAtED RiSK MANAgEMENt COMMittEE REPORt
COMPOSItIOn OF thE COMMIttEE
the Board integrated Risk Management Committee
was set up in 2007. During the year 2009, the
composition was changed and new board members
were appointed to the Committee. the Committee
comprised of the following during the year 2009:
Mr. Ajith Devasurendra - Non-Executive

Director, Chairman of the Committee
(appointed w.e.f. 3.12.2009
Mr. Naomal goonawardena - independent

Non-Executive Director
(resigned on 03.12.2009) - Chairman of the
Committee, till 03.12.2009)
Mr. Lalith Withana - independent Non-Executive

Director
Mr. Pradeep Kariyawasam - Non-Executive

Director
the Executive Director, Mr. Nadarajah,
the CEO, CFO and Key Management Personnel
supervising broad risk categories, i.e., credit,
market, liquidity, operational and strategic risks
attend the Committee meetings by invitation.
FunCtIOnS And tERMS OF REFEREnCE
OF thE COMMIttEE
the Committee was assigned revised terms
of Reference (tOR) during the year 2009. the
Committees responsibilities broadly include
assessment of all risks, i.e., credit, market, liquidity,
operational and strategic risks to the Bank through
appropriate risk indicators and management
information and reviewing the adequacy and
effectiveness of management level committees set
up to address specific risks and the Asset-Liability
Committee to address and manage such risks.
the responsibilities and the key functions of
the Committee as detailed in the terms of reference
are given under the Risk Management Report of
this Annual Report.
COMMIttEE MEEtIngS
the Committee met thrice during the year 2009.
PROCESS OF FunCtIOnIng OF thE
IntEgRAtEd RISk MAnAgEMEnt
COMMIttEE
the Committee works closely with the board of
directors as well as the senior management in
fulfilment of the Banks regulatory and statutory
responsibilities in Risk Management.
Ajith devasurendra
Chairman - Integrated Risk Management Committee
16th February 2010
REMUNERAtiON COMMittEE REPORt
the Remuneration Committee appointed by the
board comprises of six Non-Executive Directors,
three of whom are independent. the Committee is
headed by an independent Non-Executive Chairman,
Mr. N.M. Jayamanne PC and the members include
Messrs P.L.P. Withana, P.g.S. Kariyawasam, Rear
Admiral (Rtd.) B.A.J.g. Peiris, Dr. N.H. godahewa and
Mr. S.P.S. Ranatunga.
Messrs P.g.S. Kariyawasam, Rear Admiral
(Rtd.) B.A.J.g. Peiris and Dr. N.H. godahewa
were appointed to the Committee with effect from
3rd December 2009 when the Committee was
re-constituted. Mr. S.P.S. Ranatunga was appointed
to the Committee with effect from 13th January
2010. Brief profiles of the members are given on
pages 228 and 229 of the Annual Report.
the general Manager/Chief Executive of
the Bank is co-opted to the meeting and the
Deputy general Manager - Human Resources and
Administration and Chief Manager - Finance assist
the Committee by providing relevant information for
their decision making within their board approved
terms of reference.
the Committee met twice during the year under
review. the Minutes of the Committee meeting were
made available to the board of directors for their
information and necessary action and were affirmed
by the board.
REMunERAtIOn POlICY And FunCtIOnS
the Remuneration Committee is responsible for
determining the compensation of the Executive
Chairman and the Executive Director. Aggregate
remuneration paid to Executive and Non-Executive
Directors is set out in Note 7 to the Financial
Statements.
the Committee also determines the
compensation and benefits of the key management
personnel including gM/CEO based on established
performance parameters. in addition to that the
Committee is responsible to lay down guidelines
and parameters for the compensation structures
for all executive staff of the Bank and oversee the
implementation of these policies.
the Committee also determines the basis of
revising remuneration and other benefits paid.
nihal Jayamanne PC
Chairman - Remuneration Committee
16th February 2010
NOMiNAtiONS COMMittEE REPORt
the Nominations Committee appointed by the
board comprises of four Non-Executive Directors
two of whom are independent. the Committee is
headed by Rear Admiral (Rtd.) B.A.J.g. Peiris and
the members include Messrs Nihal Jayamanne PC,
Naomal goonewardena (until his resignation on
3rd December 2009), A.L. Devasurendra and S.P.S.
Ranatunga upon Mr. goonewardenas resignation,
Mr. Ajith Devasurendra was appointed w.e.f. 3rd
December 2009 and Mr. Samantha Ranatunga was
appointed w.e.f. 13th January 2010. Messrs Ajith
Devasurendra and Samanatha Ranatunga are Non-
Executive Directors. All Committee members are
appointed by the board of directors of the Bank. the
Company Secretary functions as the Secretary of the
Committee.
Brief profiles of the members of the Committee
are given on pages 228 to 229 of the Annual Report.
the general Manager/Chief Executive of the
Bank attends the meeting by invitation.
nOMInAtIOnS COMMIttEE ChARtER
the Nominations Committee is responsible for the
following:
implementation of procedure to select/appoint

new directors, CEO and key management
personnel including review of the structure,
size, composition and competencies of the
board from time to time;
Recommend (or not recommend) the re-election

of current directors having regard to their
performance and contribution towards the overall
discharge of the boards responsibilities.
Establish criteria to determine eligibility for

appointment or promotion to the post of CEO
and the key management positions.
Ensure that the directors, CEO and key

management personnel are fit and proper
persons to hold office as specified in the criteria
given in Direction 3(3) of the Banking Act Direction
No. 11 of 2007 (Code of Corporate governance
for licensed commercial banks in Sri Lanka) and
subsequent amendments thereto.
Review and recommend requirements of

additional/new expertise and the succession
arrangements for retiring directors and key
management personnel from time to time.
the Committee met once during the year under
review. the Bank implemented a strategic plan in
September 2009 and made significant changes in the
Banks organisation structure and key management
personnel heading core areas commencing from
the last quarter of 2009 in line with the strategic
plan implementation. Further changes to the
organisation structure and determining succession
arrangements for key management personnel are
yet underway.
Also in view of appointments to the board during
2009 taking place as a result of the re-capitalisation
process, the Committee has earmarked its scope for
reviewing the composition and structure of the board
with a view of maintaining a balance of skills on
the board as a necessary function to be performed
commencing from 2010.
Rear Admiral (Rtd.) B.A.J.g. Peiris
Chairman - Nominations Committee
16th February 2010
RAISIng thE BAR
in this part of the Report the Bank examines the impact our activities have had on
the economy, the environment and society in general.
today the goal of any corporate entity is not just to deliver consistent financial
value to its investors, but to ensure that its activities generate a broader social wealth
that can be distributed among a wider group of stakeholders, including our investors.
this is one of the goals of modern corporate citizenship: to ensure that diverse social
groups are empowered; to unleash new opportunities; to invest in both Company and
society; and to fan new and creative ideas.
We hope the publication of the Sustainability Report will enhance transparency
with regard to all aspects of our operations and strengthen public confidence in the
institution. We hope it will enable us to push the bar higher and continue to deliver
financial, social and environmental value consistently and ethically.
Eastman narangoda
Executive Chairman

SUStAiNABiLitY REPORt
SuStAInABlE dEvElOPMEnt AIMS tO MEEt
thE nEEdS OF thE PRESEnt wIthOut
COMPROMISIng On thE ABIlItY OF FutuRE
gEnERAtIOnS tO MEEt thEIR Own nEEdS
Seylan Bank, as a major player in the financial
industry in Sri Lanka, is committed to a vision of
sustainable development. the Banks processes
and systems are geared to ensuring that the Bank
promotes sustainable development in the way
it designs products, delivers financial services,
organises the workplace and engages with society.
in this report we document the impact of the
Banks activities on the economy, the environment, and
society in general. it also documents how the Bank
has been generating a larger social wealth for all our
stakeholders. the Companys stakeholders are many.
they consist of our customers; our employees and their
families; our shareholders; our business partners; the
larger society; and generations yet unborn.
While building financial wealth for our
shareholders is one of the things we do, we are
also conscious that our activities have an impact
on the physical environment, the economy, and
society in general. While generating financial value
we continue to work to protecting the environment,
fuelling the economy, empowering communities
and creating new opportunities for our employees.
the Bank hopes that this Sustainability Report
will provide information on all aspects of our
operations: the tangible and t he intangible. We hope
this process will enhance transparency, facilitate
better communication with our stakeholders and
increase stakeholder confidence in our operations.
Creating a more enduring social wealth has
required the Bank to constantly re-design its strategy,
mindset and internal processes. the Bank is constantly
re-evaluating its methods of work and looking at how
we can strengthen our performance on all fronts: the
financial; the social and the environmental.
Reporting on an institutions economic,
environmental and social performance supports
the Banks financial reporting. Candid sustainability
reporting also enables the Bank to review our
systems scrupulously and to improve on the
processes we have already established.
While generating a broader social wealth
the Bank has not compromised on the quality of
its products and services; on business ethics and
transparency; on serving all social segments; and
on creating safe and enjoyable workplaces.
in 2009, the Bank established a Sustainability
Committee. the Committee will enable the Bank
to engage in CSR activities in a coherent and
structured manner. Within the larger CSR are three
thematic subcommittees that look at the relevance
and feasibility of Sustainability projects with regard
to society; the economy; and the environment. the
Bank also has a Sustainability Committee at board
level and all these Committees are responsible for
guiding the CSR activities of the Bank.
the global Reporting initiative (gRi) has
developed a framework for sustainability reporting.
the framework was developed through a process
of extensive consultation with a wide variety of
stakeholders. We have used the gRi framework as
a model for this years Report.
the Board
the board of directors establishes overall policy
for sustainable entrepreneurship in consultation
with the three subcommittees: the Economic
Subcommittee; the Environment Subcommittee
and the Social Subcommittee.
Organisational Profile
this Report covers the activities of Seylan Bank
PLC during the period from 1st January 2009 to
31st December 2009. From pages 138 to 226 we
analyse the business and financial activities of the
institution and provide detailed information on the
Banks performance over the past year.
Any questions or comments about this
Sustainability Report should be directed to the
general Manager/CEO of Seylan Bank PLC, Mr. Ajita
Pasqual on telephone No. 00 11 2456755.
Seylan Bank Subsidiaries
Name of Company % Holding
of the Bank
Principal area
of Business
Seylan
Developments PLC
50.29% of Ordinary
Share Capital
Property
Development
Seylan Bank Asset
Management
Limited
100% of Ordinary
Share Capital
Dealing in
government
Securities
Awards
Last year the Bank was placed first in the trade
Finance Quiz organised by the trade Finance
Association of Bankers, first in inter-Bank Quiz
organised by the Association of Chartered Bankers
of Sri Lanka and first in the WiSDOM 2009, the quiz
challenge organised by the Management Club of
galle Face Hotel. the Bank was placed fourth in the
Sri Lanka Masterminds Quiz organised by the Lions
Club of Moratuwa.
Stakeholder dialogue
the Bank values the input of its multiple
stakeholders and has put in place a number of
processes to enable stakeholders to contribute to
decision making within the Company. Stakeholder
input has had an important impact on decision
making within the Company previously and will
continue to play a role within the institution.
the Bank has tried to engage with as many
stakeholders as possible and to be sensitive to their
views and interests. Customers and shareholders,
generally tend to influence decision making more
than others. However, we have tried to ensure a
voice for employees, the community and other
stakeholders as well, and endeavour to see that
decisions are taken with all interests in mind.
Shareholders
the board encourages the active participation of
the shareholders at its Annual and Extraordinary
general Meetings. the AgM is the main forum at
which shareholders discuss performance, financial
statements, returns, appointments and other
relevant matters. the heads of the Audit, Credit
and integrated Risk Management Committees are
present at the AgM to respond to any queries from
the shareholders.
Shareholders are free to communicate with
the Bank and their requirements and queries are
promptly addressed. Suggestions made by them
are implemented whenever possible. According to
the Companies Act No. 07 of 2007, notice of at least
15 working days must be given to shareholders
prior to the conduct of the AgM. the Bank ensures
that it complies with this requirement.
Customers
the Bank ensures that its products and services
are driven and shaped by customer needs and
aspirations. With this in mind, the Bank maintains
close relations with customers and tries to obtain
as much feed back and input as possible.
Customer feedback is one of the main methods
the Company uses to improve the levels of its
products and services and to respond to customer
demands and expectations.
Customer surveys are conducted bi-annually
by selecting a sample size from the existing
customer base. Customer complaints are dealt with
by the branch managers and the line managers and
necessary corrective measures taken.
Employees
the employees are represented by two trade
unions: the Seylan Bank Employees Union and the
Ceylon Bank Employees Union.
the unions play a crucial role in representing
the interests of the employees with the
management. Every month the Chairman meets
representatives of the two unions to discuss
employee relationships and employee grievances.
in addition, the unions have regular access to
members of the senior management team.
the Banks Open Door policy enables any
employee to have a face to face discussion with
the Executive Chairman. Every thursday of the
week is reserved by the Chairman for this purpose.
the Open Door Policy facilitates closer contact
between employees and the senior management,
enhances employee confidence and forges a dynamic
organisational culture.
Regular e-newsletters are circulated by the
Welfare Association and can be accessed on the
Welfare Website.
ECOnOMIC IMPACt
the Bank is committed to generating both social and
financial values. While generating financial value
for our shareholders is one of the main activities of
the Bank, we are also conscious of the larger social
obligations we have. this obligation is larger given
that we provide a broad range of financial solutions to
a wide range of customers from all social segments.
We are conscious of the impact we have on all these
social segments and conscious of the impact our
products and policies have on the economy and society
in general.
in this respect, the Bank seeks to generate
value in all geographical regions of the country
and among all social segments. Creating new
jobs; establishing new opportunities; designing
specially-tailored products and services; and
empowering socially disadvantaged groups; are all
part of the Banks attempts in value creation.
this part of the Report looks at the Banks
impact on investors, customers and employees.
the Value Added Statement of the Bank shows
the wealth the Bank has created with regard to its
customers, employees and shareholders and the
contribution of the Company to the governments
revenue and the economy in general.
the Bank generated a total value of Rs. 4.66 Bn.
for the year under review as against Rs. 4.58 Bn.
the previous year. this was distributed among
government, the employees, and shareholders.
Rs. 2.34 Bn. or 50.24% of the value generated
was distributed among employees as compensation.
Rs. 0.99 Bn. or 21.25% was paid to the government
by way of taxes, including the Special Financial
VAt. A sum of Rs. 1.33 Bn. was retained for further
expansion of the Banks activities.
in the year under review, the Bank supported
a number of initiatives that had broad social goals
by way of loan facilities. A sum of Rs. 4.2 Mn. was
the loan outstanding for water purification, water
supply and waste water management. A sum of
Rs. 12.6 Mn. was outstanding for power generation
including mini-hydro power projects.
vAluE AddEd StAtEMEnt
Value added is the wealth the Bank has been able
to create by providing clients with a quality, value
added service.
Last year the Bank went through a crisis
resulting from a sudden loss of public confidence. the
Central Bank stepped into help stabilise the situation
and appointed a new board of directors under the
stewardship of the Executive Chairman. the Bank is
proud to have confronted and overcome this crisis
without any financial assistance from the State.
Investors
Earnings per share increased by Rs. 1.93 (214%)
during the year under review. this was a result of
the increase in profits by Rs. 388 Mn. the reasons
for this are discussed more fully on pages of the
income Statement.
the value that accrues to a shareholder is
a combination of the dividend per share and the
appreciation/depreciation of the value of a share
over the medium to long term.
Employees
the Bank has in place a market-based compensation
scheme for its employees which is on par with the
rest of the industry. Statutory requirements are
stringently observed.
the Bank also provides medical insurance
which covers most aspects of surgical and medical
illnesses to its staff. in addition, employees are
eligible for a variety of other benefits which include
loans at concessionary rates and several other
welfare facilities.
All employees are entitled to benefits under the
Employees Provident Fund (EPF) and Employees
trust Fund (EtF). in 2009, the Banks contribution
towards the benefits under the EPF and EtF was
Rs. 229.34 Mn. and Rs. 57.30 Mn. respectively.
the Bank has in place a comprehensive
retirement benefits plan accounted for as per
Sri Lanka Accounting Standard 16. the Bank
measures the present value of the defined benefit
obligation every year using the Projected Unit Credit
Method defined by the Actuary. the following are
taken into account by the Actuary when making the
assessment: the existing interest rate; the rate of
increase in salary and the retirement age of 55 years
Customers
the Banks products are geared towards meeting
the goals and aspirations of its customers. the
Bank is in constant touch with its customers
through a variety of processes.
2009 2008
Rs. 000 Rs. 000
value Added
income Earned by Providing Banking Services 22,496,007 24,599,015
Cost of Services (16,308,349) (18,193,869)
value Added by Banking Services 6,187,658 6,405,146
Non-Banking income 658,522 647,194
Provision for Bad Debts (2,183,132) (2,467,187)
4,663,048 4,585,153
2009 2008
Rs. 000 Rs. 000 % Rs. 000 Rs. 000 %
value Allocated
to Employees
Salaries, Wages and Other Benefits 2,342,563 50.24 3,361,212 73.31
to Providers of Capital
Dividends to Shareholders 6,238 0.13 255,900 5.58
to government
income tax 349,271
Stamp Duty 63,007 65,053
VAt 176 38,022
VAt on Profit 561,440 243,055
Debits tax 16,890 990,784 21.25 14,673 360,803 7.87
to Expansion and growth
Surplus/(Deficit) 543,301 (100,659)
Depreciation 786,400 1,323,463 28.38 707,897 607,238 13.24
4,663,048 100.00 4,585,153 100.00
Dedicated relationship managers oversee high
net worth customers. the Banks employees provide
advice and other support to all our customers on a
regular basis.
PROtECtIng thE EnvIROnMEnt
the Bank is committed to preserving and
replenishing the physical environment. All our
policies and products are designed with this end in
sight. through engagements with our customers
we seek to spread the message of conservation to
a broader audience as well. Some of our special
products are designed specifically to protect the
environment and others encourage clients to
integrate environmental concerns into their project
planning and implementation processes.
in this section we examine how the Banks
policies and processes help preserve the environment
and ensure its sustainability. A key aspect of the
Banks environmental strategy has been the focus
on the employees and on generating a cultural
change within the organisation that is committed to
protecting and preserving the environment.
the Bank has integrated energy-saving
processes and technologies throughout the country
and in all its branches. in redesigning its processes
the Bank has focussed on the following areas:
Energy Conservation
Waste Management
Paper Management
Energy Conservation
the Bank constantly monitors its energy use with
a view to reducing costs and making maximum use
of the energy consumed. the main source of the
energy is the national grid. the Bank is exploring
the use of alternative and renewable sources of
energy in its branches.
Energy Conserved
Energy Consumption
Head Office 2009 2008
Consumption (Units) 2,504,928 2,827,026
Expense (Rs.) 49,300,577 52,290,190
the head office and many of the Banks
branches have replaced their incandescent lamps
with energy-saving bulbs. By 2011, we will have all
our branches using energy-saving bulbs. Natural
sunlight is used where possible.
the use of air-conditioners is reduced wherever
possible and temperatures are regulated to create
optimum levels of comfort. Computers come with
low radiation levels and are programmed to transit
to stand by mode within a short time of idling.
waste Management
the Banks policies and processes have been
adapted so as to reduce waste. Where waste does
arise, the Bank tries to reuse and recycle wherever
this is technically and economically feasible.
Some of the Banks branches have introduced
systems to segregate waste into plastics, solid waste,
paper, glass and other materials. We are exploring
several waste disposal and reuse options in this regard.
We have partnered with N.S. gunaratne and
Co. to dispose of discarded accessories from the
Head Office and branches in an environmentally
friendly way.
in the coming year, we hope to collect all used
toner cartridges in a central location and ensure that
they are disposed of an environmentally friendly way.
Paper Management
the Banks objective is to move towards a paperless
office in the near future. With this in view the Bank
has reduced substantially the amount of paper
used within the office. Last year, the Bank spent
Rs. 145.164 Mn. on stationery as against the
Rs. 174.288 Mn. spent a year previously.
Expense 2009
Rs.
2008
Rs.
Stationery 145,164,498 174,288,304
the Bank makes maximum use of electronic
communication so as to reduce paper usage.
Communications with customers make optimum
use of electronic channels and the Bank has attempted
to keep paper communications to a minimum. Where
possible, paper is recycled and reused.
EMPOwERIng PEOPlE
the Banks role as a financial services provider
means it plays a sensitive role in peoples lives.
the Bank has been conscious of this role and has
focused on unleashing new opportunities for society
in general and for its employees. Employees are the
soul of the institution and we have endeavoured to
create inspiring and safe workplaces for our staff.
in this section we look at how the Banks activities
impact on society and on our employees.
Category of Employment
Category No. of Employees Percentage (%)
Permanent 3,504 94
Contract 45 1
trainee 184 5
No. of Employes based on Country
Country No. of Outlets No. of Employees
Oman 1 5
Dubai 1 1
Saudi Arabia 1 1
Sri Lanka* 93 3,726*
No. of Employes based on Geographic Breakdown
Province No. of Outlets No. of Employees
Northern 3 65
Southern 7 170
Eastern 5 109
Western 49 2,657*
Central 9 240
North-Central 5 106
Uva 2 52
Wayamba 5 148
Sabaragamuwa 8 179
total 93 3,726*
* No. of employees includes Head Office staff too
Rewarding Innovation and Passion
the Bank has focused on building a dynamic team
that is bonded by a common set of values and
goals and committed to a notion of sustainable
entrepreneurship. the Bank has encouraged
productivity, rewarded passion and ensured the
highest levels of workplace safety. the Bank
continues to invest in their skills and future growth.
Every member of the staff came together during
the recent crisis the Bank faced. the Bank had to
respond to a sharp decline in public confidence and a
change in the ownership and management structure
of the Bank. the resilience and innovation displayed
by the entire team enabled the Bank to make this
transition relatively smoothly.
As at the end of 2009, the Bank had 2,550
employees in 93 branches across the country. the
employee turnover for the year was 146 or 3.8 % of
the total workforce.
Age No. of
Resignations
No. of
Retirements
-19
20 - 24 43
25 - 29 36
30 - 34 26
35 - 39 22
40 - 44 8
45 - 49 7
50 & above 4 20
the Bank recognises the right to freedom of
association and the right of employees to collectively
bargain for their rights. two major trade unions operate
within the Bank. Some employees are members of both
unions. the management is in regular consultation
with representatives of the unions to ensure that
worker satisfaction is at optimum levels. the Bank
also has an open door policy where any employee can
speak directly with the higher management.
No. of Employees in the Unions of the Bank
Name of Union/ Associations No. of Employees
Seylan Bank Employees Union 1,858
Ceylon Bank Employees Union 2,435
Breakdown of Employees per Category
according to Gender
*grade 1 2 3 4 5 6 7 8 9 10 11 total
Male 40 256 878 297 356 155 110 81 66 29 34 2,302
Female 1 560 268 344 110 79 46 11 5 7 1,431
Breakdown of Employees per Category
according to Ethnic Group
*grade 1 2 3 4 5 6 7 8 9 10 11 total
Sinhala 30 238 1,303 527 640 239 167 98 59 28 35 3,364
tamil 9 9 111 28 42 16 13 10 6 3 3 250
Muslim 9 18 6 10 4 6 11 7 3 2 76
Burger 1 2 4 7 6 2 6 5 1 34
Others 1 4 1 1 2 9

there were no cases of discrimination or
unfair dismissal and there were no court cases
that were pending against the Bank during the year
under review.
the Bank ensures that all employees can
practice their religion without any hindrance.
All permanent employees of the Bank are
covered by Banks Hospitalisation and insurance
Scheme. the Banks Health Policy makes direct
payments through the Sri Lanka insurance
Corporation to the respective hospital on behalf
of the employee. Critical illness Cover and Death
Cover are also provided.
Educational expenses that pertain to a staff
members employment are partially reimbursed
and subscriptions for membership in recognised
professional bodies are covered by the Bank.
Every year the line manager will evaluate
an employees performance and discuss career
advancement plans. Permanent employees (who
make up 93.87% of the staff) are appraised every
year, and employees on contract (who make up
1.23% of the workforce) are appraised at the time the
contracts are renewed. trainee banking assistants
are appraised at the end of their training period.
We ensure that every employee goes through
a periodic appraisal. Our goal is to ensure that the
Banks aspirations match the employees expectations
and to create a win-win situation for both.
Child labour
the Bank has a zero tolerance of child labour. the
Bank takes the position that all children under the
age of 18 should have an opportunity to further
their education and so does not employ anyone
under that age. We attempt to promote this policy
with our customers and business partners.
health and Safety
Ensuring the highest levels of workplace safety
is a priority for the Bank. the Bank periodically
undertakes an assessment of its safety levels across
the country to ensure that the highest levels of safety
are observed across the institution. Last year, there
were no accidents recorded on any of its premises.
the Bank periodically arranges for the staff to
attend lectures on a variety of health-related matters
conducted by medical experts from private hospitals.
Counselling is provided by the Bank on
alcoholism, drug addiction, stress management
and emotional illnesses. Regular fire drills and in-
house programmes on first aid are also conducted.
* Staff Grades
7. Assistant Manager
8. Manager
9. Senior Manager
10. Chief Manager
11. Assistant General Manager & above
1. General Office Assistant I
2. General Office Assistant II
3. Banking Assistant I & II
4. Banking Assistant III
5. Executive Officer I
6. Executive Officer II
The Employees of the Bank taking part in the Jaya Maga Campaign - January 2009 Region-wise sports festival for Bank staff was one of the many
activities organised to foster solidarity and fellowship
The Bank made a donation of essentials towards the welfare of
Internally-Displaced Persons
Seylan Bank Sports Club participated in the Api Venuwen Api
Programme to assist security forces
The Bank donated Surgical Masks to the Cancer Hospital in
Maharagama for Child Patients
The Bank through the Sports Club made donations to Army
Personnel of the Sri Lanka Army Camp, Minneriya
Employee welfare
Bank employees enjoy a number of benefits. these
include:
Benefits Full-time Employees
(Permanent)
Bonus Yes
Holiday Pay Yes
insurance Yes
Staff Loans Yes
Routine Medical Allowances Yes
Spectacles Allowance Yes
Honorarium Payment Yes
Annual Membership
Subscription Yes
training
training is a crucial component of the Banks
corporate philosophy. Every year the Bank invests
substantially in upgrading the skills of its employees.
Last year, the Bank invested Rs. 27 Mn. on
the training of its employees. 274 employees
benefitted from External training Programmes.
A total of 7,366 participants attended Regional and
in-House training Programmes during 2009.
Employee
Category
No. of
training Hours (X)
No. of
Employees (Y)
X/Y
Hours
1 360 41 8.78
2 2,530 256 9.88
3 25,570 1,438 17.78
4 10,844 565 19.19
5 10,891 700 15.56
6 3,664 265 13.83
7 2,101 189 11.12
8 1,215 127 9.57
9 477 77 6.19
10 80 34 2.35
11 72 43 1.67
Sports
the Bank has an active sports club and a welfare
society, both of which are self-managed.
Among the main events for the year are the
regional sports festivals organised in the different
regions. Last year, sports festivals were held in Kandy,
Koggala and Polonnaruwa and brought together
representatives from branches in the vicinity.
Apart from participating in a range of sports
activities, participants also have the opportunity to
interact with their peers at a reception and dinner
afterwards.
Promoting human Rights
the Bank is committed to all those human rights
enumerated in the Constitution of Sri Lanka and
the international covenants that the country has
signed. Promoting and protecting human rights is
an important part of our endeavour in sustainable
entrepreneurship.
the Bank respects, protects and promotes the
rights of all its employees, including the labour-
related rights, and also promotes the rights of
all other stakeholders. the Bank encourages our
customers and business partners to integrate
similar commitments in their business practices.
Ensuring that women have equal rights
within the institution is important to the Bank.
We attempt to create an environment in which
women feel comfortable and perform at optimum
levels. Allegations of harassment are investigated
promptly and remedial measures taken.
EMPOwERIng lIvES
Every year, the Bank invests in the future of the
broader society. through these initiatives the Bank
hopes to empower disadvantaged groups and
create new opportunities for other social segments.
Promoting Ethnic harmony
the end of the war in 2009 has created a massive
opportunity for the country. For the first time in
thirty years, the governments writ runs over the
entire country. this opportunity must be seized
by the state, business and civil society and made
use of to lay the foundations for a peaceful and
prosperous society.
in the past year, the Bank focussed on promoting
ethnic harmony and promoting reconciliation among
the different communities. it is important to provide
the opportunity for all communities to overcome
the trauma of the war, to move forward in a spirit of
harmony and to feel a sense of belonging.
Over the years, the Bank has been involved in
promoting a sense of harmony by sponsoring initiatives
in connection with the Sinhala and tamil New Year.
Last year was no different. the Bank sponsored the
traditional Oil Anointing Ceremony (Hisa thel gama)
at the Haththaka Rajamaha Viharaya, Niyagama,
Hiniduma and also sponsored the Kokila Wasanthaya
Avurudu Ullela held at the Poddiwela Maha Vidyalaya
organised by the Niyagama Divisional Secretariat and
Niyagama Provincial Council.
the Bank also made significant contributions
towards the Annual Kataragama Esala Perahera
and contributed towards the live telecast of the
Annual Jasmine Flower Offering Ceremony (the
Pichcha Mal Poojawa) which was held for the 20th
year in Anuradhapura and organised by the Shanthi
Foundation - Seruwila Buddhist Centre.
the Bank sponsored the Special tV Programme
on the Madhu Festival in August 2009. the Madhu
Shrine is venerated by Sri Lankan Catholics from
all communities and the festival was conducted in
2009 in an atmosphere free of violence for the first
time after almost 30 years.
the Bank made a contribution of Rs. 1.5 Mn.
to help the internally displaced persons who were
being held in camps in Vavuniya and Mannar.
the reconstruction of the Yal Devi railway line
linking the South with the North is a major part
of the governments reconciliation programme.
the Bank made a significant contribution towards
this initiative. Facilitating the movement of people
between the ravaged North and the South of the
country is vital if the country is to move into an era
of peace and ethnic harmony and the Bank is proud
to have been part of this initiative.
Empowering the disadvantaged
there were a number of other initiatives in which
the Bank was involved.
the North-Central Province has recently been
the site of a number of cases with kidney problems.
this has been traced to high levels of calcium in the
water in that area.
in 2009, a special renal care and research
centre was built by the National Kidney Foundation
in the Anuradhapura District in order to treat those
patients. the Bank made a significant contribution
towards the cost of the electrical cables for the
transplant theatre complex.
Surgical masks were donated, with the
assistance from the Seylan Bank Sports Club, to
the Cancer Hospital in Maharagama, to be worn by
the child-patients undergoing surgical treatment.
the Bank also supported the Sri Lanka Model
United Nations 2009 Conference, contributed to
Sri Lanka international Film Award Ceremony and
helped the Association of Professional Bankers of
Sri Lanka which, conducted their 21st Anniversary
celebration in September 2009.

grameen loans
the Bank provides grameen loans for agriculture,
fisheries and small industries. the objective of
these loans is to enable small business folk to
engage in entrepreneurship without the risks and
constraints of conventional financing.
these loans start at Rs. 5,000/- and are
progressively increased to Rs. 100,000/- depending
on how the customer performs.
Grameen Loans
No. of Beneficiaries Loan Outstanding Rs. Bn.
157,883 2.499
Other Sector Loans
Sector Amount Rs. Mn.
Agriculture 212.09
Fisheries 39.15
Education Development 190.15
Health Services 159.45
Pharmaceuticals 58.40
gRAduAtE lOAnS
the Bank provides small loans at concessionary
rates of interest to graduates who wish to establish
their own businesses. Rs. 391.1 Mn. was dispensed
under this scheme during the year under review.
Senior Citizens
Citizens over the age of 55 receive a number of
benefits from the Bank.
Fixed deposit holders receive premium interest
rate on their deposits.
Critical insurance cover up to Rs. 50,000/- is
provided.
in the case of saving accounts senior citizens
are entitled to:
the cost of lenses for cataract surgeries.
Reimbursement of the cost of surgery.
Birthday gifts.
the reimbursement of reading material.
the reimbursement of medical bills up to Rs. 5,000/-
for those over the age of 70.
Corruption
the Bank has a policy of zero tolerance on
corruption. it does not encourage ethically unsound
or corrupt practices on the part of our customers or
business partners. the internal Audit Department
carries out Audits in branches to ensure compliance
in this regard.
Regular training programmes on anti-corruption
are conducted among the Banks employees. Last
year, 35 training programmes on anti-corruption were
conducted for the staff.
Anti-Competitive Behaviour
the Bank does not engage in anti-competitive
behaviour and does not support other institutions
engaging in such practices. No legal actions have
been filed against the Bank in this regard.
Customer Privacy
the Bank takes the utmost care to respect
customer privacy and ensure that customer data
and information is fully protected. Employees in
possession of confidential data are required to take
an oath of secrecy.
FINANCIAL CALENDAR
UNAUDITED QUARTERLY FINANCIAL STATEMENTS
1st Quarter 31st March 2009
Issued to Colombo Stock Exchange 04th June 2009
Published in Newspapers 05th June 2009
2nd Quarter 30th June 2009
Issued to Colombo Stock Exchange 27th July 2009
Published in Newspapers 29th July 2009
3rd Quarter 30th September 2009
Issued to Colombo Stock Exchange 26th October 2009
Published in Newspapers 27th October 2009
4th Quarter 31st December 2009
Issued to Colombo Stock Exchange 16th February 2010
AUDITED FINANCIAL STATEMENTS AND ANNUAL REPORT
Year Ended 31st December 2009
Issued to the Colombo Stock Exchange March 2010
Circulated to Shareholders and Debenture Holders March 2010
23RD ANNUAL GENERAL MEETING TO BE HELD ON 26th MARCH 2010
PREFERENCE DIVIDEND
Payable for the year ended 31st December 2009
Date of Payment 31st March 2010
FIRST AND FINAL ORDINARY DIVIDEND
Payable for the year ended 31st December 2009
Date of Payment 7th April 2010
FINANCIAL
REPORTS
Annual Report of the Board on the State of Affairs of the Company 119
Directors Responsibility for Financial Reporting 134
Independent Auditors Report 136
Income Statement 138
Balance Sheet 139
Statement of Changes in Equity 140
Cash Flow Statement 141
Notes to the Consolidated Financial Statements 143
ANNUAL REPORT OF THE BOARD ON THE STATE
OF AFFAIRS OF THE COMPANY
The board of directors presents hereto their Report on the State of Affairs of the Company for the year ended
31st December 2009. The Report also provides information as required by the Listing Rules of the Colombo
Stock Exchange, best accounting practices and other disclosures deemed relevant to the stakeholders of
the Company. The Report was approved by the directors on 17th February 2010.
GEnErAl
Seylan Bank PLC was incorporated on 28th August 1987 as a public limited liability company under the
Companies Act No. 17 of 1982 and obtained a listing for its ordinary voting shares on the Colombo Stock
Exchange on 5th January 1989. It is an approved licensed commercial bank under the Banking Act No. 30 of
1988. The Bank was re-registered under the Companies Act No. 07 of 2007 on 30th May 2007.
PrinciPAl ActivitY
The principal activity of the Bank is commercial banking and provision of related financial services such
as accepting of deposits, personal banking, trade financing, off-shore banking, resident and non-resident
foreign currency operations, travel-related services, corporate and retail credit, pawn broking, project
financing, lease financing, rural credit, issuing of local and international credit cards, telebanking facilities,
SMS and Internet banking, internet payment gateway and dealing in Government Securities, etc.
chAnGES to thE GrouP StructurE
The Bank gradually commenced divesting its investment during the fourth quarter of 2009 in Seylan Merchant
Bank PLC and accordingly, the Banks holding in the entity dropped to 49.58% (Voting Shareholding) as at
31st December 2009. As such Seylan Merchant Bank PLC ceased to be a subsidiary of the Bank from the
fourth quarter of 2009.
SubSiDiAriES
The Banks subsidiaries as at 31st December 2009 and their principal activities are given below:
Seylan Developments PLC - Property Development
Seylan Bank Asset Management Limited - Dealing in Government Securities*
Seylan Merchant Bank PLC - Merchant Banking
(deconsolidated with effect from 1st October 2009)
* On 12th February 2010, the boards of Seylan Bank PLC and Seylan Bank Asset Management Limited (SAM)
decided to amalgamate as per the provisions of Section 242 (1) of the Companies Act No. 07 of of 2007. The
amalgamated company will be Seylan Bank PLC. The amalgamation is to take effect on 31st March 2010. Approval
in principle has already been obtained for the aforesaid amalgamation from the Central Bank of Sri Lanka.
rEviEw of oPErAtionS
A review of the operations during the financial year 2009 and the performance of the Bank are given in the
Management Report appearing on pages 57 to 62 of the Annual Report, which report forms an integral part
of this Report.
brAnch nEtwork
In November 2009, the Bank opened a branch in Nelliady and two convenient banking centres at Manipay
and Chakanai. Two branches viz. Malabe and Ja-Ela were relocated during the year.
As at 31st December 2009, the Bank had 93 branches and 24 extension offices totalling to 117 in operation,
a list of which is given on pages 241 to 242 of this Annual Report. The Bank also has 83 student savings
centres as at end 2009.
viSion AnD MiSSion
During the year, the Bank adopted a new vision and a new mission statement for the Bank, which are given
on page 49 to 50 of this Annual Report.
futurE DEvEloPMEntS
An overview of the future plans and developments of the Bank is also indicated in the Management Report
appearing on pages 57 to 62 of this Annual Report.
finAnciAl StAtEMEntS
The Audited Financial Statements of the Bank and the Group for the financial year ended 31st December 2009
are given on pages 136 to 226 and form an integral part of the Annual Report of the Board.
AuDitorS rEPort
The Auditors of the Company Messrs KPMG Ford, Rhodes, Thornton & Co., Chartered Accountants have
carried out the audit of the Consolidated Financial Statements for the financial year ended 31st December
2009 and their Report on the Financial Statements is given on pages 136 to 137 of this Annual Report.
SiGnificAnt AccountinG PoliciES
The significant accounting policies adopted in preparation of the Financial Statements are given on pages
143 to 161 of this Annual Report.
finAnciAl rESultS
incoME
The income of the Bank for the year 2009 was Rs. 23,154,529,138/- (Rs. 25,246,209,205/- in 2008), whilst the
income of the Group was Rs. 24,538,978,803/- (Rs. 27,053,948,932/- in 2008).
Profit
A summary of the consolidated financial results of the operations of the Group during the year ended
31st December 2009 is given below:
2009 2008
(Restated)
rs. 000 Rs. 000
Profit/(Loss) before Taxation 933,630 (735,579)
Less: Taxation 484,869 64,224
Profit/(Loss) after Taxation 448,761 (799,803)
Attributable to Minority Interest (120,447) (656,810)
Net Profit Attributable to Shareholders 569,208 (142,993)
Retained Profit brought forward after Dividend 3,546,814 3,693,225
Profit available for Appropriation 4,116,022 3,550,232
Adjustments/Transfer to Reserve Fund (27,165) (11,504)
Other Transfers/Adjustments (287,966) 14,324
balance carried forward 3,800,891 3,553,052
DonAtionS
During the year, the Company made donations amounting to Rs. 6,692,798/- (Donations made in 2008
amounted to Rs. 128,865,170/-).
PrEfErEncE DiviDEnD
The directors recommend the payment of a preference dividend of Rs. 1.84 per share to the preference
shareholders registered with the Bank as at the entitlement date for the year ended 31st December 2009. The
dividend rate is a pre-determined rate as per the prospectus to the Issue, viz. one percentage point over the
one year Weighted Average Treasury Bill rate at the primary auctions held during March of the preceding year;
i.e. March, 2009. The dividend is payable on 31st March 2010. A preference dividend was not paid in 2009 in
respect of the year ended 31st December 2008.
orDinArY DiviDEnD
The directors recommend the payment of a First and Final Ordinary Dividend of Rs. 0.50 per share to
the ordinary (voting and non-voting) shareholders, for the year ended 31st December 2009, payable on
7th April 2010. There was no dividend payout to ordinary shareholders in 2009 in respect of the year ended
31st December 2008.
SolvEncY cErtificAtion
The board of directors is satisfied that the Bank would meet the solvency test in terms of the provisions of
the Companies Act No. 07 of 2007 immediately after the proposed dividend which will be paid in April 2010.
The board has obtained a statement of solvency from the External Auditors in relation to the proposed
dividend payment.
tAxAtion
Provision for taxation has been computed as shown in Note 11 to the Financial Statements.
cAPitAl ExPEnDiturE
The total capital expenditure incurred on the acquisition of property, plant and equipment during the year
amounted to Rs. 227,235,000/- details of which are given in Note 27 to the Financial Statements.
ProPErtY, PlAnt AnD EQuiPMEnt
The details of the property, plant and equipment are given in Note 27 to the Financial Statements. Valuation
details of the properties are also disclosed therein. The Directors consider the market values of the property,
plant and equipment not to be significantly different to the amounts disclosed.
rESErvES
Total reserves (including Statutory Reserve Fund) of the Group as at 31st December 2009 amounted
to Rs. 5,541,319,769/- (Rs. 5,244,106,388/- in 2008) details of which are given in Notes 37 and 38 to the
StAtED cAPitAl
The Stated Capital of the Bank as at 31st December 2009 was Rs 5,567,820,324/- (Rs. 2,542,420,326/- in
2008) comprising of 130,000,000 ordinary (voting) shares, 3,390,100 non-redeemable, non-cumulative, non-
convertible and non-voting preference shares, 123,560,000 ordinary (non-voting) shares and share premium
of Rs. 837,319,324/-.
rE-cAPitAliSAtion of SEYlAn bAnk
In order to strengthen the Companys equity capital base, meet regulatory requirements relating to capital
adequacy, facilitate future expansion and enhance business volumes, the Bank made a capital raising of
Rs. 3.025 Bn., through a two-tiered process constituting - (i) a Private Placement offering to designated state
institutions and (ii) a Public Offering of shares with existing shareholders also being given an opportunity to
participate in the Share Issue.
Through the Private Placement, the Bank allotted 13 Mn. ordinary voting shares to Bank of Ceylon
amounting to 10% of the increased share capital of the Bank. 19,150,000 ordinary voting shares were allotted
to Sri Lanka Insurance Corporation Limited which together with their existing holding in the Bank amounted
to 15% of the increased share capital. A total of Rs. 1,125,250,000/- was raised from the private placement.
In October 2009, the Bank concluded the Public Offering of 54,290,000 ordinary voting shares with
existing shareholders also participating in the Share Issue with a preferential allotment of one share for
every two ordinary voting shares held. The allotment was carried out on 13th October 2009. A total sum of
Rs. 1,900,150,000/- was raised from the Public Issue.
ShArEholDinGS
As at 31st December 2009, there were 10,984 and 6,146 registered ordinary (voting) and ordinary (non-
voting) shareholders and 967 non-redeemable, non-cumulative, non-convertible and non-voting preference
shareholders respectively of the Bank. An analysis of the distribution of the ordinary voting and non-voting
shareholders is given on page 238 of this Annual report. The twenty largest ordinary voting and non-voting
shareholders of the Bank are also given on pages 236 to 237 of this Annual Report.
DEbt cAPitAl
The Bank had issued debentures (both listed and unlisted) to the value of Rs. 4,230,365,000/- as at
31st December 2009 (2008 - Rs. 4,687,465,000/-).
The Bank had the following listed debt as at 31st December 2009, details of which are given on page 239
of this Annual Report:
Type No. of Debentures
of Rs. 100/- each
Unsecured Subordinated Redeemable Five Year
Debentures - 2006/11 12,573,150
-do- - 2007/12 7,494,000
-do- - 2007/12 (Issue 2) 5,592,850
-do- - 2008/13 * 6,305,650
* The Bank allotted 6,305,650 Unsecured Subordinated Redeemable five-year listed debentures of Rs. 100/- each on 12th January 2009
under a public issue which commenced in December 2008 and concluded on 2nd January 2009. The debentures were listed on the
Colombo Stock Exchange on 10th February 2009. The Debenture Issue was primarily for the purpose of meeting capital adequacy
requirements.
invEStorS inforMAtion
Information including earnings, profitability, dividend, net assets and market value per share is given under
Financial Highlights appearing on page 56 of this Annual Report. Information pertaining to share prices
(both voting and non-voting) and debenture prices is given on pages 236 to 239 of this Annual Report.
EQuitAblE trEAtMEnt of ShArEholDErS
The Bank has at all times ensured the equitable treatment of its shareholders.
DirEctorAtE
As outlined in our 2008 Annual Report, the Seylan Bank board was re-constituted on 29th December 2008
in terms of Section 30 (9) of the Monetary Law Act (as amended) pursuant to which a new board comprising
of four directors was appointed on 30th December 2008. On 8th January 2009, two additional directors,
Mr. R. Nadarajah and Rear Admiral (Rtd.), B.A.J.G. Peiris were appointed.
Pursuant to the re-capitalisation of the Bank four new directors were appointed in November 2009, viz.-
Mr. P.G.S. Kariyawasam and Dr. N.H. Godahewa, w.e.f. 10th November 2009 and Messrs A.L. Devasurendra
and I.C. Nanayakkara, w.e.f. 24th November 2009.
Mr. F.N. Goonewardena resigned from the board, on 3rd December 2009.
Accordingly, as at the Balance Sheet date, the directors who held office together with their executive,
non-executive and independent status are given below:
Name of Director Status
Mr. E. Narangoda (Chairman) Executive
Mr. R. Nadarajah Executive
Mr. N.M. Jayamanne PC Independent Non-Executive
Mr. P.L.P. Withana Independent Non-Executive
Rear Admiral (Rtd.) B.A.J.G. Peiris Independent Non-Executive
Mr. P.G.S. Kariyawasam Non-Executive
Dr. N.H. Godahewa Non-Executive
Mr. A.L. Devasurendra Non-Executive
Mr. I.C. Nanayakkara Non-Executive
Mr. S.P.S. Ranatunga was appointed to the board as a Non-Executive Director with effect from 12th January 2010.
The profiles of the board of directors are given on pages 228 to 229 of this Annual Report.
All Non-Executive Directors have signed declarations confirming their independent/non-independent
status in compliance with the Colombo Stock Exchange Rules of Corporate Governance.
Signed affidavits and declarations have also been provided by the new directors to the Bank Supervision
Department of the Central Bank of Sri Lanka in terms of Section 42 of the Banking Act (as amended) and as
per Direction 2 (3) (i) of the Banking Act Direction No. 11 of 2007, confirming their fit and proper status to
hold office as directors of the Bank.
In terms of Article 82 of the Articles of Association, Mr. N.M. Jayamanne PC retires by rotation at the
Annual General Meeting of the Bank and being eligible, offers himself for re-election.
In terms of Article 89 of the Articles of Association, Messrs P.G.S. Kariyawasam, A.L. Devasurendra,
I.C. Nanayakkara, Dr. N.H. Godahewa and Mr. S.P.S. Ranatunga, retire as directors and being eligible, offer
themselves for re-election.
boArD SubcoMMittEES
The following board subcommittees were functional as at 31st December 2009:
Audit Committee
Members Mr. P.L.P. Withana (Chairman)
Mr. P.G.S. Kariyawasam (appointed on 3rd December 2009)
Integrated Risk Management Committee
Members Mr. A.L. Devasurendra (Chairman) (appointed on 3rd December 2009)
Mr. P.L.P. Withana
Remuneration Committee
Members Mr. N.M. Jayamanne PC (Chairman)
Mr. P.L.P. Withana
Dr. N.H. Godahewa (appointed on 3rd December 2009)
Rear Admiral (Rtd.) B.A.J.G. Peiris (appointed on 3rd December 2009)
Nomination Committee
Members Rear Admiral (Rtd.) B.A.J.G. Peiris (Chairman)
Mr. A.L. Devasurendra (appointed on 3rd December 2009)
Credit Committee
Members Mr. E. Narangoda (Chairman)
Mr. R. Nadarajah
Mr. A.L. Devasurendra (appointed on 3rd December 2009)
Mr. I.C. Nanayakkara (appointed on 3rd December 2009)
Reports of the Board Audit, Integrated Risk Management, Remuneration and Nominations Subcommittees
are set out on pages 100 to 104 respectively and form an integral part of the Annual Report of the board.
On 3rd December 2009 with the appointment of additional directors to the board, the board
subcommittees were reconstituted with their members being as detailed above.
Two additional board committees, viz. Strategic Planning Committee and Sustainability Committee were
formed in December 2009, but commenced their activities only from January 2010.
The composition of all board subcommittees, meetings held and their functions and responsibilities are
set out in the Corporate Governance Report appearing on pages 86 to 88 of this Annual Report.
ArticlES of ASSociAtion
For purposes of securing conformity with new regulations, legal provisions and more particularly the
Companies Act No. 07 of 2007, the Bank adopted new Articles of Association at an extraordinary general
meeting of the shareholders held on 2nd September 2009.
DirEctorS rESPonSibilitY for finAnciAl rEPortinG
The directors are responsible for the preparation of the Financial Statements of the Bank to reflect a true and
fair view of its state of 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, the Companies Act No. 07 of 2007,
Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, the Banking Act No. 30 of 1988 (as amended),
the Listing Rules of the Colombo Stock Exchange and Banking Act Direction No. 11 of 2007 (as amended) -
Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka.
The directors Responsibility Statement appearing on pages 134 and 135 of the Annual Report forms an
integral part of the Annual Report of the Board.
DirEctorS intErESt rEGiStEr
The directors have declared all material interests in contracts involving the Company at board meetings and
refrained from voting on matters in which they were materially interested. All such disclosures required
to be made in terms of Section 192 of the Companies Act No. 07 of 2007, have also been duly recorded in
the Interest Register. Related party transactions arising out of these disclosures made are given in Notes
42 and 43 in the Audited Accounts and on pages 129 to 133 as an annexure to this Annual Report. A list of
directorships held by the directors in public-listed companies during 2009 is also given in the annexure.
DirEctorS intErEStS in ShArES of thE bAnk
Directors holdings in shares (ordinary voting and non-voting) in the Bank as at 31st December 2009 are
given below:
Name of Director 31.12.2009 31.12.2008 Shares
Mr. E. Narangoda 34,300 10,050 Ordinary Voting
90,100 Ordinary Non-Voting
Mr. R. Nadarajah 30,900 Nil Ordinary Voting
10,000 7,000 Ordinary Non-Voting
Mr. N.M. Jayamanne PC 3,000 Ordinary Voting
Mr. P.L.P. Withana 23,363 242 Ordinary Voting
Mr. F.N. Goonewardena
(resigned on 03.12.2009) 48,000 Nil Ordinary Voting
Rear Admiral (Rtd.) B.A.J.G. Peiris nil N/A
Mr. P.G.S. Kariyawasam nil N/A
Dr. N.H. Godahewa 2,500 N/A Ordinary Non-Voting
Mr. A.L. Devasurendra nil N/A
Mr. I.C. Nanayakkara nil N/A
Percentage Shareholding of Directors:
Ordinary voting shares 0.07% 0.02%*
Ordinary non-voting shares 0.01% 0.08%*
* Represents shares held by Mr. E. Narangoda and Mr. P.L.P. Withana only.
No change occurred in the directors interest in shares after 31st December 2009 and 17th February 2010,
the date of this Annual Report.
DirEctorS intErEStS in PrEfErEncE ShArES AnD DEbEnturES
The directors had neither non-redeemable, non-cumulative, non-convertible and non-voting preference
shares nor debentures, registered in their names, both at the beginning or end of the year under review.
DirEctorS rEMunErAtion
Details of directors emoluments paid during the year are given in Note 7 to the Financial Statements.
inSurAncE AnD inDEMnitY
Pursuant to a decision taken by the board, the Bank has obtained an insurance policy to cover Directors liability.
corPorAtE GovErnAncE
The board of directors has pledged their commitment towards adoption and implementation of transparent
and effective corporate governance practices within the Bank with the view of enhancing business prosperity
and corporate accountability.
The Bank accordingly ensures that relevant practices and procedures are in place to ensure conformity to
Corporate Governance Rules laid down in the following rules/regulations, viz. -
Banking Act Direction No. 11 of 2007 (Corporate Governance for Licensed Commercial Banks in
Sri Lanka) issued by the Monetary Board of the Central Bank of Sri Lanka, amended by Banking Act
Directions Nos. 05 of 2008 and 07 of 2008. The Bank has conformed to these directions except in areas
where extended dates of compliance have been expressly provided in the rules.
ColomboStockExchange(CSE)RulesonCorporateGovernancewhichbecamemandatoryforcompliancebyall
listed companies in the financial year commencing from 1st April 2008 and for banks - from 1st January 2009.
CodeofBestPracticeofCorporateGovernancejointlyissuedbytheSecurities&ExchangeCommission
of Sri Lanka (SEC) and The Institute of Chartered Accountants of Sri Lanka (ICASL) in 2008.
The extent of compliance with the above rules and regulations and best practice guidelines are described
in the Corporate Governance report appearing on pages 75 to 99 of this Annual Report.
riSk AnD intErnAl control
The board assumes overall responsibility for managing risks in the Bank. Towards this end it has implemented
a sound risk management framework and also designated key management personnel to manage risk and
identify their areas of responsibility. The board also reviews on a regular basis the risk exposures of the Bank
and specify and approve policies with regard to risk management, measurement and control.
The board of directors has put in place an effective system of internal controls so as to safeguard the
Banks assets and ensure continuity of its operations and also to ensure as far as practicable the accuracy
and reliability of records. The board from time to time reviews through the Audit Committee, the adequacy
and integrity of the internal control systems covering accounting, financial and operational aspects based
on Audit Reports and management information systems.
coMPliAncE with lAwS AnD rEGulAtionS
The Bank has not engaged in any activities contravening any laws and regulations currently in force. Key
management personnel designated in the Bank for ensuring compliance with laws and regulations submit
a compliance report on a monthly basis to the board.
GoinG concErn
The directors are satisfied that having considered the financial position, operating conditions, regulatory
and other factors and such other matters required to be addressed in the Corporate Governance Code,
that the Bank has adequate resources to continue its operations in the foreseeable future. The Financial
Statements of the Bank have accordingly been prepared on a going concern basis.
huMAn rESourcES
Effective management of people is closely linked with the organisations performance and profitability.
Therefore, it is essential to have well trained motivated staff to achieve the objectives of the Bank.
Moving on to specific challenges where human resource policies and practices can make a competitive
difference in people management, development of human capital becomes a primary goal in achieving a
competitive advantage. The emerging role of human resource management is that of creating a human
organisation that can provide a competitive advantage.
The key challenge in people development is, to ensure that the focus is on business goals and the
overall strategy of the Bank. Developing capabilities to ensure higher performance is closely linked to the
organisations performance and profitability.
Attracting, retaining and developing its workforce is the best way to achieve the resilience that is required
to survive in an increasingly turbulent business environment and the Bank is committed towards developing
its human capital as an ongoing process to stay ahead of the competition.
StAtutorY PAYMEntS
The directors are satisfied that to the best of their knowledge and belief, all statutory payments due to the
Government and to the employees of the Bank have been made up to date.
EMPloYEES ShArE owninG SchEME
The Bank has in place several employee share owning trusts established with the objective of providing an
additional benefit to the employees at the time of their retirement/resignation in terms of the trust deeds. The
trusts have acquired shares of the Bank from time to time as and when formed. All shares held by the trusts
have been purchased at the market prices prevailing at the time. Details of facilities granted to the trusts and
outstanding as at the Balance Sheet date are provided in Notes 43 and 19.h to the Financial Statements.
In October 2009, under the Banks Public Share Issue, one of its employee share owning trusts, Seyfest
(Pvt) Limited was allotted 700,000 ordinary voting shares at the issue price of Rs. 35/- per share. The shares
were purchased by the trust company out of its own funds.
PoSt-bAlAncE ShEEt EvEntS
No events have occurred after the Balance Sheet date which would require adjustments to or disclosure in
the Accounts, other than those given in Note 41 to the Financial Statements.
AuDitorS
The Banks Auditors during the period under review were Messrs KPMG Ford, Rhodes, Thornton & Co.,
Chartered Accountants. A sum of Rs. 6,043,000/- (2008 - Rs. 4,317,000/-) is payable to the Auditors by the
Bank as audit service fees for the year under review and Rs. 480,000/- (2008 - Rs. 1,727,000/-) as audit-
related fees. No non-audit fees was payable to the Auditors for the year 2009 (2008 - Rs. 197,000/-).
Consolidated audit fees payable to the Auditors for the year under review amounted to Rs. 7,170,000/-
(2008 - Rs. 6,789,000/-) as audit service fees, Rs. 480,000/- (2008 - Rs. 1,727,000/-) as audit-related fees and
Rs. 157,000/- (2008 - Rs. 703,000/-) as non-audit fees.
Based on the declaration made by Messrs KPMG Ford, Rhodes, Thornton & Co. and as far as the directors
are aware, the Auditors do not have any relationship with or interest in the Company or any of its subsidiaries
other than disclosed in the aforesaid paragraphs.
The retiring Auditors, Messrs KPMG Ford, Rhodes, Thornton & Co., have signified their willingness to
continue in office and a resolution to re-appoint them as Auditors and authorising the directors to fix their
remuneration will be proposed at the Annual General Meeting.
inDEPEnDEncE of thE AuDitorS
Based on an assessment carried out by the Board Audit Subcommittee, the board is of the opinion that the
External Auditors, Messrs KPMG Ford, Rhodes,Thornton & Co. can be deemed to be independent for all
intents and purposes considering the following factors:
NopartnerfromtheFirmisontheboardofSeylanBankorontheboardofanysubsidiarycompany.
Theauditfeeisnegotiatedandnotaboveindustrylevels.
The Auditors do not receive fees from other assignments except for certifications and SLAS
implementation assistance.
Compliedin2009withPartnerandAudit-teamrotation.
Afirmofhighrepute.
noticE of MEEtinG
Notice of Meeting relating to the Twenty Third Annual General Meeting of the Bank is included in this
Annual Report.
By Order of the Board,
E. narangoda r. nadarajah (Ms.) M.r.S. Gunasekara
Executive Chairman Executive Director Company Secretary
17th February 2010
i. intErESt rEGiStEr
The Bank carries out transactions in the ordinary course of business at commercial rates with entities in
which a Director of the Bank is the Chairman or a director of such entities. The transactions with entities
where a Director of the Bank either has control or exercises significant influence arising as a result of
common directorships and through shareholdings have been classified as related party transactions and
disclosed in Note 43 to the Financial Statements. The transactions with entities where directors of the Bank
hold directorships are disclosed below:
1. lEnDinG trAnSActionS with thE bAnk
Aggregate Amount of
Accommodation as at
31.12.2009
Company Name of Director &
Relationship
Nature of
Transaction
Limit
Rs. Mn.
Outstanding
Rs. Mn.
Security
Brown &
Company PLC
Mr. A.L. Devasurendra,
Deputy Chairman
Mr. I.C. Nanayakkara,
Director
Overdraft
Term Loan
140.000
100.000
1.209
100.000
Corporate Guarantee from
Standard Finance Limited
(Group Company of Brown & Co.
PLC) for Rs. 240 Mn., pledge of
275,100 shares of HNB held in
the custodian account at Seylan
Bank and availability of leeway
on the value of 5.3 Mn. shares
of HNB mortgaged to Standard
Finance (Private) Limited.
total 240.000 101.209
Standard Finance
(Pvt) Limited
Director
Term Loan 335.000 218.091 Mortgage over 5.3 Mn. shares
of HNB.
total 335.000 218.091
Taprobane
Holdings Limited
Managing Director
Director
Margin
Trading
15.000 Pledge of 5,607,800 quoted
shares (MV - Rs. 46.23 Mn.).
Ceylease
Financial Services
Limited *
Mr. P.L.P. Withana,
Director
(*Resigned w.e.f.
18.11.2009)
Revolving
Term Loan
Overdraft
200.000
20.000
* Assignment over performing

lease agreements at a ratio of
1:1.25 with a special Power of
Attorney up to maximum of
Rs. 275.00 Mn. (to secure the
term loans)
* Letter of undertaking to
substitute with performing leases
if a particular lease falls into
arrears for more than 03 months.
Repo for Rs. 2.7 Mn.
total 220.000
ANNExURE TO THE ANNUAL REPORT OF THE BOARD
ON THE STATE OF AFFAIRS OF THE COMPANY
Aggregate Amount of
Accommodation as at
31.12.2009
Relationship
Nature of
Transaction
Limit
Rs. Mn.
Outstanding
Rs. Mn.
Security
Lanka ORIx
Leasing Co. PLC
Mr. I.C. Nanayakkara
Deputy Chairman
Short-Term
Loan
Overdraft
Trust
Receipt
Revolving
Lease
Letter
of Credit
Usance
Post-Dated
Cheque
Facility
640.000
20.000
135.000
180.000
10.000
5.000
440.000
0.162
44.337
Lien over fixed deposit for

USD 2,840,678/09.
Lien over special foreign
currency account of USD
356,043/79.
Assignment over factoring and
lease receivables.
Commercial Paper for Rs. 600.0
Mn. (to be provided at the time of
issuance).
Commercial Paper Agreement.
Assignment over lease
Agreements for Rs. 625.0 Mn.
Absolute ownership over motor
vehicles to be leased.
Special Power of Attorney for
Rs. 10.0 Mn. over lease
agreement for Rs. 15.0 Mn.
total 990.0 484.499
Ishara Traders
(Pvt) Limited
Director
Overdraft 800.000 0.776 Mortgage and Power of Attorney
over shares of several blue-chip
companies.
Aggregate Amount of
Accommodation as at
31.12.2009
Relationship
Nature of
Transaction
Limit
Rs. Mn.
Outstanding
Rs. Mn.
Security
Maturata
Plantations
Limited
Director
Director
Overdraft
Term Loan
(PSRP I)
Term Loan
(PSRP II)
Term Loan
(PSRP III)
Term Loan
(PSRP IV)
Term Loan
(PSRP V)
Term Loan
(E-FRIENDS)
Term Loan (IV)
Term Loan (V)
Short-Term
Loan
Term Loan
(Tea Relief)
Term Loan
(Tea Relief)
Guarantee
125.000
41.911

18.737

2.274

10.600
13.732

0.380
6.000
10.600
3.000
43.748
26.000
2.000
39.318
41.911
18.737

2.274
10.500
13.732

0.380
6.000
10.600
3.000
43.748
NIL
1.250

Mortgage over leasehold rights of
Bramley Estate for Rs. 13.0 Mn. (MV -
Rs. 27.0 Mn., FSV - Rs. 22.0 Mn.)
Primary Mortgage for Rs. 36.0 Mn.
Secondary Mortgage for
Rs. 50.0 Mn. over leasehold rights
of Gonapitiya Estate (MV -
Rs. 160.0 Mn., FSV - Rs. 120.0 Mn.)
Mortgage over leasehold rights of
Alma Estate for Rs. 26.0 Mn. (MV -
Rs. 75.0 Mn., FSV - Rs. 65.0 Mn.)
Mortgage over leasehold rights
of Ragala Estate for Rs. 74.75 Mn.
(MV - Rs. 190.0 Mn., FSV -
Rs. 160.0 Mn.)
of Maha Uva Estate for Rs. 19.5
Mn. (MV - Rs. 75.0 Mn., FSV -
Rs. 65.0 Mn.)
of Enselwatte Estate for
Rs. 102.25 Mn. (MV - Rs. 270.0 Mn.,
FSV - Rs. 220.0 Mn.)
Letter of Comfort from Free
Lanka Trading Co. and Free
Lanka Plantations Co. (Pvt)
Limited for Rs. 75.0 Mn.
Overdraft Agreement for
Rs. 125.0 Mn.
Loan Agreement Forms for
Rs. 296.986 Mn.
total 303.982 191.450
Aggregate Amount of
Accommodation as at
31.12.2009
Relationship
Nature of
Transaction
Limit
Rs. Mn.
Outstanding
Rs. Mn.
Security
Lanka Hospital
Corporation PLC
Mr. P.G.S. Kariyawasam,
Director
Dr. N.H. Godahewa,
Director
Term Loan 98.750 8.855 Syndicate Loan Agreement
entered into by the Company
and the Bank. Primary mortgage
bonds over immovable and
movable assets of the Company
covering the loan up to 42.5%
of capital, interest and other
charges in favour of International
Finance Corporation (IFC) and
Consortium of Banks including
Seylan Bank.
- Concurrent mortgage over
moneys receivable in favour of
IFC and the Consortium of Banks.
- Partial syndication loan
Guarantee from IFC up to 57.5%
of the principal amount.
Sotse (Pvt)
Limited
Mr. E. Narangoda,
Chairman
Mr. R. Nadarajah,
Director
Term Loan 38.550 30.225 Loan Agreement Form for
Rs. 38.8 Mn.
Seyshop (Pvt)
Limited
Mr. E. Narangoda,
Chairman
Mr. R. Nadarajah,
Director
Rs. 55.1 Mn.
Seybest (Pvt)
Limited
Mr. E. Narangoda,
Chairman
Mr. R. Nadarajah,
Director
Rs. 55.1 Mn.
Esots (Pvt)
Limited
Mr. E. Narangoda,
Chairman
Mr. R. Nadarajah,
Director
Rs. 54.6 Mn.
2. trADinG trAnSActionS with thE bAnk
Company Name of Director & Relationship Nature of Transaction Amount
Rs. Mn.
Brown & Company PLC Mr. A.L. Devasurendra, Deputy Chairman
Mr. I.C. Nanayakkara, Director
Purchase of 2 Nos. of
mailing metres and base
0.537
Ceylease Financial
Services Limited*
Mr. P.L.P. Withana, Director
(*Resigned w.e.f. 18.11.2009) Interest expense 0.292
Capital Payment 203.015
Interest received 17.406
Seylan Bank Employees
Gratuity Trust Fund* Mr. E. Narangoda, Trustee
Funds transferred by
Seylan Bank 31.758
Mr. R. Nadarajah, Trustee
Rear Admiral (Rtd.) B.A.J.G. Peiris, Trustee
Investment in Treasury
Bond 568.423
Mr. F.N. Goonewardena, Trustee
(*Resigned w.e.f. 03.12.2009)
Lanka ORIx Leasing Co. PLC Mr. I.C. Nanayakkara, Deputy Chairman Interest received
Interest paid
2.634
18.097
Sri Lanka Insurance
Corporation Limited
Mr. P.G.S. Kariyawasam, Chairman
Dr. N.H. Godahewa, Managing Director
Interest payable 2.564
Sotse (Pvt) Limited Mr. E. Narangoda, Chairman Interest received 1.385
Mr. R. Nadarajah, Director
Seyshop (Pvt) Limited Mr. E. Narangoda, Chairman Interest received 1.505
Seybest (Pvt) Limited Mr. E. Narangoda, Chairman Interest received 1.492
Esots (Pvt) Limited Mr. E. Narangoda, Chairman Interest received 1.526
ii. DirEctorS who hElD DirEctorShiPS in liStED coMPAniES DurinG 2009
Name of Director Name of Listed Company
Mr. R. Nadarajah Seylan Developments PLC
(formerly: Ceylinco Seylan Developments PLC)
Mr. P.L.P. Withana Dankotuwa Porcelain PLC (resigned w.e.f. 30.06.2009)
Rear Admiral (Rtd.) B.A.J.G. Peiris Seylan Developments PLC
(formerly: Ceylinco Seylan Developments PLC)
Mr. P.G.S. Kariyawasam Lanka Hospitals Corporation PLC
Dr. N.H. Godahewa Lanka Hospitals Corporation PLC
Mr. A.L. Devasurendra Brown & Company PLC
Mr. I.C. Nanayakkara Brown & Company PLC
Lanka ORIx Leasing Company PLC
Touchwood Investments PLC
DIRECTORS RESPONSIBILITY FOR FINANCIAL REPORTING
In terms of the provisions of the Companies Act No. 07 of 2007, the directors are responsible for ensuring
that the Bank maintains proper books of account of all its transactions so as to -
(i) enable the financial position of the Company to be determined with reasonable accuracy at any time;
(ii) enable the directors to prepare Financial Statements in accordance with the Act; and to
(iii) enable the Financial Statements of the Company to be readily and properly audited.
In terms of Sections 150 (1), 151 (1), 152 (1) and 153 (1) of the Companies Act, the directors are required
to ensure that Financial Statements are prepared that give a true and fair view of the state of affairs of the
Company and the Group and the profit or loss for the year ended on the Balance Sheet date.
Accordingly, the directors have ensured that proper books of account have been maintained and have also
taken reasonable steps to ensure the accuracy and reliability of accounting records. The financial reporting
system is also reviewed by the board through the management accounts submitted at board meetings and
by the Audit Committee. The Banks Interim and Audited Financial Statements are also reviewed by the Audit
Committee and the board prior to their release.
The Financial Statements of the Bank and the Group give a true and fair view of the state of affairs of
the Bank and its subsidiaries and the profit/loss for the year ended 31st December 2009. The Financial
Statements of the Bank and the Group have been certified by the Banks Chief Financial Officer, the person
responsible for their preparation and signed by two directors and the Company Secretary of the Bank on
17th February 2010.
The Banks Financial Statements for the year ended 31st December 2009 and presented in this Annual
Report are consistent with the underlying books of account of the Bank and are in conformity with the
Sri Lanka Accounting Standards, Companies Act No. 07 of 2007, Sri Lanka Accounting and Auditing
Standards Act No. 15 of 1995, the Banking Act No. 30 of 1988 (as amended), the Listing Rules of the Colombo
Stock Exchange and the Code of Best Practice 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 directors also confirm that in preparing the Financial Statements for the year ended 31st December
2009 published on pages 136 to 226 of this Annual Report, appropriate accounting policies have been selected
and applied on a consistent basis with material departures (if any) disclosed in the Financial Statements and
the rationale for same provided.
The directors also confirm that the Bank and its quoted subsidiaries have met all the requirements under
Section 7 of the Listing Rules of the Colombo Stock Exchange.
The board has also taken reasonable measures to safeguard the Banks assets and ensure continuity of
operations. To this end, effective internal control systems are in place to prevent frauds and irregularities
and ensure as far as practicable the accuracy and reliability of records.
The Banks Auditors, Messrs KPMG Ford, Rhodes, Thornton & Co. carry out reviews and sample checks on
the effectiveness of the systems of internal control, as they consider appropriate and necessary in providing
their opinion on the Financial Statements. Messrs KPMG Ford, Rhodes, Thornton & Co. have examined the
Financial Statements made available together with all other financial records, minutes of shareholders and
directors meetings and related information and have expressed their opinion which appears on pages 136
and 137 of this Annual Report.
The board of directors confirm that they have authorised the distribution of the proposed dividend after
having satisfied that the Bank would meet the solvency test in terms of the provisions of the Companies Act
No. 07 of 2007 immediately after the dividend payment. The board has obtained a statement of solvency from
the External Auditors in relation to the proposed dividend payment.
The directors confirm that to the best of their knowledge and belief, all statutory payments due and
payable to all statutory and regulatory authorities as at the Balance Sheet date, have been paid by the Bank
or where relevant provided for.
The directors further confirm that having considered the financial position, operating conditions,
regulatory and other factors and such other matters required to be addressed in the Corporate Governance
Code, the Bank has adequate resources to continue its operations in the foreseeable future. The Financial
Statements of the Bank have accordingly been prepared on a going concern basis.
The directors are of the view that they have discharged their obligations as set out in this statement.
By order of the board of directors
(Ms.) M.r.S. Gunasekara
Company Secretary
17th February 2010
INDEPENDENT AUDITORS REPORT
to thE ShArEholDErS of SEYlAn bAnk Plc
report on the financial Statements
We have audited the accompanying financial statements of Seylan Bank PLC (the Company), and the
consolidated financial statements of the Company and its subsidiaries (the Group) as at 31st December
2009, which comprise the balance sheet as at that date, and the income statement, statement of changes
in equity and cash flow statement for the year then ended, and a summary of significant accounting policies
and other explanatory notes as set out on pages 138 to 226 of this Annual Report.
Managements 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, including specific directions/exemptions from the Central Bank
of Sri Lanka as a measure of ongoing support resulting from the restructuring of the Bank. We therefore
believe that our audit provides a reasonable basis for our opinion.
opinion - company
In our opinion, so far as appears from our examination, the Company maintained proper accounting
records for the year ended 31st December 2009 and the financial statements give a true and fair view of the
Companys state of affairs as at 31st December 2009 and its profit and cash flows for the year then ended
in accordance with Sri Lanka Accounting Standards and specific directions/exemptions received from the
Central Bank of Sri Lanka that were used in applying the said Accounting Standards.
opinion - Group
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at
31st December 2009 and the profit and cash flows for the year then ended, in accordance with Sri Lanka
Accounting Standards and specific directions/exemptions received from the Central Bank of Sri Lanka that
were used in applying the said Accounting Standards, of the Company and its subsidiaries dealt with thereby,
so far as concerns the members of the Company.
report on other legal and regulatory requirements
These financial statements also comply with the requirements of Section 153(2) to 153(7) of the Companies
Act No. 07 of 2007 and present the information required by the Banking Act, No 30 of 1988.
CHARTERED ACCOUNTANTS
17th February 2010
Colombo, Sri Lanka.
INCOME STATEMENT
BANK GROUP
For the Year ended 31st December 2009 2008 2009 2008
(Reclassified) (Restated)
Note rs. 000 Rs. 000 rs. 000 Rs. 000
income 2 23,154,529 25,246,209 24,538,978 27,053,951
Interest Income 3 20,708,034 21,552,070 21,796,473 23,156,161
Less: Interest Expenses 4 13,492,053 14,361,452 14,389,303 15,875,504
net interest income 7,215,981 7,190,618 7,407,170 7,280,657
Foreign Exchange Profit 521,388 670,731 521,388 670,731
Net Fee and Commission Income 5 1,169,124 1,749,737 1,225,310 1,778,320
Other Income 6 650,856 1,221,582 879,701 1,385,305
operating income 9,557,349 10,832,668 10,033,569 11,115,013
less: operating Expenses 7
Personnel Expenses 8 2,385,255 3,405,714 2,500,429 3,608,728
Premises, Equipment & Establishment
Expenses 1,608,097 1,505,226 1,619,848 1,615,111
Provision for Loan Losses 9 2,183,132 2,467,187 2,227,623 2,804,112
Diminution/(Appreciation) in Value of
Investments 10 (47,094) 40,684 (41,965) 277,099
Other Overhead Expenses 2,535,387 3,258,616 2,794,004 3,545,542
8,664,777 10,677,427 9,099,939 11,850,592
Profit/(loss) from operations
before taxation 892,572 155,241 933,630 (735,579)
Less: Income Tax Expense 11 349,271 484,869 64,224
Profit/(loss) for the Year 543,301 155,241 448,761 (799,803)
Attributable to -
Equity Holders of the Bank 543,301 155,241 569,208 (142,993)
Minority Interest (120,447) (656,810)
net Profit/(loss) for the Year
543,301 155,241 448,761 (799,803)

basic Earnings/(loss) per Share (rs.) 12 2.83 0.90 2.97 (0.89)
Dividends per Share (rs.) * 0.50 0.50
Notes to the Consolidated Financial Statements from pages 143 to 226 form an integral part of these Financial
Statements.
* Based on the final dividend proposed to be approved at the Annual General Meeting.
BALANCE SHEET
BANK GROUP
As at 31st December 2009 2008 2009 2008
(Reclassfied) (Restated)
Note rs. 000 Rs. 000 rs. 000 Rs. 000
Assets
Cash & Cash Equivalents 14 4,683,805 5,511,331 4,691,881 5,680,774
Balance with Central Bank of Sri Lanka 15 5,084,229 6,857,039 5,084,360 6,857,153
Commercial Papers 324,500 390,000 324,500 390,000
Securities Purchased under Resale Agreements 2,951,860 664,934 2,955,390 855,055
Dealing Securities 16 14,544,172 865,977 16,475,533 1,410,066
Investment Securities 17 14,897,394 24,243,200 16,421,677 27,261,001
Bills of Exchange 18 1,322,364 1,471,831 1,322,364 1,471,831
Loans & Advances 19 76,038,971 97,746,084 76,045,385 99,078,324
Lease Rentals Receivable within One Year 20 1,598,684 2,245,873 1,598,684 3,189,889
Lease Rentals Receivable later than One Year
and not later than Five Years 21 1,325,892 2,686,524 1,325,892 3,792,276
Lease Rentals Receivable after Five Years 22 1,894 3,813 1,894 9,927
Investments in Associate Companies 54,315
Investments in Subsidiary Companies 23 860,166 948,529
Group Balances Receivable 24 808,655 623,180
Investment Properties 25 520,812 520,812 1,504,676 1,541,058
Current Taxation 89,654 108,273 89,654 108,273
Deferred Taxation 26 454,213 91,582 454,360 95,790
Property, Plant & Equipment 27 3,324,034 4,073,353 4,111,573 4,938,612
Leasehold Rights 28 63,083 64,165 664,220 673,180
Intangible Assets 29 25,410
Other Assets 30 3,881,490 4,929,745 4,195,808 5,875,555
total Assets 132,775,872 154,046,245 137,267,851 163,308,489
liabilities
Deposits 31 104,815,899 107,938,801 104,815,899 109,505,539
Borrowings 32 3,055,840 7,105,018 3,498,704 9,208,809
Securities Sold under Repurchase Agreements 1,878,704 14,516,393 4,174,877 19,085,870
Group Balances Payable 33 9,575 1,523,992
Advance Received against Debentures 34.a 630,565 630,565
Debentures 34.b 4,230,365 4,056,900 4,230,365 4,253,835
Current Tax Liabilities 142,732 25,343
Other Liabilities 35 8,203,015 11,254,565 8,493,187 11,901,450
total liabilities 122,193,398 147,026,234 125,355,764 154,611,411
Equity
Stated Capital 36 5,567,820 2,542,420 5,567,820 2,542,420
Statutory Reserve Fund 37 506,919 479,754 506,919 481,650
Reserves 38 4,507,735 3,997,837 5,034,399 4,762,455
total Equity Attributable to Equity holders of the bank 10,582,474 7,020,011 11,109,138 7,786,525
Minority interest 802,949 910,553
total Equity 10,582,474 7,020,011 11,912,087 8,697,078
total liabilities & Equity 132,775,872 154,046,245 137,267,851 163,308,489
commitments & contingencies 39 22,262,562 26,874,375 22,262,562 26,874,375
Notes to the Consolidated Financial Statements from pages 143 to 226 form an integral part of these Financial Statements.
The Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

raaj De Silva Ajita Pasqual
Chief Financial Officer General Manager/Chief Executive

Approved and signed for and on behalf of the board.

Eastman narangoda r. nadarajah Ms. M.r.S. Gunasekara
Executive Chairman Executive Director Company Secretary

17th February 2010
For the Year ended 31st December - Bank
Stated Capital
Share Share Reserve Retained Revaluation Other
Capital Premium Fund Profits Reserve Reserves Total
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000
Balance as at 01.01.2008 1,705,101 837,319 468,250 3,374,839 198,918 451,808 7,036,235
Effect of Change in Accounting Policy due to
Adoption of SLAS 16 (Revised 2006) 74,849 74,849
Adjustment to Reserve Fund* 3,742 (3,742)
Revised Balance as at 01.01.2008 1,705,101 837,319 471,992 3,445,946 198,918 451,808 7,111,084
Net Profit Attributable to the Shareholders of the Bank 155,241 155,241
Dividends (Note 13) (255,900) (255,900)
Transfers from/to Retained Profits 7,762 75,504 (83,266)
Other Transfers 9,586 9,586
Balance as at 31.12.2008 1,705,101 837,319 479,754 3,420,791 125,238 451,808 7,020,011
Balance as at 01.01.2009 1,705,101 837,319 479,754 3,420,791 125,238 451,808 7,020,011
Issue of Ordinary Voting Shares 3,025,400 3,025,400
Net Profit Attributable to the Shareholders of the Bank 543,301 543,301
Dividends (Note 13) (6,238) (6,238)
Transfers from/to Retained Profits 27,165 (27,165)
balance as at 31.12.2009 4,730,501 837,319 506,919 3,930,689 125,238 451,808 10,582,474
* 5% of the adjustment to the opening balance of the Retained Profits (as at 01.01.2008) has been transferred to Reserve Fund in order to
comply with the Sections 20 (1) and (2) of the Banking Act No. 30 of 1988.
For the Year ended 31st December - Group
STATEMENT OF CHANGES IN EQUITY
Stated Capital
Share Share Reserve Special Risk Retained Revaluation Other Minority Total
Capital Premium Fund Reserve Profits Reserve Reserves Total Interest Equity
(Restated) (Restated) (Restated) (Restated) (Restated) (Restated) (Restated) (Restated)
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000
Balance as at 01.01.2008 1,705,101 837,319 470,146 4,515 3,949,125 564,242 714,326 8,244,774 1,711,895 9,956,669
Effect of Change in Accounting
Policy due to Adoption of SLAS 16
(Revised 2006) 71,012 71,012 (3,726) 67,286
Adjustment to Reserve Fund* 3,742 (3,742)
Impact of Non-Uniform
Accounting Policies
by Subsidiaries (Note 48) (137,830) (137,830) (132,372) (270,202)
Revised Balance as at 01.01.2008 1,705,101 837,319 473,888 4,515 3,878,565 564,242 714,326 8,177,956 1,575,797 9,753,753
Profit as Reported in the
previous year 166,492 166,492 (259,666) (93,174)
Prior Year Adjustment (Note 47) (309,485) (309,485) (397,144) (706,629)
Net Profit Attributable to the
Shareholders/Minority (142,993) (142,993) (656,810) (799,803)
Dividends (Note 13) (255,900) (255,900) (255,900)
Adjustment of Change in
Minority Interest 12,972 12,972
Dividend Paid to Minority (21,406) (21,406)
Other Transfers (2,124) 9,586 - 7,462 7,462
As at 31.12.2008 (Restated) 1,705,101 837,319 481,650 4,515 3,553,052 490,562 714,326 7,786,525 910,553 8,697,078
Balance as at 01.01.2009 1,705,101 837,319 481,650 4,515 3,553,052 490,562 714,326 7,786,525 910,553 8,697,078
Issue of Ordinary Voting Shares 3,025,400 3,025,400 3,025,400
Net Profit Attributable to the
Shareholders/Minority 569,208 569,208 (120,447) 448,761
Dividends (Note 13) (6,238) (6,238) (6,238)
Deconsolidation Adjustment (1,896) (234,709) (6,670) (7,305) (250,580) (784) (251,364)
Effect on Change in % holding
in Subsidiary (15,177) (15,177) 13,627 (1,550)
balance as at 31.12.2009 4,730,501 837,319 506,919 42,595 3,800,891 483,892 707,021 11,109,138 802,949 11,912,087
* 5% of the adjustment to the opening balance of the Retained Profits (as at 01.01.2008) has been transferred to Reserve Fund in order to
comply with the Section 20 (1) and (2) of the Banking Act No. 30 of 1988.
CASH FLOW STATEMENT
BANK GROUP
rs. 000 Rs. 000 rs. 000 Rs. 000
cash flows from operating Activities
Interest Receipts 19,968,676 20,872,930 21,138,875 22,686,039
Fees and Commission Receipts 1,274,251 1,737,414 1,380,835 1,959,650
Interest Payments (13,489,437) (13,816,538) (14,386,685) (15,330,589)
Exchange Income 521,388 670,731 521,388 670,731
Receipts from Other Operating Activities 658,522 647,194 658,522 874,073
Cash Payments to Employees and Suppliers (6,174,015) (6,725,188) (6,361,407) (7,814,139)
Payments on Other Operating Activities (105,127) (52,089) (116,136) (63,434)
operating Profit before changes in
operating Assets & liabilities [note (a)] 2,654,258 3,334,454 2,835,392 2,982,331
(increase)/Decrease in operating Assets:
Funds (Advanced to)/Repaid by Customers 19,983,292 (7,025,231) 25,020,404 (9,170,454)
Deposits Held for Regulatory or Monetary Control Purposes 1,772,810 1,058,621 1,772,793 1,058,587
increase/(Decrease) in operating liabilities:
Deposits from/(Withdrawals by) Customers (3,194,089) (3,012,171) (4,760,827) (2,582,682)
Negotiable Certificates of Deposit 71,187 (348,640) 71,187 (348,640)
cash (used in)/Generated from operations 21,287,458 (5,992,967) 24,938,949 (8,060,858)
Income Tax Paid (386,797) (467,427) (406,347) (548,251)
Contribution Paid into Staff Retirement Benefit Plan (31,739) (134,816) (31,739) (134,816)
Adjustment Due to Deconsolidation (1,713,474)
net cash (used in)/Generated from operating Activities 20,868,922 (6,595,210) 22,787,389 (8,743,925)
cash flows from investing Activities
Investment in Subsidiary & Associate Company
Shares/Debentures (201,250)
Proceeds from Sale of Subsidiary/Associate Investments 4,753 44,848 4,753 18,760
Dividends Received 5,199 223,294 5,199 8,710
Treasury Bills/Bonds Maturing after 03 Months (10,210,450) (2,041,583) (10,392,733) (792,314)
Purchase of Dealing Securities (205,314) (219,959) (301,267)
Proceeds from Sale of Dealing Securities 257,010 553,101 537,296
Purchase of Non-Dealing Securities/Investments in Projects (2,250) (2,250)
Proceeds from Sale of Non-Dealing Securities/
Investments in Projects 65,500 782,727 320,821 784,136
Purchase of Property, Plant & Equipment (227,235) (1,456,575) (227,941) (1,498,408)
Proceeds from Sale of Property, Plant & Equipment 194,214 396,531 214,531 402,528
Proceeds from Sale of Investment Property 137,500 151,400
Purchase of Investment Property (371,418) (371,418)
Adjustment due to Deconsolidation (22,696)
net cash (used in)/Generated from investing Activities (10,116,323) (2,488,176) (9,764,924) (1,062,827)
cash flows from financing Activities
Proceeds from Issue of Debentures 72,550 64,900
Advance Received on Debenture Issue 630,565 630,565
Repayments on Redemption of Debentures (457,100) (1,395,010) (654,035) (1,617,612)
Proceeds from Issue of New Shares 3,025,400 3,025,400
Securities Sold under Repurchase Agreements (12,637,689) 11,394,739 (14,910,993) 10,197,755
Net Increase/(Decrease) in Other Borrowings (5,149,617) 1,917,755 (7,363,936) 1,949,443
Dividends Paid (513) (254,924) (8,276) (267,468)
Share/Debenture Issue Expenses (18,758) (5,307) (18,758) (5,307)
Adjustment due to Deconsolidation 2,162,363
net cash from financing Activities (15,238,277) 12,360,368 (17,768,235) 10,952,276
Net Increase in Cash & Cash Equivalents (4,485,678) 3,276,982 (4,745,770) 1,145,524
Cash & Cash Equivalents at beginning of the Period 12,240,216 8,963,234 12,937,088 11,791,564
Adjustment due to Deconsolidation [Note (b)] (359,781)
cash & cash Equivalents at End of the Period 7,754,538 12,240,216 7,831,537 12,937,088
reconciliation of cash & cash Equivalents
Cash and Cash Equivalents - [Note 14] 4,683,805 5,511,331 4,691,881 5,680,774
Treasury Bills/Bonds Maturing within 03 Months 118,873 6,063,951 184,266 6,401,259
Securities Purchased under Resale Agreement 2,951,860 664,934 2,955,390 855,055
7,754,538 12,240,216 7,831,537 12,937,088
BANK GROUP
rs. 000 Rs. 000 rs. 000 Rs. 000
note (a) reconciliation of operating Profit
Profit before Taxation 892,572 155,241 933,630 (735,579)
Dividend Income (5,199) (223,295) (5,199) (8,710)
(Profit)/Loss on Sale of Investment Securities 7,590 697
(Profit)/Loss on Sale of
Property, Plant & Equipment (2,978) (100,080) (22,531) (103,696)
Depreciation - Freehold
Property, Plant & Equipment 785,318 707,205 812,884 752,954
Depreciation - Leasehold
Property, Plant & Equipment 1,082 692 8,960 8,575
Depreciation of Investment Property 20,066 22,151
(Profit)/Loss on Sale of Investment Property (53,765) (56,476)
Gain on Transfer of Investments to
Trading Portfolio (197,248) (197,248)
Provision for Loan Losses 2,183,132 2,467,187 2,227,623 2,804,112
VAT Accruals 25,813 (9,550) 25,813 (9,550)
Provision for Staff Retirement Benefit (458,111) 131,379 (461,272) 141,276
Impairment Loss - Provision/(Reversal) (3,855) 301,280 (3,855) 374,030
(Profit)/Loss on Sale of Dealing Securities 9,213 9,213 (17,750)
Provision for Doubtful Receivables 32,880 16,338 112,977 72,664
Diminution/(Appreciation) in Value of Investments (47,094) (3,370) (41,965) 221,740
(Profit)/Loss on Sale of
Shares of Associates/Subsidiaries 6,630 (187,825) (5,788)
Share of Associates (Profit)/Loss
(Net of Income Tax) 16,962 (4,365)
Issue Expenses on Debentures/Shares 18,758 5,307 18,758 5,307
Notional Tax (439,968) (251,033) (439,968) (251,033)
Interest Receivable (299,388) (448,467) (217,631) (727,515)
Leave Encashment Provision 19,408 42,281 19,409 42,282
Increase/(Decrease) in Interest
Payable & Accrued Expenses (63,955) 794,352 1,753 654,253
2,654,258 3,334,454 2,835,392 2,982,331
note (b) net cash flow effect on Deconsolidation of Seylan Merchant bank Plc on 01st october 2009
Elimination of net Assets Excluding cash & cash Equivalents rs. 000
Investments 22,696
Loans & Advances 3,397,347
Investment Properties 16,316
Property, Plant & Equipment 50,097
Other Assets 88,879
Deposits (1,568,864)
Borrowings (1,672,031)
Debentures (196,935)
Other Liabilities (497,286)
cash & cash Equivalents Decrease on Deconsolidation (359,781)
1. rEPortinG EntitY
Seylan Bank PLC (Bank) is a public quoted company incorporated on 28th August 1987 and domiciled in
Sri Lanka. The registered office of the Bank is situated at No. 90, Galle Road, Colombo 03. The shares of the
Bank have a primary listing on the Colombo Stock Exchange.
The staff strength of the Bank as at 31st December 2009 is 3,733 (2008 - 3,923).
The Consolidated Financial Statements of the Bank for the year ended 31st December 2009 include the
Bank and its subsidiaries (together referred to as the Group and individually as Group entities). The Bank
does not have an identifiable Parent of its own. There were no significant changes in the nature of the
principal activities of the Bank and the Group during the financial year under review.
1.1 Principal Activities
1.1.1 bank
The principal activities of the Bank are banking and related activities such as accepting deposits, personal
banking, trade financing, off-shore banking, resident and non-resident foreign currency operations, travel
related services, corporate and retail credit, project financing, lease financing, rural credit, issuing of local
and international credit cards, telebanking facilities, Internet banking, dealing in Government Securities, etc.
1.1.2 Subsidiaries
The subsidiaries of the Bank are Seylan Bank Asset Management Limited, Seylan Developments PLC and
Seylan Merchant Bank PLC (deconsolidated with effect from 1st October 2009) and the principal activities
of these subsidiaries are primary dealing, property developing and providing financial services respectively.
1.2 basis of Preparation
1.2.1 Statement of compliance
The Balance Sheet, Income Statement, Statement of Changes in Equity and Cash Flow Statement have been
prepared in accordance with the Sri Lanka Accounting Standards laid down by the Institute of Chartered
Accountants of Sri Lanka and comply with the requirements of the Companies Act No. 07 of 2007 and
Banking Act No. 30 of 1988 and amendments thereto.
1.2.2 Approval of financial Statements by Directors
The Financial Statements were authorised for issue by the board of directors on 17th February 2010.
1.2.3 basis of Measurement
The Financial Statements have been prepared on the historical cost basis and applied consistently with no
adjustments being made for inflationary factors affecting the Financial Statements, except for the following:
Land and buildings are measured at cost at the time of acquisition and subsequently at revalued
amounts, which are the fair values at the date of revaluation less accumulated depreciation and
impairment losses, if any.
Dealing securities are measured at market value, adjustments for changes in market values are
accounted for in the Income Statement.
1.2.4 functional and Presentation currency
The Financial Statements are presented in Sri Lankan Rupees, which is the Banks functional currency. Except
as indicated, financial information presented in Sri Lankan Rupees has been rounded to the nearest thousand.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.2.5 use of Estimates and Judgments
The preparation of Financial Statements requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgments
in applying accounting policies that have the most significant effect on the amounts recognised in the
Consolidated Financial Statements are described in the following Notes:
Notes16&17-ClassificationofDealing(Trading)andInvestmentSecurities
Note17-AssessmentofImpairmentofInvestmentSecurities
Note19b-AnalysisofProvisionforLoanLosses
Note25-InvestmentProperty
Note26-DeferredTaxation
Note35a-MeasurementofDefinedBenefitObligations
1.3 Materiality and Aggregation
Each material class of similar items is presented separately in the Financial Statements. Items of a dissimilar
nature or function are presented separately unless they are immaterial.
1.4 Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these
Financial Statements. The accounting policies of the Bank have been consistently applied by Group entities
where applicable and deviations if any, have been disclosed accordingly.
1.4.1 basis of consolidation
1.4.1.1 Subsidiaries
Subsidiaries are entities that are controlled by the Bank. Control exists when the Bank has the power,
directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from
its activities. In assessing control, potential voting rights, which presently are exercisable, are taken into
account. 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 minority
interests are presented in the Consolidated Balance Sheet within Equity, separately from the equity
attributable to the equity holders of the Bank.
The Group Financial Statements comprise a consolidation of the Financial Statements of the Company
and its subsidiaries incorporated in Sri Lanka, Seylan Bank Asset Management Limited (100%) and Seylan
Developments PLC (50.29%). Financial Statements of Seylan Merchant Bank PLC have been deconsolidated
with effect from 1st October 2009.
Subsidiary Companies Nature of Business
Seylan Bank Asset Management Limited Primary Dealer
Seylan Developments PLC Property Developers
Seylan Merchant Bank PLC
(deconsolidated with effect from 1st October 2009) Financial Services
The total profit/loss of the subsidiaries are included in the Consolidated Income Statement, and the
proportion of the profit or loss after taxation applicable to outside shareholders is shown under the heading
Minority Interest (SLAS 26). All assets and liabilities of the Company and its subsidiaries are included in
the Group Balance Sheet. The interest of the outside shareholders in the net assets of the Group is stated
separately in the Consolidated Balance Sheet within Equity under the heading Minority Interest.
1.4.1.2 Transactions Eliminated on Consolidation
(a) Intra-Group Transactions
Intra-group balances and 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.
(b) Profit and Loss
In arriving at the profit attributable to the shareholders of Seylan Bank PLC, the total profits or losses of the
subsidiaries are included in the Consolidated Income Statement after eliminating intra-group transactions
and the portion of the profit or loss after taxation applicable to non-group shareholders.
(c) Assets and Liabilities
All assets and liabilities of the Company and its subsidiaries are included in the Consolidated Balance Sheet.
The proportionate interest of the non-group shareholders in the net assets employed is stated separately in
the Consolidated Balance Sheet under the heading Minority Interest.
(d) Non-Uniform Accounting Policies
The impact of non-uniform accounting policies adopted by subsidiaries has been adjusted in the consolidated
accounts. The details of the adjustments are disclosed in Note 48.
1.4.2 foreign currency translation
Transactions in foreign currencies in Domestic Banking Unit are translated to Sri Lankan Rupees at the
middle rate of exchange ruling at the date of the transaction. Monetary items denominated in foreign
currencies at the Balance Sheet date are translated to Sri Lankan Rupees at the middle rate of exchange
ruling at that date. Foreign exchange differences arising on the settlement or reporting of the Banks
monetary items at rates different from those which were initially recorded are dealt in the Income Statement.
Non-monetary assets and liabilities denominated in foreign currency that are stated at historic cost at the
Balance Sheet date are translated to Sri Lankan Rupees at the foreign exchange rates ruling at that date.
Forward exchange contracts are valued at the forward market rates ruling on the date of the Balance
Sheet. Unrealised gains and losses are dealt with through the Income Statement.
Foreign Currency Banking Unit (FCBU) balances have been converted at closing rate for all monetary
items and historic rate for non- monetary items. Income Statement of the FCBU has been converted at the
monthly average rate. Differences arising from conversion are recognised in the Income Statement.
Assets and basis of their valuation
1.4.3 Statutory Deposit with central banks
The Monetary Law Act requires that all commercial banks operating in Sri Lanka maintain reserves against
all deposit liabilities denominated in Sri Lankan Rupees. The details of reserve requirements are given
in Note 15.
1.4.4 Government of Sri lanka treasury bills and bonds
1.4.4.1 Investment in Treasury Bills and Bonds Held for Dealing
The Bank has adopted a policy of marking to market its Trading Portfolio of Government Securities in line
with the directions made by the Monetary Board of the Central Bank of Sri Lanka under Section 46 (1) of the
Banking Act No. 30 of 1988 amended by the Banking (Amendment) Act No. 33 of 1995 and Act No. 2 of 2005.
The Trading Portfolio of Seylan Bank Asset Management Limited is being marked to market based on the
weighted average rates circulated by CBSL and gains or losses recognised in the Profit and Loss Account.
1.4.4.2 Securities Purchased Under Resale Agreements (Reverse Repurchase Transactions)
These are loans collateralised by the purchase of Treasury Bills and/or guaranteed commercial papers from
the counterparty to whom 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. These loans
are stated in the Balance Sheet at cost.
1.4.5 Advances to customers
Advances to customers are stated in the Balance Sheet net of provisions for possible loan losses and
also net of interest which is not accrued to revenue. Banks policy is to discontinue accruing interest on
non-performing loans and advances after 12 months.
1.4.6 Provision for loan losses
1.4.6.1 Specific Provision for Loan Losses and Leases
In accordance with the direction issued by the Central Bank of Sri Lanka on 8th May 2008, Direction No. 3
of 2008 Classification of Loans & Advances, Income Recognition & Provisioning specific provisions on NPA
(as a minimum) are made as follows:
Category of Minimum Specific
NPA Credit Quality Provision Requirement
(Net of Security)
Substandard -
Credit Cards 25%
Other Advances 20%
Doubtful 50%
Loss 100%
The provision made relates to all categories of loans and advances including pawning and leasing
identified as substandard, doubtful and loss.
Where necessary, specific provisions have been made over and above the minimum percentages stipulated
above, on a case by case basis.
In addition to the specific provisions for possible loan losses made on the basis of a continuous review of
all loans and advances to customers in accordance with the Sri Lanka Accounting Standard 23 on Revenue
Recognition and Disclosures in the Financial Statements of Banks and the directions issued by the Central
Bank of Sri Lanka, the Bank evaluates the need for additional provisions for loans and advances based
upon managements best estimate of recoverability. In estimating the recoverability the management makes
judgments about the borrowers financial situation, the workout strategy and the net realisable value of any
underlying collateral.
1.4.6.2 General Provision
The general provisions cover loan losses inherent in portfolios with similar credit risk characteristics
(e.g., portfolio of loans, advances and lease receivables), when there is objective evidence to suggest that
they contain impaired loans, but the individual impaired loans cannot yet be identified. In assessing the need
for general provision for loan losses, management considers factors such as credit quality, portfolio size,
concentrations and economic factors. In order to estimate the required provisions, assumptions are made
to define the way inherent losses are determined based on historical experience.
The amount of potential losses not specifically identified but which experience indicates are present
in the portfolio of loans, advances and lease receivables are recognised as a general provision in the
Income Statement.
In addition, the direction issued by the Monetary Board of the Central Bank of Sri Lanka, in terms of Section
46 of the Banking Act No. 30 of 1988, as amended, in Requirements to Maintain a General Provision for
Advances requires all licensed commercial banks to maintain a general provision of 1% of the total on Balance
Sheet, performing loans and advances and on Balance Sheet overdue loans and advances, net of interest in
suspense and credit facilities secured by cash deposits, gold or Government Securities with the same bank. The
general provision was commenced with a minimum of 0.1% provision as at 31st December 2006 and thereafter
incremental provisions were made on the same basis till 31st March 2009, with the view of meeting the total
provision requirement of 1% by 31st March 2009.
1.4.7 investments
1.4.7.1 Investments in Subsidiaries
Investments in subsidiaries are stated at cost in the Banks Financial Statements in accordance with the
Sri Lanka Accounting Standard 26 on Consolidated Financial Statements and Accounting for Investments
in Subsidiaries.
1.4.7.2 Investments in Associates
Investments in associates are accounted under the Equity Method in Consolidated Financial Statements in
accordance with the Sri Lanka Accounting Standard 27 on Accounting for Investments in Associates.
1.4.7.3 Dealing Securities
These are marketable securities acquired and held with the intention to resale over a short period of time.
Such securities are recorded at market values, adjustments for changes in market values are accounted for
in the Income Statement. In classifying securities as Dealing (Trading), the Bank has determined that it
meets the description for such classification.
1.4.7.4 Investment Securities
These are acquired and held for yield or capital growth in the medium/long term. Such securities are
recorded at cost. Changes in market values of these securities are not taken into account unless there is
considered to be a permanent diminution in value. In classifying securities as Investment, the Bank has
determined that it has both the positive intention and ability to hold the securities until their maturity date.
Unquoted long-term investments are stated at cost.
1.4.7.5 Investment Properties
Investment properties are properties held either to earn rental income or for capital appreciation or both
but not for sale in the ordinary course of business, used in the production or supply of goods or services or
for administrative purposes.
Basis of Recognition
Investment property is recognised if it is probable that future economic benefits that are associated with the
investment property will flow to the Group and cost of the investment property can be reliably measured.
Measurement
An investment property is measured initially at its cost. The cost of a purchased investment property comprises
of its purchase price and any directly attributable expenditure. The cost of a self-constructed investment is
its cost at the date when the construction or development is completed. The Group applies the cost model
for investment properties in accordance with Sri Lanka Accounting Standard 40 - Investment Property
(Revised 2005). Accordingly, land classified as investment properties are stated at cost and buildings classified
as investment properties are stated at cost less any accumulated depreciation and any accumulated
impairment losses. Fair values of these properties are disclosed in Note 25 to the Financial Statements.
Derecognition
Investment properties are derecognised when disposed of, or permanently withdrawn from use because
no future economic benefits are expected. Transfers are made to and from investment property only when
there is a change in use.
1.4.7.6 Other Investments
Where the Group interest in equity is less than 20% and or in companies where the Bank does not exercise
significant influence and/or control over the financial and operating policies, investments are valued at cost.
1.4.8 Property, Plant & Equipment
Property, Plant & Equipment are tangible items that are held for servicing, or for administrative purposes
and are expected to be used during more than one period.
Basis of Recognition
Property, Plant & Equipment are recognised if it is probable that future economic benefits associated with
the assets will flow to the Group and cost of the asset can be reliably measured.
Measurement
An item of Property, Plant & Equipment that qualifies for recognition as an asset is initially measured at its
cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and cost incurred
subsequently to add to, replace part of, or service it. The cost of self-constructed assets includes the cost of
materials and direct labour, any other costs directly attributable to bringing the asset to a working condition
for its intended use and the costs of dismantling and removing the items and restoring the site on which they
are located. Purchased software that is integral to the functionality of the related equipment is capitalised
as part of computer equipment.
Cost Model
The Group applies cost model to Property, Plant & Equipment except for freehold land and buildings and
records at cost of purchase or construction together with any incidental expenses thereon less accumulated
depreciation and any accumulated impairment losses.
Revaluation Model
The Group applies the revaluation model for the entire class of freehold land and buildings. Such properties are
carried at a revalued amount, being their fair value at the date of revaluation less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. Freehold land and buildings of the Bank are
revalued every five years on a roll over basis to ensure that the carrying amounts do not differ materially from
the fair values at the Balance Sheet date. On revaluation of an asset, any increase in the carrying amount
is credited directly to equity, under revaluation reserve or used to reverse a previous revaluation decrease
relating to the same asset, which was debited to the Income Statement. In this circumstance, the increase
is recognised as income to the extent of the previous write down. Any decrease in the carrying amount is
recognised as an expense in the Income Statement or debited directly to equity under revaluation reserve to
the extent of any credit balance existing in the revaluation reserve in respect of that asset.
Subsequent Costs
The cost of replacing part of an item of Property, Plant & Equipment is recognised in the carrying amount of
the item if it is probable that the future economic benefits embodied within that part will flow to the Group
and its cost can be reliably measured. The costs of day-to-day servicing of Property, Plant & Equipment are
charged to the Income Statement as incurred.
Derecognition
The carrying amount of an item of Property, Plant & Equipment is derecognised on disposal or when no future
economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an
item of Property, Plant & Equipment is included in Income Statement when the item is derecognised. When
replacement costs are recognised in the carrying amount of an item of Property, Plant & Equipment, the
remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At
each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.
Depreciation
Seylan Bank and Seylan Bank Asset Management Limited provides depreciation from the date the assets
are available for use up to the date of disposal, at the following rates on a straight-line basis over the periods
appropriate to the estimated useful lives of the different types of assets:
life Period rate
Freehold/Leasehold Building 40 Yrs. 2.5%
Motor Vehicles 5 Yrs. 20%
Computer Equipment 5-6 Yrs. 16.67%-20%
Office Equipment, Furniture
& Fittings and Leased Assets 3-10 Yrs. 10%-33 1/3%
Building Improvements 5 Yrs. 20%
Depreciation is not provided for freehold land.
The rate of depreciation of freehold buildings was revised with effect from 1st January 1999 (from 4% to
2.5%). Freehold buildings purchased prior to 1st January 1999 have been depreciated over the remaining
useful life based on the revised depreciation rates. Freehold buildings purchased after 1st January 1999
have been depreciated based on revised rates.
Leasehold building has been depreciated over the useful economic life as the lease period is greater than
the useful life of the asset.
Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the
asset is classified as held for sale and the date that the asset is derecognised.
Seylan Developments PLC
Property, Plant & Equipment are recorded at cost of purchase or valuation together with any incidental
expenses thereon. The assets are stated at cost or valuation less accumulated depreciation which is
provided for on the basis specified below.
The property at No. 90, Galle Road, Colombo 03, which includes the leasehold land, buildings and
equipment and comprises of two towers namely, East and West were revalued on open market effective
value basis. The surplus arising on the revaluation was transferred to revaluation reserve account.
The value pertaining to the East tower is apportioned on a square feet area basis and is stated at valuation
less accumulated depreciation under Property, Plant & Equipment.
Depreciation of common types of assets within the Group are in line with the Group policy disclosed above.
Freehold land, antiques and ornamental paintings are not depreciated. Leasehold land and buildings are
depreciated over the remaining unexpired lease period. The depreciation of other assets that are unique to
Seylan Developments PLC is provided on the straight-line method at varying rates per annum based on their
useful lives as follows:
useful life (Years) Depreciation rate
Leasehold Land 81 1.23%
Building 81 1.23%
Interior Decor - General 02 50%
Motor Cycle 04 25%
Tools 03 33.33%
Cutlery & Crockery 02 50%
Equipment - West Tower 02 50%
Furniture - West Tower 03 33.33%
Interior - West Tower 03 33.33%
General Plant & Equipment 20 5%
Depreciation of an asset begins when it is available for use whereas depreciation of an asset ceases at the
earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised.
Capital Work-in-Progress
Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred in the
construction of buildings, major plant and machinery and system development, awaiting capitalisation.
Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
have been capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard 20 -
Borrowing Costs. Capitalisation of borrowing costs ceases when substantially all the activities necessary to
prepare the qualifying asset for its intended use are completed.
1.4.9 intangible Assets
Goodwill arising on acquisition was measured at cost and amortised previously. Other intangible assets
included in Note 29 has been impaired and charged to Income Statement as set out in Note 1.4.10.2.
1.4.10 impairment
1.4.10.1 Financial Assets
The Bank assesses at each Balance Sheet date whether there is objective evidence that a financial asset is
impaired. A financial asset is impaired and impairment losses are incurred if and only if, there is objective
evidence of impairment as a result of one or more loss events that occurred after the initial recognition
of the asset and prior to the Balance Sheet date (a loss event), and that loss event or events have had an
impact on the estimated realisable value of the asset.
The Bank assesses whether objective evidence of impairment exists for financial assets that are significant
(except for loans and advance explained in Note 1.4.6). For loans and advances, impairment loss is measured
individually and collectively as explained in Note 19.
When a loan is uncollectible, it is written off against the related provision. Such loans are written off
after all the necessary procedures have been completed and the amount of the loss has been determined.
Subsequent recoveries of the amounts previously written off are included under Other Income in the
Income Statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised impairment
loss is reversed by adjusting the impairment provision account. The amount of the reversal is recognised in
the Income Statement.
1.4.10.2 Non-Financial Assets
The carrying values of Property, Plant & Equipment and investment properties are reviewed for impairment
annually or when events or changes in circumstances indicate that the carrying value may not be recoverable.
If such indications exist and where the carrying values exceed the estimated recoverable amount, the assets
are written down to their recoverable amount. Impairment losses are recognised in the Income Statement
unless it reverses a previous revaluation surplus for the same asset.
Assets with an indefinite useful life, including goodwill, are not subject to amortisation and are tested on
an annual basis for impairment and additionally whenever an indication of impairment exists. Assets that
are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
The recoverable amount of an asset is the higher of its fair value less cost to sell or its value in use. Any
decrease in the carrying value is recognised as an expense in the Income Statement in the reporting period
in which the impairment loss occurs.
For assets that do not generate largely independent cash inflows, the recoverable amount is determined
for the cash generating unit to which that asset belongs. Management judgment is applied to establish cash-
generating units. Each of these cash-generating units is represented by an individual primary reporting
segment, or a sub-division of a primary segment.
An impairment loss in respect of goodwill is not reversed. In respect of other assets impairment losses
recognised in prior periods, are assessed at each Balance Sheet date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in estimates used
to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
1.4.11 inventory
Inventory mainly consists of stationery and gold. Banks policy for the accounting of inventory is as follows:
Stationery: At weighted average cost method.
Gold Stock: Market value at the year end.
liabilities and Provisions
1.4.12 Deposits from customers
Deposits include non-interest bearing deposits, saving deposits, term deposits, deposits redeemable at
call and certificates of deposit. They are brought to account at the gross value of the outstanding balance.
Interest paid is charged to the Income Statement.
1.4.13 Dividends Payable
Provision for dividends is recognised at the time the dividend recommended and declared by the board of
directors is approved by the shareholders.
1.4.14 borrowings
Borrowings include refinance borrowings, call money borrowings, Vostro account balances and borrowings
from financial institutions. They are brought to account at the gross value of the outstanding balance.
1.4.15 Securities Sold under repurchase Agreement (rEPos)
This relates to Treasury Bills and Bonds sold subject to a commitment to repurchase them at a predetermined
price. Such Treasury Bills and Bonds remain on the Balance Sheet and the liability is recorded in respect of the
consideration received. The liability is disclosed as borrowing under repurchase agreement. These Treasury
Bills and Bonds are not marked to market since the corresponding liability is also not marked to market.
1.4.16 bills Payable and other liabilities
Bills payable and other liabilities include all financial liabilities, interest, fees, expenses payable and securities
purchased but not delivered. These liabilities are recorded at the cash value to be realised when settled.
1.4.17 Employee benefits
1.4.17.1 Defined Benefit Plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Bank operates an approved Gratuity Fund to facilitate the payments for permanent staff of the Bank.
The Banks obligation in respect of defined benefit gratuity plans is calculated by estimating the amount
of future benefit that employees have earned in return for their service in the current and prior periods and
discounting that benefit to determine its present value, then deducting the fair value of any plan assets. The
discount rate is the yield at the reporting date on Government Bonds that have maturity dates approximating
to the terms of the Banks obligations. The calculation is performed by a qualified actuary using the Projected
Unit Credit Method which is the method recommended by Sri Lanka Accounting Standard 16 (Revised 2006) -
Employee Benefits (SLAS 16).
When the benefits of a plan are improved, the portion of the increased benefit relating to past service
by employees is recognised in the Income Statement on a straight-line basis over the average period until
the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised
immediately in Income Statement.
In respect of actuarial gains and losses that arise in calculating the Banks obligation in respect of a plan,
to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10% of the greater of the
present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in
Income Statement over the expected average remaining working lives of the employees participating in the
plan. Otherwise, the actuarial gain or loss is not recognised.
Monthly provision is made by the Bank for the Gratuity Fund, based on a percentage of the basic salary of
employees. The percentage of contributions is determined by the same actuary and retirement benefits are
provided to all permanent staff. The Bank carries out an actuarial valuation of the Gratuity Fund in December
each year to ascertain the full liability of the fund. The valuation method used by the actuary to value the fund
is the Projected Unit Credit Method, the method recommended by SLAS 16. The demographic assumptions
underlying the valuation are retirement age (55 yrs.), early withdrawals from service and retirement on
medical grounds, death before and after retirement etc.
However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on
completion of five years of continual service.
Changes to Gratuity Policy
Board of directors of the Bank at its meeting held on 24th March 2009 decided to change the previous
policy of gratuity payments of paying one months salary (last drawn) to resigned staff members who have
completed ten years of service in the Bank with effect from 5th March 2009.
The policy of paying half a months salary (last drawn) to resigned staff members who have completed
five years of service (not completed ten years of service) in the Bank remains unchanged.
Subsidiaries have also adopted the Revised SLAS 16 from 1st January 2008 and have made provisions
based on the above method.
Transitional Provision
On first adoption of the standard in 2008 the Bank has determined its transitional liability for defined benefit
obligation which is less than the liability recognised by the Bank, under previous accounting policy and the
difference was adjusted in the opening balance of the retained earnings.
Defined benefit obligations are partly funded by the Bank to a separate Gratuity Trust Fund, which is an
approved investment for tax purposes. The Bank makes annual contributions to the fund not exceeding
a total sum equivalent to the half a months salary of each employee as depicted in the last month of
the accounting year together with an additional 25% of the total thereof.
1.4.17.2 Defined Contribution Plans
A defined contribution plan is a post-employment plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive obligation to pay a further amount. Obligations for
contributions to defined contribution plans are recognised as expense in the Income Statement as and when
they are due.
1.4.17.2 (a) Employees Provident Fund
The Bank and employees contribute 12% and 8% respectively on the salary of each employee to the approved
private Provident Fund while the Group entities and their employees contribute the same percentages to
Employees Provident Fund [Refer Note 08].
1.4.17.2 (b) Employees Trust Fund
The Bank/Group contributes 3% of the salary of each employee to the Employees Trust Fund. The total
amount recognised as an expense to the Bank for contribution to ETF is disclosed in the Notes to Financial
Statements [Refer Note 08].
1.4.17.3 Short-Term Benefit
Short-term employee benefits are measured on an undiscounted basis and are expensed as the related
service is provided.
A provision is recognised for the amount expected to be paid under short-term compensated absences
if the Bank has a present legal or constructive obligation to pay as a result of past services provided by the
employees and the obligation can be estimated reliably. Leave encashment policy has been calculated for
the annual leave entitlement up to a maximum of 90 working days that could be carried forward up to the
date of retirement by the staff member.
1.4.18 Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation.
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group
from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The
provision is measured at the present value of the lower of the expected cost of terminating the contract and
the expected net cost of continuing with the contract before a provision is established, the Group recognises
any impairment loss on the assets associated with that contract.
1.4.19 commitments and contingencies
All discernible risks are accounted for in determining the amount of all known liabilities. The Banks share
of any contingencies and capital commitments of a subsidiary for which the Bank is also liable severally or
otherwise are also included with appropriate disclosures.
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events
or present obligations where the transfer of economic benefit is not probable or cannot be reliably measured.
Contingent liabilities are not recognised in the Balance Sheet but are disclosed unless they are remote.
1.4.20 Events After the balance Sheet Date
All material and important events which occur after the Balance Sheet date have been considered and
disclosed in Note No. 41 or adjusted as applicable.
incoME StAtEMEnt
1.4.21 revenue recognition
Interest Income: Interest receivable is recognised on an accrual basis. Interest ceases to be taken into
revenue when the recovery of interest or principal is in arrears for 90 days. Thereafter interest on advances
is accounted for on a cash basis.
Interest on non-performing debts is credited to the Interest in Suspense account which is netted in the
Balance Sheet against the relevant balance.
1.4.22 interest income
Interest receivable is recognised on an accrual basis. Interest from loans and advances ceases to be accrued
when they are classified as non-performing as explained in Note 19.e. Interest on non-performing loans and
advances is accounted for on a cash basis. Interest on non-performing loans and advances is credited to the
Interest in Suspense Account which is netted in the Balance Sheet against the relevant loans and advances.
Interest income from investments is recognised on an accrual basis.
1.4.23 Dividend income
Dividend income is recognised in the period in which it is declared.
1.4.24 Accounting for finance lease income
Assets leased to customers which transfer substantially all the risks and rewards associated with ownership
other than the legal title are classified as finance leases. Amount receivable under finance leases are
included under Lease Rental Receivable. Leasing balances are stated in the Balance Sheet after deduction
of initial rentals received.
The excess of aggregate rentals receivable over the cost of the leased assets constitutes the total
unearned income. The unearned income is taken into revenue over the term of the lease, commencing from
the month in which the lease is executed in proportion to the remaining receivable balance of the lease.
1.4.25 Accounting for operating lease income
Seylan Merchant Bank PLC, a subsidiary until 30th September 2009, rental income is recognised as revenue
over the term of lease. However, no accrued rental income is recognised where any portion of capital or
interest is in arrears for six months or more. In such cases interest income is accounted for on a cash basis.
1.4.26 income tax Expense
Income tax expense comprises of current and deferred tax. Income tax expense is recognised in the Income
Statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
1.4.26.1 Current Taxation
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted on the Balance Sheet date, and any adjustment to tax payable in respect of previous years.
Provision for taxation is based on the profit for the year adjusted for taxation purposes in accordance with
the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto at the rates specified
in Note 11.
1.4.26.2 Deferred Taxation
Deferred taxation is provided using the liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the tax base of assets and
liabilities, which is the amount attributed to those assets and liabilities for tax purposes. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively enacted by the reporting date.
Deferred tax liabilities are not recognised for the following temporary differences: the initial recognition
of goodwill, the initial recognition of assets and liabilities in a transaction that is not a business combination
and that affects both accounting nor taxable profit and differences relating to investments in subsidiaries
to the extent that they probably will not reverse in the foreseeable future. Deferred tax assets, including
those related to temporary tax effects of income tax losses and credits available to be carried forward, are
recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Since the Company enjoys 7-year tax holiday from the year of assessment 2003/04, certain temporary
differences will not reverse for a considerable period.
Considering the above tax effect and losses carried forward, temporary differences have been excluded
from the computation of deferred tax expenses for the period under review.
1.4.27 withholding tax on Dividends
Dividend distributed out of taxable profit of the subsidiaries attracts a 10% deduction at source and is not
available for set-off against the tax liability of the Bank. Thus, the withholding tax deducted at source is
added to the tax in the Consolidated Financial Statements as a consolidation adjustment. Withholding tax
that arise from the distribution of dividends by the Bank are recognised at the same time as the liability to
pay the related dividend is recognised.
1.4.28 vAt on financial Services
The value base for value added tax for the Bank is the adjusted accounting profit before tax and emoluments
of employees. The adjustment to the accounting profit before tax is for economic depreciation computed on
prescribed rates instead of the rates adopted in the Financial Statements.
1.4.29 fee and commission income
All fee and commission income have been recorded when a trade takes place.
1.4.30 Profit or loss on Sale of Property, Plant & Equipment/investments
Gains or losses of a revenue nature on the disposal of Property, Plant & Equipment and share portfolio are
accounted for in the Income Statement.
1.4.31 interest Expenses
Interest payable is recognised on an accrual basis. Other expenses have been recognised in the accounts as
they are incurred in the period to which they relate.
1.4.32 Earnings Per Share
The Group presents basic 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.
1.4.33 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 Groups
business segments, which is based on the Groups management and internal reporting structure. The Group
comprises the following major business segments: Banking, Leasing, Treasury and Property/Investments.
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.
Disclosure by geographical region is not provided for as the Groups activities are located in Sri Lanka and
the economic environment in which the Group operates is not subject to risk and return that are significantly
different on a geographical basis.
1.4.34 cash flow
The cash flow has been prepared using the direct method of preparing cash flows in accordance with the
Sri Lanka Accounting Standard 9 - Cash Flow Statements.
For the purpose of the Cash Flow Statement, cash and cash equivalents include notes and coins on hand,
unrestricted balances held with the Central Bank and highly liquid financial assets with original maturities
of less than three months, which are subject to insignificant risk of changes in their value and are used by
the Group in the management of its short-term commitments.
1.4.35 financial risk Management
(a) Introduction and Overview
Bank has implemented a risk management framework in order to identify, measure, mitigate and control
the various risk falling within market credit and operational risk.
Bank has exposure to the following risks from financial instruments:
Credit risk
Liquidity risk
Market risks
Operational risks
(b) Risk Management Framework
The board of directors has overall responsibility for the establishment and oversight of the Banks risk
management framework. The board has established the Asset and Liability (ALCO), Risk Management
Committees, which are responsible for developing and monitoring risk management policies in their
specified areas. All board committees have both executive and non-executive members and report regularly
to the board of directors on their activities.
The risk management policies are established to identify and analyse the risks faced by the Bank, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies
and systems are reviewed regularly to reflect changes in market conditions, products and services offered.
Bank, through its training and management standards and procedures, aims to develop a disciplined and
constructive control environment, in which all employees understand their roles and obligations.
The Audit Committee is responsible for monitoring compliance with the risk management policies and
procedures.
(c) 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.
(c.I) Past due but not Impaired Loans and Investment Debt Securities
Past due but not impaired loans and investment debt securities are those for which contractual interest or
principal payments are past due but the Bank believes that impairment is not appropriate on the basis of the
level of security/collateral available and/or the stage of collection of amounts owed.
(c.II) Loans with Re-negotiated Terms
Loans with re-negotiated terms are loans that have been restructured due to deterioration in the borrowers
financial position and where the Bank has made concessions that it would not otherwise consider. Once the
loan is restructured it remains in this category independent of satisfactory performance after restructuring.
(c.III) Write-off Policy
The Bank writes off a loan or investment debt security balance, and any related allowances for impairment
losses, when Bank credit determines that the loan or security is uncollectible. This determination is reached
after considering information such as the occurrence of significant changes in the borrowers/issuers
financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from
collateral will not be sufficient to pay back the entire exposure.
(d) Liquidity Risk
Central Treasury receives information from other business units regarding the liquidity profile of their
financial assets and liabilities and details of other projected cash flows arising from projected future
business. Central Treasury then maintains a portfolio of short-term liquid assets, largely made up of short-
term liquid investment securities, loans and advances to banks and other inter-bank facilities, to ensure
that sufficient liquidity is maintained.
All liquidity policies and procedures are subject to review and approval by ALCO. Daily reports cover the
liquidity position of the Bank. A summary report, including any exceptions and remedial action taken, is
submitted regularly to ALCO.
Exposure to Liquidity Risk
The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits
from customers. For this purpose net liquid assets are considered as including cash and cash equivalents.
Liquidity Management 2009 2008 2009 2008

Domestic
banking unit
Domestic
Banking Unit
foreign
currency
banking unit
Foreign
Currency
Banking Unit
As at 31st December 28.80% 20.11% 24.94% 22.11%
Highest 28.80% 22.70% 24.94% 22.72%
Lowest 11.87% 20.09% 12.85% 20.25%
Average 19.19% 21.55% 20.24% 21.33%
(e) 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 obligors/issuers credit standing) will
affect the Banks income or the value of its holdings of financial instruments. The objective of market
risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the trading portfolios for risk management purposes. Overall authority for market risk is vested
in ALCO.
Market risk is the risk arising from fluctuations in the market price/value of tradable assets such as
foreign exchange, fixed income securities and shares that are held for trading purposes where the Bank
holds either long positions or short positions of such assets.
The two risk components of the market risk most applicable to the Bank are foreign exchange risk and
interest rate risk.
(e.i) the foreign Exchange risk arises from the foreign exchange positions maintained by the Bank
where either the foreign currency denominated assets exceed such liabilities (long positions) or the foreign
currency denominated liabilities exceed the assets (short positions). Such long or short positions could also
be created through the sale or purchase transactions both in spot and forward markets as well as through
swap transactions. Bank is conservative and prudent in its management of foreign exchange exposures and
has set out limits on its transactions and exposures including dealer limits, portfolio limits, daylight limits,
overnight limits, long position limits, short position limits, counter party limits, etc.
(e.ii) interest rate risk arises from the movement of interest rates affecting the value of tradable fixed
income securities as well as the interest rate re-pricing gaps of the interest rate sensitive assets and
liabilities. The Bank evaluates the risk level of the tradable fixed income securities portfolio by assessing
the sensitivity of the market value towards a change of interest rates by one hundred basis points, which
is one percentage point. The size and duration of the trading portfolio is capped based on the potential
risk exposure as well as the board approved limits placed on absolute values. Banks also typically have
mismatches in the re-pricing periods of assets and liabilities and an approach of minimising the gaps and
limiting long-term fixed rates is followed by the Bank.
Seylan as a policy does not carry a significant exposure to the equity market whilst of course being an
active investor within applicable prudential limits.
The different types of market risks and the Balance Sheet structure with a long-term focus are monitored
by the Asset and Liability Management Committee (ALCO).
(f) Operational Risk
Operational risk refers to the losses arising from fraud, negligence, oversight, human error, process errors,
system failures, external events, etc. The Bank manages most elements of the operational risk through sound
internal control systems and well-defined processes both technology driven and with human intervention.
The areas of risk include process risks where faulty processes or errors in the processes could trigger
losses. Continuous review of the systems and the processes either on a regular review basis or pursuant to
observed loss events and incidents addresses potential weaknesses of the processes.
In implementation of new products that invariably relies on technology as well as human involvement a
risk review is an essential aspect that needs both the marketing objectives as well as the risk management
requirements. Bank strives to subject such new product introductions to adequate review.
Bank also maintains its policies with regard to access control and data protection and necessary
safeguards are constantly introduced and upgraded to ensure the integrity of the information and the data
bases. Preventive measure such as firewalls and virus guards among other steps are put in place.
(g) Capital Management
Capital Adequacy is a measure of a commercial banks ability to withstand the associated risks of its business.
Regulators find it necessary that every bank holds adequate capital to absorb unexpected losses as a going
concern, while they price their products and services to take care of expected risks. Capital Adequacy Ratio
(CAR) was measured on the basis of credit and Market risk under the BASEL I accord and under BASEL II
it takes into account the credit, market and operations risks. Keeping with the International Standards of
BASEL Committee on Banking Regulations and Supervisory Practices, Sri Lanka has been following BASEL II
CAR calculation from January 2008 after conducting parallel calculations in 2007.
(g.I) Available Capital
BASEL I and BASEL II accords recognise three capital elements, namely, Tier I, Tier II and Tier III capital. Tier
I capital includes paid up ordinary share capital, paid up non-cumulative, non-redeemable preference shares,
share premium, statutory reserve fund, published retained earnings, general and other reserves less goodwill.
Tier II capital includes 50% of asset revaluation reserves (created by revaluation carried out in every seven
years) general provision for advances, hybrid debt/equity instruments and approved subordinated term debts.
Tier II capital cannot exceed Tier I capital and subordinated debt cannot exceed 50% of the Tier I capital.
Tier III capital will consist only of short-term debt instrument and will be used for calculation of market risk
only. Tier III is subject to a maximum of 250% of Tier I capital after meeting the credit and operational risk.
Equity investments in unconsolidated banking and financial subsidiaries and investments in capital of
other banks/financial associates are deducted from capital in arriving at the capital base. The Bank is
required to maintain a minimum total risk-weighted capital ratio of 10% in respect of Domestic Banking
Unit (DBU) and Foreign Currency Banking Unit (FCBU) operations.
Capital Adequacy Details 31st December (Basel II)
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. Mn. Rs. Mn. rs. Mn. Rs. Mn.
Total Tier I Capital 9,583 6,449 11,717 8,225
Total Tier I & II Capital 11,612 9,054 14,038 11,317
Risk-weighted Assets & Off
Balance Sheet exposure 79,302 95,921 81,681 102,472
Off Balance Sheet exposure 4,405 5,259 4,405 5,259
Capital Adequacy Ratios
Tier I 9.69% 5.74% 11.35% 6.86%
Tier I & II 11.74% 8.06% 13.60% 9.44%

1.4.36 new Accounting Standards issued but not Effective as at balance Sheet Date
Two new standards issued by the Institute of Chartered Accountants of Sri Lanka have not been applied
in preparing these Consolidated Financial Statements as they are not effective for the year ended
31 December 2009.
Sri Lanka Accounting Standard 44 - Financial Instruments: Presentation provides for the following:
Guidance regarding the classification of financial instruments as equity or debt, and for the accounting for
compound instruments with characteristics of both equity and debt instruments based on the substance
of the contractual arrangement.
Criteria are specified for the netting of financial assets and financial liabilities. Netting requires a legal
right of set-off as well as the intention to offset the assets and liabilities or settle simultaneously.
Sri Lanka Accounting Standard 45 - Financial Instruments: Recognition and Measurement provides the
principles for recognising and measuring financial assets and financial liabilities.
The requirements are summarised below:
(a) Recognition and Derecognition
All financial assets and financial liabilities should be recognised in the Balance Sheet. Previously
certain instruments, in particular derivatives, were held by enterprises without being reflected in the
Balance Sheet.
In order to remove (derecognise) assets from its Balance Sheet, the Bank must be deemed to have lost
control over those financial assets.
In order to derecognise a liability, the Bank must be legally released from primary responsibility related
to that liability.
(b) Measurement
Financial assets must be classified into one of four categories: fair value through profit or loss (trading);
loans and receivables; held-to-maturity and available-for-sale. The categorisation determines whether
and where the remeasurement is recognised in the Banks Financial Statements.
Loans and receivables and held to maturity financial assets should be measured at amortised cost using
the effective interest method. Loan impairment is recognised when objective evidence is available that a
loss event has occurred and as a consequence the Bank will not likely receive all amounts owed to it. Loan
impairment is calculated as the difference between the carrying amount of the loan and the present value
of future expected cash flows associated with the loan discounted at the loans original effective interest
rate. This will be a significant change compared to the current method applied by the Bank for loan loss
provisioning based on the direction issued by the Central Bank of Sri Lanka, which is primarily time based.
Financial liabilities are categorised as either measured at amortised cost using effective interest rate or
at fair value through profit or loss.
Financial assets should be carried at fair value, with the exception of loans and receivables, held-to-
maturity assets, and in the rare circumstances where the fair value of a financial instrument cannot be
reliably measured. Remeasurement to fair value must be performed at each financial reporting date.
Derivatives are always categorised as trading and therefore measured at fair value with changes recorded
in the Income Statement, unless the enterprise can establish that an effective hedging relationship exists.
The effect of remeasurement to fair value must be recognised and consistently applied in one of two
ways: recognise all changes in fair value in the Income Statement; or recognise changes in fair value of
only trading instruments in the Income Statement, and available-for-sale instruments as a component of
equity until sold or otherwise disposed.
(c) Derivatives and Hedge Accounting
All derivatives must be measured at fair value in the Balance Sheet in situations where these are
categorised as trading, as well as when designated as a hedging instrument.
SLAS 45 provides detailed guidance as to when and how hedge accounting should be applied. The Bank
must designate all of its hedging relationships and document their assessment of effectiveness prior to
the application of hedge accounting.
Hedge accounting is permitted provided that the Bank can establish that the hedging instrument and the
hedged item have an effective hedging relationship throughout the financial reporting period.
There are three hedging models under SLAS 45. These are: the fair value hedge, the cash flow hedge and
the hedge of a net investment in a foreign operation. Each of these models is based on accounting for the
hedging instruments at fair value.
The Bank is currently in the process of evaluating the potential effect of these Standards. However, the
impact of the above requirements has not been quantified. Given the nature of the Banks operations, these
Standards are expected to have a pervasive impact on the Groups Financial Statements.
The above Standards are effective for annual periods beginning on or after 1st January 2011.
1.4.37 comparative information
Seylan Merchant PLC and Seylan Developments PLC audited Financial Statements for the year 2008 were
completed on 5th November 2009 and 29th June 2009 respectively. Accordingly, comparative figures for
2008 have been restated. The comparative information is reclassified wherever necessary to conform with
the current years presentation in order to provide a better presentation. The details of restatements are
disclosed in Notes 46 and 47 to the Financial Statements.
1.4.38 Directors responsibility Statement
The board of directors of the Bank is responsible for the preparation and presentation of these Financial Statements.
Please refer to pages 134 and 135 for the Statement of the Directors Responsibility for Financial Reporting.
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
2. incoME
Interest Income (Note 3) 20,708,034 21,552,070 21,796,473 23,156,161
Fee and Commission Income (Note 5.a) 1,274,251 1,801,826 1,341,416 1,841,754
Other Income (Note 6) 650,856 1,221,582 879,701 1,385,305
23,154,529 25,246,209 24,538,978 27,053,951
Income of the Company resulted mainly from the business of banking and related activities.
3. intErESt incoME
Customer Advances 14,836,462 17,898,073 15,074,475 18,402,956
Treasury Bills, Bonds & Placements with
Other Banks 5,820,916 3,511,299 6,603,455 4,422,303
Debentures 24,967 1,161
Other 50,656 117,731 118,543 329,741
20,708,034 21,552,070 21,796,473 23,156,161
According to the Section 137 of the Inland Revenue Act No. 10 of 2006, any person who derives income from
the secondary market transactions in Government Securities is entitled to a notional tax credit in relation
to the tax payable by such person. Notional tax credit would be determined by grossing up of the income
from the secondary market transactions to an amount equal to 1/9 of same and credit to be afforded for
a like sum. Accordingly, Bank has accounted for Rs. 439,968,584/- as notional tax credit for the year 2009
(Rs. 251,033,272/- for 2008).
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
4. intErESt ExPEnSES
Customer Deposits 11,106,062 12,415,244 11,105,997 12,667,038
Borrowings 249,884 586,400 729,053 979,659
Refinance 108,292 117,766 108,292 117,766
Treasury Bills Repurchased 1,300,100 498,838 1,691,580 1,290,211
Debentures 727,715 743,204 744,942 751,642
Other 9,439 69,188
13,492,053 14,361,452 14,389,303 15,875,504
5. nEt fEE & coMMiSSion incoME
5.a fee & commission income
Fee Income 499,842 765,964 567,528 806,898
Commission Income 774,409 1,035,862 773,888 1,034,856
1,274,251 1,801,826 1,341,416 1,841,754
5.b fee & commission Expenses
Commission Expenses 105,127 52,089 116,106 63,434
105,127 52,089 116,106 63,434
net fee & commission income 1,169,124 1,749,737 1,225,310 1,778,320
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
6. othEr incoME
Dividend Income from Dealing Securities - Quoted 2,498 3,968 2,498 5,967
Dividend Income from Investment
Securities - Quoted 540 127 540 127
Dividend Income from Investment
Securities - Unquoted 2,161 2,588 2,161 2,616
Dividend Income from Investments
in Subsidiaries 216,612
Gain on transfer of Investments to Trading Portfolio 197,248 197,248
Profit/(Loss) on Sale of Property,
Plant & Equipment 2,978 100,080 22,531 103,696
Profit/(Loss) on Sale of Investment Property 53,765 56,476
Profit/(Loss) on Sale of Investment Securities (7,590) (697)
Share of Associate Company
Profit/(Loss) after Tax (16,962) 4,365
Profit/(Loss) on Sale of Shares of
Subsidiaries (6,630) 187,825 5,788
Profit/(Loss) on Sale of Dealing Securities (9,213) (9,213) 17,750
Bad Debts Recovered and Written Back 658,522 647,194 658,522 874,073
Others 39,389 117,896
650,856 1,221,582 879,701 1,385,305
7. oPErAtinG ExPEnSES
Operating Expenses include the following:
Directors Emoluments 10,779 74,675 26,225 110,879
Auditors Remuneration - Audit Fees & Expenses 6,043 4,317 7,642 7,186
- Audit-Related Fee
& Expenses 480 1,727 480 1,727
- Non-Audit Services 197 157 703
Depreciation - Freehold Property,
Plant & Equipment (Note 27) 785,318 707,205 * 816,072 752,954
Depreciation - Leasehold Property,
Plant & Equipment (Note 28)* 1,082 692 8,960 8,575
Depreciation - Investment Property (Note 25) 20,066 22,151
Donations 6,693 128,865 6,693 136,009
Expenses on Litigation 79,890 109,958 79,889 113,724
Issue Expenses on Debentures/Shares 18,758 5,307 18,758 5,307
Value Added Tax on Financial Services 561,440 243,056 638,325 245,622
Impairment Loss - Provision/(Reversal) (3,855) 301,280 (3,855) 374,030
Provision for Doubtful Receivables 32,880 16,338 112,977 72,664
* Includes depreciation charge of Seylan Merchant Bank PLC for the nine months period ended 30th September 2009 (Rs. 3.188 Mn.) .
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
8. PErSonnEl ExPEnSES
Personnel Expenses includes the following:
Salaries and Wages 1,934,286 1,972,391 2,007,101 2,087,147
Contribution to Employees Provident Fund 229,342 235,049 238,078 249,169
Contribution to Employees Trust Fund 57,306 58,719 59,491 62,250
Provision for/(Reversal from) Staff
Retirement Benefit* (458,111) 131,379 (461,272) 141,276
Other 622,432 1,008,176 657,031 1,068,886
2,385,255 3,405,714 2,500,429 3,608,728
* Impact of Curtailing Gratuity Benefits during the year is disclosed under Note 35.a.8.

9. ProviSion for loAn loSSES
Provision for Bad & Doubtful Debts -
Specific (Note 19.c) 2,411,886 2,006,427 2,411,886 2,302,914
Provision/(Reversal) for Bad & Doubtful
Debts - General (Note 19.c) (247,441) 379,149 ** (216,949) 379,149
Direct Write Off 18,687 81,611 32,686 122,049
2,183,132 2,467,187 2,227,623 2,804,112
** Includes general provision for loan losses of Seylan Merchant Bank PLC Rs. 30.492 Mn.

10. DiMinution/(APPrEciAtion) in
vAluE of invEStMEntS
Diminution/(Appreciation) Provision
as at 1st January 40,733 49 326,943 49,844
Diminution/(Appreciation) Provision
as at 31st December (6,361) 40,733 146,208 326,943
Less: Adjustment on Deconsolidation (138,770)
Dimunition/(Appreciation) in Value of Investments (47,094) 40,684 (41,965) 277,099
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
11. incoME tAx ExPEnSE
11.a charge to taxation is as follows:
Taxation Based on Profits for the Year 601,671 233,877 736,583 253,080
Reversal from Deferred Tax (Note 26) (362,631) (185,266) (358,874) (176,142)
Withholding Tax on Dividend 36,830
(Over)/Under Provision of Taxes in Previous Years 110,231 (48,611) 107,160 (49,544)
349,271 484,869 64,224
(i) Income tax on profits has been computed at the rate of 35% on the taxable income arising from the
domestic operations and On-Shore Banking operations of the Foreign Currency Banking Unit (FCBU)
and 20% on the taxable income from Off-Shore Banking operations of the FCBU together with Social
Responsibility Levy.
(ii) The Group companies have computed taxation based on the applicable rates for such companies.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
11.b reconciliation of Accounting
Profit and taxable income
Profit/(loss) as per the income Statement 892,572 155,241 933,630 (735,579)
Add: Disallowable Expenses 5,787,110 6,605,716 5,894,437 7,452,631
Less: Allowable Expenses 4,615,483 4,967,938 4,607,903 4,973,374
Exempt/Allowable Income 77,123 1,133,755 (149,892) 1,015,137
Statutory income 1,987,076 659,264 2,370,056 728,541
Less: Tax Loss Set Off - Note below 289,795 292,957 14,829
Assessable income 1,697,281 659,264 2,077,099 713,712
Less: Donations to Approved Charities 500 500
taxable income 1,696,781 659,264 2,076,599 713,712
taxable
income
tax
Expense
Taxable
Income
Tax
Expense
taxable
income
tax
Expense
Taxable
Income
Tax
Expense
rs. 000 Rs. 000 rs. 000 Rs. 000
Bank - Domestic Banking Unit &
On-Shore Profits - 35% 1,689,489 591,321 657,154 230,003 2,069,307 724,257 711,602 249,061
Off-Shore Profits - 20% 7,292 1,458 2,110 422 7,292 1,458 2,110 422
Social Responsibility Levy (SRL) 8,892 3,452 10,868 3,597
1,696,781 601,671 659,264 233,877 2,076,599 736,583 713,712 253,080
tax losses
Due to the ambiguity of the Law, the Bank had not claimed the tax losses for the year of assessment
2002/03 on profit on sale of Treasury Bills in secondary market. Bank made an appeal to the Board of
Review and the determination was issued on 11th August 2009 in favour of the Bank. As per the boards
determination, Bank can claim the Tax Loss of Rs. 289,794,900/-.
12. bASic EArninGS/(loSS) PEr ShArE
Basic Earning/(Loss) per Share has been calculated by dividing profit after taxation, minority interest and
preference dividends by the weighted average number of ordinary shares in issue (both voting and non-voting)
during the year ended 31st December.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
Net Profit Attributable to Shareholders of the Bank 543,301 155,241 569,208 (142,993)
Preference Dividends (6,238) (5,185) (6,238) (5,185)
Net Profit after Preference Dividends 537,063 150,056 562,970 (148,178)
Weighted Average Number of Ordinary Shares 189,813 167,120 189,813 167,120
Basic Earnings/(Loss) per Share (Rs.) 2.83 0.90 2.97 (0.89)
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
13. DiviDEnDS
Ordinary Share Dividends (13.a) 250,679 250,679
Preference Share Dividends (13.b) 6,238 5,221 6,238 5,221
6,238 255,900 6,238 255,900
13.a ordinary Share Dividend
net Dividend 227,184 227,184
Tax Deducted at Source 23,495 23,495
Gross Dividend (note 41.c) 250,679 250,679
13.b Preference Share Dividend
net Dividend (rs. 1.84 per share) 6,238 5,221 6,238 5,221
Tax Deducted at Source
Gross Dividend 6,238 5,221 6,238 5,221
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
14. cASh AnD cASh EQuivAlEntS
Cash in Hand - Local Currency 4,070,066 3,794,245 4,070,114 3,811,920
Cash in Hand - Foreign Currency 197,341 102,647 197,341 102,648
Cash at Bank 2,085 7,434
Balances with Local Banks 13,146 19,536 13,146 19,536
Balances with Foreign Banks 358,252 1,594,903 358,252 1,594,903
Money at Call and Short Notice 45,000 45,000
Placements with Banks and Finance Companies 5,943 144,333
4,683,805 5,511,331 4,691,881 5,680,774

15. bAlAncE with cEntrAl bAnk of Sri lAnkA
Cash balance is required to be maintained with the Central Bank of Sri Lanka according to statutory
requirements. At present, the minimum cash reserve requirement is 7% of the deposit liabilities. Rate has been
reduced from 7.75% to 7% with effect from 27th February 2009.
BANK
2009 2008
rs. 000 Rs. 000
Average Deposit Liabilities for the
last week of December 95,665,565 104,897,406
Statutory Reserve Requirement 6,696,590 8,129,548
Less: Average Sri Lanka Currency Notes and
Coins held over & above 2% of average deposit
Liabilities, but not Exceeding 4% 1,209,967 1,275,504
total reserve required to be held with central bank 5,486,623 6,854,044
Average Balance held by the Bank for the
last week of the year 5,620,347 6,279,267
Deposit Balance as at 31st December 5,084,229 6,857,039
2009 2008 (Restated)
cost
rs. 000
Market
value
rs. 000
Cost
Rs. 000
Market
Value
Rs. 000
16. DEAlinG SEcuritiES
Seylan Bank PLC (16.a) 14,544,172 14,544,172 865,977 865,977
Seylan Bank Asset Management Limited (16.b) 1,931,361 1,931,361 544,089 544,089
total Dealing Securities - Group 16,475,533 16,475,533 1,410,066 1,410,066
31.12.2009 31.12.2008 (Restated)
no. of
ordinary
Shares
cost
rs. 000
% of
total
cost
Market
value
rs. 000
No. of
Ordinary
Shares
Cost
Rs. 000
Market
Value
Rs. 000
16.a Seylan bank Plc
16.a.1 Quoted Shares
hotels & travel
Galadari Hotels Lanka PLC 443,200 6,465 6,648
Eden Hotel Lanka PLC 44,200 1,110 1,138
Hotel Sigiriya PLC 26,700 1,326 1,435
Stafford Hotels PLC 51,500 1,346 1,416
Serendib Hotels PLC 38,900 2,363 2,577
12,610 7.69 13,214
banks, finance & insurance
DFCC Bank PLC 200,000 31,442 33,400
Hatton National Bank PLC 100,000 16,597 17,025
Hatton National Bank PLC -
Non-Voting 60,000 5,953 6,285
National Development
Bank PLC 150,000 25,683 30,900
Sampath Bank PLC 50,000 8,749 10,213
Nations Trust Bank PLC 99,300 3,555 3,649
Arpico Finance Company PLC 60,651 3,639 1,820
Nation Lanka Finance PLC 2,700 41 39 2,700 41 25
The Finance Company PLC 110,160 6,197 2,121 110,160 6,197 3,002
Ceylinco Insurance PLC 933,055 205,272 174,481
Asian Alliance Insurance PLC 50,000 2,881 2,800
Janashakthi Insurance
Company PLC 200,000 2,328 1,900
103,426 63.08 108,332 215,149 179,328
Diversified holdings
John Keells Holdings PLC 114,800 16,463 10.04 19,688
beverage, food & tobacco
Lanka Milk Foods (CWE) PLC 50,000 3,275 2.00 3,238
land & Property
Colombo Land & Development
Company PLC 250,000 1,771 1.08 1,625
31.12.2009 31.12.2008 (Restated)
no. of
ordinary
Shares
cost
rs. 000
% of
total
cost
Market
value
rs. 000
No. of
Ordinary
Shares
Cost
Rs. 000
Market
Value
Rs. 000
Manufacturing
Richard Pieris & Company PLC 133,300 5,193 5,199
Tokyo Cement Company (Lanka) PLC 50,000 875 988
ACL Cables PLC 75,000 5,293 5,756
Blue Diamonds Jewellery
Worldwide PLC 3,191,543 8,617 6,383 3,815,243 10,301 5,341
19,978 12.18 18,326 10,301 5,341
chemicals & Pharmaceuticals
Chemical Industries
(Colombo) PLC 93,800 6,448 3.93 5,909
Power & Energy
Vallibel Power Erathna PLC 75,000 200 248
total 163,971 100 170,332 225,650 184,917
Marked to Market
Valuation Gain/(Loss) - (Note 10) 6,361 (40,733)
total Quoted Shares - bank 170,332 170,332 184,917 184,917
16.a.2 Government of Sri lanka treasury bills
Discounted Value 1,220,260 1,229,788 23,578 23,413
Marked to Market
Valuation Gain/(Loss) 9,528 (165)
total treasury bills - bank 1,229,788 1,229,788 23,413 23,413
16.a.3 Government of Sri lanka treasury bonds
Face
Value
Rs. 000
Year of
Maturity
Discounted
Value
Rs. 000
316,493 2010 312,286
3,895,386 2011 3,838,342
4,350,000 2012 4,213,273
4,000,000 2013 3,973,959
250,000 2014 243,231
12,581,091 13,144,052 654,465 657,647
Marked to Market
Valuation Gain 562,961 3,182
total treasury bonds - bank 13,144,052 13,144,052 657,647 657,647
total Dealing Securities - bank
(notes 16.a.1, 16.a.2 & 16.a.3) 14,544,172 14,544,172 865,977 865,977

31.12.2009 31.12.2008 (Restated)
cost
rs. 000
Market
value
rs. 000
Cost
Rs. 000
Market
Value
Rs. 000
16.b Seylan bank Asset Management limited
16.b.1 Government of Sri lanka treasury bills
Discounted Value 157,598 159,095 213,086 212,920
Marked to Market
Valuation Gain/(Loss) 1,497 (166)
total treasury bills 159,095 159,095 212,920 212,920
16.b.2 Government of Sri lanka treasury bonds
Face
Value
Rs. 000
Year of
Maturity
Discounted
Value
Rs. 000
328,972 2010 339,421
268,075 2011 276,672
603,869 2012 629,478
400,000 2013 427,774
1,673,345 1,772,266 334,531 331,169
Marked to Market Valuation Gain/(Loss) 98,921 (3,362)
total treasury bonds 1,772,266 1,772,266 331,169 331,169
total Dealing Securities - Seylan bank Asset
Management limited (notes 16.b.1 & 16.b.2) 1,931,361 1,931,361 544,089 544,089
total Dealing Securities - Subsidiaries (note 16.b) 1,931,361 1,931,361 544,089 544,089
total Dealing Securities - Group 16,475,533 16,475,533 1,410,066 1,410,066
cost Market value Cost Market Value
rs. 000 rs. 000 Rs. 000 Rs. 000
17. invEStMEnt SEcuritiES
Seylan Bank PLC (17.a) 14,897,394 15,046,527 24,243,200 23,769,304
Seylan Merchant Bank PLC (17.b) 229,170 233,339
Seylan Developments PLC (17.c) 27,244 3,272 39,324 2,111
Seylan Bank Asset Management Limited (17.d) 1,497,039 1,511,939 2,749,307 2,526,330
total investment Securities - Group 16,421,677 16,561,738 27,261,001 26,531,144
17.a Seylan bank Plc
Quoted Shares
no. of cost Market No. of Cost Market
ordinary value Ordinary Value
Shares rs. 000 rs. 000 Shares Rs. 000 Rs. 000
17.a.1 Quoted Shares
Visa Inc. 13,328 65,184 133,294 13,328 64,414 78,993
Seylan Merchant Bank PLC 22,064,566 249,535 105,910
Less - Loss on Impairment
Seylan Merchant Bank PLC (168,701)
total Quoted Shares - bank 146,018 239,204 64,414 78,993
unquoted Shares
2009 2008
no. of cost Directors No. of Cost Directors
ordinary valuation Ordinary Valuation
17.a.2 unquoted Shares
Credit Information Bureau
of Sri Lanka 2,900 290 5,627 2,900 290 5,627
Transnational Lanka
Records Solutions
(Pvt) Limited 1,000,000 10,000 14,250 1,000,000 10,000 13,787
Lanka Clear (Pvt) Limited 1,000,000 10,000 35,010 1,000,000 10,000 28,638
Lanka Financial Services
Bureau Limited 225,000 2,250 2,828 225,000 2,250 1,767
total unquoted Shares - bank 22,540 57,715 22,540 49,819
The valuation is based on net assets per share as per the Audited Financial Statements of these companies
as at following dates:
Credit Information Bureau of Sri Lanka - 31st December 2008.
Transnational Lanka Records Solutions (Pvt) Limited - 30th June 2009.
Lanka Clear (Pvt) Limited - 31st March 2009.
Lanka Financial Services Bureau Limited - 31st March 2009.
rs. 000 rs. 000 Rs. 000 Rs. 000
17.a.3 Government of Sri lanka treasury bills
Face
Value
Rs. 000
Year of
Maturity
Discounted
Value
Rs. 000
5,000 2010 4,821 4,821 4,822
total treasury bills - bank 4,821 4,822
17.a.4 Government of Sri lanka treasury bonds
Face
Value
Rs. 000
Year of
Maturity
Discounted
Value
Rs. 000
1,223,554 2010 1,260,292
755,760 2011 786,142
3,060,500 2012 2,995,792
4,513,000 2013 4,493,345
1,700,000 2014 1,687,713
1,300,000 2015 1,272,476
12,495,760 12,516,531 16,030,145 15,514,391
CWE Bond 2016 250,000 250,000 250,000 250,000
total bonds - bank 12,745,760 12,766,531 16,280,145 15,764,391
17.a.5 foreign currency bonds
Face
Value
USD. 000
Year of
Maturity
Discounted
Value
USD. 000
300 2010 300
17,000 2011 17,000
1,978,255 1,978,255 7,876,101 7,876,101
total foreign currency bonds - bank 1,978,255 1,978,255 7,876,101 7,876,101
total bonds - bank 14,724,015 14,744,786 24,156,246 23,640,492
17.a.6 Quoted Debentures held by the bank
Seylan Merchant Bank PLC (50 Mn. -14%, 60 Mn. -
12.75%, 18.724 Mn. - 16%) 128,724
Less - Loss on Impairment (128,724)
total Quoted Debentures - bank
total investment Securities - bank (note 17.a.1,
17.a.2, 17.a.3, 17.a.4, 17.a.5 & 17.a.6) 14,897,394 15,046,527 24,243,200 23,769,304
invEStMEnt SEcuritiES hElD bY SubSiDiAriES
17.b Seylan Merchant bank Plc
17.b.1 Quoted Shares
The Finance Company PLC 108,997 5,652 2,970
Blue Diamonds Jewellery
Worldwide PLC 3,180,280 47,818 4,452
Metal Recyclers Colombo PLC 69 3
Kotmale Holding PLC 1,000 16 10
Sierra Cables PLC 5,400 16 7
Dialog Telekom PLC 9,000 256 43
Diminution in Value (Note 10) (50,508)
total Quoted Shares 3,253 7,482
2008
No. of Cost
Ordinary
Shares Rs. 000
17.b.2 unquoted Shares
Ceylinco Sports Complex Limited 300,000 3,000
Ceylinco Express (Pvt) Limited 37,050 371
MBSL Savings Bank Limited 1,189,600 11,896
Openarc Global Solutions (Pvt) Limited 45,000 450
Ceylinco Investment & Reality (Pvt) Limited 100,000 1,000
South Asian Travels Limited 30,000 300
Ceylinco Coloured Stones (Pvt) Limited 500,000 5,000
Seraka Investment Limited
(5,655,900 Non-Cumulative, Non-Redeemable,
Preference Shares) 48,645
Diminution in Value (Note 10) (70,662)
total unquoted Shares
2008
Cost
Rs. 000
17.b.3 unquoted Debentures
Ceylinco Automobiles Limited 17,600
Diminution in value (Note 10) (17,600)
total unquoted Debentures
cost Market Cost Market
value Value
rs. 000 rs. 000 Rs. 000 Rs. 000
17.b.4 Government of Sri lanka treasury bills
Discounted Value 126,448 126,448
total treasury bills 126,448 126,448
17.b.5 Government of Sri lanka treasury bonds
Discounted Value 99,469 99,469
total treasury bonds 99,469 99,469
total investment Securities - Seylan Merchant
bank Plc (notes 17.b.1, 17.b.2, 17.b.3, 17.b.4 & 17.b.5) 229,170 233,339
17.c Seylan Developments Plc
2009 2008
17.c.1 Quoted Shares
Nation Lanka Finance PLC 200,000 2,000 2,900 200,000 2,000 1,850
Associated Property Developers PLC 100 1 100 1 6
CT Land Developers PLC 100 1 2 100 1 1
City Housing & Real Estate PLC 250 2 5 250 2 3
The Colombo Fort Land & Building
Company Limited 100 1 3 100 1
Overseas Reality Ceylon PLC 100 2 100 1
Kelsey Developments PLC 100 1 1 100 1 1
Property Development PLC 100 2 2 100 2 6
Colombo Land & Development
Company PLC 1,250 8 1,250 1
East West Company PLC 200 1 2 100 1
Equity One PLC 100 1 2 100 1 1
O'nally Holdings PLC 100 1 4 100 1 2
York Arcade Holdings PLC 100 1 100 1
Blue Diamonds Jewellery &
Worldwide PLC 170,000 383 340 170,000 383 238
total Quoted Shares 2,394 3,272 2,394 2,111
17.c.2 unquoted Shares
Ceylinco Venture Capital
Investment Limited 95,000 950 95,000 950
Ceylinco Sports Complex Limited 220,000 2,200 220,000 2,200
Ceycom Global Communications
Limited 40,500 405 40,500 405
Asian Finance Company Limited 75,000 750 75,000 750
MBSL Savings Bank Limited 25,000 250 25,000 250
Ceylinco - CISCO Security Corporation
(Pvt) Limited 10,000 10,000
Ceylinco International Property
Developers (Pvt) Limited 50,000 500 50,000 500
Ceyenergy Electronics Co. (Pvt) Limited 15,000 150 15,000 150
Ceylinco SwiftCare (Pvt) Limited 75,000 750 75,000 750
Independent Financial News & Views
(Pvt) Limited 4,900 49 4,900 49
Ceylinco International Realty
(Pvt) Limited 200,000 2,000 200,000 2,000
e.Ceylinco.Com (Pvt) Limited 60,000 600 60,000 600
International Consultancy & Corporate
Services (Pvt) Limited 5,000 50 5,000 50
Ceylinco PLC Technology (Pvt) Limited 177,500 1,775 177,500 1,775
Ceylinco Investments & Realty
(Pvt) Limited 4,000,000 40,000 4,000,000 40,000
The Sitar (Pvt) Limited 60,000 600 60,000 600
Seraka Investments Limited 510,000 5,100 510,000 5,100
Ceylinco - CISCO Ranaviru Services
(Pvt) Limited 10,000 100 10,000 100
Ceylinco - CISCO Cash Management and
Transport Company Limited 10,000 100
Diminution in Value (Note 10) (31,479) (19,299)
total unquoted Shares 24,850 36,930
total investment Securities -
Seylan Developments Plc
(notes 17.c.1 & 17.c.2) 27,244 3,272 39,324 2,111
17.d Seylan bank Asset Management limited
17.d.1 Quoted Shares
Blue Diamond Jewellery
Worldwide PLC 300,000 2,392 600 1,344,200 10,725 3,764
total Quoted Shares 600 600 1,882 3,764
2009 2008
no. of cost No. of Cost
ordinary Ordinary
Shares rs. 000 Shares Rs. 000
17.d.2 unquoted Shares
Ceylinco Venture Capital Co. Limited 500,000 5,000 500,000 5,000
Ceylinco Foliage Exports (Pvt) Limited 850,000 8,500 850,000 8,500
Ceylinco - CISCO Ranaviru Services (Pvt) Limited 50,000 500 50,000 500
Ceylinco Niranjan Invention (Pvt) Limited 33,249 350 33,249 350
Ceylinco Travels & Tours Limited 100,000 1,000 100,000 1,000
Ceylinco Tourist Hotels Ltd. - Hotel Ceysands 33,000 3,500 33,000 3,500
Ceylinco Development Bank Limited 725,000 7,250 725,000 7,250
Ceylinco Vocational Training (Pvt) Limited 120,000 1,482 120,000 1,482
The Finance & Guarantee Co. Limited 30,000 3,000 30,000 3,000
Ceylinco Employees Sports Complex (Pvt) Limited 200,000 2,000 200,000 2,000
Ceylinco Lexcon Services (Pvt) Limited 77,847 778 77,847 778
Ceylinco Automobiles Limited 500,000 5,000 500,000 5,000
Tropical Foliage Limited 150,000 1,500 150,000 1,500
Ceylinco Bio Tech Limited 150,000 1,500 150,000 1,500
Economic Resurgence Association (Pvt) Limited 1,000,000 10,000 1,000,000 10,000
Ceylinco Seylan Housing & Commercial
Properties Limited 20,000 200 20,000 200
Ceylinco Building Society 10,000 5,000 10,000 5,000
Ceylinco Aruna Accessories (Pvt) Limited 25,000 250 25,000 250
The Sitar (Pvt) Limited 380,000 6,000 380,000 6,000
Independent Financial News & Views (Pvt) Limited 100,000 1,000 100,000 1,000
Ceylinco Coloured Stones (Pvt) Limited 1,000,000 10,000 1,000,000 10,000
Ceylinco Freight International (Pvt) Limited 400,000 4,000 400,000 4,000
Ceylinco Hotels Limited 475,000 4,750 475,000 4,750
Ceylinco Cellular Company (Pvt) Limited 100,000 1,000 100,000 1,000
South Asian Travels Limited 500,000 5,000 500,000 5,000
Ceylinco Packaging Company Limited 500,000 5,000 500,000 5,000
Ceylinco - CISCO Cash Management &
Transit Company 50,000 500 50,000 500
Ceylinco Consolidated International Property
Development (Pvt) Limited 700,000 7,000 700,000 7,000
Middleway Printing (Pvt) Limited 1,375,000 13,750 1,375,000 13,750
Ceylinco Design & Project Management (Pvt) Limited 200,000 2,000 200,000 2,000
total unquoted Shares
17.d.3 unquoted Debentures
Ceylinco Vocational Training (Pvt) Limited 988 988
(8,000 Debentures of Rs. 100/- each)
MBSL Savings Bank Limited 1,500 1,500
(15,000 Debentures of Rs. 100/- each)
total unquoted Debentures
rs. 000 rs. 000 Rs. 000 Rs. 000
17.d.4 Government of Sri lanka treasury bonds
Face
Value
Rs. 000
Year of
Maturity
Discounted
Value
Rs. 000
668,000 2010 700,303
515,000 2011 512,069
100,000 2012 97,679
175,000 2013 186,388
1,496,439 1,511,339 2,747,425 2,522,566
total treasury bonds 1,496,439 1,511,339 2,747,425 2,522,566
total investment Securities -
Seylan bank Asset Management limited
(notes 17.d.1, 17.d.2, 17.d.3 & 17.d.4) 1,497,039 1,511,939 2,749,307 2,526,330
total investment Securities - Subsidiaries
(notes 17.b , 17.c & 17.d) 1,524,283 1,515,211 3,017,801 2,761,840
total investment Securities - Group
(notes 17.a ,17.b , 17.c & 17.d) 16,421,677 16,561,738 27,261,001 26,531,144
17.e Assets Pledged as Security
Out of the Treasury Bills and Bonds classified as Investment Securities the following amount has been
pledged as security for repurchase agreements.
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
Treasury Bonds 2,066,574 16,504,580 4,408,935 16,645,303
Sri Lanka Development Bond (USD 500,000) * 57,175 57,175
* The Bank has pledged a Sri Lanka Development Bond amounting to USD 500,000 with Bank of Ceylon as security for a guarantee
obtained on behalf of Seylan Credit Card Centre.
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
18. billS of ExchAnGE
Export Bills 849,682 1,090,162 849,682 1,090,162
Import Bills 319,993 147,370 319,993 147,370
Local Bills 181,781 250,496 181,781 250,496
1,351,456 1,488,028 1,351,456 1,488,028
Less: Provision for Bad & Doubtful Debts (Note 19.a) (29,092) (16,197) (29,092) (16,197)
1,322,364 1,471,831 1,322,364 1,471,831
19. loAnS AnD ADvAncES
Sri lanka rupee loans and Advances
Overdrafts 20,565,334 30,003,713 20,565,334 30,003,713
Trust Receipt Loans/Revolving Import Loans (RIL) 2,377,152 3,731,720 2,377,152 3,731,720
Staff Loans 4,543,552 3,665,637 4,549,431 3,677,272
Housing Loans 8,426,228 9,242,718 8,426,228 9,242,718
Pawning Advances 3,550,851 2,731,828 3,550,851 2,731,828
Refinance Loans 1,185,931 1,594,264 1,185,931 1,594,264
Other Loans 38,547,615 43,495,807 38,548,150 44,842,234
79,196,663 94,465,687 79,203,077 95,823,749
foreign currency loans and Advances
Overdrafts 677,773 1,317,592 677,773 1,317,592
Trust Receipt Loans/Revolving Import Loans (RIL) 155,603 933,398 155,603 933,398
Other Loans 7,769,329 10,761,933 7,769,329 10,761,932
8,602,705 13,012,923 8,602,705 13,012,922
total loans & Advances - Gross 87,799,368 107,478,610 87,805,782 108,836,671
Less: Loan Loss Provision (Note 19.a) (6,167,662) (6,279,669) (6,167,662) (6,283,989)
Interest in Suspense (Note 19.a) (5,592,735) (3,452,857) (5,592,735) (3,474,358)
total loans & Advances - net 76,038,971 97,746,084 76,045,385 99,078,324
19.a Analysis of Provision for loan losses and interest in Suspense
BANK GROUP
2009 2008 2009 2008
loan loss interest in Loan Loss Interest in loan loss interest in Loan Loss Interest in
Provision Suspense Provision Suspense Provision Suspense Provision Suspense
(Reclassified) (Reclassified) (Restated) (Restated)
rs. 000 rs. 000 Rs. 000 Rs. 000 rs. 000 rs. 000 Rs. 000 Rs. 000
Bills of Exchange 29,092 16,197 29,092 16,197
Loans and Advances 6,167,662 5,592,735 6,279,669 3,452,857 6,167,662 5,592,735 6,283,989 3,474,358
Lease Rental Receivable 269,254 66,156 264,400 69,837 269,254 66,156 450,185 127,052
6,466,008 5,658,891 6,560,266 3,522,694 6,466,008 5,658,891 6,750,371 3,601,410
19.b Analysis of Provision for loan losses
BANK GROUP
2009 2008 2009 2008
(Restated)
loan loss loan loss Loan Loss Loan Loss loan loss loan loss Loan Loss Loan Loss
Provision Provision Provision Provision Provision Provision Provision Provision
Specific General Specific General Specific General Specific General
(Reclassified) (Reclassified) (Restated) (Restated)
Bills of Exchange 17,490 11,602 3,282 12,915 17,490 11,602 3,282 12,915
Loans and Advances 5,698,546 469,116 5,577,567 702,102 5,698,546 469,116 5,581,887 702,102
Lease Rental Receivable 240,796 28,458 222,800 41,600 240,796 28,458 408,585 41,600
5,956,832 509,176 5,803,649 756,617 5,956,832 509,176 5,993,754 756,617
Loan Loss Provision - Specific 5,956,832 5,803,649 5,956,832 5,993,754
Loan Loss Provision - General 509,176 756,617 509,176 756,617
Total Loan Loss Provision -
(Note 19.a) 6,466,008 6,560,266 6,466,008 6,750,371
19.c Movement in loan loss Provision
BANK GROUP
2009 2008
(Reclassified)
2009 2008
(Restated)
Specific General Specific General Specific General Specific General
Balance Brought Forward 5,803,649 756,617 4,594,758 377,468 5,993,754 756,617 4,715,254 377,468
Additional Provision Made 2,411,886 (247,441) 2,006,427 379,149 2,411,886 (247,441) 2,302,914 379,149
Fully Provided Loans Written Off (1,673,732) (248,936) (1,673,732) (248,936)
Recoveries Made During the Year (598,040) (588,268) (598,040) (815,146)
Exchange Rate Variance on
Foreign Currency Provisions 13,069 39,668 13,069 39,668
Adjustment on Deconsolidation (190,105)
5,956,832 509,176 5,803,649 756,617 5,956,832 509,176 5,993,754 756,617
19.d Movement in interest in Suspense
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
Balance Brought Forward 3,522,694 3,302,165 3,601,410 3,433,765
Interest Suspended During the Year 4,754,247 2,172,347 4,754,247 2,232,174
Interest Recovered During the Year (1,422,925) (1,485,534) (1,422,925) (1,598,245)
Reversal of Interest for Write Off/Write Down (1,197,101) (471,493) (1,197,101) (471,493)
Exchange Rate Variance on Foreign
Currency Provisions 1,976 5,209 1,976 5,209
5,658,891 3,522,694 5,658,891 3,601,410
19.e basis for Provisioning
As detailed in Note 19.b, Bank makes general provision for the potential losses (not specifically identified) in
the performing portfolio of loans and advances and lease receivables, other than credit facilities secured by
cash deposits, Gold or Government Securities with the Bank. Bank has made a cumulative general provision
of Rs. 509.176 Mn. (2008 - Rs. 756.617 Mn.) to meet the regulatory requirement. The total general provision
of Rs. 509.176 Mn. is 0.59% (2008 - 0.68%) of the total performing and overdue loans and the advances net
of interest in suspense as at the Balance Sheet date.
19.e.1 non-Performing lending Portfolio
Loans, advances and leases are classified as non-performing as detailed in Note 19.f.1. The criteria used for
the classification of lending portfolio of the Bank as non-performing is set out below. This is in accordance
with the direction issued by the Central Bank of Sri Lanka on 8th May 2008, on Classification of Loans and
Advances, Income Recognition and Provisioning.
categorisation of non-Performing lending Portfolio
Type of Facility Determinant Overdue/Special
Mention
Substandard Doubtful Loss
Overdrafts Exceeds the
sanctioned limit
for a continuous
period of
90 days or more
but less than 180
days
180 days or more
but less than 360
days
360 days or more
but less than 540
days
540 days or more
Credit facilities
repayable
in monthly
instalments
Principal and/or
interest due and
unpaid
3 instalments
or more but
less than 6
instalments
6 instalments
or more but
less than 12
instalments
12 instalments
or more but
less than 18
instalments
18 instalments or
more
Other credit
facilities
Payments are in
arrears from the
due date
90 days or more
but less than 180
days
180 days or more
but less than 360
days
360 days or more
but less than 540
days
540 days or more
Credit Cards Minimum
payments are in
arrears from the
due date
90 days or more
but less than 120
days
120 days or more
but less than 180
days
180 days or more
but less than 240
days
240 days or more
Provision for loan losses are made on the basis of continuous review of all advances to the customers in
accordance with the Sri Lanka Accounting Standard 23 - Revenue Recognition and Disclosure in Financial
Statements of Banks, and the direction issued by the Central Bank of Sri Lanka, which has been disclosed in
the Financial Statements of the Bank after considering the values of the collateral, obtained against the
respective non-performing loans and advances.
Valuation of collateral is performed based on the direction issued by the Central Bank of Sri Lanka as
explained in Note 19.e.2.
19.e.2 valuation of Securities for Provisioning Purpose
As per the amendment to the direction issued by the Central Bank of Sri Lanka on 15th August 2003
(Effective from 1st January 2004), under Section 46 of the Banking Act No. 30 of 1988, as amended by
Banking (Amended) Act No. 33 of 1995, the initial and progressive discount that need to be applied to the
forced sale value of immovable properties held as collateral, are as follows:
Category Forced Sale Value of Immovable
Property that can be Considered as the
Value of Security (%)
At the Time of 1st Provisioning 75
1 - 2 Years in the Loss Category 60
Over 4 Years in the Loss Category At the Discretion of the Management
Provision for Loans and Advances - Ceylinco Group Exposure
In view of the special circumstances under which the Bank was reconstituted by the direction of the Central
Bank of Sri Lanka, the Monetary Board has granted an exemption to Seylan Bank PLC, from the requirement
to apply progressive discount on the forced sale value of immovable property, in terms of the Banking Act
Direction No. 03 of 2008 on Classification of Loans and Advances, Income Recognition and Provisioning
when computing the provisioning to be made as at 31st December 2009, for the facilities granted to the
specific group of Companies against mortgage over immovable property.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
19.f non-Performing Advances Disclosures
non-Performing Advances (with bcci)
Loans & Advances 24,734,686 15,189,717 24,734,686 15,353,010
Lease Rentals Receivable 565,113 662,754 565,113 996,617
total 25,491,068 15,905,540 25,491,068 16,402,696
19.f.1 non-performing Assets included in the bills of Exchange, loans and Advances,
Pro notes and lease rentals receivable on which interest is not being Accrued are as follows:
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
Total Non-Performing Advances
Excluding Former BCCI Advances 25,460,589 15,861,311 25,460,589 16,358,467
Former BCCI Advances 30,479 44,229 30,479 44,229
25,491,068 15,905,540 25,491,068 16,402,696
BANK
2009 2008
Advances Advances Change
rs. 000 %* Rs. 000 %* %
Total Gross Loans and Advances including Bills of
Exchange, Pro Notes, Lease Rentals Receivable
and Group Balance Receivable 92,680,732 114,765,174 (19.24)
Interest in Suspense (Note 19.a) (5,658,891) (3,522,694) 60.64
Total Loans and Advances including Bills of
Exchange, Pro Notes, Lease Rentals
Receivable and Group Balance Receivable
(Net of Interest in Suspense) 87,021,841 111,242,480 (21.77)
Non-Performing Advances (Gross) 31,149,959 33.61 19,428,234 16.93 60.33
Non-Performing Advances
(Net of Interest in Suspense) 25,491,068 29.29 15,905,540 14.30 60.27
Less: Provision for Bad & Doubtful Debts (Note 19.a) (6,466,008) (6,560,266) (1.44)
net non-Performing Advances 19,025,060 21.86 9,345,274 8.40 103.58
* As a percentage of total loans and advances as at 31st December.
Rs. 19,025.060 Mn. net non-performing advances is covered by tangible securities valued at approximately
Rs. 20,629.911 Mn.
19.f.2 non-Performing Portfolio of Grameen Micro credit company limited
Subsequent to the Balance Sheet date the Bank has restructured its loan portfolio to Grameen Micro Credit
Company Limited (Rs. 2.725 Bn.) and obtained approval from the Monetary Board to convert Rs. 1 Bn. of the
outstanding loans to 15% Cumulative, Redeemable, Convertible Preference Shares of the said company.
Further, Bank has converted the balance of Rs. 1.725 Bn. to Secured Debentures at an Interest Rate of
Treasury Bills +10% per annum (maturing 2012 to 2019).
2009
rs. 000
Grameen Loans Outstanding as at the Balance Sheet date 2,499,468
Interest Receivable 225,532
Amount Considered for Restructuring 2,725,000
19.f.3 As per the direction issued by the Central Bank of Sri Lanka on 31st December 2004, the Non-Performing
Ratio net of Interest in Suspense after inclusion of Investment Properties is as follows:
2009 2008
% %
Non-Performing Ratio before Adjusting Investment Properties 29.29 14.30
Non-Performing Ratio after Adjusting Investment Properties 29.71 14.70
19.g.1 collateral-wise Analysis of Gross non-Performing Portfolio
The Bank holds collateral against its lending portfolio in the form of mortgage interest over property,
other registered securities and assets. Estimation of fair value/realisable value are based on the value of
collateral, assessed at the time of lending and generally are not updated except when a loan is individually
assessed as non-performing.
2009 2008
rs. 000 Rs. 000
Secured by Tangible Assets 19,025,060 9,345,274
Secured by Movable Assets (Non-Performing Lease Receivable) 644,106 599,306
Other Securities
Clean 11,480,793 9,483,654
31,149,959 19,428,234
19.g.2 foreclosed Properties
Loans & Advances 1,099,823 889,454
Bills of Exchange 68,630 28,110
1,168,453 917,564
19.h balance outstanding on Advances Granted to Employee Share owning trust companies
Amount
outstanding
2009
Amount
Outstanding
2008
rs. 000 Rs. 000
Seybest (Pvt) Limited 30,898 32,896
Sotse (Pvt) Limited 30,225 30,530
Esot (Pvt) Limited 31,540 33,462
Seyshop (Pvt) Limited 30,937 32,932
19.i concentration of credit risk
Sector-wise analysis credit portfolio given below, reflects the exposure to credit risk in the various sectors
of the economy.
BANK GROUP
2009 2008 2009 2008
rs. 000 % Rs. 000 % rs. 000 % Rs. 000 %
Food, Beverages & Tobacco 1,314,948 1.50 3,515,077 3.27 1,314,948 1.50 3,538,868 3.25
Agriculture, Agro Business & Fisheries 3,467,424 3.95 4,202,230 3.91 3,467,424 3.95 4,343,374 3.99
Textiles & Wearing Apparel 2,117,555 2.41 7,212,904 6.71 2,117,555 2.41 7,264,431 6.67
Wood & Paper Products 1,058,202 1.21 958,051 0.89 1,058,202 1.21 996,635 0.92
Rubber & Leather Products 721,436 0.82 1,417,015 1.32 721,436 0.82 1,467,679 1.35
Metals, Chemicals & Engineering 2,564,190 2.92 3,193,956 2.97 2,564,190 2.92 3,294,051 3.03
Hotels 1,897,208 2.16 2,099,516 1.95 1,897,208 2.16 2,121,951 1.95
Services 7,275,258 8.29 10,271,850 9.56 7,275,258 8.29 10,732,017 9.86
Others 67,383,147 76.74 74,608,011 69.42 67,389,561 76.74 75,077,665 68.98
Gross loans & Advances 87,799,368 100.00 107,478,610 100.00 87,805,782 100.00 108,836,671 100.00
Loans & Advances 87,799,368 107,478,610 87,805,782 108,836,671
Lease Rentals Receivable 3,261,880 5,270,446 3,261,880 7,569,329
Bills of Exchange 1,351,456 1,488,028 1,351,456 1,488,028
Inter-Company Loans 268,028 528,090
Gross loans & Advances including lease
receivables & bills of Exchange 92,680,732 114,765,174 92,419,118 117,894,028
others category comprises the following Advances
Exports 7,418,660 11.01 5,786,708 7.76 7,418,660 11.01 5,786,708 7.71
Imports 3,719,104 5.52 5,217,972 6.99 3,719,104 5.52 3,719,104 4.95
Trading 8,194,541 12.16 14,812,309 19.85 8,194,541 12.16 8,194,541 10.91
Financial Services 4,059,196 6.02 5,028,335 6.74 4,059,196 6.02 4,059,196 5.41
Housing 14,851,747 22.04 13,591,431 18.22 14,851,747 22.04 14,851,747 19.78
Consumption 8,610,171 12.78 8,400,440 11.26 8,610,171 12.78 8,610,171 11.47
Miscellaneous 20,529,728 30.47 21,770,816 29.18 20,536,142 30.47 29,856,198 39.77
67,383,147 100.00 74,608,011 100.00 67,389,561 100.00 75,077,665 100.00
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
20. lEASE rEntAlS rEcEivAblE
within onE YEAr
From the Balance Sheet date 2,470,278 3,377,886 2,470,278 4,965,751
Less: Unearned Income (536,184) (797,776) (536,184) (1,198,625)
1,934,094 2,580,110 1,934,094 3,767,126
Less: Loan Loss Provision (Note 19.a) (269,254) (264,400) (269,254) (450,185)
Interest in Suspense (Note 19.a) (66,156) (69,837) (66,156) (127,052)
1,598,684 2,245,873 1,598,684 3,189,889
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
21. lEASE rEntAlS rEcEivAblE lAtEr thAn onE YEAr
AnD not lAtEr thAn fivE YEArS
From the Balance Sheet Date (Note 21.a) 1,606,273 3,257,487 1,606,273 4,587,676
Less: Unearned Income (280,381) (570,963) (280,381) (795,400)
1,325,892 2,686,524 1,325,892 3,792,276
21.a Lease Rentals Receivable 1,787,491 3,382,025 1,787,491 4,712,214
Less: Deposit of Rentals (181,218) (124,538) (181,218) (124,538)
1,606,273 3,257,487 1,606,273 4,587,676
22. lEASE rEntAlS rEcEivAblE lAtEr thAn fivE YEArS
From the Balance Sheet Date (22.a) 1,971 4,029 1,971 11,106
Less: Unearned Income (77) (216) (77) (1,179)
1,894 3,813 1,894 9,927
Less: Loan Loss Provision (Note 19.a)
Interest in Suspense (Note 19.a)
1,894 3,813 1,894 9,927
22.a Lease Rentals Receivable 1,971 4,029 1,971 11,106
Less: Deposits of Rentals
1,971 4,029 1,971 11,106
23. invEStMEntS in SubSiDiAriES - bAnk
Principal
Activity
number of
Shares
%
holding
cost as at
31.12.2009
Market
value as at
31.12.2009
Number of
Shares
%
Holding
Cost as at
31.12.2008
Market
Value as at
31.12.2008
31.12.2009 rs. 000 rs. 000 31.12.2008 Rs. 000 Rs. 000
Quoted - ordinary Shares
& Debentures
(Note 23.1)
Merchant
Banking 23,071,066 42.88 260,919 69,213
Property
Development 37,203,584 50.29 358,916 353,434 37,203,584 51.01 358,916 148,814
Debentures
(50 Mn. - 14%, 60 Mn. -
12.75%, 18.724 Mn. - 16%) 100.00 128,724
less: loss on impairment
Seylan Merchant
Bank PLC - Shares (172,556)
Seylan Merchant
Bank PLC - Debentures (128,724)
358,916 353,434 447,279 218,027
Principal
Activity
number of
Shares
%
holding
cost as at
31.12.2009
Directors
valuation
31.12.2009
Number of
Shares
%
Holding
Cost as at
31.12.2008
Directors
Valuation
31.12.2008
31.12.2009 rs. 000 rs. 000 31.12.2008 Rs. 000 Rs. 000
unquoted - ordinary Shares
Seylan Bank Asset
Management Ltd
Primary
Dealers 19,750,000 100.00 501,250 573,234 19,750,000 100.00 501,250 420,914
total 860,166 926,668 948,529 638,941
23.1 reasons for Deconsolidation
As the Bankdoes notexercise control over the activities of Seylan Merchant Bank PLC and has no intention
to do so in the future, the board resolved during the last quarterto gradually divest its investment in this
entity.Further, there are no common directors to exercise influence, any longer. Accordingly, the Bank sold
1,006,500 shares during thelast quarter of the year and by 31st December 2009 the Banks holding in the
entity dropped to 42.45%. As such, Seylan Merchant Bank PLC has been deconsolidated with effect from
1st October 2009 in the Group accounts of the Bank and the investment is classified as Investment Securities
in the Banks Financial Statements.
23.2 Jointly-controlled operations
The Bank had a jointly-controlled operation for the Seylan Credit Card activities. The Bank reconstituted this
operations at the year end under a new Memorandum of Understanding. However, no adjustments were required
in the Banks Financial Statements.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
24. GrouP bAlAncES rEcEivAblE
name of company
Seylan Merchant Bank PLC 342,314
Seylan Developments PLC 349,028 280,866
Seylan Bank Asset Management Limited 459,627
total 808,655 623,180
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
25. invEStMEnt ProPErtiES
cost
Balance as at 1st January 520,812 149,394 1,764,455 1,403,880
Add: Additions During the Year 371,418 371,418
Transferred from Property, Plant & Equipment 346
Disposals During the Year (11,189)
cost as at 31st December 520,812 520,812 1,748,139 1,764,455
less - Provision for impairment (134,795) (134,795)
cost less impairment as at 31st December 520,812 520,812 1,613,344 1,629,660
Accumulated Depreciation
Balance as at 1st January 88,602 66,451
Charge for the year 20,066 22,151
balance as at 31st December 108,668 88,602
carrying value as at 31st December 520,812 520,812 1,504,676 1,541,058
Bank has accounted its investment properties at cost and revalues these properties periodically on a
systematic basis for disclosure purposes.
25.a investment Properties (bank) - 2009
BANK
Cost Market Value
Address Extent Date of Valuation Rs. 000 Rs. 000
Kohalwila Road, Gonawala, Gampaha 0A 1R 19.14P 26.08.2008 6,166 10,900
Walpolawatte, Kudawaskaduwa, Wadduwa 2A 0R 25.4P 06.04.2009 28,799 28,800
Kahapola, Piliyandala 20A 1R 39.5P 10.04.2009 114,429 137,119
97, Station Road, Kandana 1A 1R 9.84P 27.10.2008 139,319 150,850
161, Galle Road, Wellawatta 0A 1R 27.48P 23.11.2009 232,099 233,429
520,812 561,098
Bank is confident on the valuation carried out on above dates and the values have not significantly changed
as at the Balance Sheet date.
25.b investment Properties (Group) - 2009
GROUP
Cost
Valuation
Market
Value
Address Extent Date of Valuation Rs. 000 Rs. 000
Kohalwila Road, Gonawala, Gampaha 0A 1R 19.14P 26.08.2008 6,166 10,900
Walpolawatte, Kudawaskaduwa, Wadduwa 2A 0R 25.4P 06.04.2009 28,799 28,800
Kahapola, Piliyandala 20A 1R 39.5P 10.04.2009 114,429 137,119
97, Station Road, Kandana 1A 1R 9.84P 27.10.2008 139,319 150,850
161, Galle Road, Wellawatta 0A 1R 27.48P 23.11.2009 232,099 233,429
90, Galle Road, Colombo 3
Seylan Towers (West Tower)** 54,897.52 Sq.Ft 29.12.2009 1,022,792 1,151,494
257, Union Place, Colombo 2 52.27P 28.12.2008 204,535 250,256
1,748,139 1,962,848
** The rent income from the Seylan Towers (West Tower) for the year 2009 is Rs. 54.8 Mn. - (2008 Rs. 53.16 Mn.).
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
26. DEfErrED tAxAtion
Balance Brought Forward 91,582 95,790 13,332
Transferred from Deferred Tax Liability (93,684) (93,684)
Charge/(Reversal) for the Year - (Note 11) 362,631 185,266 358,874 176,142
Adjustment for Seylan Merchant Bank PLC (304)
Balance Carried Forward - (Note 26.a & 26.b) 454,213 91,582 454,360 95,790
2009 - bAnk 2008 - BANK
temporary
Difference
rs. 000
tax
rs. 000
Temporary
Difference
Rs. 000
Tax
Rs. 000
26.a Analysis of Deferred tax Assets and liabilities
Deferred tax - liability
Property, Plant & Equipment 1,060,002 371,000 1,083,333 379,167
Lease Rentals 242,702 84,946 289,417 101,296
1,302,704 455,946 1,372,750 480,463
Deferred tax - Assets
Defined Benefit Obligation* 614,318 215,012
Unclaimed Bad Debt Provision - Specific 2,451,368 857,979 874,778 306,172
Bad Debt Provision - General** 149,087 52,180 128,474 44,966
Tax Losses Carried Forward 16,843 5,895
2,600,455 910,159 1,634,413 572,045
net Deferred tax Assets/liabilities - (note 26.a.1) 1,297,751 454,213 261,663 91,582
2009 - bAnk 2008 - BANK
balance as at recognised balance as at Balance as at Recognised Balance as at
1st January in Profit or loss 31st December 1st January in Profit or Loss 31st December
rs. 000 rs. 000 rs. 000 Rs. 000 Rs. 000 Rs. 000
26.a.1 Movement in temporary Differences
Property, Plant &
Equipment 1,083,333 (23,331) 1,060,002 949,568 133,765 1,083,333
Lease Rentals 289,417 (46,715) 242,702 182,810 106,607 289,417
1,372,750 (70,046) 1,302,704 1,132,378 240,372 1,372,750
Defined Benefit
Obligation* 614,318 (614,318) 635,060 (20,742) 614,318
Unclaimed Bad Debt
Provision - Specific 874,778 1,576,590 2,451,368 874,778 874,778
Bad Debt Provision -
General** 128,474 20,613 149,087 377,468 (248,994) 128,474
Tax Losses Carried
Forward 16,843 (16,843) 16,843 16,843
1,634,413 966,042 2,600,455 1,012,528 621,885 1,634,413
net Deferred tax
Assets/liabilities 261,663 1,036,088 1,297,751 (119,850) 381,513 261,663

2009 - GrouP 2008 - GROUP
temporary
Difference
rs. 000
tax
rs. 000
Temporary
Difference
Rs. 000
Tax
Rs. 000
26.b Analysis of Deferred tax Assets and liabilities
Property, Plant & Equipment 1,062,455 371,859 1,071,311 374,959
Lease Rentals 242,702 84,946 289,417 101,296
1,305,157 456,805 1,360,728 476,255
Defined Benefit Obligation* 2,874 1,006 614,318 215,012
Unclaimed Bad Debt Provision - Specific 2,451,368 857,979 874,778 306,172
Bad Debt Provision - General 149,087 52,180 128,474 44,966
Tax Losses Carried Forward 16,843 5,895
2,603,329 911,165 1,634,413 572,045
net Deferred tax Assets/liabilities (note 26.b.1) 1,298,172 454,360 273,685 95,790
2009 - GrouP 2008 - GROUP
balance as at recognised balance as at Balance as at Recognised Balance as at
1st January in Profit or loss 31st December 1st January in Profit or Loss 31st December
rs. 000 rs. 000 rs. 000 Rs. 000 Rs. 000 Rs. 000
26.b.1 Movement in temporary Differences
Property, Plant &
Equipment 1,071,311 (8,856) 1,062,455 949,568 121,743 1,071,311
Lease Rentals 289,417 (46,715) 242,702 182,810 106,607 289,417
1,360,728 (55,571) 1,305,157 1,132,378 228,350 1,360,728
Defined Benefit
Obligation* 614,318 (611,444) 2,874 635,060 (20,742) 614,318
Unclaimed Bad Debt
Provision - Specific 874,778 1,576,590 2,451,368 874,778 874,778
Bad Debt Provision -
General** 128,474 20,613 149,087 377,468 (248,994) 128,474
Tax Losses Carried
Forward 16,843 (16,843) 16,843 16,843
1,634,413 968,916 2,603,329 1,012,528 621,885 1,634,413
net Deferred
tax Assets/liabilities 273,685 1,024,487 1,298,172 (119,850) 393,535 273,685
* Defined Benefit Obligation (Gratuity Provision)
The Bank has a separate Gratuity Trust Fund which was approved by the Commissioner General of Inland Revenue. As per the approval,
Bank could transfer Gratuity Provision of 62.5% of the last months salary of the year and deduct from the tax computation. Therefore,
temporary differences have not arisen.
** General Provision
Recognition of deferred tax assets arising from General Provision at Balance Sheet date was limited to non-performing ratio of the
temporary difference. In managements view the Banks NPA Ratio as at Balance Sheet date is an indicator of deferred tax assets which
could be recovered in the future periods.
The Bank has recognised deferred tax assets on the General Provision of Rs. 149,086,976 (Amount not recognised - Rs. 360,089,806).
Seylan Developments Plc
In accordance with the BOI agreement dated 30th March 1993, the profits and income of the Company
are exempt from taxation until the year 2011 and at the expiry of the said period the following options are
available for the Company.
(a) Income tax payable for the Year of Assessment shall be computed at 2% of the turnover of the Company
for 15 years;
(b) The provisions of the Inland Revenue Laws for the time being imposed shall apply.
In the event the Company elects option (a) no Deferred Tax Liability will arise even after the expiry of the
tax exemption period.
The Company needs to make the election only 90 days prior to the expiration of the said tax exemption
period after evaluating all tax implications prevailing at that time. Therefore, no provision has been made
in the Financial Statements by the Company for Deferred Tax Liability which could be arised after the tax
exemption period in the event the Company elects option (b).
27. ProPErtY, PlAnt & EQuiPMEnt
bank Freehold Freehold Computer Machine/ Furniture/ Motor Leased Capital Work- 31.12.2009 31.12.2008
Land Building Equipment Equipment Fittings Vehicles Assets in-Progress total Total
(Reclassified)
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000 Rs. 000
Cost/Valuation
Balance as at 01st January 387,214 946,867 4,976,594 1,157,904 946,501 434,451 57,903 8,907,434 7,916,735
Additions & Improvements 39,418 13,597 117,544 28,100 27,331 238 1,007 227,235 1,456,408
Disposals (342,479) (11,372) (12,427) (17,480) (40) (383,798) (465,709)
Transfers (2,802) 1,811 1,136 (145)
As at 31st December 426,632 960,464 4,748,857 1,176,443 962,541 417,209 57,718 1,007 8,750,871 8,907,434
Balance as at 01st January 96,863 2,845,444 894,823 708,568 230,524 57,859 4,834,081 4,296,134
Charge for the year 24,390 536,808 91,130 63,517 69,455 18 785,318 707,205
Disposals (152,365) (11,332) (11,940) (16,885) (40) (192,562) (169,258)
Transfers (10) 17,816 (22,695) 14,674 (9,640) (145)
As at 31st December 121,243 3,247,703 951,926 774,819 273,454 57,692 5,426,837 4,834,081
carrying Amount as at 31.12.2009 426,632 839,221 1,501,154 224,517 187,722 143,755 26 1,007 3,324,034
Carrying Amount as at 31.12.2008 387,214 850,004 2,131,150 263,081 237,933 203,927 44 4,073,353
Group
Freehold Freehold Computer Machine/ Furniture/ Motor Leased Capital Work-
31.12.2009
31.12.2008
(Restated)
Cost/Valuation
Balance as at 01st January 387,214 1,696,286 5,092,782 1,276,036 988,536 465,136 75,519 9,981,509 8,957,234
Disposals (342,479) (11,525) (12,536) (22,434) (2,085) (391,059) (473,113)
Transfers (2,802) 1,811 1,136 (145) (1,020)
Adjustment on Deconsolidation (84,342) (29,611) (28,782) (9,515) (152,250)
As at 31st December 426,632 1,709,883 4,781,334 1,264,833 975,738 433,425 73,289 1,007 9,666,141 9,981,509
Charge for the Year 33,607 539,490 97,960 64,851 73,667 3,309 812,884 752,954
Disposals (152,365) (11,371) (11,973) (21,508) (1,842) (199,059) (174,281)
Transfers (10) 17,816 (22,695) 14,674 (9,640) (145)
As at 31st December 167,501 3,271,799 987,460 782,313 280,403 65,092 5,554,568 5,042,897
carrying Amount as at 31.12.2009 426,632 1,542,382 1,509,535 277,373 193,425 153,022 8,197 1,007 4,111,573
Carrying Amount as at 31.12.2008 387,214 1,562,382 2,173,940 332,108 253,120 218,099 11,749 4,938,612
27. ProPErtY, PlAnt & EQuiPMEnt
bank Freehold Freehold Computer Machine/ Furniture/ Motor Leased Capital Work- 31.12.2009 31.12.2008
(Reclassified)
Cost/Valuation
Balance as at 01st January 387,214 946,867 4,976,594 1,157,904 946,501 434,451 57,903 8,907,434 7,916,735
Disposals (342,479) (11,372) (12,427) (17,480) (40) (383,798) (465,709)
Transfers (2,802) 1,811 1,136 (145)
As at 31st December 426,632 960,464 4,748,857 1,176,443 962,541 417,209 57,718 1,007 8,750,871 8,907,434
Charge for the year 24,390 536,808 91,130 63,517 69,455 18 785,318 707,205
Disposals (152,365) (11,332) (11,940) (16,885) (40) (192,562) (169,258)
Transfers (10) 17,816 (22,695) 14,674 (9,640) (145)
As at 31st December 121,243 3,247,703 951,926 774,819 273,454 57,692 5,426,837 4,834,081
carrying Amount as at 31.12.2009 426,632 839,221 1,501,154 224,517 187,722 143,755 26 1,007 3,324,034
Carrying Amount as at 31.12.2008 387,214 850,004 2,131,150 263,081 237,933 203,927 44 4,073,353
Group
Freehold Freehold Computer Machine/ Furniture/ Motor Leased Capital Work-
31.12.2009
31.12.2008
(Restated)
Cost/Valuation
Balance as at 01st January 387,214 1,696,286 5,092,782 1,276,036 988,536 465,136 75,519 9,981,509 8,957,234
Disposals (342,479) (11,525) (12,536) (22,434) (2,085) (391,059) (473,113)
Transfers (2,802) 1,811 1,136 (145) (1,020)
As at 31st December 426,632 1,709,883 4,781,334 1,264,833 975,738 433,425 73,289 1,007 9,666,141 9,981,509
Charge for the Year 33,607 539,490 97,960 64,851 73,667 3,309 812,884 752,954
Disposals (152,365) (11,371) (11,973) (21,508) (1,842) (199,059) (174,281)
Transfers (10) 17,816 (22,695) 14,674 (9,640) (145)
As at 31st December 167,501 3,271,799 987,460 782,313 280,403 65,092 5,554,568 5,042,897
carrying Amount as at 31.12.2009 426,632 1,542,382 1,509,535 277,373 193,425 153,022 8,197 1,007 4,111,573
Carrying Amount as at 31.12.2008 387,214 1,562,382 2,173,940 332,108 253,120 218,099 11,749 4,938,612
27.a fully Depreciated Assets
The initial cost of fully-depreciated plant, machinery, equipment & furniture as at 31st December 2009
which are still in use as at Balance Sheet date:
BANK
2009
rs. 000
GROUP
2009
rs.'000
Buildings
Computer Equipment 1,976,346 1,985,179
Office Machines & Equipment 679,732 680,590
Fixtures, Fittings & Furniture 605,518 608,508
Motor Vehicles 70,358 70,358
Leased Assets 57,626 57,626
3,389,580 3,402,261
27.a.1 temporarily idle Plant & Equipment
The following assets as at 31.12.2009 have been identified as temporarily idle plant & equipment.
BANK GROUP
Cost

Rs. 000
Depreciation
Rs. 000
Net
Book Value
Rs. 000
Cost

Rs. 000
Depreciation
Rs. 000
Net
Book Value
Rs. 000
ATM Machines 7,834 1,814 6,020 7,834 1,814 6,020
Mobile Banking Equipment 31,454 6,870 24,584 31,454 6,870 24,584
39,288 8,684 30,604 39,288 8,684 30,604
27.b freehold/leasehold land & buildings - bank
Address Extent Cost/
Valuation
Accumulated
Depreciation
net book
value as at
31.12.2009
Rs. 000 Rs. 000 rs. 000
free hold
Mt. lavinia
198, Galle Road, Ratmalana 25.75 P 23,908 3,147 20,761
badulla
10, Cocowatte Road, Badulla 1 R 6.40 P 57,866 2,065 55,801
kochchikade
66, 66 1/1, 68 2/1, Chilaw Road, Kochchikade 8.0 P 5,228 868 4,360
Avissawella
71, Ratnapura Road, Avissawella 19.13 P 9,574 1,888 7,686
Grandpass
401, Prince of Wales Avenue, Colombo 14 1R 6.0 P 44,372 201 44,171
hingurakgoda
13 & 14, Airport Road, Hingurakgoda 15.84 P 12,000 731 11,269
bandarawela
240, Badulla Road, Bandarawela 23.20 P 36,898 1,204 35,694
Sarikkamulla
97, Old Galle Road, Sarikkamulla 11.56 P 4,059 1,143 2,916
Address Extent Cost/
Valuation
Accumulated
Depreciation
net book
value as at
31.12.2009
Rs. 000 Rs. 000 rs. 000
tissamaharama
547, Debarawewa, Tissamaharama 0.091 H 11,193 483 10,710
raddolugama
171, National Housing Scheme, Raddolugama 12.80 P 11,500 476 11,024
nuwara Eliya
12, Lawson Street, Nuwara Eliya 20.28 P 6,365 1,602 4,763
Maradagahamula
150, Divulapitiya Road, Maradagahamula 35.0 P 7,569 1,197 6,372
Anuradhapura
23-A1, Anuradhapura 43.65 P 3,500 609 2,891
Embilipitiya
53 & 53/1, New Town Road, Embilipitiya 22.1 P 27,295 916 26,379
nugegoda
211, High Level Road, Nugegoda 14.0 P 36,061 2,258 33,803
nawalapitiya
77/1, 79, Dolosbage Road, Nawalapitiya 10.52 P 5,719 422 5,297
ratnapura
5, Inner Circular Road, Ratnapura 9.31 P 24,552 1,238 23,314
Embilipitiya
Pettigala Road, Embilipitiya 32.9 P 5,500 5,500
Private banking
2, Deal Place, Colombo 3 19.0 P 192,095 467 191,628
Gampola
44, Kandy Road, Gampola 13.5 P 15,599 1,030 14,569
negombo
115, Rajapaksa Broadway, Negombo 29.15 P 51,999 52 51,947
head office
90, Galle Road, Colombo 3 (Level - 1, 2, 13, 14) 31,704
Square Feet
794,244 99,246 694,998
total freehold land & buildings - bank 1,387,096 121,243 1,265,853
total freehold buildings - Seylan Developments Plc 749,419 46,258 703,161
total freehold land & buildings - Group 2,136,515 167,501 1,969,014
leasehold Properties - (note 28)
nuwara Eliya
48 & 48/1, Park Road, Nuwara Eliya 19.08 P 66,148 3,065 63,083
total leasehold land & buildings - bank 66,148 3,065 63,083
Seylan tower land
90, Galle Road, Colombo 3 640,549 39,412 601,137
total leasehold land - Seylan Developments Plc 640,549 39,412 601,137
total leasehold land & buildings - Group 706,697 42,477 664,220
total land & buildings - Group 2,843,212 209,978 2,633,234
BANK
Cost/Valuation
Rs. 000
Depreciation
Rs. 000
Net Book Value
Rs. 000
27.c Summary of freehold/leasehold Properties
Freehold Land 426,632 426,632
Freehold Building 960,464 121,243 839,221
1,387,096 121,243 1,265,853
Leasehold Land 22,603 22,603
Leasehold Building 43,545 3,065 40,480
66,148 3,065 63,083
total - bank 1,453,244 124,308 1,328,936
Leasehold Land - Seylan Developments PLC 640,549 39,412 601,137
Freehold Building - Seylan Developments PLC 749,419 46,258 703,161
total land & buildings - Group 2,843,212 209,978 2,633,234
27.d revaluation - land & building
The Banks land & building were revalued in year 2006 by a qualified valuer. Valuation was made on the
basis of open market value and the revaluation surplus was transferred to the revaluation reserve.
If land & building were stated at historical cost, the amounts would have been as follows:
BANK
Land Building Total
Rs. 000 Rs. 000 Rs. 000
Properties revalued
cost
Freehold 22,204 61,588 83,792
Leasehold 8,894 31,596 40,490
Freehold (12,490) (12,490)
Leasehold (1,153) (1,153)
carrying value 31,098 79,541 110,639
Properties not revalued
cost
Freehold 364,726 827,497 1,192,223
Leasehold
Freehold (114,130) (114,130)
Leasehold
carrying value 364,726 713,367 1,078,093
total carrying value 395,824 792,908 1,188,732
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
28. lEASEholD riGhtS
cost/valuation
Balance as at 01st January 66,148 65,981 706,697 706,530
Additions for the Year 167 167
As at 31st December 66,148 66,148 706,697 706,697
Charge for the Year 1,082 692 8,960 8,575
As at 31st December 3,065 1,983 42,477 33,517
carrying Amount as at 31st December 63,083 64,165 664,220 673,180
Bank - Leasehold property consists of the property situated at Park Road, Nuwara Eliya acquired in the year 2001.
Seylan Developments PLC - Year 1993, Seylan Developments PLC, a subsidiary of Seylan Bank PLC acquired the
leasehold rights of the land situated at No. 90, Galle Road, Colombo 03 for a period of 94 years to construct the
Seylan Towers.
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
29. intAnGiblE ASSEtS
Deferred Expenses/Others 25,410
25,410
30. othEr ASSEtS
Deposits & Prepayments 461,808 455,423 482,080 486,021
Interest Receivable 1,289,039 989,650 1,289,039 1,071,409
Clearing House Balance 1,189,688 969,160 1,164,869 969,160
Inventories 334,630 1,383,405 335,904 1,384,676
Investment in Projects 209,500 459,007
Sundry Debtors 99,130 137,488 115,447 229,212
Other Receivables 133,513 178,069 272,489 225,781
Due From Trust Companies 124,154 124,154 124,154 124,154
Others 249,528 692,396 202,326 926,135
3,881,490 4,929,745 4,195,808 5,875,555
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
31. DEPoSitS
local currency Deposits
Demand Deposits 7,923,720 7,852,370 7,923,720 7,852,370
Savings Deposits 28,867,299 28,491,646 28,867,299 28,576,708
Time Deposits 56,351,640 56,694,360 56,351,640 58,176,036
Certificates of Deposit 3,056,958 2,985,771 3,056,958 2,985,771
96,199,617 96,024,147 96,199,617 97,590,885
foreign currency Deposits
Demand Deposits 1,134,245 1,070,826 1,134,245 1,070,826
Savings Deposits 2,949,285 3,776,790 2,949,285 3,776,790
Time Deposits 4,532,752 7,067,038 4,532,752 7,067,038
8,616,282 11,914,654 8,616,282 11,914,654
total Deposits 104,815,899 107,938,801 104,815,899 109,505,539
31.a Maturity
Due within One Year 93,067,958 97,432,331 93,067,958 98,528,112
Due after One Year 11,747,941 10,506,470 11,747,941 10,977,427
104,815,899 107,938,801 104,815,899 109,505,539
31.b Deposits from
Non-Bank Customers 103,038,963 106,964,791 103,038,963 108,531,529
Banks 87,670 715,988 87,670 715,988
Finance Companies 1,689,266 258,022 1,689,266 258,022
104,815,899 107,938,801 104,815,899 109,505,539
32. borrowinGS
Call Money Borrowings 1,376,475 4,449,105 1,376,475 4,449,105
Refinance Borrowings 1,200,397 1,249,916 1,200,397 1,255,250
Borrowings from Foreign Banks 476,006 1,391,492 476,006 1,391,493
Other Borrowings 2,962 14,505 445,826 2,112,961
3,055,840 7,105,018 3,498,704 9,208,809
32.a Maturity
Due Within One Year 2,078,671 5,825,584 2,227,251 6,993,560
1-5 Years 639,072 933,356 769,586
After Five Years 338,097 1,279,434 338,097 1,445,663
3,055,840 7,105,018 3,498,704 9,208,809
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
33. GrouP bAlAncES PAYAblE
Seylan Merchant Bank PLC 92,804
Seylan Developments PLC 3,509 2,706
Seylan Bank Asset Management Limited 6,066 1,428,482
9,575 1,523,992
34. SuborDinAtED DEbEnturES
34.a Advance received on Debenture issue
This balance consists of cash received in advance for debentures in 2008 which was allotted after the
Balance Sheet date (12th January 2009) of the previous year.

34.b Debentures
BANK GROUP
Year of
Issue
Redemption
Period
Private/Public
Issue
Rate Amount
Outstanding
Amount
Outstanding
Annual Monthly Floating
(Annual)
Floating
(03 Months)
as at 31.12.2009
Rs. 000
as at 31.12.2009
Rs. 000
2005 2005-10 Private Issue 14.50% 699,000 699,000
2006 2006-11 Public Issue 13.50% 13.00% 15.74% 1,257,315 1,257,315
2006 2006-11 Private Issue 15.00% 14.00% 12.71% 162,250 162,250
2007 2007-12 Public Issue - I 16.75% 15.75% 20.13% 749,400 749,400
2007 2007-12 Public Issue - II 18.00% 17.00% 21.56% 14.36% 559,285 559,285
2007 2007-12 Private Issue 19.50% 100,000 100,000
2008 2008-13 Private Issue 20.00% 18.50% 22.50% 72,550 72,550
2008 2008-13 Public Issue 21.50% 20.50% 19.06% 12.78% 630,565 630,565
4,230,365 4,230,365
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
35. othEr liAbilitiES
Accrued Expenses and Interest Payable 4,283,666 4,347,620 4,308,554 4,365,497
Margin Accounts 604,512 693,321 604,512 693,321
Deposit Funding Accounts 1,189,313 988,225 1,189,313 988,225
Dividend Payable 22,668 16,393 23,314 24,802
Provision for Defined Benefit
Obligations (Net) (Note 35.a) 36,322 526,172 50,714 552,551
Sundry Creditors 422,149 1,622,841 451,536 1,645,829
Value Added Tax & Other Statutory Payables 350,987 (78,671) 526,782 38,426
Cheques & Drafts Payable 711,826 2,223,506 711,826 2,223,506
Unredeemed Debentures 104,990 104,990
Others 581,572 810,168 626,636 1,264,303
8,203,015 11,254,565 8,493,187 11,901,450

35.a Defined benefit obligations
The Bank pays half-a-months salary (last drawn) for each completed year of service as gratuity for
employees who has worked for more than 5 years at the time of retirement/resignation.
Board of directors of the Bank at its meeting held on 24th March 2009, decided to change the previous
policy of gratuity payments of paying one month salary (last drawn) to resigned staff members who have
completed ten years of service in the Bank with effect from 5th March 2009.
BANK GROUP
2009 2008
(Reclassified)
2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
35.a.1 the Amount recognised in the balance Sheet
Present Value of Defined Benefit
Obligations (Note 35.a.3) 663,119 1,258,285 693,568 1,300,355
Fair Value of Plan Assets (Note 35.a.4) (595,920) (542,563) (611,977) (558,254)
Unrecognised Actuarial Gain or (Loss) (Note 35.a.5) (37,966) (189,550) (37,966) (189,550)
Unrecognised Past Service Gain
Non-Vested (Note 35.a.6) 7,089 7,089
Provision for Defined benefit obligations 36,322 526,172 50,714 552,551
35.a.2 Plan Assets consists the following
Balance with Banks 28,729 4,228 44,786 19,126
Investment in Treasury Bonds 567,191 530,463 567,191 530,463
Interest Receivable 7,872 8,665
Provision for Defined benefit obligations 595,920 542,563 611,977 558,254
Plan assets are held by an approved external gratuity fund.
35.a.3 Movement in the Present value of Defined benefit obligations
Liability for Defined Benefit Obligations
as at 1st January 1,258,285 1,276,475 1,300,355 1,304,148
Adoption of SLAS 16 (Revised 2006) (236,734) (229,171)
Revised Balance as at 1st January 1,258,285 1,039,741 1,300,355 1,074,977
Current Service Cost 52,295 98,791 55,481 102,259
Interest Cost 150,994 124,769 155,012 128,938
Past Service Cost/(Gain) Non-Vested Benefits (10,633) (10,633) 3,688
Past Service Cost/(Gain) Vested Benefits (588,269) (588,269)
Transferred from Gratuity Trust Fund 468
Unrecognised Actuarial (Gains)/Losses (149,068) 131,689 (148,383) 130,260
Payments Made (Including benefits
paid by the Plan) in 2009 (50,485) (136,705) (61,037) (140,235)
liability for Defined benefit obligations
as at 31st December 663,119 1,258,285 693,568 1,300,355
BANK GROUP
2009 2008
(Reclassified)
2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
35.a.4 Movement in Plan Assets
Fair Value of Plan Assets as at 1st January 542,563 421,215 558,254 434,759
Adoption of SLAS 16 (Revised 2006) 88,917 88,917
Revised Balance as at 1st January 542,563 510,132 558,254 523,676
Expected Return on Plan Assets 75,959 92,181 78,085 94,376
Contribution Paid into Plan 31,739 134,816 31,739 134,816
Benefits Paid by the Plan (50,485) (136,705) (61,169) (136,705)
Unrecognised Actuarial Gains/(Loss)
on Plan Assets (3,856) (57,861) 5,068 (57,909)
fair value of Plan Assets at 31st December 595,920 542,563 611,977 558,254
35.a.5 unrecognised Actuarial (Gain) or loss
Actuarial (Gain)/Loss for Year - Obligation (149,068) 131,689 (148,524) 131,689
Actuarial (Gain)/Loss for Year - Plan Assets 3,856 57,861 3,856 57,861
Actuarial Gain/(Loss) Immediately Recognised (6,372) (6,916)
balance as at 31st December 37,966 189,550 37,966 189,550
35.a.6 unrecognised Past Service cost non-vested benefits
Balance as at 1st January
Past Service Cost/(Gain) Non-Vested Benefits** 10,633 10,633
Amount Recognised in the Income Statement (3,544) (3,544)
** The Past Service Cost on Non-Vested Benefits is recognised on a straight line basis over 3 years.
35.a.7 Amount recognised in the income Statement
Current Service Cost 52,295 98,791 55,481 102,259
Interest Cost 150,994 124,769 155,012 128,938
Expected Return on Plan Assets (75,959) (92,181) (78,085) (94,376)
Actuarial (Gains)/Loss Immediately Recognised 6,372 (1,867) 767
Past Service Cost/(Gain) Vested Benefits (588,269) (588,269)
Past Service Cost/(Gain) Non-Vested Benefits (3,544) (3,544) 3,688
(458,111) 131,379 (461,272) 141,276
Balance before
Reducing of Benefits
for Future Service
Rs. 000
Gain on
Reduction
of Benefits
Rs. 000
Balance after
Reducing the
Benefits
Rs. 000
35.a.8 Movement in Defined benefit Plan with the
reduction of benefits - bank
Net Present Value of Obligations (Note 35.a.3) 1,258,285 595,166 663,119
Fair Value of Plan Assets (Note 35.a.4) (542,563) 53,357 (595,920)
715,722 648,523 67,199
Unrecognised Actuarial Gains (Note 35.a.5) 189,550 151,584 37,966
Unrecognised Past Service Gain
Non-Vested (Note 35.a.6) (7,089) 7,089
Adjustment to Net Liability Recognised
in Balance Sheet 526,172 489,850 36,322
BANK
2009 2008
35.a.9 Actuarial Assumptions- bank
Normal Retirement Age 55 years 55 years
Rate of Discount 11% 12%
Salary Increase 5%,7.5% and thereafter 8% 10% increase per annum for
per annum. (next increment first 5 years and 8% per
due on 1st July 2010) annum thereafter
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
36. StAtED cAPitAl
Ordinary Shares - Voting (Note 36.a) 3,461,000 435,600 3,461,000 435,600
Ordinary Shares - Non-Voting (Note 36.b) 1,235,600 1,235,600 1,235,600 1,235,600
Preference Shares - Non-Redeemable,
Non-Cumulative, Non-Convertible and
Non-Voting (Note 36.c) 33,901 33,901 33,901 33,901
Share Premium (Note 36.d) 837,319 837,319 837,319 837,319
5,567,820 2,542,420 5,567,820 2,542,420
36.a ordinary Shares - voting
Balance as at 01st January -
43,560,000 Ordinary Shares 435,600 435,600 435,600 435,600
Issued during the year -
86,440,000 Ordinary Shares of Rs. 35/- each 3,025,400 3,025,400
130,000,000 ordinary Shares - voting 3,461,000 435,600 3,461,000 435,600
36.b ordinary Shares - non-voting
123,560,000 Ordinary Shares 1,235,600 1,235,600 1,235,600 1,235,600
123,560,000 ordinary Shares - non-voting 1,235,600 1,235,600 1,235,600 1,235,600
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
36.c Preference Shares
3,390,100 Shares of Rs. 10/- each 33,901 33,901 33,901 33,901
3,390,100 Preference Shares 33,901 33,901 33,901 33,901
36.d Movement in Share Premium
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
37. StAtutorY rESErvE funD
Add: Transferred During the Year 27,165 ** 7,762 ** 27,165 7,762
Adjustments During the Year 3,742 3,742
** 5% of Net Profit After Tax
Statutory Reserve Fund represents the statutory requirement in terms of the Section 20 (1) and (2) of the Banking Act No. 30 of 1988.
BANK GROUP
2009 2008 2009 2008
rs. 000 Rs. 000 rs. 000 Rs. 000
38. rESErvES
Capital Reserve (Note 38.a) 418,021 418,021 418,021 418,021
Revaluation Reserve (Note 38.b) 125,238 125,238 483,892 490,562
General Reserve (Note 38.c) 33,787 33,787 33,787 33,787
Capital Redemption Reserve Fund (Note 38.d) 255,213 258,997
Special Risk Reserve (Note 38.e) 42,595 4,515
Reserve on Script Issue 3,521
Retained Profits 3,930,689 3,420,791 3,800,891 3,553,052
4,507,735 3,997,837 5,034,399 4,762,455
38.a Movement in capital reserve
Consists of the Debenture Redemption Reserve Fund of Rs. 400 Mn. transferred to Capital Reserve in 2004.
Debenture Redemption Reserve Fund was created for the redemption of five-year debentures amounting to
Rs. 400 Mn. issued in November 1999. Balance consisting of Rs. 18 Mn. transferred to Capital Reserve in 1991.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
38.b Movement in revaluation reserve
Transferred to/from Revaluation Reserve (73,680) (6,670) (73,680)
In addition to the Banks Revaluation Reserve, Group includes the surplus on revaluation of fixed assets of
Seylan Developments PLC.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
38.c Movement in General reserve
Consist of Rs. 25 Mn. transferred in 1995 to General Reserve, Rs. 2.7 Mn. transferred from Bad Debts
Reserve and Rs. 6 Mn. transferred from Contingency Reserve in 2002 to General Reserve.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
38.d Movement in capital redemption
reserve fund
Add: Transferred during the Year
Less: Adjustment on Consolidation (3,784)
Capital Redemption Reserve Fund was created at the time of redeeming the preference shares of
Seylan Developments PLC.
BANK GROUP
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
38.e Movement in Special risk reserve
Add: Transferred during the Year 38,080
According to the circular Ref. No. 08/24/002/005/003 issued by the Central Bank of Sri Lanka, Seylan Bank
Asset Management Ltd. is required to appropriate 25% of the net profit after tax for the year towards the
Special Risk Reserve Fund.
39. coMMitMEntS AnD continGEnciES
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
2009 2008 2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000
39.a commitments
Undrawn Credit Lines 8,698,972 8,943,671 8,698,972 8,943,671
Capital Commitments (Note 40.a) 2,684 143,252 2,684 143,252
8,701,656 9,086,923 8,701,656 9,086,923
39.b contingencies
Acceptances 2,781,914 3,544,212 2,781,914 3,544,212
Stand by Letters of Credit 283,255 559,581 283,255 559,581
Guarantees 7,194,304 8,005,123 7,194,304 8,005,123
Documentary Credit 2,007,403 1,983,522 2,007,403 1,983,522
Bills for Collection 1,335,048 3,353,715 1,335,048 3,353,715
Forward Exchange Contracts (Net) (41,018) 341,299 (41,018) 341,299
13,560,906 17,787,452 13,560,906 17,787,452
total commitments and contingencies 22,262,562 26,874,375 22,262,562 26,874,375
39.c cases Against the bank
In the normal course of business, the Bank is involved in various types of litigation with borrowers or others
who have asserted or threatened claims/counter claims against the Bank. Including the following:
c. i. civil cases
1. Some of the appeals relate to cases;
CHC128/2001(1)andCHC14/98bothcasesareinappeal.Bothappealsnotyetlisted.
CA(Rev)1788/04.Appealpending.Fixedforargumenton12thMarch2010.
CHC157/2001(1)CasependinginSupremeCourt.Caseisfixedforargumenton21stJune2010.
HC(Civil)137/99(1).JudgmentdeliveredinfavouroftheBank.Plaintiffappealedagainstjudgment.
DCColombo15958/M.Appealpending.
2. DC Mt. Lavinia 4246/03 Case is filed against the Bank claiming wrongful seizure. The case is coming up
on 24th March 2010 for inquiry.
3. DC Colombo 157/2007 claiming that, Bank had honoured 3rd party cheque which, allegedly forged by the
customer of our Raddolumgama Branch (RDL) and credited to his account. Trial on 10th March 2010.
4. DC Ratnapura 23391/M case filed by customer for wrongful take over of assets not mortgaged. Case is
fixed for answer on 12th March 2010.
5. CHC Colombo 403/09/MR. Case filed by plaintiff claiming that Bank has not permitted the customer to
utilise the facilities and charging high rate of interest. Case is fixed for Answer.
6. DC Colombo 07219/09/DMR. Case filed by the customer for collecting proceeds of a cheque crediting to
a fictitious account. Answer 7th May 2010.
7. DC Colombo DSP 212/2009 an enjoining order preventing the Bank from paying monies under the Letter
of Credit issued by the Bank to Bank of China. Written submissions on 2nd March 2010 and notice
returnable on the 2nd defendant Veihai Joylong International.
8. D C Bandarawela 1687/L to 1695/L (9 cases) occupants before the mortgage have filed actions against
the Bank. Government intervened and acquired the property and we lodged the claim. Settlement date
7th May 2010.
9. DC Mt. Lavinia 500/4/P Bank has been added as 13th defendant and 10th defendant had mortgaged the
property to the Bank. There is no claim against the Bank. Case to be called.
10. DC Colombo 26321/M action claiming an ex-gratia payment. Trial fixed.
11. CHC 638/09/MR (DC Colombo 6033/SPL) Bank has filed the case for an injunction, counter claim has
been made by the defendant.
12. CHC 232/2002. This is instituted with regard to sale of shares of Blue Diamond Jewellery World Wide
(BDJWL) held as security for the facility of Gold Lada. Action filed for damages claiming from Bank.
Calling same. CHC 320/2002 (1) Case is fixed for hearing.
13. CHC 243/2002 (1). This action is filed seeking a declaration from Courts that the Bank is not entitled to
sell/alienate/transfer shares of the BDJWL company among other claims. Trial on 3rd May 2010.
c. ii. labour tribunal cases
1. LT 1/377/97. Case filed by an employee. Settlement pending. To be called on 1st March 2010.
2. Labour Department Inquiry No. IR/1055/2009 CA Writ 891/2009. Retired employees of Seylan Bank Vs
Seylan Bank. Labour Commissioner ordered to pay gratuity at the rate of one month salary for each year
of service for the employees who completed ten years service. Bank has filed a writ application in Court
of Appeal.
Based on the available information and current status of the above cases, the Bank is not in a position to
quantify the potential financial impact if any, as at the Balance Sheet date. Further, based on legal advice the
Bank does not expect the outcome of any action to have a material effect on the financial position of the Bank.
39.d tax Assessments Against bank
1. Assessment No. VATFS/BFSU/09/130 for VAT on Financial Services for 2007, amounts to Rs. 359,126,131/-.
Bank made the appeal on 22nd December 2009, and Department of Inland Revenue acknowledged the
same on 15th January 2010.
2. Income Tax for Y/A 2003/2004 amounting to Rs. 190,738,861/- determined by the Commissioner General
of Inland Revenue, on assessment No. 8224200. Bank has made an appeal to the Board of Review and
the final hearing will be scheduled in April 2010.
The Bank is in the view that the above assessments would not have any material impact on the
40. cAPitAl coMMitMEntS
Capital expenditure approved by the board of directors for which provision has not been made in these
accounts amounted to approximately:
BANK GROUP
2009
rs. Mn.
2008
Rs. Mn.
2009
rs. Mn.
2008
Rs. Mn.
40.a Approved and Contracted for 2.684 143.25 2.684 143.25
40.b Approved but not Contracted for 140.54 140.54
41. EvEntS occurrinG AftEr bAlAncE ShEEt DAtE
(a) The board has approved the amalgamation of Seylan Bank Asset Management Limited with Seylan Bank
PLC as per the provision of Section 242(i) of the Companies Act No. 07 of 2007. The Central Bank of Sri Lanka
has approved in principle the amalgamation of Seylan Bank Asset Management Limited with Seylan Bank
PLC and the appointment of Seylan Bank PLC as a primary dealer in principle, subject to the fulfilment of
the terms and conditions applicable to the appointment of Licensed Commercial Banks as Primary Dealers
as stipulated in Registered Stock and Securities (Primary Dealers) Regulation No. 01 of 2009 and Local
Treasury Bills (Primary Dealers) Regulation No. 01 of 2009.
(b) Subsequent to the year end loan granted to Grameeen Micro Credit Company Limited has been
restructured as referred in Note 19.f.2.
(c) The board of directors of the Bank has recommended a final ordinary dividend of Rs. 0.50 per share for the
year 2009 and to be approved at the Annual General Meeting.
Subsequent to the Balance Sheet date, no circumstances have arisen which require adjustments to or
disclosure in the Financial Statement.
42. rElAtED PArtY trAnSActionS
a. According to Sri Lanka Accounting Standard 30 (Revised 2005) - Related Party Disclosure, Key Management
Personnel are those having authority and responsibility for planning, directing and controlling the activities
of the entity. Accordingly, the board of directors, General Manager/Chief Executive Officer (GM/CEO) and key
employees of the Bank holding directorships in subsidiary companies have been classified as Key Management
Personnel of the Bank.
b. transactions with key Management Personnel (kMP)
Facilities Limit
Rs. Mn.
Outstanding
Rs. Mn.
Security
Mr. Ajita Pasqual Overdraft 1.5 0.819 Lien over REPO for Rs. 1,366,891.23 and for Rs. 250,000
Employee Provident
Fund Loan 5.9 5.527 Against Employees Provident Fund balance of Rs. 7,409,465/-
Housing Loan- I 6.0 2.736 Primary Mortgage Bond for Rs. 6,000,000/- over the property at Kirulapone
Term Loan I 3.558 3.092
}
Term Loan II 0.205 0.187 Lien over deposits for USD 69,417.36 and Rs. 500,500/-
Term Loan III 0.711 0.677
Term Loan IV 2.061 1.886
Mr. A. Madurapperuma Employee Provident
Fund Loans 7.060 7.060 Employees Provident Fund balance of Rs. 7,933,950/-
Mr. S. Palihawadana Overdraft 0.015 DPN /Overdraft Agreement
Employee Provident
Fund Loans 3.910 3.910 Employees Provident Fund balance of Rs. 4,398,183/-
Housing Loan - I 1.582 0.844 Primary Mortgage Bond for Rs. 1,582,000/- over the property at Pita-Kotte
Piyasa Housing Loan 2.375 0.180
}
Housing Loan - II 1.500 1.088 Secondary Mortgage Bond for Rs. 2,375,000/- over the above property
Housing Loan - III 0.500 0.359
Deposits
Rs. Mn.
Mr. E. Narangoda Total 0.396
Mr. R. Nadarajah Total 0.246
Mr. A.L. Devasurendra Total 0.124
Mr. A. Madurapperuma Total 0.950
Mr. S. Palihawadana Total 0.272
Other Instruments
Mr. E. Narangoda Treasury Bonds 1.821
Mr. A.L. Devasurendra Repo
Interest Earned on
Margin Trading Shares
0.105
1.886
c. Accommodation Granted to kMP for credit cards
Name of Key Management Personnel Credit Card Limit
Rs. 000
Outstanding
Rs. 000
Security Type
Mr. E. Narangoda 500 Nil
Mr. R. Nadarajah 500 6
Mr. N.M. Jayamanne PC 500 194
Mr. P.L.P. Withana
Mr. F.N. Goonewardena**
Rear Admiral (Rtd.) B.A.J.G. Peiris 500 Nil
Mr. P.G.S. Kariyawasam
Dr. N.H. Godahewa
Mr. A.L. Devasurendra 500 Nil
Mr. Ajita Pasqual 1,750 277 Secured on Treasury
Bond of Rs. 1,000,000/-
Mr. A. Madurapperuma 600 33
Mr. S. Palihawadana 500 116
** Mr. F.N. Goonewardena resigned with effect from 3rd December 2009.
d. compensation to kMP
2009 2008
rs. Mn Rs. Mn
Short-Term Employee Benefits 28.63 66.83
Post-Employement Benefits 3.98 26.56
In addition to their salaries Bank also provides non-cash benefits to the directors and executive officers
and contributes to a post-employment define benefit plan on their behalf. Directors emoluments are
disclosed in Note 7 to the Financial Statements.
e. All the other interests of each director, direct or indirect in financial and other arrangements are disclosed
under Note 43 - Other Related Party Transactions.

43. othEr rElAtED PArtY trAnSActionS
The Bank had the following financial dealings during the year 2009 with companies which are considered,
related parties and unless otherwise stated, transactions were carried out in the ordinary course of business
on an arms-length basis at commercial rates with the companies mentioned below. The parties given below
are considered related parties mainly due to significant influence arising as a result of common directorships
and through shareholdings. These companies, names of the directors and the nature of transactions entered
into are listed below:
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

Aggregate Amount of Accommodation
outstanding as at 31.12.2009
Services obtained/other transactions
relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Nature of Service Amount Payable/
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(a) Direct Subsidiaries of the bank
Seylan Development PLC Rear Admiral (Rtd.)
B.A.J.G. Peiris
Chairman Demand Deposit 3.509 Overdraft 66.000 64.802 8.998 Expenses
Term Loan 165.000 162.397 Bank Charges 0.143
3.509 Guarantee 10.245 Rent 92.217
231.000 227.199 10.245 8.998 Management Fees 4.000
Work Order Jobs 0.768
Interest Expenses 0.029
97.157
Mr. R. Nadarajah
Director
Primary Mortgage Bond
for Rs. 17.6 Mn.
units 3 and 4.
Mr. A. Madurapperuma
Director
Mr. S. Palihawadana
Director
Additional Mortgage
Bond - Rs. 9.4 Mn.
Market Value -
Rs. 42.6 Mn. Forced
Sale Value Rs. 36 Mn.
Seylan Towers,
Primary Mortgage
Bond for Rs. 21 Mn.
Unit 8 - Market Value -
Rs. 25 Mn., Forced Sale
Value - Rs. 24 Mn. Interest Income 40.829 10.483
Mortgage Bond for
Rs. 187 Mn. obtained
over Units 27, 30 and 33
depicted in Plan
No. 59/2004
40.829 10.483
Rent Deposit Rs. 81 Mn.
Forced Sale Value -
Rs. 275 Mn.
Market Value Rs. 300 Mn.

Seylan Bank Asset
Management Limited
Mr. E. Narangoda
Chairman Demand Deposit 6.066 Interest Paid 82.739
6.066 Interest Payable 0.227
0.227 82.739
Mr. R. Nadarajah
Director Reverse Repo Income 13.415
Mr. A. Pasqual
Director Branch Commission 0.521
Director Reverse Repo 459.4 Mn. Over Draft Interest Income 0.001
Mr. S. Palihawadana
Director 13.937
43. othEr rElAtED PArtY trAnSActionS
The Bank had the following financial dealings during the year 2009 with companies which are considered,
related parties and unless otherwise stated, transactions were carried out in the ordinary course of business
on an arms-length basis at commercial rates with the companies mentioned below. The parties given below
are considered related parties mainly due to significant influence arising as a result of common directorships
and through shareholdings. These companies, names of the directors and the nature of transactions entered
into are listed below:
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(a) Direct Subsidiaries of the bank
Seylan Development PLC Rear Admiral (Rtd.)
B.A.J.G. Peiris
Chairman Demand Deposit 3.509 Overdraft 66.000 64.802 8.998 Expenses
Term Loan 165.000 162.397 Bank Charges 0.143
3.509 Guarantee 10.245 Rent 92.217
231.000 227.199 10.245 8.998 Management Fees 4.000
Work Order Jobs 0.768
Interest Expenses 0.029
97.157
Mr. R. Nadarajah
Director
Primary Mortgage Bond
for Rs. 17.6 Mn.
units 3 and 4.
Director
Mr. S. Palihawadana
Director
Additional Mortgage
Bond - Rs. 9.4 Mn.
Market Value -
Rs. 42.6 Mn. Forced
Sale Value Rs. 36 Mn.
Seylan Towers,
Primary Mortgage
Bond for Rs. 21 Mn.
Unit 8 - Market Value -
Rs. 25 Mn., Forced Sale
Value - Rs. 24 Mn. Interest Income 40.829 10.483
Mortgage Bond for
Rs. 187 Mn. obtained
over Units 27, 30 and 33
depicted in Plan
No. 59/2004
40.829 10.483
Rent Deposit Rs. 81 Mn.
Forced Sale Value -
Rs. 275 Mn.
Market Value Rs. 300 Mn.

Seylan Bank Asset
Management Limited
Mr. E. Narangoda
Chairman Demand Deposit 6.066 Interest Paid 82.739
6.066 Interest Payable 0.227
0.227 82.739
Mr. R. Nadarajah
Director Reverse Repo Income 13.415
Mr. A. Pasqual
Director Branch Commission 0.521
Director Reverse Repo 459.4 Mn. Over Draft Interest Income 0.001
Mr. S. Palihawadana
Director 13.937
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(b) trust companies and funds set up under the bank
Gratuity Trust Fund
Mr. E. Narangoda
Trustee
Mr. R. Nadarajah
Trustee Demand Deposit 22.601 Investment in Treasury Bond amounting to face value Rs. 568.423 Mn.
22.601 Funds transferred by Seylan Bank PLC amounting to Rs. 31.758 Mn.
Rear Admiral
B.A.J.G. Peiris
Trustee
Trustee (Resigned
w.e.f. 03.12.2009)
Provident Fund
Mr. Ajita Pasqual
Trustee
Mr. S. Palihawadana
Trustee Savings Account 1.821.235 Investment in Seylan Bank PLC Debenture amounted to Rs. 220 Mn. Interest Expenses
74.204
1,821.235 74.204
Sesot (Pvt) Limited Mr. E. Narangoda
Chairman
Demand Deposit 0.064 No. of Voting Shares - 2,252,900
0.064 Rs. 52.153 Mn. Payable to Seylan Bank PLC
Mr. R. Nadarajah
Director
Seyfest (Pvt) Limited Mr. E. Narangoda
Chairman
Mr. R. Nadarajah
Director Demand Deposit 0.067 Rs. 23.2 Mn. Payable to Seylan Bank PLC
0.067 No. of Voting Shares - 2,977,996
Sotse (Pvt) Limited Mr. E. Narangoda
Chairman Term Loan 38.550 30.225 Interest Received 1.385
38.550 30.225 1.385
Loan Agreement Form for Rs. 38.8 Mn.
Mr. R. Nadarajah
Director No. of Voting Shares - 962,331
Rs. 8 Mn. Payable to Seylan Bank PLC
Credit facilities have been allowed at preferential rates of interest
since these facilities were utilised to purchase shares which are
allotted to the employees in proportion to their gratuity.
Seyshop (Pvt) Limited Mr. E. Narangoda
54.375 30.937 1.505
Mr. R. Nadarajah
Director No. of Voting Shares - 2,132,900
Rs. 14.10 Mn. Payable to Seylan Bank PLC
Seybest (Pvt) Limited Mr. E. Narangoda
54.510 30.898 1.492
Mr. R. Nadarajah
Esots (Pvt) Limited Mr. E. Narangoda
53.860 31.540 1.526
Mr. R. Nadarajah
Director
No. of Voting Shares - 2,115,857
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(b) trust companies and funds set up under the bank
Gratuity Trust Fund
Mr. E. Narangoda
Trustee
Mr. R. Nadarajah
Trustee Demand Deposit 22.601 Investment in Treasury Bond amounting to face value Rs. 568.423 Mn.
22.601 Funds transferred by Seylan Bank PLC amounting to Rs. 31.758 Mn.
Rear Admiral
B.A.J.G. Peiris
Trustee
Trustee (Resigned
w.e.f. 03.12.2009)
Provident Fund
Mr. Ajita Pasqual
Trustee
Mr. S. Palihawadana
Trustee Savings Account 1.821.235 Investment in Seylan Bank PLC Debenture amounted to Rs. 220 Mn. Interest Expenses
74.204
1,821.235 74.204
Sesot (Pvt) Limited Mr. E. Narangoda
Chairman
Demand Deposit 0.064 No. of Voting Shares - 2,252,900
0.064 Rs. 52.153 Mn. Payable to Seylan Bank PLC
Mr. R. Nadarajah
Director
Seyfest (Pvt) Limited Mr. E. Narangoda
Chairman
Mr. R. Nadarajah
Director Demand Deposit 0.067 Rs. 23.2 Mn. Payable to Seylan Bank PLC
0.067 No. of Voting Shares - 2,977,996
Sotse (Pvt) Limited Mr. E. Narangoda
38.550 30.225 1.385
Mr. R. Nadarajah
Director No. of Voting Shares - 962,331
Rs. 8 Mn. Payable to Seylan Bank PLC
Credit facilities have been allowed at preferential rates of interest
since these facilities were utilised to purchase shares which are
allotted to the employees in proportion to their gratuity.
Seyshop (Pvt) Limited Mr. E. Narangoda
54.375 30.937 1.505
Mr. R. Nadarajah
Seybest (Pvt) Limited Mr. E. Narangoda
54.510 30.898 1.492
Mr. R. Nadarajah
Esots (Pvt) Limited Mr. E. Narangoda
53.860 31.540 1.526
Mr. R. Nadarajah
Director
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(c) common Directorship Entities
Brown & Company PLC Mr. A.L. Devasurendra
Deputy Chairman Overdraft 140.00 1.209
Purchase of 2 Nos. of mailing
meters and base. 0.537
Term Loan 100.00 100.000 0.537
240.00 101.209
Director
Corporate Guarantee from Standard Finance Limited (Group Company of
Browns) for LKR 240 Mn. 275,100 shares of HNB presently lodged in the
custodian account of Brown & Co. PLC at Seylan Bank PLC. Leeway available on
the value of 5,300,000 shares of HNB mortgaged to Standard Finance Limited
Standard Finance
(Pvt) Limited
Director Demand Deposit 0.024 Term Loan 335.000 218.091
0.024 335.000 218.091
Mortgage over 5,300,000 shares of HNB
Taprobane Holdings
Limited
Managing Director Margin Trading 15.00
Director Demand Deposit 0.065
0.065 15.000
Secured by Rs. 46,230,000 worth of quoted shares
No. of Non-Voting Shares - 5,607,800
Ceylease Financial
Services Limited
Mr. P.L.P. Withana
Director (Resigned
w.e.f. 18.11.2009) Demand Deposit 1.231 Revolving Terms Loan 200.000 Interest Expense 0.001 0.291
1.231 Overdraft 20.000 Capital Repayment 203.015
220.000 0.001 203.306
Assignment over performing lease agreements at a ratio of 1:1.25 with a special
Power of Attorney up to maximum of Rs. 275.00 Mn. (to secure the term loans). Interest Received 17.406
17.406
Letter of undertaking confirming that the Company will settle the full outstanding or
substitute same with performing leases if a particular lease falls into arrears for more than
03 months.
Letter of undertaking that they will keep us informed in the event of any change in the
management/ownership of the Company.
Loans Agreement Form.
Series of Loans.
Overdraft Agreement Form.
Letter of Set Off (Company)
Repo Rs. 2.7 Mn.
SriLankan Catering
(Pvt) Limited
Director Time Deposits 5.280
5.280
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
(c) common Directorship Entities
Brown & Company PLC Mr. A.L. Devasurendra
Deputy Chairman Overdraft 140.00 1.209
Purchase of 2 Nos. of mailing
meters and base. 0.537
Term Loan 100.00 100.000 0.537
240.00 101.209
Director
Corporate Guarantee from Standard Finance Limited (Group Company of
Browns) for LKR 240 Mn. 275,100 shares of HNB presently lodged in the
custodian account of Brown & Co. PLC at Seylan Bank PLC. Leeway available on
the value of 5,300,000 shares of HNB mortgaged to Standard Finance Limited
Standard Finance
(Pvt) Limited
0.024 335.000 218.091
Mortgage over 5,300,000 shares of HNB
Taprobane Holdings
Limited
Managing Director Margin Trading 15.00
Director Demand Deposit 0.065
0.065 15.000
Secured by Rs. 46,230,000 worth of quoted shares
Ceylease Financial
Services Limited
Mr. P.L.P. Withana
Director (Resigned
w.e.f. 18.11.2009) Demand Deposit 1.231 Revolving Terms Loan 200.000 Interest Expense 0.001 0.291
1.231 Overdraft 20.000 Capital Repayment 203.015
220.000 0.001 203.306
Assignment over performing lease agreements at a ratio of 1:1.25 with a special
Power of Attorney up to maximum of Rs. 275.00 Mn. (to secure the term loans). Interest Received 17.406
17.406
Letter of undertaking confirming that the Company will settle the full outstanding or
substitute same with performing leases if a particular lease falls into arrears for more than
03 months.
Letter of undertaking that they will keep us informed in the event of any change in the
management/ownership of the Company.
Loans Agreement Form.
Series of Loans.
Overdraft Agreement Form.
Letter of Set Off (Company)
Repo Rs. 2.7 Mn.
SriLankan Catering
(Pvt) Limited
Director Time Deposits 5.280
5.280
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
Lanka ORIx Leasing Mr. I.C. Nanayakkara Time Deposit
Company PLC Deputy Chairman (USD 2,840,678.09) 324.832 Short-Term Loan 640.000 440.000 Interest Paid 18.097
Savings Account 0.004 Overdraft 20.000 0.162 18.097
Demand Deposit 2.284 Trust Receipt 135.000
327.120 Revolving Lease 180.000 44.337 Interest Received 2.634
Letters of Credit Usance 10.000 2.634
Post-Dated Cheque
Facility 5.00
990.00 484.499
Lien over fixed deposit for USD 2,840,678.09 (Commercial Paper Loan at Treasury)
Assignment over factoring and lease receivables.
Commercial Paper for Rs. 600.0 Mn. (to be provided at the time of issuance)
Assignment over lease agreements for Rs. 625.0 Mn.
Absolute ownership over motor vehicles to be leased.
Special Power of Attorney for Rs. 10.0 Mn. over lease agreement for Rs. 15.0 Mn.
Lien over special foreign currency account USD 356,043.79 (Revolving Short-Term Loan)
No. of Voting Shares 66
No. of Non-Voting Shares 19,733,400
Ishara Traders
(Pvt) Limited
Director Demand Deposit 0.01 Overdraft 800.000 0.776
0.01 800.000 0.776
Mortgage and Power of Attorney over a basket of quoted Blue-Chip Company Shares.
Maturata
Plantations Limited
Director Overdraft 125.000 39.318
Term Loan (PSRP I) 41.911 41.911
Director Term Loan (PSRP II) 18.737 18.737
Term Loan (PSRP III) 2.274 2.274
Term Loan (PSRP IV) 10.600 10.500
Term Loan (PSRP V) 13.732 13.732
Term Loan (EFRIENDS) 0.380 0.380
Term Loan (IV) 6.000 6.000
Term Loan (V) 10.600 10.600
Short-Term Loan 3.000 3.000
Term Loan (Tea Relief) 43.748 43.748
Term Loan (Tea Relief) 26.000 NIL
Guarantee 2.000 1.250
303.982 190.200 1.250
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
Lanka ORIx Leasing Mr. I.C. Nanayakkara Time Deposit
Company PLC Deputy Chairman (USD 2,840,678.09) 324.832 Short-Term Loan 640.000 440.000 Interest Paid 18.097
Savings Account 0.004 Overdraft 20.000 0.162 18.097
Demand Deposit 2.284 Trust Receipt 135.000
327.120 Revolving Lease 180.000 44.337 Interest Received 2.634
Letters of Credit Usance 10.000 2.634
Post-Dated Cheque
Facility 5.00
990.00 484.499
Lien over fixed deposit for USD 2,840,678.09 (Commercial Paper Loan at Treasury)
Assignment over factoring and lease receivables.
Commercial Paper for Rs. 600.0 Mn. (to be provided at the time of issuance)
Assignment over lease agreements for Rs. 625.0 Mn.
Absolute ownership over motor vehicles to be leased.
Special Power of Attorney for Rs. 10.0 Mn. over lease agreement for Rs. 15.0 Mn.
Lien over special foreign currency account USD 356,043.79 (Revolving Short-Term Loan)
No. of Voting Shares 66
No. of Non-Voting Shares 19,733,400
Ishara Traders
(Pvt) Limited
Director Demand Deposit 0.01 Overdraft 800.000 0.776
0.01 800.000 0.776
Mortgage and Power of Attorney over a basket of quoted Blue-Chip Company Shares.
Maturata
Plantations Limited
Director Overdraft 125.000 39.318
Term Loan (PSRP I) 41.911 41.911
Director Term Loan (PSRP II) 18.737 18.737
Term Loan (PSRP III) 2.274 2.274
Term Loan (PSRP IV) 10.600 10.500
Term Loan (PSRP V) 13.732 13.732
Term Loan (EFRIENDS) 0.380 0.380
Term Loan (IV) 6.000 6.000
Term Loan (V) 10.600 10.600
Short-Term Loan 3.000 3.000
Term Loan (Tea Relief) 43.748 43.748
Term Loan (Tea Relief) 26.000 NIL
Guarantee 2.000 1.250
303.982 190.200 1.250
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
Mortgage
value
bond 60%
of fSv
Mortgage over leasehold rights of Bramley Estate
for Rs. 13.0 Mn. Forced Sale Value Rs. 22.0 Mn. Market Value
Rs. 27.0 Mn. valued by Mr. S.N. Wijepala on 11.05.2009. 13.00 13.00
Primary Mortgage for Rs. 36.0 Mn. Secondary Mortgage for
Rs. 50.0 Mn. over leasehold rights of Gonapitiya Estate Forced
Sale Value Rs. 120.0 Mn, Market Value Rs. 160.0 Mn. valued by
Mr. S.N. Wijepala on 17.04.2009 86.00 72.00
Mortgage over leasehold rights of Alma Estate for
Rs. 26.0 Mn. Forced Sale Value LKR 65.0 Mn. Market Value
Rs. 75.0 Mn. valued by Mr. S.N. Wijepala on 17.04.2009 26.00 39.00
Mortgage over leasehold rights of Ragala Estate for
Rs. 74.75 Mn. Forced Sale Value Rs. 160.0 Mn. Market Value
Rs. 190.0 Mn. by Mr. S.N. Wijepala on 17.04.2009 74.75 96.00
Mortgage over leasehold rights of Maha Uva Estate for
Mortgage over leasehold rights of Enselwatte Estate for
LKR 102.25 Mn. Forced Sale Value LKR 220.0 Mn. Market Value
LKR 270.0 Mn. valued by Mr. S.N. Wijepala on 03.06.2009. 102.25 132.00
Letter of Comfort from Free Lanka Trading Co. and Free Lanka Plantations Co. (Pvt) Limited
for Rs. 75.0 Mn.
Overdraft Agreement for Rs. 125.0 Mn.
Loan Agreement Forms for Rs. 296.986 Mn.
Existing security cover and mortgage bonds are adequate to cover enhanced overdraft.
(ii) Proposed security: (Additional if any) treasury Guarantee to be obtained to cover
proposed term loan of rs. 26.0 Mn.
Lanka Hospitals
Corporation PLC
Mr. P.G.S.
Kariyawasam
0.028 98.750 8.855
Dr. N.H. Godahewa
Director
Syndicate Loan Agreement entered into by Lanka Hospital Corporation PLC and
Seylan Bank PLC.
Primary Mortgage Bond Nos. 167 and 168 over immovable and movable assets of the
Company covering the loan up to 42.5% of capital and interest and other charges on the
loan execution in favour of DFCC, NDB, HNB and SBK.
Concurrent mortgage over all moneys receivable executed in favour of International
Finance Corporation (IFC), DFCC, NDB, HNB and SBK.
Partial Syndication Loan Guarantee from IFC up to 57.5% of the principal amount.
Sri Lanka Insurance
Corporation Limited
Mr. P.G.S.
Kariyawasam
Chairman Time Deposit 500
Sri Lanka Insurance Corporation Limited held 1,500,000 Seylan Bank Debentures
(Rs. 150,000,000/-) as at 31.12.2009 (Private Placement of Debentures 2005/10). Interest Payable 2.564
_

500 2.564
Dr. N.H. Godahewa
Managing Director
Sri Lanka Insurance Corporation Limited - No. of Voting Shares 19,500,000
- No of Non-Voting Shares 714,000
Browns Plantations
Investments (Pvt) Limited
Director
Investor in Seylan Bank PLC
Commercial Leasing
Company PLC
Director
No. of Non-Voting Shares - 72,400
(d) Significant Provision of finance/Economic Dependence
Grameen Micro
Credit Co. Limited
Loan and interest of Rs. 2,725,000 Mn. restructured post-year end (Note 19.f.2).
Seylan Credit Card
Co. Limited
Mr. A. Pasqual
Director
The Bank jointly controlled operations for the Seylan Credit Card activities
Mr. T. Nanayakkara
Director
The Bank reconstituted their operations at the year end under a new Memorandum of
Understanding (Note 23.2).
Mr. C. Kotigala
Director
Leasing 5.403 3.375*
* Total rentals outstanding. Absolute ownership over the vehicle
Party/Parties
Accommodated
name of Director/
key Management
Personnel
Deposit

relationship

rs. Mn.
Nature of
Accommodation
Limit

Rs. Mn.
Funded

Rs. Mn.
Non-Funded

Rs. Mn.
Interest in
Suspense
Provision
for the Year

Rs. Mn.
Bad &
Doubtful
Debt
Provision
for the Year
Rs. Mn.
Receivable

Rs. Mn.
Amount
Paid/Received

Rs. Mn.
Mortgage
value
bond 60%
of fSv
Mortgage over leasehold rights of Bramley Estate
for Rs. 13.0 Mn. Forced Sale Value Rs. 22.0 Mn. Market Value
Primary Mortgage for Rs. 36.0 Mn. Secondary Mortgage for
Rs. 50.0 Mn. over leasehold rights of Gonapitiya Estate Forced
Sale Value Rs. 120.0 Mn, Market Value Rs. 160.0 Mn. valued by
Mr. S.N. Wijepala on 17.04.2009 86.00 72.00
Mortgage over leasehold rights of Alma Estate for
Rs. 26.0 Mn. Forced Sale Value LKR 65.0 Mn. Market Value
Rs. 75.0 Mn. valued by Mr. S.N. Wijepala on 17.04.2009 26.00 39.00
Mortgage over leasehold rights of Ragala Estate for
Rs. 190.0 Mn. by Mr. S.N. Wijepala on 17.04.2009 74.75 96.00
Mortgage over leasehold rights of Maha Uva Estate for
Mortgage over leasehold rights of Enselwatte Estate for
LKR 102.25 Mn. Forced Sale Value LKR 220.0 Mn. Market Value
LKR 270.0 Mn. valued by Mr. S.N. Wijepala on 03.06.2009. 102.25 132.00
Letter of Comfort from Free Lanka Trading Co. and Free Lanka Plantations Co. (Pvt) Limited
for Rs. 75.0 Mn.
Overdraft Agreement for Rs. 125.0 Mn.
Loan Agreement Forms for Rs. 296.986 Mn.
Existing security cover and mortgage bonds are adequate to cover enhanced overdraft.
(ii) Proposed security: (Additional if any) treasury Guarantee to be obtained to cover
proposed term loan of rs. 26.0 Mn.
Lanka Hospitals
Corporation PLC
Mr. P.G.S.
Kariyawasam
0.028 98.750 8.855
Dr. N.H. Godahewa
Director
Syndicate Loan Agreement entered into by Lanka Hospital Corporation PLC and
Seylan Bank PLC.
Primary Mortgage Bond Nos. 167 and 168 over immovable and movable assets of the
Company covering the loan up to 42.5% of capital and interest and other charges on the
loan execution in favour of DFCC, NDB, HNB and SBK.
Concurrent mortgage over all moneys receivable executed in favour of International
Finance Corporation (IFC), DFCC, NDB, HNB and SBK.
Partial Syndication Loan Guarantee from IFC up to 57.5% of the principal amount.
Sri Lanka Insurance
Corporation Limited
Mr. P.G.S.
Kariyawasam
Chairman Time Deposit 500
Sri Lanka Insurance Corporation Limited held 1,500,000 Seylan Bank Debentures
(Rs. 150,000,000/-) as at 31.12.2009 (Private Placement of Debentures 2005/10). Interest Payable 2.564
_

500 2.564
Dr. N.H. Godahewa
Managing Director
Sri Lanka Insurance Corporation Limited - No. of Voting Shares 19,500,000
- No of Non-Voting Shares 714,000
Browns Plantations
Investments (Pvt) Limited
Director
Commercial Leasing
Company PLC
Director
No. of Non-Voting Shares - 72,400
(d) Significant Provision of finance/Economic Dependence
Grameen Micro
Credit Co. Limited
Loan and interest of Rs. 2,725,000 Mn. restructured post-year end (Note 19.f.2).
Seylan Credit Card
Co. Limited
Mr. A. Pasqual
Director
The Bank jointly controlled operations for the Seylan Credit Card activities
Mr. T. Nanayakkara
Director
The Bank reconstituted their operations at the year end under a new Memorandum of
Understanding (Note 23.2).
Mr. C. Kotigala
Director
Leasing 5.403 3.375*
* Total rentals outstanding. Absolute ownership over the vehicle
44. MAturitY AnAlYSiS
bank
44.a An analysis of the total assets employed as at 31st December 2009, based on the remaining period at
the Balance Sheet date to the respective contractual maturity dates is given below:
Up to 3 3 to 12 1 to 3 3 to 5 More Than total as at
Months Months Years Years 5 Years 31.12.2009
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000
interest Earning Assets
Bills of Exchange 1,119,644 148,660 54,060 1,322,364
Loans & Advances 19,801,856 18,025,676 12,584,684 5,756,331 19,870,424 76,038,971
Lease Receivable 677,920 920,764 1,186,286 139,606 1,894 2,926,470
Balances with Banks 371,398 371,398
Short-Term Funds 45,000 45,000
Commercial Paper 324,500 324,500
Treasury Bills/Bonds 118,873 2,735,148 14,236,830 10,489,349 1,522,476 29,102,676
Securities Purchased Under
Resale Agreement 2,951,860 2,951,860
Group Balance Receivable 714,031 13,397 727,428
25,800,582 22,154,748 28,075,257 16,385,286 21,394,794 113,810,667
non-interest Earning Assets
Cash in Hand 4,267,407 4,267,407
Balances with CBSL 5,084,229 5,084,229
Investments 251,163 947,893 1,199,056
Investment Property 520,812 520,812
Group Balances Receivable 81,227 81,227
Property, Plant & Equipment 3,387,117 3,387,117
Income Taxation 89,654 89,654
Deferred Tax Assets 454,213 454,213
Other Assets 3,881,490 3,881,490
14,630,195 4,335,010 18,965,205
total Assets 40,430,777 22,154,748 28,075,257 16,385,286 25,729,804 132,775,872
44.b An analysis of the total liabilities as at 31st December 2009, based on the remaining period at the
Balance Sheet date to the respective contractual maturity dates is given below:
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000
interest bearing liabilities
Deposits 61,341,193 22,668,800 3,704,450 1,720,810 6,322,681 95,757,934
Securities Sold Under
Repurchase Agreements 1,679,754 198,950 1,878,704
Borrowings 1,884,310 194,361 427,305 211,767 338,097 3,055,840
Debentures 699,000 2,828,250 703,115 4,230,365
64,905,257 23,761,111 6,960,005 2,635,692 6,660,778 104,922,843
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000
non-interest bearing liabilities
Deposits 8,467,465 590,500 9,057,965
Other Liabilities 8,180,347 8,180,347
Dividend Payable 22,668 22,668
Group Balances Payable 9,575 9,575
Equity 10,582,474 10,582,474
16,680,055 590,500 10,582,474 27,853,029
total liabilities 81,585,312 24,351,611 6,960,005 2,635,692 17,243,252 132,775,872
Notes - Up to 3 months Interest Bearing Liabilities includes the Banks Savings Deposits base of Rs. 25.5 Bn.
More than 5 years Interest Bearing Liabilities reflects the Banks Tikiri Deposit Base of Rs. 6.3 Bn.
Shareholders Funds (Equity) are classified into the More than 5 years category since no contractual
date of maturity can be identified.
Group
44.c An analysis of the total assets employed as at 31st December 2009, based on the remaining period at
the Balance Sheet date to the respective contractual maturity date is given below:
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000
interest Earning Assets
Bills of Exchange 1,119,644 148,660 54,060 1,322,364
Loans & Advances 19,801,871 18,025,676 12,585,335 5,762,079 19,870,424 76,045,385
Lease Receivable 677,920 920,764 1,186,286 139,606 1,894 2,926,470
Balances with Banks 371,398 371,398
Short-Term Funds 50,943 50,943
Commercial Paper 324,500 324,500
Treasury Bills/Bonds 184,266 3,885,681 15,820,086 11,117,969 1,522,476 32,530,478
Securities Purchased Under
Resale Agreement 2,955,390 2,955,390
25,161,432 23,305,281 29,645,767 17,019,654 21,394,794 116,526,928
non-interest Earning Assets
Cash in Hand 4,269,540 4,269,540
Balances with CBSL 5,084,360 5,084,360
Investments 252,761 5,943 108,028 366,732
Investment Properties 520,812 983,864 1,504,676
Property, Plant & Equipment 4,775,793 4,775,793
Income Taxation 89,654 89,654
Deferred Tax Assets 454,213 147 454,360
Other Assets 3,892,632 142,639 160,537 4,195,808
14,563,972 148,729 160,537 5,867,685 20,740,923
total Assets 39,725,404 23,454,010 29,806,304 17,019,654 27,262,479 137,267,851
44.d An analysis of the total liabilities as at 31st December 2009, based on the remaining period at the
Balance Sheet date to the respective contractual maturity date is given below:
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 rs. 000
interest bearing liabilities
Deposits 61,341,193 22,668,800 3,704,450 1,720,810 6,322,681 95,757,934
Securities Sold Under
Repurchase Agreements 3,253,739 919,974 1,164 4,174,877
Borrowings 1,936,081 291,170 721,590 211,766 338,097 3,498,704
Debentures 699,000 2,828,250 703,115 4,230,365
66,531,013 24,578,944 7,255,454 2,635,691 6,660,778 107,661,880
non-interest bearing liabilities
Deposits 8,467,465 590,500 9,057,965
Other Liabilities 8,155,962 249,304 64,607 8,469,873
Deferred Taxation
Tax Payable 142,732 142,732
Dividend Payable 23,314 23,314
Equity 11,109,138 11,109,138
16,646,741 982,536 64,607 11,912,087 29,605,971
total liabilities 83,177,754 25,561,480 7,255,454 2,700,298 18,572,865 137,267,851
Notes - Up to 3 months Interest Bearing Liabilities includes the Seylan Banks Savings Deposits base of Rs. 25.5 Bn.
More than 5 years Interest Bearing Liabilities reflects the Seylan Banks Tikiri Deposit Base of Rs. 6.3 Bn.
Shareholders Funds (Equity) are classified into the More than 5 years category since no contractual
date of maturity can be identified.
45. SEGMEnt rEPortinG
45.a Group
Segment information is presented in respect of the Groups business segments. The primary format,
business segments are based on the Groups management and internal reporting structure.
business Segments
The Group comprises the following main business segments:
banking: Loans (other than Leasing), deposits and other transactions and balances with corporate and
retail customers.
leasing: Leasing balances with corporate and retail customers.
treasury: Undertakes the Groups funding and centralised risk management activities through
borrowings, issue of debt securities, use of derivatives for risk management purpose and
investing in liquid assets such as short-term placements and corporate and Government debt
securities.
Property/investment: The property investment related income, expenses, assets & liabilities.
Banking Leasing Treasury Property/Investments Total
2009 2008
(Restated)
2009 2008
(Restated)
2009 2008
(Restated)
2009 2008
(Restated)
2009 2008
(Restated)
rs. 000 Rs. 000 rs. 000 Rs. 000 rs. 000 Rs. 000 rs. 000 Rs. 000 rs. 000 Rs. 000
External revenue
Interest Income 16,053,472 19,757,109 5,448,666 2,987,399 2,949 81,577 21,505,087 22,826,085
Foreign Exchange Profit 130,003 187,647 376,481 443,754 506,484 631,401
Lease Income/Brokering 212,720 701,251 212,720 701,251
Fee and Commission
Income 1,245,899 1,691,844 29,134 28,702 62,382 (15,335) 1,337,415 1,705,211
Dividend Income &
Other Income 754,309 1,363,952 9,704 55,058 85,092 244,396 158,669 (29,952) 1,007,774 1,633,454
Total Revenue from
External Customers 18,183,683 23,000,552 251,558 785,011 5,972,621 3,660,214 161,618 51,625 24,569,480 27,497,402
Inter Segment Revenue 1,654,387 1,868,287 (266,113) (283,833) (1,388,274) (1,584,454)
Total Segment Revenue 19,838,070 24,868,839 (14,555) 501,178 4,584,347 2,075,760 161,618 51,625 24,569,480 27,497,402
Depreciation Charge
for the Year 248,835 263,094 678 13,325 27,313 5,225 29,565 31,874 306,391 313,518
Reportable Segment
Profit Before Income Tax (22,981) 1,316,968 85,701 (404,534) 2,759,979 783,133 (275,944) (23,057) 2,546,755 1,672,510
othEr inforMAtion
Reportable Segment
Assets 114,335,758 122,942,874 118,823 3,516,011 12,970,249 29,005,102 2,966,835 4,112,520 130,391,665 159,576,507
Segment Amortisations (1,789,743) (1,719,922) (9,018) (78,692) (115,374) (107,093) (142,576) (128,514) (2,056,711) (2,034,221)
total Assets 112,546,015 121,222,952 109,805 3,437,319 12,854,875 28,898,009 2,824,259 3,984,006 128,334,954 157,542,286
Reportable Segment
Liabilities 111,696,536 121,173,015 109,805 3,235,580 12,581,641 27,224,146 1,103,277 1,615,629 125,491,259 153,248,370
total liabilities 111,696,536 121,173,015 109,805 3,235,580 12,581,641 27,224,146 1,103,277 1,615,629 125,491,259 153,248,370
2009 2008
rs.000 Rs.000
45.b reconciliation of reportable Segment revenues,
Profit or loss and Assets and liabilities
total Segment revenues
Total Revenue for Reportable Segments 24,569,480 27,497,402
Unallocated Amounts 262,792 164,568
Elimination of Inter-Segment Revenue (293,294) (608,019)
24,538,978 27,053,951
reportable Segment Profit before income tax
Total Profit or Loss for Reportable Segments 2,546,755 1,672,510
Unallocated Amounts (1,613,125) (2,408,089)
933,630 (735,579)
reportable Segment total Assets
Total Assets for Reportable Segments 128,334,954 157,542,286
Other Unallocated Amounts 8,932,897 5,766,203
Consolidated Total Assets 137,267,851 163,308,489
reportable Segment total liabilities
Total Liabilities for Reportable Segments 125,491,259 153,248,370
Other Unallocated Amounts 11,776,592 10,060,119
Consolidated Total Liabilities 137,267,851 163,308,489
46. coMPArAtivE inforMAtion
The following comparative figures have been reclassified in the 2009 Financial Statements to maintain
comparability of Financial Statements in order to provide a better presentation.
income statement
As disclosed
in 2008
bank
reclassified
in 2009
Adjustment
Rs.000 rs.000 Rs.000
46.a
Interest Income 21,572,430 21,552,070 20,360
Other Income 1,201,222 1,221,582 (20,360)
Net Fee and Commission Income 1,801,826 1,749,737 52,089
Fee and Commission Expense 52,089 52,089
Operating Expenses 8,262,329 10,677,427 (2,415,098)
Provision for Loan Losses 2,467,187 2,467,187
Personnel Expenses 3,274,335 3,405,714 (131,379)
Provision for Staff Retirement Benefit 131,379 131,379

a i Capital gains/losses from Government Securities (Rs. 21.916 Mn.) and gain/loss from marked to market
valuation Rs. 1.555 Mn. included in other income have been reclassified as Treasury Bills, Bonds and
placements with other Banks (Rs. 20.36 Mn.) under Interest Income.
a ii Fee and Commission Income included in other income has been reclassified as net fee and commission
income. Accordingly, commission expense included under operating expense amounting to Rs. 52.089 Mn.
is deducted from the Fee and Commission Income.
a iii Loan loss provision of Rs. 2,467.187 Mn. (after profit on ordinary activities before loan loss provision, taxes
and associate company profits) has been reclassified and presented separately as provision for loan losses
under operating expenses.
a iv Provision for staff retirement benefit amounting to Rs. 131.379 Mn. included in the operating expenses
has been reclassified under personnel expenses in operating expenses.
balance Sheet
BANK
As Disclosed Reclassified Adjustment
Rs. 000 Rs. 000 Rs. 000
46.b
Cash and Cash Equivalents 5,491,795 5,511,331 (19,536)
Other Assets 4,944,560 4,929,745 14,815
Property, Plant & Equipment 4,142,241 4,073,353 68,888
Leasehold Rights 64,165 (64,165)
b i Balance with local banks amounting to Rs. 19.536 Mn. classified under Other Assets has been reclassified
under cash and cash equivalents.
b ii Freehold land amounting to Rs. 4.724 Mn. under Property, Plant & Equipment is reclassified as other assets.
b iii Leasehold Land & Building amounting to Rs. 64.165 Mn. is reclassified as Leasehold Rights.
BANK
Rs. 000 Rs. 000 Rs. 000
46.c
Treasury Bills & Bonds Eligible for Rediscounting with
Central Bank within One Year 13,176,451 13,176,451
After One Year 11,660,853 11,660,853
Government and Other Securities Held for Dealing Purpose 184,917 865,977 (681,060)
Investment Securities 476,956 24,243,200 (23,766,244)
Commercial Papers - 390,000 (390,000)
25,499,177 25,499,177
c i Treasury Bills and Bonds eligible for rediscounting with Central Bank within one year and after one year
have been reclassified under Government and other securities held for dealing purpose and as Investment
Securities. Accordingly, those balances are reclassified and presented in the Notes 16 and 17.
c ii Commercial papers held by Seylan Bank PLC (Lanka ORIx Leasing & Co.) of Rs. 390,000/- which was
disclosed under Investment securities previously was reclassified as commercial papers in the Balance Sheet.
BANK
Rs. 000 Rs. 000 Rs. 000
46.d Analysis of Provision for loan losses
and interest in Suspense
Bills of Exchange 1,484,746 1,471,831 12,915
Loans and Advances 97,691,569 97,746,084 (54,515)
Lease Rentals Receivable within One Year 2,287,473 2,245,873 41,600
Provision for bad and doubtful debts for above figures are restated including general provisions for
loan losses.
47. coMPArAtivE inforMAtion in thE conSoliDAtED finAnciAl StAtEMEntS hAvE
bEEn rEStAtED AS followS:
income Statement for the Year Ended 31st December 2008
Net Profit/(Loss)
After Tax
Rs. 000
As per the Financial Statements Published in 2008 (93,174)
As per the Financial Statements Restated in 2009 (799,803)
Change - Profit/(Loss) (706,629)
balance Sheet as at 31st December 2008
Assets Liabilities Equity
Rs. '000 Rs. '000 Rs. '000
As per the Financial Statements Published in 2008 164,210,437 154,530,749 9,679,688
As per the Financial Statements Restated in 2009 163,308,489 154,611,411 8,697,078
Change (901,948) 80,662 (982,610)
Net profit before tax has been restated due to adjustment carried out subsequent to the consolidation in
2008 based on unaudited Financial Statements, in the following subsidiary companies:
Seylan Merchant Bank PLC - Audited Accounts signed on 05th November 2009.
Seylan Developments PLC - Audited Accounts signed on 29th June 2009 (comparative figures were
restated in 2009 Audited Financial Statement dated 08th February 2010).
47.a income Statement for the year ended 31st December 2008
Seylan Merchant Bank PLC Seylan Developments PLC
2008
Restated
2008
Published Change
2008
Restated
2008
Published Change
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000
Income 1,180,717 920,433 260,284 292,235 280,883 11,352
Net Interest Income 96,315 44,171 52,145 (93,175) (92,599) (576)
Other Income 321,358 164,537 156,821 278,382 267,029 11,353
Operating Income 417,673 208,708 208,965 185,207 174,430 10,777
Less: Operating Expenses 1,072,806 362,377 710,429 570,612 515,023 55,589
Profit/(Loss) before Taxation (655,133) (153,669) (501,464) (385,405) (340,593) (44,812)
Less: Income Tax Expense 41,947 (922) 42,869 7,062 7,062
Profit/(Loss) after Taxation (697,080) (152,747) (544,333) (392,467) (347,655) (44,812)
47.b balance Sheet as at 31st December 2008
Seylan Merchant Bank PLC Seylan Developments PLC
2008
Restated
2008
Published Change
2008
Restated
2008
Published Change
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000
Total Assets 4,224,557 4,850,023 (625,466) 3,510,440 3,558,831 (48,391)
Liabilities 4,302,511 4,387,914 (85,403) 1,220,507 1,216,478 4,029
Equity (152,280) 381,099 (533,379) 2,289,933 2,342,353 (52,420)
Minority Interest 74,326 81,010 (6,684)
Total Liabilities & Equity 4,224,557 4,850,023 (625,466) 3,510,440 3,558,831 (48,391)

47.c reconciliation of Profit After tax as at 31st December 2008
Rs.000
Change in Profit of Seylan Merchant Bank PLC (SMB) (544,333)
Change in Profit of Seylan Developments PLC (SD) (44,812)
Elimination of Provision made by SMB for SD Shares 7,690
Change in Profit Portion of Associate Company Profits & its Classification 2,441
Impact of Non-Uniform Accounting Policies by Subsidiaries (127,615)
(706,629)
Adjustment to Equity Holders of the Bank (309,485)
Minority Holders (397,144)
(706,629)
47.d reconciliation of Equity as at 31st December 2008
Rs.000
Change in Equity of Seylan Merchant Bank PLC (SMB) - Attributable to Equity Holders of the Bank (533,379)
- Attributable to Minority Interest (6,684)
Change in Equity of Seylan Developments PLC (SD) (52,420)
Elimination of Provision made by SMB for SD Shares 7,690
Impact of Non-Uniform Accounting Policies by Subsidiaries (Note 48 (b)) (397,817)
(982,610)
48. non-uniforM AccountinG PoliciES
The impact of non-uniform accounting policies adopted by subsidiary companies has been adjusted in the
Consolidated Financial Statements as set out below:
48.a Depreciation Adjustment due to Different rates Applied by Seylan bank Asset
Management limited
Rs. 000 Rs. 000
Group Impact
Rs. 000
Minority Impact
charges Depreciation Adjusted to income Statement of 2008
Depreciation Charge as per the Seylan Bank Rates 5,878 5,878
Depreciation Charge as per the Seylan Bank Asset
Management Limited Rates 6,231 6,231
Charge made to Consolidated Financial Statements (353) (353)
48.b Adjustment due to Different Accounting Policies for investment Properties by Seylan
Developments Plc (fair value), whereas the bank Accounts investment Properties at cost
Rs. 000 Rs. 000
Group Impact
Rs. 000
Minority Impact
reversal of revaluation Gains
Reversal of Revaluation Gains Adjusted to Opening Balance
of Equity in 2008 (48.c) (203,751) (103,933) (99,818)
Reversal of Revaluation Gains Adjusted to
Income Statement of 2008 (48.c) (105,465) (53,798) (51,667)
Reversal of Revaluation Gains Adjusted to
Income Statement of 2009 (115,149) (57,908) (57,241)
(424,365) (215,639) (208,726)
charging of Depreciation
Charges Depreciation Adjusted to Opening Balance of Equity
in 2008 (48.c) (66,451) (33,897) (32,554)
Charges Depreciation Adjusted to Income Statement
of 2008 (48.c) (22,150) (11,299) (10,851)
Charges Depreciation Adjusted to Income Statement of 2009 (20,066) (10,091) (9,975)
(108,667) (55,287) (53,380)
total Adjustment Made - income/(charge) (533,032) (270,926) (262,106)
48.c impact on opening Equity
rs. 000
Revaluation gain 309,216
Depreciation 88,601
397,817
APPENDIX
Profiles of the Board of Directors 228
Senior Management Team 230
Ten Year Summary 232
Summary of Performance Indicators 233
US$ Accounts 234
Investor Information 236
Branch Network 241
Geographical Analysis 243
Glossary 244
Corporate Information 245
GRI Compliance Index 246
Subject Index 248
Notice of Meeting 249
Sinhala Translations 250
Tamil Translations 252
Form of Proxy Enclosed
PROFILES OF thE BOARd OF dIRECtORS
Mr. Eastman Narangoda
Executive Chairman
BA (Econ.), FIB, FIMS (UK), FItd (SL),
dip. in Advanced Bank Management
(Stockholm)
Mr. Eastman Narangoda has vast
experience in the Sri Lankan banking
sector. he spearheaded National
Savings Bank as its General Manager/
CEO for over five years. during his
tenure, NSB was awarded AAA rating by
Fitch Ratings for four consecutive years.
Mr. Narangoda is a former President
of the Association of Professional Bankers
of Sri Lanka and had held the positions
of director/Vice-Chairman of Financial
Ombudsman (Sri Lanka) Limited, director
of NSB Fund Management Co., Asha
Central hospital Limited and Mercantile
Leasing Limited and had also been a
director of the Institute of Bankers. he
was also appointed as the Commissioner
of the Presidential Commission on Failed
Finance Companies. he is currently a
director of Wealth trust Corporation (Pvt)
Limited and the President of Sri Lanka
Institute of training and development.
Mr. Narangoda was appointed to the
Board of Seylan Bank PLC on
30th december 2008.
Mr. R. Nadarajah Executive Director
B.Sc. (hons.), MBA, FCIB (London)
Mr. Ramanathan Nadarajah brings with
him 40 years of banking experience in
both state and private sector banks. he
served as Managing director/General
Manager/CEO of Pan Asia Bank for six
years and previously served at Bank of
Ceylon in various capacities including
as a deputy General Manager. he was
the inaugural President of the Primary
dealers Association and has been a
Past President of the Association of
Professional Bankers of Sri Lanka.
Mr. Nadarajah was appointed to the
8th January 2009.
Mr. Nihal Jayamanne - Presidents
Counsel Director
Mr. Nihal Jayamanne PC is an eminent
lawyer and holds key offices in the fields
of law, including as Member of the
Advisory Council of Jurists of the Asia
Pacific Forum for the Advancement of
human Rights, Chairman-Law College
Foundation and Member of the Board of
trustees of the Judicial Infrastructure
Maintenance trust. he was also the
President of the Bar Association of
Sri Lanka, the Vice-President
of SAARCLAW and a Member of the
Law Commission of Sri Lanka and of
the National Police Commission of
Sri Lanka. Mr. Jayamanne PC is on the
Boards of SriLankan Airlines Limited
and SriLankan Catering (Pvt) Limited.
he is also a former Commissioner of
the telecom Regulatory Commission of
Sri Lanka and a former member of the
Council of Legal Education.
Mr. Jayamanne was appointed to the
30th december 2008.
Mr. Lalith Withana Director
MBA, BA (hons.), FCMA, FCA
Mr. Lalith Withana counts over 20 years
in management positions within the
corporate sector of which more than
12 years have been at senior levels in
banking, trade and manufacturing, with
experience at organisations such as
Brandix, Messrs Ernst & Young, Amro
Bank, IBM and Carson Cumberbatch PLC.
he currently holds the position of
Consultant at Brandix Asia Limited
and has also been the CEO of Brandix
Casualware Limited, Brandix Lightsew
Limited and CEO - Procurement of
Brandix Apparels Limited. he had
served on the Boards of Bank of Ceylon,
dankotuwa Porcelain PLC, Merchant
Bank of Sri Lanka and Ceylease Financial
Services Limited. he had also been a
Commissioner of the telecommunication
Regulatory Commission.
Mr. Withana was appointed to
the Board of Seylan Bank PLC on
30th december 2008.
Rear Admiral (Rtd.) B.A.J.G. Peiris
Director
RSP, VSV, USP, ndc, psc, dISS
Rear Admiral (Rtd.) Ananda Peiris is a
decorated officer of the Sri Lanka Navy
counting a service record of over 34
years. his naval experience includes
serving as the Area Commander -
Eastern Naval Command, Western
Naval Command and Southern Naval
Command. he was also twice appointed
the deputy Area Commander of
Northern Naval Command and Squadron
Commander Fast Attack Craft and has
taken part in almost all major operations
in the North and East. he had also been
the director - Naval Administration &
Welfare, director - Naval Personnel &
training and director General (Services),
Sri Lanka Navy. he retired from the
regular naval service on 29th January
2009 and has since been mobilised to the
regular naval reserve. he currently holds
the post of director General - Sri Lanka
Civil defence Force to which position he
was appointed in mid February 2010.
Rear Admiral (Rtd.) Ananda Peiris
was granted the accolades of Rana
Sura Padakkama (RSP), Vishishta Sewa
Vibhushanaya (VSV) and Uttama Seva
Padakkama (USP) for his service to
the nation, while he was also awarded
several medals during his tenure of
service in the Navy including Sri Lanka
Navy 50th Anniversary Medal (2001),
Sri Lanka Armed Services Long Service
Medal, Presidents Inauguration Medal
(1978), North-East Operation Medal and
Purna Bumi Padakkama.
Rear Admiral (Rtd.) Ananda Peiris was
appointed to the Board of Seylan Bank
PLC with effect from 8th January 2009.
he was also elected as the Chairman
of the Banks subsidiary, Seylan
developments PLC (formerly Ceylinco
Seylan developments PLC) with effect
from 11th September 2009.
Mr. Pradeep G.S. Kariyawasam Director
Mr. Pradeep Kariyawasam is the
present Chairman of Sri Lanka
Insurance Corporation Limited and is
also on the Board of Lanka hospitals
Corporation PLC (Apollo hospitals).
Mr. Kariyawasam is a senior corporate
figure with over thirty years of experience
in the private sector, of which over
15 years has been as Chief Executive
and General Manager level at Unimo
Enterprises, United Motors Lanka PLC
and Browns Group of Companies.
Mr. Kariyawasam could also be singularly
credited in the setting-up of overall
operations at Ceylinco Limited, the
foremost Principal Agency of National
Insurance Corporation during a 3-year
period from the late 80s to early 90s. his
extensive experience in marketing and
sales management encompasses a cross
section of large corporate conglomerates.
Mr. Kariyawasam has also functioned
as a respected consultant in business
management and project management.
he holds a Certificate of Marketing from
CIM (UK).
Mr. Pradeep Kariyawasam was
PLC on 10th November 2009.
Dr. Nalaka H. Godahewa Director
Ph.d. (University of South Australia), MBA
(Sri J.), B.Sc. Eng. (Moratuwa), FCIMA (UK),
FCMA (Aus.) and FCIM (UK)
dr. Nalaka Godahewa is the Managing
director of Sri Lanka Insurance
Corporation and is also on the board
of Lanka hospitals Corporation PLC
(Apollo hospitals) and CSC Kandia
(Pvt) Limited. he gained managerial
and leadership experience at some
of Sri Lankas leading corporate
institutions including Unilever, Suntel
and apparel giant MAS. Whilst at MAS
holdings, he was the CEO of several
overseas operations. dr. Godahewa is
academically and professionally qualified
in the multiple fields of engineering,
marketing and finance. he holds a Ph.d.
from the University of South Australia
as well as a B.Sc. in Electronics and
telecommunication Engineering from the
Moratuwa University and a MBA from the
University of Sri Jayewardenepura. he is
also a Fellow Member of the Chartered
Institute of Management Accountants
(UK), a Fellow Member of the Institute
of Certified Management Accountants
(Aus.) and a Fellow Member of the
Chartered Institute of Marketing (UK).
he has also served as Consultant to the
Board of Investment and as Chairman,
Imperial College of Business Studies.
dr. Godahewa is currently the President
of the Sri Lanka branch of the Institute
of Certified Management Accountants
of Australia, honorary President of the
Global Marketing Network and Chairman
of the Association of Licensed Banker
Operations of Sri Lanka.
dr. Nalaka Godahewa was appointed
to the Board of Seylan Bank PLC on 10th
November 2009.
Mr. Ajith L. Devasurendra Director
Mr. Ajith devasurendra counts over
30 years experience both in Sri Lanka
and overseas in the financial sector.
he is currently the deputy Chairman
of Brown & Company PLC, Managing
director/CEO of taprobane holdings
Limited and director of taprobane Fund
Management Limited. he is also the
Chairman of Galoya Plantation
(Pvt) Limited.
Mr. devasurendra was also
instrumental in pioneering the money
broking and Government Securities
markets in Sri Lanka and had the honour
of being the first President of the Sri Lanka
Money Brokers Association and had also
been a past President of the Sri Lanka
Primary dealers Association.
he had also been a consultant to
PricewaterhouseCoopers, Bombay, India
on a USAId project (assigned as consultant
to Reserve Bank of India and Securities &
Exchange Commission of India on Fixed
Income Securities Market). Further, he
was also appointed to the Expert Group on
Stimulus Package for Banking, Finance
and Leasing Industry by the Central Bank
of Sri Lanka and is also a member of the
Financial System Stability Consultative
Committee (FSSCC) appointed by the
Central Bank of Sri Lanka.
Mr. Ajith devasurendra was
Mr. Ishara C. Nanayakkara Director
diploma in Business Accounting &
Finance (Aus.)
Mr. Ishara Nanayakkara who holds a
diploma in Business Accounting from
Australia, ventured into the arena of
financial services with the strategic
investment in the LOLC group. he serves
as the deputy Chairman on the board of
Lanka ORIX Leasing Co. PLC and all its
subsidiaries and associate companies,
including Commercial Leasing Company,
the latest development in LOLCs related
expansion. he is a director of Ishara
traders Group, Associated Battery
Manufacturers (Cey.) Limited and Browns
Group of Companies, a conglomerate
with exposure in trade, leisure and
manufacturing. he is also a director of
Colombo Land Exchange and taprobane
Fund Management Limited, focusing on
primary markets.
Mr. Nanayakkaras business
philosophy based on sustainable
development has made LOLC enter into
many new business ventures with high
potential for growth in all three spheres;
economic, social and environmental.
With the exposure in the SME and micro
sectors, he spearheads LOLC Micro Credit
Limited and Sundaya Lanka (Pvt) Limited,
and PRASAC, the largest micro finance
company in Cambodia.
In line with his focus on sustainable
forestry and plantations, Mr. Nanayakkara
is also the deputy Chairman of
touchwood Investments Limited and a
director of Maturata Plantations Limited,
Pussallawa Plantations Limited and
Gal Oya Plantations (Pvt) Limited, the
first Public-Private Partnership with
Government of Sri Lanka.
Mr. Ishara Nanayakkara was
appointed to the board of Seylan Bank
Mr. Samantha P.S. Ranatunga Director
MBA (Birmingham), B.Sc. (hons.) (delhi)
Mr. Samantha Ranatunga who has
over 20 years experience in the field
of marketing and managing FMCG
business, is the Managing director/
CEO of Chemical Industries (Colombo)
PLC. he joined the Board of Chemical
Industries (Colombo) PLC in May 2002
and was appointed Managing director/
CEO in April 2009.
Mr. Ranatunga holds a degree from
the University of delhi and a Masters in
Business Administration, UK.
he is a Non-Executive director in
many of the unlisted companies in the CIC
Group including Akzo Nobel Lanka Paints
(Pvt) Limited and Perfunova International
Limited, India. he is the President of the
Sri Lanka-Africa-Middle East Business
Council of the Ceylon Chamber of
Commerce and the Vice-President of the
Sri Lanka Maldivian Business Council.
he has led the Sri Lankan Chamber of
Commerce delegations to many overseas
countries. he is also a Committee
Member of the Mercantile Services
Provident Society representing the Ceylon
Chamber of Commerce by virtue of his
committee membership in the Ceylon
Chamber of Commerce.
SENIOR MANAGEMENt tEAM
01
05
09
13
17
21
02
06
10
14
18
22
03
07
11
15
19
23
04
08
12
16
20
24
GM/CEO
1. Mr. Ajita Pasqual General Manager/Chief Executive Officers
Consultants
2. Mr. Sunil De Silva Credit Monitoring/Recoveries
3. Mr. R.B. Ekanayake Information Technology
Snr. DGMs
4. Mrs. L. Seneviratne Corporate & Retail Banking
5. Mr. C. Kotigala Legal
6. Mr. Ajantha Madurapperuma Banking Services & Risk Management
7. Mr. Tissa Nanayakkara Seylan Card Centre
DGMs
8. Mr. Raaj de Silva Chief Financial Officer
9. Mr. S. Jebaratnam Operations & International
10. Mr. Kithsiri Perera Recoveries
11. Mr. Sarath Dias Bandaranayake Human Resources & Administration
12. Mr. Ravi Divulwewa Zone I
13. Mr. K.D.W. Rohana Zone II
14. Dr. P. Niranjan Zone III
15. Mr. Ranjith Fonseka E-Commerce & IT International
16. Mr. S. Palihawadana Chief Dealer
17. Ms. Shalini Perera Corporate & Foreign Currency Banking
18. Mr. Chithral De Silva Development Banking
19. Mr. A.R.M. Hanan Information Technology
20. Mr. Damith Vitharanage Audit & Inspection
25
29
33
37
41
26
30
34
38
42
27
31
35
39
43
28
32
36
40
AGMs
21. Mr. Ravi Dissanayake Personal Assistant to GM/CEO
22. Mr. Hiran Amarasinghe Treasury
23. Ms. Rohini Weerakkody Operations
24. Mr. T.J. Pathirage Information Systems Audit
25. Mr. Shafeek Samad International
26. Mr. Lalantha Kulatunga Zone I
27. Mr. Nandalal Ranasinghe Treasury & International Audit
28. Mr. Delvin Pereira Zone II
29. Mr. Christie Nanayakkara Corporate & Foreign Currency
30. Mr. A. Emmanuel Zone III
31. Mr. Kamal Deshapriya Marketing
32. Ms. Damayanthi Tillekeratne International/Exports
33. Mr. M.K. Prematilleke Property Unit
34. Mr. Sirilal Amarasinghe Development Banking
35. Mr. Neomal Suraweera Zone I
36. Ms. Deeshani Goonaratne Human Resources
37. Mrs. G. Edwards Private Banking
38. Mrs. Y. Udurawana Consumer Finance Unit
39. Mr. Rohan Fernando Audit & Inspection
40. Mr. Sumith Fernando Zone III
41. Mr. Shanaka Perera Senior Dealer
42. Mr. Asanga Dayaratne Premises Maintenance
43. Mr. Wasantha Karunaratne Supplies
Year Ended 31st December 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000
(Reclassified) (Reclassified) (Restated) (Restated) (Restated)
Trading Results
Gross Income 23,154,529 25,246,209 21,079,885 17,183,481 13,090,715 10,072,376 9,973,644 8,988,278 8,475,059 6,745,575
Profit before Income tax 892,572 155,241 1,439,069 1,606,882 1,061,033 478,291 705,953 677,989 278,435 256,536
taxation 349,271 515,880 718,814 373,200 69,648 114,539 10,021 5,928 10,932
Profit after Taxation 543,301 155,241 923,189 888,068 687,833 408,643 591,414 667,968 272,507 245,604
dividends Proposed
(Ordinary)
Rs. 0.50
Per Share
Rs. 1.50
Per Share
Rs. 1.50
Per Share
20% 16% 15% 15% 12.5% 12%
Balance Sheet
ASSETS
Cash & Short-term Funds 7,635,665 6,176,265 26,824,927 21,833,056 17,322,763 12,080,206 15,669,097 11,673,027 10,634,811 10,582,643
Statutory deposit with
Central Bank of Sri Lanka 5,084,229 6,857,039 7,915,660 6,913,224 5,908,292 5,050,665 3,951,940 3,866,450 3,351,904 3,617,909
Investments (Including
Investment Properties) 30,286,878 26,019,989 1,370,762 333,960 333,755 649,117 1,076,728 1,201,947 1,075,990 658,291
Bills of Exchange 1,322,364 1,471,831 1,967,091 1,827,824 2,154,916 2,210,842 1,745,701 1,652,786 1,502,995 2,009,411
Loans, Advances & Leases 78,965,441 102,682,294 95,684,286 91,431,102 79,314,465 60,613,807 49,903,047 42,998,354 37,254,770 33,408,337
123,294,577 143,207,418 133,762,726 122,339,166 105,034,191 80,604,637 72,346,513 61,392,564 53,820,470 50,276,591
Investment in Subsidiary 860,166 948,529 1,093,407 1,048,559 1,029,656 1,095,231 1,435,231 1,444,275 1,444,275 1,441,011
Other Assets (Including
Income taxation) 5,234,012 5,752,780 4,954,206 3,783,353 4,648,548 3,698,682 4,285,255 2,961,309 3,090,017 1,691,530
Property, Plant & Equipment 3,387,117 4,137,518 3,690,014 3,135,030 2,896,049 2,785,092 1,984,070 1,980,472 1,947,968 2,518,481
132,775,872 154,046,245 143,500,353 130,306,108 113,608,444 88,183,642 80,051,069 67,778,620 60,302,730 55,927,613

LIABILITIES
deposits from Customers 104,815,899 107,938,801 111,299,612 100,078,809 85,833,954 68,301,154 59,362,955 52,431,165 47,859,511 41,695,054
Borrowings & debentures 9,164,909 26,308,876 14,775,780 13,167,204 13,037,404 6,648,055 8,606,998 6,355,156 4,400,760 6,947,041
Other Liabilities 8,189,922 12,762,164 9,901,004 9,860,078 9,998,624 9,296,381 7,838,625 6,106,586 5,796,800 5,291,888
taxation 472,306 817,297 105,420 (187,856) (145,304) (46,339) (55,800) (32,156)
dividends 22,668 16,393 15,416 14,442 6,763 21,716 22,396 85,006 63,426 55,588
122,193,398 147,026,234 136,464,118 123,937,830 108,982,165 84,079,450 75,685,670 64,931,574 58,064,697 53,957,415
EQUITY
Stated Capital
- Share Capital 4,730,501 1,705,101 1,705,101 1,705,101 869,501 869,501 869,501 469,501 446,141 435,600
- Share Premium 837,319 837,319 837,319 837,319 674,922 696,235 713,399 183,167 194,485 202,144
Reserve Fund 506,919 479,754 468,250 422,091 377,688 343,296 303,146 289,158 275,799 270,349
Reserves 4,507,735 3,997,837 4,025,565 3,403,767 2,704,168 2,195,160 2,479,353 1,905,220 1,321,608 1,062,105
10,582,474 7,020,011 7,036,235 6,368,278 4,626,279 4,104,192 4,365,399 2,847,046 2,238,033 1,970,198
TOTAL LIABILITIES &
EQUITY 132,775,872

154,046,245 143,500,353 130,306,108 113,608,444 88,183,642 80,051,069 67,778,620 60,302,730 55,927,613
Commitments and
Contingencies 22,262,562 26,874,375 24,335,965 22,924,450 22,942,795 20,983,027 17,743,062 13,206,586 10,083,442 10,274,265
tEN YEAR SUMMARY OF FINANCIAL StAtEMENtS
SUMMARY OF PERFORMANCE INdICAtORS
Measure 2009 2008 2007 2006 2005
(Reclassified) (Reclassified) (Restated)
SIZE
Assets Growth % (13.81) 7.35 10.13 14.70 28.83
Contingent/(total Assets + Contingent) % 9.27 10.35 11.33 12.29 14.36
Interest Earning Assets/total Assets % 85.17 85.20 85.26 86.62 85.30
Cash & Reserves/total Assets % 7.36 8.03 7.50 7.57 7.89
Risk Weighted Assets Growth % (11.91) 23.00 5.37 19.04 22.22
PROFITABILITY
Return on Average Assets % 0.38 0.10 0.67 0.73 0.68
Return on Average Equity % 6.20 2.22 13.84 16.25 15.76
Net Profit/(total Assets + Commitment &
Contingencies) % 0.35 0.09 0.55 0.58 0.52
Net Interest Margin (NII/Avg. Int. Earn. Assets) % 5.91 5.67 5.77 5.84 6.19
Net Interest Income/total Income % 31.16 28.48 32.18 35.67 40.22
Cost to Income Ratio % 67.82 75.79 66.31 64.18 60.68
Average Interest Yield % 16.95 17.00 15.14 13.47 12.39
Average Interest Cost % 11.72 11.98 10.14 8.38 6.79
Interest Rate Spread % 5.23 5.02 5.00 5.09 5.60
Int. Yield on Customer Advances % 18.48 17.18 15.79 14.03 12.22
Int. Cost on Customer deposits % 10.60 11.50 8.27 6.56 5.19
Spread on Customer deposits & Advances % 7.88 5.68 7.52 7.46 7.03
dividend Payout (Note) % 24.48 27.72 28.74 49.02
Growth Rate of Equity % 50.99 (0.23) 10.54 37.93 12.83
Earnings per Share Rs. 2.83 0.90 5.50 6.69 8.20
Ordinary dividends per Share (Note) Rs. 0.50 1.50 1.50 2.00
ASSET QUALITY
Loss Provisions Rs. Mn. 6,466 6,560 4,972 4,559 4,267
Provision Recoveries Rs. Mn. 598 588 720 874 600
Provisions/Loans + Bills + Leases % 7.00 5.74 4.69 4.53 4.85
NPL with Interest in Suspense Rs. Mn. 31,150 19,428 16,345 13,951 13,502
NPL with Interest in Suspense/Gross Loans % 33.61 16.93 15.39 13.85 15.34
Interest in Suspense on Advances Rs. Mn. 5,659 3,523 3,302 2,725 2,291
NPL Excluding Interest in Suspense Rs. Mn. 25,491 15,906 13,043 11,226 11,211
NPL Excluding Interest in Suspense/Gross
Loans Excluding Interest in Suspense % 29.29 14.30 12.68 11.45 12.74
Int. in Suspense/Gross Loans % 6.11 3.07 3.11 2.70 2.60
Net Assets Value per Share Rs. 41.60 41.80 41.90 37.90 55.36
CAPITAL ADEQUACY
Leverage on Shareholders' Funds times 11.55 20.94 19.45 19.46 23.56
Leverage on Capital Funds (Including debentures) times 7.96 12.16 10.46 10.69 12.31
Percentage Earnings Retained (Note) % 75.52 100.00 72.28 71.26 50.98
Equity/deposits, Borrowings & Securities
Sold Under Repurchase Agreements % 9.61 5.39 5.81 5.84 4.87
Equity/total Assets % 7.94 4.54 4.88 4.86 4.07
Equity/Loans + Bills + Leases % 13.14 6.71 7.17 6.79 5.68
LIQUIDITY & FUNDING
Loans + Bills + Leases/deposits, Borrowings &
Securities Sold Under Repurchase Agreements % 73.15 80.39 80.98 85.98 85.79
Customer deposits/deposits, Borrowings,
Securities Sold Under Repurchase
Agreements & debentures % 91.96 80.40 88.28 88.37 86.81
Liquid Assets/total Assets % 31.63 24.70 24.21 22.06 20.40
Liquid Assets/deposits, Borrowings & Securities
Sold Under Repurchase Agreements % 38.26 29.37 28.81 26.50 24.40
Net Lending or (Borrowings) in Call Money Market Rs. Mn. (1,331) (4,449) (4,430) (2,538) (3,321)
OTHER DATA
Number of Banking Centres 117 114 114 116 116
Number of Staff Members 3,733 3,923 3,871 3,934 3,700
Profits per Staff Member Rs. 000 146 40 238 226 186
Number of Ordinary Shares - Voting 000 130,000 43,560 43,560 43,560 43,560
- Non-Voting 000 123,560 123,560 123,560 123,560 40,000
Share Prices as at 31st december - Voting Rs. 37.00 28.50 32.00 35.00 36.75
- Non-Voting Rs. 16.00 6.00 8.00 9.75 16.25
Note: dividends for year 2009 are accounted for as per the Accounting Standard SLAS 12 (Revised).
BANK GROUP
For the year ended 31st December 2009 2008 2009 2008
US$ 000 US$ 000 US$ 000 US$ 000
Income 202,488 223,418 214,595 239,415
Interest Income 181,093 190,726 190,612 204,922
Less: Interest Expenses 117,989 127,092 125,836 140,491
Net Interest Income 63,104 63,634 64,776 64,431
Net Fee and Commission Income 10,224 15,484 10,715 15,737
Other Income 5,692 10,810 7,693 12,559
Operating Income 83,580 95,864 87,744 98,663
Less: Operating Expenses
Personnel Expenses 20,859 30,139 21,866 31,936
Premises, Equipment & Establishment Expenses 14,063 13,321 14,166 14,293
Provision for Loan Losses 19,092 21,834 19,481 24,815
diminution/(Appreciation) in Value of Investments (412) 360 (367) 2,452
Other Overhead Expenses 22,172 28,837 24,434 31,376
75,774 94,491 79,580 104,872
Profit/(Loss) from Operations before Taxation 7,806 1,373 8,164 (6,509)
Less: Income tax Expense 3,054 4,240 568
Profit/(Loss) for the Year 4,752 1,373 3,924 (7,077)
Attributable to
Equity holders of the Bank 4,752 1,373 4,978 (1,265)
Minority Interest (1,053) (5,812)
Net Profit/(Loss) for the Year 4,752 1,373 3,925 (7,077)
Basic Earnings/(Loss) per Share (US$) 0.025 0.008 0.026 (0.008)
Exchange rate of US$ 1 was Rs. 114.35 as at 31.12.2009 (Rs. 113.00 as at 31.12.2008)
the Income Statement given on this page is solely for the convenience of the shareholders, bankers, investors,
customers and other users of Financial Statements and do not form part of the Audited Statements.
INCOME StAtEMENt IN US dOLLARS
BANK GROUP
As at 31st December 2009 2008 2009 2008
Assets (Reclassified) (Restated)
US$ 000 US$ 000 US$ 000 US$ 000
Cash & Cash Equivalents 40,960 48,773 41,031 50,272
Balance with Central Bank of Sri Lanka 44,462 60,682 44,463 60,683
Commercial Papers 2,838 3,451 2,838 3,451
Securities Purchased Under Resale Agreements 25,814 5,884 25,845 7,567
dealing Securities 127,190 7,664 144,080 12,478
Investment Securities 130,279 214,542 143,609 241,248
Loans & Advances 664,967 865,010 665,023 876,799
Lease Rentals Receivable within One Year 13,981 19,875 13,981 28,229
Lease Rentals Receivable later than One Year and
Not later than Five Years 11,595 23,775 11,595 33,560
Lease Rentals Receivable after Five Years 17 34 17 88
Investments in Associate Companies 481
Investments in Subsidiary Companies 7,522 8,394
Group Balances Receivable 7,072 5,515
Investment Properties 4,555 4,609 13,159 13,638
Current taxation 784 958 784 958
deferred taxation 3,972 810 3,973 848
Property, Plant & Equipment 29,069 36,047 35,956 43,705
Leasehold Rights 552 568 5,809 5,957
Intangible Assets 225
Other Assets 33,943 43,625 36,691 51,996
Total Assets 1,161,136 1,363,241 1,200,418 1,445,208
Liabilities
deposits 916,624 955,211 916,624 969,076
Borrowings 26,724 62,876 30,596 81,494
Securities Sold Under Repurchase Agreements 16,429 128,464 36,510 168,902
Group Balances Payable 84 13,487
Advance Received Against debentures 5,580 5,580
debentures 36,995 35,902 36,995 37,645
Current tax Liabilities 1,248 224
Other Liabilities 71,735 99,597 74,273 105,322
Total Liabilities 1,068,591 1,301,117 1,096,246 1,368,243
Equity
Stated Capital 48,691 22,499 48,691 22,499
Statutory Reserve Fund 4,433 4,246 4,433 4,262
Reserves 39,421 35,379 44,026 42,146
Total Equity Attributable to Equity Holders of the Bank 92,545 62,124 97,150 68,907
Total Equity 92,545 62,124 104,172 76,965
Total Liabilities & Equity 1,161,136 1,363,241 1,200,418 1,445,208
Commitments & Contingencies 194,688 237,826 194,688 237,826
Exchange rate of US$ 1 was Rs. 114.35 as at 31.12.2009 (Rs. 113.00 as at 31.12.2008)
the Balance Sheet given on this page is solely for the convenience of the Shareholders, Bankers, Investors,
Customers and Other Users of Financial Statements and do not form part of the Audited Statements.
BALANCE ShEEt IN US dOLLARS
INVEStOR INFORMAtION
TWENTY LARGEST SHAREHOLDERS AS AT 31ST DECEMBER
2009 2008*
Ordinary Voting Shares No. of Shares % No. of Shares %
1. Sri Lanka Insurance Corporation Limited
(**Including 350,000 shares of Sri Lanka Insurance
Corporation Limited - Life Fund)
19,500,000 ** 15.00 350,000
(Life Fund)
0.80
2. Bank of Ceylon 13,000,000 10.00
3. dr. t. Senthilverl 13,000,000 10.00 2,178,000 5.00
4. Browns Plantations Investment (Pvt) Limited 12,416,966 9.55
5. Lanka Orix Information technology Limited 12,416,966 9.55
6. Seyfest (Private) Limited 2,977,996 2.31 2,177,996 5.00
7. Employees Provident Fund 2,865,600 2.20
8. Sesot (Private) Limited 2,252,900 1.73 2,177,900 5.00
9. Nation Lanka Finance PLC
(Formerly Ceylinco Finance PLC) 2,139,010 1.65 2,140,226 4.91
10. Seybest (Private) Limited 2,132,900 1.64 2,177,900 5.00
11. Seyshop (Private) Limited 2,132,900 1.64 2,177,900 5.00
12. Esots (Private) Limited 2,115,857 1.63 2,160,857 4.96
13. Ceylinco Limited 1,680,896 1.29 1,680,896 3.86
14. National Savings Bank 1,510,900 1.16 1,510,900 3.47
15. the Finance Company PLC 1,473,223 1.13 1,473,223 3.38
16. Phoenix Ventures Limited 1,337,400 1.03 90,000 0.21
17. Miss. M.d. Bollagala 1,194,500 0.92
18. Sotse (Private) Limited 962,331 0.74 1,002,331 2.30
19. Mr. K.R.B. Fernando 955,400 0.73
20. Ceylinco Insurance PLC, A/C No. 2 (General Fund) 798,610 0.61 65,000 0.15
Sub Total 96,864,355 74.51 21,363,129 49.04
Balance Shares Held by Other Voting Shareholders 33,135,645 25.49 22,196,871 50.96
(10,964 Shareholders) (7,812 Shareholders)
Total Voting Shares 130,000,000 100.00 43,560,000 100.00
* Comparative shareholdings as at 31st December, 2008 of the twenty largest shareholders as at 31st December, 2009.
Note: During the year, in order to part settle their liabilities to the Bank (Settlor), under their respective Trust Deeds,
four employee share owning trusts set up by the Bank disposed of shares which were in turn purchased by two other
employee share owning trusts of the Bank out of their own funds. Details of the sales/purchases are given below:
Purchases of
Ordinary Voting
Shares of SBK
Sales of
Ordinary Voting
Shares of SBK
Sesot (Private) Limited 75,000
Seyfest (Private) Limited 100,000
Seyshop (Private) Limited 45,000
Seybest (Private) Limited 45,000
Sotse (Private) Limited 40,000
Esots (Private) Limited 45,000
In addition, Seyfest (Private) Limited was allotted 700,000 Ordinary Voting Shares in the Seylan Bank's
Public Issue at an issue price of Rs. 35/- per share. the shares were purchased by the trust Company out
of its own funds.
2009 2008*
Ordinary Non-Voting Shares No. of Shares % No. of Shares %
1. Lanka ORIX Leasing Company PLC 19,733,400 15.97
2. Pershing LLC S/A Averbach Grauson & Co. 8,582,400 6.94 10,119,200 8.19
3. Browns Plantation Investments (Pvt) Limited 6,588,700 5.33
4. taprobane holdings Limited 5,607,800 4.54
5. Mr. S.V. Somasunderam 4,368,800 3.54 5,591,900 4.52
6. Mr. L.M.S.h. Alnaqib 3,000,000 2.43
7. Miss. M.d. Bollagala 2,937,300 2.38
8. Questnet Limited 2,409,500 1.95
9. Mr. t.t. Al-Nakib 2,021,900 1.64
10. Mr. W.K.V.M. Fernando 1,669,300 1.35
11. Mr. M.M. Udeshi 1,424,000 1.15 100 0.00
12. Phoenix Ventures Limited 1,400,000 1.13
13. Prime Lands (Pvt) Limited 1,376,300 1.11
14. Mrs. K.W.S.h. Fernando 1,362,600 1.10
15. Mr. N.R. Somaiya 1,248,500 1.01 1,248,500 1.01
16. Mr. E. thavagnanasooriyam 1,183,900 0.96 500,000 0.40
17. Employees trust Fund Board 1,099,400 0.89 1,099,400 0.89
18. Miss. S.A. Fernando 1,095,700 0.89
19. Mrs. S. Surendini 935,900 0.76 500,000 0.40
20. Mr. h.W.M. Woodward 914,800 0.74 30,000 0.02
Sub Total 68,960,200 55.81 19,089,100 15.45
Balance Shares Held by other Non-Voting Shareholders 54,599,800 44.19 104,470,900 84.55
(6,126 Shareholders) (5,642 Shareholders)
Total Non-Voting Shares 123,560,000 100.00 123,560,000 100.00
* Comparative shareholdings as at 31st December, 2008 of the twenty largest shareholders as at 31st December, 2009.
ANALYSIS OF THE DISTRIBUTION OF SHAREHOLDERS AS AT 31ST DECEMBER 2009
Ordinary (Voting) Shares Ordinary (Non-Voting) Shares
Range of Shareholding No. of
Shareholders
No. of
Shares
Percentage
(%) of
Shareholding
No. of
Shareholders
No. of
Shares
Percentage
(%) of
Shareholding
1 - 1,000 8,241 2,516,018 1.94 3,007 1,430,033 1.16
1,001 - 10,000 2,318 7,630,830 5.87 2,354 9,524,999 7.71
10,001 - 100,000 362 9,974,365 7.67 669 19,196,675 15.54
100,001 - 1,000,000 46 16,080,773 12.37 98 26,298,793 21.28
1,000,001 & Above 17 93,798,014 72.15 18 67,109,500 54.31
Total 10,984 130,000,000 100.00 6,146 123,560,000 100.00
Resident/Non-Resident
Resident 10,900 128,906,075 99.16 6,079 102,966,980 83.33
Non-Resident 84 1,093,925 0.84 67 20,593,020 16.67
Individuals/Institutions
Individuals 10,707 62,679,649 48.22 5,948 63,553,261 51.44
Companies 277 67,320,351 51.78 198 60,006,739 48.56
ORDINARY SHARES (QUOTED)
Voting (SEYB-N) Non-Voting (SEYB-X)
2009 2008 2009 2008
No. of Shares Issued 130,000,000 43,560,000 123,560,000 123,560,000
First & Final dividend - Proposed (Rs. per share) 0.50 0.50
Share Prices
highest (Rs.) 49.25 34.00 19.50 10.00
Lowest (Rs.) 27.00 15.75 4.90 4.90
Last traded (Rs.) 37.00 28.50 16.00 6.00
Percentage of Public holding (%) 64.90 99.96 83.99 99.89
Shareholdings of Directors and Chief Executive Officer as at 31st December 2009
directors shareholdings are given on page 125 of the Annual Report of the board of directors. Shares held
by the Chief Executive Officer, Mr. A.M. Pasqual as at 31st december 2009 are as follows:
No. of Shares % holding
33,000 Ordinary Voting Shares 0.025
33,000 Ordinary (Non-Voting) Shares 0.027
DEBENTURES (QUOTED)
Debentures 2006/2011
(Listed on CSE in July 2006)
(SEYB d86, d87 and d88) Monthly Interest
(13%)
Annual Interest
(13.50%)
Floating
Rate of Interest
2009 2008 2009 2008 2009 2008
No. of debentures Issued 7,646,400 4,620,800 305,950
debenture Prices:
highest (Rs.) 100.00 74.00 97.00 75.69 Not
Lowest (Rs.) 60.00 74.00 97.00 75.69 traded
Last traded (Rs.) 98.00 74.00 97.00 75.69 in 2009
Debentures 2007/2012 Issue 1
(Listed on CSE in June 2007)
(SEYB d118, d119 and d120) Monthly Interest
(15.75%)
Annual Interest
(16.75%)
Floating
Rate of Interest
2009 2008 2009 2008 2009 2008
No. of debentures Issued 2,916,200 4,275,450 302,350
debenture Prices:
highest (Rs.) 100.26 74.14 90.00 84.00 86.00 82.44
Lowest (Rs.) 77.51 74.14 77.50 84.00 80.00 82.44
Last traded (Rs.) 100.00 74.14 90.00 84.00 80.00 82.44
Debentures 2007/2012 Issue 2
(Listed on CSE in January 2008)
(SEYB d127, d128, d129 and d130) Monthly Interest
(17.00%)
Annual Interest
(18.00%)
Floating
Rate of Interest
Payable Quarterly
Floating
Rate of Interest
Payable Annually
2009 2008 2009 2008 2009 2008 2009 2008
No. of debentures Issued 2,089,550 2,962,400 433,350 107,550
debenture Prices:
highest (Rs.) 84.00 99.47 90.00 85.00 100.00 Not traded Not traded
Lowest (Rs.) 59.69 99.47 90.00 85.00 100.00 during the during the
Last traded (Rs.) 80.00 99.47 90.00 85.00 100.00 Year 2008 Years 2008/09
Debentures 2008/2013
(Listed on CSE in February 2009)
(SEYB d141, d142, d143 and d144) Monthly Interest
(20.50%)
Annual Interest
(21.50%)
Floating
Rate of Interest
Payable Quarterly
Floating
Rate of Interest
Payable Annually
2009 2008 2009 2008 2009 2008 2009 2008
No. of debentures issued 3,954,450 2,316,100 1,200 33,900
debenture Prices:
highest (Rs.) 100.04 N/A Not N/A Not N/A Not N/A
Lowest (Rs.) 78.75 traded traded traded
Last traded (Rs.) 95.00 in 2009 in 2009 in 2009
Current Previous
Period Comparative
Period**
31.12.2009 31.12.2008
Interest Rate of Comparable Government Security 11.65% 18.64%
Debt/Equity Ratio 0.40 0.68
Interest Cover 2.23 1.21
Quick Asset Ratio 0.59 0.73
Interest Yield as at Date of Last Trade
2006/11 Issue
Annual Interest (27.10.2009)/(29.09.2008) 13.92% 17.84%
Monthly Interest (22.12.2009)/(03.10.2008) 14.08% 18.65%
Floating Interest - Annual* * *
2007/12 Issue I
Annual Interest (24.11.2009)/(17.09.2008) 18.61% 19.94%
Floating Interest - Annual (09.10.2009)/(08.10.2008) 25.16% 23.05%
2007/12 Issue II
Annual Interest (08.12.2009)/(14.08.2008) 20.00% 21.18%
Floating Interest - Quarterly (07.12.2009)/* 15.15% *
2008/13 Issue
Annual Interest* * *
Monthly Interest (15.10.2009)/* 23.73% *
Floating Interest - Quarterly* * *
Yield To Maturity of Trade Done On
2006/11 Issue
Annual Interest (27.10.2009)/(29.09.2008) 15.49% 26.82%
2007/12 Issue I
Annual Interest (24.11.2009)/(17.09.2008) 22.12% 23.53%
Floating Interest - Annual (09.10.2009)/(08.10.2008) 32.06% 26.90%
2007/12 Issue II
Annual Interest (08.12.2009)/(14.08.2008) 22.98% 23.79%
Floating Interest - Quarterly (07.12.2009)/* 14.36% *
2008/13 Issue
Annual Interest* * *
Monthly Interest (15.10.2009)/* 22.35% *
Floating Interest - Quarterly* * *
* No trading during the period.
** Comparative Period - Immediate Preceding Financial Year.
BRANCh NEtWORK
Ambalangoda
No. 24 A, Galle Road, Ambalangoda
tel: 091 2258010/2256154
Ampara
Regal Cinema Complex
129, d.S. Senanayake Street, Ampara
tel: 063 2224897-9
Anuradhapura
No. 250, Main Street, Anuradhapura
tel: 025 2224649/4580940
Attidiya
No. 214, Main Road, Attidiya, dehiwela
tel: 2738453/4203565
Avissawella
No. 71, Ratnapura Road, Avissawella
tel: 036 2222007/5673333
Badulla
No. 10, Cocowatta Road, Badulla
tel: 055 2223414/4499524
Balangoda
No. 123, Barns Ratwatte Mawatha, Balangoda
tel: 045 2287007/2288020
Bandaragama
No. 17 A, horana Road, Bandaragama
tel: 038 2290706/4290263
Bandarawela
No. 240, Badulla Road, Bandarawela
tel: 057 2223144/2231085
Batticaloa
No. 06, Lloyds Avenue, Batticaloa
tel: 065 2224419/2224587
Beliatta
No. 50, Walasmulla Road, Beliatta
tel: 047 2243619/2251478
Bogawanthalawa
No. 79, Main Street, Bogawanthalawa
tel: 052 2267576/060 2538295
Boralesgamuwa
No. 24, Kesbewa Road, Boralesgamuwa
tel: 2517548-9/5525054
Borella
No. 1119, Maradana Road, Borella, Colombo 08
tel: 2681191-2/2678189
Ceylinco House
No. 69, Janadhipathi Mawatha, Colombo 01
tel: 2445840-3/4714655
Chilaw
No. 46, Kurunegala Road, Chilaw
tel: 032 2222121/4860550
Cinnamon Gardens
No. 4, Baptist Chapel Road, Colombo 07
tel: 2694966/2683726
Colombo South
No. 30, Galle Road, Colombo 06
tel: 2593405/4510030
Dehiattakandiya
No. 83/84, Main Street, dehiattakandiya
tel: 027 2250268-9
Dehiwela
No. 166 d, Galle Road, dehiwela
tel: 4201756-7/2726395
Embilipitiya
53, New town Road, Embilipitiya
tel: 047 2230340/4379635
First City Office
No. 33, Sri Baron Jayathilake Mawatha,
Colombo 01
tel: 4725000/4714365
Free Trade Zone
Unit 3, Plaza Complex, KIPZ, Katunayake
tel: 2252566/2251462
Galle
No. 34, 1st Cross Street, talbot town, Galle
tel: 091 2223514/5454647
Gampaha
No. 1 J, Bauddhaloka Mawatha, Gampaha
tel: 033 2222618/2230717
Gampola
No. 44, Kandy Road, Gampola
tel: 081 2352741-2/4485435
Ganemulla
No. 187/1, Kirindiwatta Road, Ganemulla
tel: 033 2260230/2260738
Grandpass
No. 401, Prince of Wales Avenue, Colombo 14
tel: 2331726-7/2451061
Hambantota
No. 32 & 34, Wilmet Street, hambantota
tel: 047 2220507/2220518
Hatton
No. 42, dunbar Road, hatton
tel: 051 2222347/2222234
Havelock Town
No. 164,166, havelock Road, Colombo 05
tel: 2596550-3/2597497
Hingurakgoda
No. 13 & 14, Airport Road, hingurakgoda
tel: 027 2246242/027 2246087
Homagama
No. 94 , high Level Road, homagama
tel: 4442021-2/2855065
Horana
No. 160/1/1, Ratnapura Road , horana
tel: 034 2261176/2261018
Ja-ela
No. 165 and 165/2/1, Colombo Road, Ja-ela
tel: 2237421/5858373
Jaffna
No. 560 & 562, hospital Road, Jaffna
tel: 021 2223047/2225073
Kadawatha
No. 28 B, Ganemulla Road, Kadawatha
tel: 2925594-5/4816821
Kalubowila
No. 32, S. de S. Jayasinghe Mawatha,
Kalubowila
tel: 5557567/4202648
Kalutara
No. 338, Main Street, Kalutara
tel: 034 2225035-7/5081841
Kandy
No. 65, Kings Street, Kandy
tel: 081 2232767/2233484
Kattankudy
No. 230, Main Street, Kattankudy
tel: 065 2247456/2246625
Katuneriya
No. 99/1, Chilaw Road, Katuneriya
tel: 031 2255209/2257764-5
Kegalle
No. 143, Colombo Road, Kegalle
tel: 035 2223538/2222100
Kekirawa
No. 06, Yakalla Road, Kekirawa
tel: 025 2264590-1/2263215
Kiribathgoda
No. 52, Kandy Road, Kiribathgoda
tel: 2910581/4936902
Kochchikade
No. 66, Chilaw Road, Kochchikade
tel: 031 2277661/2277580
Koggala
No. 09, E.P.Z, Koggala, habaraduwa
tel: 091 2283390
Kollupitiya
428, R.A. de Mel Mawatha, Colombo 03
tel: 2576911-3/2576910
Kottawa
No. 34, Nawasiri Building, highlevel Road,
Kottawa
tel: 2842682-3/4304784
Kuliyapitiya
139, hettipola Road, Kuliyapitiya
tel: 037 2281450/4696450
Kurunegala
No. 54, Colombo Road, Kurunegala
tel: 037 2223581-2/2224276
Maharagama
No. 201, highlevel Road, Maharagama
tel: 2841997-8/2841999
Malabe
No. 11, Athurugiriya Road, Malabe
tel: 4547400/2560403
Manampitiya
Main Street, Manampitiya
tel: 027 2224455/060 2279685
Maradana
No. 250, Sri Sangaraja Mawatha, Colombo 10
tel: 2473281/2473773
Marandagahamula
No. 150, divulapitiya Road, Marandagahamula
tel: 031 2246377/2246096
Matale
No. 166, 168, Main Street, Matale
tel: 066 2223241-2/4460123
Matara
No. 45, Anagarika dharmapala Mawatha, Matara
tel: 041 2221181-2/2222393
Matugama
No. 06, Aluthgama Road, Matugama
tel: 034 2247544/4931350
Mawanella
No. 21, Courts Road, Mawanella
tel: 035 2246007/2246988
Meegoda
Meegoda Economic Centre, Meegoda
tel: 2830820/2830817
Millennium
Seylan towers,
tel: 2456145/2456135
Mirigama
No. 42, danowita Road, Mirigama
tel: 033 2273001-2
Moratuwa
No. 509, Galle Road, Rawathawatte, Moratuwa
tel: 2647900/2642954
Mount Lavinia
No. 198, Galle Road, Mount Lavinia
tel: 2731266-7/4213194
Nawala
No. 48/A, Narahenpita Road, Nawala
tel: 2806727/2807329
Nawalapitiya
No. 02, Baily Road, Nawalapitiya
tel: 054 2222056-7/2222018
Negombo
No. 141, Rajapaksha Broadway, Negombo
tel: 031 2224334-6/2233054
Nelliaddy
No. 149, Point Pedroo Road, Nelliaddy
tel: 021 3205961-3
Nittambuwa
No. 195/1, Colombo Road, Nittambuwa
tel: 033 2295270-1
Nugegoda
No. 211, high Level Road, Nugegoda
tel: 2811180-1/2809955
Nuwara Eliya
No. 48, Park Road, Nuwara Eliya
tel: 052 2223026/2234338
Old Moor Street
No. 315/317, Old Moor Street, Colombo 12
tel: 5358885/2421483
Panadura
No. 401, Galle Road, Panadura
tel: 038 2233172-3/2238355
Pelmadulla
No. 17, Galwatta Road, Pelmadulla
tel: 045 2275034/2275625
Pettah
No. 96, Main Street, Colombo 11
tel: 2337823-5/2441471
Polonnaruwa
Lake View Building, Polonnaruwa
tel: 027 2223168-9/2224590
Puttalam
No. 56, K.K. Street, Puttalam
tel: 032 2265194/2265580
Raddolugama
No. 171, N.h.S., Raddolugama
tel: 2292778/2292252
Ratnapura
No. 06, Goodshed Road, Ratnapura
tel: 045 2225801-2/2223730
Ruwanwella
No. 52, Main Street, Ruwanwella
tel: 036 2267445-6/2268623
Sarikkamulla
No. 97, Galle Road, Sarikkamulla, Panadura
tel: 038 4282844-5/2235265
Savings & Travel
No. 202,204, Main Street, Colombo 11
tel: 4718344-5/2345797
Soysapura
No. 164/2, Soysapura, Moratuwa
tel: 2622756/5524673
Thalawakele
No. 08 & 10, Kothmale Road, thalawakele
tel: 052 2258635-8
Tissamaharama
No. 547, debarawewa, tissamaharama
tel: 047 2237161-2/2239583
Trincomalee
No. 289, Central Road, trincomalee
tel: 026 2227701-2/2227704
Vavuniya
No. 45, 2nd Cross Street, Vavuniya
tel: 024 2222633-4/2220077
Warakapola
No. 192, Main Street, Warakapola
tel: 035 2267628-9/2267100
Wattala
No. 276, Negombo Road, Wattala
tel: 4814717/2946266
Welimada
No. 107, Nuwara Eliya Road, Welimada
tel: 057 2245617/2244628
Weliweriya
New Kandy Road, Weliweriya
tel: 033 2255291/2257710
Yakkala
No. 104, Kandy Road, Yakkala
tel: 033 2226378/2227014
ExTENSION OFFICES
Baduraliya
No. 92, Ratnapura Road, Baduraliya
tel: 034 2246716
Beruwela
No. 82, Galle Road, Beruwela
tel: 034 2279887
Chankanai
Mallakkam Junction, Ponnalai Road,
Main Street, Chankanai
tel: 021 3205965/3205967
Dambulla
No. 601, Anuradhapura Road, dambulla
tel: 066 2283023
Hasalaka
No. 95, 96, Corporative Society Building,
Kandy Road, hasalaka
tel: 055 2258324
Ingiriya
No. 23, Central Building, Padukka Road,
Ingiriya
tel: 034 2269754
Katugastota
No. 444, Katugastota Road, Kandy
tel: 081 2212870
Kirindiwela
No. 89, Gampaha Road, Kirindiwela
tel: 033 2269709/4923886
Kotagala
Main Street, Kotagala
tel: 051 2222797
Kotahena
No. 310, George R. de Silva Mawatha, Kotahena
tel: 2399660/4172460
Kotikawatta
No. 260 A, I.d.h. Road, Kotikawatta
tel: 2418883
Kotiyakumbura
No. 05, Main Street, Kotiyakumbura
tel: 035 2289035
Manipay
No. 103, Ward No. 07, Jaffna Road, Manipay
tel: 021 3205964/3205968
Maswela
No. 53, Mawela, Maswela
tel: 081 4927683
Mawathagama
No. 56 F, Kandy Road, Mawathagama
tel: 037 2298666
Minuwangoda
No. 40, Cargills Building, Colombo Road,
Minuwangoda
tel: 2299004
Kirulapone
No. 280 B, high Level Road, Colombo 06
tel: 2829054
Pallekele
BOI, Pallekelle
tel: 081 2423135/2423958
Piliyandala
No. 90 A, horana Road, Piliyandala
tel: 2604982-3
Ranpokunugama
No. 1, Maduwegedara, Nittambuwa
tel: 033 2282242
Samanthurai
No. 113, hijra Junction, 1st Street,
Samanthurai
tel: 067 2261284
Veyangoda
No. 177, Main Street, Veyangoda
tel: 033 2295050-1
Wijerama
No. 525, highlevel Road, Wijerama,
Nugegoda
tel: 4301878
Yatiyantota
No. 51/1/2, Ginigathhena Road, Yatiyantota
tel: 036 2271480
GEOGRAPhICAL ANALYSIS
Deposits and Advances
As at 31st December 2009
Province No. of
Branches
deposits Advances
Including
Leasing**
Rs. Mn. % Rs. Mn. %
Western 46 67,938 64.8 61,876 77.0
Southern 7 5,739 5.5 2,891 3.6
Uva 3 2,138 2.0 846 1.1
North-Central 5 2,463 2.3 1,308 1.6
North-Western 7 6,604 6.3 3,204 4.0
Eastern 5 3,637 3.5 1,808 2.3
Northern 3 2,382 2.3 1,033 1.3
Sabaragamuwa 9 6,921 6.6 3,469 4.3
Central 8 6,994 6.7 3,853 4.8
Total 93 104,816 100.0 80,288 100.0
** Loans and advances excluding loan loss provision and interest in suspense.
Commitments and Contingencies
As at 31st December 2009
Province No. of
Branches
Acceptances
Rs. Mn.
Stand by
Letters of
Credit
Rs. Mn.
Guarantees
Rs. Mn.
documentary
Credit
Rs. Mn.
Bills For
Collection
Rs. Mn.
Forward
Exchange
Contracts
Rs. Mn.
total
including
Commitments
Rs. Mn.
Western 46 2,600 279 4,864 1,845 1,246 (41) 10,793
Southern 7 19 4 337 8 13 381
Uva 3 262 262
North-Central 5 347 347
North-Western 7 69 451 35 14 569
Eastern 5 199 1 200
Northern 3 134 5 139
Sabaragamuwa 9 16 248 48 35 347
Central 8 78 352 67 26 523
Commitments 8,702
Total 93 2,782 283 7,194 2,008 1,335 (41) 22,263
GLOSSARY
Capital Adequacy Ratio
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 Settlements (BIS)
and as modified to suit local
requirements by the Central Bank
of Sri Lanka.
Cash Equivalents
Cash equivalents are short term,
highly liquid investments that
are readily convertible to known
amounts of cash and which are
subjected to an insignificant risk of
changes in value.
Contingent Liabilities
Conditions or situations at the
Balance Sheet date, the financial
effect of which are to be determined
by the future events which may or
may not occur.
Cost to Income Ratio
Operating expenses as a percentage
of net income.
Deferred Tax
Sum set aside in the Financial
Statements for taxation that may
become payable/receivable in
a financial year other than the
current financial year.
Dividend Yield
dividend earned per share as a
percentage of its market value.
Dividend Cover
Profit after tax divided by gross
dividends. this ratio measures
the number of times dividend
is covered by the current years
distributable profits.
Equity Growth Rate
the percentage increase in total
equity over the year under review.
Equity
total of shareholders funds; share
capital + statutory reserves + other
reserves.
Impairment
this occurs when recoverable
amount of an asset is less than its
carrying amount.
Interest Earning Assets
Assets, which earn interest - the
total of Advances, Bills, Leases,
Government Bills & Bonds, Call
Money and Placements with other
institutions.
Interest in Suspense
Interest Income of non-performing
loans; these are accrued but not
considered as profits.
Interest Rate Spread
the difference between the
effective interest yield and the
effective interest cost of the Bank.
Liquid Assets
Cash, Bills, Short-term Funds,
Balance with Central Bank and
dealing Securities.
Non-Performing Loans
Loans which are not activated for
90 days (3 months), or more.
NPA Ratio
total non-performing advances
(net of interest in suspense)
divided by total advances portfolio
(net of interest in suspense).
Price Earning Ratio
Market price of the Banks
share as number of times of the
earnings per share.
Profit Handout
dividends as a percentage of profit
after tax.
Provision for Bad and
Doubtful Debts
Provisions made for possible loan
losses, according to the period
of non-performance and the
exposure over the collateral.
REPOs
Repurchase agreements; the
securities sold to creditors (who
lend money for funding purposes);
with the intention of buying them
back at a set price.
Return on Average Assets (ROAA)
Profit after tax as a percentage of
average assets.
Return on Equity (ROE)
Profit after tax as a percentage of
average equity.
Risk Weighted Assets
the assets and off Balance Sheet
items weighted according to the
risk involved as stipulated by the
Central Bank.
Statutory Reserve Fund
Capital reserve created as per the
provisions of Banking Act
No. 30 of 1988.
Tier 1 Capital
Consists of the sum total of paid up
ordinary shares, non-cumulative,
non-redeemable preference shares,
share premium, statutory reserve
fund, published retained profits,
general and other reserves, less
goodwill.
Tier 2 Capital
Consists of the sum total
of revaluation reserves, general
provisions, hybrid capital
instruments and approved
subordinated debentures.
Total Capital
total Capital is the sum of tier 1
Capital and tier 2 Capital.
Value Added
Value added is the wealth created
by providing banking 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.
CORPORAtE INFORMAtION
NAME OF COMPANY
Seylan Bank PLC
LEGAL FORM
A public limited liability company
incorporated in Sri Lanka on
28th August 1987 and listed on
the Colombo Stock Exchange
in January 1989. A licensed
commercial bank regulated
under the Banking Act No. 30 of
1988 (as amended).
COMPANY REGISTRATION
NUMBER
PQ 9
REGISTERED OFFICE
Seylan towers
HEAD OFFICE
Seylan towers
P.O. Box 400,
tel : (94)-(11)-2456789,
(94)-(11)-4-701000
Fax : (94)-(11)-2456456
Swift: SEYBLKLX
E-mail: info@seylan.lk
Website: www.eseylan.com
BOARD OF DIRECTORS
Mr. Eastman Narangoda
(Executive Chairman)
BA (Econ.), FIB, FIMS (UK),
FItd (SL), dip. in Advanced Bank
Management (Stockholm)
Mr. R. Nadarajah
(Executive director)
B.Sc. (hons.), MBA, FCIB (London)
Mr. Nihal M. Jayamanne PC
Mr. P. Lalith P. Withana
MBA, BA (hons.), FCMA, FCA
Rear Admiral (Rtd.)
B. Ananda J.G. Peiris
RSP, VSV, USP, ndc, psc, dISS
Mr. Pradeep G.S. Kariyawasam
dr. Nalaka h. Godahewa
Ph.d. (University of South Australia),
MBA (Sri. J.), B.Sc. Eng. (Moratuwa),
FCIMA (UK), FCMA (Aus.) and
FCIM (UK).
Mr. Ajith L. devasurendra
Mr. Ishara C. Nanayakkara
dip. in Business Accounting &
Finance (Aus.)
Mr. Samantha P.S. Ranatunga
MBA (Birmingham), B.Sc. (hons.)
delhi
(Appointed w.e.f. 12.01.2010)
COMPANY SECRETARY
Ms. M.R.S. Gunasekara
ACIS, LLB (hons.) Colombo
Attorney-at-Law
AUDITORS
Messrs KPMG Ford, Rhodes,
thornton & Co.
Chartered Accountants
CREDIT RATING
the Bank has been assigned
a BBB+ (lka) national credit
rating for implied long term
unsecured senior debt by Fitch
Ratings Lanka Limited.
SUBSIDIARY COMPANIES
Seylan developments PLC
(formerly Ceylinco Seylan
Developments PLC)
Seylan Bank Asset Management
Limited
ExCHANGE HOUSE
MANAGED BY SEYLAN
BANK PLC
Asia Express Exchange,
Muscat, Oman
GRI COMPLIANCE INdEX
Index
No.
description Report Level Page
No.
1. STRATEGY AND ANALYSIS
1.1 Statement from the most senior decision-maker of the
organization about the relevance of sustainability to the
organization and its strategy
Sustainability Report 105
2. ORGANISATIONAL PROFILE
2.1 Name of the organisation Corporate Information 245
2.2 Primary Brands, Products, and/or services Management Report 57-62
2.3 Operational Structure of the organisation Corporate Governance Report 75-99
2.4 Location of organisation's headquarters Corporate Information 245
2.5 Number of countries where the organisation
operates, and names of countries with either major
operations or that are specifically relevant to the
sustainability issues covered in the report
2.6 Nature of ownership and legal form Corporate Information 245
2.7 Markets served Geographical Analysis 243
2.8 Scale of the reporting organisation Labour, ten Year Summary 111,230
2.9 Significant changes during the reporting period Investor Information,
Financial Statements
236,136
2.10 Awards received in the reporting period Sustainability Report 107
3. REPORT PARAMETERS
3.1 Reporting Period Sustainability Report 106
3.2 date of most recent previous report First Report based on GRI Guidelines
3.3 Reporting cycle Sustainability Report 106
3.4 Contact point for questions regarding the report or its contents Sustainability Report 106
3.5 defining report content Sustainability Report 106
3.6 Boundary of the report Sustainability Report 106-107
3.7 Any specific limitations on the scope or boundary of the report None
3.8 Basis for reporting on joint ventures, subsidiaries,
leased facilities, outsourced operations, and other entities
that can significantly affect comparability from period to
period and/or between organisations
Not Applicable
3.10 Explanation of the effect of any re-statement
of information provided in earlier report
Not Applicable
3.11 Significant changes from previous reporting
periods in the scope, boundary, or measurement methods
applied in the report
Not Applicable
4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT
4.1 Governance Structure of the Organisation Corporate Governance Report 76
4.2 Indicate whether the Chair of the highest governance body
is also an executive officer
Corporate Governance Report 75-99
4.3 For organisations that have a unitary board structure, state the
number of members of the highest governance body that are
independent and/or non-executive members
4.4 Mechanisms for shareholders and employees to
provide recommendations or direction to the highest
governance body
4.14 List of Stakeholder group engaged by the organisation Sustainability Report 107
4.15 Basis for identification and selection of stakeholders Sustainability Report 107
Index
No.
description Report Level Page
No.
5. MANAGEMENT APPROACH AND PERFORMANCE INDICATORS
Economic
EC1 direct economic value generated and distributed, including
revenues, operating costs, employee compensation, donations
and other community investments, retained earnings and
payments to capital providers and governments
Sustainability Report 108-109
EC3 Coverage of the organisations defined benefit plan obligations. Sustainability Report 108
EC4 Significant financial assistance received from government. None
EC9 Understanding and describing significant indirect economic
impacts, including the extent of impacts
Environmental
EN1 Materials used by weight or volume Sustainability Report 110
EN5 Energy saved due to conservation and efficiency improvements Sustainability Report 110
Society
SO1 Nature, scope and effectiveness of any programmes and
practices that assess and manage the impacts of operations
on communities including entering, operating and exiting.
SO2 Percentage and total number of business units analysed for
risks related to corruption
SO3 Percentage of employees trained in organisations anti-
corruption policies and procedures
SO6 total value of financial and in-kind contributions to political
parties , politicians and related institutions by Country
None
Labour
LA1 total workforce by employment type, employment contract,
and region
LA2 total number and rate of employee turnover by age group,
gender, and region
LA4 Percentage of employees covered by collective bargaining
agreements
LA6 Percentage of total workforce represented in formal joint
managementworker health and safety committees that
help monitor and advice on occupational health and safety
programmes
LA7 Rates of injury, occupational diseases, lost days, and
absenteeism, and number of work related fatalities by region.
LA8 Education, training, counseling, prevention of diseases,
and risk-control programs in place to assist workforce
members, their families, or community members regarding
serious diseases
LA10 Average hours of training per year per employee by
employee category
LA11 Programmes for skills management and lifelong learning
that support the continued employability of employees and
assist them in managing career endings
Sustainability Report 112,114
LA12 Percentage of employees receiving regular performance and
career development reviews
LA13 Composition of governance bodies and breakdown of
employees per category according to gender, age group,
minority group membership, and other indicators of diversity
SUBJECt INdEX
Page No.
Annual Report of the Board of directors 119
Asset and Liability Management
Committee (ALCO) 69
Asset Quality 60
Audit Committee Report 100
Auditors 128
Auditors Report 136
Balance Sheet 139
Balance with Central Bank of Sri Lanka 166
BASEL II Implementation Plan 73
Basis of Provisioning for Loan Losses 179
Bills of Exchange 177
Board Integrated Risk Management
Committee Report 102
Board of directors 30, 123, 228
Board Subcommittees 85, 124
Borrowings 196
Branch Network 241
Business Continuity Planning 70
Capital Adequacy Ratios 160
Capital Commitments 205
Cash and Cash Equivalents 141
Cash Flow Statement 141
CEOs Message 57
Chairmans Message 07
Commitments and Contingencies 203
Concentration of Credit Risk 183
Corporate Governance Report 75
Corporate Information 245
Cost to Income Ratio 233
Credit Rating 245
Credit Risk 66, 157
debentures 239
debt-Equity Ratio 240
deferred tax 187
deposits 196
depreciation Rates 150
directors Interests in Contracts
with the Company 129
directors' Interests in Shares 125
directors Responsibility for Financial Reporting 134
dividend Cover 56
dividend Payout 233
dividends 121
donations 121
Earnings Per Share 56
Events Occurring After Balance Sheet date 205
Financial Calendar 117
Financial highlights 56
Financial Review 58
Foreign Exchange Profit 138
Form of Proxy Enclosed
Geographical Analysis 243
Glossary 244
GRI Compliance Index 246
Income Statement 138
Income tax Expense 164
Page No.
Independence of Auditors 128
Interest Cover 240
Interest Expense 162
Interest Income 162
Interest Rate Risk 69, 158
Interest Register 125
Interest Yield on Advances 233
Interest Yield on debentures 239
Investor Information 236
Lease Receivable 183
Liquidity 158
Liquidity Risk 70, 157
Loan Losses & Provisions 178
Loans & Advances 177
Management Report 57
Market Capitalisation 60
Market Risk 68
Maturity Analysis 218
Net Asset Value Per Share 56, 233
Nomination Committee 104
Non-Performing Loans & Advances 179
Notice of Meeting 249
Operating Expenses 163
Operational Efficiency 60
Operational Risk 69
Performance Indicators 233
Price Earnings Ratio 56
Principal Activities 143
Productivity 60
Profiles of the Board of directors 228
Profitability 58
Property, Plant & Equipment 190
Quick Assets Ratio 240
Related Party disclosures 205
Remuneration Committee Report 103
Return on Average Assets 233
Return on Average Equity 233
Risk Management Report 63
Sectoral Exposure of Credit Portfolio 67
Segment Reporting 220
Senior Management team 230
Share Prices 238
Significant Accounting Policies 144
Stability 60
Stated Capital 200
Statement of Changes in Equity 140
Statutory Reserve Fund 201
Strategic Plan 52, 62
Subsidiaries 119
the Case Study 07
ten Year Summary 232
total Equity 139
US$ Accounts 234
Value Added Statement 109
Vision & Mission 49, 50
Yield to Maturity of debentures 240
NOtICE IS hEREBY GIVEN thAt the twenty third Annual General Meeting of Seylan Bank PLC will be held
on Friday 26th March 2010 at the Oak Room Cinnamon Grand Colombo, No. 77, Galle Road, Colombo 03,
at 10.30 a.m. for the following purposes:
ROUTINE BUSINESS
1. to receive and consider the Annual Report of the Board of directors on the Affairs of the Company and
the Audited Financial Statements for the year ended 31st december 2009, together with the Report of
the Auditors thereon.
2. to declare a preference dividend as recommended by the directors.
3. to declare a first and final ordinary dividend as recommended by the directors.
4. to re-elect Mr. N.M. Jayamanne PC, who retires by rotation at the Annual General Meeting in terms of
Article 82 of the Articles of Association of the Company, as a director.
5. to re-elect Mr. P.G.S. Kariyawasam at the Annual General Meeting in terms of Article 89 of the Articles
of Association of the Company, as a director.
6. to re-elect dr. N.h. Godahewa at the Annual General Meeting in terms of Article 89 of the Articles of
Association of the Company, as a director.
7. to re-elect Mr. A.L. devasurendra at the Annual General Meeting in terms of Article 89 of the Articles of
8. to re-elect Mr. I.C. Nanayakkara at the Annual General Meeting in terms of Article 89 of the Articles of
9. to re-elect Mr. S.P.S. Ranatunga at the Annual General Meeting in terms of Article 89 of the Articles of
10. to re-appoint Messrs KPMG Ford, Rhodes, thornton & Co., Chartered Accountants as the Auditors for
the ensuing year and authorise the directors to determine their remuneration.
11. to authorise the board of directors to determine donations for 2010.
12. to transact any other business of which due notice shall be given.
By Order of the Board
(Ms.) M.R.S. Gunasekara
Company Secretary
Colombo,
25th February 2010
Notes
(a) A member entitled to attend or attend and vote is entitled to appoint a proxy to attend/vote instead of him/her. A proxy holder
need not be a member of the Company. A form of proxy is enclosed for this purpose.
(b) The completed Form of Proxy should be deposited at the Office of the Company Secretary at Seylan Towers, No. 90, Galle Road,
Colombo 03 not less than 48 hours before the time appointed for the holding of the Annual General Meeting. Only registered
holders will be permitted to attend the Annual General Meeting.
(c) Shareholders/proxy holders are requested when attending the Annual General Meeting to bring with them their National
Identity Cards or any other form of valid identification.
NOtICE OF MEEtING
In order to minimise wastage, the Bank has taken steps to avoid more than one copy of the Annual Report
being dispatched, to any one shareholder.
however, please inform the Company Secretary if you have received more than one copy of the Annual Report.
250
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m[pj ng];Fthy;
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ngg;utup 17> 2010
I/We* ...............................................................
of ......................being a shareholder/s of Seylan Bank PLC
hereby appoint Mr./Mrs./Miss.*................................................................
(N.I.C. No........................) of .................................. or
failing him/her* Mr. Eastman Narangoda of Rajagiriya, whom failing, Mr. Ramanathan Nadarajah of
Colombo 07, whom failing, Mr. Nihal Michael Jayamanne PC of Colombo 08, whom failing, Mr. Punsisi Lalith
Patuwatha Withana of Battaramulla, whom failing, Rear Admiral (Rtd.) Baminahennadige Ananda Jayalal
Gurukula Peiris of Pannipitiya, whom failing, Mr. Pradeepa Gamini Suraj Kariyawasam of Colombo 08, whom
failing, dr. Nalaka harshijeewa Godahewa of Mount Lavinia, whom failing, Mr. Ajith Lasantha devasurendra
of Colombo 05, whom failing, Mr. Ishara Chinthaka Nanayakkara of Rajagiriya, whom failing, Mr. Samantha
Pradeep Samarawickrama Ranatunga of Colombo 05, as my/our* Proxy to represent me/us* and to vote on
my /our* behalf at the Annual General Meeting of the Company to be held on 26th March 2010 and at any
adjournment thereof. I/We* the undersigned hereby authorise my/our Proxy to vote for me/us* and on my/our*
behalf in accordance with the preferences indicated below:
(
**
) For Against
1. to receive and consider the Annual Report of the Board of directors on the
Affairs of the Company and the Audited Financial Statements for the year
ended 31st december 2009, together with the Report of the Auditors thereon.
2. to declare a preference dividend as recommended by the directors.
3. to declare a first and final ordinary dividend as recommended by the directors.
4. to re-elect Mr. N.M. Jayamanne PC, who retires by rotation in terms
of Article 82 of the Articles of Association of the Company, as a director.
5. to re-elect Mr. P.G.S. Kariyawasam, who retires in terms of Article 89
of the Articles of Association of the Company, as a director.
6. to re-elect dr. N.h. Godahewa, who retires in terms of Article 89
7. to re-elect Mr. A.L. devasurendra, who retires in terms of Article 89
8. to re-elect Mr. I.C. Nanayakkara, who retires in terms of Article 89
9. to re-elect Mr. S.P.S. Ranatunga, who retires in terms of Article 89
10. to re-appoint M/s. KPMG Ford, Rhodes, thornton & Co.,
Chartered Accountants as the Auditors for the ensuing year and
authorise the directors to determine their remuneration.
11. to authorise the board of directors to determine donations for 2010.
(* Please delete the inappropriate words)
(** Please mark your preference with X)
Signed this . day of March 2010
................................................ ................................................
Signature/s of Shareholder/s Shareholder/s N.I.C/Co. Reg. No.
Notes and Instruction as to the completion of the Form of Proxy are noted on the reverse hereof:
FORM OF PROXY
Notes
Only proxy holders of Ordinary voting shareholders are entitled to vote on their behalf at the Annual General Meeting and at
any adjournment thereof. Ordinary (Non-voting) shareholders and Preference shareholders can only appoint a proxy holder to
represent them at the Annual General Meeting.
INSTRUCTIONS FOR THE COMPLETION OF FORM OF PROxY
1. In terms of Article 63 of the Articles of Association of the Company -
this instrument appointing a proxy shall be in writing and
(a) in the case of an individual be under the hand of the appointer or his attorney or
(b) if such appointer is a company or corporation either under its common seal or under the hand of an
officer or attorney authorised in that behalf in accordance with its Articles of Association or constitution.
In terms of Article 69, a company or corporation being a member of the Company may appoint any of its
officers or any other person to be its representative or proxy at any meeting or meetings of the Company
and any person so appointed shall be entitled to be present and vote and exercise all other powers in
regard to any such meeting on behalf of the Company or Corporation which he represents as if he were
a member holding the shares of such company or corporation.
2. the full name and address of the shareholder should be filled in legibly on the Form of Proxy together
with the National Identity Card Number/Passport/Company Registration Number (as applicable).
3. the completed Form of Proxy should be deposited at the Office of the Company Secretary at Level 13,
Seylan towers, No. 90, Galle Road, Colombo 03 not later than 48 hours before the time appointed for the
holding of the Meeting.
4. If the Form of Proxy has been signed by an attorney, the relative power of attorney should also accompany
the completed Form of Proxy for registration, if such power of attorney has not already been registered
with the Company.
5. If there is any doubt as to how the vote is to be exercised, by reason of the manner in which the Form of
Proxy has been completed, no vote will be recorded by the Form of Proxy.

2009 Annual Report

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2009 Annual Report

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The Case Study > Seylan Bank PLC Annual Report 2009 b

Annual Report 2009

Extended weekday banking hours, as well as Saturday service

1% bonus interest on minimum average balances for savings accounts

Special high-interest savings accounts with contracted monthly deposits

5% thank-you bonuses on interest reinvested in fixed deposits

Personal Assistance Loans for customers with limited credit opportunities

Cash-card access to non-resident foreign currency accounts (often used by

Seylan Banks cost-to-income ratio was the highest in the industry.

Operating expenses were as high, in absolute terms, as those of the nations

Profitability, measured both by return on assets and return on shareholders

Re-establish financial stability

Remedy any continuing stresses on operations as a result of the Bank run

Introduce more effective risk management policies and practices

Improve the quality of credit appraisal, monitoring and recovery

Implement new measures for containing and managing operational costs

Continuous improvement of business processes across the enterprise

Transformation of the organisational structure and resources required to

Preparation of employees to embrace and support the planned changes

Identification of critical issues facing the business going forward

Establishing a new vision, mission, values statement and set of defined

Creation of a comprehensive strategic plan with clear guideposts for

As long as a significant number of depositors continued to empty their

More aggressive measures were adopted for handling defaulters.

In the absence of proper procurement procedures, the Bank established a

Personal loans to staff were temporarily suspended.

Overtime was severely limited.

Foreign travel was eliminated unless absolutely necessary.

The age of retirement was lowered from 58 to 55.

Some staff members who were considering resignation were offered

To support the Banks new ethical standards, a revised Disciplinary Code

In July and August the Bank launched a high-profile marketing campaign

In a further strengthening of its national retail presence, Seylan Bank

Commitment to ethical governance and accountability

Respect for basic values such as integrity, commitment and trust

Belief in the power of teamwork

Leadership grounded in experience and sound judgment

Dedication, among thousands of loyal employees, to doing whatever is

Goals - defined and quantified in relation to seven specific performance indicators:

Strategic Initiatives - including domestic and international expansion

Business-Level Strategies - focusing on the core business areas of retail banking,

the Banking Act Direction No. 11 of 2007

the Colombo Stock Exchange rules on Corporate

the Code of Best Practice of Corporate

Mr. Ajith Devasurendra - Non-Executive

Mr. Naomal goonawardena - independent

Mr. Lalith Withana - independent Non-Executive

Mr. Pradeep Kariyawasam - Non-Executive

implementation of procedure to select/appoint

Recommend (or not recommend) the re-election

Establish criteria to determine eligibility for

Ensure that the directors, CEO and key

Review and recommend requirements of

* Assignment over performing

Lien over fixed deposit for

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